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Chanan Singh Son Of Kartar Singh vs State Of Haryana on 2 April, 1971 Equivalent citations: AIR1971SC1554, (1971)3SCC466, AIR 1971 SUPREME COURT 1554 Author: A. N. Ray Bench: A.N. Ray, C.A. Vaidialingam JUDGMENT A. N. Ray, J. 1. This is an appeal by special leave from the judgment dated 9 February, 1970 of the High Court of Punjab and Haryana convicting the appellant under Section 302/34 of the Indian Penal Code for the murder of Mohinder Singh and confirming the death sentence imposed upon him by the Sessions Court. 2. The appellant was sentenced by the Sessions Court to death on three counts, namely, under Section 302 of the Indian Penal Code for causing the murder of Mohinder Singh and under Section 302/34 of the Indian Penal Code for causing the murder of Mukhtiar Singh alias Mukha and Lachhman Singh. Kala Singh was sentenced by the Sessions Court to life imprisonment on two counts under Section 302/34 of the Indian Penal Code for the murder of Mukhtiar Singh alias Mukha and Lachhman Singh. Both of them preferred appeals to the High Court. The sentence of death passed by the Sessions Court on Chanan Singh was before the High Court for confirmation. 3. The High Court acquitted Kala Singh and accepted his appeal. The appeal of Chanan Singh was accepted as to the offence for causing the murder of Mukhtiar Singh and Lachhman Singh and he was acquitted of these offences. His conviction was however upheld for the murder of Mohinder Singh. The sentence of death passed upon Chanan Singh was confirmed. 4.The alleged occurrence was on 9 December, 1968 between 9 and 9.30 p. m. at the house of Chanan Singh in village Hijravan Kalan fat the district of Hissar in Haryana. Three persons died of gun shot wounds. They were Mohinder Singh, Mukhtiar Singh alias Mukha and Lachhman Singh. The prosecution case rested on the single eye-witness Shangara Singh. 5. Shangara Singh Is a resident of village Ali Musa about three miles from Hijravan. He is a relation Mohinder Singh deceased. Kala Singh was a partner of Chanan Singh in the cultivation work. Mohinder Singh deceased and his brother Pishora Singh resided at a field known as Dhani at a Chanan Singh Son Of Kartar Singh vs State Of Haryana on 2 April, 1971 1 distance of about one mile from the resident of Chanan Singh. Mukhtiar Singh was the son of Pishora Singh. 6. The prosecution case was that on the date of the incident, Shangara Singh went to Fatehabad to buy a few things. There he met Mohinder Singh, Mukhtiar Singh, Lachhman Singh and Chanan Singh. Mukhtiar Singh purchased some cloth from the shop of one Diwan Chand. Mohinder Singh asked Shangara Singh to come back with them to their village. All the four, Mohinder Singh, Mukhtiar Singh, Lachhman Singh and Chanan Singh had come on horse back and tied their horses at the house of Harnam Singh. They all went to the house of Harnam Singh. Harnam Singh's daughter Balvinder Kaur handed over a stitched lady's shirt and a salwar to Mohinder Singh. Chanan Singh purchased two bottles of liquor and some cooked potatoes and vegetables. They all thereafter left for Hijravan. When they were about 5 or 6 miles away from Hijravan, Chanan Singh met them. Chanan Singh exchanged greetings with Dalip Singh. Lachhman Singh all along carried a gun. Chanan Singh invited all of them to drinks and snacks at his house. They started drinking. They were sitting on cots. A little later Pritam Singh came to ask for some Mexican wheat seeds from Chanan Singh. Chanan Singh asked him to come the following day. Pritam Singh went away. Mukhtiar Singh drank two pegs and thereafter lay on the cot and did not drink any more. The other persons finished the two bottles. They all ate some potatoes and tomatoes. At about 9 p. m. Chanan Singh demanded from Mohinder Singh repayment of the loan of Rs. 500/-. Mohinder Singh said that Chanan Singh had earlier disgraced him in the presence of his brother Pishora Singh. Mohinder Singh stated that he would not take food with Chanan Singh and would leave. Chanan Singh also got up from the cot. Mohinder Singh was wrapping his loi (wrapper) to go away. Chanan Singh at that moment went inside the house and returned with his gun. He immediately fired at Mohinder Singh near his left ear. Mohinder Singh fell down. Chanan Singh again loaded his gun and fired a second shot at Mohinder Singh while he was lying on the ground. Lachhman Singh tried to run away. Kala Singh caught him. Kala Singh was assisted by Chanan Singh in overpowering Lachhman Singh. Both of them carried Lachhman Singh inside the house. Shangara Singh then slipped away. While going away he heard a gun shot when he was near the outer courtyard. Shangara Singh heard another gun shot a little later. Shangara Singh on account of fear ran away to his village. He reached his house at about 11 p. m. He informed his father about the incident. He requested his father to inform Pishora Singh. His father did not do so on account of fear but agreed to go in the morning. On the following morning Shangara Singh's father left for Hijravan and returned at about 10 a. m. Shangara Singh's father told him that he could not meet Pishora Singh and that Pishora Singh had already gone to lodge the report Shangara Singh was called by the police and his statement was recorded at about 4 p.m. on 10 December, 1968. 7. The defence of Chanan Singh was that in the evening on 9 December, 1968 when he was standing in front of his house Mukhtiar Singh and Mohinder Singh came on horse back. They exchanged greetings. They asked Chanan Singh for drink. Chanan Singh asked them to get down. The horses were tied in the yard. They started having drinks. Chanan Singh then asked his wife for some cooked vegetables. When Chanan Singh's wife came out with the vegetables, Lachhman Singh cracked a joke. Chanan Singh objected. He asked Mohinder Singh as to why he had brought such a bad man and then pointed to Lachhman Singh. Mohinder Singh asked Chanan Singh to keep quiet and said that he would deal with Lachhman Singh. Mukhtiar Singh and Mohinder Singh caught hold of Chanan Singh Son Of Kartar Singh vs State Of Haryana on 2 April, 1971 2 Lachhman Singh and beat him with shoes. Lachhman Singh was turned out. After a while Lachhman Singh came back armed with a gun. He fired a shot at Mukhtiar. He fell down. Chanan Singh ran inside the house. In the meantime Mohinder Singh had got up. Lachhman Singh shot at Mohinder Singh. Chanan Singh came armed with a gun. Chanan Singh found Lachhman Singh had followed him and had gone inside the house. Chanan Singh fired one shot in the air and threw the empty where Mohinder Singh was lying. Chanan Singh again loaded his gun. Chanan Singh felt that Lachhman Singh was grappling with his wife. Chanan Singh went inside the house and found that Lachhman Singh was dragging his wife by her arm and stating that she was the root cause of the trouble and that he would take her. Chanan Singh abused Lachhman Singh and asked him to release his wife. Lachhman Singh then opened the barrel of his gun, threw the empty and was reloading the gun when Chanan Singh fired at him to save himself and his wife. Lachhman Singh fell down in the room where he was struggling with his wife. He saw that Mukhtiar Singh and Mohinder Singh had died. Chanan Singh was afraid that the house of Lachhman Singh was so near that his brothers might come and kill him. Chanan Singh and his wife rode on horse back to the place where Kala Singh was present and then the three of them went to village Sangha, Chanan Singh surrendered after two days. 8. The High Court found that Shangara Singh was with Chanan Singh, Mohinder Singh, Mukhtiar Singh and Lachhman Singh at Fatehabad. Three reasons were given for that finding. The first was that Diwan Chand a shop owner in Fatehabad proved the signature of Mukhtiar Singh in an account book at the time Mukhtiar Singh purchased materials worth about Rs. 200/-. Diwan Chand's evidence was also accepted that he saw Shangara Singh along with Chanan Singh, Mohinder Singh, Lachhman Singh and Mukhtiar Singh. The second reason was that Dalip Singh met all the five at about 7 p. m. on the day of the occurrence when Dalip Singh was going to Fatehabad from his own village Hijravan. The third reason was that Pritam Singh who had gone to the house of Chanan Singh to get some Mexican wheat seeds said that Chanan Singh, Kala Singh, Mukhtiar Singh, Mohinder Singh were all having liquor at the house of Chanan Singh at about 8 p. m. The High Court therefore held that Shangara Singh was present with alt the four at Chanan Singh's house party. 9. The High Court next held that Shangara Singh was a reliable witness. The reason given by the High Court was that Shangara Singh found that everybody was drunk and his Instinct would be to try and establish that he was not in the party and he ran away from Chanan Singh's house without informing anybody to save himself and there was nothing unnatural in doing so. 10. The High Court next dealt with the question as to whether Shangara Singh's evidence was truthful. The High Court gave one reason for finding Shangara Singh to be a truthful witness. The reason was that if Shangara Singh wanted to implicate the accused he could have easily deposed as to how Mukhtiar Singh received the injuries and how Lachhman Singh was killed but he never said either of these two things. 11. On these grounds the High Court found Chanan Singh to be guilty of the murder of Mohinder Singh. As to the murder of Mukhtiar Singh and Lachhman Singh the High Court said that the evidence was of circumstantial nature and all were drunk and therefore the High Court did not Chanan Singh Son Of Kartar Singh vs State Of Haryana on 2 April, 1971 3 really know what had happened. 12. The entire prosecution case rests on the slender thread of the testimony of Shangara Singh. He said that he saw Chanan Singh fire a shot at Mohinder Singh which hit him near the ear. When Mohinder Singh fell down Chanan Singh again loaded his gun and fired a shot at Mohinder Singh when he was lying on the ground. Shangara Singh further said that Lachhman Singh then wanted to run away. Kala Singh caught Lachhman Singh. Chanan Singh assisted Kala Singh in overpowering Lachhman Singh. Both of them carried Lachhman Singh inside the house. At that time Shangara Singh slipped away. 13. Two questions arise. First, whether Shangara Singh actually saw Chanan Singh fire twice at Mohinder Singh: secondly, whether Shangara Singh told the truth. Shangara Singh's conduct after the occurrence appears to be abnormal. It was said on behalf of the prosecution that he ran away out of fear. There is no evidence whatever to suggest that Shangara Singh was struck by terror or fear. No one pursued or chased Shangara Singh. There was no threat to him. It would be strange to expect so many persons to stand silent and watch Chanan Singh fire at Mohinder Singh and none would offer any resistance. Shangara Singh's slipping away unnoticed by the others particulary after the alleged shooting by Chanan Singh would be utterly unbelievable. It appears unreal. The second surprising and significant feature in the evidence of Shangara Singh is that at that hour of the night he went through the fields to his house. If Shangara Singh's evidence were at all true that he saw Mohinder Singh being shot twice by Chanan Singh and he also saw Chanan Singh and Kala Singh dragging Lachhman Singh inside the house, he would go at once to Lachhman Singh's house which was 25 karams, i.e., 75 feet away from the house of Chanan Singh. It would be normal and natural for Shangara Singh to run to Lachhman Singh's house immediately and inform the members of the house and get others to try to save the life of Lachhman Singh. The third reason why Shangara Singh's evidence is not believable is that if he saw Chanan Singh fire twice at Mohinder Singh, Shangara Singh would normally go to Pishora Singh brother of Mohinder Singh and tell him that Mohinder Singh had been shot by Chanan Singh. The fourth reason for not accepting Shangara Singh as a truthful witness is that his alleged statement to his father Suba Singh at about 11 at night that Chanan Singh had shot Mohinder Singh does not get any support from conduct. Neither Shangara Singh nor his father went to the police station. The first thing that would occur to Shangara Singh would be to go to the police station. He did not do that. His father also followed suit. The reason given by Shangara Singh was that his father did not move out of fear of the accused. The aspect of fear is without any foundation and is not supported by any evidence of act or conduct. These features indicate the infirmities as to truthful evidence of Shangara Singh. 14. A curious feature of the prosecution case is that Pritam Singh came to Chanan Singh for Mexican wheat seeds at about 8 p. m. Pritam Singh was asked by Chanan Singh to come the next morning. Pritam Singh went the next morning and found three dead bodies. Pritam Singh then went to the police station and lodged the first information report. The presence of Pritam Singh both at night and in the morning appears to be sudden at the critical hours to fit in with the prosecution case. 15. The High Court did not at all take into consideration the vital discrepancy between the medical evidence and the oral evidence of Shangara Singh. Shangara Singh said that he saw Chanan Singh Chanan Singh Son Of Kartar Singh vs State Of Haryana on 2 April, 1971 4 fire twice at Mohinder Singh. The doctor's evidence was that there were two injuries on Mohinder Singh and these were caused by one shot Injury No. 1 was described by the doctor as the wound of exit Injury No. 2 was described as an inlet wound. The pellets entered the body en masse as would appear from injury No. 2. The medical evidence was also that for causing injury No. 2 the shot must have been fired from a close range say within 3 feet. In reexamination the doctor said that in his view there was no possibility that injury No. 1 might be the exit of another shot with which the head was blown oft The doctor was then asked two further questions in re-examination. These are as follows: Q. Could injury No. 1 be not the result of a distinct gun shot if it was given first in order and then immediately the second shot was fired as a result of both the gun shots the entire skull, brain, etc., was blown off? It may be further explained that the first shot had hit on the left side and second on the right side? Ans. I do not agree because there were no signs of any separate wound of entrance or exit for another shot. Q. If the first shot had hit the victim one inch or more above the left ear and had hit the portion which was blown off either as a result of blow or the other blow, what traces you would have found to state the inlet or exit of the other shot especially when the firing was from close range? Ans. If this had happened there must have been found blackening or scorching or skin colour changing on the adjoining skin just above the ear, in an area of about one inch around but if the other shot had hit on the top of the skull and had affected the area which was blown off then there could be 2 or more fires. 16. The purpose of re-examination is explaining any part of the cross-examination which is capable of being construed unfavourably to the party for whom he has given evidence in chief. Re-examination cannot be allowed for new matters except with leave of the Court. The medical evidence both in examination-in-chief and cross-examination was that there was one shot. There was nothing to be clarified. There was no scope for re-examination. The second question put in re-examination contained several hypothetical questions which again were not split up but were compressed into one question. It is not permissible to put two or three questions into one question. The answer in re-examination that if certain things happened then there could be two or more fires far less from giving an answer obscured the matter more. 17. A death sentence can rest on evidence beyond any reasonable doubt. In the present case, there are not only doubts but also inherent improbabilities and infirmities in the evidence of Shangara Singh to hold that he saw Chanan Singh fire at Mohinder Singh. The conviction cannot be sustained. The appeal is accepted. The judgment of the High Court is set aside. The accused is set at liberty. Chanan Singh Son Of Kartar Singh vs State Of Haryana on 2 April, 1971 5 | {
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Gurmukh Singh And Ors. vs The State Of Punjab on 14 December, 1971 Equivalent citations: AIR1972SC824, 1972CRILJ654, (1972)4SCC805, 1972(4)UJ406(SC), AIR 1972 SUPREME COURT 824, 1972 4 SCC 805, 1972 MADLJ(CRI) 523, 1972 CURLJ 232, 1972 SCD 220, (1972) 2 SCJ 194 Author: P. Jaganmohan Reddy Bench: D.G. Palekar, P. Jaganmohan Reddy JUDGMENT P. Jaganmohan Reddy, J. 1. These appeals are by special leave against the judgment of the High Court in a case under Section 439 of the CrPC by which the sentence of fine imposed by the Judicial Magistrate, First Class, Patiala for an offence under Section 16(1)(a) of the Prevention of Food Adulteration Act, 1951 hereinafter called 'the Act' was enhanced to six months rigorous imprisonment and a fine of Rs. 1000/-in default the respective appellants were ordered to further undergo simple imprisonment for 1 1/2 months. In all these cases the appellants were charged under Section 16(1)(a) of the Act for selling without licence articles of food, such as, milk, sweetmeats, tea, curd, biscuits, chappati, ice-cream, dal, bhajji A separate charge was framed against each of the appellants, on respective dates and on the same day they pleaded guilty to the charge and were forthwith sentenced to pay a fine. In Appeal No. 51 and 56 of 1969 the appellants were fined Rs. 30/-each on August 10, 1967 ; in Appeals Nos 52 to 55 & 58 of 1969 they were sentenced to pay a fine of Rs. 50/-each on August 19, 1967, and in Appeal No. 57 of 1969 a sentence of Rs. 40/-was imposed on June 26, 1967. In default of payment of fine in all these case the appellants were directed to further undergo one month's rigorous imprisonment. The reason for imposing the light sentences in all these cases except in Appeal No. 57 of 1969 was that the appellants had made "voluntary confessions" while in Appeal No. 57 of 1969 the reason given was firstly the spontaneous nature of the confession which showed that the accused was in repentant frame of mind and secondly that he was petty shop keeper and a heavy punishment may prove harsh. 2. The High Court enhanced the sentence because under Section 16(1) of the Act the appellants were punishable with imprisonment for a term which may not be less than 6 months but which may extend to six years & with a fine which may not be less than Rs. 1000/-, and though a discretion was given to the court to impose lessor sentence under the proviso to the said sub-section if it is satisfied that there is "any adequate and special reasons", the Magistrate had failed to give valid reasons for giving lenient sentences. The High Court further observed that whether there existed some adequate Gurmukh Singh And Ors. vs The State Of Punjab on 14 December, 1971 1 or special reasons is a question of fact in each case, but in the cases before it no reasons much less any adequate and special reasons had been mentioned in the judgment of the Trial Court for imposing a lesser sentence as required by the proviso. In this view the orders of the Trial Court were held not to have complied with requirements of the proviso for imposing a lesser sentence. 3. It was contended on behalf of the appellants before the High Court that the appellants were found selling articles of food without a licence and not adulterated articles of food and, therefore, a lessor sentence may be imposed on them. This contention was rejected because in the view of the learned Judge selling of articles of food without a licence as required under Sub-rule (5) of Rule 50 of the Prevention of Fo d Adulteration Rules, 1955, is no less serious than selling adulterated articles of food. It is so because before granting a licence for manufacture, stock or exhibition of any of the articles of food in respect of which a licence is required, the licensing authority shall inspect the premises and satisfy itself that it is free from sanitary defects, and the applicant for the licence has to make such alterations in the premises as may be required by the licensing authority for the grant of a licence. When a licence is granted the licensee must observe the conditions of the licence such as preparing articles of food under hygienic conditions and keeping them covered in clean containers protected against dust, disease-bearing flies and other noxious elements. 4. Before the High Court the appellants had questioned the legality of conviction and urged that they could do so under Section 439(6) of the CrPC. While admitting that such a right existed, it was observed that since the appellants had pleaded guilty to the charge they were rightly convicted. The submission that under the provisions of Section 251 A, 252 and 259 of the CrPC the Procedure to be followed was that prescribed for warrant cases. If so, that procedure has not been followed because the Magistrate did not examine the witnesses for the prosecution before framing the charge and therefore the trial was vitiated. This submission also was rejected on the ground that the procedure prescribed under Section 254 of the CrPC was applicable under which the Court can at any previous stage of a case, if it is of the opinion that there is ground for presuming that the accused has committed an offence triable under Ch. XXI, which such Magistrate is competent to try, frame the charge. Even otherwise it was observed that at the most the omission to examine the accused before framing a charge, is an irregularity which is curable under Section 537 of the CrPC and since no prejudice has been caused to them the conviction is not vitiated. 5. Before us one of the grounds urged is that the High Court had not taken into consideration the prejudice caused to the accused in not giving them an opportunity to plead that their's was not a case where they had not obtained a licence at all, but had not renewed their licences which under the law they could renew on a date subsequent to the expiry of the licence. The learned Advocate for the State contested this allegation firstly because the appellants had not while pleading guilty mentioned these facts, and secondly that under Rule 4(b)(iii) of the Prevention of Food Adulteration (Punjab) Rules, 1958, even if the appellant had taken licences those would expire on the 31st day of March of the succeeding year and since on the date they were charged the appellants had not admittedly renewed the licences they were guilty of the offence of selling articles of food without a licence, as such there is no warrant for the submission that the convictions are bad or that the sentences imposed are illegal. Apart from the legality of the convictions which is challenged, it is contended by the appellants that the enhancement of the sentence was not justified. Gurmukh Singh And Ors. vs The State Of Punjab on 14 December, 1971 2 6. It is alleged in the special leave petition that the appellants were carrying on business of selling articles of food under a licence since a long time and that they were renewing their licences each year and had intended to do so even after the financial year 1967-68, but for the fact that the licence Inspector who used to visit the appellants' shops annually and renew the licences had not that year renewed them in time because there was a proposal to increases the licence fee. For this reason they could not renew their licences in time. It is therefore urged that this plea could have been taken if the witnesses had been examined before a charge was framed, but when in fact a charge was framed and they were asked to plead immediately there was no opportunity for them to put forward the reason for not renewing the licence in time. 7. The learned Advocate for the appellants has placed before us certified copies of the licences in each of these cases which are in Form B issued under Rule 4(c) and in which it is categorically stated that the licence shall be in force for the financial year and subsequently for the financial year in which it is renewed. It may also be mentioned that the renewal each year is endorsed on the licence itself so that there is no question of any fresh licence being granted every year or the licensee submitting plans of altering their premises every year. There is ample power under the Act when a licence is granted to a dealer, by rules under Section 23(1)(c) of the Act to maintain control over the production, distribution and sale of any article or class of food which the Central Government may be notification specify in this behalf including the registration of the premises where they are manufactured, maintenance of the premises in a sanitary condition and maintenance of the healthy state of human beings associated with the production, distribution and sale of such article or class of articles : (see Rule 9 of the Prevention of Food Adulteration Rules, 1955). Rule 4 of the Punjab Rules, which is relevant for the purpose of this submission is as follows : (a) The local authority or any officer authorised by it by order in writing in this behalf shall be the licensing authority in its local area for purposes of issuing licences for the manufacturer for sale, for storage, for the sale or for the distribution of the articles of food in respect of which a licence is necessary under the Prevention of Food Adulteration Rules, 1955. (b)(i) An application for licence to manufacturer for sale or store, sell or distribute any article of food for which licence is required shall be made in Form A to the licensing authority and shall be accompanied by a fee of Rs. 5/-in the case of a whole seller and Rs. 2 in the case of a retailer. (ii) The fee shall be credited to the local authority within whose jurisdiction the premises are situated. (iii) The validity of every licence shall terminate on the 31st day of March immediately succeeding the date of issue. (iv) Any person whose application for a licence has been rejected shall have a right of appeal to the District Magistrate. Gurmukh Singh And Ors. vs The State Of Punjab on 14 December, 1971 3 (c) A licence shall be issued in Form B. 8. It is contended that the rules in no where specifically provide for the time within which the licence once granted has to be renewed each year after the date of its expiry, nor is there anything in the Punjab Rules which provides for a renewal before the expiry of the licence, as such it is quite likely that the authorities concerned may not entertain an application for renewal if presented before the expiry of the licence and may direct him to apply on the expiry of the licence, leaving him only an option to renew it on the 1st of April every year, which may in most cases not be possible either due to the volume of applications or some other cause for which the licensee may not be responsible. This contention, in our view, is not valid, because under Rule 51 of the Central Rules "A licence shall, unless suspended or cancelled, will be in force for such period as the State Government may prescribe : Provided that if application for a fresh licence is made before the expiry of the period of validity of the licence, the licence shall continue to be in force until orders are passed on the application". Reading this rule with Rule 4 of the Punjab Rules the plea of the appellants that because they have not been given an opportunity to put forward their respective pleas, they were prejudiced and hence their conviction is illegal will not avail them because firstly not only did they not renew their licences before the expiry of the licence but they had not even applied for a renewal by the time they were charged, which in one case is three months and in other cases is five months. The conviction of the appellants for selling, storing or preparing articles of food without a licence cannot therefore be assailed. 9. On the question of the sentence, it is not denied that the offence with which each of the appellants was charged was committed after the amendment of Sub-section (1) of Section 16 of the Act under which the sentence has to be a minimum of six months rigorous imprisonment and a fine of Rs 1000/-, unless it is covered by the proviso to that sub-section in which case a lesser sentence can be given for adequate and special reasons to be mentioned in the judgment. The appellants were charged for an offence under Section 16(1)(a)(ii) where "any person whether by himself or by any other person on his behalf...manufactures for sale, or stores, sells or distributes any articles of food (i) which is adulterated or misbranded or the sale of which is prohibited by the Food (Health) Authority in the "interests of public health ; (ii) other than an article of food referred to in Sub-clause (i) in contravention of any of the provisions of the Act or of any rule made there under". It is not the case of the prosecution that the appellants sold or stored any adulterated or misbranded or prohibited articles of food. Even in such cases if the offence is with respect to an article of food which is adulterated under Sub-clause (1) of Clause (i) of Section 2 or misbranded under Sub-clause (ix) of atc. 2 a lesser sentence under the proviso can be awarded As pointed out in Jagdish Prasad alias Jagdish Prasad Gupta v. State of West Bengal Crl. Appeal No. 50 of 1969 decided on Dec. 13, 1971 the offence under the Act being anti social crimes affecting the health and well being of our people, the Legislature having regard to the trend of courts to impose in most cases only fines or where a sentence of imprisonment was passed a light sentence was awarded even in cases a severe sentence was called for a more drastic step was taken by it in prescribing a minimum sentence and a minimum fine to be imposed even for a first offence. The reason for the Legislature to nuke the exception is not that the offence specified are not considered to be serious but the gravity of the offence having regard to its nature can be less if there are any special or adequate reasons. In our view though offences for adulteration of food must be severely dealt with, no doubt depending on Gurmukh Singh And Ors. vs The State Of Punjab on 14 December, 1971 4 the facts of each case which cannot be considered as precedents in other cases, in this case having regard to the fact that the offence is only one for non renewal of a licence within a reasonable time, and the appellants as pointed out by the trying Magistrate were only petty traders, a mitigation in the sentence is justified-No doubt as the High Court points out, the reason given by the Trial Court that the accused pleaded guilty and were repentant may not be adequate. But in the special circumstances pointed out by us a lesser sentence is called for. In view of the fact that all the appellants have already served one week's sentence, we think interests of justice would be served it the sentence of 6 months imprisonment and fine of Rs 1000/-is reduced to a period of imprisonment already undergone by each of them, and to pay a fine of Rs. 250/-and in default of which they are directed to undergo a further period of imprisonment for 1 month. In each of these appeals this sentence is substituted for the sentence awarded Ly the High Court and the appeals are accordingly allowed to this extent. Gurmukh Singh And Ors. vs The State Of Punjab on 14 December, 1971 5 | {
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Lallubhai Devchand Shah And Ors. vs The State Of Gujarat on 3 November, 1971 Equivalent citations: AIR1972SC1776, 1972CRILJ828, (1971)3SCC767, 1972(4)UJ177(SC), AIR 1972 SUPREME COURT 1776 Author: D.G. Palekar Bench: A.N. Ray, D.G. Palekar JUDGMENT D.G. Palekar, J. 1. The appellants (1) Lallubhai Devchand Shah (2) Jayantlal Lallubhai Shah and (3) Bai Nathi were convicted by the learned Additional Sessions Judge, Ahmedabad of the offence under Section 302 IPC and sentenced to suffer imprisonment for life. The Gujarat High Court confirmed the conviction and sentence in appeal. The present appeal has been filed by special leave. 2. Lallubhai is the father of Jayantilal and Bai Nathi is his wife. Together' they lived in a house near the Jain Temple in village Poshina in Idar Taluka, District Sabarkantha. The village is a small village with a population of about 1500. At the relevant time, the deceased Bai Sharda was about 22 years old and was also living with them. Sharda had been married to another son of Lallubhai named Amritlal in about 1962-63. She was the daughter of one Kachralal Kevaldas P.W. 10 who lived in another village Mau which is about 7 or 8 miles from Poshina. Her husband Amritlal had been living in Bombay to earn his livelihood since before his marriage. Though Sharda was betrothed to Amritlal for many years before the marriage the marriage seems to have been a failure because Amritlal did not show any affection for her He used to come from Bombay to Poshina once in six months or a year for a stay of one or two days and did not think of taking her to Bombay. He did not also visit his father-in-law's house at Mau. In or about 1964-65, Amritlal started giving tuition to one girl named Aruna in Bombay and in course of time formed an attachment for her. In 1967 they decided to marry but as Amritlal's wife was living, they converted themselves to Islam and thus overcame the obstacle to marriage Thereafter Amritlal and Aruna married on 16-11-1967 at Bombay and lived together as husband and wife. Aruna's brother there after filed a complaint at Bombay against Amritlal, but by about the first week of April, 1968, Aruna's relations were won over and nothing happened in the criminal case. The action of Amritlal seems to have met with the approval of his parents which we know from a letter written by Amritlal on 8-4-1968 Ext. 24. The letter has specifically referred to the criminal complaint against him and informed the family members about the changed attitude of Aruna's relations. It is in evidence that Aruna also used to write letters to the members of her husband's family. The same letter further shows Amritlal general attitude towards Lallubhai Devchand Shah And Ors. vs The State Of Gujarat on 3 November, 1971 1 his first wife Sharda. Sharda was living at that time with the accused having returned from her father's house a few months earlier. During all those six years of the marriage, Sharda lived sometimes with her father and sometimes with the accused. The letter reveals that Amritlal hated Sharda because he tells his father that if the matter were left to him, he would not have allowed Sharda to come to the house, let alone allow her to enter the kitchen. With a touch of sarcasm, he compliments his parents for giving shelter to Sharda due to social pressure. In short, Sharda had been abandoned by her husband Amritlal. 3. At about 10.00 A.M. on 18-4-1968 i.e. about a week after the letter Ext. 24 was received by the accused, there was a quarrel between the mother-in-law Nathi Bai and Sharda. We do not know the nature of the quarrel But it was not a serious one. One of the witnesses Bhuderlal P.W. 5 described it as the usual quarrel which takes place in many houses which are joint. That witness P.W. 5 and Bai Tara who came there on hearing the quarrel advised them not to quarrel and the matter ended there. At about 1.00 p m. neighbours heard cries and shrieks from the house of the accused and ran to the place. They saw a ghastly sight there. In the hindmost room which is also described as the second room in the judgment of the High Court, Sharda had fallen on the ground naked with burns all over her body. She was in great pain but perfectly conscious. The neighbours who came there asked her what had happened and she told them that the three accused had sprinkled kerosene on her clothes and set them on fire. A large crowed had collected and one of them was Amritlal Manga Lal, P.W. 1, Amritlal was a relation. He was related to Lallubhai, accused No. 1, as his brother's son and he was also related to Sharda who was the daughter of the maternal uncle of Amritlal's wife. On hearing what the girl had stated within their hearing, the Sarpanch of the village, Dharam Chand, P.W. 3 prepared statement Ext. 10 and the same was signed by about 14 persons including P.W. 1 Amritlal. Neither the signature nor the thumb impression of Sharda could be taken below the writing because that was not possible as the palms of her hands were burnt. After signing the writing, Amritlal and some others left she village to fetch a Doctor and to inform the Police. Amritlal obtained a Jeep and went to the Police outpost at Chitroda which is two miles away. Some other persons went to the Medical Officer Dr. Keshavlal whose headquarters were also at Chitroda. Head Constable Samat Singh P.W. 19 was in charge of the Police outpost. On a statement made by Amritlal to him, he prepared an occurrence report Ext. 9 to the effect that the three accused had, after beating Bai Sharda, sprinkled kerosene on her body and set fire to her clothes. The occurrence report was signed by P.W. 1 Amritlal who was instructed by the Head Constable to proceed to the Police Station at Jadar which was about 10/12 miles away. The Head Constable there-after proceeded to village Poshina. 4. In the meantime Dr. Keshavlal P.W. 15 having learnt that Bai Sharda had received burns, came to Poshina in a Jeep. He reached the house of the accused at about 4 15 P.M. He directly went to the place where Sharda was lying. On seeing the Doctor, Sharda implored him loudly 'save me, Save me'. He noticed that her body had been extensively burnt and the case was very serious. He casually asked her as to how she got burnt. Thereupon she told him that she was burnt by her father in law Lallubhai, mother-in-law Bai Nathi and brother-in'law Jayantilal after sprinkling kerosene on her. He carried out whatever medical examination was possible and since the case was serious he recommended that she be taken to the Civil Hospital at Himatnagar, By this time, Head Constable Samat Singh had also arrived at that place. He also noticed that Sharda had extensive burn on her Lallubhai Devchand Shah And Ors. vs The State Of Gujarat on 3 November, 1971 2 body and she was quite conscious and able to speak. He asked her what had happened and, according to the witness, she told him that her husband had contracted a second marriage and that her father-in-law, mother-in-law and brother-in-law had burnt her after sprinkling kerosene on her. At the instance of the Medical Officer Dr. Keshavlal, he then took Sharda to the Civil Hospital round about 6.00 p m. Her condition at that time was very bad. She was speaking in a very low voice and it was not possible to follow her. He started giving treatment to her and intimated the Police Section at Himatnagar to arrange for recording her dying declaration. Before the police could arrive, Sharda expired at 6.35 p.m. In due course Dr. Pandya performed the post-mortem examination. The results noticed by him were as follows. 5 "Pieces of clothes stuck to the body and black threads tying the hairs of the head were collected at the post Mortem Examination. Smell of Kerosene was found Body had blisters which had burst and from head to legs she was blackened. The hairs on the head were practically burnt. Face, legs, eyes, cheek, shoulders, chest, abdomen, neck, back of chest, both things, and buttocks, lower part of the abdomen and genitals, both knees and calves of legs were burnt and found black. Both the palms with fingers had also burns and blisters. All these injuries were found to be ante-mortem. According to Dr. Pandya the burns were so extensive that they were sufficient in the ordinary course of nature to cause death- 6. The principal evidence against the accused consisted of the dying declarations made by Sharda from time to time. First there was the dying declaration recorded as per Ext. 10 by the Sarpanch Dharam Chand P.W. 3. It was signed by no less than 14 persons who had come to the place immediately after hearing Sharda's cries. The second time when Sharda made the statement was when Dr. Keshavlal questioned her. He had prepared rough notes at the time which he later transferred to the case papers Ext. 38, prepared the same day. Ext. 38 records the statement made by her to the effect that Sharda's father-in-law, mother-in-law and brother-in-law had sprinkled kerosene on her and "set on fire". The third dying declaration is to be found in the statement of the Head Constable Samatsingh, P.W 19 who says that when he asked Sharda as to what had happened, she told him that her husband had contracted a second marriage and her mother-in-law Bai Nathi, father-in-law Lallubhai and brother in-law Jayantilal had burnt her after sprinkling kerosene on her. The second and the Third declarations have been proved by Dr. Keshavlal and Head Constable Samat Singh respectively and Dr Keshavlal produced Ext. 38 the case papers, in corroboration of his evidence. With regard to the first dying declaration Ext. 10 which was prepared by the neighbours who had come to the house on hearing the cries, no less than six persons out of the 14 persons who were signatories to the statement, were e-xamined. Most of them deliberately avoided supporting the prosecution P.W. 1 Amritlal who had signed the statement and had also made his report at the outpost in accordance with that statement turned hostile and denied having heard the dying declaration or even having made the report Ext. 9 which he had signed. Sarpanch Dharam Chand P.W. 3 though admitting that he had recorded the statement and signed it along with the others gave a twist in the course of evidence suggesting thereby that the had prepared the report on what the ladies questioned and as it Sharda had told him. In these circumstances the learned Sessions Judge held that Ext. 10 was inadmissible in evidence. At the same time he held that the first dying declaration had been duly proved by P.W. 4 Ravashankar who did not disclose any disposition to turn hostile. Ravashankar stated that when he was returning home at about 1 00 p.m., he heard a Lallubhai Devchand Shah And Ors. vs The State Of Gujarat on 3 November, 1971 3 noise at the house of the accused and so he went there. There were many persons including the females and the sarpanch. Sharda was lying in the second room The females were questioning Sharda and within his hearing Sharda said that she had been burnt by the accused. The Sarpanch prepared Ex'. 10 and he also signed it, though in his cross-examination he admitted that he had not read it before signing because it was prepared on the basis of what they had heard from Sharda. The learned Sessions Judge found that this witness and he had no difficulty in holding that Sharda had nude a statement soon after she was burnt implicating the accused as the persons who had burnt her after sprinkling kerosene on her body. 7. Apart from denying that they had set fire to the clothes of Sharda and pleading not guilt, no consistent defence was put forward by the accused. 8. The burning could have been either homicidal or accidental. Accident was ruled out by the fact that even at the time of the post-mortem, there was smell of kerosene and there was no possibility of Sharda being burnt by accidentally catching fire in the second room because the kitchen was far from the place and the room was used merely as a store room. Accident was not also suggested before us. There can be, therefore, no doubt that death was homicidal The High Court has further noticed that in the Sessions Court it did not appear to have been suggested that death was suicidal, but the agreement was advanced in the High Court that it was quite likely that Sharda might have committed suicide by sprinkling kerosene on her clothes and setting fire to herself the reason being that she had been discarded by her husband, she was issueless and she had nothing to look forward in her life, her husband having married a second time. 9. Both the courts have accepted the truthfulness of Sharda's dying declaration and on the basis the High Court has confirmed the conviction of the accused. The law with regard to dying declarations is very clear. A dying declaration must be closely scruitinised as to its truthfulness like any other important piece of evidence in the light of the surrounding facts and circumstances of the case, bearing in mind, on the one hand, that the statement is by a person who has not been examined in court on oath and, on the other hand, that the dying men is normally not likely to implicate innocent persons falsely. See Khushal Rao vs The State of Bombay 1958 SCR p. 552. If the court is satisfied on a close Scrutiny of the dying declaration that it is truthful, it is open to the court to convict the accused on its basis without and independent corroboration. In the present case, we find that on a close scrutiny of the dying declaration both the courts, after a detailed consideration of the evidence, have come to the conclusion that the dying declaration is true. The normal rule so far as this Court is concerned is that when the High Court accepts a piece of evidence as true, this Court does not examine the evidence afresh for itself unless there is substantial error of law or procedure or there is a failure of justice by reason of misapprehension or mistake in reading the evidence or the case involves a question of principle of general importance. See Brahmin Ishwarlal Manilal v. The State of Gujarat Crl. Appeal No. 120 of 1963 decided on 10-8-1965, and Tapinder Singh v. State of Punjab and Anr. 1970 (2) SCC p. 133. 10. Mr. Mehta appearing for the appellants, though conceding that it was not open to contend here that Sharda had not made the dying declaration as alleged, submitted that the courts had not found as a fact that Sharda was in a fit mental condition to make the statement. According to Mr. Mehta, Lallubhai Devchand Shah And Ors. vs The State Of Gujarat on 3 November, 1971 4 though the witnesses stated in the evidence that Sharda was conscious and was able to speak, it did not necessarily mean that she was in a proper mental condition to make a consciously truthful statement and unless clear evidence about her mental state was produced the statement could not be regarded as reliable evidence. In support of his submission Mr. Mehta relied on an unreported judgment of this Court in Sucha Singh v. The State of U.P. Crl. Appeal No. 225 of 1967 decided on 12-11-1968 and specially on the following observation at page 4 of the blue print. It would be very unsafe to record a conviction for the offence of murder, relying solely upon a statement recorded as a dying declaration which is not shown to be made by a person in a fit state of mind. There can be no doubt that when a dying declaration is recorded the person who records the statement must be satisfied that the person who makes the statement is consciously making the statement understanding the implications of the words he uses. The expression 'fit state of mind used in the case referred to above means no more than that. The facts of that case go to show that though the dying man Trilok Singh had purported to make a statement implicating Sucha Singh and Mahendra. Singh as his assailants, that court was not prepared, on the evidence, to accept that statement as having been consciously made by Trilok Singh. The evidence showed that Trilok Singh had died a few minutes after his statement had been recorded by Dr. Pant and just before recording the statement of Trilok Singh he had been surrounded by other Sikh Sardars who were speaking to Tiilok Singh in Punjabi. The suspicion, therefore, could not be eliminated that Trilok Singh, when he made the statement, was merely transmitting the suggestions made to him by the Sikh Sardars surrounding him and was not making a conscious and voluntary statement of his own. The court, therefore, blamed Dr. Pant for not questioning Trilok Singh with a view to test whether Trilok Singh was in a 'fit state of mind' to make the statement. The 'fit state of mind' referred to is in relation to the statement that the dying man was making. In other words, that the case suggests is that the person who records a dying declaration must be satisfied that the dying man was making a conscious and voluntary statement with normal understanding, and the responsibility of the court is greater in holding that it was so made when in fact it is found that the man dies a few minutes afterwards. 11. In the present case there can be hardly any doubt that Sharda was not only conscious and able to speak but also that she was consciously and voluntarily making the statement. It is not the case that she was surrounded at the time when she made the first dying declaration at 1.00 P.M. by her friends and relatives. Her parents and other relations were away and there was no body in the house who could have made any suggestions to her to make a false statement. The evidence is that throughout she was conscious and was able to speak. Not only at 1.00 P.M. but even between 4 00 and 4.30 P.M. when Dr. Keshavlal and the Head Constable spoke to her she was perfectly conscious and able to speak her mind. As a matter of fact when she saw Dr. Keshavlal coming inside the house, perhaps with the Doctor's bag, she implored him to save her. She said "Save me, Save me". That clearly goes to show that she had perfect understanding and was able to make a rational statement of her own No suggestion has been made to Dr. Keshavlal that her mental condition was such that she was not able to make a conscious statement. In fact in his cross-examination Dr. Keshavlal says that at that time the temperature of Bai Sharda was 98 F, respiration 19 and pulse 76. There was no Lallubhai Devchand Shah And Ors. vs The State Of Gujarat on 3 November, 1971 5 restlessness. There was no shock. She was not unconscious. Her voice was not feeble. Her voice was clear. In these circumstances we have no doubt at all that the dying declaration was a conscious statement voluntarily made by Sharda. 12 Mr. Mehta next contended that the accused had really no reason to murder her because inspite of her husband's aversion towards her, the accused were giving her food and shelter and for this even the husband had complimented them in the letter Ext 24. There is no substance in this argument because if as suggested, the accused were kind and sympathetic towards her because she was a young woman abandoned by her husband, it could be hardly conceived that Sharda would implicate them falsely. On the other hand, we would expect her to be grateful to her parents-in-law who had given her shelter and maintenance though her husband did not like her at all. 13. Mr. Mehta next submitted that it was not unlikely that Sharda committed suicide by pouring Kerosene oil upon herself because her husband had abandoned her, she had no issue and there was no future for her. And having decided to commit suicide it is further suggested, that she had decided to implicate the accused in a revengeful mood. No sufficient material has been placed before the Court to show that this could have been possible She had been living for the last six years in the village sometimes with her parent and sometimes with parents-in-law. Her husband had never cared for her. There is no evidence whatsoever that she had previously tried to commit suicide or showed disgust for life. The fact that her husband hid turned to another woman could not have remained unknown to her, the marriage having taken place more than 5 to 6 months before the present incident. Undoubtedly she must have been a disappointed woman. But it is not shown what impelled her to commit suicide on that day. She had never enjoyed the love of her husband since the date of her marriage and it could hardly be said the it she had any hopes of her husband treating her better whether he married a second time or not. Her disappointment with life, if any, could not have started after her husband married Aruna in 1967. It is quite likely that she was neglected in the house of the accused that being the fate of most young women who have to live with parents-in-law after being abandoned by their husbands. But that did not prevent her from living with them because it is seen from the evidence that she lived with the accused and her father alternately. No circumstances have been brought on record to show that she was disposed to commit suicide or that the father-in-law or brother-in-law out of the three accused were treating her so harshly that she would think of implicating them also in a vengeful mood. On the other hand, the immediate conduct of the accused tends to negative the possibility of he suicide When people rushed to the house on hearing her cries, they do not appear to have noticed that anything was being done by the accused which could be regarded at evidence of their sympathy for the girl The accused were sitting in the verandah quietly. Being in the house they should have been the first to go near the girl when her clothes had caught fire, But the evidence shows that there were no visible signs on the persons of any of the accused to suggest that they helped the girl when the clothes caught fire. No attempt was made by them to call the Doctor or sent for relations. On the other hand, when the girl was telling her interrogators that the three accused had poured kerosene on her and set her clothes on fire, the accused did not so much as protest and declare that she had committed suicide and was blaming them unjustly Reference was made to the fact that some sand was seen at the place when a Panchnama was made next morning. The suggestions was that one or the other accused had thrown sand to extinguish the fire. If in fact the sand had been thrown at the girl to extinguish the fire, the Lallubhai Devchand Shah And Ors. vs The State Of Gujarat on 3 November, 1971 6 Doctors who examined the body would not have failed to see the sand particles on the body of the girl There is no cross-examination of the Doctors with a view to elicit from them that there were particles of sand on the naked body of Sharda. Similarly reference was made to a quilt, a small part of which is supposed to have been burnt. The suggestion now is that the quilt had been used to smother the fire. The quilt was, however, actually found in the verandah and, according to the learned Sessions Judge, it was taken there from the other room and not from the room where Sharda had fallen. Ordinarily if that quilt or any other quilt had been used by any one of the accused to smother the fire, some injury would have been caused to the man or woman who attempted to cover the burning clothes of the girl with the quilt. Secondly the quilt would have fallen and remained, if not extensively burnt, at the place where the woman was burnt and fell. It is not elicited from any witness, though some of them were hostile to the prosecution and inclined towards the accused, that any quilt was found close to the place where Sharda was lying. We, therefore, find no hesitation in agreeing with the High Court when it observes that this unusual conduct on the part of the accused is more consistent with the prosecution case than with the possibility of suicide. All the points raised before us on facts had been raised before the High Court and they have been satisfactorily discussed and dealt with. We are not shown that there was any misapprehension or misreading of the evidence on the part of the Trial Court or the High Court resulting in failure of justice. Therefore, this is not a fit case for interference in appeal by special leave. The appeal is, therefore, dismissed. Lallubhai Devchand Shah And Ors. vs The State Of Gujarat on 3 November, 1971 7 | {
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State Of Mysore vs Swamy Satyanand Saraswati, ... on 31 March, 1971 Equivalent citations: 1971 AIR 1569, 1971 SCR 284, AIR 1971 SUPREME COURT 1569 Author: G.K. Mitter Bench: G.K. Mitter, K.S. Hegde, P. Jaganmohan Reddy PETITIONER: STATE OF MYSORE Vs. RESPONDENT: SWAMY SATYANAND SARASWATI, RELIGIOUSPREACHER, RAICHUR DATE OF JUDGMENT31/03/1971 BENCH: MITTER, G.K. BENCH: MITTER, G.K. HEGDE, K.S. REDDY, P. JAGANMOHAN CITATION: 1971 AIR 1569 1971 SCR 284 ACT: Grant by Jagirdar-If includes right to minerals in favour of grantee Burden of proof. HEADNOTE: The Nizam of Hyderabad granted a jagir to his prime minister. The successor of the jagirdar granted an island in one of the villages, comprising a hillock of granite, to the predecessor-in-interest of the respondent. The area covered by the grant was acquired by the State Government for purposes of an irrigation project. On the question whether the respondent was entitled to sub- soil rights, and as a consequence, became entitled to compensation for the granite and quarries as minerals, HELD:It was for the respondent to establish his claim to minerals or quarry rights by putting forward proof of the State Of Mysore vs Swamy Satyanand Saraswati, ... on 31 March, 1971 1 grant thereof by the Nizam to the jagirdar and by the jagirdar to his predecessor. But assuming that the Nizam conferred the right on the jagirdar, the patta granted by the jagirdar and the connected documents showed that what was in contemplation of the jagirdar and his grantee at the time of the grant, was either the cultivation of the land or the grazing of cattle on it. Nobody at that time had any thought or idea of the land being put to any other use or any mining or quarrying rights being exercised therein. When the grantor was careful to exclude even the fruit bearing trees, it would be wrong to hold that he must have parted with the sub-soil rights by implication. Therefore,the right to minerals was not granted to the respondent's predecessor.[287B-C; 289B; 292D-E] What has to beconsidered in each case is the purpose for which the lands are leased oran interest created therein with all the clauses which throw any light on the question as to whether the grantor purported to include his rights to the sub-soil in the grant when there was no express mention of it. If the grant shows that the purpose of the grant was to allow the user of the surface only it would be wrong to presume that subsoil rights were also covered thereby. [292C-D] The test of what is a mineral is, what at the date of the instrument, the word meant in the vernacular of the mining world, the commercial world, and among landowners; and in case of conflict that meaning must prevail over the purely scientific meaning. Since granite is a mineral according to this test the respondent had no right to the granite or quarries. [293B-C] State of Andhra Pradesh v. Duvvuru Balarami Reddy, [1963] 1 S.C.R. 173, followed. Hari Narayan Singh v. Sriram Chakravarti, 37 I.A. 136, Durga Prasad Singh v. Braja Nath Bose, 39 I.A. 133, Girdhari Singh v. Megh Lal Pandey 44 I.A. 246, Sashi Bhusan Misra v. Jyoti Prasad Singh Deo, 44 I.A. 46, Govinda Narayan Singh v. Sham Lal Singh, 58 I.A. 125, Bejoy Singh Dudhoria v. Surendra Narayan Singh, I.L.R. 61 Cal. I (P.C.) and Attorney General v. Welsh Granite Co. The Law Times Reports 549, applied. 285 JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 496 of 1966. Appeal by special leave from the judgment and order dated August 10, 1964 of the Mysore High Court in Regular Appeal (H) No. 75 of 1956. S. T. Desai, B. D. Sharma, Shyamala Pappu and S. P. Nayar, for the appellant. State Of Mysore vs Swamy Satyanand Saraswati, ... on 31 March, 1971 2 M. Natesan, B. Parthasarathy, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for respondent Nos. 1 and 3. The Judgment of the Court was delivered by Mitter, J.-The main question involved in this appeal is whether the respondent was entitled to sub-soil rights by virtue of the pattas granted in favour of his predecessor-in-interest by Nawab Salar Jung III of Hyderabad and as a consequence thereof became entitled to compensation claimed by him for acquisition of a large block of land containing a hillock of granite which was required for the Tungabhadra Project and was notified for acquisition under the Hyderabad Land Acquisition Act on February 3, 1946. The relevant facts are as follows. In 1820 the Nizam of Hyderabad granted a jagir, the terms whereof do not appear from the record before us, to his Prime Minister known as Nawab Salar Jung T. This jagir consisted of many villages in the district of Raichur one of them being Madlapur on the bank of the river Tungabhadra. In the year 1930 the successor of the original grantee of the jagir, Nawab Salar Jung III made a grant of an island in that village comprising S. Nos. 154, 312 and 313 with a hillock rising to a height of 250 ft. and measuring Ac. 290-00 in favour of one Swami Nijananda, the predecessor-in-interest of the respondent. In February 1946 the entire area covered by the grant to Swami Nijananda was proposed to be acquired for an irrigation and hydroelectric project known as the Tungabhadra Project which had been embarked upon by the Governments of Hyderabad and Madras States. The purpose of acquisition was the gathering of granite stone for the construction of a dam across the river Tungabhadra. The acquisition proceedings were completed pursuant to a final notification made on June 16, 1947 followed by an award by the Land Acquisition Officer on July 24, 1950. Before the Land Acquisition Officer two claims were put forward, one on behalf of the respondent Swami Satyananda and the other by Nawab Salar Jung III. But as all jagirs including that of Nawab Salar Jung were abolished during the pendency of the acquisition proceedings, the claim for compensation by Nawab Salar Jung III also disappeared. The claim of Swami Satyananda was for Rs. 29,91,600. The Land Acquisition Officer awarded Rs. 31,260-8-0 as the total compensation disallowing the claim in respect of the granite hillock on the ground that it was not covered by the grant to Swami Nijananda. The District Judge to whom reference was made under the Land Acquisition Act enhanced the compensation to Rs. 48,892 exclusive of statutory allowance and interest. Two of the issues framed by the District Judge related to the respondent's claim to a right in the quarry and also to the situs thereof i.e. as to whether it was within the patta land belonging to the claimant. He found that the rock was situated within the patta land of the claimant but with regard to the quarry rights he took the view on the basis of two Farmans of the Nizam Exs. A-21 and A-22 and Section 2(d) of the Mines Act and Section 3 of the Hyderabad Land Revenue Act that the claimant had no right to the minerals and quarries. He did not record any finding as to whether the jagir granted by the Nizam included the mining rights and whether the patta granted by the jagirdar conferred the same rights on the claimant in view of his conclusion on the points of law urged that mining rights were in the exclusive ownership of the Nizam. The High Court took the view that the District Judge had proceeded on the assumption that there was a grant to Nawab Salar Jung I with all the mineral products in the land by the jagir of 1820. It however held, differing from the District Judge, that the Farmans Exs. A-21 and A-22 did no more than explain the provisions of Section 63 of the Land Revenue Act and did not affect any subsisting rights in the minerals if they belonged to the jagirdar. According to the High Court the question as to whether the grant to Nawab Salar Jung did or did not include the granite in the hillock was never raised at any stage and it was assumed by every one that the grant to Nawab Salar Jung included the State Of Mysore vs Swamy Satyanand Saraswati, ... on 31 March, 1971 3 right to granite and that right was a subsisting right even while the Hyderabad Land Revenue Act 1907 was enacted. The High Court was not willing to entertain the contention raised by the Advocate-General for the first time that the grant did not include the right to granite in the hillock. The High Court apparently fortified its conclusion placing reliance,on the fact that copies of all the grants of jagirs should have been available with the State authorities and as the original grant to Nawab Salar Jung or an authenticated copy thereof was not produced, the necessary inference would be that the same would not support the contention of the Advocate-General. The High Court further took the view that the granite in respect of which compensation was claimed in the case was not a mineral and that being so neither Section 63 of the Hyderabad Land Revenue Act nor the Farmans referred to in Exs. A-21 and A-22 were relevant to the issue before it and it would not be possible to hold that the minerals and mineral products in the hillock vested in the Government under Section 63 of the Hyderabad Land Revenue Act. In our view it is not necessary to consider the effect of the Farmans or of Section 63 of the Hyderabad Land Revenue Act. It was for the respondent to establish his claim to minerals or quarry rights by putting forward proof of the grant thereof by the Nizam to Salar Jung and to show that his rights in the land held by him were co-extensive with those of Nawab Salar Jung 111. There is no scope for any presumption that the Nizam had parted with the mineral rights to the jagirdar or that the jagirdar had done so in his turn. Even assuming that the Nizam conferred the right of minerals in the land or to quarry for granite therein to Nawab Salar Jung 1, the question still remains, what right did the patta of the Salar Jung estate confer on the predecessor-in-interest of the claimant. The patta for S. Nos. 312 and 313 was marked as Ex. 49 in this case. It contains various columns including those for the name of "Khatedar", 'any increase or decrease in the land on account of cultivation or left uncultivated', 'remarks of the, village officers', "opinion of the Tahsildar" and "the approval of the 'Nizam' of settlement". Under the column headed "opinion of the Tahsildar" is to be found the following :- "The land bearing S. No. 254 Paramboke known as Bolurguddi' is situated in Madlapur village, the area of which is Ac. 290-00 and it has not been surveyed. Narasimha Bharati Swamy has filed an application wherein he has approved/accepted land the extent of Ac. 89-00 area in Tahsil office. As the village was under survey the Tahsil office sent the file to the Settlement Department... According to the profit accruing to the State as pointed measuring 109 acres and 13 guntas, having an measuring 13 acres 13 guntas having an assessment of Rs. 19 in all 183 acres 33 guntas and with a total assessment of Rs. 46 were given into the possession of the applicant and the remaining 109 acres 20 guntas have been included in the Paramboke the survey number of which is 154, the Government has got the right over the trees bearing fruit. The patta bearing S. Nos. 312- 313 may be made in the name of the applicant Narsimha Bharati Swamy from 1331 Fasli. The letter received from the Settlement is worthy of perusal. According to the remarks of Settlement Department, the entry of unculti- vated land has been made since 1330 F. because it was approved in 1330 F. The file of the Thasil has also been submitted. The acceptor has filed an application in the District office stating that the entry of the patta be made in the year 1330 Fasli and that he is willing to pay the amount." State Of Mysore vs Swamy Satyanand Saraswati, ... on 31 March, 1971 4 Ex. 50 is a copy of the proforma No. 8 (Takavi) statement of village Madlapur and is for Paramboke (patta) granted on 7th Mehar 1336 F. The remarks of the Tahsil office in this case read : "An assessment of Rs. 28-4-9 of the unsurveyed guntas at the Bolguddi is approved as per the District Office Order. Nijanand Narasimha Bharati Swamy of Dolurguddi is granted the excess of 'Lawani' in accordance with Rs. 0-4- 0 agreement from 'Dhara' to 'Rev-Sharan'." Reference may also be made to the letter issued by the Superintendent, Settlement Department, Salar Jung Estate where the petition for grant of patta of land of Bolur Gedda by Narasimha Bharati Swamy mentioned as one for the purpose of grazing cattle. According to this letter : measuring 209 acres and known as Bolur Gedda has been lying as a waste since a long time. The land in the said survey number is not fit for cultivation. On all the occasions water of the stream will be surrounded on all the four sides. It would be useful only for grazing the cattle. Near about the said survey land there are two tamarind trees. But the product of the trees has not been auctioned at any time. Now regarding the rent received by the Government of the State as indicated by the petitioner in regard to the aforesaid land of the land measuring 109 acres 13 guntas and measuring 74 acres and 20 guntas assessed at Rs. 19, thus a total of 183 acres and 33 guntas assessed at Rs. 46 has been given in possession of the petitioner and the rest of the land 106 acres and 20 guntas has been included in this 'purpose' land only and its survey number is 154. The tamarind trees standing on the said survey land would belong to the Government only. In case a petition is presented in future the lands may be included in the patta as per rules. The patta of the survey lands bearing S. Nos. 312, 313 may be made in the name of the peti- tioner Sri Nijanand Narasimha Bharati Swamy from the year 1331 F." It is amply clear from the above that what was in contem- plation of the grantor and grantee at the time of the grant was either the cultivation of the land or the grazing of cattle on it. Nobody at that time had any thought or idea of the land being put to any other use or any mining or quarrying rights being exercised therein. The grantor was careful to exclude even the fruit-bearing trees. It would be wholly unrealistic to construe the grant as conferring mining rights by implication simply because of the fact that there was no mention of it. A long line of decisions of the Judicial Committee of Privy Council relating mainly to the grants of land and leases by the Zamindars in Bengal makes it amply clear that sub-soil rights are not to be treated as having been conveyed by implication in grants of surface rights to tenure-holders pattidars (lessees) etc. In this connection it may be State Of Mysore vs Swamy Satyanand Saraswati, ... on 31 March, 1971 5 noted that by the Permanent Settlement of 1793 the zamindars with whom the lands were settled were held to be owners of all mines and minerals in their zamindaries. The decisions of the Privy Council relate principally to grants of land in coal-bearing areas before the discovery of any coal therein. One of the early cases of this type was that of Hari Narayan Singh v.. Sriram Chakravarti(1). There the dispute was as to the right to minerals lying under a village called Petena situate within the zamindari of the first appellant. The appellant's predecessor had conveyed some sort of interest in the village to a set of persons called Goswamis who were shebaits or priests of an idol. The Goswamis had purported to grant to the respondents two leases by virtue of which the latter claimed to have exercised rights with respect to minerals. There was no evidence whatever that the zamindar Raja had ever granted mineral rights to the Goswamis or any other person. The courts in India concurrently found that, no prescriptive rights had been proved by the respondents to any underground rights in the village. The High Court took the view that the Goswamis being tenure-holders had per- manent heritable and transferable rights, from which it was inferred that the underground rights also belonged to them. The Subordinate Judge had however inferred from the smallness of the jumma (rent) that only the surface rights and not the underground rights were intended to be let out to the Goswamis. The Board held that (p. 146) : ". . . . the title of the zamindar raja to the village Pctena as part of his zamindari before the arrival of the Goswamis on the scene being established as it has been, (1) 371. A. 136. 19-1 S.C. India/71 he must be presumed to be the owner of the underground rights thereto appertaining in the absence of evidence that he ever parted with them, and no such evidence has been produced." Durga Prasad Singh v. Braja Nath Bose (1) was a case where the zamindar of a permanently settled estate who asked for a declaration of his right to minerals as against a lessee from a digwar tenure holder. The digwar tenure was originally granted in consideration of the performance of military service to which police duties were attached. The tenure was hereditary and inalienable, the digwar being appointed by Government and being liable to be dismissed by Government for misconduct. On such dismissal the next male heir if fit to be appointed had the right to be appointed. The digwar of Tasra granted a perpetual lease of the coal mines underlying two villages to Tasra Coal Company in 1892. On the question as to whether the digwar had a proprietary right in the underground minerals the Board took the view that the permanent settlement having been made between the Government and the zamindar of Jharia and no attempt having been made to prove that the mineral rights were vested in the digwar before or at the time of the permanent settlement and there being no evidence to show that the zamindar had ever parted with mineral rights to the digwar, the latter could not be held to have any proprietary right in the minerals. In Girdhari Singh v. Megh Lai Pandey (2) the question before the Board was whether a mokarari lease of land with all rights carried a right to the subjecent minerals in a permanently settled estate. According to the Board (see page 248) "It is unavailing to urge that the right granted by the mokrari State Of Mysore vs Swamy Satyanand Saraswati, ... on 31 March, 1971 6 pottah to the lessee is of a permanent, heritable, and transferable character, as, even although this be the case, it does not advance the question whether the lease itself embraced within its scope the mineral rights. On the contrary, unless there. be by the terms of the lease an express or plainly implied grant of those rights, they remain reserved to the zamindar as part of the zamindari." Their Lordships referred to the decisions mentioned above as also to that of Sashi Bhushan Misra v. Jyoti Prasahad Singh Deo(3) and adopted the principle (p. 249) : "....... when a grant is made by a zamindar of a tenure at a fixed rent although the tenure may be permanent, heritable, and 'transferable, minerals will not be (1) 391. A. 133. (2) 441. A. 246. (3)44 I. A. 46. held to have formed part of the grant in the absence of express evidence to that effect." According to the Board "On the assumption that the expression (mai hak hakuk) means 'with all rights'. or may be properly amplified as 'with all right, title and interest', such expressions ... did not increase the actual corpus of the subject affected by the pottah. They only give expressly what might otherwise quite well be implied, namely, that that corpus being once ascertained, there will be carried with it all rights appurtenant thereto, including not only possession of the subject itself, but it may be of rights of passage, water or the like which enure to the subject of the potta and may even be derivable from outside properties. It must be borne in mind also that the essential characteristics of a lease is that the subject is one which is occupied and enjoyed and the corpus of which does not in the nature of things and by reason of the user disappear. In order to cause the latter specially to arise, minerals must be expressly denominated, so as thus to permit of the idea of partial consumption of the subject leased." Accordingly it was held that the words founded on did not add to the true scope of the grant nor cause mineral rights to be included within it. It should be noted here that there was a reference to the trees on the land in the pottas it being expressly provided that the lessee would be entitled to take the price of the trees by cutting and selling them and the zamindar would not have any right thereto. This was held by the Board to negative the idea that mokarari pottab could be comprehensively viewed to include mineral rights. According to the Board : "Such a lease is a lessee of the surface only. This is the general case to which in the present case there is alone superadded a right to the trees. The minerals are not included." Most of the above cases were referred to again by the, Board in Govinda Narayan Singh v. Sham Lai Singh (1) where after noting the earlier cases the Board concluded that' in the case of any claim against the zamindar to the lands which were included at the permanent settlement the burden of proof is upon the (1) 58 I. A. 125. State Of Mysore vs Swamy Satyanand Saraswati, ... on 31 March, 1971 7 claimant. Reference may also be made to Bejoy Singh Dudhoria v. Surendra Narayan Singh (1) where the Board held that the grant of a patni lease by a zamindar of his zamindari lands "including all interest therein, and jalkar, banker, falkar, beels and jhils at an annual jama containing a stipulation that the grantee should not cut trees or excavate a tank was only consistent with the theory that the lessee and those claiming under him were not entitled to excavate the soil for the purpose of making bricks and that there was no transfer of the property in the soil". In our view the principle which is to be deduced from these cases is not one which is to be confined to the case of zamindars in permanently settled estates. What has to be considered in each case is the purpose for which the lands are leased or an interest created therein with all the clauses which throw any light on the question as to whether the grantor purported to include his rights to the subsoil in the grant when there was no express mention of it. If the lease shows that the purpose of the grant was to allow the user of the surface only it would be wrong to presume that sub-soil rights were also covered thereby. The patta Ex. 49 in this case amply demonstrates that what was in contemplation of the parties at the time of the grant in .1930 was the cultivation thereof or grazing cattle thereon. The grantor was even careful to reserve the right to fruit-baring trees. It would be a strange construction to hold that although the grantor expressly excluded such trees from his grant he must be taken to have parted with his sub-soil rights by implication. We may also note that in State of Andhra Pradesh v. Duvvuru Balarami Reddy (2) where the respondents had obtained mining leases for mining mica from the owners of a certain shor- triem village it was held that shortriemdars had no rights in the minerals and the leases granted by them to the respondent had no legal effect. It is true that this Court was there dealing with rights of a different class of persons and it was claimed on behalf of the respondent that inasmuch as the grant included poramboke if followed that mere surface rights were not the subject matter of the grant. Rejecting this contention the Court observed (p. 183) : "So far as the sub-soil rights are concerned, they can only pass to the grantee if they are conferred as such by the grant or if it can be inferred from the grant that subsoil rights were also included therein.' (1) I. L.R. 61 Calcutta 1 (2) [1963] 1 S. C. R. 173 It is not in our view possible to hold otherwise than that granite is a mineral. According to Halsbury's Laws of England : "There is no generad definition of the word 'mineral'. The word is susceptible of expansion or limitation in meaning according to the intention with which it is used... It is a question of fact whether in a particular case a substance is a mineral or not. . . The test of what is a mineral is what, at the date of the instrument in question, the word meant in the vernacular of the mining world, the commercial world, and among landowners, and in case of conflict this meaning must prevail over the purely scientific meaning". State Of Mysore vs Swamy Satyanand Saraswati, ... on 31 March, 1971 8 (See Vol. 26, 3rd edition, Art. 674 page 320). In Article 675 at page 322 the learned authors summarise the case law on the subject as to whether particular substances are minerals or not. Reference is there made to the case of Attorney General v. Welsh Granite Co.(1) where granite was held to be included under the reservation of "minerals" in the Enclosure Act which reserved all mines, minerals, ores, coal, limestone, and slate to the Crown. According to Lord Coleridge, the word "minerals" was large enough to include granite. In the view we have taken, it is not necessary to consider the effect of the Farmans or Section 63 of the Hyderabad Land Revenue Act. In our view the pattas only indicating that the grant was for the purpose of cultivation or grazing of cattle with the express reservation of the trees on the land to the grantor, the question of grant of sub-soil rights by implication does not arise. It is therefore not necessary to consider the effect of the Farmans Exs. A-21 and A-22 or of Section 63 of the Hyderabad Land Revenue Act. The claim to compensation on the basis of the sub-soil rights to the hillock must therefore be negatived and the appeal allowed. In the result the decree of the High Court regarding the minerals in the land or quarry rights will be set aside and the judgement and order of the District Judge on that point restored. The respondent will be entitled to the costs of the appeal in pursuance of the, order of this Court made as a condition for setting aside the abatement of the appeal. V.P.S. Appeal allowed. (1) 1 The Law Times Reports 549. State Of Mysore vs Swamy Satyanand Saraswati, ... on 31 March, 1971 9 | {
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Lekh Raj Khurana vs Union Of India on 3 March, 1971 Equivalent citations: 1971 AIR 2111, 1971 SCR (3) 908, AIR 1971 SUPREME COURT 2111, 1971 LAB. I. C. 1240 Author: A.N. Grover Bench: A.N. Grover, S.M. Sikri, G.K. Mitter, K.S. Hegde, P. Jaganmohan Reddy PETITIONER: LEKH RAJ KHURANA, Vs. RESPONDENT: UNION OF INDIA DATE OF JUDGMENT03/03/1971 BENCH: GROVER, A.N. BENCH: GROVER, A.N. SIKRI, S.M. (CJ) MITTER, G.K. HEGDE, K.S. REDDY, P. JAGANMOHAN CITATION: 1971 AIR 2111 1971 SCR (3) 908 1971 SCC (1) 780 ACT: Constitution of India, 1950-Article 311-Civilian employee of Defence Service-If entitled to protection of Article. Statuory Rules-Breach of-justiciability Natural Justice-If can be invoked under general law of master and servant. HEADNOTE: The appellant was appointed in 1942 as Labour Supervisor, Army Ordnance Corps. In 1951, pending inquiry into certain charges against him his service was terminated by giving him one month's notice under rule 5 of the Civilians in Defence Services (Temporary Service) Rules, 1949. He challenged the legality of the order of termination on the grounds that it had been passed by an officer subordinate to the authority Lekh Raj Khurana vs Union Of India on 3 March, 1971 1 who appointed him and that no adequate opportunity had been afforded to him of defending himself. He also alleged that the Order was vitiated by mala fides. In the appellant's appeal against the dismissal of his suit the High Court held that Article 311 of the Constitution was inapplicable, that breach of the Rules did not give an aggrieved party a right to go to the Court and that the Order was not vitiated by mala fides.-Dismissing the appeal to this Court. HELD : The appellant, holding a post connected with Defence cannot claim the protection of Article 311 of the Constitution. Jugatrai Mahinchand Ajwani v. Union of India C.A. 1185 of 1965 dt. 6-2-67 and S. P. Bahl v. Union of India C.A. 1918 of 1966 dt. 8-3-68: followed. (ii)The view of the High Court that the rules are not justifiable cannot be sustained. Breach of statutory rules in relation to conditions ,of service would entitle the aggrieved government servant to have recourse to the court for redress. R. Venkataro v. Secretary of State, A.I.R. 1937 P.C. 31, The State ,of Uttar Pradesh & Others v. Ajodhya Prasad, [1961] 2 S.C.R. 671 and State of Mysore v. M. H. Bellary, [1964] 7 S.C.R. 471, referred to. In the present case the order of discharge has been passed by the ,appointing authority as required by rule 5. (iii)In the appeal before this Court the finding on the point of mala fides must be accepted as final and the appellant cannot be allowed to re-agitate that matters. (iv)As regards the applicability of the rule-of natural justice it has not been shown how under the general law of master and servant, in the absence of any protection conferred by Article 311 of the Constitution such a rule can be invoked. 909 JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 17-19 or 67. Appeal from the judgment and decree dated May 23, 1961 of e Punjab High Court, Circuit Bench at Delhi in Regular Second appeal No. 43-D of 1956. N. N. Keswani, for the appellant. V. A. Seyid Muhammad and S. P. Nayar, for the respondent. The Judgment of the Court was delivered by Grover, L This is an appeal by certificate from a judgment and decree of the Punjab High Court (Circuit Bench, Delhi) by which the suit filed by the appellant for a declaration that the order dated May 26, 1951 directing his removal from service was wrongful, illegal and void and that he still continued to be in the service of the respondent as Supervisor, Army Ordnance Corps. Lekh Raj Khurana vs Union Of India on 3 March, 1971 2 According to the allegations in the plaint the appellant was appointed by the Governor-General in July 1942 as Supervisor, Army Ordnance Corps which, according to him, was a civil post under the Crown in India. In the months of September and October, 1950 the appellant was served with chargesheets by the Ordnance Officer, Administration, Shakurbasti, Delhi State, where he was posted at that time calling upon him to submit his defence to the charges of making serious false allegations against his superior officer Maj. H. S. Dhillon. The appellant asked for grant of time for submitting his defence and be also demanded copies of certain documents etc to prove his case. On May 26, 1951 while this inquiry was pending he was served with an order by the Ordnance Officer, Administration, Shakur- basti, Delhi which was as follows-- "Under instructions received from Army Head- quarters you are hereby given one month's notice of discharge with immediate effect, services being no longer required. Your services will be terminated on 25th June, 1951". The appellant challenged the legality of the above order principally on the ground that it had been passed by an officer who was subordinate to the authority who appointed him and that no inquiry "as required by Fundamental Rules and under the provisions of the Constitution of India" had been held in the matter of allegations against him and that no adequate opportunity had been afforded to him of defending himself or of show- ing cause against the action proposed to be taken. He all raised the question of the order being vitiated by mala fid In the written statement filed by the Union of India it was stat that the appellant had been appointed as a Labour Supervisor he Extra Temporary Establishment by the COO/Ordnan Officer Incharge, Ammunition Depot, Kasubegu under t authority of Financial Regulations, India, Part 1, Volume and not by the Governor General. It was pleaded, inter all that it was decided by the Government of India vide Army Headquarter's letter dated May, 25, 1951 to terminate the services by serving one month's notice. Consequently a notice of discharge from the service was given to him by the Ordnance Officer, Administration, who was competent to serve the notice on him under the authority of the Army Order No. 1202/1943 read in conjunction with 'Financial Regulations referred to before. The sole material issue which was framed was whether the order dated May 26, 1951 removing the appellant from service was illegal, wrong, void, ultra vires and inoperative. The trial judge held that Art. 311 of the Constitution was applicable to the case of the appellant and that his removal had not been ordered by the appointing authority. The suit was decreed. respondent preferred an appeal which was decided by the Additional District Judge, Delhi. It :Was held by him that Art. 311 was not applicable to the appellant as he held a post connected with defence. According to the learned judge the appellant's services were terminated under Rule 5 of the Civilians in Defence (Temporary Services) Rules, 1949, hereinafter called the 'Rules'. It was found that the order terminating the services had been passed by the proper authority. The appeal was allowed and the suit was dismissed. The appellant appealed to the High Court which was dismissed. His appeal was heard along with certain other appeals in which similar points were involved. It was found that the salary of the appellant was paid out of the estimates of the Mnistry of Defence and he was intimately connected with the defence of the country not as a combatant but as a person holding a post the object of which was exclusively to serve the Military Department. In the opinion of the High' Court Articles 309 and 310 were applicable to the case of the appellant but Article 311 was inapplicable. On Lekh Raj Khurana vs Union Of India on 3 March, 1971 3 the question whether the services of the appellant were terminated without complying with the rules the High Court expressed the view that the breach of such rules did not give the aggrieved party a right to go to the court Reliance in that connection was placed on the decision of the Privy Council in R. Venkatarao v. Secretary of State(1) and certain other cases in which that decision was followed. In the case of the appellant the only other point which appears to have appear to have been argued on his behalf and which was decided by the High Court related to the allegation of mala fides. The decision went against him on that, point. The question whether the case of the appellant was governed by Art. 311 of the Constitution stands concluded by two decisions of this court. In Jagatrai Mahinchand Ajwani v. Union of India(2) it was held that an Engineer in the Military Service who was drawing these salary from the Defence Estimates could not claim the protection of Art. 311(2) of the Constitution. In that case also the appellant was found to have held a post connected with Defence as in the present case. This decision was followed in S. P. Bell v. Union of India (3). Both these decisions fully cover the case of the appellant so far as the applicability of Art. 3 1 1 is concerned. Learned counsel for the appellant sought to argue that since the appellant was admittedly governed by the rules which framed under s. 241(2) 'of the Government of India Act 1935 he was entitled to the protection of s. 240 of that Act. Chapter I of Part 10 of that Act related to the Defence Services. According to ss. 239, 235, 236 and 237 were applicable to persons who not being members of His Majest's Forces held or had held posts in India connected with the equipment or administration of those forces or otherwise connected with Defence as they applied in relation to persons who were or had been members of those forces. Section 240, to the extent it is material was in the following terms:- "240(1) Except as expressly provided by this Act, every person who is a member of a civil service of the Crown in India, or holds any civil post under the Crown in India, holds office during His Majesty's pleasure. (2) No such' person as aforesaid shall be dismissed from the service of His Majesty by any authority subordinate to that by which he was appointed. (3) No such person as aforesaid shall be dismissed or reduced in rank until he has been given a reason able opportunity or showing cause against the action proposed to be taken in regard to him : (1) A.I.R. (1937) P.C. 31. (3) C, A 1918 of 1966 dt. 8-3-68. 14-L1100sup.CI/72 (2) C. A. 1185 of 1965 dt. 6-2-67. Provided................ Section 241 provided for recruitment and conditions of service. On behalf of the appellant it was contended that since his conditions of service were governed by the rules which were framed under the above section, s.240 was clearly applicable and his services could not have been terminated in terms of subs. (2) of that section by any authority subordinate to that by which Lekh Raj Khurana vs Union Of India on 3 March, 1971 4 he was appointed nor could he be dismissed or reduced in rank until he had been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. At no stage of the proceedings in the courts below the appellant relied on s. 240 of the Government of India Act and rightly so because the order of his discharge or termination of service was made after the Constitution had come into force. It was apparently for that reason. that protection was sought from Art 311 and not s. 240 of the Government of India Act 1935. We see no reason or justification in the present case for determining whether a person holding a civilian post which is connected with the defence and for which he is paid salary and emoluments from the Defence Estimates would be governed by the provisions of section 240 of the Government of India Act if the provisions of that Act were not applicable to the case of such a servant. The next question is whether rule 5 of the Rules was applique able and whether the appellant could claim the benefit of that rule. It provided, inter-alia, that the service of a temporary government servant who is not in quasi-permanent service shall be liable to termination at any time by notice in writing given either by the", government servant to the appointing authority or by the appointing authority to the government servant. The view of the High Court that the rules were not justifiable cannot be sustained as the decision of the Privy Council in Venkatarao's case (supra) and the other cases following that view have not been accepted as laying down the law correctly by this court. It has been held that the breach of a statutory rule in relation to the conditions of service would entitle the government servant to have recourse to the court for redress; vide The State of Uttar Pradesh & Others v. Ajodhya Prasad(1) and State of Mysore v. M. R. Bellary(1). Now Exhibit P. 3 which is a letter dated May 26, 1951 and which was produced by the appellant himself shows that one months notice of discharge was given by the ordnance Officer, Administration, under instructions received from the Army Headquarters. A copy of another letter Exht. P-2 dated May 27, 1951 was produced according to which it had been decided by the Government (1) [1951] 2 S.C.R.671. (2) [1964] 7 S.C.R.471. of India that the services of the appellant be terminated by giving him one month's notice. It is true that the origin of that letter was not produced although it had been summoned by the appellant It is at least clear that the. Ordnance Officer, Administration, had served the notice of discharge under instructions from the Army Headquarters. In this view of the matter there is no substance in the contention raised on behalf of the appellant that the order of discharge had not been made by the appointing authority. At any rate before the High Court there was no challenge to the finding of the learned District Judge on the point and a question of fact cannot be allowed to be reopened at this stage. The learned counsel for the appellant attempted to reopen the finding on the question of mala fides and also invoked the rule of natural Justice in so far as the appellant had not been afforded any opportunity of showing cause against his discharge or termination of services. In the appeal before this Court the finding on the point of mala fides must be accepted as final and the appellant cannot be allowed to reagitate that matter. As regards the applicability of the rule of natural justice it has not been shown to us how under the general law of master and servant, in the absence of any protection conferred by Article 311 of the Constitution such a rule can be invoked. The appeal fails and it is dismissed but in view of the cir- cumstances we leave the parties to bear their own costs in this Court. Lekh Raj Khurana vs Union Of India on 3 March, 1971 5 R.K.P.S. Appeal dismissed. Lekh Raj Khurana vs Union Of India on 3 March, 1971 6 | {
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K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 Equivalent citations: 1972 TAX. L. R. 197, (1972) 1 S C R 1034, (1972) 1 I T J 491, 1972 U P T C 64, (1972) 1 S C J 734, 82 I T R 680 PETITIONER: K. D. KAMATH & CO Vs. RESPONDENT: C.I.T., BANGALORE DATE OF JUDGMENT11/10/1971 BENCH: ACT: Indian Income-tax Act, 1922, s. 26A-Indian Partnership Act, 1932, ss. 4, 14, 18-Working partners to work under direction and control of managing partner-Working Partners not authorised to pledge property of firm or raise loans on behalf of firm-Whether partnership lacks essential element of agency of partners--Firm whether to be registered under s. 26A of Income-tax Act. HEADNOTE: The appellant was a firm consisting of six partners and the partnership was constituted under a document dated March 20, 1959, the business of the partnership having already commenced from October 1, 1958. The partnership was registered under the Indian Partnership Act 1932 on or about August 11, 1959. For the assessment year 1959-60 corresponding to the previous year ending March 31, 1959 the appellant filed an application for registration under s. 26A of the Indian Income-tax Act, 1922. The Income-tax Officer by his order dated September 28, 1960 declined to grant registration on the ground that there was no . relationship of partners inter se created under the partnership deed. The Appellate Assistant Commissioner upheld the order of the Income-tax Officer. The Tribunal held that there was agreement to share profits between partners and each of the partners could act as agent of all and therefore the requirements of partnership were fully satisfied. In the reference the High Court held that cls. 8, 9 and 16 of the deed showed that the management as well as the control of business was entirely left in the hands of the first partner and that the other partners were on to K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 1 serve under his directions and further they had no authority to ac cept any business except with the consent of the first partner nor could they raise any loan or pledge the firm's interest. On this reasoning the High Court came to the conclusion that there was no relationship of partners created under the partnership deed and as the essential element of agency was lacking the appellant was not eligible to be granted registration under s. 26A. In appeal to this Court, HELD : (i) The mere nomenclature given to a document is by itself not sufficient to hold that the document in question is one of partnership. Two essential conditions to be satisfied are (1).that there should be an agreement to share profits as well as. the losses of the business and (2) the business must he carried on by all or any of them acting for all within the meaning of the definition of partnership under s. 4 of the partnership Act. The fact that the exclusive power to control by agreement of the parties is vested in one partner or the further circumstance that only one partner can operate the bank account or borrow on behalf of the firm are not destructive of the theory of partnership provided the two essential conditions mentioned earlier are satisfied. [1050 F-G] (ii)Under the partnership deed in question the relationship which had been brought into existence between the six parties was a relationship of partners who had agreed to share profits and losses of the, business carried on by all or any of them acting for all and it satisfied the defini- tion of partnership under s. 4 of the Partnership Act. There was sharing 1035 of the profits or losses of the business by the partners in the ratio of the proportion mentioned in cl. 5. That clause read with other clauses clearly showed that the first condition namely of all persons agreeing to share profits or losses was satisfied. Even on the basis that the entire control or management of the business was vested in Party No. 1 and that parties 2 to 6 were working partners who had to work under his directions, from all the other %circumstances it was clear that the conduct of business by Party No. 1 was done by him acting for all the partners. There was no indication to the contrary in the partnership deed. Therefore even without anything more it was clear that as the partnership business was carried on by Party No. 1 acting for all, the second condition of agency was also satisfied. This idea was further reinforced by cl. 16 of the deed which provided that the firm's affairs were to be carried on for mutual benefits. [1051 C-F] (iii)The High Court was wrong in holding that cl. 9 of the deed under which parties 2 to 6 had no right to raise loans for and on behalf of the firm or pledge the firm's interest was destructive of the element of partnership. No doubt under s. 18 of the Partnership Act a partner is the K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 2 agent of the firm for the business of the firm. But that section itself clearly says, that it is subject to the provisions of the Act. It is open to the parties under s. 11 to enter into an agreement regarding their mutual rights and duties as partners of the firm. Further if the ingredi- ents of partnership referred to in s. 4 of the Act are found to exist there is no escape from the conclusion that a partnership has come into existence. So far as the outside world was concerned, so long as parties 2 to 6 were held out as partners of the firm, as had been done under the partnership deed their acts would bind the partnership. The provision in cl. 9 was only an inter se arrangement entered into by the partners in and by which the working partners had agreed not to raise loans or pledge the firms interest. [1052 A-E] (iv)The provisions of s. 14 of the Act could not sustain the argument that cl. 9 of the deed negatived the theory of agency. Section 14 itself clearly shows that the provisions contained therein are subject to the contract between the parties. [1052 G-H] In the result, the appeal must be allowed. Babubhai Gulabdas Navlakhi v. C.I.T., Bombay, [1962] 46 I.T.R. 492, C.I.T., Gujarat v. A. Abdul Rahim & Co., [1965] 55 I.T.R. 651, C.I.T. Kerala v. Pathrose Rice & Oil Mills, [1960] 40 I.T.R. 353, P.G. C. Ratnaswamy Nadar & Sons v. C. I. T., Madras, [1962] 46 I.T.R. 1148, C.I.T. v. R. S. Shoe Factory, [1963] 47 I.T.R. 917, Murlidhar Kishangopal v. C. I. T.. M.P. Nagpur & Bhandara, [1963] 50 I.T.R., 628 and City Tobacco Mart v. C.I.T., Mysore, [1967] 64 I.T.R. 478, referred to. Umarbhai Chandbhai v. C.I.T., Bombay City, [1952] 22 I.T.R. 27 and M. P. Davis v. Commissioner of Agricultural, Income- tax, [1959] 35 I.T.R. 803, distinguished. Steel Brothers & Co. v. C.I.T., [1958] 33 I.T.R. 1 and Agarwal & Co. C.I.T., U.P., [1970] 77 I.T.R. 10, relied on. C.I.T., Mysore V. K. D. Kamath & Co., [1964] 54 I.T.R. 72, reversed. 1036 JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1242 of 1968. Appeal by special leave from the judgment and order dated January 21, 1964 of _the Mysore High Court in I.T.R.C. No. 13 of 1963. S.K. Venkataranga Iyengar and J. Ramamurthi, for the appellant. K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 3 S. K. lyer and R. N. Sachthey, for the respondent. The Judgment of the Court was delivered by Vaidialingam, J. This appeal, by special leave, raises the. question whether the, deed dated March 20, 1959 and marked Ex. A is an Instrument of Partnership on the basis of which the ,appellant firm is eligible to be granted registration under S. 26A of the Indian Income-tax Act, 1922 (hereinafter to be referred as the Income-tax Act). The appellant is a firm consisting of six, partners and the partnership was constituted under the document dated March 20, 1959. The 'business of the partnership, as recited in the deed. is stated to have been carried on in partnership from October 1, 1958. The partnership was registered under the Indian Partnership Act, 1932, (hereinafter to be referred as the Partnership Act) on or about August II,, 1959. For the assessment year 1959-60, corresponding to the previous year ending March 31, 1959, the appellant filed an application to the Income-tax Officer, 'A' Ward, Dharawat under s. 26A for registration of the partnership in the name of M/s. K. D. Kamath and Company. The Income-tax Officer by his order dated September 28, 1960 declined to grant registration on the ground that there was no genuine partnership brought into existence by the deed of March 20, 1959 and that the claim of the firm having been constituted is not genuine. The said officer further held that the business should be held to be the sole concern of K. D. Kamath. For coming to this conclusion, the Income-tax Officer has mainly relied on clauses 8, 9, 12 and 16 of the partnership deed. Though the Income-tax Officer has used a loose expression that there is no genuine partnership, the sum. and substance of his finding is that there is no relationship of partners inter se created under the said document. Mr. S. k. Iyer, learned counsel for the Revenue, has also ,clarified the position before us by stating that the Department is not challenging the genuineness of the document. According to the learned counsel, the stand taken by the Revenue is that no legal relationship of partners has been brought about as between the parties to the document. In short, his contention is that the arrangement evidenced by Ex. A is not that of "partnership" as understood in law. On appeal by the assessee, the Appellate Assistant Commis- sioner on May 5, 1961 confirmed the order of the Income-tax Officer. According to the Appellate Assistant Commissioner no partnership has been brought about by the deed dated March 20, 1959 and that the business continues to be the proprietary concerti of K. D. Kamath. In coming to. this conclusion 'the appellate authority has laid special emphasis on clause 12 of the deed-. The assessee carried the matter in further appeal I.T.A. No. 3220 of 1961-62 (Assessment year 1959-60) before the. Income-, tax Appellate Tribunal, Bombay Bench 'B'. The Appellate Tribunal, after a reference to the relevant clauses in the partnership deed, came to the conclusion that the two essential requirements as laid down by the courts for determining whether there is a partnership, namely, an agreement between the parties to ;hare profits and each of the parties acting as agent of all, are fully satisfied in this case. In this connection the Tribunal placed reliance on the decision of the Bombay High Court in Balubhai Gulabdas Navlakhi v. Commissioner of Income-Tax, Bombay(1) and distinguished an earlier decision of the same court reported in Umarbhai Chandbhai v. Commissioner of Income- tax, Bombay City(2). Ultimately, the Appellate Tribunal held that the partnership deed makes it clear that profits and losses are to be shared between the parties and that, K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 4 subject to the over-riding authority of K. D. Kamath, the other partners could act for the firm. In this view, the Appellate Tribunal held that the deed does create a relationship of partners inter se between the parties thereto and directed the Income-tax Officer to register the firm under s. 26A of the Income-tax Act. herein, made an application on October 4, 1962 under s. 66(1) of the Income-tax Act praying for a reference being made by the Appellate Tribunal to the High Court of the question of law mentioned in the application. The said application was numbered as 66-RA-978 of 1962-63. The Appellate Tribunal accordingly submitted an agreed statement of case and referred to the High Court for its opinion the following question of law : "Whether, on the facts and in the circumstances of the case, M/s. K. D. Kamath & Co., could be granted registration under Section 26A of the 1 Act for the assessment year 1959-60 ?". (1) [1962] 46 I.T.R. 492. (2) [1952] 22 I.T.R. 27 The High Court by its judgment and order dated January 21, 1964 in I.T.R. C. No. 13 of 1963 answered the question ,referred to it against the assessee and held that the appellant firm could not be granted registration under s. 26A for the assessment year 1959-60. It is against this decision of the, High Court that the assessee has filed the above appeal. The High Court has generally considered the effect of cls. 5 to 9, 12 and 16 of the partnership deed. The High Court also considered the question whether the partnership deed satisfies the two essential requisites to constitute the partnership, namely, (1) whether there is an agreement to share profits as well as the losses of the business, and (2) whether each of the partners under the deed can act as agent of all. From the discussion in the judgment, the learned Judges. so far as we could see, have not thought it necessary to consider elaborately the question whether there is an. agreement in the partnership deed to share the profits and losses of the business. Obviously, the High Court must have been satisfied from the recitals in the partnership deed that this requirement is amply satisfied in this case. That is why we find that the learned Judges have focused their attention as they themselves say in the Judgment, on the question whether it is possible to hold from the recitals in the partnership deed that each partner is entitled to act as agent of all. In considering this aspect, the learned Judges have referred particularly to cls. 8, 9 and 16 of the partnership deed and have held that it is clear from these clauses that the management, as well as the control of the business, is entirely left in the hands of the alleged first partner K. D. Kamath and that the other partners are only to work under his directions and share profits and losses in accordance with the proportions mentioned in cl. 5. It is the further view of the High Court that it is not within the power of the other five parties to act as agent of the other partners as they cannot accept any business except with the consent of K. D. Kamath nor can they raise any loan or pledge the firm's interest. On this reasoning, the High Court has come to the conclusion that there is no relationship of partners created under the partnership deed and as this essefftial element of agency is lacking, the appellant was not eligible K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 5 to be granted registration under S. 26A. The learned Judges, in coming to this conclusion, have placed considerable reliance on the decision of the Bombay High Court in Umarbhai Chanbhai v. Commissioner Of Income-tax, Bombay City(1) as well as the decision of this Court in M. P. Davis v. Commissioner of Agricultural Income-tax(2). At this stage we may mention that the judgment of the Mysore High Court, which is under appeal before us, is reported in Commissioner of Income-tax, Mysore v. K. D. Kamath & Co.($). (1) [1952] 22 I.T.R. 27. (2) [1959] 35 I.T.R. 803. (3) [1964] 54 I.T.R. 72. Mr. S. K. Venkataranga Iyengar, learned counsel for the assessee-appellant referred us to the various clauses in the partnership deed and urged that the view of the High Court that the essential element of agency is absent in this case, is erroneous. The counsel further urged that the, partnership deed, read as a whole, leaves no room for doubt that there is an agreement to share the profits and losses of the business in the proportion mentioned in the deed. Therefore, one of the essential ingredients to constitute a partnership is satisfied in this case. He further urged that though a large amount of control regarding the conduct of business may have been left in the hands of the first partner K. D. Kamath, that circumstance, by itself, does not militate against the view of one partner acting as a of the other partners. He referred us, in this connection, tip- certain decisions of the High Courts, as well as of this Court, where under circumstances similar to the one exisitng before us, it has been held that the mere fact that more control is to be exercised only by one of the partners, is 'not a circumstance which militates against the parties having, entered into a partnership arrangement as understood in law, Mr. S. K. Iyer, learned counsel for the Revenue, supported the reasoning of the High Court its entirety. According to the learned counsel, the question whether there is an agreement to share the profits and the losses of the business and the further question whether each of the partners is entitled to act as agent of all are to be determined by looking into all the facts as borne out by the deed of partnership. He urged that on a consideration of all such facts, the High Court ha' held that one of the essential conditions, namely, the right of one partner to act as. agent of all, does not exist in the present case. If so, the counsel urged, the opinion expressed by the High Court that the appellant is not eligible for registration under s. 26A is correct. 'In support of his contentions, the counsel also referred us to certain clauses in the partnership deed as well as to certain provisions of the Partnership Act. From what is stated above, it is clear that the various authorities as well as the High Court have only considered some of the clauses of the partnership deed for coming to the conclusion one way or the other. In considering the question whether the partnership deed creates the relationship of partners as between the parties thereto, as understood in law, it is desirable to have a complete picture of the entire document. Ex. A, the partnership deed runs as follows "INSTRUMENT OF PARTNERSHIP. Articles of agreement made at Hubli, this 20th day of March, 1959, Among (1) Shri krishnarao Dadasaheb Kamat, hereinafter called the Party hereto of the 1st part, (2) Shri Narayan Ganesh. K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 6 kamat hereinafter called the party hereto of the 2nd part, (3) Shri Shripadrao Damodara Kamat, hereinafter called the party hereto of the 3rd part, (4) Shri Dnyanoba Jotiram Mohite, hereinafter called the party hereto of the 4th part, (5) Shri Shankar Govind Joshi, hereinafter, called the party, hereto of the 5th party, and (6) Shri Yashavant Bhawoo Kate, hereinafter called the party of the 6th part, All Hindu inhabitants. residing at Hubli, and whereas the parteis from 2 to 6, who have been serving with party No. 1since a very long time and in view of the appreciation of their honest and sincere services which the above parties have rendered in past and with the object that the above parties should also have their material and economical- progress, party No. i.e. Shri K. D. Kamat has been pleased to convert his sole proprietary concern, as a partnership concern, by admitting the above parties from 2 to 6 as working partners and the party No. 1 shall be the main financing and managing partner and the, business of the partnership is agreed and is being carried on accordingly in partnership as from 1st Day of October, 1958, as "Contractors" or any other business that the parties may think fit under the name and style of "Messrs. K. D. Kamat & Co., Engineers and Contractors, Hubli" and it is hereby agreed by and among, the parties to this Agreement as under 2.That the business of the partnership is running under the name and style of "Messrs K. D. Kamat & Co., Engineers & Contractors, Hubli" as from the 1st day of October 1958 and this agreement shall take retrospective effect and shall be deemed to have come into operation as from the commencement of 1st October, 1958. 3. That the duration of the partnership shall be at will. 4.That the business of the partnership is running at Hubli and shall run at Hubli or at such other place or places, as the case may be under the name and style, of "Messrs. K. D. Kamat & Co., Engineers & Contractors" or in such other name or names that the parties may from time to time decide and agree upon. 5.That the final accounts of the partnership firm shall be made up on the last day of each year of account, which shall generally be on 31st day of March every year of account and the accounts shall be taken upto that date of all the stock-in-trade and after providing for all the working expenses, the remaining net profits or losses, as the case may be, shall as shared by the parties hereto as under:- ----------------------------------------------------------- Names of Partners Extent of Individual Share ------------- - -- - --- - -------------------------------- 1.Shri Krishnarao Dadasaheb Kamat 5 shars 2.Shri Narayan Ganesh Kamat 2 shares 3.Shri Shri Dadarao Damodara Kamat 2 shares K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 7 4.Shri Dayanoba Jotiram Mohite 2 shares 5.Shri Shankar Govind Joshi 2 shares 6.Shri Yashavant Bhawoo Kate 2 shares ------------------- TOTAL 15 shares --------------------- 6. That it is agreed among the partners that the party No. 1, i.e., Shri K. D. Kamat, shall be the principal and financing partner and the rest of the partners i.e. from 2 to 6 are admitted only as working partners contributing labour. 7. That the Good-will of the firm shall be wholly and solely belong to party No. 1 i.e. Shri K. D. Kamath. 8. That the party No. 1, i.e., Shri K. D. Kamat, who is the principal and financing partner and by virtue of his having the long standing experience.in the line of business together with the technical knowledge of Engineer, shall have full right of control and management of the firm's business and in the best interest of the firm, it is thus decided and agreed upon among all the partners that all the working partners from 2 to 6 shall always work according to the instructions and directions given from time to time by Shri K. D. Kamat, in the actual execution of works and in any other matter connecting thereof, pertaining to this partnership business. The decision of the principal partner on the aspect of taking any new business or giving Lenders for, new works, shall always vest with him, whose decision shall be final and 'binding upon all the working partners. 9. That it, is also agreed among the partners that no working partner or partners is/are authorised to raise a loan for and on behalf of the firm or pledge the firm's interest directly or indirectly and such an act shall not be binding on the firm, except under the written authority of the principal partner. 10. That it is further expressly agreed, that excepting the parties No. 1 and 2 i.e. Shri K. D. Kamat and Shri N. G. Kamat, the other Parties from 3 to 6 shall not do contract business, so long as they are partners in this firm and this clause is inserted in the betterment of the firm's business and with the object that the firm's business should not suffer and the works if taken or standing in the name of the said parties from 3 to 6, the same, shall be the business of the firm. 11. That it is also further agreed that the Managing Partner Shri K. D. Kamat shall alone operate the Bank accounts and in case of any need for convenience, the partner authorised by him in writing and so intimated to the Bank or Banks, shall operate, K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 8 ,the Bank accounts. 12. That in the course of the business or during the existence of the firm's business, the principal partner has reason to believe that any working partner or partners is/are not working and conducting to the best interest of the firm, the principal partner shall have a right to remove such a working partner or partners from the "Partnership concern and in such an eventuality the out going working partner or-partners, shall have only right of the profit, or loss upto the date of his retirement, as may be decided by the principal partner in Jump sum either by paying or receiving. regard being had to the progress of the business or otherwise upto the date of retirement, only on the completed works.. 13. That proper books of accounts shall be kept by the said parties and entries made therein of all such matters, transactions and things. as are usually entered in the books of accounts kept by the persons engaged in business of a similar nature; all books of accounts, documents, papers and things shall be kept at the principal place of business of the firm and each partner shall at all times, have free and equal access to them. 14. That each partner shall be just and faithful to the other or others in all matters relating to the business of the firm, shall attend deligently to the firm's business and give a true account and shall give information relating to the same without fail. 15. That each partner shall withdraw such sums as will be mutually determined by the partners from time to time, in anticipation of the Profit falling to-their individual share and in case of loss, the same shall be made good by the partners. 16. Thus subject to the provisions herein mentioned and laid ,down and made thoroughly known by each of the parties to this Agreement with sound mind and body, the firm's affairs be carried on for mutual gain and benefit and if any questions which may ..arise or occur touching to the conduct or management or liability of the firm, the same shall be amicably settled among the parties with the consent of principal partner, whose decision in the matter shall be final and binding on all partners. In witness whereof the parties to this agreement have set their hands and seals to this Agreement as under: 1. Signed and Delivered by the within named Shri K. D. Kamat, himself Sd. K. D. Kamat 2. Signed & Delivered by the within named Shri N. G. Kamat, himself Sd. N. G. Kamat K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 9 3. Signed & Delivered by the within Sd.S. D. Kamat named Shri S. D. Kamat, himself Sd. V. D. Jituri in the presence of 4. Signed & Delivered by the within named Shri D. J. Mohite, himself Sd. D. J. Mohite 5. Signed & Delivered by the within named Shri S. G. Joshi, himself Sd. S. G. Joshi 6. Signed & Delivered by the within named Shri Y. B. Kate, himself Sd. Y. B. Kate. Sd./ Certified to be the true copy of the original. For K. K. D. KAMAT & CO." The High Court, so far as we could see, has rested its decision On five circumstances for holding that there is no relationship of partners as between the parties inter se, created under the partnership deed. They are based on consideration in particular of cls. 8, 9 and 16. The following are the circumstances, which according to the learned Judges militate against holding in favour of the assessee; (1) The management as well as the control of the business is entirely left in the hands of the alleged first partner k. D. Kamath; (2) The other partners can merely work under his directions and share in the profits and losses in accordance with the proportion mentioned in cl. 5; (3). It is not within the power of the parties Nos. 2 to 6 to act as agent of other partners; (4) The said parties cannot accept any business except with the consent of K. D. Kamath; and (5) Those parties cannot raise any loan or pledge the, firm's interest, directly or indirectly, except under the written authority of K. D. Kamath. In view of all these circumstances, according to the High Court, one of the essential element to constitute partnership, namely, agency is lacking. We will now refer to some of the provisions of the Income- tax Act as well as the Partnership Act. Section 2 (6B) of the Income-tax Act provides that the expressions "firm", "partner" and "Partnership" have the same meaning respectively as in the Partnership Act. There is no doubt a proviso with which We are not concerned. Section 26A of the Income-tax Act lays down the procedure regarding registration of films. Section 59 authorises the Central Board of Revenue, subject to, the control of the Central Government, to make rules for carrying out the purpose of the Act. The relevant Income-tax Rules Jay down the details of the procedure for making an application for registration of a firm as contemplated under s. 26A. As there is no controversy that the application has been made by the appel- lant in accordance with s. 26A and the relevant Rules, it is 'unnecessary for us to quote the section and the relevant Rules. Coming to the Partnership Act, s. 4 which defines "partner- ship" runs as follows : " Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all." K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 10 Section 6 deals with the made of determining the existence of partnership. As per that section in determining whether a group of persons is or is not a firm or whether a person is or is not a partner in a firm, regard is to be had to the real relation between the parties as shown by all relevant facts taken together. Section 11(1) provides that subject to the provisions of the Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners and such contract may be expressed or may be implied by a course of dealing. It further provides that such contract may be varied by consent of all the partners and such consent may be expressed or may be implied by a course of dealing. Sub-s. (2) clearly provides that notwithstanding anything contained in s. 27 of the Indian Contract Act, the contract between the partners may provide that a partner shall not carry on any business other than that of the firm while he is a partner. Section 12 in cls. (a) to (d) deals with the rights and duties of a partner, but that again is subject to contract between the partners. Section 14, on which some reliance has been placed by the counsel for the Revenue is as follows "Section 14 : The property of the firm : Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business. Unless the contrary intention appears, property and rights and interests in property acquired With money belonging to the firm are deemed to have been acquired for the firm." Section 18 provides that subject to the provisions of the Act, a partner, is the agent of the firm for the Purpose of the business of the firm. Section 19(1) provides that subject to the provisions of s. 22, the act of a partner which is done to carry on, in the usual way, the business of the kind carried on by the firm binds the firm. It further states that the authority of a partner to so bind the firm conferred by the said section is called his "implied autho- rity." Sub-section (2) enumerates the various matters, which a partner cannot do under the implied authority, in the absence of any usage or custom or trade to the contrary. Section 20 dealing with the extension and restriction of partner's implied authority runs as follows "Section 20. Extension and restriction of partner's implied authority : The partners in a firm may, by contract between the partners, extend or restrict the implied authority of any partner. Notwithstanding any such restriction, any act done by a partner on behalf of the firm which falls within his implied authority binds the firm, unless, the person with whom he is dealing, knows of the restriction or doesnot know or believe that partner to be a partner." From a perusal of the partnership deed one thing is clear, namely, under cl. (1) what was originally the sole proprietary concern of K. D. Kamath has been converted as partnership concern by admitting parties Nos. 2 to 6 as working partners, along with party No. 1, and party No. 1 is the main financing and managing K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 11 partner of the business. That clause has to be read a-long with cl. (6) whereunder the partners have agreed that K. D. Kamath shall be the principal and financing partner and the rest of the partners, namely, parties Nos. 2 to 6 are admitted only as working partners contributing labour. Clause (4) deals with the running of the partnership business at Hubli as also other place or places or with such other name or names that the parties (which means partners Nos. 1 to 6) may from time to time decide and agree upon. From clauses (1), (2) and (3), it is clear that the business of the partnership is that of Engineers and Con-tractors. We are referring to this aspect because it will have a bearing regarding the control of the business agreed to be vested in K. D. Kamath. There does not appear to be any controversy that party No. 1 has been carrying on such business as a proprietary concern for a long time before the partnership was formed and as such he is considerably experienced in the said technical type of business. Clause" (5) provides that final accounting is to be taken as on March 31 of every year and the net profits and losses are to be shared by the parties thereto in the proportion of the shares specified in the said clause. Under clause 11, apart from the managing partner, K. D. Kamath operating the bank accounts, any other partner authorised by him isalsoeligibletooperatethebankaccounts. Clause,(12) entitles a partner, when he ceases to be a partner to be paid his share of profit or loss, upto the date of his so ceasing to be a partner. Clause (13) provides that books of accounts are to be properly maintained and each partner has a right at all times to have free and equal access to them. Clause (14) enjoins on each part-; ner to be just and faithful to the other partners in all matters relating to the business of the firm and each of them has got a duty to diligently attend to the business of the firm. Each of them has also an obligation to give a true account and information regarding the business of the firm. Clause (15) enables the partners to withdraw the amounts in anticipation of profits falling to their individual share; and in case of loss, each of them is also liable to make good the same in proportion to his share in the partnership. Clause (16) enjoins on the partners to carry on the affairs of the firm for mutual gain and benefit. All the above clauses clearly, in our opinion, establish that the sole proprietary concern of K. D. Kamath has vanished. The above clauses also establish the right of each of the partners to share the profits and also to bear the losses in 'the proportion of their shares mentioned in cl. (5). Therefore, one of the essential ingredients to constitute partnership, namely, that there should be an agreement to share the profits and the losses of the business is more than amply satisfied in this case. Then the question is whether the circumstances pointed out by the High Court and referred to by us earlier, necessarily lead to the conclusion that no relationship of partners, as understood in law, has been created as between the parties under the partnership deed. For this purpose it is necessary to refer to certain decisions of this Court as well as of the High Courts, which may have a bearing on this aspect. In Steel Brothers & Co. Ltd. vs. Commissioner of Income-tax(1) one of the questions this Court had to consider was whether the fact that the control and manage'- ment of a business was in the hands of one person when there were (1) [1958] 33 I.T.R. 1. three partners is destructive of the element of partnership. The facts were that A and B, two companies were carrying on trade in Burma rice. Later on, an agreement was entered into between K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 12 A B and C for the working of the Burma rice business. It was, provided that the entire management of the business and the conduct of its affairs was to be done by A in its absolute discretion. The profit and loss was provided to be shared in the proportion mentioned under the agreement. There was a restriction on B and C against hiring the properties of the firm without the consent of At was held by this Court that notwithstanding the fact that the management and conduct or the business in its own discretion was vested with A, that circumstance is not destructive of the partnership relationship that exists between the parties to the agreement. In this decision two conditions have been laid down as essential to constitute a partnership in law: (1) sharing of profit or loss of the business; and (2) business being carried on by all the parties or any of them acting for all, in which is implicit the theory of agency. In M. P. Davis v. Commissioner of Agricultural Income- tax(1), this Court had to consider whether the relationship as partners. had been created by the agreement of partnership relied on by the parties. From the relevant facts it is seen that it was an extreme case where two brothers ostensibly entered into a partnership arrangement. But the recitals in the document, as pointed out by this Court, clearly showed that the entire management was with one brother A and that B had no right to make any con- tribution towards capital. There was no provision as to how losses are to be dealt with and there was a very complicated manner for ascertaining the so called profits. Having due regard to the tenor of the document and the clauses contained therein, this Court held that there was no intention to bring about the, relationship of partners between the two brothers. On the other hand, it is the view of this Court that the document had been executed to continue under the cloak of a partnership the pre-existing and real relationship, namely, that of master and servant. It is to be noted that this Court did not hold that there was no relationship of partners created under the document only on the basis that the exclusive control and management was left in the hands of A. Such a conclusion was reached having due, regard to the various other clauses in the deed. lo fact this Court, has already held in the earlier decision referred to above. that the mere circumstance that the control and management are vested in One partner is not destructive of the existence of partnership. No doubt. the High Court in the case on hand, has placed some reliance upon the decision in M. P. Davis v. Commissioner of Agricultural Income-tax(1), in support of its conclusion that no partnership (1) [1959] 35 I.T. 803. arrangement can be spelled out from the document before us. In our opinion, there has not been a proper appreciation by the High Court of the reasons which led to this Court for holding. in the said decision that there was no relationship of partners between the two brothers A and B. That was an extreme case where the clauses in the partnership deed were entirely different. In Commissioner of Income-tax, Gujarat v. A. Abdul Rahim ,and Co.(1) this Court has held that it is the settled law that if a partnership is _genuine and valid one, the Income- tax Officer has no power to reject its registration, if the other provisions of s. 26A and the Rules made thereunder are complied with. In Agarwal and Co. v. Commissioner of Income-tax, U.P.(2) this Court dealing with the conditions of registration prescribed in S. 26A and the relevant Rules observed as follows : K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 13 "The conditions of registration prescribed in this section and the relevant rules are: (1) on behalf of the firm, an application should be made to the Income-tax Officer by such person and at such time and containing such particulars, being is such form and verified in such manner as are prescribed by the rules: (2) ;the firm should be constituted under an instrument of partner,ship. (3) the instrument must specify the individual snares of the partners, and (4) the partnership must be valid and genuine and must actually exist in the terms specified in the instrument. If all the above conditions are fulfilled, the Income-tax Officer is bound to register the firm unless the assessee has contravened section 23 (4) of the Act." In certain decisions of the High Courts the two essential conditions necessary to form the relation of partnership have, been stated to be: (1) that there should be an agreement to share the profits and losses of the business, and (2) that each of the partners should,be acting as agent of all. Though, these two conditions, by and large, have to be satisfied when the, relationship of partners is created between the parties, we would emphasise that the legal requirements under s. 4 of the Partnership Act to constitute a partnership in law are: (1) there must be an agreement to share the profits or losses of the business; and (2) the, business must be carried on by all the partners or any of them acting for all. There is implicit in the second requirement the principle of agency. The tests laid down by the High Courts have again been appli ed by the Bombay High Court in Balubhai Gulabdas Navlakhi (1) [1965] 55 I.T. R. 651. (2) [1970] 77 I.T.R. 10. v. Commissioner of Income-tax(1) to consider whether the document before them created a relationship of partners between the parties thereto. One of the main contention that was urged, as militating against theory of partnership was that very wide powers of control and management were given to one of the partners so much so that he is to be considered to be the owner or proprietor of the concern. This contention was rejected by the High Court. After a reference to the various clauses in the document, the Bombay High Court came to the conclusion that the two essential conditions necessary to form a relation of partnership, re- ferred to above-, were present in the document constituting the partnership. The High Court further held that the fact that some of the terms of the document gave enlarged powers of management and control to one of the partners, who has brought in all the finances, is not by itself sufficient to hold, having due regard to the other clauses that the real agree ment between the parties is not that of partners, but that of master and servant. We may also observe that most of the clauses in the document before the Bombay High Court were more or less similar to the clauses in the partnership deed before us. In similar cases, where the control and management was vested in the hands of one partner and where it was also provided that only one partner can operate on the bank account and the others can do so, only if authorised by him, and that only one party can borrow on behalf of the firm for all, have been held not to militate against holding a particular document as creating the relationship of K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 14 master and servant. Those decisions are of Kerala High Courts in Commissioner of Income-tax, Kerala v. Pathrose Rice & Oil MillS(2); by the Madras High Court in P.A C. Ratnaswamy Nadar & Sons v. Commissioner of Income-tax, Madras(3); by the Allahabad High Court in Commissioner of Income-tax V. R. S. Shoe Factory (4) ; by the Madhya Pradesh High Court in Murlidhar Kishangopal v. Commissioner of Income-tax, M.P. Nagpur and Bhandara(5) and by the Mysore High Court in City Tobacco Mart v. Commissioner Of Income-tax Mysore(,). We have already referred to the fact that the Bombay High Court in Balubhai Gulabdas Navlakhi vs. Commissioner of In- come-tax(1), has also taken the same view. In addition to the existence of clauses to the above effect in the partnership deed, we may mention that in the Allahabad decision. referred to above, in a partnership between A, B and C, there was a clause that C (1) [1962] 46 I.T.R. 492. (2) [1960] 40 I.T. R. 353. (3) [1962] 46 I.T.R. 1148. (4) [1963] 471.T.R.917. (5) [1963] 50 I.T.R. 628. (6) [1967] 64 I.T.R. 478. 119Sup CI/72 was not entitled to invest any capital and that the,business is to be carried on only by A and B and that C has no power to interfere with the management of the business. The Allahabad. High Court, in spite of all these clauses held that the document created a relationship of partners as the two essential conditions, referred to by us earlier, existed in that case. We have already referred to the decision of this Court in Agarwal and Company v. Commissioner of Income-tax, U.P.(1) laying down the conditions, which if fulfilled makes it obligatory on the Income-tax Officer to register the firm, unless the assessee has contravened s. 23 (4) of the Act. It is not the case of the Revenue that the assessee before us has-contravened section 23 (4). There is also no controversy that the application has been made in accordance with S. 26A as well as the relevant Rules. The firm has been constituted under an instrument of partnership dated March 20, 1959. From the clauses of the partnership deed, extracted above, particularly cl. (5), the shares of the partners regarding the profit and loss have also been specified. Therefore, it follows that conditions Nos. 1, 2 and 3 specified in the above decision are fully satisfied. Regarding Condition No. 4 also there is no controversy that the partnership is genuine in the sense that it is not a fictitious document. Then the only other requirement referred to in condition No. 4 to be satisfied is whether the partnership is valid in the sense that it creates relationship of partners between the parties thereto. From our discussion in this judgment, according to us, the relationship of partners inter se has been created under the partnership deed and that such relationship had actually existed in accordance with the terms specified in the said document From a review of the above decisions, it is clear that the mere nomenclature given to a document is by itself not sufficient to hold that the document in question is one of partnership. Two essential conditions to be satisfied are : (1) that there should be an agreement to share the profits as well as the losses of the business, and (2) the business must be carried on by all or any of them acting for all, within the meaning of the definition of " partnership" under s. 4 of the Partnership Act. The fact that the exclusive power and control, by agreement of the parties is vested in one partner or the further circumstance that only one partner can operate the bank accounts or borrow on behalf of the firm are not destructive of the theory of partnership provided the two essential conditions, mentioned earlier are satisfied. K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 15 In the light of the principles laid down by this Court in Steel Brothers & Co. Ltd. v. Commissioner of Income-tax (2 ) and in the decisions of the High Courts, referred to above, the reasons (1) [1970] 77 I.T.R. 10. (2) [1958] 33 I.T.R. 1. given by the High Court for holding that the relationship of partners has not been created under the deed of partnership before us, cannot be sustained. As the control and management of business can be left by agreement in the hands of one partner to be exercised on behalf of all the partners, the other consequence by way of restriction on the rights of the other partners lose all significance. In fact the clauses providing that the working partners are to work under the directions of the managing partner and the further clause restricting their right to accept 'business or raise any loans or pledge the firm's interest except with the consent of the managing partner K. D. Kamath, have all to be related with the agreement entered into by the partners regarding the management and control by K. D. Kamath. We are of the opinion that under the partnership deed the relationship which has been brought into existence between the six parties is a relationship of partners who have agreed to share the profits and losses of business carried on by all or any of them acting for all and it satisfies the definition of "Partnership under s. 4 of the Partnership Act. W.-. have already pointed out that there is a sharing of the profits or losses of the business by the partners in the ratio of the proportion mentioned in Cl. (5). That clause read with other clauses already discussed by us, clearly shows that the first condition, namely, all persons agreeing to share profits or losses is satisfied. Even on the basis that the entire control and management of the business is vested in K. D. Kamath, party No. 1 and that parties Nos. 2 to 6 as working partners have to work under his direction, from all the other circumstances it is clear that the conduct of business by party No. 1 is done by him acting for all the partners. There is no indication to the contrary in the partnership deed. Therefore, even without anything more, it is clear that as the partnership business is carried on by party No. 1, acting for all, the second condition of agency is also satisfied. This idea reinforced by cl.(16) which provides that the firm's affairs are to be carried on for mutual benefits. That clause is to the effect that the firm's affairs which are managed by party No. 1 is really for the mutual gain and benefits of all the partners. It is no doubt, true that the second essential test of the business being carried on by all or any of the partners acting for all must be satisfied. The provisions in the partnership deed clearly establish that K. D. Kamath, the managing partner, carries on the business, acting for all the partners. Much stress has been laid by the High Court on the fact that under Cl. (9) parties Nos. 2 to 6 have no Tight to raise loans for and on behalf of the firm or pledge the firm's interest. This circumstance, according to the High Court, is destructive of the element of partnership. We have already held that the management and control of the business done by party go. 1, is carrying on of the business on behalf of all the partners. No doubt under s. 18 of the Partnership Act, a partner is the agent of the firm for the purpose of the business of the firm. But that section itself clearly says that it is subject to the provisions of the Act. It is open to ,the- parties, under s. 11, to enter into_an agreement regarding their mutual rights and duties as partners of the firm and that can be done by contract, which in this case is evidenced by the deed of partnership. Further s. 18 will have to be read along K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 16 with s. 4. If the relationship of partners is established as a "partnership" as defined in s. 4, and if the necessary ingredients referred to in that section are found to exist,' there is no escape from the conclusion that in law a partnership has come into exist- ence. lit is in the light of these provisions that s. 18, will have to be appreciated. Section 18 only emphasises the principle of agency which is already incorporated in the definition of "partnership" under s. 4. It should be remembered that so far as the outside world is concerned, so long as the parties Nos. 2 to 6 are held out, as partners of this firm, as has been done under the partnership deed. their acts would bind the whole partner- ship. The provision in cl. (9) in our opinion, is only an inter se arrangement enter, into by the partners, in and by which the-working partners have agreed not to raise loans or pledge the firm's interest. Mr. S. K. lyer, learned counsel for the Revenue placed some reliance on s. 14 of the Partnership Act. According to the counsel, there is no contract to the contrary in the partnership deed that the assets brought in by party No. 1, do not belong to the partnership. It is his further contention that under s. 14, those assets will belong to the partnership, in which case, it will be open to any partner, as agent of the other partners to pledge the firm's interest or raise loan for partnership purposes. This right, accor- ding to the counsel is restricted by cl. (9) and that clause negatives the theory of agency. In our opinion, this contention of the learned counsel cannot be accepted. Section 14 of the Partnership Act itself clearly shows- that the provisions contained therein are subject to the contract between the parties. We have already held that the provision regarding the control and management vesting in party No.1 is not itself destructive of the theory of partnership. Clause (9) in our opinion, itself shows that the theory of agency is recognised. But the parties, by mutual agreement, have placed a restriction on the working partners' right to borrow on behalf of the firm or pledge the firm's interest without the written authority of the principal partner. Mr. Iyer placed considerable reliance as the High Court has also done, on the earlier decision of the Bombay High Court in Umarbhai Chandbhai v. Commissioner of Income-tax, Bombay City(1). That again, in our opinion, was a case of an extreme nature where, under a partnership deed, between the father and his two sons, the former had a right to exclude either or born his sons from the management of the firm, wholly or in part. There was also a provision to the effect that the father was entitled to entrust the management to any other person and also determine what quantum of profits should be distributed and what ,is to be done regarding the remaining profits. There were further provisions to the effect that the father could terminate the partnership and- on such termination, the share of the partner was to revert to the father. The Bombay High Court, having due regard to the clauses, referred to above, as well as other clauses of the partnership deed, held that the document offended against the two principles which were essential to constitute a partnership, namely, agreement to share the profits and losses and the business being carried on by all or any of them for all of them. The learned Judges held that there was no agreement to share the profits and loses of the business and even the business carried on by the father was not, on behalf of all the partners. In such circumstances, it was held, that the arrangement evidenced by the deed cannot be considered in law to be a partnership. In our opinion, reliance placed upon this decision by the High Court as well as by Mr. Iyer is misplaced. In fact, from a perusal of the clauses in the document which- the Bombay High Court had to consider, it is clear that the business continued to K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 17 be the proprietary concern of one single individual namely, the father. Excepting that the two sons were styled as partners in the document, the essential requisites for constituting the relationship of partners inter se between the father and the two sons were 'totally absent. The clause in the case before us are totally different. We have already indicated that there is an agreement for sharing the profits and losses and that even though vast powers of control and management have been given to K. D. Kamath, the managing partner, the business was being carried on by the said managing partner, on behalf of all the partners. These conditions fully satisfy the requirements of the definition of "partnership" under s. 4 of the Partnership Act. To conclude we are of the opinion that all the ingredients of partnership are satisfied under the partnership deed dated March 20, 1959 and that the view of the High Court that the appellant firm cannot be granted registration under s. 26A of the Incometax Act for the assessment year 1959-60, cannot be sustained. (1) [1952] 22 I.T.R. 27. In, the result, we answer the question of law in the affirmative in favour of the assessee. This answer given by, us to the question referred to the High Court by the Income-tax Appellate Tribunal will be substituted in the place of that given by the High Court. We accordingly reverse the Judgment and order of the High Court and-allow the appeal with costs. G. C. Appeal allowed. K. D. Kamath & Co vs C.I.T., Bangalore on 11 October, 1971 18 | {
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The State Of West Bengal vs Shebaits Of Iswar Sri Saradia Thakurani ... on 4 March, 1971 Equivalent citations: AIR1971SC2097, (1972)4SCC158, 1971(III)UJ458(SC), AIR 1971 SUPREME COURT 2097, 1972 4 SCC 158 1971 U J (SC) 458, 1971 U J (SC) 458 Author: J.M. Shelat Bench: C.A. Vaidialingam, J.M. Shelat JUDGMENT J.M. Shelat, J. 1. This appeal, by special leave, arises out of proceedings Under Section 44(2a) of the West Bengal Estates Acquisition Act, 1 of 1954 (hereinafter referred to as the Act) and concerns a tank fishery known as 'Napukar' situate in Mauza Kandi, District Murshidabad. 2. The tank is the absolute debuttar property of the deity known as Iswar Sri Sri Saradia Thakurani, of whom the respondents are and have at all material times been the shebaits. The last District settlement Record recorded the interest of the deity in the said tank and described it as a rent free tenure. The maintenance of the deity and expenses connected with her seba nuia are met from the income and usufruct of the tank. The Revisional Record of Right under the Act also described the tank as the absolute debuttar property of the deity. But the entry also mentioned that one Kumarish Chandra Saba and Aswini Kumar Saba were the tenants of the tank paying an annual rent of Rs. 63/-. A receipt issued by the respondents also stated that the tank had been leased for a period of nine years; i.e., from 1358 B.S. to 1366 B.S., at the rate of Rs. 60/-a year. But there was no registered deed or any document at all in respect of the said alleged lease The appellant State relied on the said entry and the said receipt for its case that the tank was under a lease for a period of 9 years and the said Sabas were in possession as lesses thereof. 3. The Act was passed with the object of compulsory acquisition by the State of estates and all rights of intermediaries therein. It came into force on February 12, 1954. Section 4 of the Act empowers the State Government to declare by notification that with effect from the date therein mentioned all estates and the rights of every intermediary in each such estate situated in the district specified in the notification shall vest in the State free from all incumbents. Under Section 5(1)(a), upon the notification Under Section 4 and from the date of vesting, the estates and the rights of intermediaries therein, to which the declaration Under Section 4 applies; shall vest in the State, and under Clause (c) of Section 5(1), every non-agricultural tenant holding any land under an The State Of West Bengal vs Shebaits Of Iswar Sri Saradia Thakurani ... on 4 March, 1971 1 intermediary shall hold, subject to the provisions of Section 6(3) the same directly under the State, as if the State had been the intermediary, on the same terms and conditions as immediately before the date of vesting. A non-agricultural tenant Under Section 2(k) means a tenant of non-agricultural land who holds inter alia under a tenure-holder. If the Sabas were the lessees, as was the case of the State, they would be non-agricultural tenants of the deity, an intermediary and under the combined effect of Sections 4, 5(1)(a) and (c) would become the direct tenants of the State. Section 6(1) however, provides that: Notwithstanding anything contained in Sections 4 and 5, an intermediary shall, except in the cases mentioned in the proviso to Sub-section (2) but subject to the other provisions of that sub-section, be entitled to retain with effect from the date of vesting- (c) non-agricultural land in his khas possession including land held under him by any person, not being a tenant, by lease or license; (e) tank fisheries; Tank fisheries, as defined by the explanation to Section 6(1) means a reservoir or place for the storage of water used for pisciculture or for fishing, together with sub-soil and the banks of such reservoir or place and includes any right of pisciculture or fishing in such reservoir or place. Section 6(2) provides that an intermediary, who under Sub-section (1) is entitled to retain possession of any land, shall be deemed to hold such land directly under the State as a tenant subject to such terms and conditions as laid down therein. But the proviso to this Sub-section, which is by way of an exception, lays down that if any tank fishery or any land of the description there set out "was held immediately before the date of vesting under a lease, such base shill be deemed to have been given by the State Government.... Briefly stated, the effect of these provisions is that if the tank fishery in question was under a lease in favour of the said Sabas immediately before the date of vesting, as the State authorities asserted, the interest of the deity as an intermediary would, by reason of Section 5 and this proviso, be wiped off and the said Sabas would become the direct tenants of and under the State Government. 4. Gh. V of the Act deals with preparation of Record-if rights which presumably became necessary in consequence of the changes which came about in the rights of holders of lands as a result of the vesting of estates in the State Government, Section 39 in that Chapter authories, therefore, the Government to make an order, for carrying out the purposes of the Act, directing preparation of a record.of rights. Under Section 42, when an intermediary is entitled to retain possession of any land Under Section 6(1) then, except incases falling under the proviso to Section 6(2), the Revenue Officer shall determine the rent payable by him to the State in accordance with the principles set out in the section. Under Section 44(i), when the record-of-rights has been prepared or revised, the Revenue Officer has to publish a draft thereof and to receive objections thereto, if any. On disposal of such objection, that officer would finally frame the record and cause such record to be published in the prescribed manner. Sub-section (2)a of Section 44 then provides that an officer especially empowered by the Government may, either on an application or suo-motu within the time The State Of West Bengal vs Shebaits Of Iswar Sri Saradia Thakurani ... on 4 March, 1971 2 prescribed therein revise an entry in the record-of-rights, even though it has been finalised and published under Sub-section (i) 5. As stated earlier, both the last District settlement and the Revisional Settlement have recorded the tank fishery as the debuttor property in respect of which the names of the respondents were entered as shebaits. But in view of the names of the Sahas appearing therein as tenants paying Rs. 60/-as annual rent, a notice was served on the respondent by the Collector of Murshidabad to hand over possession of the said tank. The respondents object to the said notice. The State Government thereupon filed an objection Under Section 44(2A) for revising the entry in the record-of-rights. The objection was heard by the Settlement Officer, Kandi, Under Section 44(2a). He rejected the Government's objection and held that the said tank was not leased out to the said Sabas, that what was described as lease in the said entry was no more than a right of fishing without any right in the sub-soil of the tank or its embankments, and therefore, the deity must be died have been in the khas possession thereof immediately before the date of vesting under the Act. In an appeal by the Government, the District Judge, as the appellate tribunal under the Act, reversed the order of the Settlement Officer and held that the said Sabas were the tenants of the tank fishery immediately before the date of vesting, and that therefore, the proviso to Section 6(2) applied and the said Sabas must be deemed to be the direct tenants of the Government 6. The respondents thereupon filed a writ petition in the High Court for having the said order of the tribunal quashed. The High Court agreed with the Settlement Officer and held that what was mentioned in the Revisional Record was an arrangement between the respondents and the said Sabas, under which the latter, in consideration of their cleansing the tank and payment of Rs. 60/-per year, were to have the fish which they might catch from the tank, and that therefore, Section 6(2) proviso, was not attracted. This appeal by the State Government disputes that view. 7. On the facts on record there can be no manner of doubt that the deity was the intermediary in respect of the tank fishery within the meaning of Section 2(i). It is also beyond doubt that if the proviso to Sub-section (2) of Section 6 were not to apply, the respondents as the shebaits of the deity would be entitled notwithstanding sees 4 and 5, to retain the said tank fishery Under Section 6(1) but would hold it, under Sub-section (2) of Section 6, directly under the state as tenants from the date of vesting. 8. Did the proviso to Section 6(2) then apply to the present case ? The answer to that question depends upon, as the proviso says, whether the tank fishery was held immediately before the date of vesting under a lease by the said sabas. If so, the lessees under such a lease, and not the lessors, would become the direct tenants of the Slate. In other words, the interest in the tank of the intermediary would disappear. 9. It is true that the entry in the Divisional Record and the receipt passed by the Respondents in favour of the Sabas mentioned them as tenants. The receipt mentions that the tank was leased to them for a period of 9 years at an annual rent of Rs. 60/-from 1358. B. S. to 1366 B. S Two facts however emerge from the record. The first is that there was no deed, much less a registered deed, evidencing the alleged lease. The second is that neither the sub-soil nor the embankments of the The State Of West Bengal vs Shebaits Of Iswar Sri Saradia Thakurani ... on 4 March, 1971 3 tank were the subject matter of the alleged lease. In the absence of any registered deed there could be no valid lease of the tank for a period of 9 years as was the case of the appellant-State No right, either in the sub-soil of the tank or its embankments, was acquired by the said sabas. The only interest, therefore, they could have acquired was in the fish in the tank. The materials on record show that their interest was confined to the fish they would catch from the tank in consideration for which they had they agree to pay Rs. 60/-per year and in addition were under the obligation to cleanse the tank and keep it cleaned. Such an arrangement would not mean a lease within the meaning of the proviso to Section 6(2), but only Constitution a licence under which, for the consideration above-stated, they became entitled to fish yielded by and caught by them from the tank. 10. A point somewhat similar to the one in this appeal arose in Anand Bebera v. Orissa where it was held that a right to catch fish it profit a prendre which is immovable property within the meaning of the Transfer of property Act read with Section 2(25) of the General Clauses Act, which would be accompanied by a licence to enter upon the land, in the present case the embankments, for the purpose of going into the tank to catch the fish and to keep the tank cleansed. It is clear, therefore, that there was no legally enforceable lease of the tank in favour of the Sabas immediately before the date of vesting, so as to attack the proviso to Section 6(2). Therefore, it was the deity through the respondents, who was entitled under Sub-Section 6(2) read with Section 6(1) to become to tenant, of the State and not the said Sabas. The notice directing the respondents to hand over possession the State was, therefore, without jurisdiction and was liable to be quashed. 11. In our view, the High Court was right in quashing the order of the appellate tribunal, inasmuch as the tribunal by wrongly interpreting the Revisional Record appropriated to itself the jurisdiction Under Section 44(2) of the Act to revise the entry in the Record of rights. 12. The appeal fails and is dismissed with costs. The State Of West Bengal vs Shebaits Of Iswar Sri Saradia Thakurani ... on 4 March, 1971 4 | {
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R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 Equivalent citations: 1972 AIR 1767, 1972 SCR (2) 799, AIR 1972 SUPREME COURT 1767, 1972 LAB. I. C. 618, 1972 SERVLR 94, 1972 (1) LABLJ 565, 1973 2 SCJ 265, 1972 2 SCR 799 Author: A.N. Ray Bench: A.N. Ray, D.G. Palekar PETITIONER: R. N. NANJUNDAPPA Vs. RESPONDENT: T. THIMMIAH & ANR. DATE OF JUDGMENT08/12/1971 BENCH: RAY, A.N. BENCH: RAY, A.N. PALEKAR, D.G. CITATION: 1972 AIR 1767 1972 SCR (2) 799 1972 SCC (1) 409 CITATOR INFO : R 1979 SC1676 (5) RF 1980 SC2086 (7) F 1984 SC 885 (27) ACT: Civil Service--state Rules providing for 'methods' of recruitment by selection, or competitive examination--Appointment of Class III Officer to Class I post, in the absence of 'rules' of recruitment--Validiry--If could be treated as appointment of 'local candidate'. Constitution of India, 1950, Arts. 14, 16, 162 and 309--Appointment if violative of Arts. 14 and 16--Scope of Arts. 162 and 309. HEADNOTE: In 1957, the respondent, who was working as an Assistant Geologist in Class III Service, was sent on deputation as R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 1 Vice-Principal of the School of Mines, in the State From 15th February, 1958, he was also doing the duties of the Principal. In September, 1958, the State Government appointed him as officiating Principal but on 3rd April 1959 modified the order and appointed him as temporary Officiating Principal with effect from the 15th February, 1958. On 9th January, 1967, the Mysore Education Department Service Rules were published by which appointment of the respondent, with effect from 15th February, 1958 was regu- larised. The appellant, who was the Principal of a Government Polytechnic, and was in Class 11 Service, contended that the respondent's appointment was in breach of the Mysore State Civil Services (General Recruitment) Rules, 1957, and the Mysore Education Department Services (Technical Education Department Recruitment) Rules, 1964, and offended Arts, 14 and 16 of the Constitution. The High Court held that the respondent was a local candidate within the meaning of the Mysore Government Seniority Rules, 1957, and therefore his appointment could be regularised with effect from any date. Allowing the appeal to this Court, HELD : (1) Rule 3 of the Mysore State Civil Services (General Recruitment) Rules, 1957, which were in force from February 1, 1958, speaks of the method of recruitment to the State Civil Service by competitive examination, or by selection, or by promotion. The respondent's appointment was not by competitive examination nor was it a case of direct recruitment either in the year 1958 or at any time. If it were a case of direct recruitment there would have been advertisements for the post, and candidate would have been selected on merit. [808 E-H] (2)The appointment of the respondent could not be said to be by promotion because, under r. 4 of the 1957 Rules, it should be on the basis of merit and suitability or on the basis of seniority-cum-merit from among persons eligible for promotion. Moreover, the State contended that it was not a case of promotion, but was a case of selection on the basis that the respondent was the only person fit for the post. [806 E-G; 811 C-D] (3)It is true that the rules of recruitment were not made until 1964. Even sothe three'-methods of recruitment are specific. If it is a case of electionit should have been after consulting the Public- Service commission orthe Advisory or Election Committee, or' the ;appointing authority, and should have been made after inviting applications. 'To say that the 800 appellant was the only eligible candidate, is to deny the rights of others to apply. [805 F; 808 E-H] (4)Rule 16 of the 1957 rules provides for relaxation of rules relating to appointment and qualifications, and one of the instances of relaxation is when the Government, for reasons to be recorded in writing, appoints an officer R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 2 holding a post of equivalent grade by transfer from any other service of the State. But, in the present case, the respondent did not belong to a grade which Could be said to be equivalent, within the meaning of r. 8(1) of the Rules, to that of the Principal of School of Mines. Therefore, it could not be a case of transfer. In fact, the rule was neither available, nor acted on the present case. [806 G-H; 807 A-C] (5)The State Government has no power to make a rule for regular rising an appointment under Art. 309 of the Constitution, since the Article speaks of rules for appointment and general conditions of service, Regu- larisation of appointment by stating that "notwithstanding any rules the appointment is regularised" strikes at the root of existing rules prescribing promotion, selection or competitive examination as methods of recruitment. Therefore the regularisation was in violation of the Article. [808 A-D] Champaklal Chimanlal Shah v. Union of India, [1964] 5 S.C.R. 190 and State of Mysore v. Padmanabhacharya, [1966] 1 S.C.R. 994, referred to. (6)(a) The contention that a rule under Art. 309 for regularisation would itself be a form of recruitment read with reference to the power under Art. 162 is unsound, because regularisation is not a form of appointment. [809 G] (b)In the present case, the regularisation with effect from February 15, 1958, notwithstanding any rules cannot be said to be in exercise of the power under Art. 162. Articles 162 and 309 operate in different areas, and when the Government acted under Art. 309 they cannot be said to have acted also Linder Art. 162 [809 G-H; 810 A-B] (c)If the appointment itself was in infraction of the Rules or in violation of the provisions of the Constitution, the illegality cannot be regularised.. Ratification or regularisation is possible of an act which is within the power and province of the authority and there has been some noncompliance with procedure which does not go to the root of the appointment. Article 162 does not confer either the power of regularisation nor the power to make rules for the recruitment or conditions of service. There may be a rule for person or one post, but rules are meant for recruitment and conditions of service, and not for the purpose of validating illegal appointments or promotions or transfer. [810 B-D; 814 D] B.N. Nagarajan & Ors. v. State of- Mysore & Ors. [1966] 3 S.C.R. 682, followed. (7)(a) The High Court erred in holding that the respondent was a local candidate within the meaning of the 1957 rules. A local candidate is a temporary government servant not appointed regularly as per rules of recruitment to that service. But two government servants cannot be appointed substantively to the same permanent post at the same time R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 3 except as a temporary measure. The respondent, in the present case, was a permanent government servant and was on deputation having a lien on his post as Assistant Lecturer Geology when he was appointed to officiate as Principal. Therefore, it cannot be said that he was substantively appointed to the post of Principal. If the respondent was appointed as 801 a temporary measure to the post of Principal, it would not therefore be as a local candidate, but as a Government servant appointed to another post as a temporary measure. [810 D-E; 813 A-C] (i)Moreover the orders of appointment as officiating Principal in September 1958 and the modified order in April 1959, state that proposals to fill the post by advertisement through the State Public Service Commission should be forwarded. They show that the respondent was not treated as a local candidate, but was appointed as a temporary measure till proper appointment is made through the State Public Service Commission from persons possessing the necessary qualifications. [811 G-H] (8)When the State Public Service Commission agreed for regularisament ofthe respondent, but only to regularise the appointment to the post of Principal. [813 F-G] (9)The High Court was wrong in holding that the appointment of the respondent did not offend Arts. 14 and 16. Under the 1964-rules the recruitment for the post was by promotion from the cadre of Heads of sections or by direct 'recruitment and Principals of Polytechnics and Heads of sections belonged to a common cadre and should have been considered for the appointment. As the appellant and others were not given equal opportunity and treatment in regard to the appointment, there was discrimination. [814 F-H; 815 A- F] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2357 of 1968. Appeal by special leave from the judgment and order dated September 12, 1968 of the Mysore High Court in Writ Petition No. 473 of 1967. A. K. Sen, S. S. Javali and M. Veerappa, for the appellant. A. R. Somanatha Iyer, 0. P. Malhotra, J. P. Dadachanji and C. S. Srinivasa Rau, for respondent No. 1. Bera Reddy and R. H. Dhebar, for respondent No. 2. The Judgment of the Court was delivered by Ray, J. This is an appeal by special leave from the judgement dated 12 September, 1968 of the High Court of Mysore dismissing by a common judgment a group of petitions. The appellant challenged the Mysore Education Department Service Rules dated 9 February 1967 published in the R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 4 notification No. ED. 91DGO 58, on 9 February, 1967. The Rules impeached by the appellant are as follows "In exercise of the powers conferred by the proviso to Article 309 of the Constitution of India, and all other powers enabling him in this behalf, the Governor of Mysore hereby makes the following rules, namely :- 1.Title : These rules may be called the Mysore Education Department Services (Technical Education Department (Special Recruitment) Rules, 1967. 2.Provisions relating to regularisation of appointment of Principal, School of Mines, Ooragaum, Kolar Gold Fields. Notwithstanding any rule made under the proviso to article 309 of the Constitution of India, or any other rules or Order in force at any time, Dr. T. Thimmiah, B.Sc. (Hons.) Ph.D. (Lond.) F.G.S. shall be deemed to have been regularly appointed as Principal, School of Mines, Ooragaum, Kolar Gold Fields, with effect from 15-2-1958. By order and in the name of the Governor of Mysore Sd/- S. N. Sreenath Under Secretary to Government Education Department". The appellant was posted as 'additional in-charge' of Technical Education, Bangalore. There were other petitions before the Mysore High Court similarly challenging the aforesaid Service Rule. The petitioners in those cases were the Principal of the Polytechnic at Mysore; Head of the Mechanical Engineering Section, C.P.C. Polytechnic, Mysore; Principal of the Polytechnic, Hassan; and Principal of B.D.T. College of Engineering, Devangere. The appellant joined as lecturer in Physics at the University Department of the Government of Mysore in 1941. In 1946 the appellant took a post graduate degree in Chemical Engineering at Madras University. The appellant was then posted as Lecturer in Chemical Engineering, Government Engineering College, Bangalore. In 1949 the appellant was promoted and posted as Superintendent (Principal), Government Polytechnic, Devangere in the grade of Rs. 200-20-300. In 1954 the appellant was posted as Principal, Polytechnic College at Hassan in the grade of Rs. 200-20-300. The appellant was confirmed in the year 1957 in the grade of Rs. 200-20-300 in Class II with effect from 12 December, 1949. On 1 January, 1957 the pay scale of the appellant was revised at Rs. 250-600. The respondent Thimmiah graduated and was appointed through the Public Service Commission in the year 1951 as an Assistant Geologist in the Department of Geology in the Mysore Government in the grade of Rs. 125-10-175. The respondent went to the United Kingdom and returned in 1957 with a Ph.D. in Geology. In the month of July, 1957 the establishment of the School of Mines at Kolar Gold Fields was sanctioned in the Department of Technical Education. The respondent who was in 1957 a Lecturer in the Department of Geology was deputed for appointment is Vice Principal of the School of Mines at Kolar Gold Fields. On 15 February, 1958 the respondent was asked to perform the duties of the Principal. On 22 July, 1958 Isaac son who was the Principal of the School of Mines at Kolar Gold Fields left. On 25 September, 1958 the respondent was appointed officiating Principal of the School of Mines on a temporary basis with effect from 22 July, 1958. On 3 July, 1959 the respondent was R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 5 appointed Principal with effect from 15 February, 1958. The Government of India in the year 1959 wrote to the State Government that the respondent did not possess qualifications and proposed prescribed qualifications for the- Principal of School of Mines. Qualifications were proposed by the Director of Technical Education in the month of August, 1959. In the month of August, 1960 the respondent was promoted in his parent Department of Geology as Geologist. In the year 1962 the appellant made an application under Article 226 challenging the officiating appointment of the respondent. The High Court of Mysore on 17 November, 1963 dismissed the appellant's application as premature, because the Government was going to frame rules for recruitment for the Department. In the month of May, 1964 rules of recruitment were framed by the Government for the Department of Technical Education. In the year 1967 Rules were made under Article 309 of the Constitution regularising the appointment of the respondent as Principal, School of Mines with effect from 15 February, 1958. The Kolar Gold Fields, School of Mines was set up in the month of July, 1957. The respondent was sent in the month of August, 1957 on deputation for two years as Vice Principal of the School of Mines. The respondent was then working as an Assistant Geologist. The then Principal of the School of Mines was Isaacson. He was employed on a part time basis on an allowance of Rs. 200 p.m. On 22 July, 1958 when Isaacson left the respondent who was the Vice Principal had been doing the duties of the Principal since 15 February, 1958. The State Government on 25 September, 1958 appointed the respondent Thimmiah as officiating Principal with effect from 22 July, 1958 in the grade of Rs. 500-30- 800. On 3 April, 1958 the State Government in modification of the notification of 25 September, 1958 appointed the respondent as temporary officiating Principal with effect from 15 February, 1958. The impugned rules regularising the Appointment of the respondent with effect from 15 February, 1958 came into existence on 9 February, 1967. The appellant contended that the respondent was governed by the Mysore Service Regulations, 1943, the Mysore State Civil Services (General Recruitment) Rules, 1957 as well as the Mysore Education Department Services (Technical Education Department) (Recruitment) Rules, 19 4. The appellant also contended that the respondent was in Class III service, and, therefore, the impeached regularisation of the respondent's appointment was in breach of the aforesaid Rules and Regulations and offended Articles 14 and 16 of the Constitution. The contention of the respondent before the High Court was that the appointment to a civil post could be made in three ways : one by promotion; second by direct recruitment; and the third by regularisation of an appointment which had been initially made irregularly. It Was also contended in the High Court, though there was no suggestion in the affidavit or in the return in answer to the petition, that the respondent was a local candidate in service, and, therefore, under rule 8 (27A) of the Mysore Civil Services Rules, 1957 the rules would not apply to the respondent and the regularisation ",as valid. An additional argument was advanced in this Court that under Article 162 of the Constitution regularisation would in itself be a mode of exercise of power of appointment of the Executive Government. Regularisation was said to have the consequence of impressing upon the appointment the quality of permanence and the elimination of R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 6 precariousness. According to the State such an appointment even if made in the shape of rules under Article 309 could not be attacked on the ground of being made for one person just as a piece of legislation could not be attacked on the ground of being made for a particular person or entity. The High Court held that the respondent was a local candi- date within the meaning of Rule 1-A of the Mysore Government Seniority Rules, 1957 and therefore the appointment of the respondent could be regularised with effect from any date. The High Court expressed no opinion on the question of seniority among the several petitioners inter se. On that basis the High Court held that there could be a temporary employment and recognition of a temporary servant as quasi permanent employee without violating Articles 14 and 16. The High Court held that the appointment of a local candidate could not be said to be discriminatory or a denial of equal opportunity. The High Court also held that when the respondent was appointed temporarily in 1958 there were no qualifications prescribed for the post and there were no cadre and recruitment rules. On 17 August, 1957 when the respondent was sent on depu- tation as Vice Principal his post was counted as that of a lecturer. When Issacson left the School of Mines and when the respondent was asked to be in charge as Principal and thereafter when the respondent was in the month of September, 1958 appointed to officiate as Principal which was Class I service with effect from 15 February, 1958 the respondent had been on deputation from foreign service and in the affidavit it was stated that it was Class III service to which the respondent belonged and the appointment of the respondent to the post of Principal of the School of Mines was challenged by the appellant to amount to promotion from Class III to Class I. Under rule 57 of the Mysore Civil Service Regulations, 1943 an officer could be sent on deputation on such temporary duty for the performance of which there is no permanently or temporarily sanctioned appointment. Deputation however was not permissible under Rule 57 without the sanction of the Government. The question here is whether an officer like the respondent who was sent on deputation could be said not to be governed by any rule and be a local candidate as contended for by the State. At the relevant time in the month of February, 1958 the Mysore State Civil Service (General Recruitment) Rules, 1957 were in existence inasmuch as those rules came into force on 1 February, 1958. The Mysore State Civil Services Rules, 1957 defined 'direct recruitment', 'promotion' and 'selection'. Direct recruitment would be appointment otherwise than by promotion or transfer. Promotion would be appointment of a Government servant from a post, grade of service or class of service, to a higher post or higher grade of service or higher class of service. Selection would be after consulting the Commission or the Advisory or the Selection Committee, or the appointing Authority. Rule 3 of the Mysore State Civil Services Rules, 1957 speaks of method of recruitment to the State Civil Service to be by competitive examination or by selection or by promotion. Judged by these rules the appointment in the present case could be said to be only by promotion. Indisputably there was neither any competitive examination not any selection nor it was a case of direct recruitment. Sub-clauses (a) and (b) of Rule 4(3) of the Mysore State Civil Services Rules, 1957 lay down the restrictions as to recruitment by promotion. The restrictions are two-fold in sub-clauses (a) and (b). First, if it :is to a selection post or to a post to be filled by promotion or by selection of a person on the basis of merit and suitability in all respects to discharge the duties of the post it is with due regard to seniority from among persons eligible for promotion. The second is recruitment by R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 7 promotion to a post other than that referred to in sub- clause (1) by selection of a person on the basis of seniority-cum-merit, that is seniority subject to the fitness of the candidate to discharge the duties of the post from among persons eligible for promotion. In 1958 the post of the Principal of the School of Mines was a penurious post. The pay of the Principal was Rs. 500-800 at that time. The respondent was getting a salary of Rs. 165 plus Rs. 75, in the month of February 1958 and his grade of scale was from Rs. 125-175. The respondent had been substantively appointed to the post of a lecturer in Geology from which he was sent on deputation. The respondent under Rule 17 of the General Rules regarding lien on appointment and admissibility of allowances could not be appointed substantively to two or more permanent posts at the same time except as a temporary measure. Then again under Rule 20(1) of the General Rules regarding lien on appointment the Government shall suspend the lien of a Government servant on a permanent post which he holds substantively if he is appointed in a substantive capacity. In the month of February, 1958 the respondent was on deputation and having a lien on post as Assistant Lecturer of Geology when he was appointed to officiate as Principal, School of Mines, and, therefore, it could not be said that he was substantively appointed to the post of a Principal. The appointment of the respondent as officiating Principal in the month of February, 1958 could be only by promotion. The two impediments to the case of recruitment by promotion have already been noticed in rule 4(3) sub-clauses (a) and (b) of the Mysore State Civil Services (General Recruitment) Rules, 1957. Under sub-clause (a) it is to be on the basis of merit and suitability with due regard to seniority from among persons eligible for promotion. Under sub-clause (b) it is to be on the basis of seniority-cum-merit from among persons eligible for promotion. It is not the case of the Government that it was a case of promotion because there is no material to show that merit and suitability in all respects with due regard to seniority from among persons eligible for promotion were considered. The Mysore State Civil Services Rules, 1957 in Rule 16 speaks of relaxation of rules relating to appointment and qualifications and one of the instances of relaxation is that the Government may for reasons to be recorded in writing (a) (i) appoint to a post an officer of the Defence Services, an All India Service or a Civil Service of the Union or the Civil Service of any other State and (ii) an officer holding a post of an equivalent grade, by transfer, from any other service of the State. Equivalent grade -fined in the more Civil Services Rules 1957 which came into effect on 10 February, 1958. Rule 8(1) of the Mysore Civil Services Rules, 1958 speaks of class and grade. Appointments are said to be in the same 'Class' when they are in the same department, and bear the same designation, or have, been declared by Government to be in the same, class. Appointments in the same class are sometimes divided into 'grades' according to pay. The post of Principal School of Mines was said to be Class 1. It was said that in the month of February, 1958 there were no classes. But the respondent did not belong to a grade which could be said to be equivalent grade to that of the Principal School of Mines. Therefore it could not be a case of transfer within the meaning of the aforesaid Rule 16. R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 8 The Mysore Technical Education Rules which came into existence on 5 May, 1964 referred to two classes and the Principal, School of Mines was in Class I and the Heads or Principal of Polytechnics were in Class I. In 1964 the post of Assistant Geologist was in Class III and not identical in rank. The respondent alleged that he was appointed temporarily to the post of Principal, School of Mines in February, 1958 and thereafter he was appointed under Article 162 of the Constitution because of his qualifications. It will appear from the affidavit evidence that the appellant in 1957 was Principal of the Government Polytechnic at Davangere and was in the grade, of Rs. 200-20-300. The respondent was in 1956 an Assistant Geologist at a salary of Rs. 165/- in the scale of Rs. 125-10-175. In 1964 the appellant was in Class III under the 1964 Rules as Principal of Polytechnic whereas the respondent was in the substantive post of Assistant Geologist which under the 1964 Rules was in Class 111. Therefore when the appointment of the respondent was attempted to be regularised with effect from 1958 the respondent was being placed at a position of advantage. The appointment of the respondent by promotion or transfer is inherently indefensible. The respondent was in Class III service. He was being appointed to Class 1. If it were a case of promotion persons in the same grade and seniority and merit were to be considered. The appellant was senior to the respondent. There were other petitioners before the High Court who were senior to the respondent. When the appellant made an application to the Mysore High Court in the year 1962 the application was dismissed because it was found to be premature as the Government was preparing the cadre and recruitment rules. The High Court left it open and said if and when the appointment was regularised it would be open to the appellant to take such steps as law permits. It was contended on behalf of the State that under Article 309 of the Constitution the State has power to make a rule regularising the appointment. Shelter was taken behind Article 162 of the Constitution andthe power of the Government to appoint. No one can deny thepower of the Government to appoint. If it were a case of direct appointment or if it were a case of appointment of a candidateby competitive examination or if it were a case of appointment by selection recourse to rule under Article 309 for regularisation would not be necessary. Assume that Rules under Article 309 could be made in respect of appoint- ment of one man but there are two limitations. Article 309 speaks of rules for appointment and general conditions of service. Regularisation of appointment by stating that notwithstanding any rules the appointment is regularised strikes at the root of the rules and if the effect of the regularisation is to nullify the operation and effectiveness of the rules, the rule itself is open to criticism on the ground that it is in violation of current rules. Therefore the relevant rules at the material time as to promotion and appointment are infringed and the impeached rule cannot be permitted to stand to operate as a regularisation of appointment of one person in utter defiance of rules requiring consideration of seniority and merit in the case of promotion and consideration of appointment by selection or by competitive examination. It was contended on behalf of the State that Rule 3 of the Mysore State Civil Services Rules, 1957 spoke of method of recruitment to be by competitive examination, or by selection, or by promotion. The method of recruitment and qualifications for each State Civil Service were to be set forth in the rules of recruitment but there were no rules until the year 1964. In 1964 the rule spoke of the Principal of School of Mines to be Class I and the method of recruitment for the Principal of School of Mines was to fill up the post by promotion from the cadre of Heads of Sections or by direct R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 9 recruitment. It was said on behalf of the respondent that he was the only eligible candidate in 1964, and, therefore, his appointment was valid. This is opposed to facts. It is not a case of direct recruitment in the year 1958 or at any time. The State made rules in the year 1967 to regularise the appointment from the month of February, 1958. Again, if it were a case of direct recruitment one Would expect proper materials for the direct recruitment. There should be advertisements for the post. Candidates have to be selected. Their respective merits would have to be considered. To say that the appellant was the only eligible candidate is to deny the rights of others to apply for such eligibility tests. Counsel on behalf of the State relied on the decision of this Court in Champaklal Chimanlal Shah v. The Union of India(1) (1) [1964] 5 S.C.R. 190. and the observations at page 201 of the report : "That the Government have to employ temporary servants to satisfy the needs of a particular contingency and such employment would be perfectly legitimate." No exception could ordinarily be taken to such appointment. The appointment in the present case does not fall under that category. The appointment was in breach of rules as a case of promotion. It was not a case of direct recruitment. It was not a case of temporary appointment. It was not a case of appointment of a local candidate. This Court in the case of The State of Mysore v. Padmanabhacharya etc.(1) dealt with a rule under Article 309 to the effect that the respondents in that case having been invalidly retired should have been validly retired from service on superannuation. The notification of the Government under Article 309 was issued on 25 March, 1959 there validating the action taken in retiring the respondent and others upon their attaining the age of 55 years. The respondents contended before the High Court that they were entitled to continue in service upto the age of 58 years and not to be retired at the age of 55 years in view of an exception carved out by note 4 to rule 294(1) of the Mysore Civil Services Regulations. This Court did not express any opinion as to the power of the Legislature to make a retrospective provision under Article 309 but the notification retiring certain persons on superannuation was struck down by this Court in these words : "We are, of opinion that this notification cannot be said to be a rule, regulating the recruitment and conditions of service of persons appointed to the services and posts in connection with the affairs of the State. All that the rule does is to say in so many words that certain persons who had been, in view of our decision on this point, invalidly retired should be deemed to have been validly retired from service on superannuation. It would if given effect contravene Article 311 of the Constitution. Such a rule in our opinion is not a rule contemplated under the proviso to Article 309". The contention on behalf of the State that a rule under Article 309 for regularisation of the appointment of a person would be a form of recruitment read with reference to power under Article 162 is unsound and unacceptable. The executive has the power to appoint. That power may have its source in Article 162. In the present case the rule which regularised the appointment of the respondent with effect from 15 February, 1958 notwithstanding any rules cannot be said to be in exercise of power under Article 162. First, Article 162 does not speak of rules whereas Article 309 speaks of rules. Therefore, the present case touches the power of the State, to make rules under Article 309 of the nature impeached here. Secondly, when the Government acted (1) [1966] 1 S.C.R. 994. R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 10 under Article 309 the Government cannot be said to have acted also under Article 162 in the same breath. The two Articles operate in different areas. Regularisation cannot be said to be a form of appointment. Counsel on behalf of the respondent contended that regularisation would mean conferring the quality of permanence on the appointment whereas counsel on behalf of the State contended that regularisation did not mean permanence but that it was a case of regularisation of the rules under Article 309. Both the contentions are fallacious. If the appointment itself is in infraction of the rules or if it is in violation of the provisions of the Constitution illegality cannot be regularised. Ratification or regularisation is possible of an act which is within the power and province of the authority but there has been some non-compliance with procedure or manner which does not go to the root of the appointment. Regularisation cannot be said to be a mode of recruitment. To accede to such a proposition would be to introduce a new head of appointment in defiance of rules or it may have the effect of setting at naught the rules. In the present case, it was said that the respondent was a local candidate within the meaning of rule 8(27A) of the Mysore Civil Services Rules, 1957 which came into effect on 1 March, 1958. A local candidate is defined there as a local candidate in service meaning a temporary Government servant not appointed regularly as per rules of recruitment to that service. When the appointment of a local candidate would be regularised it would be in consonance with the rules. A contention was advanced on behalf of the respondents that Rules 3, 4 and 14 in the Mysore State Civil Service Rules, 1957 which came into effect on 10 February, 1958 would not apply until rules of recruitment as con- templated in Rule 3 were brought into existence. In support of that contention reliance was placed on the decision of this Court in B. N. Nagarajan Ors. v. State of Mysore & Ors.(1). In that case a question arose as to the validity of appointments of 88 Assistant Enginers who were appointed in October, 1961. It was contended that the appointments there were to have been in consonance with the Rules which came into existence in December, 1960. It was held that the December 1960 Rules were not intended to cover appointments of persons who had been interviewed and recommended for appointment by the Public Service Commission in the month of November, 1960 prior to the making of the rules. It was also held in that case that the absence of rules would not take away the power of the executive Government to make appointments under Article 162 of the Constitution. In the present case, the contention on behalf of the respondents that the regularisation was itself a mode of appointment (1) [1966] 3 S.C.R. 682. under Article 162 of the Constitution is unsound. The Rules came into existence in the present case in 1964. The regularisation was made in the year 1967. The regularisation was made with effect from 1958. Therefore, the Rules became applicable. The regularisation in the present case was also bad because even without specific methods of recruitment appointments could be made only by selection or promotion or transfer from equivalent grade. The method of recruitment and qualification for each State Civil Service was to be setforth in the rules of recruitment of such service specialty made in that behalf. It follows that in the present case in the face of rules which spoke of recruitment to be by competitive examination or by selection or by promotion, these are the three modes of appointment. Even if the method of recruitment and qualifications are not laid down the three modes are specific. Counsel on behalf of the State stated that the respondent was not promoted but that it was a case of selection because the respondent was the only person fit for that post. A selection would have to be made by inviting applicants and then selecting them. The State relied on the affidavit of the Deputy Secretary to the Government that the respondent was a highly R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 11 qualified person and there were no other qualified persons available to fill up the post of Principal of the School. It was therefore said that the Government found that the respondent was the only candidate found suitable and he was therefore selected. The affidavit does not say that he was selected on the basis that other candidates were interviewed and that claim of other candidates were considered. In Nagarajan's case (supra') this Court said that if rules were made the Executive would have to follow the Rules and the Executive could not under Article 162 of the Constitution ignore the Rule. Therefore, in the present case the Executive acted illegally in regularising the appointment of the respondent Thimmiah. In the present case, the respondent was appointed tempora- rily as officiating Principal on 25 September 1958 until further orders. In foot note I to the letter dated 25 September, 1958 communicating the order it was stated that the Director of Technical Education was requested to forward proposals to fill the post by advertisement through Mysore Public Service Commission. Again on 3 April, 1958 when the respondent was appointed temporarily as officiating Principal with effect from 15 February, 1958 until further orders a similar foot note was given in that letter communicating the order to the effect that the Director of Technical Education would forward proposals to fill up the post by advertisement through Mysore Public Service Commission. These letters totally repel the suggestion of the respondent being a local candidate. 'These letters contain intrinsic evidence that the appointment was to be made, 'by advertisement through Mysore Public Service Commission so that persons who would possess the necessary qualifications would be able to apply for the same for consideration. The case of promotion is totally impermeable in the present case. There were three classes of services under the Mysore Civil Services (Classification, Control and Appeal) Rules, 1957. Rule 5 classified the services under four classes. Class I consisted of gazetted posts with the minimum pay of not less than Rs. 350 p.m. Class 11 was to consist of gazetted posts other than those referred to in Class 1. Class III was to consist of non-gazetted posts of Primary School teacher, Assistant Inspector of Shops and Establishments, Compounders, Village Accountants, Bill Collectors and other posts the pay or maximum pay of which if on a time scale is more than Rs. 90. Class IV was to consist of non-gazetted posts classified in the Schedule. There, were three Schedules. Promotion would have to be under rule 4 of the Mysore Civil Services (General Recruitment) Rules, 1957 on the basis of merit and suitability or on the basis of seniority-cum-merit. Rule 16 of the 1957 General Recruitment Rules speaks of relaxation of rules relating to appointment and qualifications. The Government has power to relax any rule and may appoint persons for reasons to be recorded in writing inter alia to a post of an equivalent grade by transfer. In the present case, it was not an appointment by transfer from one post to a post of an equivalent grade under the rules. The relaxation under Rule 16 of the Mysore Civil Service (General Recruitment) Rules, 1957 for a specified period of the qualifications prescribed for purposes of direct recruitment of candidates possessing the prescribed qualifications was neither available nor done in fact in the present case. Therefore it could not be said here that the appointment was by promotion because the respondent did not hold the post of an equivalent grade. It is said on behalf of the State that the appointment of the respondent was justified on the following grounds. In the year 1958 the respondent was appointed on, a temporary basis. The Government has power to make a temporary appointment. The respondent was, according to the rules, a local candidate. A local candidate could be appointed irrespective of rules. Up to the year 1964 there were no rules fixed with regard to cadre or appointment. In 1964 when the cadre and recruitment rules R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 12 were made the respondent was the only qualified person. There were no specific rules for regularisation. The Government has power under Article 162 to regularise appointments. Rules under Article 309 can be made for one Person. Therefore, the respondent was validly appointed. The contentions on behalf of the State and the respondent are unacceptable. A local candidate means a temporary Government servant not appointed regularly. The respondent was a permanent Government servant at the material time. He was already in service. Under the rules in force in the year 1958 two Government servants cannot be appointed substantively to the same permanent post at the same time. A Government servant cannot be appointed substantively except as a temporary measure to two or more permanent posts at the same time. Therefore, if the respondent were appointed as a temporary measure to the post of Principal it would be not as a local candidate but as a Government servant appointed to another post as a temporary measure. This happened in 1958. When the appellant impeached the appointment of the respondent before the Mysore High Court in 1962 the State Government stated that the rules had been framed and forwarded to the Public Service Commission and the post of the Principal had to be filled up by promotion from the cadre of Heads of Sections or by direct recruitment. The qualifications for direct recruitments were also given. It was also stated before the Mysore High Court that the matter of regularisation of the respondent in the post was under consideration and the Public Service Commission had agreed to the regularisation and the matter was to be considered by the Government and the decision was to be given in that behalf. In that context, the Mysore High Court said that no useful purpose would be served in pronouncing on the questions raised in the writ petitioN and if and when the appellant felt aggrieved by such regularisation it would be open to him to take such steps. It is in this background that when regularisation was made in the year 1967 that the appellant came up before the High Court challenging the regularisation. When it was said before the Mysore High Court in 1962 that the Public Service Commission agreed to regularisation it did not mean that the Public Service Commission agreed to regularise the appointment of the respondent. All that the Public Service Commission did was to regularise the appointment to the post of the Principal. The regularisation by the State of the appointment is with effect from 1958. This reguularisation is bad for the following reasons. First, regularisation is not itself a mode of appointment. Secondly, the modes of appointments are direct recruitment or selection or pro- motion or appointing for reasons to be recorded in writing an officer holding a post of an equivalent grade, by transfer, from any other service of the, State. The Government did not contend-, it to be a case of promotion. If it were a case of promotion it would not be valid because it would be a promotion not on the basis of seniority-cum- merit but a promotion of some one who was in Class III to Class I. Even with regard to appointment under rule 16 by transfer of a person holding an equivalent grade the appointment would be offending the rules because it would not be transfer from an equivalent grade. Again, merit and seniority could not be disregarded because the respondent was not in the same class as the Principal of the School of Mines. The pay of the Principal was Rs. 500-800 whereas the respondent was getting a salary of Rs. 165 in the grade of Rs. 125-165 plus an allowance of Rs. 75. The contention of the State that there were no rules and that the Government was free to appoint the respondent is wrong. There were 1957 rules which spoke of appointment by competitive examination or by selection or by promotion. Even if specific rules of recruitment for such services were not made the rule as to-appointment by competitive examination or selection or by promotion R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 13 was there. Article 162 does not confer power of regularisation. Article 162 does not confer power on the Government to make rules for the recruitment or conditions of service. There can be rule for one person or one post but rules are meant for recruitment and conditions of service. Rules are not for the purpose of validating an illegal appointment or for making appointments or promotions or transfer. Rules under Article 309 are for the purpose of laying down the conditions of service and recruitment. Therefore, the regularisation by way of rules under Article 309 in the present case by stating that notwithstanding anything in the rules the appointment of the respondent was being regularised was in itself violation of the rules as to appointment and as to cadre and also as to the proper selection. if the respondent were to be appointed by direct recruitment, there should have been advertisements. Then others would have the opportunity of applying. That would be proper selection. Counsel on behalf of the appellant contended that Articles 14 and 16 of the Constitution were infringed by the impugned regularisation by rules under Article 309 of the Constitution inasmuch as the appellant and the other petitioners in the High Court were not given equal opportunity and treatment in regard to the appointment and there was also discrimination. It was said on, behalf of the respondent that the appellant did not possess qualifications prescribed by the 1964 Rules. The appellant disputed that contention. 'Me appellant and the respondent belonged to the same class of service. The Mysore Education Department Services Technical Education Department) (Recruitment) Rules, 1964 provided that the method of recruitment for the post of Principal, School of Mines was by, promotion from the cadre of Heads of Sections or by direct recruitment. The minimum qualifications for direct recruitment were age limit of 40 years and M.Sc. Degree in applied Geology with five years experience in Mining. The appointment of the respondent was not by direct recruitment at any stage. The appointment of the respondent was sought to be justified by the State and the respondent first on the ground of promotion and second on the ground of the respondent possessing the qualification. The appellant contended that the appellant was the Principal of the Polytechnics since the year 1949. The appellant also contended that the appellant was senior to the respondent. The Principals of Polytechnics and the Heads of sections, according to the contention of the appellant, belonged to the common cadre. Therefore, the appellant alleged that the appellant was eligible for promotion under the 1964 Rules. The case of promotion could not be considered by considering only the respondent. Again, the impeached rules do not show that it was a case of promotion but that it was a case of regularisation of an appointment with effect from the year 1958. If it was the case of selection the appellant and the respondent and others should have been considered. The 1964 Rules prescribed qualifications for the first time. The 1964 Rules provided appointment by promotion or by direct recruitment. The appellant alleged eligibility. The appellant was Head of a Section. The respondent was also a Head of a Section. They both belonged to the same cadre. Therefore, the impugned rule affects the appellant not only in regard to his eligibility but also his seniority. The High Court was wrong in holding that the appointment of the respondents was defensible as a local candidate and therefore the appointment did not offend Article 14 and 16 of the Constitution. R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 14 For these reasons, the judgment of the High Court is set aside. The appeal is allowed. The impeded Rules dated 9 February, 1967 published in the notification No. ED.91DGO58 are declared to be void. There will be no order as to costs. V.P.S. Appeal allowed. R. N. Nanjundappa vs T. Thimmiah & Anr on 8 December, 1971 15 | {
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Dalmia Jain & Co. Ltd vs Commissioner Of Income-Tax,Bihar & ... on 29 July, 1971 Equivalent citations: 1971 AIR 2129, 1971 SCR 963, AIR 1971 SUPREME COURT 2129, 1971 TAX. L. R. 1373, 1973 BLJR 1, 81 ITR 754, 1972 (1) ITJ 149, 1971 UPTC 734, 1972 (1) SCJ 215, ILR 1972 51 PAT 185 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: DALMIA JAIN & CO. LTD. Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX,BIHAR & ORISSA, PATNA DATE OF JUDGMENT29/07/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 2129 1971 SCR 963 ACT: Income Tax-Litigation expenses-Capital expenditure or Revenue expenditure-Tests for determining. HEADNOTE: The appellant-assessee, one of whose business activities was quarrying lime-stone, was working a quarry as agent of the government with an understanding that the quarry would be leased out to the assessee if the ,government succeeded in the litigation in respect of it. When the assessee was in possession, a company instituted a suit against the government for specific performance of an agreement to lease the quarry. The assessee was made a party to the suit and a claim for damages was made against the government as well as the assessee. This Court granted a decree for damages and the assessee was also made liable to pay damages. On the Dalmia Jain & Co. Ltd vs Commissioner Of Income-Tax,Bihar & ... on 29 July, 1971 1 ,question whether the litigation expenses incurred by the assessee constituted expenditure laid out wholly and exclusively for the purpose of the assessee's business or whether it was incurred for the purpose of acquiring a new asset, HELD:(i) Where the expenditure laid out for the acquisition or improvement of a fixed capital asset is attributable to capital, it is capital Expenditure but if it is incurred to protect the trade or business of the assessee, it is a revenue expenditure. In deciding whether a particular ex penditure is capital or revenue in nature, what the courts have to see is whether the expenditure in question was incurred to create any new asset or was incurred for maintaining the business of the company. If it is the former it is capital expenditure; if it is the latter, it is revenue expenditure. [965A-966B] (ii)In the present case the expenditure was incurred for the purpose of protecting the assessee's business and, therefore, was revenue expenditure. The assessee was dragged into the litigation and a claim for damages was made against the assessee also. The litigation came to be instituted against the assessee because the assessee was working the quarry and it was working the same at the time of the litigation. Therefore, the only reasonable inference that could be drawn was that the assessee resisted the suit in order to protect its business and not with a view to safeguarding its prospects of getting a new lease. [966G] Shree Meenakshi Mills Ltd. v. Commissioner of Income-Tax, Madras, 63 I.T.R. 207, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1812 of 1967. Appeal from the judgment and order dated January13, 1966 of the Patna High Court in Misc. Judicial Case No. 665 of 1962. M. C. Chagla and R. Gopalakrishnan, for the appellant. Jagadish Swarup, Solicitor-General, B. B. Ahuja and B. D. Sharma, for the respondent. The Judgment of the Court was delivered by Hegde J This appeal arises from the decision of the High Court of Patna in a reference under s. 66(1) of the Indian Income tax Act, 1922 (to be hereinafter referred to as the Act). In that reference several questions of law were referred to the High Court for its opinion. In this appeal we are concerned with only one of those questions and that question is : "Whether on the facts and circumstances of the case the Tribunal was justified in holding that litigation expenses of Rs. 1,29,994/- incurred by the assessee for the Dalmia Jain & Co. Ltd vs Commissioner Of Income-Tax,Bihar & ... on 29 July, 1971 2 assessment year 1951-52 constitute expenditure laid out wholly and exclusively for the purpose of the assessee's business"? The relevant facts as found by the tribunal may now be briefly stated. The litigation expenses in question relate to the protracted litigation in respect of Murli Hills. Those Hills were owned by the State of Bihar. On April 1, 1928, the State Government gave a lease of those Hills to Kutchwar Lime Company for 20 years for the purpose of quarrying limestone therein. In the lease deed entered into between the parties, there was a clause preventing the lessee from assigning its rights to any third party without the consent of the lessor. in January 1933, Kutchwar Lime Co. went into voluntary liquidation and the liquidators assigned the lease-hold right to Subodh Gopal Bose in September 1933 without the permission of the State Government. The assignee took possession of the property on March 9, 1933 but was topped from working the quarry by the Government. The Government forfeited the lease of the Kutchwar Lime Company on March 23, 1933 and recentered into possession. The Government granted a fresh lease of those Hills to Kalyanpur Lime Company for a period of 20 years with effect from April, 1934. On September 24, 1934 the Kutchwar Lime Co. sued the Government for a, declaration that the lease granted to it in 1928 had not been validly forfeited and for an injunction restraining the respondent from granting Murli Hills on lease to anyone else. The suit was decreed by the High Court on February 7, 1936 and the decree was affirmed by the Privy Council on November 19, 1937. The Kalyanpur Lime Co. vacated the quarry in April 1936 after the Kutchwar Lime Company started contempt proceedings. Kutchwar Lime Company got possession of the Murli Hills and remained in possession until the lease expired on March 31, 1948. The Government then re-entered into possession. Thereafter Kalyanpur Lime Company repeatedly asked the Government to execute the lease as agreed to by it in 1934. The Government refused to do so and informed the Kalyanpur Lime Company on June 2, 1949 that the Government has decided to lease Murli Hills to the assessee. The Government leased the Murli Hills to the assessee for one year from September 22, 1949 to September 22 1950. Thereafter the Government appointed the assessee as the agent of the Government for working in the quarry with an understanding that the Murli Hills will be leased out to the assessee if the Government succeed in the litigation. When the assessee company was in possession of the Murli Hills as an agent of the Government, the Kalyanpur Lime Company filed a suit for specific performance. In the alternative it claimed damages. In that suit the Kalyanpur Lime Company imleaded the State of Bihar as well as the assessee as defendants. It is necessary to remember that in that suit a claim for damages was also made in the alternative. That suit was resisted by the State Government as well as by the assessee. That suit was dismissed by the High Court. The appeal of the Kalyanpur Lime Company was allowed by this Court and the suit decreed against both the defendants. But as by that time the term of the, lease agreed upon between the State Government and the Kalyanpur Lime Company had come to an end this Court instead of granting a decree for specific performance granted a decree for damages. Under that decree, 'he assessee company was also made liable to pay damages-see the Dalmia Jain & Co. Ltd vs Commissioner Of Income-Tax,Bihar & ... on 29 July, 1971 3 decision by this Court in Civil Appeals Nos. 1170 and 1171 of 1965. From the facts stated above, it is clear that Kalyanpur Lime Company claimed damages not only from the State Government 'but also from the assessee company which in the course of its business was acting as the agent of the Government, no doubt with the prospect of getting a lease of the Murli Hills if the Government succeeded in the litigation. In the judgment of this Court it was observed that the assessee had no locus stand to resist the suit of Kalyanpur Lime Company. The question for decision is whether the litigation expenses incurred by the assessee were for the purpose of creating, curing ,or completing the assessee's title to capital or whether it was for the purpose of protecting its business. If it is the former then the expenses incurred must be considered as capital expenditure. But on the other hand if it is held that the expenses were incurred to protect the business of the assessee then it must be considered as a business loss. The principle which has to be deduced from decided cases is that where the expenditure laid out for the acquisition or improvement of a fixed capital asset is attributable to capital it is capital expenditure but if it is incurred to protect the trade or business of the assesee then it is as revenue expenditure. In deciding whether a particular expenditure is capital or revenue in nature, what the courts have to see is whether the expenditure in question was incurred to create any new asset or was incurred for maintaining the business of the company. If it is the former it is the capital expenditure; if it is the latter, it is the revenue expenditure. The Income-tax Officer as well as the Appellate Assistant Commissioner came to the conclusion that the expenditure in question was incurred for the purpose of acquiring a new asset. Their orders are not clear as to what is the new asset intended to be acquired by the assessee. Possibly they were of the opinion, arm, was urged by the learned Solicitor-General on behalf of the Revenue that the expenditure was incurred for securing the assessee's prospect of getting a lease of the Murli Hills if and when the Government succeeded in the litigation. But the appellate tribunal took a different view of the matter. It came to, the conclusion that the expenditure in question was incurred to protect the business of the assessee. On the other hand, the High Court agreed with the view taken by the Income-tax Officer and the Appellate Assistant Commissioner. The salient facts that could be gathered from the material before the tribunal are : (1) one of the business activities of the assessee was to quarry lime stone; (2) the Murli Hills had been leased out by the Government to the assessee for a period of one year from September 22, 1949 to September 22, 1950; (3) Thereafter the assessee was working the quarry in question as the agent filed by the Kalyanp limer of the Government; (4) in the suit filed by the Kalyanpur Limeur Company, the assessee had been made a party; and (5) in that suit a claim for damages was made both against the Government as well as against the assessee. What has been overlooked by the High Court is that them assessee did not get into the litigation of its own accord. It was dragged into the litigation by the Kalyanpur Lime Co. Further the Kalyanpur Lime Company had made a claim for damages Dalmia Jain & Co. Ltd vs Commissioner Of Income-Tax,Bihar & ... on 29 July, 1971 4 against the assessee also. This litigation came to be instituted against the assessee because the assessee was working the Murli Hills. It was working the same at the time of the litigation. From these facts, the only reasonable inference that can be drawn is that the assessee resisted the suit in order to protect its business as opined by the tribunal and not with a view to safeguard its prospects of getting a new lease. At any rate the view taken by the tribunal on the facts before it that the assessee incurred the expenditure in question to protect its business interest cannot be 96 7 considered as a unreasonable view. As observed by this Court in Shree Meenakshi Mills Ltd. v. Commissioner of Income-tax, Madras(1) that deductibility of expenditure incurred in prosecuting a civil proceeding depends upon the nature and purpose of the legal proceeding in relation to the assessee's business and the same cannot be affected by the final outcome of that proceeding. However wrong-headed, ill-advised, unduly optimistic or overconfident in his conviction the assessee might appear in the light of the ultimate decision, expenditure in starting and prosecuting a civil proceeding cannot be denied as a permissible deduction in computing the taxable income merely because the proceeding had failed, if otherwise the expenditure was laid out for the purpose of the business wholly and exclusively, that is, reasonably and honestly incurred to promote the interest of the business. Persistence of the assessee in launching the proceeding and carrying it from court to court and incurring expenditure for that purpose is not a ground for disallowing the claim. In this case the assessee stands on a better footing. It did not initiate the proceeding. It merely defended the claim made against it. The claim was made against it because it was working the Murli Hills though as an agent of the Government. Therefore the civil proceedings were launched against it because of one of its business activities. Under those circumstances we are of opinion that the High Court was not right in holding that the expenditure in question was not a revenue expenditure. For the reasons mentioned above we revoke the answer given by the High Court to the question referred to it for its opinion and in its place we answer that question in the affirmativeness and in favour of the assessee. The assessee is entitled to its costs both in this Court as well as in the High Court. K.B.N. Appeal allowed. (1) 63 I.T.R. 207. Dalmia Jain & Co. Ltd vs Commissioner Of Income-Tax,Bihar & ... on 29 July, 1971 5 | {
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Indian Oxygen Limited vs Their Workmen on 9 December, 1971 Equivalent citations: 1972 AIR 471, 1972 SCR (2) 816, AIR 1972 SUPREME COURT 471, 1972 4 SCC 578, 1972 LAB. I. C. 293, 1972 (1) LABLJ 627, 1972 24 FACLR 184, 41 FJR 1, 84 FAC L R 184, 1972 2 SCR 816 Author: C.A. Vaidyialingam Bench: C.A. Vaidyialingam, Kuttyil Kurien Mathew PETITIONER: INDIAN OXYGEN LIMITED Vs. RESPONDENT: THEIR WORKMEN DATE OF JUDGMENT09/12/1971 BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. MATHEW, KUTTYIL KURIEN CITATION: 1972 AIR 471 1972 SCR (2) 816 1972 SCC (4) 578 CITATOR INFO : R 1972 SC2195 (10,14) ACT: Payment of Bonus Act, 1964 s. 6-Bonus paid in respect of accounting year not to be deducted from grows profit for computing direct taxes-Dividend declared during accounting year-Whether to be deducted from reserves shown at commencement- of accounting year-Doubtful debts' whether rightly treated as part of reserves-Bonus paid in respect of year preceding the accounting year to be deducted from gross profits-Set on, directions as to. HEADNOTE: For its accounting year 1964-65 the Indian Oxygen Ltd. was liable to pay bonus under the Payment of Bonus Act 1965. The accounts of the company for the said year were passed on February 12. 1966. The company calculated bonus at the rate Indian Oxygen Limited vs Their Workmen on 9 December, 1971 1 of 17.58% of the total annual wages of salary plus Dearness Allowance and declared the said amount payable by notice dated March 23, 1966. The workmen demanded a higher rate of bonus. The resulting industrial dispute was referred to the National Industrial Tribunal. The Tribunal fixed the rate of bonus at 20%. Against the decision of the Tribunal appeals were filed in this Court. The questions that fell for consideration were- : (i) whether the tribunal was right in calculating the direct taxes after deducting the amount of bonus payable for the accounting year 1964-65 from the gross profits; (ii) whether the Tribunal was justified in deducting the amount earmarked for distribution of dividends from the reserves shown in the balance sheet at the commencement of the accounting year even though the dividend had not been declared at the commencement of the accounting year'. (iii) whether the Tribunal was justified in treating the amount shown against doubtful debts as part of the reserves; (iv) whether the Tribunal while calculating direct taxes was justified in not taking into account the bonus paid for the year 1963-64; (v) whether the directions given by the Tribunal regarding set on were justified. HELD : (i) In Metal Box Co. this Court laid down that an employer is entitled to compute his tax liability without deducting first the amount of bonus, he would be liable to pay, from and out of the amount computed under ss. 4 and 6 of the Act. After the above decision Parliament enacted the Payment of Bonus (Amendment) Act 1969. Parliament at that time was fully aware of the principle laid down by this Court that the tax liability has to be worked out by first working out the gross-profits and deducting therefrom the prior charges under s. 6 but not the bonus payable to the employees. Nevertheless Parliament did not make any change in the Act enacting that a different method is to be adopted for computing the direct taxes. If Parliament intended to make a departure from the principles laid down by this Court in Metal Box Co. that bonus amount should be calculated after a provision for tax was made and not before a provision to that effect would have been incorporated by the Amendment Act. That not having been done, the law as laid down by this Court in Metal Box Co. and reaffirmed by two later decisions namely William Jacks & Co. Ltd. and Delhi Cloth and General Mills Co. still holds the field. It follows that the view of the National Tribunal that bonus must be deducted from the gross-profits before income-tax is calculated, was not correct. [826 F-G; 829 C-F] 817 Further the view of the Tribunal that the tax concessions by way of rebate that an employer will get under the Indian Income-tax Act on the bonus found to be payable has also to be taken into consideration in dividing the surplus between the workmen and the company, was also erroneous in view of the fact that the Act which is a self contained Code has prescribed the manner in which available surplus and the Indian Oxygen Limited vs Their Workmen on 9 December, 1971 2 allocable surplus are to be calculated. [829 G] Metal Box Co. of India Ltd. v. Workmen, [1969] 1 S.C.R. 750, Workment of William Jacks & Co. Ltd. v. Management of William Jacks & Co. [1971]1 L.L.J. 503 and Delhi Cloth & General Mills Co. Ltd. v. Workmen [1971] 2 S.C.C. 695, applied. (ii) The relevant accounting year in the present case was October 1, 1964 to September 30, 1965. In its balance sheet as on September 30, 1964 the appellant had shown a sum of Rs. 2,35,07,686 reserves. Similarly in its balance sheet as on September 30, 1965 apart from showing its reserves on that date, it had also shown a sum of Rs. 2,35,07,686 as reserves at the commencement of the accounting year. On December 5, 1964 a notice was issued regarding holding of the Annual General Meeting on February 12, 1965. The dividend was paid on March 9, 1965. From the notice calling for the General Meeting the Directors' Report and balance sheet as on September 30, 1964 it was clear that a sum of Rs. 43,68,000 out of the General Reserve of Rs. 2,35,07,686 had been set apart and was to be appropriated for payment of dividend for the previous year 1963-64. In the circumstances the Tribunal correctly applied the provisions of s. 6(d) of the Act read with item 1 cl. (iii) together with the material part of the Explanation to the Third Schedule of the Act when it deducted the sum earmarked to be paid as dividend, i.e., Rs. 43,68,000 from the General Revenue at the beginning of the accounting year, i.e., Rs. 2,35,07,686 for the purpose of determining the return on Reserves. The fact that the dividend had not been declared at the commencement of the accounting year was not material. In no case will a company be able to declare a dividend for the year ending September 30, 1964 on the morning of October 1, 1964. Once the Directors have, on the basis of auditor's report and other materials decided to declare a particular amount as dividend and have set apart the required amount from the General Reserve, it must relate back to the date of the commencement of the accounting year. [830 G-H; 832 C-F; 833 A-C] (iii) The Tribunal was justified in holding that the appellant was not in order in deducting Rs. 55,127 under the head 'doubtful debts' an item of expenditure. It was perfectly justified in adding back the amount in computing the gross profits. The creation of such an amount is really a reserve and not a provision as contended by the appellant. The appellant itself in its breach up had distinguished bad debts from doubtful debts. [834 F-835 B] Textile Machinery Corpn. Ltd. v. Workmen, [1960] 1 L.L.J. 34. applied. (iv) The Tribunal was justified in holding that in calculating direct taxes the bonus for the accounting year 1963-64 though paid during the accounting year 1964-65 should not be taken into account. As the bonus year must be taken as a unit, bonus paid for the previous accounting year Indian Oxygen Limited vs Their Workmen on 9 December, 1971 3 from and out of the profits of the said previous year does not come into the picture. [836 E] (v) On a proper computation even the bonus already paid by the company at 17.58% was on the big side.It follows that the direction of 818 the National Tribunal regarding set on based as it was on the rate 20% bonus fixed by the Tribunal, could not be accepted. [836 F-G] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 415, 813 and 1302 of 1967. Appeals by special leave from the award dated January 20, 1967 of the National Industrial Tribunal, Calcutta in Reference No. NIT-1. of 1966. G. B. Pai and D. N. Mukherjee, for the appellant (in C.A. No. 415 of 1967) and respondent No. 1 (in C.As. Nos. 813 and 1302 of 1967. Janardan Sharma and Indira Jaisingh, for respondent No. 1 (in C.A. No. 415 of 1967), the appellants (in C.A. No. 813 of 1967) and respondent No. 2 (in C.A. No. 1302 of 1967). K. R. Chaudhuri, for respondent No. 3 (in C.A. 415 of 1967). C. L. Dudhia, C. G. Nadkarni, K. L. Hathi and P. C. Kapur, for respondent No. 4 (in C.As. Nos. 415 and 813 of 1967) and the appellants (in C.A. No. 1302 of 1967). Janardan Sharma, for the intervener, The Judgment of the Court was delivered by Vaidiyalingam, J. AR these appeals, by special leave, are directed against the Award dated January 20, 1967 of the National Industrial Calcutta in Reference No. NIT-1 of 1966. Civil Appeal No. 415 of 1967 is by the Company regarding the disallowance of certain items by the Tribunal for arriving at the available and allocable surplus for calculating bonus to be paid for the accounting year 1964-65. Civil Appeals Nos. 813 and 1302 of 1967 are by the two Unions representing the workmen, against that part of the Award rejecting the claim of the Unions for adding back certain items for the purposes of calculating the rate of bonus to be paid by the appellant Company. As mentioned earlier, the year of account is 1964-65, which is October 1, 1964 and ending September 30, 1965. The appellant Company was incorporated under the Indian Companies Act, in 1935 and was made into a public company in 1958. It is a venture of the British Oxygen Company incorporated in England and the English Company still holds a little over 66% of the shares of the Indian Company. The main products of the Company are production of industrial gases like oxygen, dissolved acetylene, nitrogen and hydrogen and also electrodes and welding equipment and medical equipment. The Company has been paying bonus to its workmen from 1948; and since, then it has been paying bonus by agreements with the union. The bonus, so paid, has been more or less at five Indian Oxygen Limited vs Their Workmen on 9 December, 1971 4 months basic wages, subject to a minimum and maximum as per the agreement. For the year in question, 1964-65, there was no agreement, as the Payment of Bonus Act, 1965 (hereinafter to be referred as the Act) came into force. There is no controversy that this is the first accounting year, in respect of which the bonus is to be paid under the Act. The accounts of the Company were passed at the Annual General Meeting held on February 12, 1966. The Company calculated bonus at the rate of 17.58% of the total annual wages or salary plus Dearness Allowance and declared the said amount payable by notice dated March 23, 1966. The Company originally worked out the allocable surplus under the Act for the said year at Rs. 30,35,958. As the sum of Rs. 1,72,69,770 was the total salary and wages including Dearness Allowance payable for the said year, the allocable surplus worked out at 17.58% of the said total wage bill and hence bonus was declared at that rate. The Unions protested against the rate of bonus declared by the Company and demanded a substantial increase in the quantum of bonus. The claim by the Indian Oxygen & Acetylene Employees' Federation was for payment of bonus equal to eight months' basic wages subject to a minimum of Rs. 400/-. Another union, National Federation of Indian Oxygen Workmen, Jamshedpur, claimed bonus at the maximum rate of 20% provided under the Act. A third union, also the Bombay Labour Union, claimed bonus at the maximum rate of 20%. A fourth union, Indian Oxygen Employees Union of Rajawadi, Bombay, demanded bonus at 25% of the total earnings or at six months' basic wages, whichever was higher. As attempts at settlement failed, a strike notice was given by some of the Unions. Originally, there was a reference of the dispute by the Government of West Bengal to a Tribunal. Later on, this order of reference by the State Government was cancelled and the Central Government by order dated July 7, 1966 referred the dispute for adjudication to the National Industrial Tribunal at Calcutta. The question referred was as follows : "Whether the, workmen are entitled to a higher bonus than 17.5 per cent for the year 1964-65 as offered by the management? If so, what should be the quantum of bonus for the said year?" Though the question referred was regarding the, claim for higher bonus than 17.5 per cent, all parties were agreed that the appellant Company had actually offered and paid as bonus for the said year at 17.58 per cent. It is on this basis that the dispute also was adjudicated by the National Industrial Tribunal. Though originally, the appellant, as mentioned earlier, had calculated the allocable surplus in the sum of Rs. 30,35,958, during the proceedings before the Tribunal, they recomputed the amount and filed a revised statement Ex.4, by which the allocable surplus was worked out at only Rs. 23,30,396. This reduced figure was explained by the appellant Company as due to omission in the previous statement, to add back certain items in computing the gross profits and higher figure for income-tax. All the unions very strenuously contested both the calculations of the Company. According to the unions,- in the balance sheet and profit and loss accounts of the Company various items of expenses have been inflated. Details of such inflation were given by them. The unions also contested the amount of direct taxes shown in the statement of the Company. It was the further case Indian Oxygen Limited vs Their Workmen on 9 December, 1971 5 of the unions that if there is a proper computation, the allocable surplus would be very much higher than 50 lacs as against the figure of Rs. 30,35,958 shown in the original calculation and miserably reduced in the subsequent calculation Ex.4. The National Industrial Tribunal, in its Award has disallow- ed certain claims made by the appellant Company. It also disallowed certain extreme claims made by the unions. Ultimately, it fixed the available surplus in the sum of Rs. 65,29,507. On this basis it fixed the sum of Rs. 39,17,704 as the allowable surplus being 60% of available surplus. As the allocable surplus so fixed was more than 20% of the annual wage bill of Rs. 1,72,69,770, the ban-us was fixed by the Tribunal at the maximum rate of 20%. It further gave a direction that a set on of Rs. 4,63,750 is to be carried forward. In the end the Tribunal made an Award that the workmen are entitled to a higher bonus than 1.7.58% for the accounting year 1964-65 and fixed the quantum of bonus so payable, at the maximum rate of 20%, with a further direction that there should be a set on to be carried forward of Rs. 4,63,750. In Civil Appeal No. 415 of 1967, certain items which the Company claimed to be added back to the net profit', shown in the profit and loss account, for arriving at the gross- profits and which have been rejected by the Tribunal are in controversy. Further, there is also a controversy, in the said appeal, regarding certain deductions sought to be made from the gross-profits for the purpose of arriving at the allocable surplus and which have not been allowed by the Tribunal. But the major item in controversy in the appeal of the Company is regarding the manner in which the calculation of direct taxes have to be made under the Act. Though the Unions support the Award of the Tribunal, in so far as it is against the Company,, grievance in their appeals Nos. 813 and 1302 of 1967 relates to the Tribunal's declining to add back certain further items in calculating the gross-profits and permitting the Company to deduct from the gross-profits certain items for arriving at the allocable surplus. There are several items, which, according to the Unions, should have been either added back to the gross-profits or should not have been deducted from the gross-profits to arrive at the allocable surplus. We are not referring in detail to the various items, referred to in the two appeals of the Unions, as their counsel have represented before us that if the claim of the Company regarding the manner in which the computation of direct taxes, is accepted'. by this Court, they are not pressing their appeals. In order to appreciate the points in controversy we are giving below the statement, which will show the calculations of the Company, as well as the computation made in the Award. "COMPUTATION OF ALLOCABLE SURPLUS FOR THE YEAR ENDED 30-9- 1965. Appellant Company's Computation as per the computation award 1. Net profit as per P & L Account 67,74,315 67,74,315 2. Add back (a) Bonus for 64-65 30,00,000 30,00,000 (b) Depreciation 70,44,600 70,44,600 (c) Direct taxer. 1,04,00,000 1,04,00,000 Indian Oxygen Limited vs Their Workmen on 9 December, 1971 6 (d) Development rebate 5,00,000 5,00,000 (e) Other reserves pr- ovision for doubtful 2,09,44,600 55,127 2,09,99,727 debts. 3. Add back also (a) Bonus paid for pre- vious year 25,21,347 25,21,347 (b) Donations in excess of incometax 4,569 4,569 (c) Capital expenditure (i)Patent fees 10,000 -L736 SupCI/72 (ii) Plant transfer charges 72,516 (iii)Disallowable rent 25,25,960 74,000 26,82,432 4.Gross profits 3,02,44,8313,04,56,474 5. Less (a) Depreciation 76,10,540 76,10,540 (b) Development rebate 6,11,42582,21,965 6,11,42582,21,965 2,20,22,8662,22,34,509 6. Less direct taxes (a) Income-tax at 55% of the balance 1,21,12,576 1,04,68,219 (b) Surtax 14,67,236 9,39,802 (e) Additional income- tax 54,600 1,36,34,412 54,600 1,14,62,621 83,88,454 1,07,71,888 7. (a)Return on paid up capital at 8.5% on Rs. 3,64,00,000 30,94,000 30,94,000 (b)Return on reserves at 6 % on Rs. 2,35,07,686 14,10,461 45,04,461 11,48,38142,42,381 Balance 38,83,993 65,29,507 8: Allocable Surplus 23,30,39639,17,704 9. Bonus at 20% on annual wages amounting to Rs. 1,72,69,770 34,53,954 Indian Oxygen Limited vs Their Workmen on 9 December, 1971 7 10. Set on to be carried for- ward 4,63,750 In the Award, the Tribunal has given its computationas well as the manner in which direct taxes have been calculatedfor the year 1964-1965. At this stage we may indicate that while the Company com- puted the direct taxes on the gross-profits, before deducting any amount on account of bonus, the Tribunal has calculated the taxes, after deducting the amount of bonus from the gross-profits. A decision on this really depends upon the construction of certain provisions of the Act, having due regard to the principles laid down by this Court. We have stated earlier that the claim for bonus is for the year 1964-65, i.e., from October 1, 1964 to September 30, 1965. There is no controversy that for this period bonus is to be calculated under the Act, which had become applicable. The Company worked out the allocable surplus under the Act and paid a sum of Rs. 30,35,958 as bonus for the said year. If that calculation is correct, there is no controversy that the amount represents 17.58% of the total wages earned by the eligible employees during the said accounting year. Later on, the appellant Company in view of the provisions of the Finance Act, 1966 recomputed the allocable surplus and fixed it in the sum of Rs. 23,30,396. It is the, claim of the Company that they paid bonus at a higher percentage than is, warranted under the Act. There is also no controversy that the Annual Wage Bill of the employees throughout the country was Rs. 1,72,69,770. Though the claim of the Company was that they paid bonus at a higher percentage, its Chief Exe- cutive, Finance, M.W. 1 has given evidence to the effect that the Company would not seek to recover the excess amount paid. Before us also, Mr. G.B. Pai, learned counsel for the appellant Company represented, that even, if on the basis of the decision of,' this Court, it is found that bonus at a higher percentage has been paid to the employees, the appellant Company will not seek to, recover any excess amount paid. That is, even if after accepting any of the contentions of the appellant. Company, it is found that bonus is payable at a percentage lesser than the rate, at which it has been paid, the excess amount will not be recovered from the employees, nor adjusted in any other manner. From the chart, given above, the tribunal has computed the; allocable surplus in the sum of Rs. 65,29,507 and fixed the bonus at the rate mentioned in the Award. The main controversy under this head centres round the question whether the Tribunal should have estimated the amount of direct taxes on the balance of gross-profits as worked out under ss. 4 and 6 of the Act, but without deducting bonus, as contended by the appellant Company or whether the Tribunal was justified in deducting the amount of bonus from the gross-profits before calculating the tax as urged on behalf of the Unions. The contention of the appellant Company in brief is as follows: The Scheme of the Act clearly indicates that gross- profits are first to be calculated and certain prior charges are to be deducted therefrom. One of the Prior charges under s. 6 is "direct tax". The tax is to be calculated by reference to the profits as they emerge at the stage when deduction of prior charges begins. After the prior charges are deducted from the gross-profits, the balance,left over is the available surplus. 60% of the available surplus represents the allocable surplus payable as bonus to the employees. At the stage of calculating the tax, bonus does not come into the picture as the same is ascertained after deduction- the tax. Hence ,the order of the Tribunal holding that bonus, which is payable on the profits of the Indian Oxygen Limited vs Their Workmen on 9 December, 1971 8 year in question, i.e., 1964-65, should be deducted from the gross-profits for the purpose of computation of incometax under s.6(c) of the Act, is erroneous. In this connection Mr. G. B. Pai, learned counsel for the appellant, has referred us to certain provisions of the, Act and in particular to the decision of this Court in Metal Box Co. of India Ltd. v. Their Workmen(1). According to the Unions bonus for both the years 1963-64 and. 1964-65 included in the profit and loss account of the appellant Company and added back for computation of gross- profits have to be deducted for ascertaining the taxable income for the yearyear 1964-65. They have made reference to the debate in parliament at the time of the passing of Act. In particular Mr. Dudhiya learned counsel for the fourth respondent,whose contentions have been acceptedby the learned counsel for other respondents, has urged that the decision in Metal Box Co.(1) has not considered several relevant matters, which, if taken into account, would clearly indicate that the intention of Parliament was that direct tax is to be computed after deducting the bonus payable for the relevant accounting year. The counsel, therefore urged that the decision of this Court in Metal Box Co. (1) should be reconsidered. The National Tribunal considered the question whether the provision for bonus in question in the sum of Rs. 30,00,000 and the bonus paid to the employees in respect of the previous accounting year, namely, Rs. 25,21,347, which have been added in the Company's statement in computing the gross-profits under the Act should or should not be deducted from the gross-profits before Income-tax is computed. It is the view of the Tribunal that the bonus for the previous accounting year 1963-64 is payable out of the profits of the said previous year and that amount cannot be deducted in calculating the Income-tax of the accounting year 1964-65. But it accepted the contention of the Company that in order to ascertain the gross-profits, bonus which is found payable on the profits for the year 1964-65 can be added back to the net profit shown in the Profit and Loss Account, but rejected its contention that the tax liability is to be computed without deducting the said amount. The Tribunal has further held that it has to take into account the concession by way of rebate which an employer is entitled to get under the Income-tax Act on the amount of bonus paid to workmen. On this basis the Tribunal held that a rough calculation shows that the allocable surplus will exceed 20% of the Annual Wage Bill and that the maximum statutory bonus of 20% must be subtracted from the gross-profits before the Incometax is calculated. It is now necessary to refer to the provisions of, the Act, as it stood at the material date, without the amendment effected to it in 1969. Under section 1(4), the Act has effect in respect of the accounting year commencing on any day in the year 1964 and in (1) [1969] 1 S.C.R. 750. respect of every subsequent accounting Year. Section 2 contains definitions of various expressions. The expressions "allocable surplus" "available surplus" "direct tax" "gross-Profits" and the "Incometax Act" are defined in clauses 4, 6, 12, 18 and 19 respectively. As the appellant Company is not a Banking Company, its gross profits, in respect of any accounting year, is to be calculated under s. 4(b) in the manner specified in the Second Schedule. The "available surplus" in respect of any accounting year, as provided under s. 5, is the gross-profits for that year, after deducting therefrom the sums referred to in section 6. Section 6 enumerates the various sums which are to be deducted from the gross-profits as prior charges. We are concerned with the relevant provision in Cl. (c) which is as follows: Indian Oxygen Limited vs Their Workmen on 9 December, 1971 9 "Section 6. The following sums shall be deducted from the gross profits as prior charges namely, (c) subject to the provisions of section 7, any direct tax which the employer is liable to pay for the accounting year in respect of his income, profits and gains during that year." Section 7 deals with the method of calculation of direct tax payable by an employer "for the purpose of cl.(c) of section 6." Section 11 fixes the maximum amount of bonus at 20% of the salary or wage. Section 15 deals with set on and set off of allocable surplus in the circumstances mentioned therein. Section 19 fixes the time limit for payment of bonus. As the entire scheme of the Act, as well is the principle to be adopted for ascertaining the direct tax, have been considered by this Court in certain decisions, to which we will refer presently, it is not necessary for us to cover the ground over again. In Metal Box Co. of India Ltd. v. Their Workmen(1), one of the questions that arose for consideration was the method of working out the direct taxes under the Act. The Company in that case claimed that direct taxes are to be worked out under s. 6 (c) on the gross- profits worked out under s. 4, less the prior charges allowable under s. 6, namely, depreciation and development rebate, but without deducting from such balance, the bonus payable by the Company in the particular accounting year. The Tribunal, in that case, had accepted the said claim of the Company. On behalf of the workmen it was contended before this Court that the said manner of calculation of direct taxes was contrary to the scheme and provisions of the Act. According to the workmen, the Tribunal must start its calculation, from the net profits shown in the Profit and Loss Account, which would have, (1) [1969] 1 S.C.R. 750. made provisions for direct taxes and then deduct from the gross-profits calculated under s. 4 the prior charges permissible under S. 6. The provisions for direct taxes made in the Profit and Loss Account would have been computed after deducting from gross receipts, such deductions, allowances, reliefs and rebates etc. as are permissible under the Income,-tax Act. It was the further case of the workmen that the bonus amount payable during a particular year would have been deducted from the gross receipts, as without such deduction, the Profit and Loss Account would not reflect the true net profit of an employer. In dealing with the above contentions, this Court, in the above decision, has referred to the views expressed by this Court on earlier occasions that the deduction by way of Income-tax is not the actual amount payable, but what would be nationally payable on the profits determined under the Full Bench Formula. This Court further considered the question whether the concept of notional tax liability adopted for a long time, has been altered or given the go- bye by Parliament in enacting ss. 6(c) and 7. After a very elaborate reference to the scheme of the Act and in particular to ss. 4 to 7 read with the Second Schedule, this Court ultimately accepted the contention of the Company that the tax liability is to be worked out by first working out the gross-profits and deducting therefrom the prior charges under s. 6, but not the bonus payable to the employees. This Court further observed as follows : Indian Oxygen Limited vs Their Workmen on 9 December, 1971 10 "If Parliament intended to make a departure from the rule laid down by courts and tribunals that the bonus amount should be calculated after provision for tax was made and not before, we would have expected an express provision to that effect either in the Act or in the Schedules." This decision has categorically laid down that an employer is entitled to compute his tax liability, without deducting first the amount of bonus, he would be liable to pay, from and out of the amount computed under ss. 4 and 6. After the decision of this Court in Metal Box Co.(1) Parlia- ment enacted the Payment of Bonus (Amendment) Act, 1969, (hereinafter to be referred as the Amendment Act). Section 2 of the Amendment Act, added a proviso to s. 5 of the Act. Similarly section 3 of 'the Amendment Act deleted in s. 7 of the Act, the opening words "for the purpose of cl. (c) of s. 6 any direct tax payable by the employer' and substituted the words "any direct tax payable by the employer." (1) [1969] 1 S.C.R. 750. In The Workmen of William Jacks and Co. Ltd. Madras v. Management of Will lacks and Co. Ltd., Madras(1), one of the questions that arose for consideration related to the correctness of the method adopted by the Company therein in calculating the amount of Income-tax, without taking into account the bonus which would be payable to the workmen for the relevant year. It was urged on behalf of the Union that the Income-tax should be calculated after taking into account the bonus. This contention again was rejected by this Court relying on its previous decision in Metal Box Co.(2) . The principle laid down in Metal Box Co. (2) was approved and reiterated. That principle, we have already pointed out, is that the Income-tax liability is to be worked out by first working out the gross-profits and deducting therefrom the prior charges under s. 6, but not the bonus payable to the employees in a relevant accounting year. It is significant to note that in William Jacks and Co.(1) the Union referred to the Amendment Act and strongly urged that the principle laid down by this Court in Metal Box Co.(2) regarding the method of computing direct tax has been modified by the Legislature. This Court, in the said decision referred to the provisions of the Amendment Act, and observed that no amendment has been effected to s. 6, and that the amendment in s. 7 is only to, the effect that the principles laid down therein are to be applied not only in respect of s. 6(c) but also to other sections of the Act. It was further stated that the change in s. 7 became necessary cause of certain amendments effected in s. 5 by making, certain additions, which referred to direct taxes including Income-tax. It was further held that the amendment in s. 5, has no bearing on the question whether Income-tax, to be taken into account in calculation, should be worked out after taking into account the bonus payable under the Act or without having regard to it. Ultimately, this Court wound up the discussion on this point as follows : "........ Consequently, there is no reason for us to differ from the view expressed by this Court in Metal Box Co. (2). This ground of challenge also, therefore, fails." Therefore, it will be noted that the principle laid down in Metal Box Co. (2) regarding the manner of computation of direct tax has been reiterated and reaffirmed in William Jacks and Co.,(1) and it has also been further pointed out that the Amendment Act had made no change whatsoever on this aspect. Indian Oxygen Limited vs Their Workmen on 9 December, 1971 11 The same question again came, up for consideration before this Court in Delhi Cloth and General Mills Co. Ltd. v. Workmen(3) (1) [1971] 1 L.L.J. 503. (2) [1969] 1 SC.R. 750. (3) [4971] 2 S.C.C. 695. The workmen therein again contended that many of the observations in Metal Box Co.(1) were obiter and that the said decision should not be followed as a precedent for determination of the question regarding the manner in which direct taxes have to be computed. Again, after a very elaborate consideration of the scheme of the Act, this Court rejected the contention of the Union, and observed as follows : "Strong reliance was placed by learned counsel for the appellant on the decision of this Court in Metal Box Co. v. Workmen. Counsel for the respondents made valiant efforts to persuade us to hold that many of the observations therein were obiter and as such the case should either be distinguished or be not followed as a precedent for the determination of the question before us. While no doubt the dispute in that case was somewhat different from the one which we have to resolve and there are some distinguishing features in that case, namely, that the Court was not called upon to examine the computation of the figures of gross profits, etc.,-for an establishment which came within the proviso to Section 3, the observations bearing on the question of the computation of direct tax under Section 6(c) of the Act are certainly in point. It was pointed out there at p. 775 : "What Section 7 really means is that the Tribunal has to compute the direct taxes at the rates at which the income, gains and profits of the employer are taxed under the Income-tax Act and other such Acts during the accounting year in question. That is the reason why Section 6(c) has the words "is liable for" and the words "income, gains and profits". These words do not, however, mean that the Tribunal while computing direct taxes as a prior charge has to assess the actual taxable income and the taxes thereon." With respect, we entirely agree with the above observation and in our view no useful purpose will be served by referring to the other observations bearing on a question with which we are not directly concerned." This decision again reiterates the principle laid down in Metal Box Co.(1). In view of the fact that the two later decisions, William Jacks and Co. (2) and Delhi Cloth and General Mills Co. (s) have approved and adopted the principles laid down by this Court in (1) [1969] 1 S.C.R. 750. (2) [1971] 1 L.L.J. 503. (3) [1971] 2 S.C.C. 695. Metal Box Co.(1) that decision holds good and governs the principles to be applied to the case on hand.' We are not persuaded by the request made by Mr. Dudhiya that the decision in Metal Box Co.(1) has to be reconsidered. In fact we have already pointed out that even the effect of the Amendment Act has been considered by this Court in William Jacks and Co. Ltd.(2) and it has been held that the Amendment Act has made no change in the principles laid down by this Court in Metal Indian Oxygen Limited vs Their Workmen on 9 December, 1971 12 Box Co. (1). It is rather significant to note that the, Amendment Act was passed, after the decision of this Court in Metal Box Co.(1). Parliament at that time was fully aware of the principle laid down by this Court that the tax liability has to be worked out by first working out the gross-profits and deducting therefrom the prior charges under s. 6, but not the bonus payable to the employees. Nevertheless, Parliament did not make any change in the Act enacting that a different method is to be adopted for computing direct taxes. If the Parliament intended to make a departure from the principle laid down by this Court in Metal Box Co., (1) that bonus amount should be calculated, after a provision for tax was made and not before, a provision to that effect would have been incorporated by the Amendment Act. That not having been done, the law as laid down by this Court in Metal Box Co.(1) and reaffirmed by the two later decisions, referred to above, still holds the field. One must in fairness state that the National Tribunal in the case before us, was for the first time applying the provisions of the Act and it did not have the benefit of the decision of this Court in Metal Box Co. (1). From what is stated above, it follows that the view of the National Tribunal that bonus must be subtracted from the gross- profits before Income-tax is calculated, is not correct. Before closing the discussion on this aspect, it is necessary to point out that the view of the National Tribunal that the tax concession by way of rebate that an employer will get under the Income-tax Act on the bonus found to be payable has also to be taken into consideration in dividing the surplus between the workmen and the Company, is also erroneous in view of the fact that the Act, which is a self-contained Code has prescribed the manner in which available surplus and the allocable surplus are to be calculated. The second claim made by the Company related to deduction of Rs. 14,10,461 from the gross-profits as Return on reserves at 6% on Rs. 2,35,07,686. As against the amount claimed by the Company, the National: Tribunal has allowed a sum of (1) [1969] 1 S.C.R. 750. (2) [1971] 1 L.L.J. 503. Rs. 11,48,381. This claim of Return on reserves made by the Company was based on s. 6, clause (d) read with Item 1 Cl. (iii)together with the material part of the Explanation to the ThirdSchedule of the Act. Section 6 enumerates the various sums whichare to be deducted from the gross- profits as prior charges. Section 6 (d) runs as follows : "Section 6 : The following sums shall be deducted from the gross-profits as prior charges, namely (d)such further sums as are specified in respect of the employer in the Third Schedule." Indian Oxygen Limited vs Their Workmen on 9 December, 1971 13 In the Third Schedule there are three columns. As the appellant is a Company other than a Banking Company, the relevant item is Item No. 1, of Column I and clause (iii) of Column 3, which are as follows : Item Category of employer Further sums to be deducted No. 1 2 3 1. Company, other than a banking company. (iii) 6 per cent of its reserves shown in its balance sheet as at the commencement of the accounting year, including any profits carried forward from the previous accounting year. The material part of the Explanation in the Third Schedule is as follows : "The expression "reserves" occurring in column (3) against Item No. 1 (iii) * * * shall not include any amount set apart for the purpose of (iii) payment of dividends which have been declared............ We have already referred to the fact that the relevant accounting year with which we are concerned is October 1, 1964 to September 30, 1965. In its balance-sheet as on September 30, 1964, the appellant had shown a sum of Rs. 2,35,07,686. as reserves. Similarly, in its balance sheet as on September 30, 1965, apart from showing its reserves as on that date, it had also shown a sum of Rs. 2,35,07,686 as reserves at the commencement of the accounting year. In view of the circumstances the claim for Return at 6% of this amount has been made' by the Company. The National Tribunal,- on the other hand, though accepting the figure as correct, held that from the reserves shown in the balance-sheet a sum of Rs. 43,68,000 has been earmarked and paid as dividend for the year ending September 30, 1964, and, therefore, this amount will have to be deducted from the reserves shown at the commencement of the accounting year 1964-65. After so deducting this amount, the Tribunal fixed the reserve at the commencement of the accounting year in the sum of Rs. 1,91,39,686. It allowed 6% Return on this amount and thus arrived at the sum of Rs. 11,48,381, as against ',he claim of the Company in the sum of Rs. 14,10,486. This method of approach by the National Tribunal is attacked by Mr. G. B. Pai on the ground that it is clearly contrary to the provisions referred to above. According to him the amount claimed as reserve has been shown in the balance- sheet "as at the commencement of the accounting year" i.e. October 1, 1965. So according to him the essential requirement of cl. (iii) in Column 3 relating to Item No. 1 in the Third Schedule is satisfied. In the said amount shown as reserve, the appellant Company will not be entitled to include any amount which is governed by the Explanation in the Third Schedule. So far as Item No. 1 (iii) of the Third Schedule is concerned, in order to attract the Explanation, the amount should have been set apart for the purpose of payment of dividend which have been declared. In this case, the counsel pointed out, no amount has been set apart for payment of dividend; nor has any payment of dividend been declared as on October 1, 1964. Therefore, going by the clear wordings of the relevant provision, the counsel criticised, the deduction by the Tribunal of the dividend declared for the year 1963-64 some time during the accounting year, 1964-65. Indian Oxygen Limited vs Their Workmen on 9 December, 1971 14 Mr. Dudhiya, learned counsel for the Unions, pointed out that the approach made by the Tribunal is correct. The counsel pointed out that on no occasion will dividend be declared for the accounting year ending September 30, 1964, on October 1, 1964, which is the beginning of the relevant accounting year now under consideration. The counsel referred us to the notices issued calling for the general meeting of the shareholders as well as the declaration made by the Directors regarding setting apart of th e necessary amounts in the General Reserve for payment of dividend for the year 1963-64. He further pointed out that though dividend for the year 1963-64 was actually paid only some time in March, 1965, the appellant is not entitled to claim Return on the entire amount shown as Reserve on October 1, 1964 as it is from and out of that Reserve that the dividend for the previous year has been paid. In our opinion, there is considerable force in the contention ,of Mr. Dudhiya. Going by a strict interpretation of the language of the provisions relied on by Mr. G. B. Pai, his argument, no doubt, looks attractive. But from the other proceedings, to which we will refer immediately, it will be seen that the approach made by the Tribunal is correct. In the Schedule to the balance-sheet as on September 30, 1964, the appellant Company has shown a sum of Rs. 1,23,00,000 as General Reserve. It has further shown a sum of Rs. 43,68,000 as the amount transferred to appropriation account for payment of dividend subject to tax in respect of the previous year, namely, 1962-63. it has also shown a sum of Rs. 63,00,000 as added to the General Reserve during the year ended September 30, 1964. On December 5, 1964, a notice was issued regarding holding of the Annual General Meeting on February 12, 1965. One of the items in the agenda for the said meeting was to declare dividend. It is further stated in the said notice that the dividend to be declared at the meeting will be payable on or before March 9, 1965, to those members whose names are on the Company's Register of Members as on February 12, 1965. In the Directors' Report accompanying the notice, it is stated that a sum of Rs. 43,68,000 has been appropriated "for payment of dividend for the previous year' (paid during the year). The reference to the "previous year" obviously is to the accounting year ended September 30, 1964. It is also clear that the amount so appropriated for payment of dividend is to be paid "during the year" namely, 1964-65. It is also stated that this amount for payment of dividend has been transferred from the General Reserve. The notice further states that the Directors recommend payment of dividend for the year ended September 30, 1964 at 12% subject to deduction of tax at the appropriate rate and that the said payment will absorb Rs. 43,68,000, out of the General Reserve. It will be seen that from the notice calling for the General Meeting, the Directors' Report and the balance-sheet, referred to above, that a sum of Rs. 43,68,000 out of the General Reserve ,of Rs. 2,35,07,686 has been set apart and is to be appropriated for payment of dividend for the previous year 1963-64. In no case will a Company be able to declare a dividend for the year ending September 30, 1964 on the morning of October 1, 1964. Therefore, it is clear that from the Reserve shown at the commencement of the accounting year i.e. October 1, 1964, a sum of Rs. 43,68,000 has to be deducted as per the Explanation to the Third Schedule, as the said amount must be considered to 'have been set apart for payment of dividend. No doubt, Mr. Pai urged that the notice calling for a General Meeting on February 12, 1965 was issued on December 5, 1964 and that the dividend was actually declared only on a later date and in fact the dividend was paid only as late as March 9, 1965. Therefore, he pointed out that in any event it cannot be considered that the said amount has been Indian Oxygen Limited vs Their Workmen on 9 December, 1971 15 set apart for payment of dividend which have been declared. It is not possible to accept this contention of Mr. Pai. Once the Directors have, on the basis of the auditor's report and other materials, decided to declare a particular amount as dividend and have set apart the required amount from the General Reserve, it must relate back to the date of the commencement of the accounting year. The mere fact that dividend was actually paid only on March 9, 1965, in this view, is of no consequence. Therefore, the National Tribunal was perfectly justified in allowing interest at 6% only on the sum of Rs. 1,91,39,686. Therefore is no controversy that 6% Return on this amount, as correctly stated in the Award, is the sum of Rs. 11,48,381. Another amount that has been added back by the Tribunal to the net profits shown in the Profit and Loss Account is the sum of Rs. 55.127/-. According to the appellant this amount represents doubtful debts and as such the Tribunal should not have added back the same. In this connection Mr. G. B. Pai, learned counsel for the appellant, drew our attention to s. 211 of the Companies Act, 1956, which provides for the Form and Contents of balance-sheet and Profit and Loss Account. He also invited our attention to Part II and Schedule Six of the same Act regarding the requirements as to Profit and Loss Account as well as to Part HI regarding the interpretation of the expressions contained in Parts I and III of the said Schedule. He has also referred us to the auditor's report for the year ending September 30, 1965 and also to certain passages in Pickles and Dunkerley on Accountancy. All the above matters were relied on by the learned counsel to support his contention that the doubtful debts have been properly excluded by the Company in computing the gross- profits, Here again, it is not possible to accept the contention of Mr. Pai. In the Profit and Loss Account for the year ended September 30, 1965, the appellant under the column Expenses, had given one item as Miscellaneous. Under this heading it had shown a sum of Rs. 71,71,072. Later on, under Ex. 3B, the appellant gave a break up of this amount. In particular, it is only necessary to note that it had referred to two separate items, namely, Rs. 41,099 as bad debts and the sum of Rs. 55,127 as doubtful debts. This clearly shows that the appellant Company made a clear distinc- tion between bad debts and doubtful debts. The claim of the appellant that this amount of Rs. 55,127, shown as doubtful debts is really a Provision and not a Reserve. Mr. Pai has referred us to the decision in Metal Box Co.(1) to show that doubtful debts have been treated as Reserve. We have gone through the said decision. This Court had no occasion- at all to express any opinion on this point as there appears to have been no controversy between the parties therein. This Court in Textile Machinery Corporation Ltd. v. Their Workmen(2) did not accept the claim of the management therein regarding certain amount treating it as a Reserve to meet possible losses in future. The Tribunal added back the said amount for determining the gross-profits. This Court in rejecting the contention of the management that the Tribunal was in error in adding back the said amount observed as follows : "It is true that some of the debts due to the appellant may not be fully realised but it is difficult to understand how the appellant can create a reserve solely for the purpose of meeting any possible losses on account of bad or irrecoverable debts and claim a deduction of this amount while determining the available surplus. The creation of such a reserve is wholly inconsistent with the Full Bench formula in question. There is, therefore, no substance in the argument that this amount should not have been Indian Oxygen Limited vs Their Workmen on 9 December, 1971 16 added back." No doubt, this Court was considering the question on the basis of the Full Bench formula; but in our opinion that principle applies with equal force to the case on hand even under the Act. In fact the above decision also shows that creation of such an amount is really a reserve and not a Provision, as contended by the appellant. Even apart from the above circumstances, there is a crucial fact that the appellant itself in its break-up has distinguished bad debts from doubtful debts. The Tribunal had not added back the amount shown by the appellant in the break-up sheet under the heading "bad debts". We may also refer to the evidence of Mr. Banerji, W.W.1, who was a Chartered Accountant. In chief examination he has stated that under the Act the amount claimed by the appellant as doubtful debts has to be added back for ascertaining the gross-profits. He has further stated that under the Income-tax Act. Provision for doubtful debts cannot be deducted in computing the net profits. On this point, so far as we could see, there is (1) [1969] 1 S.C.R. 750. (2) [1960] 1 L.L.J. 34. no cross-examination on be-half of the, Company. The Tribunal was justified in holding that the, appellant was not in order in deducting Rs. 55,127 under the head "doubtful debts" as an item of expenditure. It was perfectly justified in adding back this amount in computing the gross-profits. The last point in controversy relates to three items shown as capital expenditure in Ex.4. Those items are : (1) Patent fees Rs. 10,000; (2) Plant transfer charges Rs. 72,516; and (3) Disallowable rent Rs. 74,000. The above three items were claimed by the appellant as revenue expenditure and hence should not be added back for ascertaining the gross- profits. So far as Plant transfer charges of Rs. 72,516/- is concern- ed, it is seen that though this was claimed as a revenue expenditure, Mr. K. B. Bose, appearing for the appellant, had conceded before the National Tribunal that this amount is an item of capital expenditure which should be added back. This concession has been recorded in the Award and it has not been challenged before us on behalf of the appellant. Therefore. it follows that the Tribunal was justified in adding back this amount for ascertaining the gross-profits. Similarly, regarding Patent fees of Rs. 10,000, the appel- lant's witness Mr. Basu, M.W. I has admitted in cross- examination that Patent fees is also regarded as an item of capital expenditure. If that is so, the Tribunal was justified in adding back this amount also. The same witness has also admitted that rent paid for godown for storing capital goods in the process of erection of a factory is not allowable as an item of revenue expenditure and that the Income-tax authorities would treat the same as Part of capital expenditure for erecting a factory. Therefore, from the evidence on the side of the appellant, it is clear that this amount also is an item of capital expenditure and has to be added back in computing the gross- profits. Similarly, Mr. Banjerji, Chartered Accountant, who gave evidence on the side of the Union, as W.W. 1, has also stated that the appellant itself originally added back in computing gross-profits the amount under Patent Fees, Disallowable Rent and Plant Transfer Charges and that it was only at a later stage that it claimed these items as revenue expenditure. Under these circumstances, the Tribunal was justified in adding back the amount of Rs. 74,000/- under the heading Disallowable Indian Oxygen Limited vs Their Workmen on 9 December, 1971 17 Rent. So far as the calculation of Surtax is concerned, the Tri- bunal has held that the method of calculation made by the Company in Ex. 4 is correct, but it has to be altered because the income-tax calculated by it after deducting bonus was less. Now, that we are accepting the claim of the appellant that bonus should not be deducted for calculating direct taxes, it follows that the view of the Tribunal in this respect is not correct. We have already pointed out that the National Tribunal has held that direct tax has to be calculated without taking into account the bonus paid for the year 1963-64 and the bonus payable for the accounting year 1964-65. So far as the bonus payable for the accounting year 1964-65 is concerned, we have already discussed the matter and held that the view of the Tribunal is erroneous. But, in our opinion, the Tribunal was justified in holding that in calculating direct taxes, the bonus for the accounting year 1963-64, though paid during the accounting year 1964-65 should not be taken into account, is correct. As the bonus year must be taken as a unit, bonus paid for the previous accounting year from and out of the profits of the said previous year does not come into the picture. From the discussion above, it follows that except the error committed by the National Tribunal in the matter of computa- tion of direct taxes after excluding bonus payable for the accounting year 1964-65, in all other respects it was justified in rejecting the various claims made by the Company. Even on the basis of the rejection of the claim of the appellant that the bonus paid for the previous accounting year 1963-64 has also to be taken into account for purposes of calculation of direct taxes, there is no controvert that on a proper calculation, the bonus to which the workmen will be entitled, will be very much less than 17.58% already given by the Company. Hence it is not necessary for us to recompute the figure, as the appellant has agreed not to claim a refund or in any other manner adjust or collect the excess bonus that has been already paid. But it follows that the view of the Tribunal that the work- men are entitled to bonus at the maximum rate of 20% and the further direction regarding the set on to be carried forward, cannot be sustained. From the calculation given by us earlier, it will be seen that the National Tribunal had directed that a sum of Rs. 4,63,750 had to be carried forward as set on in the succeeding year.' This direction' has been given on its finding that the allocable surplus work@ out at more than 20% of the Annual Wage, Bill. If that finding is correct, the direction regarding set on will be justified under s.. 15 of the Act. But as we have already held that parties are agreed that on a proper computation, on the basis, indicated by us in the earlier part of the judgment, even the bonus already paid at 17.58%, will be on the high side, it follows that the direction of the, National Tribunal regarding set on cannot be accepted. In the view that we have taken about the appellant's claim regarding direct taxes, it has been represented by the counsel appearing for the various unions that they are not pressing their appeals Nos. 813 and 1302 of 1967. In the result, the Award of the National Tribunal is modi- fied to the extent indicated above and Civil Appeal No. 415 of 1967 allowed in part. In other respects the said appeal will stand dismissed. Civil Appeals Nos. 813 and 1302 of 1967 are dismissed as not pressed. There will be no order as to costs in all the appeals. G.C. 6-L736Sup CI/72 Indian Oxygen Limited vs Their Workmen on 9 December, 1971 18 | {
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Dominic Varkey vs The State Of Kerala on 6 April, 1971 Equivalent citations: AIR1971SC1208, 1971CRILJ1057, (1971)3SCC275 Bench: A.N. Ray, C.A. Vaidialingam JUDGMENT R.N. Ray, J. 1. This is an appeal by special leave from the judgment dated 19 September. 1968 of the High Court of Kerala setting aside the order of acquittal passed by the Sessions Court on 17 July, 1967 and convicting the appellant under Section 304. Part II of the Indian Penal Code and sentencing him to undergo rigorous imprisonment for three years. 2. The appellant was charged under Section 302. Indian Penal Code for having murdered his elder brother on 20 March, 1967. The prosecution case was as follows. There was ex change of words between the appellant George and his elder brother Dominic in the course of which George drew out dagger from his waist and Dominic bent down to pick up a stone. Before Dominic could rise after picking up the stone. George rushed towards Dominic and stabbed him with the knife. The stab was warded off by Dominic. George again stabbed Dominic on the left thigh causing an incised gaping wound on the upper third of the left thigh. Immediately thereafter George ran away. Dominic was taken to the Government dispensary and on the way he died. 3. There were three eye-wit nesses. Of them two turned hostile. P.W. 3 Thomas Mathai the third eye witness was the family lawyer and friend of both the brothers George and Dominic. The trial Court found Mathai to be an independent and respectable witness. His evidence was that he had not seen George drawing out the knife. His attempt to pacify both the elder brother and the appellant was in vain. When the quarrel assumed an aggravated form Mathai intervened and separated both Dominic and George. Dominic then was re moved a little towards east and George towards west George who was behind Mathai suddenly passed him by his side with a knife and stabbed Dominic. The evidence of Mathai was that when he saw George passing by his side with the knife. Dominic was stooping down. According to Mathai these acts of George and Dominic were simultaneous. 4. The appellant George took the plea of, right of, self-defence. The trial Court found that George and Dominic were on bitter inimical terms. There were property disputes. Litigations were going on between them. The trial Court held that in view of the bitterness existing between the two brothers, George was Justified In reasonably apprehending grievous hurt or danger to his life at the hands of Dominic when he stooped down to Pick up a stone of a dangerous size. The trial Court held that it could not be conclusively held from the evidence of Mathai that Dominic bent down to pick up the stone only after seeing the appellant advancing towards him drawing out a knife. The trial Court Dominic Varkey vs The State Of Kerala on 6 April, 1971 1 said that if It was Dominic who first bent down to pick up the stone George Could in that situation reasonably apprehend grievous hurt or danger to his life at the hands of Dominic. The other important piece of evidence of Mathai was that he did not see George draw out the knife. The trial Court held that the prosecution failed to prove beyond any reasonable doubt that George was the aggressor and that the incident happened in the manner alleged by the prosecution. The trial Court therefore gave the benefit of reasonable doubt to the appellant George and acquitted him. 5. The High Court held that the Sessions Court "quite justifiably entertained a reasonable doubt as to whether George or Dominic was the aggressor" The High Court there after said that the question still remained whether the accused George had exceeded the right of private defence, The High Court held that even if Dominic was the aggressor George had exceeded the right of private defence. The reasonings given were that Dominic was completely un armed and when Dominic stooped down and took a stone George could have reasonably apprehended that Dominic would with the stone he had taken, cause minor injuries on him and thus cause him simple hurt and not that Dominic would kill him or cause grievous hurt to him. 6. The High Court having held that Dominic was the aggressor erred In holding that the appellant had exceeded the right of private defence. The other error Into which the High Court fell was that the appellant could have reasonably apprehended that Dominic could have caused him simple hurt. The apprehension is in the mind of the person exercising the right of self-defence and the apprehension Is to be ascertained objectively with reference to events and deeds at that crucial time and in the total situation of surrounding circumstances. Broadly stated, the right of private defence rests on three ideas; first, that there must be no more harm inflicted than is necessary for the purpose of defence; secondly, that there must be reasonable apprehension of danger to the body from the attempt or threat to commit some offence and, thirdly, the right does not commence until there is a reasonable apprehension. It is entirely a question of fact in the circumstances of a case as to whether there has been excess of private [defence within the meaning of the 4th clause of Section 99 of the Indian Penal Code, namely, that no more harm is inflicted than is necessary for the purpose of defence. No one can be expected to find any pattern of conduct to meet a particular case. Circumstances must show that the Court can find that there was apprehension to life or property or of grievous hurt. If it is found that there was apprehension to life or property or of grievous hurt the right of private defence is in operation. The person exercising right of private defence is entitled to stay and overcome the threat. All the acts of George will have to be examined as to whether in overcoming the threat he exceeded the right of defence. In the present case, it is found that Dominic was the aggressor and when he was picking up a large piece of stone George had reasonable apprehension that Dominic would kill him or cause him grievous hurt. Those features indicate that, apprehension. Dominic was picking up a stone of a dangerous size. The two brothers had quarrelled before reaching the scene. The antecedents are that the quarrels in the past were started by Dominic and he was in aggressive attitude Mathai who was present at the scene of occurrence said that he did not see George bringing out , the knife. The finding of fact of the trial Court is that, it could not be conclusively hold that Dominic bent down to pick up 'he stone only after seeing George advance towards Dominic drawing out a knife. There was threat to the person and of grievous hurt to George. It was real and immediate danger In such circumstances, George would try to ward off the danger and save himself. George, the appellant was entitled to stay and defend. The circumstances Dominic Varkey vs The State Of Kerala on 6 April, 1971 2 indicated real apprehension to his body and life. The appellant acted in a reasonable manner of self-defence and did not exceed the right. 7. The concurrent finding of fact fact is that Dominic was the aggressor. The happenings show in an over whelming manner that George the appellant acted in self-defence and the manner and the moment of the incident both indicate that he did not use more force than was necessary for mere defence against the real and imminent danger to his body and of grievous hurt. The appellant did not not inflict more harm than was necessary for the purpose of defence. 8, The trial Court rightly ac quitted the accused. The High Court was in error in convicting the accused. The appeal is accepted. The appellant is set at liberty. The bail bond in discharged. Dominic Varkey vs The State Of Kerala on 6 April, 1971 3 | {
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Commissioner Of Income Tax, Gujarat vs Bhanji Lavji, Porbandar on 21 January, 1971 Equivalent citations: AIR1971SC717, [1971]79ITR582(SC), (1972)4SCC88, [1971]79STC583(SC), AIR 1971 SUPREME COURT 717, 1972 4 SCC 88, 1971 TAX. L. R. 77, 1972 (1) ITJ 126, 79 ITR 582, 1971 UPTC 239, 1972 (1) SCJ 203 Author: J.C. Shah Bench: J.C. Shah, A.N. Grover, K.S. Hegde JUDGMENT J.C. Shah, J. 1. These appeals are filed with certificate granted by the High Court of Gujarat. They arise out of proceedings for re-assessment of income of the respondent relating to assessment years 1947-48, 1948-49 and 1949-50. The respondent - who will hereinafter be called 'the assessee' - carried on the business in ghee at Porbandar, which was at all material times relevant to the assessments in question outside the taxable territories. The Income-tax Officer C-III Ward, Bombay, initiated proceedings against the assessee as a non-resident for the assessment years, amongst others, 1947-48, 1948-49 and 1949-50. The assessee had in the relevant years of accounts a current account with the Bank of India Ltd., in Bombay and sale proceeds in respect of large quantities of ghee supplied outside taxable territories were credited in that account and were then transferred to Porbandar. The assessee had also a current account with the firm Shamji Kalidas and Company at Bombay and in this accounts Messrs. Shamji Kalidas and Company had paid interest to the assessee. The assessee being a nonresident, tax at the maximum rate was deducted by Messrs. Shamji Kalidas and Company, in respect of the interest paid to the assessee under Section 18(3-A) of the Income-tax Act, 1922. The assessee disclosed those facts to the Income-tax Officer and contended that since the assessee had no business in the taxable territories nor any income taxable in the taxable territories (other than the income from Messrs. Shamji Kalidas and Company in respect of which certificates showing deduction at the maximum rate), the assessment proceedings initiated by the Income-tax Officer be discharged. The Income-tax Officer upheld the contention and made an order on December 30, 1948, for the assessment years 1947-48 and 1948-49 observing that there was no source of income taxable in British India and that the proceedings started should be dropped. In the assessment year 1949-50 the Income Tax Officer also passed an order that the proceeding be discharged. 2. In 1956 the Income-tax Officer, Porbandar, initiated proceedings under Section 34(1)(a) of the Income-tax Act, 1922, for re-opening the assessment of the assessee for the assessment years Commissioner Of Income Tax, Gujarat vs Bhanji Lavji, Porbandar on 21 January, 1971 1 1947-48, 1948-49 and 1949-50, and served the requisite notices. The assessee challenged the jurisdiction of the Income-tax Officer to assess him on various grounds one of which alone survives for consideration. The assessee submitted that it had disclosed fully and truly all the primary facts necessary for the purpose of assessment and on that account the Income-tax Officer had no jurisdiction to initiate re-assessment proceedings. The assessee contended that the Income-tax Officer could not commence re-assessment proceedings merely because he entertained a view different from the view of his predecessor. The Income-tax Officer rejected the plea raised by the assessee and brought the income which in his view had escaped assessment to tax. Appeals filed by the assessee to the Appellate Assistant Commissioner and to the Income-tax Appellate Tribunal were dismissed. 3. At the instance of the assessee, four questions were referred to the High Court of Gujarat as arising out of the order of the Tribunal. We are concerned with the third question: (3) Whether on the facts and circumstances of the case, the Tribunal was justified in upholding the action under Section 34(1)(a) as valid in all the three assessment years? The High Court recorded on that question an answer in the negative. With certificate granted by the High Court, the Commissioner of Income-tax has appealed to this Court. 4. The High Court held that all primary facts relevant to the assessment of the income of the assessee were disclosed by the assessee. In respect of the notice for the first two years, viz. 1947-48 and 1948-49 the Income-tax Officer had by his order dropped the proceedings of assessment observing: In response to notice issued under Section 23(2) of the Act Mr. A.V. Deshpande x x x attends on behalf of the assessee states that the assessee is a non-resident and has absolutely no business in British India. The assessee is doing ghee business at Porbandar and delivers goods at Porbandar to merchants who buy ghee from Indian Union. There is no office nor any agency of the non-resident in British India. The non-resident assessee has maintained a Bank account in British India but this is only for recovering from the merchants dues in respect of goods delivered at Porbandar. Bank Pass Books are produced. It appears that the cheques that are received from the merchants are credited in this account and subsequently transferred to Porbandar. The assessee has, however, got a current account with Shamji Kalidas & Co., and receives interest on the amounts deposited in this firm. Mr. Deshpande, however, produces certificates of the taxes deducted at the maximum rate under Section 18(3A) on interest received by the non-resident. The tax is regularly paid upto 1948-49 assessment years. As there is no source of income taxable in British India, I drop the proceedings already started. In the proceeding for assessment of income for the assessment year 1949-50 the assessee submitted a blank return stating: Commissioner Of Income Tax, Gujarat vs Bhanji Lavji, Porbandar on 21 January, 1971 2 With reference to your above, we have to return herewith the forms sent by you and have to inform that the income-tax is always paid by us at maximum scale in British India and that we have no other income therefore and hence the forms sent by you are returned herewith with a request to cancel the same. After considering the representation the Income-tax Officer passed the following order: Return of income for assessment year 1949-50 was served on the assessee direct at Porbandar. The assessee is a non-resident and has absolutely no business in British India. The nonresident has interest income in British India on which tax is recovered at the maximum rate. Assessment proceedings in the previous year were also dropped after enquiries. I, therefore, cancel the return of income issued for assessment year 1949-50. 5. The assessee had in the course of the assessment proceedings shown his bank pass-books of his account with the Bank of India Ltd. He also disclosed the account with Messrs. Shamji Kalidas & Company. The Tribunal in dealing with the appeals relating to the assessment years 1947-48 and 1948-49 observed: The duty of the assessee is to disclose all the primary facts in his possession. In the present case, a considerable portion of the sale proceeds of ghee was received in Bombay. There is difference between accrual and receipt x x x and x x it depended upon the opinion of the Income-tax Officer as to whether any profit had accrued in British India. Receipt of sale proceeds of ghee in British India, however, stands on a different footing, and the question of full and true disclosure on the part of the assessee of all material facts should be examined with regard to the sale proceeds of ghee only. If the assessee could satisfy us that there was no concealment with regard to the said question, that should be enough for our purposes, and it would not be necessary further to examine the position with regard to the profits which are deemed to have accrued in British India under Sections 42(1) and 42(3). The Tribunal proceeded to observe that the statements made by the assessee's representative only disclosed that the assessee was a non-resident, that it had no business in British India, that it had delivered ghee at Porbandar, and that it had no office or agency in British India. They also observed that the Bank Account and the Bank Pass Books of the assessee were produced and the Income-tax Officer was informed that the cheques received were "subsequently transferred to Porbandar", and the current account with Messrs. Shamji Kalidas & Company and the amounts deposited therein were also disclosed. In the view of the Tribunal, by these disclosures, the "assessee did not furnish any particulars about how the delivery was given" and "the all-important, question about the price of the goods was not mentioned", that on that account the statement must be regarded as incomplete: that it was the duty of the assessee's representative to disclose "the profits embedded in Commissioner Of Income Tax, Gujarat vs Bhanji Lavji, Porbandar on 21 January, 1971 3 the price, but the sequence of the several statements was such that the assessee wished to show thereby that there was no office or agency in British India and whatever was done was done at Porbandar"; that the question of receipt of sale proceeds in British India was "thus bypassed"; that the Income-tax Officer was informed about the interest paid to the assessee but "no question was raised of any possible liability of the assessee to tax on other account"; that "all the statements taken together contained such a meagre presentation of the facts, that it was difficult to consider that there was a full and true disclosure of material facts"; and that "the material facts were not disclosed, whatever was disclosed was not fully disclosed, and in that sense there was no true disclosure". The Tribunal then observed: This is not a case where the Income-tax Officer drew a wrong legal inference from facts. This is a case where facts must be regarded as not fully or truly disclosed. x x x Even so, in this case, it is mainly the assessee who failed to carry out the obligation under the law, with the result that the income escaped assessment. The words "full" and "true" and "material facts" and the Explanation to Section 34(1)(a) would lose all their meaning if the meagre statements by the assessee were to pass muster. Under those circumstances, we must hold that the initiation of action under Section 34(1)(a) was valid. 6. In our judgment, the High Court was right in holding that the Tribunal misconceived the nature of the proceedings and the duty imposed upon the assessee by Section 34(1)(a). It is not for the assessee to satisfy the Income-tax Officer that there was no concealment with regard to any question; it is for the Income-tax Officer, if that issue is raised, to establish that the assessee had failed to disclose fully and truly certain facts material to the assessment of income which had escaped assessment. Failure to disclose how the delivery of ghee was given at Porbandar was wholly irrelevant, and failure to furnish particulars in that behalf cannot assist the case of the Department. Observation relating to the failure to disclose the price of ghee supplied is not strictly accurate, for, it was disclosed by the assessee's representative that the cheques were delivered for payment of the dues for ghee supplied at Porbandar and that "they were subsequently transferred to Porbandar". It was again no duty of the assessee to disclose to or instruct the Income-tax Officer that there were "profits embedded in the receipt" of the money at Bombay. Section 34(1)(a) does not cast any duty upon the assessee to instruct the Income-tax Officer on questions of law. The assessee had disclosed that ghee was delivered at Porbandar by him and the price in respect of those supplied was received in Bombay which was subsequently transferred to Porbandar We are unable to accept the view of the Tribunal that the "question of receipt of sale proceeds in British India was thus by-passed". The assessee's representative had expressly stated that the assessee had maintained a Bank account in British India in which "for recovering from merchants dues in respect of the goods delivered at Porbandar" were credited. The assessee also produced the Bank Pass Books. The finding that "the question of receipt of sale proceeds was by-passed" cannot be accepted as correct. The statement that the cheques were "subsequently transferred to Porbandar" only means that the amounts realized by encashment of the cheques were sent to Porbandar, and not that the cheques were sent to Porbandar. We do not think that any more detailed disclosure was necessary to comply with the requirements that the assessee had fully and' truly disclosed all the material facts necessary for the Commissioner Of Income Tax, Gujarat vs Bhanji Lavji, Porbandar on 21 January, 1971 4 purpose of assessment. 7. The Income-tax Officer may, if he is satisfied, that on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, income has escaped assessment, he may assess or re-assess the income. But when the primary facts necessary for assessment are fully and truly disclosed, he is not entitled on change of opinion to commence proceedings for re-assessment. The Income-tax Officer was apprised of all the primary facts necessary for assessment, and he proceeded to "drop the assessment proceedings". He may have raised a wrong legal inference from the facts, disclosed but on that account he was not competent to commence re-assessment proceedings under Section 34(1)(a) for the two assessment years 1947-48 and 1948-49. 8. Counsel for the Commissioner contended that in any event the assessee had in the assessment of income for the year 1949-50 not disclosed all the primary facts. Counsel contended that the statement before the Income-tax Officer was a bare statement about the receipt of interest from Messrs. Shamji Kalidas and Company and there was no reference to the account with the Bank of India Ltd. There is no substance in this contention. The assessee had invited the attention of the Income-tax Officer to the previous assessment proceedings and also had invited his attention to the fact that on the interest received tax at maximum rate was charged. In the Bank account there was no express reference. But we agree with the High Court that since the factual position having remained unaltered in the assessment year 1949-50, there was no non-disclosure of material facts necessary for assessment of the income. The Income-tax Officer was fully aware of the assessment proceedings for the years 1947-48 and 1948-49, and in his order he expressly referred to those proceedings. Being aware of the earlier proceedings and the reasons for passing the previous order, if the Income-tax Officer passed an order in effect holding that there was no income of the assessee chargeable to tax, the Income-tax Officer cannot seek to reassess the income on the ground of failure to disclose fully and truly the facts necessary for assessment. We do not think that any ground is made out for disagreeing with the High Court in respect of the validity of the order of re-assessment for the year 1949-50. 9. The appeals fail and are dismissed with costs. One hearing fee. Commissioner Of Income Tax, Gujarat vs Bhanji Lavji, Porbandar on 21 January, 1971 5 | {
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Md. Usman & Ors vs State Of Andhra Pradesh & Ors on 29 April, 1971 Equivalent citations: 1971 AIR 1801, 1971 SCR 549, AIR 1971 SUPREME COURT 1801, 1971 LAB. I. C. 1114, 1971 (1) LABLJ 534, 1971 SERVLR 584 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: MD. USMAN & ORS. Vs. RESPONDENT: STATE OF ANDHRA PRADESH & ORS. DATE OF JUDGMENT29/04/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 1801 1971 SCR 549 1971 SCC (2) 188 ACT: Andhra Pradesh Registration Subordinate Service Special Rules, r. 5--U.D.Cs. and L.D.Cs. put together for recruitment to post of Grade-II Sub-registrars-If violative of Art. 14 of Constitution. Recruitment on seniority--cum--merit basis-Preferential qualifications considered-Validity of recruitment. HEADNOTE: The validity of the recruitment of the appellants as Grade- II Sub-registrars as well as the vires of r. 5 of the Andhra Pradesh Registration Subordinate Service Special Rules under which the recruitment was made, were challenged by some of the respondents. The rule deals with the qualifications for being recruited as Grade II sub-registrars. It put' in one class for the purpose of recruitment, both U.D.Cs. as well Md. Usman & Ors vs State Of Andhra Pradesh & Ors on 29 April, 1971 1 as L.D.Cs. It was therefore contended that the rule violated Art. 14 of the Constitution by treating unequals as equals. The High Court held that the recruitment was in accordance with the rule, but struck down the rule as violative of Art. 14. In appeal to this Court, HELD: (1) (a) U.D.Cs. and L.D.Cs. belong to a district wise cadre, that is, promotion from L.D.C. to U.D.C. is made district-wise. Since the chances of promotion from L.D.C. to U.D.C. in one district differ materially from that of another, a L.D.C. in one district may be promoted as a U.D.C. much earlier than a L.D.C. in another district who may be his senior, more efficient or may possess the same or better qualifications. But Grade-II sub-registrars are in a statewise cadre. Though the position of a U.D.C. is superior to a L.D.C, if the State treated U.D.Cs. as superior to L.D.Cs. while recruiting for a statewise cadre, it would result in great injustice to a large section of the clerks, because of the fortuitous circumstance of a L.D.C. in a particular district becoming a U.D.C. in that district. Therefore, the State was justified in not Classifying the U.D.Cs. and L.D.Cs. separately. (b) Though there was an anomaly in the case of L.D.Cs. and U.D.Cs. serving in the same district, the anomaly could not have been avoided. The validity of the rule has to be judged by assessing its overall effect and not by picking up exceptional cases. Further, the rule provides for giving preference to the U.D.Cs. who had put in service of 5 years or more. [552H-553F] (2) The selection in the present case was made on the basis of seniority-cum-merit. A list of all the clerks, U.D.Cs. as well as L.D.Cs., was prepared in the order of seniority as L.D.Cs. and fitness of each person was considered. Also, those persons who were entitled to be given preference under the rules were considered separately and recruited in the first instance. The method adopted was the most reasonable one and was in accordance with the rule. [553H-554B] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 153 of 1971. Appeal from the judgment and order dated October 21, 1970 of the Andhra Pradesh High Court in Writ Appeal No. 240 of 1968. B. V. Subrahamanyam and G. Narayana Rao, for the appellants. P. Ram Reddy and P. P. Rao, for respondents Nos. 1 and 2. M. Natesan, Venkataramhiah and K. Jayaram, for respondents Nos. 3 to 21. Md. Usman & Ors vs State Of Andhra Pradesh & Ors on 29 April, 1971 2 The Judgment of the Court was delivered by Hegde, J.-The principal question that arises for decision in this appeal by certificate is as to the vires of Rule 5 of the Andhra Pradesh Registration Subordinate Service Special Rules, to be hereinafter referred as "the rules". The High Court has struck down this rule on the ground that it is violative of Art. 14 of the Constitution. As a result of that conclusion, it has also quashed the recruitment of some of the respondents made in March, 1965 for being posted as Sub-Registrars Grade-11. The petitioners as well as respondents No. 3 onwards in the Writ Petition were serving as clerks, either in the upper division or in the lower division, in the Registration and Stamps Department including the office of the Registrar General of Births, Deaths and Marriages and the Office of the Registrar of the Firms. Some of the respondents had been recruited by the Inspector General of Registration and Stamps, Andhra Pradesh for being appointed as Sub- Registrars. The petitioners challenged the validity of their recruitment on various grounds, by means of a Writ Petition under Art. 226 of the Constitution. But that peti- tion was summarily dismissed by a single Judge of the Andhra Pradesh High Court. Thereafter, the matter was taken up in appeal to a Division Bench of that Court. The Division Bench rejected all the contentions of the petitioners except one viz. that rule 5 of the rules is ultra vires Art. 14 of the Constitution. As a result. of that conclusion it struck down the impugned recruitments. Only two questions were presented before us for decision viz : (i) whether rule 5 of the rules is ultra vires Art. 14 of the Constitution; and (ii) whether the recruitments made are not in accordance with the rules. At this stage, it may be mentioned that the High Court has held that the impugned recruitments were made in accordance with the rules. In other words, the second question was decided against the petitioners. We shall first take up the question as to the vires of rule 5. The rules provide for the promotion to the posts of Sub- Registrar as well as for recruitment to those posts. Rule 2 provides that a post of Grade-I Sub-Registrar should be filled by promotion from Grade-11 Sub-Registrar. So far as Grade II Sub-Registrars are concerned, they are to be appointed either by promotion from reserve Sub-Registrars or by "recruitment by transfer from the clerks of the Registration and Stamps Department including the Office of the Registrar General of Births, Deaths and Marriages and the Office of the Registrar of the Firms." Rule 5 deals with qualifications for being recruited as Grade-11 Sub- Registrars. That rule reads : "Qualifications : -No person shall be eligible for appointment to the category mentioned below unless he possesses the qualification shown. Category and qualifications 1. Sub-Registrars, II Grade :-(i) Must be a permanent clerk and must have served for a period of not less than seven years on duty as clerk in the Registration and Stamps Md. Usman & Ors vs State Of Andhra Pradesh & Ors on 29 April, 1971 3 Department including the office of the Regi- strar-General of Births, Deaths and Marriages and the Office of the Registrar of Firms; (ii) Must have passed the Registration Test; and (iii)(1) Must have taken at the final examination at the end of his school or college course, one of the following languages, namely :-- Telugu, Hindi, Oriya, Kannada, Tamil, Urdu or Marathi, or (2) Must have passed the Government Translation Test or the Second Class Language Test-Full Test. "(iv) Must have passed the second class language Test-Full Test-in a language other than that taken for S.S. L. C. or University." Preference shall be given to persons who, in addition to the qualifications specified in items (i) to (iii) possess a degree in Law of University in the State or any other equivalent qualification or a Pleader-ship Certificate in the First Grade or who have put in five years service in the category of Upper Division Clerks in the Registration Department." It was urged that this rule is violative Art. 14 of the Constitution because though among the clerks there are U.D.Cs., as well as L.D.Cs., yet all of them had been put in one class for the purpose of recruitment. As per the Ministerial Service Rules the U.D.Cs. had to be selected from the L. D. Cs. after the L. D. Cs. had put in certain number of years of service and after they had passed the Accounts Test as well as the Registration Test. A U. D. C. holds superior post to that of a L. D. C. His salary is higher and his conditions of service are better than that of a L. D. C. Hence it was urged that as rule 5 treats U. D. Cs. as well as L. D. Cs. as equal for the purpose of recruitment for the post of a Grade II Sub-Registrar, the rule violates the doctrine of equality. According to the petitioners the equality doctrine is attracted not only when equals are treated as unequals but also where unequals are treated as equals. It was contended on behalf of the petitioners that a statutory provision may offend Art. 14 of the Constitution both by finding differences where there are none and by making no difference where there is one. The proposition of lam( advanced on behalf of the petitioners is unexceptionable. This Court ruled in Kunnathat Thathunni Moopil Nair v. The State of Kerala another(1) that when the statute obliged every person who held land to pay tax at the flat rate prescribed, whether or not he made any income out of the property, or whether or not the property was capable of yielding any income, there being no attempt at classification in the provisions of the statute, the Statute denied equality before law because of lack of classification. Similar views have been expressed by this Court in other decisions. It is not necessary to refer to those decisions. On the other hand it was argued on behalf of the contesting respondents that before considering the vires of rule 5, we must first ascertain the reason behind the rule to find out whether in fact there is discrimination. The contesting respondents do not 'deny that the position of a U. D. C. is superior to that of a L. D. C. But according to them it became necessary for the State to pool together the U. D. Cs. as well as the L. D. Cs. for the purpose of recruitment in question for the following reasons:- Md. Usman & Ors vs State Of Andhra Pradesh & Ors on 29 April, 1971 4 The Grade II Sub-Registrars are in a state-wise cadre whereas the U. D. Cs. and L. D. Cs. belong to a district- wise cadre. Promotion from L. D. C to U. D. C. is made district-wise. The chances of promotion from L. D. C. to U. D. C. in one district (1) [1961] 3 S.C.R. 77. materially differs from another district. It depends on the number of posts available in a particular district. In one district a L. D. C. may be promoted as a U. D. C. as soon as he puts in a service of 5 years, whereas in another district a L. D. C. possessing the same or better qualifications as well as efficiency may not be promoted as a U. D. C. for 15 years or more. That being so while making recruitment to a state-wise cadre it was not possible for the State to make distinction between the L. D. Cs. and the U. D. Cs. The only reasonable basis that could have been adopted was to treat the U. D. Cs. and L. D. Cs. as one class for the purpose of recruitment. But at the same time the rule provides for giving preference to the U. D. Cs. who had put in a service of 5 years or more. There is force in these contentions though there may be some anomaly in the case of L. D. Cs. and U. D. Cs. serving in the same district. But that anomaly cannot be avoided. The validity of a rule has to be judged by assessing its over-all effect and not by picking up exceptional cases. What the court has to see is whether the classification made is a just one taking all aspects into consideration. On the facts before us we are unable to agree that for the purpose of recruitment with which we are concerned herein the State should have classified the U. D. Cs. and L. D. Cs. separately. If the State had treated the U. D. Cs. as being superior to the L. D. Cs. for the purpose of that recruitment it would have resulted in a great deal of injustice to a large section of the clerks. The fortuitous circumstance of an officer in a particular district becoming a U. D. C. would have given him an undue advantage over his seniors who might have been as efficient or even more efficient than himself, merely because they chanced to serve in some other district. For the reasons mentioned above, we do not think that in the present case the State can be said to have treated unequals as equals. The rule of equality is intended to advance justice by avoiding discrimination. In our opinion the High Court by overlooking the reason behind Rule 5 came to the erroneous conclusion that the said rule violated Art. 14 of the Constitution. We agree with the High Court that there is no substance in the petitioners' contention that the impugned recruitments were not made in accordance with Rule 5. It is clear from the affidavit filed on behalf of the State and the Registrar that the Registrar had considered the case of all the qualified clerks, but the Registrar thought that the best basis for recruitment was to prepare a list of all the clerks, U. D. Cs. as well as L. D. Cs. arranging the names in the order of seniority as L. D. Cs. and thereafter consider each name and reject the unfit. In other words, the selection was made on the basis of seniority-cum- merit -the seniors among the clerks were selected subject to suitability. Those persons who were entitled to be given preference under the rules were considered separately and recruited at the first instance. Only thereafter the other recruitments were made. The rules do not prescribe that the recruitment should be made on the basis of merit and merit alone. Bearing in mind the fact that the recruitment with which we are concerned in this case is a recruitment by transfer which means recruitment from among, the ministerial officials, the method adopted by the Registrar appears to us to be the most reasonable one. Md. Usman & Ors vs State Of Andhra Pradesh & Ors on 29 April, 1971 5 In the result this appeal is allowed, the order of the Division Bench of the High Court is set aside and that of the single judge restored. In the circumstances of the case, we direct the parties to bear their own costs in. all the courts. V.P.S. Appeal allowed.. Md. Usman & Ors vs State Of Andhra Pradesh & Ors on 29 April, 1971 6 | {
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State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 Equivalent citations: 1972 AIR 749, 1972 SCR (2) 874, AIR 1972 SUPREME COURT 749 Author: C.A. Vaidyialingam Bench: C.A. Vaidyialingam, Kuttyil Kurien Mathew PETITIONER: STATE OF WEST BENGAL Vs. RESPONDENT: ADMINISTRATOR, HOWRAH MUNICIPALITY & ORS. DATE OF JUDGMENT14/12/1971 BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. MATHEW, KUTTYIL KURIEN CITATION: 1972 AIR 749 1972 SCR (2) 874 1972 SCC (1) 366 CITATOR INFO : F 1972 SC1973 (3) R 1978 SC 335 (12) F 1978 SC 537 (8) RF 1979 SC1666 (5) ACT: Limitation Act, 1963, s. 5-Sufficient cause' and necessary steps's', scope of-Party acting on advice of legal adviser- If sufficient cause. HEADNOTE: In certain land acquisition references the District Judge passed an order in 1963 awarding compensation to be paid by the appellant to the first respondent. When the first respondent levied execution the appellant filed objections on Aug" 27, 1964, under s. 47, Civil Procedure Code, but the State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 1 objection petitions were dismissed in January 1965. On March 4, 1965, it was discovered that no appeal was filed against the. Order of the district judge awarding compensation. Thereafter the appellant took diligent and active steps to challenge the decision of.the district judge. On the advice of the legal adviser an application under Art. 227 was filed on May 17, 1965 and on July 4, 1965 appeals were filed against the decision of the district judge with an application under s. 5 of the Limitation Act 1963, praying that the delay in filing the appeal may be excused. In that application after stating the above facts it was also severed that the delay was caused by the omission and neglect of the Government Pleader to advise the appellant. The High Court held that the appellant had not sufficiently explained the delay during the period between August 27, 1964 and July 3, 1965 but gave no reasons for its conclusion. Allowing the appeal to this Court, HELD : It is not possible to lay down precisely as to what facts or matters would constitute 'sufficient cause' under s. 5 of the Limitation Act. But those words should be liberally construed so as to advance substantial justice when no negligence or any inaction or want of bona fides is imputable to a party; that is, the delay in filing an. appeal should not have been for reasons which indicate the party's negligence in not taking necessary steps which he could have or should have taken. What would be 'such necessary steps will again depend upon the circumstances of a particular case. The High Court in the present case was certainly not bound to accept readily whatever has been stated on behalf of the State to explain the delay. But, it was the duty of the High Court to have scrutinised the reasons given by the State and considered the same on merits. The circumstance that the appellant discovered that no appeal was filed only in March 1965 and that thereafter diligent steps were taken by filing the application under Art. 227 and the appeal show that it is not possible to impute to the appellant want of bona fides or such inaction. or negligence as would deprive them of the protection of s. 5 of the Limitation Act. Even if filing the application under Act. 227 was not a proper step, if a party had acted in a particular manner on the wrong advice given by his legal adviser he cannot be held guilty of negligence so as to dissentitle him to plead 'sufficient cause' under s. 5 of the Limitation Act. [883 B-D, H; 888 E-G; 889 B-C] 875 Ramlal, Motilal and Chhotelal v. Rewa Coalfields Ltd. [1962] 2 S.C.R. 762. Shakuntala Devi Jain v. Kuntal Kumari & ors. [1969] 1 S.C.R. 1006 Ran, Narain Joshi v. Parmeshwar Narain Mahta & Ors., 30 I.A. 20 and Kunwar Rajendra Singh v. Rai Rajeshwar Bali & Ors., A.I.R. 1937 276, referred to. State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 2 JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 821 to 823 of 1968. Appeals by special leave from the order dated August 18, 1966 of the Calcutta High Court in Civil Rules Nos. 1827(F) to 1829(F) of 1966. Jagadish Swarup' Solicitor-General of India, P. Chatterjee and P. K. Chakravarti, for the appellant (in all the appeals). D. Mookherjee and S. C. Majumdar, for respondent No. 1 (in C.As. Nos. 821 and 823 of 1968). D. N. Mukherjee and G. K. Deb, for respondents Nos. 2 to 4 (in C.As. Nos. 821, and 823 of 1968) and the respondents (in C.A. No. 882 of 1968). The Judgment of the Court was delivered by Vaidiyalingam, J. These three appeals, by special leave, are directed against the common judgment and order dated August 18, 1966 of the Calcutta High Court dismissing Civil Rule Nos 827(F) to 829(F) of 1966, which were applications 'filed by the appellant under s. 5 of the Limitation Act, 1963, to excuse the delay in filing three appeals against the decision of the Additional District Judge, Howrah, dated June 27, 1963, in three Land Acquisition Reference Cases. In this judgment we are referring the ranks of the.parties AS in Civil Appeal No. 821 of 1968. "Thee first respondent is the Howrah Municipality. The second respondent had taken a lease of about 21 bighas 9 kotas of land from the first respondent and respondents Nos. 3 and 4 have taken a sub- lease from the second respondent of the said area. The circumstances leading up to the order of the High Court may be stated : About 41 bighas of land situated in Salkia it Howrah were acquired by the Government of West Bengal for the purpose of utilising the same as market place at Howrah. After, the acquisition, the entire land was placed at the disposal of the first respondent the Municipality, Howrah, on th e specific condition that the said land was to be used for establishing a public market and that it would not be used for any other purpose without the permission of the Government. According to the appellant them was also an agreement that the land would be resumed in the event of a public market not being established within a reasonable time. the appellant. On January 25, 1960, the suit filed by the second respondent, namely, T.S..No. 15 of 1999 was decreed and the suit, No. 10 of 1959 filed by the Municipality was dismissed. It is, claimed by,the appellant that T. S. No. 34 of 1961 for possession of 4 1 bighas was decreed,.on July 21, 196 1. We are particularly referring, to this aspect 'because considerable argument was advanced before us, particularly on behalf of the respondents Nos. 2 to 4 regarding the binding,nature of this- judgment. Mr. D. N. Mukherji, learned counsel for respondents Nos. 2 to 4 urged that as the name of respondent No. 2 had been struck off from the array of defendants in the; said suit, the decree therein is not binding either on the second respo ndent or% his sub-lessees, respondents Nos. 3 and 4. According to him, even on the basis that the decree is- binding on the Municipality, that decree wilt have no effect so far as the properties which have been sub-leased. by the Municipality in favour of respondent No. 2, are concerned. On the other hand, it was the contention of the learned Solicitor' General that the decree in the suit clearly shows that the' appellant was entitled to recover State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 3 the entire area of' 41 bighas And odd with included the portion leased out by the, Municipality to respondent No. 2. Once the right of the Government to resume the entire area was recognised by the, Court, the second respondent has no further tight on the basis of the lease granted in his favour by the first respondent and that the position is not in any manner altered by the second respondent having. ceased to be in the.: array of attendants. In the said suit. It is not necessary for us to go' into all these aspects more especially when it is brought to our notice that the 1st respondent has filed an appeal against this decree,, which is pending in the High Court as First Appeal No. 135 of 1963. On June 27,1963, the Additional District Judge, Howrah, decided the three Land Acquisition References and made the appellant liable to pay compensation of the sum of about Rs. 16,00,000. The decrees in these references were signed on September 21 1963. According to, the appellant, when in the title suit No, 34 of. 1961, which has 'been decreed on July"21, 1961, it has being held that the State is entitled to recover possession of the entire area, the Award. made in the Land Acquisition Cases on June 27, 1963, in favour of respondents Nos. 1 to 4 is 'illegal and without jurisdiction as the respondents are mere trespassers, who have no right, title or interest in the lands concerned. It is the furth er averment of the State that in: view of the enormous amount awarded in the Land Acquisition References, the; first respondent is purposely delaying taking further steps in prosecution of first Appeal No. 135 of 1963. This attitude, the State avers, is due to the fact that if the Municipality is able to withdraw the huge amount of compensation awarded, it will have no further interest in prosecuting the appeal against the decree in Title Suit No. 34 of 1961. The second respondent on the basis of the Award, levied exe- cution and the appellant filed objection on August 27, 1964 under s. 47 C.P.C. on the ground that the Award is not executable in view of the decree in Title Suit No. 34 of 1961. According to the appellant, the Department of Land Acquisition at Howrah did not known about the proceedings in Title Suit No. 34 of 1961 as the latter related ' to another Department of the Government. When the objections filed regarding the executability of the Award were rejected, the matter was referred to the Legal Remembrancer, West Bengal, for taking necessary action. It was on March 4, 1965, that it was discovered that the judgment of the Additional District Judge in the three Land Acquisition References had not been appealed against. As the reasons for the appeals not being filed, were not clear, they were investigated by the Legal Adviser of the State. On or about April 15, 1965, the State Lawyer in the High Court advised the State to move the High Court under Art. 227 of the Constitution to quash the judgment of the Addl. District Judge dated June 27, 1963 in the three Land Acquisition References, as the time for filing appeals had expired. Accordingly writ petitions under Art. 227 of the Constitution west filed in the High Court on May 17, 1965 to quash the judgment of the Addl. District Judge in the Land Acquisition References. On the same day the learned Judges while declining to issue a Rule, however, granted stay of execution of the Award for one mouth with a direction that appeals should be filed with proper applications against the Award in Miscellaneous Cases Nos. 21 40 of 1958 and 13 of 1959 within a month. The learned Judges granted further two weeks' time on June 17, 1965 and also extended the period of stay by two weeks. A further order was passed on July 1, 1965 to obtain the necessary orders of stay regarding the execution of the Award from the appropriate Beach dealing with the appeals. Three appeals against the three Land Acquisition References Nos. 21 and 40 of 1958 and 13 of 1959 were State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 4 filed in the,High Court on July 3, 1965. The appeals on being returned by- the High Court Office on July 5, 1965 with the endorsement that the is a delay of one year seven months and twenty two days, were represented on July 7, 1965 with the necessary, applications under s. 5 of the Limitation Act, 1963. All the above facts were set out in the applications for excusing the delay and praying that impartable loss and injury would be caused to the, State, if nearly 16,00,000 have to be paid to persons who have been held to be in wrongful possession of the land and against whom a decree in Title Suit No. 34 of 1961 for eviction had been passed on July 21,1961. It was further submitted that in view of the various matters mentioned in the applications filed under s. 5 of the Limitation Act, sufficient cause has been shown for excusing the delay in filing the appeals. The High Court on July 7, 1965 issued notice to the respon- dents to show cause why the delay should not be condoned and the appeals taken on file. After the issue of the notice, the appellant, filed an additional affidavit on January 18, 1966 referring to the: relevant provisions of the Legal Remembrancer Manual in West Bengal regarding the procedure to be followed by its Legal Officer& in cases where appeals have to be filed. The State also referred to the letters written by the Collector of Howrah on December 18,1965 and January 5, 1966 to the Advocate, who was at the material time Government Pleader asking for his explanation as to why' the Government was not advised by him regarding the filing of appeals against the Land Acquisition References. On January-' 21, 1966, the High Court passed the following order "On the present materials before us we are not satisfied that sufficient cause has been made out to explain the delay of over a year and a half in filing of the connected appeals. Mr. Chakrabarty expressed his inability to produce better materials on information, at present available to him. In the circumstances, we have no option but to discharge these Rules. Liberty is, however, given to the petitioner to apply for reconsideration or modification of this order on further and better materials. There will be no order as to costs in any of these Rules." Later on, the appellant received a reply dated January 29, 1966 from their Ex. Government Pleader and filed the three applications in question requesting the High Court to reconsider its previous order dated January 21, 1966 and to excuse the delay under s. 5 of the Limitation Act in filing the three appeals. The High Court, on June 3, 1966 issued notice to the respon- dents. After hearing the respondents, the High Court assesed by the' common order in question on August 18, 1966 dismissing the applications filed by the appellant for excusing the delay under s. 5 of the Limitation Act in filing the three appeals. In the order it is stated that though the decrees, under appeal were passed as early as September 21, 1963, the appeals were filed along with the applications under s. 5 of the Limitation Act only on July 3, 1965 the interval being over one year and nine months. The High Court, no doubt, states that there were previous proceedings, but it is not necessary to refer to them. Ultimately, the High Court in its brief order is of the view that the State has not sufficiently explained the delay during the period August 27, 1964 and July 3, 1965. The former is the dam on which the State filed under s. 47 C.P.C. to the executability of the Land Acquisition Award, in view of the decree in Title-Suit No. 34 of 1961. Regarding the period anterior to August 27, 1964, so far as we could see the High Court. does not put it against the appellant and in fact it does not seem to give much importance to that period. On the other hand,, the view of the High Court is.: "These State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 5 applications must fail for the 1 unexplained delay between the two dates, August 27, 1964 and July 3, 1965." Ultimately, the learned Judges dismissed-the application for excusing the delay.. There is a further direction given by the High Court that the writ petitions filed by the appellant under Art.' 227 of Constitution on May 17., 1965 be taken up by 'the 'appropriate Bench for disposal. There is also further direction that the order of stay of execution of the Award will continue for a fortnight with liberty to the State to apply for its continuance before the; Bench, which is to take up the writ petitions. It may be mentioned at this stage that the writ petitions filed under Art. 227 on May 17, 1965 and in which stay had been granted and which stay was 'continued till the disposal of the applications filed under s. was actually withdrawn only on September 28, 1966 as having become infructuous. The learned Solicitor General, on behalf of the appellant rather strenuously urged that it was the duty of the High Court to consider on the materials, placed before it whether sufficient cause for excusing the delay had been made out by the appellant. Though the decision in the Land Acquisition Cases was given on June 27, 1963, and the award signed on September-21 1963,the High Court" as prepared to proceed on, the basis, in- view of the averment made in the a ffidavit of the appellant that, the, delay between September 2 1, 1963 and August 27, 1964 has been properly explained. At any rate, the Solicitor General pointed out the High Court has not put that period against the appellant. On the other hand, the High Court has held that there is an unexplained delay from August 27, 1964, the date on which the State filed objections under s. 47 C.P.C. to the execution of the decree under the Award and July 3, 1965, the date on which the appeals were filed, and on this ground the applications have been dismisissed. The learned Solicitor General further pointed out that there is no proper consideration of the various matters, referred to in the affidavit, which according to him have not been controverted by the respondents. He has further urged that the judicial power and discretion to excuse the delay given to the Courts under s. 5 of the Limitation Act, should be exercised to advance substantial justice, ,especially when the appellants has not been held. guilty of any negligence or inaction. The learned Solicitor General further pointed. out that the High Court has not disbelieved any of the facts mentioned in the affidavits. filed on behalf of the appellant, regarding the circumstances under which the appeals came to be filed beyond the period 4 limitation. On the other hand, Mr. D. Mukherji, learned counsel for the first respondent, Howrah Municipality, urged that the question whether a party has made out a sufficient cause for excusing the delay in filing the appeals is a pure question of' fact and it was. within the exclusive jurisdiction of the High Court to decide it one way or the other. In this case, the counsel pointed out, that after a consideration of the reasons given by the appellant, the High Court has come to the conclusion that the delay during the period August 27, 1964 and July 3, 1965 has not been properly accounted for In fact, the counsel pointed out the appellant should have been called upon to explain the delay even from September 21, 1963 and the High Court has been very considerate in reducing the period upto August 27, 1964. Mr. Mukherji further pointed out that the period of limitation applicable both to a private litigant as well as to the State is the same and the same principles are applicable to both the parties in considering whether sufficient cause has been shown for excusing the delay in filing an appeal beyond the period of limitation. Mr. Mukherji further urged that the same Government Pleader was appearing on behalf of the State both in the title suit No. 34 of 1961 and in the Land Acquisition Proceedings and therefore it is idle for the State to contend that it was not aware that an State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 6 appeal had not been filed against the decision in Land Acquisition References till March 4, 1965. The fact that one Department may be dealing with Land Acquisition matters and another Department may be dealing with Ordinary Civil Suits, is not a sufficient excuse which will be accepted by the courts to justify an application under s. 5 of the Limitation Act. Mr. D. N. Mukherji, learned counsel for the respondents Nos. 2 to 4, in particular, attempted to argue about the binding nature against his clients of the decree obtained by the State against the Municipality in Title Suit No. 34 of 1961. He also relied on the decision in the said suit to controvert the averment of the State that the Municipality has been held to be a trespasser without any rights in the land in question. The learned Solicitor General has also referred: us to the various aspects dealt within the said judgment. According: to him the effect of the said judgment is that the respondents are all trespassers having no rights' in. the land and therefore they are. not entitled to receive the compensation, amount. He. has also stated that if the decrees in the. Land Acquisition Reference Cases are allowed to stand, the respondents, who are in possession as trespassers without any title or right in the properties, will have to be paid by the State nearly about Rs.. 16,00,000 We have only referred above to the various matters placed before us. We expressed no opinion whatsoever regarding those aspects. As and when occasion arises, it is open to the parties concerned to raise any contention that may be available to them in 'law or on facts. We have already referred to the fact that on the first occasion when the High Court dealt with the applications under s. 5 of the Limitation Act it had passed an order on January 21, 1966, Which we have extracted in the earlier part of this judgment. That itself ,Was a brief order. But that order clearly indicates that the learned Judges were not inclined to close the proceedings once and for all. In fact, they have given a further opportunity to the State to move for reconsideration of the order or modification of the order on better materials. The order dated August 18, 1966, unfortunately, is very brief ,and does not give the reasons as to why the High Court has come to the conclusion that the delay between August 27, 1964 and July 3, 1965 has not been explained by the appellant. There is ,only a brief statement to the effect that on the first on the above dates, i.e. August 27, 1964, the appellant filed objections under s. 47 C.P.C. to the execution of the decree under Award. Though the respondents urged that the delay is really from September 21, 1963, we are not inclined to accept that contention, especially when the High Court itself has not given any importance to the period prior to August 27, 1964. In view of the nature of the order passed 'by the High Court without an investigation into the facts and without giving reasons, we would have normally remanded the proceedings to the High Court for a fresh consideration. But we are not adopting that procedure in view of the fact that considerable time has already elapsed and if the State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 7 matter is remanded, it will give rise again to a further challenge by way of appeal to this Court, whatever the decision of the High- Court may be. Hence, we proceed to consider the matter and adjudicate upon the question Whether the High Court was justified in rejecting the applications filed by the appellant under s. 5 of the Limitation Act. One feature that strikes us on a perusal of the judgment of the High Court is, that there is absolutely no indication that it has disbelieved any of the averments made in the affidavits filed on behalf of the appellant. If the High Court had considered the reasons given by the appellant, and rejected them as false or if the High ,Court had hold that there has been such total inaction or negligence on the part of the appellant as would deprive the State of the protection under s. 5 of the Limitation Act, the position would be different. We do not have the benefit of the views of the High Court, one way or the other, on these aspects. At any rate, it has not held that the appellant is guilty of negligence or that the applications lack in bona fides. The legal position when a question arises under s. 5 of the Limitation Act is fairly well-settled. It is not possible to lay down precisely as to what facts or matters would constitute "sufficient cause" under s. 5, of the Limitation Act. But it may be safely stated that the delay in filing an appeal should not have been for reasons which indicate the party's negligence in not taking necessary steps, which he could have or should have taken. Here again, what would be such necessary steps will again depend upon the circumstances of a particular case and each case will have to be decided by the courts on the facts and circumstances of the case. Any observation of an illustrative circumstance or fact, will only tend to be a curb on the free exercise of the judicial mind by the Court in determining whether the facts and circumstances of a particular case amount to "sufficient cause" or not. It is needless to emphasise that courts have to use their judicial discretion in the matter soundly in the interest of justice. Mr. D. Mukerji learned counsel for the first respondent is certainly well-founded in his contention that the expression " sufficient cause" cannot be construed too liberally, merely because the party in default is the Government. It is no doubt true that whether it is a Government or a private party, the provisions of law applicable are the same, unless the Statute itself makes any distinction. But it cannot also be gainsaid that the same consideration that will be shown by courts to a private party when he claims the protection of s. 5 of the Limitation Act should also be available to the State. In the case before us, it must be stated in fairness to the learned Solicitor General that he has not contended that the State must be treated differently. On the other hand, his contention is that the reasons given by the appellant, which, according to him will establish "sufficient cause" have not at all been adverted to, much less, considered by the High Court. In our opinion, the contention of the learned Solicitor General is perfectly justified in the circumstances of this case. The High Court, certainly, was not bound to accept readily whatever has been stated on 'behalf of the State to explain the delay. But, it was the State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 8 duty of the High Court to have scrutinised the reasons given by the State and considered the same on merits and expressed an opinion, one way or the other. That, unfortunately, is lacking in this case. It has been pointed out by this Court in-Ramlal, Motilal and Chhotelal v. Rewa Coalfields Ltd. (1) as follows: "In construing s. 5 it is relevant to bear in mind two important considerations. The first consideration is that the expiration of the period of limitation prescribed for or making an appeal gives rise to a right in favour of the decree-holder to treat the decree as binding between the parties. In other words, when the period of limitation prescribed has expired the decree holder has obtained a benefit under the law of limitation to treat the decree as beyond challenge, and this legal right which has accrued to the decree-holder by lapse of time should not be lightheartedly disturbed. The other consideration which cannot be ignored is that if sufficient cause for excusing delay is shown discretion is given to the Court to condone delay and admit the appeal. This discretion has been deliberately conferred on the Court in order that judicial power and discretion in that behalf should be, exercised to advance substantial justice.' As has been observed by the Madras High Court in Krishna v. Chattappan(2) s. 5 gives the Court a discretion which in respect of jurisdi ction is to be exercised in the way in which judicial power and discretion ought to be exercised, upon principles which are well understood; the words 'sufficient cause receiving a liberal construction go as to advance substantial justice when no negligence for inaction nor want of bona fide is. imputable to the appellant." From the above observations it is clear that the words "sufficient cause" should receive a liberal construction so, as to advance substantial justice when no negligence nor inaction nor is, imputable to a party. No doubt, Mr. D. Mukherji drew our attention to the observa- tions at page 771 to the effect "The proof of a sufficient chase, is condition precedent for the exercise of the discretionary jurisdiction vested in the court by s.5 if sufficient cause is not proved, nothing further has to be done; the application for condoning delay has to be dismissed on that ground alone" That is according to Mr. Mukherji as, the Appellant has not shown sufficient cause in, this matter,. the only course open is to dismiss the applications, as has been done by the High Court. That, in our opinion,, is over simplifying the matter, and begging the (1) [1962] 2 S.C.R. 762 (2) [1890] 1 L.R. 13 Mad. 269. question. That point really is whether on the facts stated by the appellant, it can be held that it had shown sufficient cause for filing the appeals beyond the period of limitation. State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 9 The observations of the Madras High Court, extracted in the above decision, have again been quoted with approval in Shakuntala Devi Jain v. Kuntal Kumari and others(1). On the particular facts of the case, this Court held in the said decision that it was not a case where it was possible to impute to the appellant therein want of bonafide or such inaction or negligence as would deprive a party of the protection of s. 5 of the Limitation Act, 1963. Mr. D. N. Mukherji learned counsel for the respondents Nos. 2 to 4 invited our attention to the decision of the Judicial committee in Ram Narain Joshi v. Parmeshwar Narain Mahta and, others(1), where the Judicial Committee declined to interfere with the order of the High Court declining to excuse the delay in filing an appeal under s. 5 of the Limitation Act on the ground that no sufficient cause was shown by the party concerned. The judgment of the High Court, which was under appeal before the Judicial Committee, is contained in the report. The High Court had considered the reasons given by the party for filing the appeal out of time. After a full and detailed consideration of the reasons given by the party, the High Court had come to the conclusion that the party had not shown due diligence in the matter of filing appeal and, therefore, if was further held that no sufficient cause had been shown for not having filed the appeal within time. The Judicial Committee after a consideration of the reasons given by the High Court declined to interfere on the ground that they were satisfied that the refusal by the High Court to admit the appeal after the period of limitation was over, was justified. This decision does not help the respondents in view of the fact that there has been no such proper consideration by the High Court in the case before us. We have already stated that the High Court has neither adverted to the reasons given by the appellant; nor has the High Court expressed its views on them. Bearing in mind the principles, referred to by us earlier, we proceed to consider the facts in the case on hand. We do not think it necessary to refer very elaborately to the affidavits filed on both sides because they contain a lot of material relating to the various litigations, referred to above , as well as the legal consequences flowing from them. As stated earlier, we do not propose to go into those matters in these appeals. Though originally when the High Court dealt with the applications under S. 5 of the Limitation Act, on January 21, 1966, it was of the view that there has been a delay of over one and a half, year- (1) [1969] 1 S.C.R. 1006. (2) 30 I.A. 20. -L736SupCI/72 in filing the appeals, nevertheless, in the present order, which is under attack, the High Court has rejected the applications on the ground that there is an unexplained delay during the period August 27, 1964 and July 3, 1965. Therefore, even according to the High Court the appellant has been able to satisfactorily explain the delay upto August 27, 1964 and therefore the period of delay has been very much narrowed down. On behalf of the appellant it had been categorically stated in the affidavit filed in support of the applications under S. 5 of the Limitation Act, to excuse the delay, that when the objections filed by the State under s. 47 C.P.C. regarding executability of the Award in the Land Acquisition Cases were dismissed on January 30, 1965, the matter was referred to the Legal Remembrancer, West Bengal, State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 10 for taking necessary action. It has been further stated that it was on March 4, 1965, that it became known that the judgment of the Addl. District Judge, dated September 21, 1963 in the three Land Acquisition Cases had not been appealed from. It must be noted that the objections to the execution were filed by the State in Reference No. 21 of 1958, which was one of the cases covered by the judgment of the Addl. District Judge, and in which execution was taken for realising the compensation amount. It has been further stated that the counsel for the State in the High Court persued all the papers and consulted the officers of the Land Acquisition Department, Howrah, to consider the steps to be taken to challenge the decision of the Addl. District Judge in the Land Acquisition Reference Cases. It was only on April 15, 1965, that the State was advised by its lawyer in the High Court to move applications under Art. 227 of the Constitution to quash the judgment of the Addl. District Judge in the Land Acquisition Reference Cases. Admittedly, writ petitions under Art. 227 were filed on May 17, 1965, in which the High Court granted stay of execution of the decree under the Award. We have already referred to the fact that these writ petitions were kept pending till September 28, 1966. It may be, that the State was not properly advised regarding the remedy to be adopted to challenge the judgment in the Land Acquisition Reference Cases. But, as pointed out by the Judicial Committee in Kunwar Rajendra Singh v. Rai Rajeshwar Bali and others(1), if a party had acted in a particular manner on a wrong advice given by his Legal Adviser, he cannot be held guilty of negligence so as to disentitle the party to plead sufficient cause under s. 5 of the Limitation Act. In fact the Judicial Committee observes as follows : "Mistaken advice given by a legal practitioner may in the circumstances of a particular case give rise to sufficient cause within the section though there is cer- (1) A.I.R. 1937 P.C. 276. .lm15 tainly no general doctrine which saves parties from the results of wrong advice." The advice given by the lawyer to file applications under Art. 227, in our opinion, is also a circumstance to be taken into account in considering whether the appellant has shown sufficient cause. In the additional affidavit filed on behalf of the State on January 18, 1966, after a reference to the provisions of the Legal Remembrancer's Manual in West Bengal, it has been stated that the Government Pleader at Howrah omitted and neglected to send any proposal, according to the Rules, advising the Government to file appeal against the decision of the Addl. District Judge in the Land Acquisition Reference Cases. In support of the application filed on behalf of the State, copies of the letters written by the Collector dated December 18, 1965 and January 5, 1966 to the Ex. Government Pleader as well as the copy of the latter's reply dated January 29, 1966 were also filed in the High Court. In the letter dated December 18, 1965, the Collector, after a reference to the relevant provisions of the Legal Remembrancer's Manual informed the Ex. Government Pleader that the latter had not complied with those provisions inasmuch as he had not obtained the certified copies of the judgment and decree and forwarded them to the Collector with his opinion in the case specially when the decision was adverse to the Government. State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 11 In the counter-affidavit filed on behalf of the respondents, there is no specific denial of the fact that the Government came to know only on March 4, 1965 that no appeals had been filed against the decision of the Addl. District Judge in the Land Acquisition Reference Cases. On the other hand, the main stand taken by them is that inasmuch as the State filed objections under s. 47 C.P.C. on August 27, 1964, regarding executability of the Award, in view of the decree in Title Suit No. 34 of 1961, the Government had become fully aware that, it was imperative that appeals should be filed against the decision in the Land Acquisition Reference Cases, It was also emphasised that the same Law Officer, who appeared in the Land Acquisition Reference Cases and represented the Government, had appeared on behalf of the State in the Title Suit No. 34 of 1961. It is also averred that the opinion of the Government Pleader regarding the necessity of filing appeals against the decision of the Addl. District Judge in the Land Acquisition Reference Cases had been furnished to the Government even in 1963. In view of all these circumstances, it is pointed out on behalf of the respondents that the Government is guilty of ,negligence and inaction in not having filed the appeals immediately after August 27, 1964. We have already referred to the fact that the High Court itself did not attach any importance to the period anterior to August 27, 1964. It has dismissed the applications of the State on the ground that there is unexplained delay between the period August 27, 1964 and July 3, 1965. We have already referred to the fact that the High Court does not disbelieve the statement in the affidavit filed on behalf of the State that it was only on March 4, 1965 that it was known that no appeal had been filed against the decision of the Addl. District Judge in the Land Acquisition Reference Cases. We have already pointed out that even this fact is not denied in the counter-affidavits filed on behalf of the respondents. If that is so, it follows that the High Court was not justified in holding, at any rate, that there was an unexplained delay from August 27, 1964 upto March 4, 1965. The date, August 27, 1964, is a date prior to the date of the knowledge of the Legal Remembrancer, namely, March 4, 1965, that no appeal has been filed against the Award. Then the question arises whether the appellant has taken diligent after March 4, 1965. It has been stated in the affidavit filed on behalf of the State that immediately after March 4, 1965, the matter was investigated and the question of the remedy to be persued for challenging the judgment in the Land Acquisition Reference Cases was immediately taken on hand. According to the State, papers were entrusted to the Lawyer in the High Court for giving advice regarding the procedure and that the State Lawyer in the High Court on April 15, 1965, advised the appellant to file an application in the High Court under Art. 227. The averment that the State was so advised on April 15, 1965, by the State Lawyer has neither been disputed nor denied by the respondents. The High Court also has not disbelieved this plea of the State. That writ petitions were filed under Art. 227 on May 17, 1965, is clear from the proceedings, referred to earlier. In fact we have also stated that the High Court granted in the said proceedings stay of execution of the decree under the Award and the writ petitions were pending till September 28, 1966. No doubt, it may be a wrong advice on the part of the State Counsel; but the fact that the State acted upon that advice cannot be considered to be a circumstance showing negligence on the part of the State. At the utmost what could be said is that they were misguided by a wrong advice given by its counsel. Even as late as June 17, 1965, the High Court in the writ petitions extended the stay and granted further time to the appellant to file regular appeals together with applications under S. 5 of the Limitation Act. Again, even on July 1, 1965, the State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 12 High Court in the writ petitions further extended the stay and directed the appellant to get appropriate orders from the Bench dealing with the regular appeals. On July 3, 1965, the appeals were filed along with the applications for excusing the delay. In view of the circumstances mentioned above, which, unfor- tunately, have not been adverted to and touched upon by the Hip-II Court, we are of the opinion that after March 4, 1965 the appellant had been taking diligent and active steps to challenge the decision of the Addl. District Judge in the Land Acquisition Reference Cases. We are satisfied that in the circumstances of this case, the appellant has shown sufficient cause and it is not possible to impute to the appellant want of bona fides or such inaction or negligence as would-deprive them of the protection of S. 5 of the Limitation Act. We are, therefore, inclined to allow the three applications filed by. the appellant in the High Court under s. 5 of the Limitation Act and to condone the delay in filing the three appeals. In the result, we set aside the judgment and order of the High Court dated August 18, 1966 and allow the appeals. The applications filed by the appellant under S. 5 of the Limitation Act are allowed. The High Court will take up the three appeals on its file and dispose them of according to law. The appellant will pay the taxed costs separately of the first respondent and respondents Nos. 2 to 4 in all these three appeals in this Court. The appellant will also pay the separate costs of respondent No. 1 and respondents Nos. 2 to 4 as taxed by the High Court in all the proceedings filed by the appellant under S. 5 of the Limitation Act. It is needless to state that the High Court will consider the question of giving a very early disposal to the appeals. It is open to the High Court to give appropriate directions regarding the land acquisition amount. V.P.S. Appeals allowed. State Of West Bengal vs Administrator, Howrah Municipality & ... on 14 December, 1971 13 | {
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Pullangode Rubber Produce Co. Ltd. vs State Of Kerala And Anr. on 22 September, 1971 Equivalent citations: [1973]91ITR18(SC) Author: K.S. Hegde Bench: A.N. Grover, H.R. Khanna, K.S. Hegde JUDGMENT K.S. Hegde, J. 1. This appeal by special leave arises from a decision of the Kerala High Court refusing to direct the Tribunal to submit the two questions set out by the assessee in its application under Section 60(2) of the Kerala Agricultural Income-tax Act, 1950 (Act 22 of 1950). The questions that the assessee wanted the Tribunal to refer to the High Court and which the Tribunal refused to refer are : (1) Whether the fact that the applicant apportioned the sum of Rs. 79,680/-out of the general revenue expenses of its estate towards the immature area and capitalised the same for purposes of its accounts precluded the appellant from claiming the same as revenue expenses for the purpose of agricultural income-tax assessment. (2) Whether the Tribunal ought not to have considered the nature of the expenses amounting to Rs. 79,680/-for the purpose of determining whether it is allowable expenditure or not irrespective of the way it was dealt with by the applicant for the purpose of its accounts. 2. The Tribunal in his order refusing to refer those questions observed: The assessees have treated a sum of Rs. 79,680/-being a portion of the general charges as capital expenditure for all purposes including working out the managing agents' commission. If the general charges were not in any way connected with maintenance of immature area, the Company would not have apportioned and capitalised a part of such expenditure as attributable to immature area. It is, therefore, a matter of fact that even according to the assessee, the above expenditure relates to maintenance of immature area. The claim is therefore not allowable as per explanation (2) to Section 5 of the Act 3. This question was considered by the Tribunal while dealing with the assessee's appeal before it and the Tribunal observed in its order : Pullangode Rubber Produce Co. Ltd. vs State Of Kerala And Anr. on 22 September, 1971 1 The first contention raised before us is that the Deputy Commissioner went wrong in upholding the disallowance of Rs. 79,680/-on the sole ground that the expenditure has been capitalised in the appellant company's accounts. The identical question under similar circumstances, relating to the assessment on the appellant company for 1963-64 in Appeal AITA. 224/64. We have as per our order dated 19-11-1965 found the contention against the appellant company. For the reasons discussed therein, we find that the authorities below are perfectly justified in disallowing the claim and we accordingly confirm it as correct. 4. The High Court rejected the application of the assessee with a very short order and that order reads: We are not satisfied that the questions suggested arise from the Order of the Tribunal. We, therefore, decline their request to compel a reference under Section 60(2) of the Agricultural Income-Tax Act, 1950. We dismiss this petition. There will be no order as to costs. 5. There is material on record to show that in respect of the assessment year 1963-64, the year previous to the one with which we are concerned in this case, the Tribunal refused to refer similar questions which the assessee wanted it to refer to the High Court. But at the instance of the assessee those questions were referred to the High Court as ordered by the High Court and the High Court answered those questions in favour of the assessee. It is no doubt true that the entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. 6. Section 5 deals with computation of agricultural income-tax. That section also provides for deduction of certain items of expenditure incurred by the assessee. Explanation (2) to that section reads : Nothing contained in this section shall be deemed to entitle a person deriving agricultural income to deduction of any expenditure laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income has been derived during the previous year. According to Dr. Seyid Muhammed the books of accounts maintained by the assessee clearly show that the assessee itself has held out that the sum of Rs. 79,680/-, with which we are concerned in this appeal, were expended or laid out for the cultivation, upkeep of maintenance of immature plants. It may be so, but what the assessee complaint is that it should have been given an opportunity to show that the books of accounts maintained by them do not disclose the correct state of facts. From the order of the Tribunal it is not clear that such an opportunity was afforded to the Pullangode Rubber Produce Co. Ltd. vs State Of Kerala And Anr. on 22 September, 1971 2 assessee. The Tribunal appears to have been unduly influenced by its decision relating to the year immediately previous to the year of assessment and consequently, it appears that it ignored thi: assessee's assertion that their account books do not correctly show the facts. If the Tribunal had examined the plea of the assessse that their account books do not correctly disclose the real facts and thereafter rejected that contention then the finding of the Tribunal would have been a finding of fact and this Court would not have interfered with such a finding. 7. Dr. Seyid Muhammed urged that the decision of the High Court relating to the assessment of the assessee in the earlier year is wrong. An uncertified copy of that order was produced before us. Therein the High Court purported to follow an earlier decision of that court That decision was placed before us. We have not gone into the question whether the decision of the High Court was right or wrong. The only question that we have consider is whether from the order of Tribunal, we can come to the conclusion that the assessee was given a proper opportunity to establish its plea-about that we are not satisfied. 8. Hence we are of the opinion that the questions set out in the application of the assessee do arise for consideration and therefore the High Court should have directed the Tribunal to refer those questions to the High Court for its opinion. 9. In the result, we allow the appeal and direct the Tribunal to refer the two questions set out in the application of the assessee to the High Court for its opinion. In the circumstances of the case, we make no order as to costs in this appeal. Pullangode Rubber Produce Co. Ltd. vs State Of Kerala And Anr. on 22 September, 1971 3 | {
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Krishna Biharilal vs Gulabchand Am Ors on 16 March, 1971 Equivalent citations: 1971 AIR 1041, 1971 SCR 27 Author: K.S. Hegde Bench: K.S. Hegde, P. Jaganmohan Reddy PETITIONER: KRISHNA BIHARILAL Vs. RESPONDENT: GULABCHAND AM ORS. DATE OF JUDGMENT16/03/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. REDDY, P. JAGANMOHAN CITATION: 1971 AIR 1041 1971 SCR 27 1971 SCC (1) 837 CITATOR INFO : RF 1972 SC2069 (21,26) F 1976 SC 794 (16) R 1976 SC 807 (17,41) RF 1984 SC 664 (5) ACT: Hindu Law--Widow entitled to life estate-Entering into compromise with reversioners giving up rights over portion of property in return for recognition of her absolute ownership of part of property--Reversioners are estopped from challenging alienations by widow of properties recog- nised as absolutely hers in compromise--'Malik Mustakal' means absolute estate--Document must be read to give effect to plain and natural meaning to words employed--Plea of estoppel when may be considered though not specifically raised in pleadings. HEADNOTE: B filed a suit for the possession of ancestral property against the descendants of his father's brother and sister. Krishna Biharilal vs Gulabchand Am Ors on 16 March, 1971 1 During the pendency of the suit B died and his widow P was impleaded as his legal representative. Some of the defendants also died; those who left legal representatives were substituted by them. On June 7.1941 the parties to the suit compromised their disputes. Before compromising the suit the parties had obtained the leave of the court as the minor defendants had joined the compromise. Under the compromise a portion of the suit properties was given to P and the remaining portion to the defendants in that suit. P alienated the properties given to her under three different sale deeds. The appellant was the alienee under all these sale deeds. The alienations were challenged by the defendants in the earlier suit and their descendants in three suits wherein declarations were sought that the aforesaid alienations by P were not valid and binding on the plaintiffs who were the presumptive reversioners to the estate of B. During the pendency of the suits P died and thereafter the suits were contested only by the appellant as the alienee. The trial. court dismissed two of the suits holding that in view of the compromise in the earlier suit the parties were estopped from challenging the validity of the sale deeds as under that compromise the estate given to P was an absolute one. After various stages of litigation the Division Bench of the High Court held that the compromise of 1941 was illegal and as such could not be used to non-suit the plaintiffs. It also, held that the compromise did not amount to a family arrangement. HELD:(i) The ordinary rule of construction of a document is to give effect to the normal and natural meaning of. the words employed in the document. The compromise deed specifically said that the properties given to P were to be enjoyed by her as 'Malik Mustakal'. These words have been interpreted to mean an absolute estate. The circumstances in which the compromise was entered into as well as the language used in the deed did not in any manner go to indicate that the estate given to P was anything other than an absolute estate. [31E-F] Dhyan Singh and Anr. v. Jugal Kishore & Anr., [1952] S.C.R. 478 and Bishunath Prasad Singh v. Chandika Prasad Kumar, 60 I.A. 56, relied on. (ii)In holding that the compromise in question was illegal the Division Bench overlooked the fact that this was not a compromise entered into with third parties. It was a compromise entered into with presumptive reversioners. Further, since at no stage had the plaintiffs pleaded that the compromise was illegal, the High Court was not justified in going into the validity of the compromise. [31H-32B] 28 (iii) Even if the compromise was illegal the parties to the compromise were estopped from challenging the impugned alienation. It is well settled that a Hindu widow cannot enlarge her estate by entering into a compromise with third parties to Krishna Biharilal vs Gulabchand Am Ors on 16 March, 1971 2 the prejudice of the ultimate reversioners. But the same will not be true if the compromise is entered into with persons who ultimately become the reversioners. P was entitled to enjoy the entire properties included in the earlier suit during her life time; but under the compromise a fraction of those properties was given to her absolutely. She gave up her rights in a substantial portion of the properties on the representation of the, defendants that she could take a portion of the suit properties absolutely. This was a representation of fact and not law. [32B-33A] T.V.R. Subbu Chetty's Family Charities v. M. Raghava Mudilyarand ors., [1961] 3 S.C.R. 624, relied on. When the nearest presumptive reversioners who were parties to the compromise were estopped from challenging it, they could not advance their case by impleading their sons who could only claim through them, as co-plaintiffs. [33E-F] The issue whether the plaintiffs 1 & 2 were bound by the terms of the compromise was broad enough to cover the defendant's plea of estoppel even though it was not specifically raised in the pleadings but considered by all the courts. [34A] (iv)The nearest reversioners who were parties to the compromise were the grand-children of B's aunt. The parties to, the earlier suit were near relations. The dispute, was in respect of property originally owned by their common ancestor. To consider a settlement as a family arrangement it is not necessary that the parties to the compromise should all belong to one family. The courts lean strongly in favour of family arrangements to bring about harmony in a family and do justice to its various members and avoid in anticipation future disputes which might ruin them all. [34B-E] Ram Charan Das v. Girjanandini Devi and Ors., [1965] 3 S.C.R. 841 and Sahu Madho Das and Ors. v. Pandit Mukand Ram and Anr., relied on. [The suits being held to be not maintainable the Court did not consider the question whether the impugned alienations were effected for valid necessity.] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 74 and 75 of 1967. Appeals by special leave from the judgment and decree dated May 3, 1966 of the Madhya Pradesh High Court in L.P.A. Nos. 3 and 4 of 1964. S.V. Gupte, Rameshwar Nath, Rajendar Nath and Manik Chand Jain, for the appellants (in both the appeals). S.T Desai, Motilal Gupta, B. M. Agarwal, P. N. Tiwari, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the respondents (in both the appeals). Krishna Biharilal vs Gulabchand Am Ors on 16 March, 1971 3 The Judgment of the Court was delivered by Hegde J.-In these appeals by special leave identical ques- tions of fact and law arise for decision. It would be convenient to set out the material facts before formulating the questions arising for decision. In the State of Gwalior there was a firm known as Chhedilal Chaturbhuj. Chhedilal, the owner of the firm had two sons and one daughter. The genealogy of the family of Chhedilal is as follows: Chhedilal |--------------------|-------------| | | | Baldy Prasad Chhaturbhuj Parvati | | Bulak chand I Imarried to Jwalaprasad Suta Rajabett Manorthilal Mst. Pattobai (daughter) (widow) I in 1953. Kanialal Karnimal Hiralal@ Raggamal Pannalal alias Kannimal Harijit II Ganeshilal Lakshmichand Sarswatibai (widow) Balktshan Krishanlal Phoolchand Poonamchand (minor) (Res. 7) (Res. 9) (Res. 8) Gulabland Jagdish Chandra Ma Ka' a @Rambabu (Res. 2) (minor) (daughter) (Res . 1) (Res. 3)Minor, Res. 4 After the death of Chhedilal, it appears the firm in question came into the possession of some of the children of Parvati. In 1926, Bulakichand, grandson of Chhedilal filed a suit against Jwalaprasad (his first cousin), Karnimal, Raggamal and Pannalal; seeking possession of the firm. Therein he appears to have alleged that Jwalaprasad who had a half share in the suit properties had been colluding with the other defendants. Bulakichand died during the pendency of the suit. Thereafter his widow Pattobai was impleaded as his legal representative. During the pendency of the suit Jwalaprasad, Karnimal, Raggamal and Pannalal also died. Neither Jwalaprasad nor Karnimal left any successors. Raggamal was succeeded by his son Ganeshilal and Pannalal by his son Lakshmichand. They were duly impleaded in the suit. On June 7, 1941, the parties to the suit compromised their disputes. It may be noted that to that compromise the minor sons of Lakshmichand as well as of Ganeshilal were also parties. Before compromising the suit the parties had obtained the leave of the court as the minor defendants had joined the compromise. Under the compromise, a portion of the suit properties was given to Pattobai and the remaining portion to the defendants in that suit. Pattobai alienated the properties given to her under, three different sale deeds i.e. one on July 15, 1941 and the other two on July 24, 1941. The first sale deed was for a sum of Rs. 1,000/- and the other two for Rs. 9,000/- and Rs. 20,500/- respectively. The appellant is the alienee under all these sale deeds. In 1953, Lakshmichand and his sons and Ganeshilal and his sons instituted three suits seeking declarations that the alienations referred to above are not valid and binding against them, the presumptive reversioners to the estate of Bulakichand. One of those suits is still pending trial. These appeals arise from the other two suits. During the pendency of those suits Pattobai died. Thereafter the suits were contested only by the appellant, the alienee (he will be hereinafter referred to as the defendant). The trial court dismissed the two suits holding that in view. of the compromise in the earlier suit, the parties are estopped from challenging the validity of the sale deeds as under that compromise the estate given to Pattobai is an absolute one. In appeal the first appellate court confirmed the Judgment of the trial court on the ground that as the plaintiffs had not amended the plaint seeking possession of the suit properties after the death of Pattobai, the suits were not maintainable. On further appeals being Krishna Biharilal vs Gulabchand Am Ors on 16 March, 1971 4 taken by the plaintiffs, the High Court set aside the first appellate court's judgment. 'It came to the conclusion that the first appellate court should have taken into consideration the change in the circumstances that had taken place pending the trial of the suits and moulded the relief according-to law. It, accordingly remanded the cases to the first appellate court for disposal of the same on merits. After remand the first appellate court again affirmed the decision of the trial court on two grounds viz. (1) that the plaintiffs were,estopped from claiming any right in the suit properties as an absolute estate had been given to Pattobai in respect of those properties and (2) that under any circumstance the compromise in question should be considered as a family arrangement and as such is not liable to be reopened. This decision was affirmed by a single judge- of the High Court in second appeal. Thereafter the plaintiffs took up the matter in appeal to the Letters Patent Bench. The Letters Patent Bench reversed the judgment of the courts below. It held that the compromise entered into in 1941 was an illegal compromise and as such the same cannot be used to non-suit the plaintiffs. It also disagreed with the conclusion of the learned single judge that the compromise recorded amounted to a family settlement. These appeals are directed against that judgment. The first question that falls for consideration is whether on a true construction of the compromise decree it can be held that Pattobai had been given an absolute estate ? According to the plaintiffs Pattobai having been impleaded to the suit as a legal representative of her husband, in law she could not take an absolute estate; she could only have a widow's estate and therefore in construing the compromise decree, we must bear in mind the principles of Hindu Law and if we do so, the only possible conclusion is that the intention of the parties was only to give her a life estate. On the other hand it is contended on behalf of the defendant that under law Pattobai was entitled to enjoy all the properties included in the plaint in the earlier suit during her life time but she agreed to give up her right in bulk of the properties in consideration of her getting an absolute estate in a small portion of the properties involved in that suit. It was further urged on his behalf that the compromise deed specifically says that the properties given to Pattobai are to be enjoyed by her as "Malik Mustikal" which means absolutely and hence there is no basis for the contention that she took a Widow's estate. The ordinary rule of construction of a document is to give effect to the normal and natural meaning of the words employed in the document. The compromise deed specifically says that the properties given to Pattobai were to be enjoyed by her as "Malik Mustakil". The meaning of the expression "Malik Mustakil" an urdu word, has come up for consideration before this Court in some cases. In Dhyan Singh and anr. v. Jugal Kishore & anr(1) this Court ruled that the, words "Malik Mustakil" were strong, clear and unambiguous and if those words are not qualified by other words and circumstances appearing in the same document, the courts must hold that the estate given is an absolute one. A similar view was taken by the Judicial Committee in Bishunath Prasad Singh v. Chandika Prasad Kumar (2). The circumstances under which the compromise was entered into as well as the Krishna Biharilal vs Gulabchand Am Ors on 16 March, 1971 5 language used in the deed do not in any manner go to indicate that the estate given to Pattobai was anything other than an absolute estate. The Letters Patent Bench of the High Court held that the compromise entered into was illegal compromise. It came to that conclusion on the basis that a Hindu widow cannot enlarge her own rights by entering into a compromise in a suit. But the High Court overlooked the fact that this was not a compromise entered into with third parties. It was a compromise entered into with the (1) [1952] S. C. R. 478. (2) 60 I. A. 56. 32` presumptive reversioners. Further at no stage the plaintiffs had pleaded that the compromise entered into in 1941 was an illegal compromise. The plaintiffs took no such plea in the plaint. There was no issue relating to the validity 'of the compromise. Hence, the High Court was not justified in going into the validity of the compromise. Further even if the compromise was an invalid one, the parties to the compromise are estopped from challenging the impugned alienations-see Dhyan Singh's case(1). This takes us to the question of estoppel. As seen earlier, the trial court, the first appellate court as well as the learned single judge of the High Court have concurrently come to the conclusion that the plaintiffs are estopped from challenging the impugned alienations. But the Letters Patent Bench took a different view. Its conclusion, as mentioned earlier, proceeded on the basis that a Hindu widow cannot enlarge her own estate by entering into a compromise with, others. It is well settled that a Hindu widow cannot enlarge her estate by entering into a compromise with third parties to 'the prejudice to the ultimate reversioners. But the same will not be true if the compromise is entered into with persons who ultimately become the reversioners. It was urged on behalf of the respondents that Pattobai was im- pleaded in the earlier suit only as a legal representative of her deceased husband, therefore she could only represent his estate and not carve out an estate for herself. But this argument overlooks the fact that according to Pattobai she was entitled to enjoy the entire properties included in the earlier suit during her life time; but under the compromise a fraction of those properties were given to her absolutely; that being so the plaintiffs are estopped from backing out of that compromise. It was urged on behalf of the plaintiffs that the representation made by the defen- dants in the earlier suit is at best a representation as regards the true legal position and such a representation cannot estop them; before there can be an estoppel, the representation must be about some fact, the opposite side must rely on that representation and must suffer some detriment by acting on the basis of that representation. It was urged on their behalf that in this case the only representation that the plaintiffs are said to have made in that Pattobai had an absolute estate in a portion of the suit properties,, this cannot be said to be a representation of a fact and therefore the same cannot form any basis for invoking the rule of estoppel. We are unable to accept this contention. From the facts set out earlier, it is clear that Bulakichand claimed the entire estate for himself after the death of Jwalapmsad. If the contention of Bulakichand is correct, as we must assume for the purpose of this case, then Pattobai would have been entitled to enjoy the entire properties during her life time. But she' gave up her right in a substantial portion of those properties on the representation by (1) [1952] S. C. R. 478. Krishna Biharilal vs Gulabchand Am Ors on 16 March, 1971 6 the defendants that she can take a portion of the suit properties absolutely. This is a representation of a fact and not of law. The representation is that the defendants were willing to confer on Pattobai an absolute right in a portion of the suit properties if she gave up her right in the remaining properties. Pattobai relied on that representation and gave up her claim in respect of a substantial portion of the properties included in the earlier suit. Hence the plaintiffs particularly Lakshmichand and Ganeshilal who alone were the reversioners to the estate of Bulakichand on the date of the death of Pattobai, are estopped from contending that they are entitled to succeed to the properties given to Pattobai. The other plaintiffs have no independent right of their own in the properties with which we are concerned. In Dhyan Singh's case(1) this Court ruled that even if an award made is 'invalid, the persons who were parties to that award are estopped from challenging the validity of the award or from going behind the award in a subsequent litigation. In T. V. R. Subbu Chetty's Family Charities v. M. Raghava Mudaliar and ors.,(2) this Court ruled that if a person having full knowledge of his rights as a possible reversioner enters into a transaction which settles his claim as well as the claim of the opponent at the relevant time, he cannot be permitted to go back on that arrangement when reversion actually opens. At the time of the compromise Lakshmichand and Ganeshilal were the nearest presumptive reversioners. They must be deemed to have known their rights under law. Under the compromise they purported to give a portion of the suit properties absolutely to Pattobai, evidently in consideration of her giving up, her claim in respect of the other properties. They cannot be now permitted to resile from the compromise and claim a right inconsistent With the one embodied in the compromise. They cannot advance their case by impleading their sons as co-plaintiffs. Their sons can only claim through them. For the first time in this Court it was urged that the plea of estoppel was not available to the defendant as no such plea had been taken in the pleadings. It is true that no specific plea of estoppel had been taken in the written statement filed by the defendant. But be had definitely stated in paragraph 14 of his written statement that the plaintiffs are bound by the compromise and have no right to deny the right of Pattobai over the whole of the properties sold to him. One of the issue raised in the suit (Issue No. 4) is the plaintiffs Nos. 1 and 2 bound by the terms of compromise filed in Civil Original Suit No. 3 of S. Y. 1991 of the High Court? If so, what is its effect?" (1) [1952] S. C. R. 478. (2) [1961] 3 S. C. R. 624. This issue is broad enough to cover the plea of estoppel. The plea of estoppel had been urged and considered by all the courts without any objection from the plaintiffs. They cannot be now permitted to contend that the defendant had not taken any specific plea of estoppel. The next question that we have to consider is whether the compromise in question can be considered as a settlement of family disputes. It may be noted that Lakshmichand and Ganeshilal Krishna Biharilal vs Gulabchand Am Ors on 16 March, 1971 7 who alongwith Pattobai were the principal parties to the compromise were the grand-children of Parvati who was the aunt of Bulakichand. The parties to the earlier suit were near relations. The dispute between the parties was in respect of a certain property which was originally owned by their common ancestor namely Chhedilal. To consider a settlement as a family arrangement, it is not necessary that the parties to the compromise should all belong to one family. As observed by this Court in Ram Charan Das v.Girjanandini Devi and ors.(1) the word "family" in the context of a family arrangement is not to be understood in a narrow sense of being a group of persons who are recognised in law as having a right of succession or having a claim to a share in the property in dispute. If the dispute which is settled is one between near relations then the settlement of such a dispute can be considered as a family arrangement-see Ramcharan Das's case(1) The courts lean strongly in favour of the family arrangements to bring about harmony in a family and do justice to its various members and avoid in anticipation future disputes which might ruin them all-see Sahu Madho Das and ors. v. Pandit Mukanel Ram and anr.(2) For the reasons mentioned above we are of the opinion that in view of the compromise entered into between the parties in 1941, the suits from which these appeals arise are not maintainable. In that view, it is not necessary to go into the question whether the alienations were effected for valid necessity, a question that has not been gone into finally. In the result these appeals are allowed and the suits from which these appeals arise dismissed with costs throughout. G.C. Appeals allowed. (1) [1965] 3 S. C. R. 841 at P. 850 & 851. 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Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 Equivalent citations: 1971 AIR 2164, 1971 SCR (3) 762, AIR 1971 SUPREME COURT 2164 Author: P. Jaganmohan Reddy Bench: P. Jaganmohan Reddy, S.M. Sikri, G.K. Mitter, K.S. Hegde, A.N. Grover PETITIONER: BACHAN SINGH & ORS. Vs. RESPONDENT: STATE OF PUNJAB & ORS. DATE OF JUDGMENT18/02/1971 BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN SIKRI, S.M. (CJ) MITTER, G.K. HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 2164 1971 SCR (3) 762 ACT: Punjab Development of Damaged Areas Act (10 of 1951)-If violative of Arts. 14, 19(1)(f) and (g) and 31(2) of the Constitution. HEADNOTE: In order to deal with extensive damage to property and to clear the debris and refuse caused by communal riots in 1947 in Punjab, statutes we're enacted, giving suitable powers the last of which is the Punjab Development of Damaged Areas Act, 1951. Under s. 2(d) of the Act the State Government declared by a Notification that the entire area within the walled city of Amritsar to be damaged area. The Improvement Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 1 Trust formulated certain schemes which were sanctioned by the State Government. Thereafter, notice was issued to the first petitioner to vacate the shop in his possession and to the second and third petitioners to appear before the Land Acquisition Collector and explain the interest which they had in the, premises in their occupation sought to be acquired. In a petition under Art. 32, on the questions whether (1) the Act is violative of Art. 14, because (a) the power to declare an area as damaged is arbitrary, and (b) the property can be acquired at the discretion of the Trust either under the Punjab Town Improvement Act, 1922, or under the Act, compensation payable under the form& Act being more advantageous; (2) the restrictions imposed by the Act are unreasonable and violative of Art. 19(1 ) (f) and (g); and (3) the acquisition and compensation provisions of the Act violate Art. 31(2). HELD : (1) There is no violation of Art. 14. (a) The purpose of the Act is for framing and executing schemes of improvement in urban areas where damage has been caused to buildings by wholesale and serious rioting and hence, the power conferred on the State Government to declare an area damaged area is not arbitrary, unguided or uncanalised. If the whole of the walled city of Amritsar is a damaged area and part thereof is equally a damaged area. Therefore, it is not difficult to determine what is damaged area and the Notification in the present case is not vague. [773 A-D] (b) No option is given to acquire the area either under the 1951 Act or Punjab Town Improvement Act according to the discretion of the Improvement Trust. The 1951-Act only provides that the Trust in framing a scheme may provide for all or any of the matters mentioned in s. 28 of the Punjab Town Improvement Act, and that any scheme already framed under the latter Act is deemed to have been framed under 1951-Act. [771 A-B] (2) The provisions of the Act are reasonable and are designed to serve the interest of the general public by executing schemes in a planned manner for the improvement of the damaged areas of the city and the restrictions imposed are protected by Art. 19(5) and (6) of the Constitution. [769 G-H] 763 (a) Persons who are affected by a scheme are given an opportunity to file their objections which have to be given due consideration by the Improvement Trust before finalising the scheme, and by State Government before sanctioning the scheme. They have also the right to take part in, the proceedings before the Collector in the inquiry into claims for compensation. They are given notice of the award and are given a right to have their objections to the award fixing the compensation or the are' I demarcated and other matters specified in s. 20 referred to a Tribunal. The Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 2 award, or any order passed by the Tribunal, is deemed to be a judgment 'and decree under the Civil Procedure Code, and affected persons have a right of appeal to the High Court and to this Court. [770 B-F] (b) The fact that there are some newly built buildings which are not damaged would not make the provisions of the Act unreasonable nor justify an impediment being placed to a scheme which is designed to achieve a social purpose and is for the public good [770 G-H] (c) The persons in occupation of shops have been assured in writing by the Improvement Trust of alternative accommodation and allotment of pucca shops as soon as possible. [771 H] (3) The compensation payable is neither inadequate nor illusory but on the other hand it is not less than the market value and may even be more. There is thus no violation of Art. 31(2) of the Constitution. [770 G 772 B] (a) The compensation payable to persons interested under the Act is more in the nature of a profit sharing scheme in that the minimum that they would be entitled for payment is the market value of the property which has come under the scheme and may even be more depending upon the income of the scheme and the expenditure incurred therefore. The com- pensation is determined on principles similar to those under the Land Acquisition Act or the Punjab Town Improvement Act. [770 B-C, H] (b) It cannot be contended that compensation is not payable for the buildings but only for the land, because, the definition of land under the Act is similar to that in s. 3 (a) of the Land Acquisition Act and is comprehensive enough to include buildings also. [771 D] (c) The finalisation of the scheme will take time but under S. 12(2) the submission of the scheme by the Trust is not to be later than three years. Therefore, it cannot be urged that the final compensation is not immediately payable and that it may take several years without any payment of interest during that time. In any case, the scheme is for the benefit of all those who have properties in the areas which are covered by the scheme and is on a profit sharing basis. There is thus no hardship or disadvantage. [771 E-G] JUDGMENT: ORIGINAL JURISDICTION: Writ Petition No. 1 of 1970. Petition under Art. 32 of the Constitution of India for the enforcement of fundamental rights. J. P. Goyal and Sobhag Mal Jain, for the petitioners. Bishan Nar and R. N. Sachthey, for respondent No. 1. Bishan Narain, B. Datta, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for respondent Nos. 2 and 3. 7 64 The Judgment of the Court was delivered by P. Jaganmohan Reddy, J. The three Petitioners who are residents of Amritsar have filed this Petition under Art. 3 2 of the Constitution, Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 3 challenging the Punjab Development of Damaged Areas Act 10 of 1951 (hereinafter called 'the Act') as being violative of Art. 14, 19 ( 1 ) (f ) & (g) and 3 1 (2) of the Constitution of India. The first Petitioner carries on a Bakery business in a shop in Bazar Jallianwala near Chowk Phowara of which he is a tenant. The second Petitioner is the owner of a building consisting of a number of shops situated in Bazar Bikanarian while the third Petitioner is a tenant in occupation of a residential house situated in Bazar Sodhian. On 26th June 1962 the State Govt. declared by a Notification under Sec. 2(d) of the Act the entire area within the walled city of Amritsar to be a damaged area. In pursuance of the said Notification a number of schemes were formulated by the Improvement Trust of Amritsar. Two of such Schemes with which the Petitioners are concerned related to ( 1 ) Chowk Phowara cum Jallianwala Bagh and (2) Ghantaghar. The former Scheme was sanctioned by the State Govt., by a Notification dated the 17th July 1968, while the Ghantaghar Scheme was sanctioned by Notification of the 10th October 1969. Pursuant to these Notifications a Notice was issued on 26th November 1969 to the first Petitioner whose shop is covered by the Chowk Phowara cum Jallianwala Bagh Scheme to vacate the premises in his possession. A notice was also given to Petitioners 2 & 3 in respect of the buildings owned or occupied by them in the Ghantaghar area Scheme, asking them to appear before the Land Acquisition Collector-the 3rd Respondent and explain the interest which they have in the respective premises sought to be acquired. It is contended by the Petitioners :-(1) (a) that Sec. 2(d) offends Art. 14 of the Constitution inasmuch as the damaged area as defined under that Section furnishes no guidelines, is arbitrary, unguided, un-canalised and discriminatory inasmuch- as it enables the State. Government to pick and choose any area and declare it to be damaged area even though it may not at all be damaged while at the same time leaving out other areas similarly situated which are either not damaged or really damaged; that in any case the Notification under Sec. 2(d) is vague and therefore bad, (b) that the provisions regarding compensation are also discriminatory because property can be acquired at the discretion of the Improvement Trust either under the Punjab Town Improvement Act 1922 or under the Act even though the compensation payable under the provision of the former Act are advantageous as compared to those payable under the Act; (2) that the compensation provisions in the Act violate Art. 31 (2) as it stood at the time when the Act was passed in 1951; (3) that the Acquisition under the Act cannot be said to be for a public purpose as not a single pie comes from the Govt. or is contributed by the local authority; and (4) that the impugned Notification sanctioning the two schemes is also void because once the Govt. had exercised the power by sanctioning Dharam Singh Market Scheme, the power ,of sanction under Section 5 is exhausted. In order to appreciate the several contentions it is necessary to examine the provisions of the Act but before we do so it may be useful also to briefly set out the legislative history of the enactment and the purpose for which it was enacted. Prior to the partition of India there were, serious communal rioting in March 1947 in some parts of Punjab, particularly in Amritsar These riots as well as those which subsequently took place on the eve of partition caused extensive damage to property and left a lot of debris and refuse which had to be cleared. The Governor of Punjab who had by a proclamation under Sec. 93 of the Govt. of India Act 1935 assuming to himself all powers vested by and under the said Act passed the Punjab Damaged Areas Act 11 of 1947 on 9th May 1947. The Act so passed would only have force for two years from the date on which the proclamation ceases to have effect unless sooner repealed or re-enacted by an Act of the appropriate legislature. The rule of the Governor Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 4 came to an end on 15th August 1947 and consequently the 1947 Act would cease to have, force on 15th August 1949. It appears from the statement of objects and reasons of the 1947 Act that Government finding that it had not adequate power to deal with dangerous or damaged buildings summarily, or to deal satisfactorily with debris, the materials of damaged or fallen buildings or to control salvage of property and its disposal or to indemnify teh Crown or the Local authorities or their employees for the action already taken in respect of the aforesaid matters, wanted to arm itself by emergency changes in the Laws regulating the administration of Urban areas and to provide in an orderly way for the custody and disposal of debris and salved property. The substantive portions of the Act were meant to come into force in any area to which their application may be considered desirable by the Provincial Government, on such date as may be notified. Under Sec. 2(c) the Damaged area was defined in much the same way as is defined in Sec. 2(b) of the present Act. It conferred power on the Provincial Government to declare by Notification any area or any portion thereof to be a damaged area. Under this provision the whole of the walled city of Amritsar was declared to be damaged area. As this. Act would have lapsed by the 15th August 1949, the East Punjab Damaged Areas Act 10 of 1949 was enacted which embodied practically the same provisions as were contained in the 1947 Act. Under this Act no fresh Notification in respect of the area Notified in the 1947 Act was issue& and though Sections 1 to 3 of the 1949 Act came into, force immediately after its publication the other provisions of that Act were to come into force in any urban area as the State Govt. by Notification may appoint. These provisions however did not meet the need for planned development of the damaged areas had consequently the Damaged Area Ordinance 16 of 1950 was promulgated by the Governor of Punjab on the 1st December 1950. The Ordinance was replaced by the present Act. Though under sub. sec. (2) of Section 1 the Act extends to the whole of Punjab sub-sec. (3) was to come into force at once within the local area of Amritsar Improvement Trust and any other such areas as the Govt. may by Notification specify. Sec. 2(d) defines damaged area to be an area which the State Govt. by Notification may declare to be a damaged area and includes the area already notified by the East Punjab Damaged Area Act 1949. Section 2(e) defined 'The Improvement Trust' or 'Trusts' as an Improvement Trust constituted under the Punjab Town Improvement Act 1922 while Land under Sec. 2(f) include$ benefits to arise out of land or things attached to the earth or permanently fastened to anything attached to the earth. Sec. 3 empowers the Trust to frame a Scheme or Schemes for the development of the damaged area providing for all or any of the matters mentioned under Sec. 28 of the Punjab Town Improvement Act 1922 and any Scheme already framed or sanctioned in respect- of a damaged area under the Provisions of that Act which shall be deemed to have been framed or sanctioned under the Act. Sections 4 & 5 then provide for the publication of the Scheme giving certain specified details calling for objections to the Scheme within a period prescribed. After considering the objections, if any, which may, be received by the Trust during the period prescribed the Trust may approve the scheme with or without modification and thereafter submit it to the State Govt. with a statement of objections received by it. The State Govt. may modify the scheme if necessary and notify it either in original or as modified. The Scheme so published shall be deemed to be the sanctioned scheme; such publications being conclusive evidence of the Scheme having been duly framed and sanctioned. Under Sec. 6 the Trust shall within 3 months from the date of the publication of the Scheme udder Sub- Section 3 of Section 5 apply to the' Collector for acquisition and if considered necessary for taking immediate possession of the Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 5 whole or part of any damaged area comprised in the Scheme and on such application being made the Collector may forthwith deliver or caused to be delivered to it the possession of the damaged area. On such order being made by the Collector the damaged area vests in the Trust free from all encumbrances but subject to payment in due course of compensation by the Trust in accordance with the provisions of the Act. The occupier of any building or any part of the building was to be, given at least 2 weeks notice or such longer notice as it considered reasonably sufficient to enable him to remove his movable property from such building without unnecessary inconvenience to him. Section 7 empowers the Collector, if he is himself a Magistrate and if not to apply to a Magistrate to remove obstruction and to deliver possession of the land to the Improvement Trust. Sec. 8 provides for marking and measuring. Sec. 9 requires the Collector to cause notices giving particulars as required under sub-sec. (2) inviting claims lo be made to him for compensation. Sec. 1 1 requires the Collector to make an enquiry into the objections and claims made pursuant to the notice issued under sub-sec. 2(b) of Sec. 9, and to determine: (a) the true area of the land; (b) the market value, at the time of publication of the Scheme under Section 4(1), of- (i) the land, (ii) all material standing on them, and (iii) any sources of income derived from the land. (c) The value of plots, the material thereon and other sources of income remaining outstanding as notified by the State Government under Section 12; and (d) the extent of the interest of every person claiming compensation, and the market value of the interest of such persons at the time of publication of the scheme under Section 4(1). Under Sec. 12 the Trust shall as soon as possession of the land comprised in the sanctioned scheme is delivered to it proceed to execute the scheme-but not later than 3 years of the sanction of the scheme submit for the scrutiny of the State Govt. an accurate statement which shall contain the following particulars (a) the actual cost of the scheme; (b) the income derived from the scheme; (c) the particulars and the estimated value of the plots and any material thereon that remain to be sold; and Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 6 (d) the estimated value of the other sources of Income from the scheme which remain out- 5-Ll 100SupCI/71 standing. On the scheme being submitted to the State Govt., it shall after necessary scrutiny notify the details of he aforesaid statement. The manner in which compensation is to be computed and the award to be passed by the Collector and the payment of com- pensation are provided for in Sec. 13 and 16. Section 14 provides for the Collector's award to be filed and Sec. 15 empowers Trust either to notify its intention to make a reference to the Tribunal in the manner stated in Sec. 19 against the amount awarded by the Collector or place the amount awarded at his disposal. Sections 13 and 16 which deal with the calculation of the total compensation and its payment are as follows Sec. 13 : (1) After the statement has been notified under the preceding section, the Collector shall make an award apportioning compensation in the manner hereinafter prescribed, among all the persons known or be- lieved to be interested in the land, of whom or of whose claims he has information, whether or not they have (2) Notwithstanding anything contained in any other law for the time being in force, the total compensation payable for any land acquired under this Act shall be the difference between- (a) the income of the Scheme, which shall include the estimated value of the plots and the material thereon that remain to be sold and the other sources of income from the scheme which remain outstanding; and (b) the cost of the scheme, as notified in the statement under Sec. 12. (3) subject to the provisions of the Administration of Evacuee Property Act 1950, or any other law on the subject for the time being in force, the compensation awarded in respect of the structures, if any, standing on the land comprised in the scheme shall be payable to the persons known or believed to be interested in those structures according to their respective interests as determined by the Collector under See. 11. Explanation: In computing such compensation, the Collector shall assess the market value of the structures at the time of delivery of possession of the land to the Trust and deduct from such value the cost of demolishing them said removing the material from the site. 7 69 (4) The total compensation, less any deductions that may be necessary on account of the amounts, if any, payable under sub-section (3), shall be paid to the various persons interested in proportion to the interests hold by them as determined by the Collector under sec. 1 1 (c). Provided that the amount paid to any person shall not be less than the market value of his, interest as determined by the Collector under Sec. 11 (1) minus the cost of demolition and removal incurred by the Trust. Sec. 16: From the amount placed at his disposal under section 15 the Collector shall, according to the award, tender payments to the persons interested and make payments to those who agree to receive Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 7 the same, with or without protest. Sections 19 to 21 provide that the Trust or persons interested who receive compensation under protest, may require the Collector to make a reference to the Tribunal in respect of the measurement of the land, amount of compensation, the persons to whom it is payable, its apportionment among persons interested. A statement of the case is also required to be drawn up by the Collector on reference, and a notice to be given by the Tribunal to the persons interested. Under Sec. 23 the Tribunal has power to either maintain or modify the award passed by the Collector and order payment to the persons entitled to it, provided that it shall not question the amounts notified under Sec. 12. The award passed by the Tribunal is deemed to be a decree and the statement of the grounds therefore a Judgment within the meaning of sub-section (2) and (9) of Section 2 of the Civil Procedure Code; and every award and order of the Tribunal is enforceable by the Court of the Senior Sub Judge within the local limits of its jurisdiction as if it were a decree made or passed by it. While Section 24 makes provision for the award of costs, Section 25 does not require the Trust to pay interest on any amount awarded as compensation and tendered in accordance with the order of the Collector. The provisions of the Act it may be noticed clearly indicate that they are reasonable and are designed to serve the interest of the general public namely to execute schemes in a planned manner for the improvement of the damaged areas of the city of Amritsar. They do not in any way violate the provisions of Art. 19(1) (f) & (g). This Court has in no uncertain terms laid down the test for ascertaining reasonableness of the restrictions on the rights guaranteed under Art. 19 to be determined by a reference to the nature of the right said to have been infringed, the purpose of the restrictions sought to be imposed, the urgency of the evil and the necessity to rectify or remedy it-all of which has to be balanced with the social welfare or social purpose sought to be achieved. The right of the individual has therefore to be sublimated to the larger interest of the general public, Applying this test it will be seen that persons who are affected by the Scheme are given an opportunity to fide their objections which have to be given due consideration by the Trust before finalising the scheme. Their objections are further considered by the Govt. before sanctioning the scheme. They have also a right to take part in the proceedings before the Collector in the enquiry into claims, for compensation, and are given notice of the award made by the Collector. The compensation payable to them is. more in the nature of a profit sharing scheme in that the minimum that they would be entitled for payment is the market value of the property which has come under the scheme and may even be entitled to, something more depending upon the income of the scheme and the expenditure incurred therefore. The total amount of compensation for any land so acquired under Sec. 13 (2) is the difference between the income of the scheme which is to include the estimated value of the buildings and the material thereon that remains to be sold, the profits on the plots sold and the other source of the income of the scheme as notified in the statement under Sec. 12, subject as we have pointed out earlier to the compensation in any case not being less than the market value of his interest as determined by the Collector under Sec. 11(d) minus the cost of the demolition and removal incurred by the Trust. The persons interested are further given a right to have their objections to the award fixing compensation, the area of the land demarcated and other matters as Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 8 specified in Sec. 20 referred to the Tribunal. The award or any order passed by the Tribunal being deemed to be a Judgment and a decree under the Civil Procedure Code, the affected persons have therefore right of appeal provided under that Code, which will give the man opportunity to go up to the High Court and even to the Supreme Court. The fundamental rights to acquire, hold or dispose property or to carry on any occupation, trade or business guaranteed under Art. 19 (1) (f) & (g) is subject to the restrictions contained in clauses (5) & (6) of the said Article. The Act in our view complies substantially if not abundantly with the restrictions imposed on the ,exercise of the said fundamental rights. It is then contended that some buildings in these areas are newly build or that some of them are not damaged and hence the restriction is unreasonable but in our view this alone does not in any way justify an impediment being placed for a scheme which is designed to achieve a social purpose and is for the public good The compensation payable under the Act is 'also determined on principles similar to those under the Land Acquisition Act or the Punjab Town Improvement Act. There is however no justification in the submission that option is given to acquire the area either under the Act or under the Punjab Town Improvement Act according to the discretion of the Trust which is without guide-lines and arbitrary. This argument is devoid of force because what Section 3 empowers is that the Trust in framing a scheme may provide for all or any of the matters mentioned in Section 28 of the Punjab Town'- Improvement Act. It further declares that any scheme already framed under the Punjab Town Improvement Act is deemed to have been framed under the Act. This is far from saying that a discretion is given to the Trust to frame a Scheme either under the provisions of the Act or under the provisions of the Punjab Town Improvement Act, or that the provisions of the latter Act are more advantageous in the matter of compensation or in respect of any other matter. The section merely incorporates by reference some of the provisions of the other Act and is also an enabling one. There is also no validity in the contention that compensation is not payable for the buildings but only for the land because the definition of land under the Act is similar to that under Sec. 3(a) of the Land Acquisition Act and is comprehensive enough to include buildings also. It is next urged that compensation so determined is not im- mediately payable because under the provisions of the Act the final compensation will only be determined after the scheme is submitted and sanctioned by the Govt. which may take several years and also there is a prohibition against payment of interest on the amount of compensation unlike that provided under the provisions of the Land Acquisition Act. It is true that the finalisation of the scheme will take time but under the provisions of sub-see (2) of Sec. 12 the submission of the Scheme by the Trust is not to be later than- 3 years which does not mean necessarily that it will take 3 years and may even take less if not obstructed by persons affected. In any case as we have said where the scheme is for the benefit of all those who have properties in the areas which are covered by the scheme and is on a profit sharing basis, there is no hardship or disadvantage- particularly when the Petitioners as we shall point out presently are assured of, alternative accommodation and the allotment of newly built shops under the scheme. Though the actual schemes are not before us, it is stated in the counter of Respondent No'. 2 the Chairman of the Amritsar Improvement Trust that the Petitioners have been assured in writing by the Trust that, allotment of pacca shops as soon as the commercial building in Dharam Singh Market which is being constructed at an estimated cost of Rs. 26 lakhs is completed. In fact Ahata Bishan Dass and the adjoining scheme areas are ready. In the meanwhile many of the Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 9 persons who have applied for alternate accommodation have for the time being been ac- commodated by the Trust in the stalls recently set up in Kesribagh in the immediate vicinity of the Trust office. Though the Petitioners 1 and 3 have not applied for alternative accommodation they have been assured that they will be treated alike with-the said displaced occupiers of shops in case they apply for alternative accommodation. In so far as the petitioner No. 2 is concerned it is alleged that he is not an occupier of the building, as such there is no question of an alternative accommodation being given to him but this matter will have to be decided under the provisions of the Act. Be that as it may in fact the Chairman of the Amritsar Improvement Trust has appended to the counter a letter addressed to one Inder Singh Arora who has a shop in Bazar Jallianwala in Amritsar and who is also similarly situated like the petitioners. In that letter of 6-1-1970 he has stated as follows "Reference your discussion with/ the undersigned, It has been decided to offer you accommodation on the lines of commitments made by the Trust of 1969 (Mulk Raj & Others Vs. Trust) i.e. as soon as commercial buildings in Dharam Singh Market, Ahata Bishan Dass and the adjoining Scheme areas are ready,,/ the Trust would give preference to the oustees from the scheme area (Chowk Phowara to Jallianwala Bagh in Main Bazar and, other Markets) who are 5 years old to occupy shops of their choice at the rent which is fixed by the Trust for the particular shop. The rent fixed by the Improvement Trust may be the highest that can be fetched in the Market. At that rent the tenants may exercise their option to get tenancy rights in preference to others and in case they refuse to take the shops on rent so fixed by the Trust, the same would be given to others". These assurances are commitments and would equally apply to the Petitioners. We cannot envisage a more reasonable and fair treatment accorded to the persons who have been displaced as a result of the Improvement Schemes. The petitioners in spite of all these assurances have taken an unreasonable attitude in litigating and holding up a scheme that is beneficial for all those affected in the damaged areas by the two impugned schemes. in our view the compensation payable is neither inadequate nor illusory, but on the other hand is not less than the market value and may even be more. There is therefore no violation of Art. 31(2) of the Constitution. The further contention that Sec. 2(d) is discriminatory of vague in that it does not indicate the criteria for determining what is a damaged area appears to us to be without force. We have seen the purpose for which the Act was passed by the Legislature which leaves little doubt that it was the damage caused by wholesale and serious rioting to buildings in certain urban ,areas in the State of Punjab and particularly in the area within the walled city of Amritsar which-necessitated the framing and execution of schemes of improvement in those areas. In so far as the present petition is concerned it relates to two of the areas within the walled city of Amritsar. It is therefore not difficult to determine what is a damaged area for, if the whole of the walled city of Amritsar is a damaged area, any part thereof is equally a damaged area. There is nothing arbitrary nor is the power conferred on the State Govt., unguided or un- canalised nor for that matter can it be said that the Notification issued on the 26th June 1962 is vague. In so far as the contention that the impugned Notification sanctioning the two schemes are void as the power under Sec. 5 of the Act was exhausted because the Govt. had already exercised its power when it sanctioned Dharam Singh Market Scheme, the learned Advocate has (not chosen to address any arguments or to substantiate that contention. As such we find it unnecessary to deal with it. Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 10 In our view none of the objections are sustainable either on the ground of discrimination under Art. 14 or on the scheme are being unreasonable or not in the interest of general public violating Art. 19 (1) (f) & (g) nor on the ground of the compensation payable being inadequate or insufficient so as to infringe the guarantee under Art. 31(2) of the Constitution of India. The petition is accordingly dismissed with costs. V.P.S. Petition dismissed. Bachan Singh & Ors vs State Of Punjab & Ors on 18 February, 1971 11 | {
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State Of Punjab vs Kishan Dass on 19 January, 1971 Equivalent citations: 1971 AIR 766, 1971 SCR (3) 389, AIR 1971 SUPREME COURT 766, 1971 LAB. I. C. 481, 1971 (1) LABLJ 271, 1971 SERVLR 174, 1971 3 SCR 389, 1971 2 SCJ 291 Author: J.M. Shelat Bench: J.M. Shelat, C.A. Vaidyialingam PETITIONER: STATE OF PUNJAB Vs. RESPONDENT: KISHAN DASS DATE OF JUDGMENT19/01/1971 BENCH: SHELAT, J.M. BENCH: SHELAT, J.M. VAIDYIALINGAM, C.A. CITATION: 1971 AIR 766 1971 SCR (3) 389 1971 SCC (1) 319 CITATOR INFO : E 1984 SC 885 (23) ACT: Constitution of India. Art. 311-Forfeiture of past service- If amounts to reduction in rank. HEADNOTE: Pursuant to certain charges against the respondent, a police constable, his entire service with permanent effect were forfeited, which meant reducing his salary to the starting point in the time scale for constables. An appeal by him before the Deputy Inspector General having failed, be filed a suit. The trial court decreed the suit holding that the order amounted to reduction in rank, therefore, Art. 311(2) of the Constitution was attracted and as no show cause notice was served before the order was passed, the order was vitiated and was bad. The decree was affirmed by the first State Of Punjab vs Kishan Dass on 19 January, 1971 1 appellate court and thereafter in second appeal by the High Court. Allowing the appeal by the State, this Court, HELD : The expression "reduction in rank" in Art. 311(2) has to be construed according to the well-established meaning it has acquired, as in 'the case of the other two expressions, namely, 'dismissal' and 'removal' in that Article, under the various service rules and under the provisions in that regard in the Constitution Acts of 1915 and 1935. The expression "reduction in rank" in the Article, therefore, means reduction from a higher to a lower rank or post when imposed as a penalty. Therefore, an order forfeiting the past service which has earned a Government servant increments in the post or rank he holds, howsoever adverse it is to him, affecting his seniority within the rank to which he belongs or his future chances or promotion, does not attract the Article. His remedy, therefore, .is confined to the rules of service governing his post. [397 E] High Court, Calcutta v. Amal Kumar Roy, [1963] 1 S.C.R. 437 and Shitla S. Shrivastava v. North Eastern Rly. [1963] 3 S.C.R. 61, followed. Parshotam Lal Dhingra v. Union of India, [1958] S.C.R. 828. disapproved. Rupnarain Singh, State of Orissa, A.I.R. 1959, Orissa 167, P. C. Wadhwa v. Union of India, [1964] 4 S.C.R. 598 and Dubesh Chandra Das v. Union of India, A.I.R. 1970 S.C. 77, distinguished. Shri Madhav Laxman Vaikunthe v. State of Mysore' [1962] 1 S.C.R. 886 and Afzalur Rahman v. Emperor, A.I.R. 1943 F.C. 18, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 359 of 1967. Appeal by special leave from the judgment and order dated July 29, 1966 of the Punjab High Court in Civil Misc. No. 1144-C of 1966 in Regular Second Appeal No. 340 of 1966. V. C. Mahajan, for the appellant. A. N. Nag, for the respondent. The Judgment of the Court was delivered by Shelat, J. The respondent was at all material times a constable in the Punjab Police Service and was posted at Ambala. In November 1960, he was served with a charge sheet attributing to him arrogance towards his superior officers and indiscipline. A departmental enquiry was admittedly held in accordance with the procedure laid down therefor in the Punjab Police Rules, 1934. The said charges having been held to have been proved, an order followed forfeiting his entire service with permanent effect. This meant bringing down his salary to Rs. 45/- per month, which would be the salary payable to a constable at the staring point of his service. An appeal by him before the Deputy Inspector-Gene- ral having failed, he tiled a suit in the Court of Sub- Judge,, Ambala. State Of Punjab vs Kishan Dass on 19 January, 1971 2 The suit was on the basis that- the said order amounted to reduction in rank, that therefore, Art. 311(2) of the Constitution was attracted and that no show cause notice against the action proposed against him having been served upon him before the said order was passed, the order was vitiated and was bad. The Trial Court accepted this contention and decreed the suit. An Appeal by the appellant-State failed as the District Judge, relying on Rupnarain Singh v. State of Orissa(1) held that the said order amounted to reduction in rank and the respondent was therefore entitled to the procedural safeguards laid down in Art. 311(2). A second appeal by the State before the High Court was summarily rejected. Hence this appeal founded on special leave granted by this Court. The only question arising in this appeal, the facts not being in dispute, is whether the order forfeiting-the respondent's service, which meant reducing his salary to the starting point in the time scale for constables, amounted to reduction in rank within the, meaning of Art. 311(2). The respondent being a constable., there was no question of his being reduced from a higher post or rank to a lower post or rank. The order, nonetheless, reduced the emoluments received by him as it deprived him of the increments earned by him as a result of the approved service, he had put in, having been forfeited. It also affected his seniority, and therefore, chances of promotion. The question is, whether for that reason the order is tantamount to reduction in rank attracting, Art. 311(2). Rule 1.13 of he Punjab Police Service Rules (hereinafter re- ferred to as the Rules) provides that a gazetted police officer', means a police officer appointed under s. 4 of Act V of 1861. (1) A.T.R. 1959 Orissa 107. and includes the Inspector General, Deputy Inspectors- General, Assistant Inspectors-General, Superintendents, Assistant Superintendents and Deputy Superintendents. The expression "enrolled police officer" means police officers appointed under s. 7 of the said Act and includes inspectors, sergeants, sub-inspectors, asistant sub- inspectors, head constables and constables. The expression "upper subordinate" includes all enrolled police officer of and above the rank of assistant sub-inspector, and the expression "lower subordinate" includes all other enrolled police officers. There is thus a hierarchy in the Police Service of the State comprised of several posts, the post of a constable being the last rung in the ladder. Rule 13.1, which deals with promotion of police officers from one rank to another, provides that- such promotions from one rank to another and from one grade to another in the same rank shall be made by selection tampered by seniority. Cl. 3 of that rule lays down that for purposes of regulating promotion. amongst enrolled police officers, six promotion lists, A, B, C, D, E and F should be maintained. Lists A, B, C and D are meant to regulate promotion to the selection grade of constables and to the ranks of head constables and assistant sub-inspectors. List E regulates promotion to the rank of sub-inspector and List F regulates promotion to the rank of Inspector. Rule 13.5 deals with promotion of constables to selection grade and r. 13.6 provides that a list, called List A, shall be maintained by each Superintendent of Police of constables eligible under r. 13.5 for promotion to the selection grade of constables. Rule 13.7 provides for a list, called List B, divided into two parts, namely, selection grade constables considered suitable as candidates for the Lower School course at the Police Training School, and constables, selection or time-scale, considered suitable for drill and other special courses at the Police Training School. Rule 13.8 lays State Of Punjab vs Kishan Dass on 19 January, 1971 3 down that promotion to the post of head constable has to be made in accordance with principle described in sub-rules (1) and (2) of r. 13.1. Rule 13.8-A provides that infliction of any major punishment would be a bar to admission to or retention in lists A, B or C. Rule 16.1 lays down diverse punishments which can be awarded to members of the service in accordance with the provisions contained in these Rules. These punishments are : (1) dismissal, (2) reduction, (3) stoppage of increment or forfeiture of approved service for increment, (4) entry of censure, (5) confinement to, quarters for a period not exceeding 15 days, (6) extra guards. fatigue or other duty, and punishment drill for certain days. Under r. 16.1(3), a major punishment means any authorized punishment of reduction, withholding of increments, forfeiture of approved service, dismissal and every judicial conviction on a criminal charge. Rule 16.4 defines 'reduction' and provides that a police officer may be reduced (a) to a lower rank (except in the case- of sergents and of constables on the time-scale), (b) from the selection grade of a rank to the time scale of the same rank, (c) if in a graded rank to a lower position in the seniority list of his grade or to a lower grade in his rank. Rule 16.5 provides that the increment of a police officer on a time scale may be withheld as a punishment. Cl. (2) of that rule provides that approved service for increment may be forfeited, either temporarily or permanently, and such forfeiture may entail either the deferment of an increment or increments or a reduction in pay. It further provides that the order must state whether the forfeiture of approved service is to be permanent, or, if not, the period for which it has been forfeited. Thus, under rules 16.4 and 16.5 the two punishments of reduction and forfeiture of service are two distinct punishments. Rule 16.24 lays down the procedure to be followed in departmental enquiries. Cl. (ix) of that rule clearly provides that it is only in the case of an order of dismissal or reduction in rank that a second show cause notice against the, proposed action against a police officer has to be served before an order is passed against him. Such a second show cause notice is, therefore, not required to be served in the case of other major or minor punishments. There is no dispute that in the present case the procedure laid down in these Rules and applicable to the respondent was followed. The contention, however, was that though the Rules distinguish the two punishments of reduction and forfeiture of service and treat them as distinct, there were certain decisions of this Court which have held that for an order to amount to reduction in rank within the meaning of Art. 311(2) it was necessary that it must actually reduce a government servant from a higher to a lower post or rank, and that even if the order affected adversely his seniority or chances of promotion within the rank or cadre to which he belongs, it would still constitute reduction in rank. Parshotam Lal Dhingra v. Union of India(1) was one such case on which counsel leaned heavily. But the question there was whether the reversion of the the appellant from Class 11 service, wherein he was at the relevant time officiating, to Class III service to which he permanently belonged, amounted to punishment, and therefore, attracted Art. 311(2). The decision laid down the principle that reduction in rank would be punishment if it carried with it penal consequences and that the two tests to be applied were (1) whether the servant had the right to the post or Tank, and (2) whether evil consequences, such as forfeiture of pay or allowances, loss of seniority in his substantive rank, stoppage (1) (1958) S.C.R. 828. State Of Punjab vs Kishan Dass on 19 January, 1971 4 or post-ponement of future chances of promotion followed as a result of reduction in rank. The appellant in that case was holding an officiating post and had therefore no right under the Railway Code to continue in it. The Court held that since under the general law such appointment was terminable at any time on reasonable notice, the reduction could not operate as a forfeiture of any right, and there- fore, the order could not be said to have visited him with any evil consequences. Consequently, it did not amount to reduction in rank by way of punishment. The decision also laid down that the words "dismissal", "removal" and "reduc- tion in rank" used in Art. 311(2) were words of art, having technical meanings, they having been adopted from service rules prevailing earlier, such as Classification Rules of 1920 and 1930, and having therefore acquired well-known meanings. Under those rules, dismissal, removal and reduction in rank were major punishments providing special procedural protection. On examination of the history of the service rules, s. 96B(i) of the Government of India Act, 1915, and s. 240 of the 1935 Act, the Court held that "both at the date of the commencement of the 1935 Act and of our Constitution the words "dismissed", "removed" and "reduced in rank", as used in the service rules, were-- well-under- stood as signifying or denoting the three major punishments which could be inflicted on Government servants". The decision concluded that "the principle is that when a servant has right to a post or to a rank either under the terms of the contract of employment, express or implied, or under the rules governing the conditions of his service, the termination of the service of such a servant or the reduction to a lower post is by itself and prima facie a punishment, for if operates as a forfeiture of his right to hold post or that rank and to get the emoluments and other benefits attached thereto". The passage in the judgment emphasised before us was : "A reduction in rank likewise may be by way of punishment or it may be an innocuous thing. If the Government servant has a right to a particular rank, than the very reduction from that rank will operate as a penalty, for he will then lose the emoluments and privileges of that rank. If, however, he has no right to the particular rank, his reduction from an officiating higher rank to his substantive lower rank will not ordinarily be a punishment. But the mere fact that the servant has no title to the post or the rank and the Government has, by contract, express or implied, or under the rules, the right to reduce him to a lower post does not mean that an order of reduction of a servant to a lower post or rank cannot in any circumstances be a punishment. The real test for determining whether the reduction in such cases is or is not by way of punishment is to find out if the order for the reduction also visits the servant with any penal consequences." According to this decision, reduction in rank within the meaning of Art. 311(2) means reduction from a higher to a lower rank or post in the hierarchy of the service to which a government servant seeking protection of that article belongs and' not reduction in the same rank, e.g., losing places in seniority in the rank to which he belongs. Shri Madhav Laxman Vaikunthe v. The State of Mysore(1) another decision relied on by counsel, was a case of a Mamlatdar, officiating as a District Deputy Collector. His reversion from the officiating post to his permanent post was held to be punishment attracting Art. 311 (2). This was a clear case of reduction in rank as the reversion brought down the appellant from a higher to a lower post. It did not merely affect his seniority or the stage at which he was in the time-scale to which he belonged in the hierarchy of service. State Of Punjab vs Kishan Dass on 19 January, 1971 5 The decision in point really is The High Court Calcutta v. Amal Kumar Roy(2) where the respondent, a Munsif, was ex- cluded by the High Court from consideration for the post of a Subordinate Judge for a year thereby depriving him eight places in the cadre of Subordinate Judges when he was appointed an Additional Subordinate Judge. The respondent's contention was ,that such an exclusion amounted to withholding of promotion or reduction in rank. The first part of the contention was rejected on the ground that he had no right to promotion and the second on the ground that deprivation, of eight places in seniority in the same rank did not constitute reduction in rank. This decision was followed in Shitla S. Srivastava v. North Eastern Railway(1) where it was held that the removal of the appellant's name from a provisional panel of persons for consideration for higher posts did not attract Art. 311 (2) as it did not amount to reduction in rank. The Court held that the expression "rank" in Art. 311(2) had reference to a person's classification and not his particular place in the same cadre in the heirarchy of the service to which he belongs. It is thus clear that reduction in rank within the meaning of Art. 311(2), as the expression itself suggests, means reduction from a higher to a lower rank or post and not merely losing places in the rank or cadre to which the Government servant belongs, and consequently, his seniority within such cadre or rank. (1) [1962] 1 S.C.R. 886. (3) [1966]3 S..C.R. 61. (2) [1963]1 S.C.R.437. This would be so, even if as a result of the Government's action. he loses a higher salary or his chances of promotion to a higher post are reduced. For such action, the remedy would be under the rules governing, the service and not under Art. 311(2) as such action does not amount to reduction in rank as understood for the purposes of Art. 311 (2). Counsel for the respondent, however, argued that there were other decisions which have held otherwise and assisted him. P. C. Wadhwa v. Union of India(1) was one such decision which, he thought, assisted him. In that case, the appellant was officiating in the senior time-scale and was posted at Ferozepore as an Additional Superintendent of Police. In July 1958, he was reverted to his substantive post. The reason for the reversion was that he was tried as a Superintendent of Police and was found to be immature. The record showed that the reversion was not due to the return of the permanent incumbent from leave or deputation or for any other administrative reason and other officers junior to him continued in the senior time-scale while he was reverted. The record also revealed that an enquiry was not resorted to only for the reason that it would take a long time. His contention in these circumstances was that his reversion amounted to reduction in rank. That was accepted because it would seem from the facts that the reversion was from senior time-scale to junior time-scale of the service. Though both the posts were cadre posts in the Police Service, the reversion was from the post of the Additional Superintendent of Police to one of Assistant Superintendent of Police, the former obviously being a post higher than the latter. Although both the posts were in the same cadre, promotion from the junior to the senior time- scale was by seniority. It is clear, therefore, that appointment of one in the junior time-scale to a post in the senior time-scale was promotion, and therefore, appointment to a higher post. Such is not, however, the position, in State Of Punjab vs Kishan Dass on 19 January, 1971 6 the instant case. Dubesh Chandra Das v. Union of India (2) was another deci- sion relied upon by Mr. Nag. The appellant there was the Chief Secretary of Assam and a member of the Indian Civil Service. He was appointed a Secretary in the Union Government, a tenurepost, the tenure period of which was to expire in July 1969. In September 1966, he was asked to choose between reversion to the service of his parent State or compulsory retirement. He, complained against the order by a writ petition contending that the order was a stigma and amounted to reduction in rank, which, therefore, could not be passed without undergoing the procedure laid down in Art. 311(2). His appointment as the Secre- (1) [1964]4S.C.R.598. (2) A.I.R. 1070 S.C. 77. tary at the Centre was not by way of deputation but was by way of appointment to a tenure post. This Court held, on an examination of the rules, that cadres for the Indian Administrative Services were to be found in the States only, that there were no cadres in the Government of India, that a few of them were, however, intended to serve at the Centre and when they did so, they enjoyed better emoluments and better status. Such an appointment, the Court held, meant promotion to a higher post. In the circumstances, the -order amounted to the appellant's reduction from a higher to a lesser rank. This, again, was a case where the government servant was reverted from a post higher than the post of the Chief Secretary, Assam, and not a reduction in the same time-scale post or deprivation of places in the same time-scale post thereby adversely affecting his seniority therein or chances of promotion. The decision of the High Court of Orissa in Rupnarain Singh v. Orissa(1) would apparently assist the respondent, for, the impugned order there was similar to the one in the instant case. That order directed that the petitioner, who was then serving as a forester, be reduced to the lowest scale of Rs. 50,1- in the, scale of pay of Rs. 50-2-70 fixed for the foresters. The High Court upheld' the contentions of the petitioner, viz., (1) that the order was punishment, and (2) that it amounted to reduction in rank within the meaning of S. 240(3) of the 1935 Act and Art. 311(2). These conclusions were reached on two premises. 'The first was that r. 2 of the Bihar and Orissa Subordinate Services Discipline and Appeal Rules in cl. (iii) provided, amongst others, the punishment of "reduction to a lower post or time scale or to a lower stage in the time-scale". Following the decision in Afzalur Rahman v. Emperor(2) where the Court had observed that in construing s. 240 of the 1935 Act, the long standing service practice based on statutory rules in force long before the passing of the 1935 Act, and which were continued in force by that Act. should be considered, the High Court held that the expression "reduction in rank" in s. 240(3) must also include reduction to a lower stage in the time-:scale as r. 2 (iii) had treated reduction to a lower post and "reduction to a lower stage in the time- scale" as one kind of punishment. Such a reasoning does not apply to the present case because r. 16.1 of the Punjab Police Rules makes a 'clear distinction between "reduction" and stoppage of increment ,or forfeiture of approved service for increment, the two being distinct and separate punishments permissible under that rule. The second premise upon which the High Court reached State Of Punjab vs Kishan Dass on 19 January, 1971 7 the said conclusions rested on the observations in Dhingra's case(1), wherein this Court laid down the criterion to judge whether an order is a (1) A.I.R. 1959 orissa 167 P.C. (2) A.I.R. 1943 F.C. 18. (3) [1958] S.C.R. 828. punishment or not by observing that it would be punishment if the: order entailed or provided for forfeiture of pay or allowances or loss of seniority in his substantive rank or stoppage or postponement of his future chances of promotion. The passage relied on the High Court laid down determinents for treating an order as. one of punishment and not a test for reduction in rank. As already stated, in Dhingra's case(1) the impugned order was held to be one of reduction in rank because the appellant there was reduced from Class 11 to Class III service, i.e., from a higher to a lower post, the time-scales of the two posts being different. The reduction of rank was held not to be a punishment because the appellant was not entitled to the better post wherein he was merely officiating and therefore did not visit him with any evil consequences. The observations relied on by the High Court thus related to the question whether the impugned order was one of punishment and not for deciding whether it amounted to a reduction in rank and were, therefore, not apposite. The basis for the, second premise of the High Court, therefore, was not correct and therefore cannot help the respondent. The aforesaid analysis of the decisions leads us to the conclusion that the expression "reduction in rank" in Art. 311 (2) has to be construed according to the well- established meaning it has acquired, as in the case of the other two expressions, namely, dismissal' and 'removal' in that article, under the various service rules, and the provisions in that regard in the Constitution Acts of 1915 and 1935. The expression "reduction in rank" in the article, therefore, means reduction from a higher to a lower rank or post when imposed as a penalty. Therefore, an order forfeiting the past service which has earned a government servant increments in the post or rank he holds, however adverse it is to him, affecting his seniority within the rank to which he belongs or his future chances of promotion does not attract the article. His remedy, therefore, is confined to the rules of service governing his post. In our view, neither Parshotam Lal Dhingra's case(1) nor Rupnarain Singh's case(2) assisted the respondent, as the first does not lay down what he contended and the second was not correctly decided. The result is that the State's appeal succeeds and must be allowed. Consequently, the respondent's suit has to be dismissed. In the circumstances of the case, however, there will be no order as to costs. Y.P. Appeal allowed. (1) [1958] S.C.R. 828 (2) [1958] S.C.R. 828 (3) A.I.R. 1959 Orissa 167 P.C. State Of Punjab vs Kishan Dass on 19 January, 1971 8 | {
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Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 Equivalent citations: 1971 AIR 1935, 1971 SCR 834, AIR 1971 SUPREME COURT 1935, 1974 MADLW (CRI) 114 1971 SCD 663, 1971 SCD 663 Author: I.D. Dua Bench: I.D. Dua, S.M. Sikri, P. Jaganmohan Reddy PETITIONER: PATEL LALJIBHAI SOMABHAI Vs. RESPONDENT: THE STATE OF GUJARAT DATE OF JUDGMENT07/05/1971 BENCH: DUA, I.D. BENCH: DUA, I.D. SIKRI, S.M. (CJ) REDDY, P. JAGANMOHAN CITATION: 1971 AIR 1935 1971 SCR 834 1971 SCC (2) 376 ACT: Code of Criminal Procedure, 1898-Section 195(1)(c), Scope of. HEADNOTE: The appellant had filed a suit for the recovery of certain amount on the basis of a forged cheque. A private complaint was filed in the Court of the Judicial Magistrate against the appellant and another person for offences punishable under sections 467 and 471 Penal Code. The Magistrate found prima facie evidence that the appellant had fraudulently used in the Civil Suit a forged cheque, and committed him to the Sessions for trial. The appellant raised an objection that in view of section 195(i)(C) of the Code of Criminal Procedure no cognizance of the offence could be taken on a private complaint. The High Court upheld the commitment order. On the-scope and effect of section 195(i)(C) and its Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 1 applicability to cases where a forged document has been produced as evidence in a judicial proceeding by a party thereto and prosecution of that party is sought for offences under sections 467 and 471 Penal Code, HELD:The words "to have been committed by a party to any proceeding in any court' in section 195(1)(c) mean that the offence should be alleged to have been committed by the party to the proceeding in his character as such party, that is, after having become a party to the proceeding. Sections 195(1)(C), 476 and 476A Code of Criminal Procedure, read together indicate that the legislature could not have intended to extend the prohibition contained in section 195(1)(c) to the offences mentioned therein when committed by a party to a proceeding in that court prior to his be- coming such party. The offences about which the court alone, to the exclusion of the aggrieved private parties, is clothed with the right to complain, may be appropriately considered to be only those offences committed by a party to a proceeding in that court, the commission of which has a reasonably close nexus with the proceedings in that court so that it can. without embarking upon a completely independent and fresh inquiry, satisfactorily consider by reference principally to its records the expediency of prosecuting the delinquent party. [842-D-H] In this case the offence under section 471 Penal Code is clearly covered by the prohibition contained in section 195(1) (C); but the offence under section 467 Penal Code can be tried in the absence of a complaint by the Court unless it is shown by the evidence that documents in question were forged by a party to the earlier proceeding in his character as such a party; in other words after the suit had been instituted. [847B] Emperor v. Kushal Pal Singh, I.L.R. [1953] AU. 804 approved. State of Gujarat v. Ali Bin Rajak, 9 Guj. Law Reporter 1, Emperor v. Mallappa, A.I.R. 1937 Bom. 14, Har Prasad v. Hans Rai, A.I.R. 1966 All. 124, Vivekanand V. State A.I.R. 1969 AU. 189, Harinath Singh v. State 1964 All. L. J. 467, Basir-ul-Haq v. State of West Bengal, A.I.R. 1953 S.C. 293, Krishna Nair v. State of Kerala, (1962) 1 Crl. L. J, 340 and State v. Bhikubhai, A.I.R. 1965 Guj. 70, referred to. 835 JUDGMENT: CRIMINAL APPELLATE Jurisdictionally : Criminal Appeal No. 169 of 1969. Appeal from the judgment and order dated April 30, 1968 of the Gujarat High Court in Criminal Reference No. 49 of 1966. N. N. Keswani, for the appellant. Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 2 S. K. Dholakia and S. P. Nayar, for the respondent. The Judgment of the Court was delivered by J,-This appeal with certificate under Art. 134(1)(c.) of the Constitution dated against the judgment and order of the Gujuat High Court in Criminal reference made by the Sessions Jung, Ahmedabad, rains an important question of law on which there appears to be conflict, of judicial opinion. Even in the Gujarat High Court the correctness of the majority view in the Full bench demon in the State of Gujarat v. Ali Bin Rajak(1) has boon doubted by the learned Judge hearing the criminal reference in the present case, who followed the majority view merely because he felt bound by it. The learned single Judge did not consider the case to be fit for reference to a larger bench for reconsidering the majority view in the case of All Bin Rajak(2). Certificate of fitness for appeal to this Court was, however. granted by the learned Judge. The question raised relates to the scope and effect of s. 195(1)(c), Cr.. P.C. and its applicability to cases where a forged document has been produced as evidence in a judicial proceeding by a party there to and prosecution of that party is sought for offences under ss. 467 and 471, I.P.C. in respect of that document. The relevant facts of the case may now be briefly stated, The appellant Patel Laljibhai Somabhai instituted a: civil suit (No. 11 of 1964) in the court of Joint Civil Judge at Dholka against Vora Safakat Husaian Yusufali (hereafter called the complainmant) and his brother Vora Ahmed Huseian Yusufali for the recovery of Rs 2,000 on the basis, of a cheque dated November 22, 1963 (alleged to have been been given to him on June 27, 1963) under: the signature of the complainant Vora Safakat Huseian Yusufali Lakadwala on the Bombay Mercantile Cooperative Bank Ltd., Ahmedabad _Branch. The defence in the suit was that the cheque in question and certain coupons which were produced and relied upon in that suit were forged and the suit was false. The suit was, dismis on January 30,,1965 by ,the Joint,, civil Judge, Dholka. The Court did not believe the (1) 9 Guj. Law Reporter I. plaintive's story about the cheque. On November 16, 1965 the complainant filed a complaint in the court of the Judicial Magistrate, First Class, Dholka against two accused persons for offences punishable under ss. 467 and 471, I.P.C. The two accused were Vora Saifuddin Akbarali and the appellant. Vora Saifuddin Akbarali (accused no. 1) is described in the complaint as the complainant's sister's husband. It was averred in the complaint that the complainant's elder brother Ahmedbhai had started a business in milk in Ahmedabad and accused no. I used to help him in that business from time to time. This business had been started in the shop of the brother of accused no. I who was also dealing in milk. Ahmedbhai used to stay at the house of accused no. 1. The books, coupons and cheque books of the milk business had been kept at the residence of accused no. 1. This business was carried on till July, 1962 when it was closed and Ahmedbhai left Ahmedabad for Limbdi for staying there. The appellant had been appointed as the commission agent through accused no. 1 and milk was collected from various milkmen through him (the appellant). When the business was closed on July 28, 1962 a sum of Rs. 231-1-0 remained to be paid to the appellant and nine cans of milk remained in balance with him. A notice was given in this connection after settling all the accounts and the appellant paid Rs. 200/- in cash to Ahmedbhai and thereafter nothing was due to the appellant. November 30, 1962 the defendants in the suit at the instance of accused no. I started a milk shop at Jamalpur and they used to stay at the house of accused no. I who was employed in the Mercantile Bank and through whom an account was opened with that bank in the Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 3 name of the defendants. Accused no. I used to utilise this account for himself and his brothers. Being a relative, accused no. I was trusted by the complainant and his brother and they used to act according to the instructions of accused no. 1. In June, 1962 accused no. I had come to Limbdi and asked for a loan of Rs. 15,0001- from the complainant's father. But this request was declined with the result that accused no. I got annoyed and threatened him with ruinous consequence. Thereafter accused no. I conspired with the appellant to harm the complainant and his brother and father. Cheque books containing blank cheque forms but bearing the complainant's signatures and all the books of account were at that time kept in the house of accused no. 1, where the complainant and his brother used to stay. It is in this background that the accused no. I prepared a cheque for Rs. 2,000/- in his own handwriting on a blank cheque form bearing the complainant's signature and the appellant utilised that cheque. The appellant and accused no. I were, on these averments, alleged to have forged the cheque. Civil Suit No. 11/64 was then filed in which this cheque was used knowing the same to be forged. The Magistrate found prima facie evidence that the appellant (accused No. 2) had fraudulently used in the civil suit the forged cheque in question. The Magistrate also found prima facie evidence that accused no. I had committed an offence punishable under s. 467, I.P.C. and the appellant was liable under s. 34, I.P.C. The forgery of the cheque and the use of the forged cheque as genuine were considered by the Committing Magistrate to form part of the same transaction and the two charges could, therefore, be tried together. The question of the necessity of complaint by the Civil Court under s. 195(1)(c), Cr. P.C. was also raised in the committing court but following the decision of the Bombay High Court in Emperor v. Mallappa(1) the Magistrate held that provision to be inapplicable to the present case. On behalf of the appellant an application was then made in the court of the Assistant Sessions Judge in which the trial was to be held, praying for quashing the commitment proceedings because in face of s. 195(1)(c) no cognizance of the offence could be taken by the court on a private complaint. As the Assistant Sessions Judge could not make any reference to the High Court the case was withdrawn by the Sessions Judge to his own court who after hearing the application referred the case to the High Court with a recommendation that the commitment order be quashed. The High Court, considering itself bound by the majority view in the case of Ali Bin Rajak(2) declined the recommendation and upheld the commitment order as already noticed. In view of the conflict of judicial opinion amongst the various High Courts and even in the Gujarat High Court itself we would prefer first to consider the relevant statutory provisions on their own language and thereafter to consider the decided cases. Section 195 occurs in Division B of Chapter XV in Part VI of the Code of Criminal Procedure. Part VI consisting of Chapters XV to XXX is headed "Proceedings in prosecution". Chapter XV deals with "The jurisdiction of criminal courts in inquiries and trial". It consists of ss. 177 to 199B and is divided into two divisions. Sections 177 to 189 (Division A) deal with the "Place of inquiry or trial" and ss. 190 to 199B (Division B) deal with the "Conditions requisite for initiation of proceedings". We are only concerned with Division B but it is unnecessary to deal with each one of the sections contained in that Division. Only two sections require to be noticed, namely, ss. 190 and 195. Section 190 deals with "cognizance of offences by Magistrates". This section, subject to the exceptions contained in the succeeding provisions of the Code, empowers the Magistrates mentioned therein to take cognizance of any offence upon complaint, police report, or information or on the knowledge or suspicion of the (1) A. I. R. 1937 Bom. 14. (2) 9 Guj. Law Reporter 1. Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 4 Magistrate about the commission of an offence. The main purpose of this section is to ensure freedom and safety of the subject by giving him a right to approach the court if he considers that a wrong has been done to him. Sub-section (1) of S. 195 which is concerned with (a) "Prosecution for contempt of lawful authority of public servants", (b) "Prosecution for certain offences against public justice", and (c) "Prosecution for certain offences relating to documents given in evidence" places some restrictions on the general power conferred on courts of Magistrates by s. 190 to take cognizance of offences. This section may here be reproduced. " 195. Prosecution for contempt of lawful authority of public servants.- (1) No Court shall take cognizance- (a) of any offence punishable under sections 172 to 188 of the Indian Penal Code, except on the complaint in writing of the public servant concerned, or of some other public servant to whom he is subordinate-, (b) Prosecution for certain offences against public justice.-of any offence punishable under any of the following sections of the same Code, namely, sections 193, 194, 195, 196, 199, 200, 205, 206, 207, 208, 209, 210, 211 and 228, when such offence is alleged to have been committed in or in relation to any proceeding in any Court, except on the complaint in writing of such Court or some other Court to which such Court is subordinate; or (c) Prosecution for certain offences relating to documents given in evidence. Of any offence described in section 463 or punishable under section 471, section 475 or section 476 of the same Code, when such offence is alleged to have been committed by a party to any proceeding in any Court in respect of a document produced or given in evidence in such proceeding, except on the complaint in writing of such Court, or of some other Court to which such Court is subordinate. (2) In clauses (b) and (c) of sub-section (1), the term "Court" includes a Civil, Revenue or Criminal Court, but does not include a Registrar or Sub- Registrar under the Indian Registration Act, 1877. (3) For the purposes of this section, a Court shall be deemed to be subordinate to the Court to which appeals ordinarily lie from the appealable decrees or sentences of such former Court, or in the case of a civil Court from whose decrees no appeal ordinarily lies to the principal Court having ordinary original civil jurisdiction within the local limits of whose jurisdiction such Civil Court is situate : Provided that- (a) where appeals lie to more than one Court, the Appellate Court of inferior jurisdiction shall be the Court to which such Court shall be deemed to be Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 5 subordinate; and (b) where appeals lie to a Civil and also to a Revenue Court, such Court shall be deemed to be subordinate to the Civil or Revenue Court according to the nature of the case or proceeding in connection with which the offence is alleged to have been committed. (4) The provisions of sub-section (1). with reference to the offences named therein, apply also to criminal conspiracies to commit such offences and to the abetment of such offences, and attempts to commit them. (5) Where a complaint has been made under subsection (1), clause (a), by a public servant, any authority to which such public servant is subordinate may order the withdrawal of the complaint and, if it does so, it shall forward a copy of such order to the Court and, upon receipt thereof by the Court, no further proceedings shall be taken on the complaint." We are directly concerned only with cl. (c) of S. 195(1) What is particularly worth noting in this clause is (i) the allegation of commission of an offence in respect of a document produced or given in evidence in a proceeding in a court; and (ii) the commission of such offence by a party to such proceeding The use of the words "in respect of" in the first ingredient would seem to some extent to enlarge the scope of this clause. Judicial opinion, however, differs on the effect and meaning of the words "to have been committed by a party to any proceeding in any ,court". As cl. (b) of s. 195(1) does not speak of offence committed by a party to the proceeding, while considering decisions on that clause this distinction deserves to be borne in mind Broadly speaking two divergent views have been expressed in decided cases in this connection. According to one view, to attract the prohibition contained in cl. (c) the offence should be alleged to have been committed by the party to the proceeding in his character as such party, which means after having become a party to the proceeding, whereas according to the other view the alleged offence may have been committed by the accused even prior to his becoming a party to the proceeding provided that the document in question is produced or given in evidence in such proceeding. The language used seems to us to be capable of either meaning without straining it. We have, therefore, to see which of the two alternative constructions is to be preferred as being more in accord with the legislative intent, keeping in view the statutory scheme and the purpose and object of enacting the prohibition contained in S. 195(1)(c). In construing this clause we consider it appropriate to read it along with S. 476 Cr. P.C. which prescribes the procedure for cases mentioned in S. 195(1)(b) and (c), also bearing in mind that under S. 476A a superior court is empowered to complain when the subordinate court has omitted to do so and that S. 476B confers on an aggrieved party a right of appeal from an order refusing to make a complaint under S. 476 or S. 476A as also from an order making such a complaint. All these provisions, forming part as they do of the statutory scheme dealing with the subject of prosecution for offences against administration of justice, require to be read together and when so read would help us considerably in having a more vivid picture of the legislative intendment in prescribing the prohibition in the two clauses of S. 195(1) and the procedure for initiating prosecutions for offences mentioned therein. Section 476 reads : Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 6 "476. Procedure in cases mentioned in section 195.- (1) When any Civil, Revenue or Criminal Court is, whether on application made to it in this behalf or otherwise, of opinion that it is expedient in the interests of justice that an inquiry should be made into any offence referred to in section 195, sub-section (1), clause (b) or clause (c), which appears to have been committed in or in relation to a proceeding in that court, such Court may, after such preliminary inquiry, if any, as it thinks necessary, record a finding to that effect and make a complaint thereof in writing signed by the presiding officer of the Court, and shall forward the same to a Magistrate of the first class having jurisdiction, and may take sufficient security for the appearance of the accused before such Magistrate or if the alleged offence is non-bailable may, if it thinks necessary so to do, send the accused in custody to such Magistrate, and may bind over any person to appear and give evidence before such Magistrate Provided that, where the Court making the com- plaint is a High Court, the complaint may be signed by such officer of the Court as the Court may appoint. For the purposes of this sub-section, a Presidency Magistrate shall be deemed to be a Magistrate of the first class. (2) Such Magistrate shall thereupon proceed according to law and as if upon complaint made under section 200. (3) Where it is brought to the notice of such Magistrate or of any other Magistrate to whom the case may have been transferred, that an appeal is pending against the decision arrived at in the judicial proceeding out of which the matter has arisen, he may, if he thinks fit, at any stage adjourn the hearing of the case until such appeal is decided." This section quite clearly postulates formation of judicial opinion that it is expedient to hold an inquiry into an offence referred to in cl. (b) or in cl. (c) of s. 195(1) which appears to the Court to have been committed either in or in relation to a proceeding in that court. Offences mentioned in cl. (b), it may be recalled, would be covered by that clause even if they are alleged to have been committed in relation to a proceeding in a court, whereas those mentioned in cl. (c) should be alleged to have been committed by a party to a proceeding in a court in respect of a document produced or given in evidence in that proceeding. Section 476, it is also noteworthy, empowers the court even suo motu to take up the question of expediency of making a complaint. As a general rule, the courts consider it expedient in the interest of justice to start prosecutions as contemplated by s. 476 only if there is a reasonable foundation for the charge and there is a reasonable likelihood, of conviction. The requirement of a finding as to the expediency is understandable in case of an offence alleged to have been committed either in or in relation to a proceeding in that court in case of offences specified, in cl. (b) because of the close nexus between the offence and the proceeding. In Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 7 case of offences specified in cl. (c) they are required to be committed by a party to a proceeding in that court with respect to a document produced or given in evidence in that court. The offence covered by s. 471 I.P.C. from the its very nature must be committed in the proceeding itself by a party thereto. With respect to such an offence also expression of opinion by the court as to the expediency of prosecution would serve a useful purpose. It is only with respect to the offence described in s. 463 I.P.C. and the offences punishable under ss. 475 or 476 I.P.C. that two views are possible and therefore the effect of reading s. 195(1)(c) and s. 476 Cr. P.C. together has to be examined for discovering the true legislative intendment in respect of these offences. The underlying purpose of enacting s. 195(1)(b) and (c) and s. 476 seems to be to control the temptation on the part of the private parties considering themselves aggrieved by the offences mentioned in those sections to start criminal prosecutions on frivolous, vexatious or insufficient grounds inspired by a revengeful desire to harass or spite their opponents. These offences have been selected for the court's control because of their direct impact on the judicial process. It is the judicial process, in other words the administration of public justice, which is the direct and immediate object or victim of these offences and it is only by misleading the courts and thereby perverting the due course of law and justice that the ultimate object of harming the private party is designed to be realised. As the purity of the proceedings of the court is directly sullied by the crime the Court is considered to be the only party entitled to consider the desirability of complaining against the guilty party. The private party designed ultimately to be injured through the offence against the administration of public justice is undoubtedly entitled to move the, court for persuading it to file the complaint. But such party is deprived of the general right recognized by S. 190 Cr. P.C. of the aggrieved parties directly initiating the criminal proceedings. The offences about which the court alone, to the exclusion of the aggrieved. private parties, is clothed with the right to complain may, therefore, be appropriately considered to be only those offences committed by a party to a proceeding in that court, the commission of which has a reasonably close nexus with the proceedings in that court so that it can, without embarking upon a completely independent and fresh inquiry, satisfactorily consider by reference principally to its records the expediency of prosecuting the delinquent party. It, therefore, appears to us to be more appropriate to adopt the strict construction of confining the prohibition contained in S. 195(1)(c) only to those cases in which the offences specified therein were committed by a party to the proceeding in the character as such party. It may be recalled that the superior court is equally competent under s. 476A Cr. P.C. to consider the question of expediency of prosecution and to complain and there is also a right of appeal conferred by S. 476B on a person on whose application the, Court has refused to make a complaint under S. 476 or s. 476A or against whom such a complaint has been made. The appellate court is empowered after hearing the parties to direct the withdrawal of the complaint or as the case may be, itself to, make the complaint. All these sections read together indicate that the legislature could not have intended to extend the prohibition contained in S. 195(1)(c) Cr. P.C.-to the offences mentioned, therein when committed by a party to a proceeding in that court prior to his becoming such party. It is no doubt true that quite- often-if not almost invariably-the documents are forged for being used or produced in evidence in court before the proceedings are started. But that in our opinion cannot be the controlling factor. because to adopt that construction, documents forged long before the commencement of a proceeding in which they may happen to be actually used or produced in evidence, years later by some other party would also be subject to ss. 195 and 476 Cr. Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 8 P.C. This in our opinion would unreasonably restrict the right possessed by a person and, recognized by s. 190 Cr. P.C. without promoting the real purpose and object underlying these two sections. The Court in such a case may not be in a position to satisfactorily determine the question of expediency of making a complaint. We may now consider the decisions cited at the bar. In Emperor v. Kushal Pal Singh(1) it was held by a Full Bench, of that Court that s. 195(1)(c) Cr. P.C. applies only to cases where an offence mentioned therein is committed by a party as such to a proceeding in any court in respect of a document which has been produced or given in evidence in such proceeding. The words "committed by a party to a proceeding" in s. 195(1)(c) were interpreted in that case to mean "committed by a person who is already a party to a proceeding". The court in that case read both s. 195 and s. 476 Cr. P.C. together because s. 195 was held to lay down the bar against the cognizance of certain offences and s. 476 the method for removing the bar. On the view taken by the court a complaint cannot be filed by a court under its inherent jurisdiction outside the provisions of s. 476 Cr. P.C. In Hari Prasad v. Hans Rai(1) a learned single Judge of the Allahabad High Court, dealing with the allegations made in a complaint under ss. 476 and 471 I.P.C. that a forged sale deed had been got executed and registered in pursuance of a criminal conspiracy amongst three opposite parties one of whom had filed an application for the mutation proceedings on the basis of the said forged deed observed that a close nexus was established between the conspiracy and its resulting in a forged deed and the subsequent filing of the mutation application on its basis, all of which form various links of the same chain. On this premise it was observed that cognizance of the offences was a bar on a private complaint under s. 195(1)(b) Cr. P.C. The learned Judge in the course of the judgment also said that even if it is held that the allegations made in the complaint disclose offences under ss. 467 and 471 I.P.C. as alleged therein and not under s. 193 I.P.C. their cognizance would be barred under s. 195(1)(c). The words "in respect of" were considered to be wide enough to include even a document which was prepared before the proceedings started in a court of law but was produced or given in evidence in that proceeding. According to this decision, when a document is produced in a court or is given in evidence, it is for that court to decide whether it is genuine or forged and if (1) I. L. R. [1953] All. 804. (2) A. T. R. 1966 All. 124. a private party is allowed to lodge a complaint on the basis of that document describing it as forged and if that complaint is ,entertained without affording opportunity to the court before whom the document had been produced to give its opinion it would amount to forestalling its decision and is likely to lead to anomalous situation and also sometimes the contradictory findings by two competent courts. Incidently it may be pointed out that the earlier Full Bench decision of the Allahabad High Court was not cited in this case. In Vivekanand v. State(1) another single Judge of the Allahabad High Court observed that when the main finding is the one under S. 471 I.P.C., namely, the finding of using a forged document as genuine and the other. offences all flow from it, in, the sense that if the charge under S. 471 fails, the charges for the other offences would also fail, none of which offences can in truth and substance be said to be of a distinct nature, the mere fact that ss. 406, 467 and 420 I.P.C. are also tacked on to the offence under S. 471 I.P.C. would not serve to take the case out of the scope and ambit of S. 195 (1) (c). In this case a forged vakalatnama was Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 9 produced before the Compensation Officer for withdrawing certain amount. The Cornpensation Officer was held to be a Court. Of the offence charged, viz. under ss. 406. 420 and 467 I.P.C. along with S. 471 I.P.C., the first three sections were held to be cognate to S. 471 I.P.C. In this case too the earlier Full Bench decision was not noticed and the learned single Judge followed an earlier Division Bench decision of that Court reported as Hari Nath Singh v. State(1) In Hari Nath Singh's case(2), distinguishing the decision of this Court in Basr-ul-Huq v. State of West Bengal(1) it was observed that offences under ss. 193 and 218 I.P.C. in that case were both barred. In Krishna Nair v. State of Kerala(1) a learned single Judge of the Kerala High Court observed that the words "when such offence has been committed by a party to any proceedings in any court" used in S. 195(1)(c) referred not to the date of the commission of the alleged offence but to the date on which the cognizance of the criminal court is invited and that when once a document has been produced or given in evidence before a court the sanction of that court or perhaps of some other court to which that court is subordinate is necessary before a party to the proceedings in which the document was produced or given in evidence can be prosecuted notwithstanding that the offence alleged was committed before the document came into the court at a date when the person complained against was not a party to any proceeding in court. In this case reference was made to several decisions of various High Courts including some decisions of the Allahabad High Court prior to (1) A. I. R. 1969 All. 189. (3) A. I. R. 1953 S. C. 293. (2) 1964 All. L. J. 467. (4)(1962) 1 Crl. L., J. 340. the Full Bench decision which was significantly not noticed. The Full Bench of the Gujarat High Court in State of Gujarat v. Ali Bin Rajak(1) by majority held that under s. 195 (1) (c) Cr. P.C. sanction for prosecuting a party to a proceeding for an offence under s. 471 I.P.C. was not necessary in respect of a use made outside the court in which the document was subsequently used, as the bar to cl. (c) would apply only to those cases where the offences mentioned therein were committed in regard to the documents produced or given in evidence in proceeding. The facts in the reported case were, that one Har Govind Kalidas had obtained a decree against Ali Bin Rajak of Junagadh from the court of a civil Judge, Junior Division, Visavadar, District Junagadh. Har Govind filed an execution application for re- covering his decretal dues in the course of which the amount payable by the Mamlatdar, Dhari to the judgment-debtor under an annuity card was attached. Garnishee order was served on the Mamlatdar, Dhari. Rajak thereafter appeared before the Mamlatdar and stated that he had paid the decretal amount to Har Govind. The Mamlatdar, required Rajak to produce the receipt which was produced on July 27, 1964. The receipt bore the date May 23, 1964, purporting to be signed by Har Govind. Thereupon the Mamlatdar paid the amount due under the annuity card to Rajak and made a report to the Civil Court enclosing the receipt produced by Rajak. The Civil Court called upon Har Govind to show cause why the execution application should not be disposed of. Har Govind denied receipt of any amount from Rajak and alleged the receipt to be forged. The Civil Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 10 Court thereupon issued notice to the Mamlatdar requiring him to show cause why he should not be held up for contempt of court. The Mamlatdar regretted his action in making payment without the Civil Court's order and explained how he relied upon Rajak's word. The Mamlatdar got the amount produced by Rajak and forwarded the same to the Civil Court.- The amount was produced by Rajak under protest and subject to his right to claim the same. Thereafter Har Govind lodged a F.I.R. with the police at Dhari and on completion of the investigation the P.S.I. sent a charge-sheet against Ali Bin Rajak to the court. The Magistrate finding prima facie case committed Rajak to the Sessions Court for trial. One of the charges was under s. 420 I.P.C. and the other was under s. 471 I.P.C. The second charge with which alone the court was concerned was based on the allegation that Rajak had made use of the receipt dated May, 23, 1964, alleged to be forged before the Mamlatdar by producing the same before that officer on July 16, 1964. The objection taken by Rajak was that by virtue of s. 195(1)(c) the court could not take cognizance of this case whereas on behalf of the prose- (1) 9 Guj. Law Reporter 1. cution it was contended that the forged receipt had been produced before the Mamlatdar before its production in the civil court and, therefore, s. 195(1)(c) was inapplicable. It was in this context that the majority of the judges held that no complaint by the court was necessary whereas one learned Judge took the contrary view. It appears to us that in the Gujarat case the use of the forged power of attorney before the Mamlatdar occurred while the execution proceedings were pending but since it was not this user which was the subject matter of the charge the majority of the Judges rightly held that this was not barred by s. 195(1)(c). It was apparently not argued that the complaint of the Mamlatdar was necessary. In State v. Bhikubhai(1) a Division Bench of the Gujarat High Court observed that s. 195(1)(c) Cr. P.C. would apply even when the person accused of the offence referred therein in respect of a document produced in a court was not a party to the proceeding in which the document was produced provided such offence was committed by him jointly with a person who was a party to the proceeding or provided the offence with which he is charged is the same as alleged to have been committed by the persons who were parties to the proceedings. The Bench also observed that the words "party to a proceeding" are used in an abstract manner to indicate the only class or category of offenders. It was further said that cl. (c) of s. 195(1) must be strictly construed because it encroaches upon the jurisdiction of the ordinary criminal courts empowered to punish offences under s. 195 and is engrafted by way of an exception to the ordinary powers of criminal courts. It would, therefore, be improper to construe it in a manner which would restrict the jurisdiction of criminal courts unless the restriction is expressly provided for or necessarily follows. Broadly speaking we are inclined to agree with the reasoning of the Allahabad Full Bench in Kushal Pal Singh's case(2). This in our opinion reflects the better view,. The purpose and object of the Legislature in creating the bar against cognizance of private complaints in regard to the offences mentioned in s. 195(1)(b) and (c) is both to save the accused person from vexatious or baseless prosecutions inspired by feelings of vindictiveness on the part of the private complainants to harass their opponents and also to avoid confusion which is likely to arise on account of conflicts between findings of the courts in which forged documents are produced or false evidence is led and the conclusions of the criminal courts dealing with the private complaint. It is for this reason as Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 11 suggested earlier, that the Legislature has entrusted the court, whose proceedings bad been the (1) A. I. R. 1965 Guj. 70. (2) I. L. R. [1953] All. 804. target of the offence of perjury to consider the expediency in the larger public interest, of a criminal trial of the guilty party. In this case the offence under s. 471 I.P.C. is clearly covered by the prohibition contained in S. 195(1)(c) but the offence under s. 467 I.P.C. can in our view be tried in the absence of a complaint by the court unless it is shown by the evidence that the documents in question were forged by a party to the earlier proceeding in his character as such party, in other words, after the suit had been instituted. The appeal is accordingly allowed in part, in the terms just ,stated. The lower court, we hope, will dispose of the case with due despatch. K.B.N. Appeal allowed in part. Patel Laljibhai Somabhai vs The State Of Gujarat on 7 May, 1971 12 | {
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Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari on 5 October, 1971 Equivalent citations: 1972 AIR 391, 1972 SCR (1) 950, AIR 1972 SUPREME COURT 391, 1972 4 SCC 402, 1972 TAX. L. R. 168, 1972 (1) SCR 950, 1972 2 ITJ 24, 1974 SCC (TAX) 92, 82 ITR 794, 1972 2 SCJ 141 Author: A.N. Grover Bench: A.N. Grover, K.S. Hegde PETITIONER: COMMISSIONER OF INCOME TAX, GUJARAT Vs. RESPONDENT: M/S. S. C. KOTHARI DATE OF JUDGMENT05/10/1971 BENCH: GROVER, A.N. BENCH: GROVER, A.N. HEGDE, K.S. CITATION: 1972 AIR 391 1972 SCR (1) 950 CITATOR INFO : RF 1977 SC1142 (8) F 1980 SC1271 (6) ACT: Income tax act (11 of 1922) ss 10 (1) and (2) and s. 24 (1)--Scope of. Forward Contracts (Regulation) Act, 1952 s. 15(4)-Contract in violation of-If illegal HEADNOTE: Section 15(4) of the Forward Contracts (Regulation) Act, 1952 is conceived in the larger interest of the public to protect them against the malpractices indulged in by members of recognised associations in respect of transactions in which their duties as agents come into conflict with their personal interest. Parliament had made a writing, Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari on 5 October, 1971 1 evidencing or confirming the consent or authority of a non- member, as a condition of the contract if the member has entered into a contract on his own account. So long as there was no such writing there was no enforceable contract. Under the Act, there is not only an express prohibition but also punishment for contravention of that prohibition. The assessee, a registered firm, was a member of the Saurashtra Oil and Oilseeds Association, and was carrying on the business of commission agency and general merchants. It was also doing forward business. During the assessment year 1958-59 it incurred a loss in certain transactions. Those transactions were in contravention of the provisions of s. 15(4) of the Forward Contracts (Regulation) Act. The assessee claimed that the loss was allowable under s. 10(1) of the Income-tax Act, 1922, as a deduction against its other business income even if the losses were incurred in illegal transactions. The Income-tax Officer rejected the contention of the assessee, and also held that the losses incurred in illegal business could not be deducted from speculative profits under s. 24 of the Income-tax Act. The Appellate Assistant Commissioner confirmed the order. The Tribunal held that the assessee could not set off the loss against the other income under s. 10(1) of the Income-tax Act but was entitled to do so under s. 24. On the questions referred to the High Court namely : (1) Whether the loss was in respect of illegal contracts, (2) Whether the loss was a result of speculative transactions and therefore could be set off under s. 24 of the Income-tax Act, and (3) whether even if the loss was as a result of illegal transactions the assessee was entitled to set off the loss under s. 10(1) of the Income-tax Act, the High Court did not answer the first question but held that the losses could be set off both under s. 10 and s. 24 of the Income-tax Act. In appeal to this Court, HELD:(1) It is well settled that contracts which are prohibited by statute, the prohibition being either express or implied, would be illegal and unenforceable if they are entered into in contravention of the statute. Therefore, the contracts in the present case, were illegal contracts and the loss was in respect of such illegal contracts. [955 C-D] Sunder Lal v. Bharat Handicrafts [1968] 1 S.C.R. 608, followed. 951 (2)Under Explanation 2 of s. 24 a speculative transaction means a transaction in which a contract for purchase and sale of any commodity is periodically or ultimately settled otherwise than by actual delivery etc.; but the contract has to be an enforceable contract and not an unenforceable one by reason of any taint or illegality. In the present case, the contracts were illegal and unenforceable on account of the contravention of s. 15(4) of the Forward Contracts Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari on 5 October, 1971 2 (Regulation) Act. The High Court was therefore in error in considering that set off could be allowed under s. 24(1) of the Income-tax Act. [959 D-F] (3)While s. 10(1) of the Income-tax Act imposes a charge on profits or gains of a business it does not provide how those profits are to be computed. Section 10(2) enumerates various items which are admissible as deductions but they are not exhaustive. The profits and gains which are liable to tax under s. 10(1) are what are understood to be such under ordinary commercial practice. The loss for which the deduction is claimed must be one that springs directly from the carrying on of the business and is incidental to it, that is, the profit was earned and the loss was sustained in the same business. If this is established the deduction must be allowed provided that there is no provision against it. If the business is illegal, neither the profits earned nor the losses incurred would be enforceable in law but that does not take the profits out of the taxing statute. Simi- larly, the taint of illegality of the business cannot detract from the loss being taken into account for computation of the amount which can BE subjected to tax as profits. Cases which deal with payment of a penalty for infraction of law or the execution of some illegal activity stand on a different footing, because, an expenditure is not deductible unless it is a commercial loss in trade and such a penalty cannot be described as such. [956 G-H. 957 A-B, D- E, G-H; 959 H; 960 A-B] [Since in the present case no finding was given by the High Court that the two businesses in which profits were made and losses were sustained were the same, the matter was remanded to the High Court for decision on this point.] Raj Woollen Industries v. C.I.T., Simla, 43 I.T.R. 36, Chandrika Prasad Ram Swarup v. C.I.T., U.P. & C.P., 7 I.T.R. 269, Badridas Daga v. Commissioner of Income-tax, 34 I.T.R. 10, Haji Aziz & Abdul Shakhor Bros v. C.I.T., Bombay City, 41 I.T.R. 350 and Allen v. Fraquharson Bros. 17 T.C. 59, referred to. JUDGMENT: CIVIL APPFLLATE JURISDICTION: Civil Appeals Nos. 1993 of 1968 and 1173 of 1971. Appeals by certificate/special leave from the judgment and order dated August 3, 4, 1967 of the Gujarat High Court in Income-tax Reference No. 18 of 1966. S. T. Desai, R. N. Sachthey and B. D. Sharma, for the appellant (in both the appeals). V.S. Desai, K. L. Hathi and P. C. Kapur, for the respondent (in both the appeals). Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari on 5 October, 1971 3 The Judgment of the Court was delivered by Grover, J. This is ,in appeal from a judgment of the Gujarat High Court. Originally an appeal (C.A. 1993/68) had been brought by certificate but that certificate was found to be defective as no reasons were stated therein for granting it. A Petition for special leave, was, therefore, filed and the same has been granted. Both the appeals shall stand disposed of by this judgment. The assessee is a registered firm and carried on the business of commission agency and general merchants. It also does forward business. It is a member of the Saurashtra Oil and Oilseeds Association Ltd., Rajkot. During the assessment year 1958- 59 the corresponding accounting period being the samvat year 2013 the assessee claimed to have incurred a loss of Rs. 3 40,443/- in certain transactions entered into with different people for the supply of groundnut oil. The transactions, according to the assessee, were non-transferable ready delivery contracts entered into with non-members of the Association. It was expected that these contracts would be performed but owing to certain reasons some of the contracts could not be performed and differences had to be paid. According to the assessee it had acted as a Pucca Artia. The assessee claimed that the aforesaid loss was allowable under s. 10(1) of the Income Tax Act, 1922 as a deduction against its other business income. The Income tax Officer came to the conclusion that the transactions in question were hit by the provisions of the Forward Contracts Regulation Act, 1952, hereinafter called the 'Act' and the Rules and Regulations of the Saurashtra Oil and Oilseeds Association Ltd. In particular the transactions were hit by the provisions of sub-ss. (1) and (4) of s. 15 of the Act and were not saved by s. 18. The losses were held to have been incurred in illegal transactions. He rejected the contention of the assessee that even on the assumption that the losses were incurred in illegal transactions they could be allowed in the computation of the income. The Income tax Officer further held that the losses incurred in illegal business could not be deducted from the speculative profits under s. 24 of the Indian Income tax Act, 1922, hereinafter called the "Act of 1922". The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. In the appeal before the Tribunal it was held that the transactions in question were not illegal contracts but were contracts which had been, validly entered into under the Act and the bye-laws etc. The Tribunal thereafter proceeded to examine the question whether the losses incurred could be allowed on the assumption that the transactions were illegal. It was of the view that the assessee would be entitled to a set off under s. 24 even if the losses were incurred in illegal transactions. The Tribunal remanded the matter for a report from the Appellate Assistant Commissioner as to the applicability of the proviso to s. 24(1) (read with the Explanation) of the Act of 1922. After the remand report was received the Tribunal gave the following two findings : (1) the contracts under consideration were all non-transferable specific delivery contracts where the intention ab initio was either to give or take delivery (2) the contracts were entered into either for the purchase or sale and later on the same quantity was either sold or purchased back by the assessee on behalf of the same constituents at the market rates prevailing at the material time i.e. they were squared up by corresponding sales or purchases as the case might be. After referring to certain decisions of High Courts the Tribunal held that the loss of Rs. 3,40,443 had been incurred in speculative transactions. The Tribunal next proceeded to consider whether notwithstanding that the losses had been incurred in speculative transactions the assessee could set off those against the other income under s. 10(1) of the Act of 1922. Purporting to follow the view of the majority of the High Courts, the Tribunal held that such a loss could not be set off against the other income. But according to the Tribunal the assessee was certainly entitled to set off the loss against the profits in speculative transactions and to that extent the contention of the assessee was accepted. Both the assessee and the Commissioner of Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari on 5 October, 1971 4 Income tax moved the Tribunal for submitting a case and referring certain questions of law to the High Court. Thus in all the following four questions were referred by the Tribunal (1) Whether on the facts and in the circumstances of the case the contracts in respect of which the loss of Rs. 3,40,443 was claimed were illegal contracts and were not validly entered into under the Forward Contracts Regulation Act 1952 ? (2) Whether even assuming the transactions in which the loss of Rs. 3,40,443/- was incurred, were illegal transactions, the assessee would be entitled to the set off of the said loss ? (3) Whether on the facts and in the circumstances of the case the transactions resulting in a loss of Rs. 3,40,443 were speculative transactions for the purpose of s. 24 of the Indian Income tax Act 1922 merely on the ground that The assesses had not performed the contracts by giving delivery and had paid damages in settlement of the obligations contracted for ? (4) Whether on the facts and in the circumstances of the case the assessee is entitled to set off the balance of the loss of Rs. 1,21,397/- against the assessee's other income ?" The High Court did not consider that it was necessary to answer the first question. The answer to the second question was that even though the disputed contracts were not validly entered into in accordance with the provisions of S. 15(4) of the Act the loss ,of Rs. 3,40,443/- was liable to be taken into account in computing the business income, of the assessee under S. IO of the Act of 1922 and the assessee was entitled to set it off against the profits fro other speculative transactions. The third question was answered in the affirmative with the result that the transactions resulting in the loss of Rs. 3,40,443/- were held to be speculative for the purpose of s. 24 of the Act of 1922. The fourth question was answered in the negative and against the assessee. It is the Commissioner of Income tax alone who has appealed. So far as the first question is concerned we are unable to comprehend why the High Court did not decide it. A lot of debate took place before us on the question whether the contravention of S. 15 (4) of the Act would render the contracts illegal. According to that provision no member of a recognised Association shall, in respect of any goods specified in the notification under sub-s. (1), enter into any contract on his own account with any person other than, a member of the recognised Association unless he has secured the, consent or authority of such person and disclosed in the note memorandum or agreement of sale or purchase that he has bought or sold the goods as the case may be on his own account. It is not necessary to refer to the proviso. It is common ground and has been admitted before us that there was a clear contravention of the provisions of S. 15(4) so far as the transactions in question were concerned. According to S. 20(e) any person who enters into any contract in contravention of the provisions of S. 15(4) among other sections shall on conviction be punishable for the first offence with imprisonment which may extend to one year or with fine of not less than Rs. 1,000/- or with both. It is wholly incomprehensible how such a contract would not fall directly within the ambit of the first part of s. 23 of Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari on 5 October, 1971 5 the Indian Contract Act which deals with consideration or object of an agreement which is forbidden by law. Such consideration or object would be unlawful according to the provisions of that section and the agreement would consequently be 'void. The High Court did not decide the point whether the contracts which contravened the provisions of S. 15(4) of the Act were illegal. It did not consider it material to decide whether the impugned contracts were illegal. In its opinion what was material was that the impugned contracts had been entered into unlawfully and the question was whether the loss sustained in the unlawful business could be taken into account in computing the business income of the assessee. We consider that the first question which was referred to the High Court stands concluded by the law laid down by this Court in Sunderlal & Son v. Bharat Handicrafts (P) Ltd..(1) It was laid down that the prohibition imposed by s. 15 (4) of the Act was not imposed in the interest of revenue. That provision was conceived in the larger interest of the public to protect them against the malpractices indulged in by members of recognised associations in respect of transactions in which their duties as agents came into conflict with their personal interest. Parliament had made a writing, evidencing or confirming the consent or authority of a non-member, as a condition of the contract if the member has entered into a contract on his own account. So long as there was no writing as was contemplated by s. 15 (4) or its proviso there was no enforceable contracts It is well settled that contracts which are prohibited by statute the prohibition being either express or implied would be illegal and unenforceable if they are entered into in contravention of the statute. Under the provisions of the Act there is not only an express prohibition (s., 15 (4) ) but punishment is also provided for contravention of that prohibition, (s' 20). Such contracts could not possibly be regarded as having been validly entered into under the Act. The answer 'to the first question, therefore, should have been in the affirmative and against the assessee. Coming to the second question, the language thereof is some- what ambiguous and the question was not framed properly. It appears that there were two aspects which had come up for consideration before the departmental authorities the Tribunal and the High Court. The first aspect related to the deduction of the loss of Rs. 3.40,443/- incurred in the aforesaid illegal transactions while computing the profits of the assessee's speculative business under s. 10(1). The other was the set off which can be allowed within the relevant parts of s. 24 of the, Act of 1922. The High Court referred to various English decisions as also to Wheat croft's Law of Income tax and Simon's Income tax for supporting the 'View that even where a trade is illegal it would still be a trade within the meaning of income tax law and if any profits are derives from such trade they would be assessable to tax. The High Court did not accept the contention urged on behalf of the Revenue that although the profits from an, illegal I trade or business would be exigible to tax the losses from such business could not be taken Court observed "There is in principle no distinction between profits and losses of a business and if the profits of an illegal business are assessable to tax, equally the losses arising (1) [1968] 1 S.C.R. 608. Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari on 5 October, 1971 6 from illegal business must be held to be liable to be taken into account in computing the income of the assessee'. The High Court was not inclined to accede to the submission on behalf of the Revenue that the same principle would be applicable as has been applied in certain cases in which the question which came up for determination was whether an expenditure, incurred on an illegal activity would be deductible under S. 10 (2) (xv) of the Act of 1922. One of such cases, is a decision of the Punjab High Court in Raj Woollen Industries v. Commissioner of Income tax, Simla(1). In that case the real question was whether a certain amount which was paid to achieve what was prohibited by law, viz., the export of wool without having the requisite export licence was an amount which the assessee was entitled to deduct under S. 10 (2) (xv) of the Act of 1922. It was held that according to principle and authority such a deduction could not be claimed. It was also observed that such a deduction would not be permissible even under S. 10(1). Following observations may be referred to : .lm15 "Profits had to be ascertained according to the accepted principles of commercial accountancy and if S. 10(2) (xv) did not permit deduction of an item of expenditure which was laid out or expended for carrying on the business in contravention of the law, then such an outgoing though otherwise properly admissible, as set off against the gross receipts on the principles of commercial accountancy could not be taken into consideration in computing the profits". On the other hand according to the decision of a full bench of the, Allahabad High Court in Chandrika Prasad Ram Swarup v. Commissioner of Income tax, U.P. & C.P. (2) income assessable to tax is the actual income of an individual or a firm irrespective of the manner in which the income was derived. Legality or illegality of the transaction culminating in profits or losses, was, therefore, foreign to the scope of an inquiry into the income of an individual or a firm for the purpose of income tax. Now while s. 10(1) of the Act of 1922 imposes a charge on the profits or gains of a business it does not provide how these profits are to be computed. Section 10(2) enumerates various items which are admissible as deductions. They are, however, not exhaustive of all allowances which can be made in ascertaining the profits of a business taxable under S. 10(1). It is undoubtedly true that profits and gains which are liable to be taxed under (1) 43 I.T.R. 36. (2) 7 I.T.R. 269. s.10(1) are what are understood to be such under ordinary commercial principles. The loss for which the deduction is claimed must be one that springs directly from the carrying on of the business and is incidental to it. If this is established the deduction must be allowed provided that there is no provision against it express or implied in the Act : (See Badridas Daga V. Commissioner of Income tax(1). In that case loss sustained by the business by reason of embezzlement by an employee was held to be an admissible deduction under s. 10(1) although it did not fall within s. 10(2) (xi) of the Act of 1922. Indeed profits cannot be computed without deducting the loss and permissible expenses incurred for-the purpose of the business. The approach of the high Court in the present case has been that in order to arrive at the figure of profits even of an illegal business the loss must be deducted if it has actually been incurred in the carrying on of that business. It is the net profit Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari on 5 October, 1971 7 after deducting the out goings that can be brought to tax. It certainly seems to have been held and that view has not been shown to be incorrect that so far as the admissible deductions under s. 10(2) are concerned they cannot be claimed by the, assessee if such expenses have been incurred in either payment of a penalty for infraction of law or the execution of some illegal activity. This, however, is based on the principle that an expenditure is not deductible unless it is a commercial loss in trade and a penalty imposed for breach of the law during the course of the trade cannot be described as such. Penalties which are incurred for infraction of the law is not a normal incident of business and they fall on the assessee in some character other than that of a trader; (See Haji Aziz & Abdul Shakoor Bros v. Commissioner of Income tax, Bombay City(2). In that case this Court said quite clearly that a disbursement is deductible only if it falls within s. 10(2) (xv) of the Act of 1922 and a penalty cannot be regarded as an expenditure wholly and exclusively laid for the purpose of the business. Moreover disbursement or expense of a trader is something "which comes out of his pocket. , A loss is something different. That is not a thing which he expends or disburses. That is a thing which comes upon him abextra" (Finlay J., in Allen v. Farquharson Brothers & Co.) (3). If the 'business is illegal neither the profits earned nor the losses incur-red would be enforceable in law. But that does not take the profits. out of the taxing statute. Similarly the taint of illegality of the business cannot detract from the losses being taken into account for computation of the amount which can be subjected to tax as "profits" under s. 1 0 ( 1 ) of the Act of (1)34 I.T.R. 10. (3) 17 T.C. 59. (2) 41 I.T.R. 350. 1922. The tax collector cannot be heard to say that he will bring the gross receipts to tax. He can only tax profits of a trade or business. That cannot be done without deducting the losses and the legitimate expenses of the business. We concur in the view of the High Court that for the purpose of s.10(1) the losses which have actually been incurred in carrying on a particular illegal business must be deducted before the true figure relating to profits which have to be brought to tax can be computed or determined. This will, however, not conclude the answer to question No. 2 because it seems to have been framed with the other aspect relating to "set off" under s.24 of the Act. The High Court found that the transactions were of a speculative nature. It was thus held that the loss of Rs. 3,40,443/- sustained in the impugned contracts was liable to be set off against ,the profit of Rs. 2,19,046/- which was admittedly a profit from speculative, transactions. The concluding portion of the judgment of the High Court may be reproduced because to Our mind it creates a certain amount of difficulty. "The loss of Rs. 3,40,443/- sustained in the impugned contracts was, therefore, liable to be set off only against the profit of Rs. Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari on 5 October, 1971 8 2,19,046/- which was admittedly profit from speculative transactions and the balance of Rs. 1,21,397/- after such set off was not liable to be set off against the other income of the assessee in view of the first proviso to s. 24(1). We may make it clear that in taking this view we have proceeded upon the basis (that the impugned contracts which resulted in the loss of Rs. 3,40,443 constituted a separate business distinct from the business of forward contracts resulting in the profit of Rs. 2,19,046/-. The result would, however, be the same even if the impugned contracts which resulted in the loss of Rs. 3,40,443/- did not constitute a separate business but were part of the same business of forward contracts which resulted in the profit of Rs. 2,19,046/- for in that event the loss of Rs. 3,40,443 would be liable to be taken into account in determining the profits from such business under section 10". Section 24, to the extent it is material for our purposes, is set out below : "Set off of loss in computing aggregate income (1)Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year Provided that in computing the profits and gains. chargeable under the head "profits and gains of business, profession or vocation" any loss sustained in speculative transactions which are in the nature of a business shall not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of speculative transactions; Explanation 1. Where the speculative transactions carried on are of such a nature as to constitute a business, the business shall be deemed to be distinct and separate from any other business. Explanation 2. A speculative transaction means a, transaction in which a contract for purchase and sale of any commodity including stocks and shares is periodically or ultimately settled otherwise than by actual delivery or. transfer of the commodity or scripts;" In order to claim the set off the meaning of the speculative transaction has to be first looked at. Under Explanation 2 such a transaction means a transaction in which a contract for the purchase and sale of any commodity is periodically or ultimately settled otherwise than by actual delivery etc. Now the contract has to be an enforceable contract and not an unenforceable one by reason of any taint of illegality resulting in its invalidity. It has already been found by us that the contracts in question were illegal and unenforceable on account of contravention of s. 15(4) of the Act. The High Court was in error in considering that any set off could be allowed in the present case under the first proviso to s. 24(1) which must be read with Explanation 2. There would have been no difficulty in disposing of the matter finally after the above discussion. But enough attention was not devoted to the business which the assessee was doing and in which the profit of Rs. 2,19,046 was made and the loss of Rs. 3,40,443 was sustained. It has been found to be of a speculative nature but the High Court has not clearly found that it was the same business in which the Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari on 5 October, 1971 9 amount of the profit and the loss mentioned above was earned and sustained in which case alone a deduction will be possible of the loss under s. 10(1). The High Court proceeded on the basis that if the business in which the profit was made and the business in which the loss was incurred were separate a set off could be claimed by the assessee under s. 24(1). If, however, the business was the same then the loss would be liable to be taken into account while computing the profits under s.10(1). As we have come to the conclusion that no set off could be allowed under S. 24(1) of the Act of 1922 it will have to be determined whether the profits and losses were incurred in' the same business even though that business involved the entering into contracts some of which were, in the eye of the law, illegal. If the trade or the business, for instance, the business of commission agency or forward business was the same in which the profits were made and the loss was incurred then in order to arrive at the figure which can be subjected to tax the loss will have to be deducted from the profit. For this purpose we shall have to remit the matter to the High Court to decide this point and if necessary, after calling for a supplementary statement of the case. In the result our answer to the first question is that the contracts were illegal. on the third and the fourth questions there is no dispute nor has- any appeal been preferred by the assessee relating to them that the answers returned by the High Court in the affirmative and in the negative respectively were not correctly answered. As regards question No. 2 the High Court will have to answer the same in the light of our judgment. Th.-, appeal by special leave (i.e. C.A. 1173/71) shall stand disposed of accordingly and the other appeal by certificate (i.e. C.A. 1993/68) is hereby dismissed. There will be no order as to costs. V.P.S. Appeal partly allowed. Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari on 5 October, 1971 10 | {
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Delhi Cloth And General Mills Co. Ltd. ... vs Commissioner Of Sales Tax, Indore on 28 July, 1971 Equivalent citations: 1971 AIR 2216, 1971 SCR 945, AIR 1971 SUPREME COURT 2216, 1971 TAX. L. R. 1510, 1971 JABLJ 833, 1972 MPLJ 4, 28 STC 331, 1971 UPTC 737, 1972 2 SCJ 513 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: DELHI CLOTH AND GENERAL MILLS CO. LTD. ETC. Vs. RESPONDENT: COMMISSIONER OF SALES TAX, INDORE DATE OF JUDGMENT28/07/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 2216 1971 SCR 945 ACT: Madhya Pradesh General Sales Tax Act, 1958, ss. 2(c), (o), (t), and 4-Sales Tax recovered from buyer-If part of turnover. HEADNOTE: The assessee, while selling goods, charged the sales tax separately and collected it from the buyers. It did not include the sales-tax so collected in its turnover. The authorities under the Madhya Pradesh General Sales Tax Act, 1958, as well as the High Court, held that the sales tax collected from the buyers was a part of the price of the goods,sold and therefore should have been included in the asscssee's turnover. In appeal to this Court, HELD: Under s. 4 of the Act the liability to pay tax is that Delhi Cloth And General Mills Co. Ltd. ... vs Commissioner Of Sales Tax, Indore on 28 July, 1971 1 of the dealer. There is no provision in the Act imposing any liability on the purchaser to pay the tax so imposed on the dealer and there is no law empowering the dealer to collect the tax from his buyer. Hence the dealer would not be legally entitled to collect the tax payable by him from his buyer, and whatever collection the dealer. makes from his customers can only be by adding the tax to the price, lo that, the tax becomes part of the valuable consideration given by a purchaser for the goods purchased by him. Therefore, the distinction between the two amounts-tax and price-loses all significance, and the tax becomes a part of the sale price as defined in s. 2(c) of the Act and must be taken into consideration in computing the turnover. [948D-G; 950A] Tata Iron & Steel Co. Ltd. v. State of Bihar, [1958] S.C.R. 1355, M/s. George Oakes (PI Ltd. v. State of Madras, 12 S.T.C. 476, Paprika Ltd. & Anr. v. Board of Trade, [1944] All. E.R. 372 and Love v. Norman Wright (Builders) Ltd., [1944] 1 All. E.R. 618, referred to. Deputy Commissioner of Commercial Taxes, Coimbatore, v. M. Krishnaswamy Mudaliar & Sons, 5 S.T.C. 88, distinguished. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos, 1272 and 1273 of 1967. Appeals by special leave from the judgment and order dated July 10, 1967 of the Madhya Pradesh High Court in Misc. Civil Cases Nos. 61 and 62 of 1967. AND Civil Appeal No. 2453 of 1968. S.T. Desai, A. N. Sinha and G. S. Chatterjee for the appellant (in C.As. Nos. 1272 and 1273 of 1967). A. N. Sinha, for the appellant (in C.A. No. 2453 of 1968). I. N. Shroff for the respondent (in all the, appeals). 60-1 S.C. India/71 The Judgment of the Court was delivered by Hegde, J.These appeals by special leave arise from the decision of the High Court of Madhya Pradesh in three references under s. 44(1)of the' Madhya Pradesh General Sales Tax Act, 1958 (to be hereinafter referred to as the Act). Those references were made at the instance of the assessee who is the appellant in all these appeals. The question of law referred to the High Court for its opinion in each one of these cases is identical and that question reads : "In the facts and circumstances of the case is the sales tax recovered by the petitioner a part of the sale price as defined in clause (o) of Section 2 of the Madhya Pradesh General Sales Tax Act, 1958." Herein we are concerned with the assessment years 1961-1962, 1962-1963 and 1963-1964. The Delhi Cloth And General Mills Co. Ltd. ... vs Commissioner Of Sales Tax, Indore on 28 July, 1971 2 assessee is a dealer in Vanaspati. The facts found are that while selling Vanaspati, the assessee charged the sales tax separately and collected the same from his buyers. To each of its buyer it issued a receipt in respect of each sale transaction wherein it showed the price of the goods as such and the sales tax payable on the price of those goods. In the turnover returned it did not include the sales tax collected by it from its buyers but the authorities under the Act as well as the High Court held that sales tax collected by it from its buyers was a part of the price of the goods sold and therefore the same will have to be taken into consideration in computing its turnover. The assessee is challenging that conclusion. Section 4 of that Act is the charging section. Sub-s. (1) thereof says "Every dealer whose turnover during a period of twelve months immediately preceding the commencement of this Act exceeds the limit specified in sub-section (5), shall from such commencement be liable to pay tax under this Act on his taxable turnover in respect of sales or supplies of goods effected in Madhya Pradesh." A dealer is defined in s. 2(d) as meaning any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, be it a society, a club, firm or association which buys goods from or sells, supplies or distributes goods to its members or commission agent, a broker, a del-creders agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal. "Turnover" is defined thus in S. 24t) "turnover"'. used in relation to any period means the aggregate of the amount of sale prices received and receivable by a dealer in respect of any sale or supply or distribution of goods made during that period, whether or not the whole or any portion of such turnover is liable to tax but after deducting the amount. if any. refunded by the dealer to a purchaser, in respect of any goods purchased and returned by the purchaser within the prescribed period: Provided that in the case of a sale by a person of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest, whether as owner, usufructuary mortgagee, tenant or otherwise, the amount of the consideration relating to such sale shall be excluded from his turnover when such produce is sold in the form in which it was produced, without being subjected to any physical, chemical or other process for being made fit for consumption save mere dehusking, cleaning, grading or sorting." "Sale price" is defined In s. 2(o) : " sale price' means the amount payable to a dealer as valuable consideration for the sale of any goods, less any, sum allowed as cash discount according to ordinary trade practice but including any sum charged for anything done by the dealer in respect of the goods at the time or before delivery thereof other than the cost of installation when such cost is separately charged and the expression purchase price' shall be Delhi Cloth And General Mills Co. Ltd. ... vs Commissioner Of Sales Tax, Indore on 28 July, 1971 3 construed accordingly." In view of the definition of sale price all that we have to see is whether the collection of sales tax by the dealer from his purchasers can be considered as valuable consideration received by him for the sale of goods. Under s. 4 the liability to pay tax is that of the dealer. The purchaser has no liability to pay tax. There is no provision in the Act from which it can be gathered that the Act imposes any liability on the purchaser to pay the tax imposed on the. dealer. If the dealer passes on his tax burden to his purchasers he can only do it by adding the tax in question to the price of the goods sold. In that event the price fixed for the goods including the tax payable becomes the valuable consideration given by the purchasers for the goods purchased by him. If that be so, the tax collected by the dealer from his purchasers becomes a part of the sale price fixed, as defined in S. 2(o). In some of the Sales Tax Acts power has been conferred on the dealers to pass on the incidence of tax to the purchasers subject to certain conditions. Those provisions may call for different consideration. In the Act there is no such provision except S. 7-A which was introduced into the Act by Madhya Pradesh Act 23 of 1963. That provision would have relevance only in respect of the assessment for the year 1963-64. Section 7-A says "No dealer shall collect any amount, by way of sales-tax or purchase tax, from a person who sells agricultural or horticultural produce grown by himself or grown on any land in which he has an interest, whether, as owner, usufructuary mortgagee, tenant or otherwise, when such produce is sold in the form in which it was produced, without being subjected to any physical, chemical or other process for being made fit for consumption save mere dehusking, cleaning, grading or sorting." In these appeals, it is not necessary to examine the relevance of that provision. But that provision does not give any statutory power to collect sales tax as such from any class of buyers. There is no other provision in the Act which confers such a power on the dealers. Unless the price of an article is controlled, it is always open to the buyer and the seller to agree upon the price to be payable. While doing so it is open to the dealer to include in the price the tax payable by him to the government. If he does so, he cannot be said to be collecting the tax payable by him from his buyers. The levy and collection of tax is regulated by law and not by contract. So long as there is no law empowering the dealer to collect tax from has buyer or seller, there is no legal basis for saying that the dealer is entitled to collect the tax payable by him from his buyer or seller. Whatever collection that may be made by the dealer from his customers the same can only be considered as valuable consideration for the goods sold. In M/s. George Oakes (Private) Ltd. v. The State of Madras and Ors. (1) this Court was called upon to consider whether a dealer' can pass on his tax liability as such to his customer. In that decision while rejecting the contention that the tax liability as such can be transferred to the buyers this Court referred to the observations of Lawrence J. in Paprika Ltd. and anr. v. Board of (1) 12 S.T.C. 476. Trade(1) and Goddard L. J. in Love v. Norman Wright (Builders) Ltd.(2). In the former case Lawrence J. observed : "Whenever a sale attracts purchase tax, that tax presumably affects the price which the seller who is liable to pay the tax demands but it does not cease to be the price Delhi Cloth And General Mills Co. Ltd. ... vs Commissioner Of Sales Tax, Indore on 28 July, 1971 4 which the buyer has to pay even if the price is expressed as x plus purchase tax." In Love's case (supra) Goddard L. J. observed "Where an article is taxed, whether by purchase tax, customs duty, or excise duty, the tax becomes part of the price which- ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rate of tax, but on a sale there is only one consideration though made up of cost plus profit plus tax. So, if a seller offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass it on to the buyer. If the buyer agrees to the price, it is not for him to consider how it is made up or whether the seller has included tax or not." In that decision reference was also made to the decision of this Court in Tata Iron and Steel Co. Ltd. v. State of Bihar(1) Therein Das C. J. who delivered the majority judgment of the Court said: "The circumstance that the 1947 Act, after the amendment, permitted the seller who was a registered dealer to collect the sales tax as a tax from the purchaser does not do away with the primary liability of the seller to pay the sales tax. This is further made clear by the fact that the registered dealer need not, if he so pleases or chooses, collect the tax from the purchaser and sometimes by reason of competition with ,other registered dealers he may find it profitable to sell his goods and to retain his old customers even at the sacrifice of the sales tax. This also makes it clear that the sales tax need not be passed on to the purchasers and this fact does not alter the real nature of the tax, which by the express provisions of the law, is cast upon the seller. The buyer is under no liability to pay sales tax in addition to the agreed sale price unless the contract specifically provides otherwise. See Love v. Norman Wright (Builders), Ltd."(2) (1)[1944] 1, All. E.R. 372. (2) [1944]1 All. E.R (3) [1959] S. C. R. 1355. From all these observations, it is clear that when the seller passed on his tax liability to the buyer, the amount recovered by dealer is really part of the entire consideration paid by the buyer and the distinction between the two amounts, tax and price looses all significance. In support of his contention the appellant relied on the decision of the Madras High Court in The Deputy Commissioner of Commercial Taxes, Coimbatore v. M. Krishnaswamy Mudaliar and sons(1). Therein on an interpretation of the relevant provisions of the Madras General Sales Tax Act, the court came to the conclusion that the sales tax which the dealer was authorised to collect from his customers was not a part of the sale price received by him. This conclusion was primarily based on s. 8(B) (1) of the Madras General Sales Tax Act, 1939. There is no similar provision in the Act. Therefore it is not necessary for us to consider the correctness of that decision. In the result these appeals fail and they are dismissed with costs. Hearing fee one set. V. P. S. Appeals dismissed. (1) 5 S.T.C. 88. Delhi Cloth And General Mills Co. Ltd. ... vs Commissioner Of Sales Tax, Indore on 28 July, 1971 5 Delhi Cloth And General Mills Co. Ltd. ... vs Commissioner Of Sales Tax, Indore on 28 July, 1971 6 | {
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Sohan Lal Naraindas vs Laxmidas Raghunath Gadit on 8 January, 1971 Equivalent citations: AIRONLINE 1971 SC 29 Bench: J. C. Shah, A. N. Grover PETITIONER: SOHAN LAL NARAINDAS Vs. RESPONDENT: LAXMIDAS RAGHUNATH GADIT DATE OF JUDGMENT08/01/1971 BENCH: [J. C. SHAH, C.J., K, S. HEGDE AND A. N. GROVER, JJ.] ACT: Lease and licence-Difference between-Test, of exclusive possession Language of document must be read wish surrounding circumstances. HEADNOTE: The plaintiff commenced an action in the City Civil Court, Bombay for a decree in ejectment against the defendant alleging that the defendant was occupying loft on the upper floor of a building under an agreement of licence and the licence had been duly terminated and withdrawn. The defendant contended that he was tenant of the loft, that the tenancy had not been duly terminated as required by law; that he was entitled to the protection of the Bombay Rents, Hotel and Lodging Rates Contract. Act, 1947; and that the court had no jurisdiction to try the suit. The trial court dismissed the suit. The decree was confirmed in appeal by the High Court of Bombay. The plaintiff applied for certificate under Art. 133(1)(a) of the Constitution and in the alternative under Art. 133(1)(c) thereof. The High Court passed an order certifying the case under Art. 133(1)(c), and the plaintiff appealed. HELD : (1) A certificate granted by the High Court must be supported by adequate reasons. It is obligatory upon the High Court to setout the question of public or private Sohan Lal Naraindas vs Laxmidas Raghunath Gadit on 8 January, 1971 1 importance which in their opinion-falls to be determined in the proposed appeal. In the present case since there was no merit in the appeal it was not necessary to vacate the: cirtificate. [318 G] (2)A licence confers a right to do or continue to do something in or upon immovable property of grantor which but for the grant of the right may be unlawful, but it create no estate or interest in the immovable property of the grantor. A lease on the other hand creates an interest in the property demised. [322 G] Intention of the parties to an instrument must be gathered from the terms of the agreement examined in the light of surrounding circumstances. The description given by the parties may be evidence of the intention but is not decisive. The crucial test in each case is whether the instrument is intended to create or not to create an interest in the property, the subject matter of the agreement. If it is in fact intended to, create interest in the property it is a lease, if it does not, it is a licence. In determining whether the agreement creates a lease or a licence, the test of exclusive possession though not decisive, is of significance. [322 H-323 B] Mrs. M. N. Clubwala v. Fida Hussain Saheb & Ors., [1964] 6 S.C.R. 2. relied on. In the present case on a careful consideration of the covenants and in the light of the relevant surrounding circumstances it must held that the exclusive possession given to the defendant was intended to confer an. interest in the loft and on that account the agreement operated as a- lease and not as a licence. [323 D] 320 JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2443 of 1966. Appeal from the judgment and order dated January 21, 25 of the Bombay High Court in First Appeal No. 769 of 1963. F. S. Nariman, P. C. Bhartari and J. B. Dadachanji, for the appellant. D. V. Patel,, Ramesh Malik and Ganpat Rai, for the respondent. The Judgment of the Court was delivered by Shah, C.J. Sohan Lal Naraindas-hereinafter referred to as 'the plaintiff-commenced an action in the City Civil Court, Bombay, for a decree in ejectment against Laxmidas Raghunath hereinafter called 'the defendant'- alleging that the defendant was occupying a loft 19' x 15' on the upper floor of a building at Pragraj Galli, Mulji Jetha Market, Bombay under an agreement of licence dated November 3, 1958 and that the licence had been duly terminated and withdrawn but the defendant had failed and neglected to vacate the loft Sohan Lal Naraindas vs Laxmidas Raghunath Gadit on 8 January, 1971 2 notwithstanding the demand. The defendant contended that he was a tenant of the loft, that the tenancy had not be duly terminated as required by law, that he was entitled to the protection of the Bombay Rents Hotel & Lodging House Rates Contract Act 1947 and that the Court had no jurisdiction to try the suit. The Trial Court dismissed the suit holding that the defendant was a tenant of the plaintiff and not his licensee. The decree was confirmed in appeal, by the High Court of Bombay. The High Court held that on the terms of the agreement and in the light of the surrounding circumstances the relationship between the parties was that of landlord and tenant. With certificate granted by the High Court the plaintiff has appealed to this Court. The certificate granted by the High Court is defective. The plaintiff applied for certificate under Art. 133 (1 ) (a) of the Constitution and in the alternative under Art. 1 3 3 (1 ) (c) of the Constitution. The High Court passed an order certifying the case under Art. 1 3 3 (1 ) (c). A certificate granted by the High Court must be supported by adequate reasons. It is obligatory upon the High Court to set out the question of public or private importance which in their opinion fall to be determined in the proposed appeal. Since we are of the view that there is no merit in this appeal, we have not thought it fit to vacate the certificate. The agreement dated November 3, 1958 was recorded formally in writing and was duly executed. The plaintiff was the lessee of a shop No. 11 in Pragraj Galli, Mulji Jetha Market, and the loft of that shop was the subject matter of that agreement. The period of the agreement was one year. It was stated in the agreement that the loft "was given on leave and licence basis for use and occupation" of the defendant on the terms and conditions mentioned therein. The relevant conditions were "1. The owner (the plaintiff) has agreed to grant the leave the licence for use and occupation of the said loft (Medo) of the said shop for a period one year commencing from Aso Vad 13 S. Y. 2014 to Aso Vad 12 S. Y. 2,015. 2. The Licensee (the defendant) shall pay to the Owner monthly compensation or Licensee fee at the rate of Rs. 250/- per month, and the Licensee has paid Rs. 3000/- (Rupee three thousand) only to the Owner as compensation or licence fee for the said period in advance on or before the execution of this agreement. 3 The Licensee shall have no right as a tenant or sub-tenant in respect of the said loft (Medo) of the said shop. The Licensee shall not sub-let, allow to use, transfer or assign in any way the said loft (Medo) of the shop to any one else. 4. The Owner shall bear and pay the rent of the said shop. 5. The Licensee shall use and occupy the said loft (Medo) of the said shop as a cloth merchants only and shall not be entitled to carry on any other business. 6. The parties hereto shall give one month's clear notice of their intention to terminate this agreements in writing. 7................................................... .... Sohan Lal Naraindas vs Laxmidas Raghunath Gadit on 8 January, 1971 3 8. If the Licensee commits breach of any of the terms of this agreement in that case the Owner shall be entitled to terminate and recoke the leave and licence hereby granted without giving notice to the Licensee." The defendant was put in exclusive possession of the loft. The plaintiff did not reserve possession of any part of the loft or a right of entry therein. The loft had a separate entrance. The customers of the defendant used the separate entrance to the loft during the business hours and his stock of cloth remained in the loft after business hours. The plaintiff and defendant were both cloth merchants, and the only consideration for granting the licence was the payment of Rs. 250/- per month. There is no L7Sup./71 evidence that the loft was given to the defendant out of sympathy or because of friendship, or relationship, or any similar motive. It was stipulated that the plaintiff may terminate the agreement by giving one month's clear notice, the agreement could not be terminated by notice of a shorter duration. An attempt was deliberately made to camouflage the true nature of the agreement, by reciting in several clauses that the agreement was for leave and licence, and to emphasise the presence it was also recited that the defendant was not to have any right as tenant or sub-tenant in respect of the loft. At the trial the elder brother of the defendant was examined as a witness. He stated that the agreement dated November 3, 1958 was intended to be an agreement of lease, but the plaintiff insisted that the agreement be drafted with the conditions set out therein. Section 52 of the Easements Act defines a "Licence" "Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a licence " Section 105 of the Transfer of Property Act defines "lease" "A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transfer or by the transferee, who accepts the transfer on such terms. A licence confers a right to do or continue to do something in or upon immovable property of grantor which but for the grant of the right may be unlawful, but it creates no estate or interest in the immovable property of the grantor. A lease on the other hand creates an interest in the property demised. Intention of the parties to an instrument must be gathered from the terms of the agreement examined in the light of the surrounding circumstances. The description Sohan Lal Naraindas vs Laxmidas Raghunath Gadit on 8 January, 1971 4 given by the parties may be evidence of the intention but is not decisive. Mere use of the words appropriate to the creation of a lease will not preclude the agreement operating as a licence. A recital that the agreement does not create a tenancy is also not decisive. The crucial test in each case is whether the instrument is intended to create or not to create an interest in the property the subject matter of the agreement. If it is in fact intended to create an interest in the property it is a lease, if it does not, it is a licence. In determining whether the agreement creates a lease or a licence the test of exclusive epossession, though not decisive, is of significance. Mrs. M. N. Clubwala v. Fida Hussain Saheb and Ors(1). The Trial Court regarded exclusive possession of the premises, given to the defendant as conclusive of the question whether the loft was in the occupation of the defendant as a tenant. The Court observed that on a consideration of the clauses of the agreement it was unable to reach a conclusion whether the agreement was intended to operate as a lease or as a licence but since exclusive possession was given it must be regarded a lease. The High Court considered all the covenants and the attendant cir-- cumstances and reached the conclusion that having regard to the exclusive possession given to the defendant it was intended to confer an interest in the loft and on that account the agreement operated as a lease and not as a licence. We have carefully considered the covenants in the light of the relevant surrounding circumstances. We are unable to disagree with the view taken by the High Court that by the terms of the agreement an interest was created in the loft in favour of the defendant. The appeal fails and is dismissed with costs. G.C. Appeal dismissed- (1) [1964]6 S.C,R. 642. Sohan Lal Naraindas vs Laxmidas Raghunath Gadit on 8 January, 1971 5 | {
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The State Of Punjab And Ors. vs Bakhtawar Singh And Ors. on 19 November, 1971 Equivalent citations: AIR1972SC2083, (1972)4SCC730, 1972(4)UJ244(SC), AIR 1972 SUPREME COURT 2083, 1972 4 SCC 730 1972 SERVLR 85, 1972 SERVLR 85, 1972 SERVLR 85 1972 4 SCC 730, 1972 4 SCC 730 Bench: A.N. Grover, K.S. Hegde JUDGMENT 1. These are appeals by special leave. In both these appeals we are concerned with the validity of the removal from office of the concerned respondents under Section 10(1)(e)(iv) of the Electricity (Supply) Act, 1948 (which will hereinafter be referred to as the Act). 2. We shall first take up the case of the respondent Shri Baktawar Singh. He was appointed as a member of the Punjab State Electricity Board, Patiala by the Punjab Government on April 29, 1967 for a period of five years under Section 5 of the Act. After giving him a show cause notice and obtaining his reply thereto the Punjab Government removed him from the membership of the Electricity Board on April 25, 1969 in purported exercise of its powers under Section 10(1)(e)(iv) of the Act. He challenged the validity of the order removing him from office by means of a writ petition under Article 225 of the Constitution before the High Court of Punjab and Haryana on various grounds. The High Court of Punjab and Haryana has accepted his writ petition and quashed the order complained of. 3. Now coming to the case of the respondent Shri Rajinder pal Abrol, he was appointed as a member of the Punjab State Electricity Board, Patiala by the Punjab Government on April 29, 1967 for a period of five years under Section 5 of the Act. After giving him a show cause notice and obtaining his reply thereto, he was removed from the membership of the Board on April 25, 1969. The Government purported to remove him under Section 10(1)(e)(iv) of the Act He also challenged the validity of the order removing him before the High Court of Punjab and Haryana. His petition was also accepted and the impugned order struck down. 4. Aggrieved by the judgments of the High Court, the State Govt. has brought up these appeals. 5. Before proceeding to discuss the issues arising for decision, we may mention that so far as Shri Baktawar Singh was concerned, he was initially appointed on a salary of Rs. 1200/-per month but later on his salary was raised to Rs. 1800/-per month. Shri Rajinder Pal Abrol was appointed as an honorary member. He was not entitled to any salary. One further fact that needs to be mentioned at this stage is that both Shri Baktawar Singh and Shri Rajinder Pal Abrol were appointed by Shri Lachhman Singh Gill when he was the Minister for Electricity. As the time of their appointments, Shri Lachhman Singh Gill was a member of the Ministry headed by Shri Gurnam Singh. Later on there was a rift between Shri Gurnam Singh and Shri Lachhman Singh Gill as a result of which Shri The State Of Punjab And Ors. vs Bakhtawar Singh And Ors. on 19 November, 1971 1 Gurnam Singh's Ministry fell and a new Ministry was formed by Shri Lachhman Singh Gill. That ministry also fell at a later stage and the same was followed up by President's rule. Thereafter there was a fresh election and after the election, Shri Gurnam Singh formed a fresh ministry. Shri Baktawar Singh and Shri Rajinder Pal Abrol were removed from their membership when the ministry of Shri Gurnam Singh was in office after the elections. It is seen from the material on record that Shri Baktawar Singh as well as Shri Rajinder Pal Abrol were friends of Shri Lachhman Singh Gill. 6. Various grounds were taken by Shri Baktawar Singh and Shri Rajinder Pal Abrol in challenging the validity of the impugned orders. We have not thought it necessary to go into all those grounds as we are of opinion that the impugned orders are vitiated for the reasons to be mentioned hereinafter. Section 10 of the Act reads : (1) The State Government may suspend from office for such period as it thinks fit or remove from office any member of the Board who (a) is found to be a lunatic or becomes of unsound mind or (b) is adjudged insolvent: or (c) fails to comply with the provisions of Section 9; or (d)become or seeks to become a member of (Parliament) or any State legislature or any local authority or (e) in the opinion of the State Government (i) has refused to act; (ii) has become incapable of acting; or (iii) has so abused his position as a member as to render his continuance on the Board detrimental to the interests of the general public; (iv) is otherwise unfit to continue as a member or (f) is convicted of an offence involving moral turpitude. (2) No order of removal shall be made under this section unless the member concerned has been given an opportunity to submit his explanation to the State Government, and when such order is passed the seat of the member removed shall become vacant and another member may be appointed under Section 5 to fill up the vacancy. The State Of Punjab And Ors. vs Bakhtawar Singh And Ors. on 19 November, 1971 2 7. It is clear from a reading of this section that removal contemplated under Section 10(1)(e)(iv) is as a punishment. That being so natural justice requires that the person complained of should be informed of the charges against him and that he should be given a reasonable opportunity consistent with the charges leveled against him to rebut those charges. We have not thought it necessary in this case to go into the question whether a formal enquiry was necessary while taking action under that provision. 8. In the case of Shri Baktawar Singh, the main allegations against him as that he was trying to win over support from among the M.L. As for the Janta Party of which Shri Lachhman Singh Gill was the leader. There were other minor charges also. He denied those charges, and he wanted an opportunity to cross-examine his accusers. But that opportunity was not made available; to him-Ultimately he was removed from office by the order of the Governor. That order does not disclose any reason for removing him from the office. But that order appears to have been made on the basis of the order made by the Minister in charge. The Minister's order reads thus : I have carefully considered the whole file, show cause notice and the explanation furnished by Shri Bakhtawar Singh. I have also seen the opinions of our Legal remembrancer and the Advocate-General. I agree, with the Secretary, Irrigation and Power, that this fact is established that Shri Bakhtawar Singh while working as Member of the State Electricity Board, was taking part in politics, as a result whereof the work of the Board was adversely affected. Besides, he did not discharge his duties impartially. For these reasons, I agree with the proposal of the Secretary, Irrigation and Power, that it is not desirable that Shri Bakhtawar Singh should continue as Member of the State Electricity Board. I, therefore, order that Shri Bakhtawar Singh should be removed from membership of the Board under Section 10(1)(e)(iv) of the Act. Before the orders are actually issued, the file should be sent to the Chief Minister as well. Sd/-Sohan Singh Bassi, 24-4-1969. 9. This order does not show that the Minister found him guilty of any of the charges leveled against him On the other hand the order gives two reasons for removing Shri Bakhtawar Singh from office. They are (1) that he was taking part in politics and (2) that he did not discharge his duties impartially. 10. It may be noted that Shri Bakhtawar singh was not charged with having not discharged his duties impartially. None of the charges leveled against him accused him of not discharging his duties impartially. Hence the Minister was not justified in taking into consideration a charge in respect of which the member was not given opportunity to explain his position. Further the finding of the Minister that Shri Bakhtawar Singh was taking part in politics is a vague finding. Politics is a word of wide import. By merely saying that he was taking part in politics nothing concrete is conveyed or established. In view of this conclusion of ours, it is not necessary to go into the other grounds urged on behalf of Shri Bakhtawar Singh. The State Of Punjab And Ors. vs Bakhtawar Singh And Ors. on 19 November, 1971 3 11. Now coming to Shri Rajinder Pal Abrol, all the charges leveled against him related to alleged acts and omissions prior to his appointments as a member of the Board. That apart, the order of the Minister removing him does not disclose that he had applied his mind to the material on record. That order does not show what charges against Shri Abrol have been established. The order reads: I have gone through the charges and the explanation furnished by Shri R.P. Abrol. From the material on the file, I am definitely of the opinion that he is not a fit person to be retained as part time member of the Electricity Board. I, therefore, order that Shri Abrol may be removed from membership under Sub-clause (iv) of Clause (e) of Sub-section (1) of Section 10 of the Electricity Supply Act, 1948. C.M. may kindly See. After C.M. has seen, immediate orders be issued. Sd/-Sohan Singh Basi, I.P.M. 17-7-1969. 12. This order cannot be said to be a speaking order. It is arbitrary to the core. Such an order cannot be upheld. Hence it is not necessary to go in to the other contentions advanced on behalf of Shri Abrol. 13. For the reasons mentioned above, both these appeals fail and they are dismissed with costs. The State Of Punjab And Ors. vs Bakhtawar Singh And Ors. on 19 November, 1971 4 | {
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Chhugamal Rajpal vs S. P. Chaliha & Ors on 21 January, 1971 Equivalent citations: 1971 AIR 730, 1971 SCR (3) 342, AIR 1971 SUPREME COURT 730, 1971 TAX. L. R. 198, 1972 BLJR 528, 1972 (1) ITJ 97, 79 ITR 603, 1971 3 SCR 442, 1972 (1) SCJ 168, ILR 1972 51 PAT 267 Author: K.S. Hegde Bench: K.S. Hegde, J.C. Shah, A.N. Grover PETITIONER: CHHUGAMAL RAJPAL Vs. RESPONDENT: S. P. CHALIHA & ORS. DATE OF JUDGMENT21/01/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. SHAH, J.C. (CJ) GROVER, A.N. CITATION: 1971 AIR 730 1971 SCR (3) 342 1971 SCC (1) 453 CITATOR INFO : F 1971 SC2451 (9) R 1974 SC 478 (5) RF 1976 SC1753 (3,9) ACT: Income-tax Act, 1961, s. 147, 148 and 151-Issue of notice under s. 148-Assessment of escaped income-Requirement of s. 147(a) and (b) must be satisfied and reasons recorded before the issue of notice under s. 148-Report to Commissioner under s. 151(i) must disclose existence of grounds for issue of notice-Commissioner must apply mind before granting sanction. HEADNOTE: The appellant, a partnership firm, filed its return of income for the assessment year i960-61 and subsequently Chhugamal Rajpal vs S. P. Chaliha & Ors on 21 January, 1971 1 produced before the Incometax Officer its relevant books of accounts and papers. It also produced before him the statement showing various creditors from whom it had borrowed on Hundis during the accounting year in question, giving full names and addresses of the alleged creditors. After enquiry the Incometax Officer made an assessment. On June 3, 1966 the Income-tax Officer issued to the appellant a notice under s. 148 of the Income-tax Act, 1961. The notice was issued after four years but before 8 years of the end of the original assessment year. The appellant challenged the validity of the notice as well as the proceedings taken on the strength of that notice in a writ petition under Arts. 226 and 227 of the Constitution. The High Court dismissed the petition. By special leave appeal was filed in this Court. On direction given by the Court the report submitted by the Income-tax Officer to the Commissioner and the Commissioner's order thereon were produced. In the report it was said that it appeared that the alleged creditors of the appellant were name lenders and transactions were bogus; hence proper investigation regarding those loans was necessary. Question No. 8 on the report was whether the Commissioner was satisfied that the case was fit for the issue of notice under s. 148. Against this the commissioner had noted 'yes'. On these facts this Court, HELD : Under s. 148 and s. 151(2) the Income-tax Officer Must record his reasons for issuing the notice under s. 148. There must be prima facie grounds for taking action under s. 148 Further before issuing such a notice the provisions of cis. (a) and (b) of s. 147 must be satisfied. [447 B, E] In this case the Income-tax Officer appears to have had a vague feeling that the transactions were bogus and that the alleged creditors were only name lenders. According to him proper investigation regarding the loans was necessary. That is not the same thing as saying that there ,are reasons to issue notice under s. 148. [447 A-C] In these circumstances it could not be held that the Income- tax Officer had any material before him which could satisfy the requirements of either cl. (a) or cl. (b) of s. 147. Therefore he could not have issued a notice under s. 148. Further the report submitted by him under s. 151(2) did not mention any reason for coming to the conclusion that it was a fit case for the issue of the notice under s. 148. The Commissioner also mechanically accorded permission. Thus the important safeguards provided in ss. 147 and 151 were lightly treated by the income-tax Officer as well as by the Commissioner. [447 F-448 B] The appeal must accordingly be allowed. 443 JUDGMENT: Chhugamal Rajpal vs S. P. Chaliha & Ors on 21 January, 1971 2 CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1311 of 1967. Appeal by special leave from the judgment and order dated January 17, 1967 of the Patna High Court in C.W.J.C. No. 952 of 1966. M. C. Chagla, N. D. Karkhanis, S. P. Chowdhury, Bhuvanesh Kumari, for the appellant. S. C. Manchanda, R. N. Sachthey and B. D. Sharma, for the respondent. The Judgment of the Court was delivered by Hegde, J. This is an assessee's, appeal by special leave against the judgment of the High Court of Patna dismissing in limini its writ petition under Arts 226 and 227 of the Constitution of India. The assessee is having construction contracts under the Railways as well as the Government. It is a partnership firm. For the assessment year 1960-61, relevant to the accounting year 1959-60, after the assessee submitted its income-tax return, it was asked by the Income-tax Officer during the income-tax assessment proceedings to produce before him its books of account and the other relevant papers. The assessee also produced before him a statement showing various creditors from whom it had borrowed on Hundis during the accounting year in question. In that statement it gave the lull names and address of the alleged creditors. After enquiry, the assessee's total income was assessed at Rs. 69,886/-. On June 3, 1966, the 1st respondent (Income-tax Officer Ward 'A',, Muzaffarpur) issued to the assessee a notice under s. 148 of the Indian Income-tax Act, 1961. The material portion of that notice reads as follows "Notice under s. 148 of the Income-tax Act, 1961. Income-Tax Officer, Muzaffarpur Dated, the 3-6-1966. TO M/s. Chugamal Rajpal, Muzaffarpur. Whereas (1) have reason to believe that your income chargeable the income of 1960-1961 in respect of which you are assessable to tax for the assessment year 19 19 has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. I therefore propose to re-assess the income for the said assessment year and I hereby require you to deliver to me within 30 days from the date of service of this notice a return in the prescribed form of your income The income assessable relevant to the assessment year 1960- of in respect of which you are assessable for the said assessment year. 2. The notice is being issued after obtaining the necessary satisfaction of the Commissioner of IncomeTax, Bihar and Orissa, Patna. Sd/- S. P. Chaliha Income-Tax Officer, Ward A, Muzaffarpur." The assessee challenged the validity of that notice as well as proceedings taken on the strength of that notice on various grounds. As we are accepting the contention of the assessee that the impugned notice is invalid inasmuch as it did not comply with the requirements of s. 151(2) of the Act, we have not thought it necessary to examine the other contentions advanced on behalf of the assessee. In this case the notice was issued after four years but before eight years of the date of the original assessment. Section 151 (2) of the Act reads "No notice shall be issued under Section 148 after the expiry of four years from the end of the relevant assessment year, unless the Commissioner Chhugamal Rajpal vs S. P. Chaliha & Ors on 21 January, 1971 3 is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice." Section 148 prescribes : "(1) Before making the assessment, re-assessment or re- computation under Section 147, the Income-tax Officer shall serve on the assesee a notice containing all or any of the requirements which may be included in a notice under sub- section (2) of Section 139 and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. (2) The Income-tax Officer shall, before issuing any notice under this section, record his reasons for doing so. " Section 147 deals with income escaping assessment. At this stage we need not refer to that section : We shall refer to that provision at a later stage. Section 139(2) says : "In the case of any person who, in the incometax Officer's opinion, assessable under this Act, whether on his own total income or, on the total income of any other person during the previous year, the Income-tax Officer may, before the end of the relevant assessment year, serve a notice upon him requiring him to furnish, within thirty days from the date of service of the notice, a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed." (proviso is not necessary for our present purpose) When this appeal came up for hearing on the last occasion, as we found the affidavit filed by the Income-tax Officer to 'be vague and indefinite, we directed the learned Counsel for the Department to produce before us the records of the Incometax Officer to show that the, Income-tax Officer had complied with the requirements of s. 148 and s. 151(2) of the Act. When the appeal was taken up for hearing on the 18th January 1971, only the report submitted by the Income- tax Officer to the Commissioner and the order of the Commissioner was produced. The order sheet recording the reasons of the Income-tax Officer as required by s. 148(2) was not produced. Hereinbelow we have sent out the report of the Income-tax Officer as well as the order of the Commissioner: Report in Connection with the starting of proceeding" under Section 147 of the Income-tax Act, 1951. Name of District Ward of Circle A Ward, Muzaffarpur G. I.R. No. 303-C. 1.1. Name and address of the assessee M/S. Chugamal Rajpal, Muzaffarpur. R.F. Chhugamal Rajpal vs S. P. Chaliha & Ors on 21 January, 1971 4 2.Status 3. Assessment year for which notice under s. 1 48 is proposed to be issued 1960-61. 4. Whether it is a new case or one in which re-assessment (or recomputation) has to be made Re-assessment 5. If a case of reassessment (or recomputation) the income (or loss or depreciation allowance) originally assessed/determined. Rs. 73,604/- 6. Whether the case falls under cl. (a) or (b) of s. 147 147(a) 7. Brief reasons for starting proceedings under Kindly see s. 147 (indicate the items which are Sd/- S. P. Chaliha. I.T.O. 30-4-66 believed to have escaped assessment) A-Ward, Muzaffarpur. 8.Whether the Commissioner is satisfied that Yes it is a fit case for the issue of notice under Sd/- K. Narain section 148. 13-5-66 Commissioner of Income-tax, Bihar and Orissa, Patna 9. Whether the Board is satisfied that it is aSecretary, Board of Revenue.fit case for the issue of notice under s. 148. During the year the assessee hasshown to have taken loans from various parties of Calcutta. From D.I.s Inv. No. A/P/ Misc.(5)D.I./63-64/5623 dated 13-8-65, forwarded to this office under C.I.T. Bihar and Orissa, Patna's letter No. Inv. (Inv.)15/ 65-66/1953-2017 dated Patna 24-9-65, it appears that these persons are name lenders and the transactions are bogus. Hence proper investigation regarding these loans is necessary. The name of some of the persons from whom money is alleged to have taken on loan on Hundis are: 1. Seth Bhagwan Singh Sricharan. 2. Lakha Singh Lal Singh. 3. Radhakissen Shyam Sunder. The amount of escapement involved amounts to Rs. 100,000/-. Sd/- S. P. Chaliha, 30-4-66. Income-tax Officer, A-Ward, Muzaffarpur." In his report the Income-tax Officer does not set out any reason for coming to the conclusion that this is a fit case to issue notice under s. 148. The material that he had before him for issuing notice under s. 148 is not mentioned in the report. In his report he vaguely refers to certain communications received by him from the C.I.T., Bihar and Orissa. He does not mention the facts Chhugamal Rajpal vs S. P. Chaliha & Ors on 21 January, 1971 5 contained in those communications. All that he says is that from those communications "it appears that these persons (alleged creditors) are name lenders and the transactions are bogus". He has not even come to a prima facie conclusion that the transactions to which he referred are not genuine transactions. He appears to have had only a vague feeling that they may be bogus transactions. Such a conclusion 'does not fulfil the requirements of s. 151(2). What that provision requires is that he must give reasons for issuing a notice under s. 148. In other words he must have some prima facie grounds before him for taking action under s. 148. Further his report mentions : "Hence proper investigation regarding these loans is necessary In other words his conclusion is that there is a case for investigating as to the truth of the alleged transactions. That is not the same thing as saying that there are reasons to issue, notice under s. 148. Before issuing a notice under s. 148, the Income-tax Officer must have either reasons to believe that by reason of the omission or failure on the part of these assessee to, make a return under s. 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively not- withstanding that there has been no omission or failure as mentioned above on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of clause (a) or (b) of s. 147 are satisfied, the Income-tax Officer has no jurisdiction to issue a notice under s. 148. From the report submitted by the Income-tax Officer to the Commissioner, it is clear that he could not have had reasons to believe that by reason of the assessee's omission to disclose fully and truly all material' facts necessary for his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year; nor could it be said that he as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year. We are not satisfied that the Income-tax Officer had any material before him which could satisfy the requirements of either cl. (a) or cl. (b) of s. 147. Therefore he could not have issued a notice under s. 148. Further the report submitted by him under s. 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under s. 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under s. 148. To Question No. 8 in the report which reads "Whether the, Commissioner is satisfied that it is a case for the I issue of notice under section 148", he just noted the word "yes" and affixed his signatures thereunder. We are of the opinion .that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under s. 148. The important safeguards provided in sections 147 and 151 were lightly treated by the Income-tax Officer as well as by the Commissioner.. Both of them, appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the substance. In the result this appeal is allowed, the order of the High Court is set aside and the impugned notice quashed. The Respondent No. 2 shall pay the costs of the appellant both in this Court and in the High Court. G.C. Appeal allowed. Chhugamal Rajpal vs S. P. Chaliha & Ors on 21 January, 1971 6 Chhugamal Rajpal vs S. P. Chaliha & Ors on 21 January, 1971 7 | {
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Ram Janki Devi & Anr vs M/S. Juggilal Kamlapat on 28 January, 1971 Equivalent citations: 1971 AIR 2551, 1971 SCR (3) 573, AIR 1971 SUPREME COURT 2551 Author: A.N. Ray Bench: A.N. Ray, G.K. Mitter PETITIONER: RAM JANKI DEVI & ANR. Vs. RESPONDENT: M/S. JUGGILAL KAMLAPAT DATE OF JUDGMENT28/01/1971 BENCH: RAY, A.N. BENCH: RAY, A.N. MITTER, G.K. CITATION: 1971 AIR 2551 1971 SCR (3) 573 ACT: Deposit and Loan-Difference between-Tests-Demand for part of loan whether starts limitation. HEADNOTE: Two groups known as the Singhania group and the Gupta Group were partners in M/s. India Supplies. Both were also interested in-the business of Lakshmi Ratan Cotton Mills. In the present litigation the Gupta group was represented by the appellants and the Singhania group by the respondent. In the year 1942 Lakshmi Rattan Cotton Mills was the creditor of M/s. India Supplies for the approximate sum of Rs. 4,00,000. Lakshmi Ratan Cotton Mills was a debtor to the respondent for the approximate sum of Rs. 400,000. Lakshmi Ratan Cotton Mills demanded the sum of Rs. 4,00,000 from India Supplies. India Supplies could not repay Lakshmi Ratan Cotton Mills. Thereafter India Supplies proposed that Ram Janki Devi & Anr vs M/S. Juggilal Kamlapat on 28 January, 1971 1 the respondent should deposit a sum of Rs. 4,00,000 with India Supplies to wipe out the indebtedness of the India Supplies to Lakshmi Ratan Cotton Mills. The respondent accepted the 'said proposal and thereafter a letter dated 29, September 1942 was written by the head of the Gupta group on behalf of India Supplies to the respondent recording the agreement that "a sum of Rs. 4,00,000 should be debited to India Supplies as deposit at the usual rate of interest as agreed upon." The respondent was to place to the credit of Lakshmi Ratan Cotton Mills a sum of Rs. 4,00,000 in its account with the respondent thus reducing the indebtedness of Lakshmi Ratan Cotton Mills from Rs. 9,00,000 to Rs. 5,00,000. Disputes and differences arose between the two groups thereafter. In 1944 there was an arbitration award. The Sing Hanias went out of both India Supplies and Lakshmi Ratan Cotton Mills, and the Gupta group carried on both the businesses. The present suit was, filed by the respondent in 1953. The claim was based on the aforesaid deposit of Rs. 4,00,000. The suit though originally filed in the court of the Civil Judge, Kanpur was tried by the Allahabad High Court in its original jurisdiction. The suit was decreed in favour of the respondent. With certificate appeal was filed in this Court. The questions for consideration were : (i) whether the money was deposited under an agreement and payable on demand so that limitation would commence from the date of demand within three years of which it was filed, or whether it was a loan made on 30th December 1942 in respect of which the suit was barred under Art. 59 by limitation, the same not having been filed within three years from the date of the loan; (ii) whether there was a demand for a part of the amount in 1943 and therefore limitation would start from that date. HELD: (i) The amount was a deposit and not a loan. The case of a deposit is something more than a mere loan of money. It will depend on the facts of each case whether the transaction is clothed with the character of a deposit of money. The surrounding circumstances, the relationship and character of the transaction and the manner in which the parties treated the transaction will throw light on the true form of the transaction. [577 H] 574 V.E, A. Annamalai Chettiar & Anr. v. S. V. V. S. Veerappa Chettiar, A.I.R. 1956 S.C. 12 and Nawab Major Sir Mohammad Akbar Khan v. Attar Singh & Ors., 63 I.A. 279, referred to. Some of the partners of the appellant and the respondent in the year 1942 were common. It would be more explicable and natural course of events that monies would be kept in deposit with the appellant in order to enable them to have financial accommodation without immediate worry of repayment. The mere fact that money in specie was not paid would not be destructive of the case of deposit. The respondent acted as bankers. The way in which the respondent made entries in the pass-book of the appellant Ram Janki Devi & Anr vs M/S. Juggilal Kamlapat on 28 January, 1971 2 was consistent with the roznamcha, khata and nakalbahi books. It was not a case of the respondent giving loan to the appellant for the obvious reason that the history of the transaction between the appellant and Lakshmi Cotton Mills showed that the appellant had to be put on a footing of financial stability by giving the appellant the use of the sum of Rs. 4,00,000 for a long time. The absence of any negotiable instrument was significant. A hundi or a promissory note would have been consistent with the case of a loan. The relationship between the parties the surrounding circumstances at the time of the transaction, the pecuniary position of the appellant were all overwhelming features to corroborate the oral as well as the documentary evidence of the respondent that the amount was deposited with the appellant. [580 E-H] The arbitration award in the dispute between the parties gave directions on the basis that there were advances between the parties which were in the nature of deposit and were not covered by the award., [581 A-B] In contemporarious documents the appellant never said that it was a case of advancing loan. The non-production of the appellant's accounts coupled with the appellant's staying away from the witness box indicated the inherent infirmities of the appellant's case. [581 D] (ii)There is a consensus among the High Courts that there must be an unqualified demand for the whole sum before the limitation can start in case of demand for return of the amount deposited. Further, a demand in the year 1943 for a part of the amount would not be effective because there were common partners in the firms of respondent and the appellant. 1581 E-G] Jogendranath Chakerbutty v. Dinkar Ram, A.I.R. 1921 Cal. 644, Motigauri v. Naranji, A.I.R. 1927 Bom. 362 and Subbaih Chetty & Ors. The appeal must accordingly be dismissed. JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2151 of 1966. Appeal from the judgment and order dated August 3, 1965 of the Allahabad High Court in Original Suit No. I of 1964. S. V. Gupte and J., P. Gopal, for the appellants. A. K. Sen, Rameshwar Nath and Swaranjit Sodhi, for the respondent. The Judgment of Court was delivered by Ray, J.-This is an appeal by certificate from the judgment and decree dated 3 August, 1965 of the High Court of Allahabad decreeing the, respondents suit for the sum of Rs. 4,11,367.92. The respondent filed the suit on 16 May, 1953 against the appellant for the recovery of Rs. 4,11,367.92 with interest and costs. Ram Janki Devi & Anr vs M/S. Juggilal Kamlapat on 28 January, 1971 3 The respondent's case in short was that the respondent on 30 September, 1942 deposited a sum of Rs. 4,00,000 with M/s India Supplies whereof the appellants were the partners on the condition that interest would be payable @ 7/9 per cent per month and that the respondent would be entitled to withdraw the deposit on demand. The suit was filed in the court of the First Civil Judge, Kanpur. The evidence was concluded before the Civil Judge, Kanpur. Thereafter by an order dated 12 May, 1964 of the High Court at Allahabad the suit was transferred to the High Court in its original ,civil jurisdiction. The High Court heard the suit and on 3 August, 1965 decreed the suit in favour of the respondent. At the trial the issues were first whether the respondent deposit ed the sum of Rs. 4,00,000 with the appellant and secondly whether the suit was barred by time. The entire controversy in the suit is whether it was a case where money was deposited under an agreement and that it was payable on demand or whether it was a case of an ordinary loan of Rs. 4,00.000. The respondent contended that Article 60 of the Indian Limitation Act, 1908 was the relevant Article because if was a case of money deposited under an agreement that it was payable on demand and therefore the limitation would commence from the date of demand and the suit was filed within three years from the demand. The rival contention of the appellant was that it was money lent under an agreement that it was payable on demand and the loan was made on 30 December, 1942 and therefore the suit not having been filed within 3 years from the date of the loan under Article 59 was barred by limitation. In the year 1942 Kailashpat Singhania and Pushpa Devi wife of Lakshmipat Singhania were partners of India Supplies along with the defendants. Defendant Ram Janki Devi is the wife of Ram Ratan Gupta and the other defendant Lal Ram Gopal Gupta is a brother of Ram Ratan Gupta and married Padampat Singhania's sister's daughter. The Singhania group and the Gupta group were the partners of India Supplies. The Singhania and the Gupta groups were also both interested in the business of Lakshmi Ratan Cotton Mills, The evidence on behalf of the respondent is that Lakshmi Rattan Cotton Mills a limited Company acted as financiers and bankers of India Supplies. In the year 1942, Lakshmi Ratan Cotton Mills was the creditor of M/s. India Supplies for the approximate sum of Rs. 4,00,000. Lakshmi Ratan Cotton Mills was a debtor to the respondent for the approximate sum of Rs. 4,00,000. Lakshmi Ratan Cotton Mills demanded the sum of Rs. 4,00,000 from India Supplies. India Supplies could not repay Lakshmi Ratan Cotton Mills. Thereafter India Supplies proposed that the respondent should deposit a sum of Rs. 4,00,000 with India Supplies to wipe out the indebtedness of India Supplies to Lakshmi Ratan Cotton Mills. The respondent accepted the said proposal and thereafter a letter dated 29 September, 1942 was written by Ram Ratan Gupta head of the Gupta group on behalf of India Supplies to the respondent recording the agreement that "a sum of Rs. 4,00,000 should be debited to India Supplies as deposit at the usual rate of interest as agreed upon". The respondent was to place to the credit of Lakshmi Ratan Cotton Mills a sum of Rs. 4,00,000 in its account with the respondent thus reducing the indebtedness of Lakshmi Ratan Cotton Mills from Rs. 9,00,000 to Rs. 5,00,000. Disputes and differences arose between the two groups thereafter. In 1944 there was an arbitration award. The Singhanias went out of both India Supplies and Lakshmi Ratan Cotton Mills and the Gupta groups carried on both the businesses. Ram Janki Devi & Anr vs M/S. Juggilal Kamlapat on 28 January, 1971 4 One of the books of account of the respondent, namely, the roznamcha (daily book) under the entry 30 September, 1942 shows that according to the letter of India Supplies the sum of Rs. 4,00,000 was deposited in the name of India Supplies. The other books of account of the plaintiff are khata (ledger) and nakalbahi (journal). The respondent also relied on the pass book entry being Ex-A-4 which shows that a sum of Rs. 4,00,000 was withdrawn on 30 September, 1942 by the appellant from the respondent as a banker and along with the interest from time to time the amount of Rs. 4,00,000 stood with the appellant in the deposit account. The balance-sheet of the appellant as on 30 June, 1943 being Ex.A-4 showed that a sum of Rs. 4,00,000 was unsecured loan from the respondent. Counsel on behalf of the appellant contended that the use of the word 'deposit by itself occurring either in the roznamcha or in the letter dated 29 September, 1942 written by Ram Ratan Gupta would not be decisive of the question whether it was a case of deposit of the sum of Rs.- 4,00,000 by the respondent with the appellant under an agreement that the same would be paid on demand. At one stage in the proceedings there was a controversy as 'to whether Rain Ratan Gupta had authority to bind the appellant by the letter dated 29 September, 1942. There is evidence that Ram Ratan Gupta looked after the business of the appellant and acted on behalf of the firm of the appellant in ordinary mercantile transaction. Counsel for the appellant in all fairness did not question the authority of Ram Ratan Gupta to bind the firm of the appellant. It was said by counsel for the appellant that there were six principal reasons to indicate that, it was a case of an ordinary loan of Rs. 4,00,000 and not- an instance of the sum of Rs. 4,00,000 being deposited by the respondent with the appellant under an agreement that the same would be paid on demand. The primary and pre-eminent point emphasized by the appellant was the background of the transaction between M/s India Supplies on the one hand and Lakshmi Ratan Cotton Mills on the other, that moneys were lent and advanced by Lakshmi Ratan Cotton Mills to India Supplies from time to time and all that happened was that in place of Lakshmi Ratan Cotton Mills the respondent became the creditor of the firm of the appellants. There was just a substitution of the creditor debitor relationship by substituting the respondent in place of Lakshmi Ratan Cotton Mills as the creditor. Secondly, it was said that there was never any payment of money in cash and adjustment entries were made in the books of the respondent. Thirdly, monies were not given nationally for the convenience of the respondent banker. Fourthly, monies were required by the appellant for his own business because Lakshmi Ratan Cotton Mills refused to help the appellant any more. Fifthly, Ex. A-4 the pass book would show that it was a case of advance of Rs. 4,00,000 by the respondent to the appellant, and finally, the appellants were not bankers and therefore it was improbable that the respondents who were bankers would deposit with the traders the sum of Rs. 4,00,000. Counsel for the appellant relied on the decision of this Court in V. E. A. Annamalai Chettiar & Anr. v. S. V. V. S. Veerappa Chettiar(1) in support of the proposition that the answer to the question as to whether it was a loan or deposit would not depend merely on the terms of the document but had to be judged from the intention of the parties and the circumstances of the case. That is manifestly the correct approach. Ram Janki Devi & Anr vs M/S. Juggilal Kamlapat on 28 January, 1971 5 The case of a deposit is something more than a mere loan of money. It will depend on the facts of each case whether the transaction is clothed with the character of a deposit of money. The surrounding circumstances, the relationship and character of the (1) A.I.R. 1956. S.C. 12. transaction and the manner in which parties treated the transaction will throw light on the true form of the transaction. The Judicial Committee in Nawab Major Sir Mohammad Akbar Khan v. Attar Singh & Ors. (1) spoke of the distinction bet- ween the deposit and loan to be that the two terms were not mutually exclusive but that a deposit not for a fixed term did not seem to impose an immediate obligation on the depositee to seek out the depositor and repay him. Though,documents by themselves are not conclusive of the question they have the evidentiary value and if they corroborate the oral evidence the importance of the documents is magnified. The letter Ex. A-5 bears the date 29 September, 1942 and is contemporaneous with the entire transaction between the appellant and the respondent. The letter was as follows:- "Messrs. Juggilal Kamlapat Kothl, Cawnpore. Dear Sirs, As per my talk with Sir Padampat I shall thank you to credit a sum of S. 4 lacs(Rupees four lacs only to the account of Messrs Lakshmi ratan Cotton Mills Co. Ltd., and debit the same to the account of India Supplies as deposit at the usual rate of interest as agreed upon by the partners of the said firm. Thanking you, Yours faithfully, Sd/- R. Ratan Gupta". The intrinsic evidence in the letter is that the sum of Rs. 4,00,000 was debited to India Supplies as deposit. The words "debited as deposit", were criticised by counsel for the appellant to be meaningless. Too much precision cannot always be expected in regard to use of foreign language by merchants and traders in their short memorandum. The character of deposit is an inherent.impression in the writing. The rozmancha refers to the letter and is therefore corroborative of the letter and the terms thereof. The letter further shows that the terms were agreed to by the partners of the firm, namely, the partners of India Supplies and of ale respondent. The respondent's partner Padampat Singhania gave oral evidence and substantiated the terms of the letter and the respondent's case. Padampat Singhania was the person on behalf of the respondent who carried on the negotiations. His evidence was therefore im- portant. The appellants did not examine themselves and did not (1) 63 I.A. 279. give any evidence challenging the oral testimony of the respondent s partner. On the contrary, the correctness of the, letter EX. A-5 was accepted by the appellants' witness Ram Ratan Gupta the author of the letter. The roznamcha entry. was proved by Gopi Kishan Saraugi a munim of the plaintiff. The roznalucha entry was as follows "4,00,000 India Supply Ke nam Asoj Badi Chhat : 30-9-42 Lakshmiratan Cotton Mill Ki Chithi se apke nam mada deposit karaya panna 2486". His evidence was that the books were systematically kept on 'mahaj ani" system in connection with the business. The witness proved the Khata, the raznamcha and the nakalbahi entries. In Ram Janki Devi & Anr vs M/S. Juggilal Kamlapat on 28 January, 1971 6 cross-examination of Gopi Kishan Saraugi it was suggested that the entry under the date 30 September, 1942 in the roznamcha was not written at the same time. The suggestion was that there was interpolation of the words "deposit karaya" in the roznamcha entry. In cross- examination of Padampat Singhania questions were asked about the rokar, khata, nakal bahi and roznamcha entries. Padampat Singhania said that the entry of Rs. 4,00,000 was not recorded in the daily cash book but was recorded in the roznanicha. He also said that credit and debit entries were made in the roznamcha, Padampat Singhania said that the entries were made by Gopi Kishan Jaipuria who was in a dying condition at the time the witness gave evidence. It was suggested to Padampat Singhania that the words "de- posit karaya" in the roznamcha entry were not written at the same sitting. Padampat Singhania denied that, Counsel for the appellant contended that in the absence of Gopi Kishan Jaipuria the account books were not proved. This is unacceptable for two reasons. First, the account books were shown in cross-examination of Padampat Singhania and question were asked on the same. It is not open to the appellant to complain of lack of proof of account books when the documents are shown to the witness in cross-examination. Secondly, both Padampat Singhania and Gopi Kishan Saraugi spoke of the proper maintenance and keeping of books of account and that it was not possible to arrange the presence of the writer of the entry. Suggestion of tampering is a serious one. The original entries were called for from the High Court. We had occasion to look into the originals. We are in agreement with the High Court that the suggestion of fabrication is utterly unmeritious. The words 'deposit karaya' appear without any doubt to have been written at the same time as the rest of the writing. It is in evidence that the reference to the page of the panna under that entry was written later inasmuch as the page of the panna was put on when the panna was put on when the panna book was written. The most important documentary evidence of the appellant namely, their book of account was not produced. These books of the appellant would have shown how they treated the transaction, namely, whether it was a case of deposit or loan. The irresistible inference from the non-production of books of the appellant would arise that they would have supported the respondents case and that is why they were not produced. The appellant's contention that the background of the transaction was mercantile loan, would be more a conjecture than a conclusion to be arrived at. The financial transactions between the respondent and Lakshmi Ratan Cotton Mills were running accounts. It would, be more consistent to hold that,by allowing India Supplies a deposit of Rs. 4,00,000 India Supplies would be relieved of the situation of repaying the money immediately. It is precisely. because of the then inability of India Supplies to repay Lakshmi Ratan Cotton Mills that the parties resorted to the mode of having the use of the money by way of deposit. The transaction was between the appellant, the respondent and Lakshmi Ratan Cotton Mills. All figured in the transaction. A more loan of Rs. 4,00,000 would not have sufficed the needs of the appellant who were then unable to pay the dues of Lakshmi Ratan Cotton Mills. Some of the partners of the appellant and the respondent in the year 1942 were common. It would be more explicable and natural course of events that monies would be kept in deposit with the appellant in order to enable them to have financial accommodation without immediate worry of repayment. The mere fact that money in specie was not paid would not be destructive of deposit. The respondent acted as bankers. The, way in which the respondent made entries in the pass book of the appellant is consistent with their roznamcha, khata and nakal bahi books. It was not a case of Ram Janki Devi & Anr vs M/S. Juggilal Kamlapat on 28 January, 1971 7 the respondent giving loan to the appellant for the obvious reason that the history of the transactions between the appellant and Lakshmi Rantan Cotton Mills show.% that the appellant had to be put on a footing of financial stability by giving the appellant the use of the sum.' of Rs. 4,00,000 for a long time. The absence of any negotiable instrument is significant. A hundi or a promissory note would have been consistent with the case of a loan. The relationship between the parties; the surrounding circumstances at the time of the transaction, the pecuniary position of the appellant are all overwhelming features to corroborats the oral as well as the documentary evidence of the respondent that the amount was deposited with the appellant. The award dated 18 January, 1944 has also a tale to tell. There were disputes between the partners of the various businesses in which the Singhania and Gupta groups were interested. These disputes were before the arbitrators. One of the terms in the award was that the award in respect of Lakshmi Ratan Cotton Mills and India Supplies "do not cover the advances which either party or their separate firms may have made to all or any of them or their moneys which may be in deposit with them and they shall be payable and paid in their usual course". This direction, in the award shows that there were advances which were in the nature of deposit and were not covered by the award. The award would have evidentiary value to show as to how the parties treated and understood their financial dealings. It is also significant that when the respondent demanded the money by a letter dated 27 April 1953 (Ex. 7) the appellant in their reply dated 5/6 May, 1953 (Ex. 6) totally denied the claim. The respondent set out all the facts of deposit of the money with advancing loan. The non-production of the appellant's accounts coupled with the appellants staying away from the witness box indicates the inherent infirmities in the appellant's case. Counsel for the appellant contended that there was a demand for a part of the amount in the year 1943 because Padampat Singhania said that there was demand in the month of October, 1943 and therefore limitation would start from that date. The view of Calcutta, Bombay and Madras High Courts is that there must be an unqualified demand for the whole sum before the limitation can star in case of demand for return of the amount deposited. (See Jogendranath Chokerbutty v. Dinkar(1) Ram Motigaur v. Naranji ( 2 ) and Subbaih Chetty & Ors. v. Visalakshgi Achi) ( 3 ) . That is the correct position in law. Counsel for the appellant did not contend to the contrary in view of the consensus of opinion of the different High Courts. It is also important to bear in mind that a demand in the year 1943 for a part of the amount would not be effective because there were common partners in the firms of the respondent and the appellant. For these reasons we are of opinion that the High Court was correct in decreeing the suit. The appeal therefore fails and is dismissed with costs. G. C. Appeal dismissed. (1) A.I.R. 1921 Cal. 644 (2) A.I.R. 1927 Bom. 362 (3) A.I.R. 1932 Mad. 685 Ram Janki Devi & Anr vs M/S. Juggilal Kamlapat on 28 January, 1971 8 | {
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State Of Madras vs Lateef Hamid & Co on 2 September, 1971 Equivalent citations: 1972 AIR 1781, 1972 SCR (1) 577 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: STATE OF MADRAS Vs. RESPONDENT: LATEEF HAMID & CO. DATE OF JUDGMENT02/09/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1972 AIR 1781 1972 SCR (1) 577 1971 SCC (3) 560 CITATOR INFO : D 1973 SC1387 (5) ACT: Madras General Sales Tax Act 1 of 1959 s. 31-Section conferring power on Appellate Assistant Commissioner to enhance assessment Power to enhance assessment under Madras General Sales Tax Act, 1939 exercisable by Commercial Tax Officer-Appellate Assistant Commissioner hearing appeal under s. 31 of 1959 Act whether can exercise power of enhancement in respect of assessment year 1958-59 which was governed by 1939 Act-Whether any right or privilege of assessee under 1939 Act affected if power of enhancement exercised by Appellate Assistant Commissioner under s. 31 of 1959 Act. HEADNOTE: The Appellant was a dealer in hides and skins at Madras. Up to March 31, 1959 sales tax on dealers in the State of Madras was leviable under the Madras General Sales Tax Act, 1939. The appellant's turnover for the assessment year State Of Madras vs Lateef Hamid & Co on 2 September, 1971 1 1958-59 thus stood charged with liability to pay tax as leviable under the 1939 Act. The 1939 Act was repealed by the Madras General Sales Tax Act, 1959 which came into force on April 1, 1959. The appellant was assessed for the year 1958-59 on March 24, 1961. By an order dated August 16, 1962 the Appellate Assistant Commissioner while disposing of the appeal against the said assessment order enhanced the assessment under power conferred on him by s. 31 of the 1959 Act. The Tribunal accepted the contention of the assessee that the Appellate Assistant Commissioner had no power to enhance the assessment. The High Court in revision held that since under the 1939 Act the appellate authority while exercising its appellate powers had no power to enhance the assessment and the said immunity or protection was a vested right in the assessee, the same not having been taken away either expressly or by necessary implication by the 1959 Act, the Appellate Assistant Commissioner could not have enhanced the assessment. it further held that the immunity or protection was a right or privilege protected by s. 61(1) of the 1959 Act as amended in 1963, which amendment was retrospective in its operation. In appeal to this Court by certificate, HELD: (i) In the matter of assessment the purpose of the 1939 as well as the1959 Act is identical. That purpose was and is to see that neither theassessee is over assessed nor the State is deprived of the Revenue towhich it is entitled. Under the 1939 Act an aggrieved assessee could first appeal to the Appellate Authority and then to the Tribunal. Further he could on questions of law go up in revision to the High Court. Rule 13(1) of the Madras General Sales Tax Rules, 1939 prescribed that subject to the provisions of s. 11 any person aggrieved by any original order passed by the Assistant Commercial Tax Officer may appeal to the Commercial Tax Officer of the District. Thus the Commercial Tax Officer had both the powers of the appellate authority as well as the, special powers conferred on him under s. 12(1) of the 1939 Act. By the exercise of those two powers he could have confirmed, altered, amended or enhanced the assessment made. Under the 1959 Act the Appellate Assistant Commissioner who primarily took over the quasi-judicial functions of the Commercial Tax Officer was conferred with power not only to confirm, vary, or annul the assessment but also the power to enhance the assessment. The power conferred on him under 3-1-3Sup.C.I./72 578 s.31 of the 1959 Act combines to an extent both the appellate power as well as the special power the Commercial Tax officer had under s. 11 and s. 12(1) of the 1939 Act. Hence the changes effected by the 1959 Act in the machinery sections do not touch the substance of the matter. The 1959 Act merely simplified the procedure without touching the Substance of the right of the parties. [582C-583A] State Of Madras vs Lateef Hamid & Co on 2 September, 1971 2 No assessee has any vested right in the procedure prescribed under the 1939 Act. So long as the new procedure laid down in the 1959 Act ,does not interfere with any of his vested rights, an assessee has no right to claim that his case must be dealt with under the provisions of the repealed Act. It is well settled that the new procedure prescribed by law gover ns all pending cases. The assessee in the present case filed its appeal under s. 31 of the 1959 Act and not under s. 11 of the 1939 Act. its right of appeal under the 1959 Act does not take away in any manner .any of its vested rights under the 1939 Act [585 B-C] The appeal must accordingly he allowed. Deputy Commissioner of Commercial Tax, Madras Division v. N. Balasundaram & Co. 14, S.T.C. 996, disapproved. Observations contra in Deputy Commissioner of Commercial Taxes, Madras Division v. Sri S. Swami & Co., 13 S.T.C. 468, held incorrect. (Since it was held that no vested right of the assessee was infringed by the provisions of the 1959 Act the Court did not find it necessary to consider the meaning of the words 'any right privilege..... accrued......under the Act' in s. 61 (1) (ii) (c) of the Act or to examine the scope of s. 61(2) thereof] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2186 of 1968. Appeal from the judgment and order dated July 3, 1967 of the Madras High Court in Tax Case No. 250 of 1964 (Revision No. 172). S. T. Desai and A. V. Rangam, for the appellant. R. K. P. Shankardass, R. Vasudeva Pillai, P. Keshava Pillai Rajiv Sawhney, for the respondent. The Judgment of the Court was delivered by Hegde, J. This appeal by certificate arises from the decision 'of the High Court of Madras. It raises two questions for decision viz (1) whether the High Court was right in its opinion that the Appellate Assistant Commissioner of Commercial Taxes was incompetent to enhance the assessment of the assessee, the respondent, herein and (2) whether the High Court was justified in' holding that the additional exemptions granted by the Tribunal were justified by the evidence on record. There is no merit in the second contention. Therefore it will ,be convenient to dispose it of even before going to the facts of the case. The assessing officer as well as the Appellate Assistant Commissioner of Commercial Taxes disallowed the two exemp- tions asked for by the assessee on the ground that there was interpolation in the, relative documents covering the turnover. The State Of Madras vs Lateef Hamid & Co on 2 September, 1971 3 Tribunal reversed that finding of those authorities and allowed the exemptions asked for. It appears from the order of the Tribunal that it proceeded on the basis that there was no ;Interpolation. This finding of the Tribunal is essentially a finding of fact and hence we Will not be justified in interfering with that finding and more so as the High Court has declined to interfere with that finding. This takes us to the real controversy in the appeal namely whether the Appellate Assistant Commissioner had power to enhance the assessment of the assessee. The assessee is a dealer in Hides and Skins at Madras. We are concerned herein with its assessment for the year 1958-59. That assessment was made on March 24, 1961. By his order dated August 16, 1962, the Appellate Assistant Commissioner enhanced the assessment of the assessee while disposing of the appeal by the assessee. Until March 31, 1956, sales tax was being levied on dealers in the State of Madras under the provisions of the Madras Sales Tax Act, 1939 (to be hereinafter referred to as the "1939 Act"). The assessee's turnover for the year 1958-59 stood charged with the liability to pay tax as leviable under the 1939 Act. The 1939 Act was repealed by the Madras General Sales Tax Act, 1959 (to be hereinafter referred to as the "1959 Act"). That Act came into force on April 1, 1959. As seen earlier the assessee was assessed after that Act came into force. The assessee filed its appeal under S. 31 of that Act and the Appellate Assistant Commissioner dealt with that appeal under that provision. Aggrieved by that order, the assessee took up the matter in appeal to Tribunal. The Tribunal following the decision of the Madras High Court in Deputy Commissioner of Commercial Taxes, Madras Division v. Sri Swami and Company,(1) accepted the contention of the assessee. As against that decision, the State of Madras went up in revision to the High Court under s. 38 of the 1959 Act. That petition was dismissed. Hence this appeal. The High Court has opined that under the 1939 Act,' the appellate authority while exercising its appellate powers could not have enhanced the assessment of the assessee. That was an immunity or protection afforded to the assessee under the 1939 Act. Such an immunity or protection was a vested right of the assessee. The same having not been taken away either expressly or by necessary implication by the provisions of the 1959 Act, the Appellate Assistant Commissioner could not have. enhanced (1)13, S.T.C. 468. the assessment. It further held that that immunity or protection of the assessee, is protected by s. 66(1) of the 1959 Act as amended in 1963, which amendment was retrospective in its ,operation. The turnover of the assessee during the year 1958-59 became charged with liability to pay sales-tax under the 1939 Act as and when the assessee effected sales and the total sales- tax liability of the assessee for that year became fixed Under the same Act on March 31, 1959. Hence the charging section in the 1959 Act is not relevant for determining the liability of the assessee. Herein we have only to consider the effect of the change in the machinery provisions. Before enhancing the assessment the Appellate Assistant Commissioner had given opportunity to the assessee to show cause against the proposed enhancement. The Appellate Assistant Commissioner rejected the contention of the assessee that he had no power to enhance the assessment, as the power to, enhance assessment conferred on him by. s. 3 1 of the 195 9 Act was inapplicable to the proceedings before him. State Of Madras vs Lateef Hamid & Co on 2 September, 1971 4 We shall now examine the relevant provisions of the 1939 Act and the 1959 Act. We shall first take up the material pro- visions in the 1939 Act. Section 2(a-2) defines the expression "assessing authority" as meaning any person authorised by the State Government to make any assessment under the Act The expression "Commercial Tax Officer" is defined in s. 2(a-3) as meaning any person appointed to be a Commercial Tax Officer under s. 2-B. The Deputy Commissioner is defined in S. 2(b-1) as meaning any person appointed to be a Deputy Commissioner of Commercial Taxes under s. 2-B. Section 2-B empowers the State Government to make appointments of as many Deputy Commissioners of Commercial Taxes and Commercial Tax Officers as they think fit for the purpose of performing the functions respectively conferred on them by or under the Act. The expression "Appellate Tribunal" is defined in s. 2(a-2) as meaning the Tribunal appointed under s. 2-A, which empowered the Government to appoint a Tribunal consisting of three members to exercise the functions conferred on the Appellate Tribunal by or under the Act. Section II provided for appeal by the assessee objecting to an assessment made on him under s. 9(2) within the prescribed period. Section 9 prescribed the procedure to be followed by the assessing authority. Section 12(1) conferred certain special powers on the Commercial Tax Officer. It said that "the Commercial Tax officer may (i) suo moto or (ii) in cases in which an appeal does not lie to him under section 11, on application, call for and' examine the record of any order passed or pro- ceeding recorded under the provisions of this Act by any officer subordinate to him, for the purpose of satisfying himself as to the legality or propriety of such order or as to the regularity of such proceeding, and may pass such order with respect thereto as he thinks fit." The application under s. 12 (1) (ii) could have been made even by the assessing authority. It may also be remembered 'that the Commercial Tax Officer was one of the authorities charged with the duty to see that no taxable turnover went untaxed. The power under S. 12(1) could have been exercised within three years from the date the assessee was served with assessment order. Power under S. 12(1)(ii) could have been exercised by the Commercial Tax Officer simultaneously with the exercise of his appellate powers under s. 11 (1) Section 12(2) conferred special powers on the Deputy Com- missioner to call for and examine any order or proceeding recorded under the provisions of the Act satisfying himself as to the legality or propriety of that order or as to the regularity of such proceeding and may pass such order with respect thereto as he thinks fit. This power he could have exercised within four years from the date on which the assessment order was communicated to the assessee. Section 12-A provided for an appeal by an assessee objecting to an order relating to his assessment passed by the Commercial Tax Officer whether on appeal under s. 11 or under s. 12, sub-s. (1) or by the Deputy Commissioner under s. 12, sub-s. (2) subject to certain conditions with which we are not concerned in this case. The assessee as well as the Deputy Commissioner were conferred with power to move the High Court under s. 12-B within the prescribed period against the order of the Appellate Tribunal on the ground that order either decided erroneously a question of law or it failed to decide the question of law arising for decision. State Of Madras vs Lateef Hamid & Co on 2 September, 1971 5 This takes us to the relevant provisions in the 1959 Act. Therein again 'the assessing authority" is defined in s. 2(c) as meaning any person authorised by the Government or by any authority empowered by them to make assessment under the Act. Against the order of assessment made by the assessing authority an appeal by any person objecting to the assessment lies to the Appellate Assistant Commissioner appointed under s. 28, sub-S. (3). Section 31 empowers the Appellate Assistant Commis- sioner to confirm, reduce, enhance,, or annul the assessment. The power to enhance the assessment was conferred on the Appellate Authority for the first time by the 1959 Act. Under this Act also' the Deputy Commissioner's power to suo moto revise the order of assessment is retained, subject to certain conditions. Any person objecting to the, order made by the Appellate Assistant Commissioner under s. 31(3) or against the order made by the Deputy Commissioner under s. 31 (1) can appeal to the Appellate Tribunal. Under s. 38 the assessee or the Deputy Commissioner can take up a revision to the High Court either on the ground that the Tribunal has decided a question of law erroneously or it has failed to decide a question of law arising for decision. In the matter of assessment, the purpose of the 1939 as well as the 1959 Act is identical. That purpose was and is to see that neither the assessee is over-assessed nor the State is deprived of the Revenue to which it is entitled. Under the 1939 Act, an aggrieved assessee could first appeal to the Appellate Authority and then to Tribunal. Further he could on questions of law go up in revision to the High Court. To protect the interest of the State, special powers were conferred on the Commercial Tax Officer as well as the Deputy Commissioner of Commercial Taxes. If the Deputy Commissioner was not satisfied with the decision of the Tribunal on questions of law, he could have gone up in revi- sion to the High Court. Under the 1959 Act, the procedure was simplified to some extent. The Appellate Assistant Commissioner who primarily took over the quasi-judicial functions of the Commercial Tax Officer was conferred with power not only to confirm, vary or annual the assessment but also the power to enhance the assessment. The power conferred on him under s. 31 of the 1959 Act combines to an extent both the appellate power as well as the special power the Commercial Tax Officer had under s. 11 and 12(1) of the 1939 Act. Hence the changes effected by the 1959 Act in the machinery provisions do not touch the substance of the matter. Even as regards the time within which the enhancement of assessment can be made the change excepting in exceptional cases is in favour of the assessees. The Commercial Tax Officer could have exercised his special powers under s. 12(1) of the 1939 Act within three years from the date the assessment order was served on the assessee. Under the, 1959 Act, he can enhance the assessment only during the pendency of the appeal and not thereafter. Herein we are not concerned with the special powers of the Deputy Commissioner nor with the powers of the Tribunal or the High Court. In our opinion there is no basis for saying that the provisions of the 1959 Act relating to the determination of the assessment are more onerous than those in the 1939 Act. The 1959 Act in our opinion merely, simplified the procedure without touching the substance of the right of the parties. No benefit that was available to an assessee as regards the procedure, was taken away. by the 1959 Act, if we ignore the remote possibility of an appeal pending before an Appellate, Assistant Commissioner for more than three years and that authority failing to exercise his power to enhance the tax within that period. The assessee before us cannot even have the benefit of such a contingency because the order of assessment in this case was made on March 24, 1961 and the appellate order was passed on State Of Madras vs Lateef Hamid & Co on 2 September, 1971 6 August 16, 1962. In this case it cannot be said that any vested right of the assessee had been in fact affected by the 1959 Act. Now we shall go to S. 61 of the 1959 Act on the basis of which the Tribunal and the High Court have upheld the contention of the assessee. Section 61 (1) to the extent material for our purpose reads : "61(1).(i) The Madras General Sales Tax Act, 1939 (Madras Act IX of 1939), (hereinafter in this section referred to as the said Act), is hereby repealed. (ii)The repeal of the said Act by clause (i) shall not affect- (a) anything done or any offence committed, or any fine or penalty incurred or any proceedings begun before the commencement of this Act; or (b) the previous operation of the said Act or anything duly done or suffered thereunder; or (c) any right, privilege, obligation or liability acquired, accrue or incurred under the said Act or; (d) any fine, penalty, forfeiture or punishment incurred in respect of any offence, committed against the said Act; or (e) any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, fine, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such fine, penalty, forfeiture or punishment may be imposed, as if this Act had not been passed. (iii)Subject to the provisions of clause (ii), anything done or any action taken including any appointment made, notification, notice or order issued, rule, form or regulation framed, certificate, licence or permit 5 84 granted, under the said Act shall be deemed to have been done or taken under the corresponding provision of this Act and shall continue in force accordingly, unless and until, superseded by anything done or any action taken under this Act. (2) Notwithstanding anything contained in sub-s. (1) any application, appeal, revision of other proceeding made or preferred to any officer or authority under the said Act and pending at the commencement of this Act, shall after such commencement, be transferred to and disposed of by the officer or authority who would have had jurisdiction to entertain such application, appeal, revision or other proceeding under this Act if it State Of Madras vs Lateef Hamid & Co on 2 September, 1971 7 had been in force on the date on which any application, appeal, revision or other proceeding was made or preferred. The rules framed under the 1939 Act (the Madras General Sales Tax Rules, 1939), provide for the appointment of Assistant Commercial Tax Officers and the Deputy Commercial Tax Officers. By his order dated September 15, 1939, in exercise of the powers conferred on him by cl. (a) of s. 2 and sub-ss. 1 and 2 of S. 14 of the 1939 Act, the Governor of Madras authorised the Assistant Commercial Tax Officers to exercise the powers of the assessing authority in the case of dealers whose turnover does not exceed Rs. 20,000/- and Deputy Commercial Tax Officers to exercise the powers of an assessing authority in the case of dealers whose turnover exceeds Rs. 20,000/-. It is not necessary to refer to the exceptional cases for which provision is made in the provisos to cl. (1) of that order. Rule 13(1)of the Rules prescribed that subject to the provisions of s. 11 any person aggrieved by any original order of an assessing authority may appeal to the Commercial Tax Officer of the District. The proviso to that section permits the Board of Revenue to transfer an appeal pending before a Commercial Tax Officer to another Commercial Tax Officer for reasons to be recorded in writing. But the usual appellate authority is the Commercial Tax Officer of the District. Hence the Commercial Tax Officer had both the powers of the appellate authority as well as the special powers conferred on him under S. 12(1) of the 1939 Act. By the exercise of those two powers, he could have confirmed, altered, amended or enhanced the assessment made. The power conferred on the appellate authority under the 1959 Act is not wider than that the Commercial Tax Officer had under the 1939 Act. Hence the 1959 Act does not adversely affect in any manner the right of appeal an assessee had under the 1939 Act. If one probes into the grievance of the assessee before us, it would be obvious that it is wholly imaginary. No assessee has any vested right in the procedure prescribed under the 1939 Act. So long as the new procedure laid down in the 1959 Act does not interfere with any of his vested rights, an assessee has no right to claim that his case must be dealt with under the provisions of the repealed Act. It is well settled that the new procedure prescribed by law governs all pending cases. As seen earlier, the assessee filed its appeal under S. 31 of the 1959 Act and not under s. 11 of the 1939 Act. But that is a minor aspect. What is of the essence is that his right of appeal under the 1959 Act does not take away in any manner any of his vested rights under the 1939 Act. Inview of what we have said herein before, it is not necessary for usto consider the meaning of the words "any right, privilege .......... accrued............ under the Act" in s. 61(1) (ii)(c). We repeat that no right of the assessee was infringed by the provisions of the 1959 Act. In this view' it is not necessary to examine the scope of s. 61 (2) of the 1959 Act about which there was considerable argument before us. The decision under appeal is based on the earlier two deci- sions of that High Court i.e. in Deputy Commissioner Commer- cial Taxes, Madras Division v. Sri Swami & Co.(1) and Deputy Commissioner of Commercial Taxes, Madras Division v. M. Balasundaram and Co.(2). Hence it is necessary to examine the correctness of those decisions. In Swami & Co.'s case (supra) the assessee was assessed by the Deputy Commercial Tax Officer for its turnover for the year 1955-56 under the 1939 Act. The order or assessment was passed on December 15, 1956. The assessee filed an appeal before the Commercial Tax Officer on February 15, 1957. During the pendency of the appeal, the 1959 Act came into force on April 1, 1959. Thereafter the appeal was transferred to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner reduced the turnover of the State Of Madras vs Lateef Hamid & Co on 2 September, 1971 8 assessee to certain extent. Not being satisfied with the' order of the Appellate Assistant Commissioner, the assessee preferred a further appeal to the Appellate Tribunal. In the course of the hearing of the appeal by the Tribunal, the State representative filed a petition seeking enhancement of the turnover of the assessee on certain grounds. The Tribunal rejected that plea holding that the assessee had a vested right to have his appeal disposed of under the provisions of the 1939 Act. It may be noted that under the 1939 Act, only an assessee could have appealed to the Tribunal against the order of the Appellate Assistant Com- (1) 13 S.T.C. 468. (2) 14. S.T.C. 996. sioner but under the 1959 Act both the assessee as well as the Deputy Commissioner can appeal against his order. Aggrieved by the order of the Tribunal, the Deputy Commissioner took up the matter in revision to the High Court. The High Court allowed the revision petition. It held that the Tribunal went wrong in holding that the petition filed by the State representative for enhancement of the assessment was not maintainable. In the course of its judgment the High Court observed "The immunity or protection which the assessee had under the 1939 Act so as to save the assessment made by the Deputy Commercial Tax Officer, the primary assessing authority, from being enhanced by the exercise of the appellate power by the Commercial Tax Officer, is a vested right, which cannot be interfered with or in any way impaired having regard to the specific provision of S. 61 (1) of the Madras Act 1 of 195 9. The order of the Appellate Assistant Commissioner only reduced the turnover to the benefit of the assessee, and it is clear that there was no violation of the vested right of the assessee by reason of the said order. The order of the Appellate Assistant Commissioner was passed after the coming into force of the 1959 Act and on that date the assessee had no vested right to prevent an enhancement of his assessment by the future appellate authority, namely the Tribunal. The Tribunal entertained an appeal at the instance of the assesses only under the new Act as the order appealed against was one passed after the coming into force of the new Act, and by a Tribunal which functioned under the new Act. It is impossible for the assessee to maintain the position that any order of the Appellate Tribunal enhancing the assessment made by the Appellate Assistant Commissioner would amount to deprivation of their vested rights or violation of the provisions of section 61 (1) of the 1959 Act." These observations appear to us to be somewhat incongruous. As seen earlier under the 1939 Act, the Revenue could not have appealed either against the order of the assessing authority or against that of the appellate authority. If the non-existence of the right of appeal on the part of the Department is considered as an immunity or protection and if that immunity or protection is considered as a vested right, the assessee will have that right both at the stage of the appeal to the Appellate Assistant Commissioner as well as at the stage of the appeal to the Tribunal. It is difficult to follow how the High Court was able to make a dichotomy as between the powers of the Appellate Assistant Commissioner and that of the Tribunal in that regard. If the newly constituted Tribunal were clothed with wider and larger powers as opined by the High Court, the same would be the case with the Appellate Assistant Commissioner. In our opinion, the true test to be applied to the case was whether in fact any vested right of the assessee had been taken away under the 1959 Act because of the enlargement of the powers of the first appellate authority or that of the Tribunal. As seen earlier, no real right of the assessee was infringed by the 1959 Act because of State Of Madras vs Lateef Hamid & Co on 2 September, 1971 9 the enlargement of the powers of those authorities. This takes us to the decision in Balasundaram & Co's case (supra). This case was decided by the same bench which decided Swami & Co's case. Therein the assessee was assessed to sales tax under the 1939 Act. During the pendency of its appeal to the Commercial Tax Officer, the 1959 Act came into force. Its appeal was transferred to the Appellate Assistant Commissioner who enhanced the assessment. But on a further appeal, the Tribunal came to the conclusion that the Appellate Assistant Commissioner had no jurisdiction to enhance the assessment. As against that order, the Deputy Commissioner of Commercial Taxes went up in revision to the High Court. The High Court held that the assessee had a vested right at the time when the 1959 Act came into force to prevent the Commercial Tax Officer from enhancing the assessment in the course of the appeal preferred by him. However, there was always the peril of the Commercial Tax Officer, who was also the revising authority, revising the assessment to his prejudice in exercise of his revisional power, but that peril effectively disappeared when under the 1959 Act, the revisional power was conferred upon the Deputy Commissioner of Commercial Taxes and not upon the Appellate Assistant Commissioner. Therefore the interference by the Appellate Assistant Commissioner with the assessment order passed by the Deputy Commercial Tax Officer to the prejudice of the assessee in the purported exercise of his appellate power, was clearly violative of the assessee's vested rights. In our opinion this decision proceeded on a wrong basis. The question before the High Court was whether there was a vested right in the assessee not to have his assessment enhanced, under the 1939 Act and whether that vested right had been in any manner infringed by the 1959 Act. As seen earlier he had no such vested right under the 1939 Act. The fact that a different procedure is prescribed under the 1959 Act for enhancing the assessment cannot be said to be an infringement of a vested right. No one can have a vested right in a mere procedure. We are of opinion that Balasundaram's case (supra) was wrongly decided and some of the observations in Swami & Co's case (supra) are not correct though the decision in that case is not open to question. Mr. S. T. Desai, learned- Counsel for the Revenue placed strong reliance on the decision of a Division Bench of the Kerala High Court in Velukutty v. Kerala Sales Tax Appellate Tribunal, Trivandrum and Ors. (1) Therein, interpreting a provision similar to S. 61 (2) of the Act, the High Court came to the conclusion that the clause "be transferred to and disposed of by the officer or authority who would have had jurisdiction to entertain such. application, appeal, revision or other proceeding under this Act, if it had been in force on the date on which any application. appeal, revision or other proceeding was made or preferred" con- ferred power on the appellate authority to enhance assessment. The correctness of this conclusion was contested by Mr. Shankardass, learned Counsel for the assessee. According to him that clause merely provided for transference of the appeals pending .before the authorities under the 1939 Act to the authorities under the 1959 Act without enlarging their powers. In view of our conclusion that no vested right of the assessee had been interfered with, it is not necessary for us to go into this controversy. For the reasons mentioned above, this appeal is allowed, orders of the High Court as well as that of the Tribunal are set aside and the case is remitted to the Tribunal for disposal :according to law. In the circumstances of the case we direct the parties to bear their own costs both in this Court as well as in the High Court. G.C. Appeal allowed. State Of Madras vs Lateef Hamid & Co on 2 September, 1971 10 (1) 20 S.T.C. 28. State Of Madras vs Lateef Hamid & Co on 2 September, 1971 11 | {
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Commissioner Of Income-Tax, West ... vs Dinesh Chandra H. Shah And Ors. on 27 August, 1971 Equivalent citations: AIR1972SC29, [1971]82ITR367(SC), (1972)3SCC231, AIR 1972 SUPREME COURT 29, 1972 TAX. L. R. 20 Author: A.N. Grover Bench: A.N. Grover, K.S. Hegde JUDGMENT A.N. Grover, J. 1. This is an appeal from a judgment of the Calcutta High Court in an Income-tax Reference. Originally it has been brought by certificate but the same had to be revoked (i.e. in C. A. 1685 of 1968) as no reasons had been given in the order granting the certificate. The Commissioner of Income-tax, West Bengal moved this Court under Article 136 of the Constitution for special leave and the same has been granted. This appeal (C. A. 1080 of 1971) will be disposed of by his judgment and for doing so we shall refer to the printed record in C. A. 1685 of 1968. 2. The assessee was H. K. Shah who is now dead and is represented by the present respondents. The assessment year with which, we are concerned is 1955-56 the previous year being that ending on March 31, 1955. H. K. Shah deceased, hereinafter referred to as the "assessee". had a share of profit from the Mysore Premier Metal Factory Madras of which he was 9 partner. He was also carrying on other business and was being assessed at Calcutta. In his return which he filed before the Income-tax Officer at Calcutta he specifically disclosed his share in the income of the Madras firm. The profit allocation report of the share of profit from the Madras firm had been received in the office of the Income-tax Officer In September 1955 and an order was recorded on the order sheet of the proceedings to that effect. The assessment for the year in question was completed some time in November 1958. The Income-tax Officer failed to include in the total income the share of profit from the Madras firm. On March 22, 1960 the Income-tax Officer issued a notice under Section 34(1)(b) of the Income-tax Act, 1922, hereinafter called the "Act", calling upon the assessee to show cause why the profits from the Madras Arm which had escaped assessment should not be included in the income. The assessee wrote a letter saying that he had fully disclosed the details of his income from all sources in his original return and nothing had escaped assessment. In fact he had indicated that he had a share in the profits of the Madras firm and was also entitled to interest on the capital invested therein. The Income-tax Officer, however, completed the assessment for the aforesaid year as also the subsequent assessment year in which also the share of the income from the Madras firm had not been included. The assessee went up in appeal to the Appellate Assistant Commissioner Commissioner Of Income-Tax, West ... vs Dinesh Chandra H. Shah And Ors. on 27 August, 1971 1 which was allowed on the ground that the Income-tax Officer had no additional information either externally or internally which came Into his possession subsequent to the making of the assessment to justify the action taken under Section 34(1)(b). The Revenue appealed to the Appellate Tribunal which reversed the decision of the Appellate Assistant Commissioner in respect of the assessment year 1955-56. The view of the Tribunal was that the information on the record in respect of the share of profit assessable to tax had escaped the notice of the Income-tax Officer and therefore he was justified in taking action under Section 34(1)(b). Two questions were referred for the opinion of the High Court but we are only concerned with the first question which is as follows: Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the action under Section 34(1)(b) of the Income-tax Act, 1922 was legal and valid? The High Court was of the opinion that there may be information existing on the record or brought to the notice which does, not become informative at the first sight and requires further investigation or consideration. In such cases the realisation of the effect of the information subsequently may give to the Income-tax Officer the jurisdiction to start proceedings under Section 34(1)(b) but the mere fact that the Income-tax Officer changes his opinion subsequently or the fact that he fails to notice a palpable or glaring matter earlier should not be treated as additional information coming to his notice subsequent to the assessment order. The question was, therefore, answered against the Revenue. 3. It may be mentioned that the decisions relating to Section 34(1)(b) are a legion and it may seem that divergent views have been expressed in some of the cases in the light of their peculiar facts. The Revenue has contended for the proposition which was accepted by the Madras High Court in Family of V.A.M. Sankaralinga Nadar v. Commissioner of Income-tax, Madras (1963) 48 ITR 314 (Mad) that although a mere change of opinion regarding the chargeability of income on the part of the reassessing Officer different from his own previous opinion or that of his predecessor in Office might not justify action under Section 34(1)(b) but Income which escapes assessment as a result of the lack of vigilance of the Income-tax Officer or due to inadvertence or negligence or due to perfunctory performance of his duties without due care and caution could well be within the ambit of Section 34(1)(b) provided the requirements of that section are satisfied. In other words even if the assessee has placed the entire facts which would enable the Income-tax Officer to make a proper assessment of his income but he fails to do so for the various reasons stated earlier he can, as soon as he realizes his mistake, issue a notice under Section 34(1)(b) after completing the assessment. 4. We may refer at this stage to wane of the decisions of this Court in which the principles applicable to the case of the present kind have been enunciated. In Kamal Singh v. Commr. of Income-tax, Bihar and Orissa it was laid down that two conditions must be satisfied before the Income-tax Officer could act under Section 34(1)(b). He must have information in his possession which in the context meant that, that relevant information must have come into possession subsequent to the making of the assessment order in question and that information must lead to his belief that income chargeable to income-tax had escaped assessment for any year. According to the decision in Commr. Commissioner Of Income-Tax, West ... vs Dinesh Chandra H. Shah And Ors. on 27 August, 1971 2 of Income-tax, Gujarat v. A. Raman and Company jurisdiction of the Income-tax Officer to reassess income arises if he has, in consequence of information in his possession, reason to believe that income chargeable to tax has escaped assessment. That information must have come into possession after the previous assessment but even if the information be such that it could have been obtained during the previous assessment from an investigation of the materials on the record or the facts disclosed thereby or from other inquiry or research into facts or law but was not in fact obtained, the jurisdiction of the Income-tax Officer was not affected. 5. It is not disputed that the facts in the above case were altogether different from those of the present case. But on behalf of the Revenue assistance has been sought to support the contention that even if there has been an omission to include a particular item of income in an assessment by inadvertence it is open to the Income-tax Officer to invoke the provisions of Section 34(1)(b) when he discovers subsequently that, that particular Item of Income has escaped assessment. In our judgment it is wholly unnecessary to go into the question whether an inadvertent omission can justify the reopening of the assessment on its subsequent discovery by the Income-tax Officer, No such position was adopted by the Income-tax Officer when he was called upon by the Appellate Assistant Commissioner to state the reason for not including the income of the Madras firm about the factum and existence of which full disclosure had been made in the return filed by the assessee and with regard to the income of which a note had been made on the file when the share allocation report was received from the Income-tax Officer, Madras on September 21, 1955. It appears that the Income-tax Officer clearly sought to justify the reopening of the assessment under Section 34(1)(b) merely on the ground of change of opinion. It is well settled by now and Mr. Desai quite rightly does not dispute the proposition that mere change of opinion could not be a valid ground for reopening the assessment under Section 34(1)(b) of the Act. We would accordingly uphold the answer returned by the High Court on the short ground that the reassessment for the year in question was sought to be reopened for the reason that the successor of the Income-tax Officer who had made the original assessment had changed his opinion which did not furnish a justifiable reason for taking action under Section 34(1)(b). 6. In the result the appeal fails and it is dismissed but in the circumstances we leave the parties to bear their own costs. Commissioner Of Income-Tax, West ... vs Dinesh Chandra H. Shah And Ors. on 27 August, 1971 3 | {
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Firm Of Harbanslal Jagmohandas & Anr vs Prabhudas Shivlal on 16 April, 1971 Equivalent citations: 1973 AIR 2056, 1971 SCR 397, AIR 1973 SUPREME COURT 2056, 1971 2 SCC 155, 1971 (1971) RENCR 456, 1971 (1) SCWR 906 Author: C.A. Vaidyialingam Bench: C.A. Vaidyialingam, A.N. Ray PETITIONER: FIRM OF HARBANSLAL JAGMOHANDAS & ANR. Vs. RESPONDENT: PRABHUDAS SHIVLAL DATE OF JUDGMENT16/04/1971 BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. RAY, A.N. CITATION: 1973 AIR 2056 1971 SCR 397 1971 SCC (2) 155 ACT: Practice and Procedure-Application for special leave to this Court Averment giving impression that attention of High Court was drawn to the conflicting decision of another High Court, when in fact it was not so drawn-Grant of leave-If may be revoked on the ground that this Court was misled. HEADNOTE: The respondent who was the landlord of certain premises in Surat, filed a suit for the eviction of the petitioners, who were the tenants, on the ground of non payment of rent. The petitioners filed a written statement in which they raised a dispute regarding the standard rent, and also con- tended that they had raised such a dispute, within the time allowed by law that is, one month of service of the suit notice., The trial court as well as the appellate court Firm Of Harbanslal Jagmohandas & Anr vs Prabhudas Shivlal on 16 April, 1971 1 found that a dispute regarding standard rent was not raised within one month of service of the suit notice and held, following a decision of the Gujarat High Court, that the respondent was entitled to recover possession under s. 12(3)(a) of the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947. The High Court of Gujarat also rejected the petitioners' revision petition. Thereupon, the petitioners filed an application in this Court, for special leave, contending that the High Court of Bombay had held that it was sufficient if the dispute regarding standard rent was raised in the written statement, and that, in such a case eviction could not be ordered under s. 12(3) (a); and since there was a direct conflict between the High Courts of Gujarat and Bombay an important question of law relating to the scope and applicability of s. 12(3) (a) arose. This Court granted special leave and stay. The respondent filed an application for revocation of the grant of special leave on the ground that the averments in the special leave petition gave the impression that the attention of the Gujarat High Court was drawn to the decision of the Bombay High Court, while in fact, it was not so, and that therefore the petitioners had misled this Court. HELD: Assuming that the grounds in the special leave application gave the impression that the attention of Gujarat High Court was drawn to the decision of the Bombay High Court, it could not be stated that there was any misstatement or untrue averment in the grounds. The contention raised was a legal contention, and there was no other manner in which a party could draw the attention of this Court to the conflict between the two High Courts. [405E-G]. It is but proper that if a party wants to have a particular legal position settled in a High Court, reconsidered on the basis of a different view taken by another High Court, he should draw the attention of the High Court, when the question is raised, to the conflicting decisions. Even if he has omitted to do so it cannot be said that when the correctness of the judgment so given, is concerned before this Court he should not be allowed to challenge the decision on the ground that another High Court has taken a different view. Such A ground on a legal point should not be confused 398 or mixed up with averments regarding material facts or matters of importance. [405G-H; 406A-C]. The statements in the special leave petition could not be considered to be untrue or false on material facts or matters of importance, and therefore, the prayer for revoking the special leave would have to be rejected. [406D]. Firm Of Harbanslal Jagmohandas & Anr vs Prabhudas Shivlal on 16 April, 1971 2 JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Misc. Petition Nos, 854 and 2282 of 1971. Applications for stay and for amendment of the prayer in C. M. P. No. 854 of 1971. Civil Appeal No. 28 2 of 1971. Appeal by special leave from the judgment and order dated December 22, 1970 of the Gujarat High Court in Civil Revision Application No. 1353 of 1970. S. T. Desai, S. V. Tambwekar for S. K. Dholakia, for the petitioners and appellants. I. N. Shroff, for the respondent. The Judgment of the Court was delivered by Vaidialingam, J.-The petitioners in both these applications have taken on lease the ground floor portion of property in Ward No. V. Nondh No. 1088 of Surat. The respondent became the owner of the said property by purchasing it from the previous owner by a registered sale deed dated September 18, 1958. The petitioners who were the tenants of the premises even prior to the date of purchase by the respondent, have continued to be his tenants and they are using the premises for their business purposes. The respondent landlord filed on February 12, 1967 a civil suit No. 144 of 1967 in the court of the Third Joint Civil Judge, Junior Division, Surat for evicting the petitioners. According to the landlord the petitioners had not paid the rent for a period of over six months and had also not complied with the notice issued under Section 12 of the Bombay Rents Hotel and Lodging House Rates (Control) Act 1947 (Act 57 of 1947) (hereinafter called the Bombay Rent Act). The respondent had alleged that he had terminated the tenancy of the petitioners by notice dated November 24, 1966. The respondent sought eviction of the petitioners on two grounds namely, (1) default in payment of rent, and (2) premises being required for bonafide personal use and occupation. The petitioners contested the suit on various grounds and denied that they were in arrears and pleaded that they had raised a dispute in respect of the standard rent within the time allowed by law They also contended that the landlords requirements for use of occupation-was not bonafide Both the trial court as well as the appellate : Court the Extra Assistant Judge, surat, have concurrently rejected the plea of the respondent that he required the promises bonafide for personal use. Both the courts held that the petitioners have not raised any dispute about the standard rent within one month of service of suit notice either by preferring a standard rent application or by sending, a reply to the, suit: notice raising such a dispute. : On this basis both the courts hold that the respondent-plaintiff is entitled to recover possession of the premises on the ground of, non payment of rent under Section 12 (3) (a) of the Bombay Rent Act and accordingly passed an order directing eviction of the petitioners from the suit, premises. The petitioners filed Civil, Revision Application No. 1353 of 1970 before the Gujarat High. Court challenging the decision of the two subordinate Firm Of Harbanslal Jagmohandas & Anr vs Prabhudas Shivlal on 16 April, 1971 3 courts ordering their eviction. The High Court summarily rejected the said application by its order dated December 22, 1970. The petitioners filed Special Leave Petition No. 342 of 1971 seeking special leave to appeal against the decision of the Gujarat High- Court. In the special, leave petition it has been stated that the appeal raises important the of law relating to the scope ,and applicability of Section 12 (33) (a) of the Bombay Rent Act, which applies in all material particular& to both the States of Maharashtra and Gujarat. It has been further stated that there is a direct conflict regarding the interpretation of this section between the Full Bench of the Bombay High Court and the Gujarat High Court. According to the petitioners, the Bombay High Court has held that the matter will not fall under. Section 12 (3) (a) even in those cases where a dispute in respect of standard rent has been raised in the written statement, whereas the Gujarat High Court has held to the contrary and, therefore, there is a direct conflict between the two High Courts on this point. Along with the special leave petition the petitioners have filed C. M. P. No. 854 of 1971 praying for the stay of operation of the order of the Gujarat High Court in Civil Revision Application No. 1353 of 1970. In view of the conflict between the Bombay and Gujarat High Courts regarding the interpretation of the above section, this Court granted special leave by its order dated February 15, 1971. This Court further granted exparte stay pending disposal of the notice of motion, which was made returnable within three weeks. The respondent entered appearance and filed his counter- affidavit in C. M. P. No. 854 of 1971. In the counter- affidavit the respondent has made two prayers, namely, (1) to revoke the special leave granted to the petitioners and (2) to dissolve the order of stay granted- exparte. In order to, clarify the Prayers made in C.M. P. No. 854 of 1971, the petitioners have filed C. M. P. No, 2282 of 1971 requesting permission to amend their original application C. M. P. No: 854 of 1971 by stating that the relief asked for is for stay of eviction of the petitioners from the suit premises and to grant, stay of operation of the judgments of the trial court as well as of the Appellate Court. Reading the two applications it is clear that the petitioners seek relief from dispossession pending the disposal of the appeal by this Court. We will deal with the prayers for grant of stay of dispossession after disposal of the plea raised by the respondent that the Special leave granted by this Court should be revoked. The grounds on which the respondent requests for cancellation of special leave are that the petitioners have completely misled this Court in regard to the true facts of the case and that they are guilty of suppressio veri or suggestio falsi. The bone of contention in this regard as pointed out by Mr, 1. N. Shroff, learned counsel for the respondent is that the Full Bench decision of the Bombay High Court, which is stated to be in direct conflict with the decision of the Gujarat High Court has never been placed before the Gujarat High Court when it dismissed in limine C. R. P. No. 1353 of 1970. Mr. S. T. Desai, learned counsel for the petitioners, pointed out by reference to the special leave petition that there has been no attempt by his clients to mislead this Court and he further urged that all the facts have been stated correctly. He admitted that it has been mentioned in the special leave Firm Of Harbanslal Jagmohandas & Anr vs Prabhudas Shivlal on 16 April, 1971 4 petition that there is a direct conflict between the Bombay and Gujarat High Courts in the matter of interpretation of Section 12 (3) (a) of the Bombay Rent Act. This plea, being a legal contention was available to the petitioners and they were perfectly justified in placing before this Court the conflict so that it may be resolved one way or the other. The statement regarding the conflict made in the special leave petition is also true. At the outset we may clear the ground by stating that Mr. S. T. Desai, learned counsel for the petitioners, desired us to proceed on the basis that there is nothing on record to show that the Full Bench decision of the Bombay High Court was placed before the Gujarat High Court when C. R. P. No. 1353 of 1970 was being heard. We Will now refer to the statements made in the special leave petition, which are relevant for the purpose of deciding whether there has been any untrue statement made by the petitioners. In paragraph 2, it is stated that the special leave petition raises important question of law relating to the scope and applicability of Section 12 (3) (a) of the Bombay Rent Act, which applies in all material particulars to both the States of Maharashtra and Gujarat and that there is a direct conflict between the Full Bench of the Bombay High Court and the, Gujarat High Court. It is further stated that the Bombay High Court has held that a matter will not fall in Section 12(3)(a) not only in those cases for which a dispute in respect of standard rent has been raised within one month of the service of, notice but also in those cases in which a dispute in respect of standard rent is raised in written statement filed in reply to the plaint of the landlord. In paragraph 2 it is further stated "This important decision given by the Full Bench of the Bombay High Court, it is respectfully submitted, is in direct conflict with the authorities of the Gujarat High Court, and the present decision of the Gujarat High Court from which this special leave is being filed has also proceeded on the basis which is in direct conflict with the judgment of the Bombay High Court. This is because the petitioners who are the tenants had in any event and accepting all findings of fact of the Courts below. raised a dispute regarding standard rent in the written statement and therefore on the ratio of the Bombay High Court judgment the petitioners cannot be ordered to be evicted from the premises." Paragraphs 4 to 13 give the facts and circumstances leading to the filing of the petition for special leave. In. those paragraphs facts relating to the tenancy, the notices that passed between the parties, as well as the findings of the two subordinate courts and the dismissal by the High Court of C. R. P. No. 1353 of 1970 are stated. Paragraph 14 enumerates the various grounds which, according to the petitioners, will enable them to obtain special leave. Grounds which according to the respondent, amount to statements of facts and which are not true are Nos. 2, 3 and 16. They are as follows : "II. That the High Court ought to have examined the aspect as to whether in view of the judgment of the Full Bench of the Bombay High Court in Special Civil Application No. 718 of 1968 decided on 17th August, 1970, a case is made out as to whether Section 12 (3) Firm Of Harbanslal Jagmohandas & Anr vs Prabhudas Shivlal on 16 April, 1971 5 (a) of the aforesaid Act applied when a dispute about standard rent is raised at the time of written statement. 26-.1 S.C. India/71 III. That the High Court ought to 'have considered the reasons on the basis of which the judgment of the Full Bench of the Bombay High Court was delivered, particularly in view of the fact that there was a clear conflict between the judgments of the High Court of Bombay and the High Court of Gujarat on the question of the scope and applicability of section 12 (3) (a) of the aforesaid Act. XVI. It is respectfully submitted that the petition involves substantial questions of law of public importance and the decision on which would affect a large number of pending cases both in the Maharashtra and Gujarat Courts which deal with identical section 12 (3) (a) of the aforesaid Act. In view of the direct conflict between the Bombay and Gujarat High Courts it is respectfully submitted that it is a fit case for this Hon'ble Court or other- wise the same section would be interpreted by both the courts in contradictory manner. In fact if the petitioners had been in Maharashtra then he would have succeeded in view of the Full Bench judgment of the Bombay which squarely applies to the facts of this case, even accepting all findings of facts against the petitioners. A true copy of the Bombay High Court Full Bench judgment is annexed hereto as Annexure B and a true copy of the judgment of the lower appellate court is annexed hereto to as Annexure C." The true copy of the Full Bench, judgment of the Bombay High Court, referred to in ground No. XVI is the one in Special Civil Application No. 781 of 1968 decided on August 17, 1970. In the counter-affidavit filed by the respondent in C. M. P. No. 854 of 1971 in paragraph 5, after referring to the fact that the Petitioners are making a grievance about the summary dismissal of the C. R. P. No. 1353 of 1970 by the Gujarat High Court on the ground that the said decision is in conflict with the Full Bench decision of the Bombay High Court, referred to above, it is stated : "The enquiries made by me show that the Petitioners had not produced before the Gujarat High Court a Certified or even an Ordinary copy of the said Full Bench Judgment of the Bombay High Court nor had the petitioners at the admission stage of the Petitioners' Civil Revision Petition before the Gujarat High Court cited or referred to the said Full Bench decision. If the information received by me is correct and I believe it to be correct, it is wholly improper for the Petitioners to approach this Hon'ble Court and to contend that the Gujarat High Court is in error in not examining and following the Full Bench decision of the Bombay High Court." In Paragraphs 8 and 9 it is stated "8. The conduct of the Petitioners would further appear to be improper because they do not appear to have taken up this point in their Civil Revision Petition No. 1353 of 1970 filed by them in the Gujarat High Court. 9. It, therefore, appears that the Petitioners have completely misled this Hon'ble Court in regard to the true facts and have thereby obtained from this Hon'ble Court Special Leave to Appeal, which, in all probability, this Hon'ble Court would not have been pleased to grant had the Petitioners placed before this Hon'ble Court true facts of the case." Firm Of Harbanslal Jagmohandas & Anr vs Prabhudas Shivlal on 16 April, 1971 6 Therefore, it will be seen from the material averments of the respondent that his bone of contention regarding the statements of fact by the petitioners is that the statements contained in the relevant paragraphs of the special leave petition, adverted to earlier, give the impression that the Full Bench decision of the Bombay High Court was placed before the Single Judge of the Gujarat High Court when C. R. P. No. 1353 of 1970 was being disposed of. That the said judgment was not brought to the notice of the High Court is clear from the fact that no grounds were taken in the Civil Revision Petition regarding any conflict between the Gujarat and the Bombay High Courts on identical provisions of the statute. The petitioners have in their rejoinder affidavit controverted the allegation that they have in any manner misled the Court. They have, on the other hand, stated that the conflict between the two High Courts has been stated in the special leave petition, which is a fact and it was mainly on that basis that the special leave was asked for and granted by this Court. They have further stated that there has been no suppression of many material facts or misstatement of facts which misled the Court in granting the special leave. Mr. I. N. Shroff has referred us to the decisions of this Court wherein it has been held that when there has been an untrue statement of a matter of importance or when there has been a misstatement as to valuation so as to mislead the Count to exercise its discretion in a party's favour or when a false statement has been made on material facts. this Court had revoked the special leave already granted. There can be no- controversy that if the petitioners have made an untrue averment regarding material statements or false statement of matters of importance or a deliberate untrue statement of material facts so as to mislead this Court or if there, has been any suppression on any point of importance the special leave granted by this Court will have to be revoked. But the question is whether in the circumstances of the case the petitioners have made any such misstatement or untrue statement of matters of importance. In S. R. Shetty v. Phirozeshah Nusserwanji Golabawalla and another (1) special leave was revoked on the ground that the valuation had been' deliberately inflated by the parties with a view to getting over the preliminary hurdle regarding valuation. In Hari Narain v. Badri Das (2), it was observed by this Court : "It is of utmost importance that in making material statements and setting forth grounds in applications for special leave, care must be taken not to make any statements which are inaccurate, untrue or misleading. In dealing with applications for special leave, the Court naturally takes statements of fact and grounds of fact contained in the petitions at their face value and it would be unfair to betray the confidence of the Court by making statements which are untrue and misleading. That is why we have come to the conclusion that in the present case, special leave granted to the appellant ought to be revoked." In Rajabhai Abdul Rehman Munshi v. Vasudev Dhanjibhai Mody (3) this Court after referring to the previous decision, cited above, observed as follows : Firm Of Harbanslal Jagmohandas & Anr vs Prabhudas Shivlal on 16 April, 1971 7 "Exercise of the jurisdiction of the Court under Art. 136 of the Constitution is discretionary : it is exercised sparingly and in exceptional cases, when a substantial question of law falls to be determined or where it appears to the Court that interference by, this Court is necessary to remedy serious injustice. A party who approaches this Court invoking the exercise of this overriding discretion of the Court must come with clean hands. If there appears on his part any attempt to overreach or mislead the Court by false or untrue statements or by withholding true information which would have a bearing on the question of exercise of the discretion, the Court would be justified in refusing to exercise the discretion or if the discretion has been exercised in revoking the leave to appeal granted even at the time of hearing of the appeal." (1) C.A.No. 155 of 1963 decided on 5-4-1963. (2) [1964] 2 S. C. R. 203. (3) [1964] 3 S. C. R. 480. In Sita Bai (dead by her legal representative and another v. sonu vanji Warti and others (1) this Court revoked special leave on the ground that on matter of importance the, appellants therein had made untrue statements' before this Court. Recently in Shankar Madhoji Nemade v. Chisuji Janaji Bhadke and others (2) this Court reiterated the principles laid down in the above decisions. But on facts it was held that there has been no untrue or false averment regarding material facts. Having due regard to the principles laid down above and applying them to the case on hand, we are of the, opinion that the request of the respondent for revoking special leave granted has to be rejected. We are also satisfied that there has been no false or untrue averment on material facts made by the petitioners for the purpose of misleading this Court. Paragraph No. 2 of the special leave petition refers to the conflict between the Gujarat and- Bombay High Courts with regard to the scope and applicability of Section 12 (3) (a) of the Bombay Rent Act. The contrary view taken by the Gujarat High Court is the one reported in Chunilal Shivlal v. Chimanlal Nagindas (3), which has been followed by the two subordinate courts. No doubt the High Court has summarily rejected the Civil Revision Petition. Therefore, what is stated in paragraph No. 2 is a pure statement of the legal position and factually it is correct. We have also referred to the grounds Nos. 2, 3 and 16 which are purely legal contentions. The contention of Mr. Shroff, learned counsel for respondent is that a reading of these grounds gives the impression that the attention of the Gujarat High Court was drawn to the Full Bench decision of the Bombay High Court when the Civil Revision Petition was disposed of. Assuming it is so, in our opinion, it cannot be stated that there is any misstatement or untrue averment contained in these grounds. It must be remembered that they are legal contentions taken in the grounds attacking the judgment of the Gujarat High Court. We fail. to see in what other manner a party can draw the attention of this Court to a conflict between two High Courts with regard to the interpretation of a substantially similar provision of a statute. It is needless to state that if a party wants to have a particular legal position settled in a High Court, reconsidered on the basis of a different decision on identical point by another High Court and specially with regard to the same statute, he must draw the attention of the learned Judge to that Firm Of Harbanslal Jagmohandas & Anr vs Prabhudas Shivlal on 16 April, 1971 8 decision bearing on the point in question. This will be a very proper thing for a party to do. But that is far from saying (1) C. A. No. 982 of 1965 decided on 25-4-1968. (2) C. A. No. 85 of 1967 decided on 8-9-1970. (3) 7 C. L. R. 945. that if he has omitted to place a particular decision of another High Court on' an identical matter, but nevertheless when the judgment so given is before a higher Tribunal, he should not be allowed to challenge the decision on the ground that the other High Courts have taken a different view. For instance, if a matter is disposed of by a Division Bench of the same High Court and a similar matter is disposed of by a Single Judge' on the next day without being made aware of the decision of the Division Bench in our opinion, it will be perfectly open to the party aggrieved by the judgment of the Single Judge, when filing. an appeal against that judgement to urge that it is contrary to the Division Bench decision of the same court, though that judgment was not brought to the notice of the Single Judge. The grounds taken on legal points should not, in our opinion, be confused or mixed up with the averments regarding material facts or matters of importance. We are of the opinion that none of the statements in the special leave petition relied on by Mr. Shroff can be considered to be untrue or false statements on material facts or matters of importance. Therefore, the prayer of the respondent for revoking the special leave granted will have to be rejected. The C. M. Ps. Nos. 2282 of 1971 is allowed and the prayer in C. M. P. No. 854 of 1961 will stand suitably amended. Regarding the stay application, it is ordered that there will be a stay of dispossession of the petitioners from the premises pending disposal of the appeal by this Court provided, (1) the petitioners deposit in the trial court within one month from today the entire arrears of rent; and (2) the petitioners deposit in the trial court rent for every month on or before the 10th of the succeeding month. The respondent will be at liberty to withdraw the rents so deposited unconditionally and without prejudice to his contentions in the appeal. If the petitioners fail to deposit the arrears or commit two consecutive defaults in depositing the monthly rent, the stay granted will stand vacated and the respondent will be entitled to take delivery of the properties. It is also recorded that Mr. S. T. Desai, learned counsel for the petitioners, has undertaken on behalf of the firm and its partners that they will deliver possession of the premises within three months from the date of judgment in the appeal, in case the appeal is dismissed. There will be no order as to costs. V.P.S. Appeal dismissed. Firm Of Harbanslal Jagmohandas & Anr vs Prabhudas Shivlal on 16 April, 1971 9 | {
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Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 Equivalent citations: 1971 AIR 2422, 1972 SCR (1) 202, AIR 1971 SUPREME COURT 2422, 1971 LAB. I. C. 1401, 1971 2 LABLJ 393, 1973 MAH LJ 753, 1973 MPLJ 879, 1972 (1) SCJ 149, 1972 2 SCJ 683, 1972 2 ITJ 568, 1972 UPTC 181, 24 FACLR 87, 40 FJR 126, 1972 (1) SCR 202, 1972 (1) SCR 230, 1975 BOM LR 465 Author: G.K. Mitter Bench: G.K. Mitter, P. Jaganmohan Reddy PETITIONER: BOMBAY PANJRAPOLE, BHULESHWAR Vs. RESPONDENT: THE WORKMEN AND ANOTHER DATE OF JUDGMENT16/08/1971 BENCH: MITTER, G.K. BENCH: MITTER, G.K. REDDY, P. JAGANMOHAN CITATION: 1971 AIR 2422 1972 SCR (1) 202 1971 SCC (3) 349 ACT: Industrial Disputes Act, 1947-Section 2(j) -'Industry'-A Panjrapole started initially as a charitable institution but later organised commercially-If "Industry". HEADNOTE: The appellant Panjrapole was started in 1834 as a charitable institution for the care and protection of animals. it expanded its activities considerably over the years. The institution gradually diversified its objects from only tending to the sick, infirm and unwanted cattle by adopting a policy of keeping cattle not merely for their own sake but Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 1 for the sake of improving the cattle population in order to get large quantities of milk for sale and there by get an income which would augment its sources. The institution was using stud bulls for the purpose of breeding healthy cattle including cows so as to be able to make a sizable income from the sale of milk. The value of the milk sold was considerable compared to the value of milk supplied to the sick and infirm cattle of the institution. The expenses for treating the sick animals was also very little compared to the total expenses of the Institution. A large number of workers were employed at the institution. They raised an industrial dispute in relation to their wages and other service benefits. The dispute was referred for adjudication to the Industrial Tribunal. It was contended by the Appellant that the Institution was a charitable institution and therefore was not an 'industry' within the meaning of s. 2(j) of the Industrial Disputes Act. The Tribunal found that the activities of the institution in connection with its movable property and collection and sale of milk to be an "industry" while the maintenance of lame, infirm and sick cows, dogs and other animals was held not to constitute an "industry". A petition under Art. 227 was moved in the High Court for quashing the award of the Industrial Tribunal but the same was summarily rejected. Dismissing the appeal, HELD:On the facts and circumstances of the case, the Bombay Panjrapole is an "Industry" within the meaning of Sec. 2(j) of the Industrial Disputes Act. The activities of the Panjrapole, though charitable at the. beginning, was not exclusively so in later years, and the later activities show that it was carried on as a business concern. Even the value of the milk supplied for the last 3 or 4 years itself was well in excess ,of Rs. 2 lakhs per annum and this could only be possible if the cows ,and buffaloes had been kept and maintained not merely to keep them ,alive but with the idea of getting as much production out of them as possible and the Panjrapole was run like a dairy firm. [223H] State of Bombay v. The Hospital Mazdoor Sabha, [1960] 2 S.C.R. 866, Safdar Jung Hospital, New Delhi v. K. S. Sethi & Management of M/s T. B.- Hospital, New Delhi v. The Workmen, A.I.R. 1970'S.C. 1407. Gynmkhana Club Union v. Management, [1968]. 1 S.C.R. 742, Lalit Hari Ayurvedic College Pharmacy v.Its Workers Union, A.I. R. 1960 S. C. 1261, Madras Panjrapole v. Labour Court, [1960] 2 L. L J. 686, Worknien Employed in Madras Panjapole v. Madras Panjropole [1962] 2 L.L.J. 472, Cricket Club v. Labour Union, ' [1969] 1 S.C.R. 60, Harinagar Cone Firma v. State of Bihar, [1964] 2 S.C.R. 458, referred to. JUDGMENT: Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 2 CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1331 of 1966. Appeal by special leave from the order dated January 20, 1966 of the Bombay High Court in Special Civil Application No. 54 of 1966. D. V. Patel and L N. Shroff for the appellant. G. P. Pai, Bhajan Ram Rakhiani and R. K. Khanna, for respondent No. 1. The Judgment of the Court was delivered by Mitter, J. The question involved in this appeal by special leave from an order of the Bombay High Court rejecting summarily a petition -under Art.227 of the Constitution for the issue of a writ of certiorari or other appropriate writ for examining the legality of the award made by the Industrial Tribunal, Maharashtra on July 27, 1965 and published in the Maharashtra Gazette on August 19, 1905 and for quashing the same appears to be one of first impression so far as this Court is concerned. The appellant before e this Court is an institution which came into existence as far back as 1834. It originated in the desire of certain Hindu and Parsee gentlemen of the City of Bombay to put a stop to the practice of killing of stray dogs by the stray dogs by the sepoys of the East India Company. the deed of October 18, 1834 shows that certain Hindus , Parsees and Mahajuns had resolved to start a Panjrapole with suitable.buildings by raising subscription and also by promising to pay certain fees on stated mercantile commodities to the Panjrapole to be established for the keeping of stray cattle and other animals and for protecting their lives. This was followed by a deed of declaration of- trust executed on 2nd November, 1850. This shows that the institution mentioned in the earlier document had been established and the management of its funds had been placed in the hands of certain Banians. under the superintendence of Sir Jamshedjee Jeejeebhoy and that out of the surplus funds collected Rs. 75,057/- had been invested in the purchase of Government Promissory notes. The trustees were -to stand possessed of the said notes and interest and dividends thereof upon trust for the use and benefit of the said institution. On 2nd November, 1850 a deed of assignment and declaration of trust in favour of panjrapole was executed by Sir Jamshedjee Jeejeebhoy to Khimchand Motichand. This document shows that a part of the surplus funds had been invested in the purchase of several pieces or parce Is ,of lands, houses etc. and the new trustees were to stand possessed of the same upon trust for the use and benefit ,of the said institution. Another trust deed was executed ,on 5th September, 1851 by Khimchand Motichand, Sir Jamshedjee Jeejeebhoy and others. This document shows that the institution was then possessed of considerable wealth comprising of Government promissory notes, houses, lands and other immovable estate in the Islands of Bombay, besides cash balances. The funds of the institution appear to have been augmented further-under a deed of 10th June, 1871. According to this document certain charitably disposed persons, Hindus and Parsees, had raised a fund for releasing animals in Surat meant for slaughter on the occasion of Bakrild and Id-E- Kurbani. The trustees of the said fund being desirous of transferring the sums in their hands with all accumulations of interest, income etc. and also the trust thereof to the trustees of the Bombay Panjrapole had requested the trustees of the said Panjrapole to become the trustees of Surat Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 3 Bakri-Id fund to which the latter had a in Surat meant for slaughter on the occasion of Bakrild and Id-E-Kurbani. The trustees of the said fund being desirous of transferring the sums in their hands with all accumulations of interest, income etc. and also the trust thereof to the trustees of the Bombay Panjrapole had requested the trustees of the said Panjrapole to become the trustees of Surat Bakri-Id fund to which the latter had agreed. This document shows further that the trustees of the Bombay Panjrapole had agreed to use the said funds towards the purchasing, releasing and redeeming from slaughter some of the cows, sheep and other animals intended or likely to be sacrificed at Surat on the Bakrid or Id-Kurbani occasions and for conveyance of the animals so purchased to be kept there according to the custom and rules of that institution. In 1915 the Government declared the institution as an infirmary under the Preven- tion of Cruelty to Animals Act (IX of 1890). it would appear that the Bombay Panjrapole expanded its activities considerably over the years and had besides its original seat at Bombay, branches at three other places viz., at Raita, Bhiwandi and Chembur Cattle, birds and other animals were kept and maintained at all these places. A very large number of persons was pursuing manifold acti- vities at the said places. Latterly the workers of the institution were not satisfied with their wage scales and other service conditions. On the basis of the report submitted by the Conciliation Officer under sub-s.(4) of s.12 of the Industrial Disputes Act the Government of Maharashtra referred the dispute for adjudication to the Tribunal constituted under a Government notification. An order of reference was made on 25th June, 1963 and the heads of disputes were, the wages, privilege, sick and casual leave, bonus, gratuity and reinstatement of certain workmen. In the written statement filed by Panjrapole it was stated inter alia (a) The main aims and objects of the institution were purely charitable. Whatever income the institution had was not all to be distributed either to the donors or the trustees. It was wholly and solely for the maintenance and treatment of animals of the Bombay Panjrapole. To aehieve the above objects the means to be adopted were (i) maintenance of a shelter house for aged and unserviceable animals; (ii) the feeding and treatment of all animals entrusted to the institution either by the owners anxious to pension their old animals or rescued by philanthropic persons from the hands of butchers and the protection of animals remanded by magistrates; (iii) the breeding of bulls under ideal and sanitary conditions; (iv) the maintenance of a dairy farm with special attention to proper feeding, accommodation and water supply, the proceeds to go to the benefit of other animals of the Panjrapole; and 20 6 (v) bringing up of calves of the young cows under healthy conditions. (b) The Managing Committee of trustees of the institution was advised that in fulfilment of their primary and only object of maintaining sick and infirm cattle and dogs etc. it was necessary that they should have healthy food and nutrition. Since milk from outside would not fulfil that condition it was decided to upgrade the infirm cattle and rear them into good animals so as to get good and Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 4 pure milk for the inmates of the Panjrapole. Thus the milk that was produced and remained surplus after feeding the old cows, motherless calves and dogs and other such animals was sold to members of public instead of being thrown off. The income derived therefrom was again utilised only after maintenance of the Panjrapole animals. The sale proceeds of the milk was never utilised nor meant for the benefit or the profit of the donors of of trustees nor was it produced and sold for the purpose or satisfying human needs or desires or with any object of rendering material service to the community. The cows which yielded milk were kept by the Panjrapole till the end of their lives. The milk derived from them could only be considered as natural and incidental product in the maintenance of cows. It was submitted on the basis of the above that essentially object with which the institution received animals was not for doing service to their owners or others but to the animals themselves. The Tribunal examined meticulously the activities of the institution over a number of years. The workers served various interrogatories on the trustees to elicit from the various facts relating to the income by way of rent from building etc. the income from milk and milk products, the income from sale of other commodities, the number and categories of animals in the Panjrapole, the number of animals, if any, purchased, the number of dry -and wet cows owned by the -Panjrapole and the number of stud bulls either purchased by or bred at the Panjrapole for the last ten years. The society answered all the particulars. The chart below prepared by the respondent shows the total cattle strength of the Panjirapole in all its four branches comprising of productive animals (whether milch cows milch buffaloes, stud bulls and working bullocks), the number of unpro ductive animals, including cows, buffaloes, buffalo calves, heifers and calves and bullocks. The chart was compiled from the documents disclosed by the appellant and contains the figures for the years 1958 to 1962 -- Total strength in the following years. 1958 1959 1960 1961 1962- Total strength Bombay 149 117 150 201 214 Raita 833 595 508 604 538 Bhiwandi 501 653 503 408 426 Chambur 191 233 272 275 281 --------------------------------------------- Total 1,674 1,598 1,533 1,4881,459 ---------------------------------------------- Sick, old and infirm Bombay. - - - - - Raita 32 19 10 16 31 Bhiwandi 424 364 132 150 171 Chambur. - - - - Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 5 ----------------------------------------------- Total 466 25 % 383 20% 142 10% 166 10% 202 15% ----------------------------------------------- Young animals Bombay - - - - Raita 181 44 120 50 36 Bhiwandi 6 47 5 99 59 Chambur 56 87 79 93 100 -------------------------------------------- Total 243 178 204 242 185 --------------------------------------------- Other cattle not sick Bombay 149 117 150 201 214 Raita 620 532 488 538 471 Bhiwandi 71 242 366 159 196 Chambur 135 146 193 182 181 ----------------------------------------------- Total. 975 1,037 1,197 1,080 1,602 ------------------------------------------------ The following chart was pared by the respondents showing the values of the milk supplied to the animals as also the amounts fetched by sale of the surplus milk for the same years. Chart. ------------------------------------------------------------- Year Own consump- Sale Total Percentage tion. Rs. Rs. Rs. of sale approxima- tely -------------------------------------------------------------- 1 2 3 4 5 --------------------------------------------------------------- 1958 2,681 1,49,854 1,314 3,995 1,53,849 2. 6% Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 6 1959 5,256 6,716 5,475 17,447 1,69,465 1,86,912 9. 5% 1960 1,755 6,570 2,686 11,011 2,13,117 24,1185% 1961 2,046 3,286 3,504 8,836 2,23,095 2,31,9314 4% 1962 1,954 4,555 3,650 10,159 2,30,043 2,40,2024% ---------------------------------------------------------- The facts found by the Tribunal may be summarised as follows (1) At the end of the year 1962 there were altogether, 445 cows, 48 bulls, bullocks and oxen, other cattle (cows and bullocks) 508, calves 495, dogs 160, goats and sheep 32, horses 12, hares 18, cocks, hens and ducks' 18 and parrots 8 : the total number was 1754. (2) The total income for the year was Rs. 6,64,043 including the amount of Rs. 1,73,583 received by way of donation. The income proper was thus Rs. 4,90,459., 20 9 (3) Some lands of the institution were under its personal cultivation. The sale proceeds of the yield thereof was Rs. 6,492. The rent fetched by the immovable property was Rs. 2,20.549. The milk vielded by the cows was regularly collected and sold, the sale proceeds for the year being Rs. 4,30,034. A large number of workmen was employed to attend to the cows and to feed them, to. milk the cows and to carry and sell the milk to the public. (4) The number of cows yielding milk at the end of the year was 242. At that time there were 75 pregnant cows. There were 57 other cows, 101 grown-up calves (female) and 91 other small calves (female) all described as "reserved". In the opinion of the Tribunal all these calves would in course of time grow into cows. (5) The institution maintained some stud bulls. Besides there were bullocks which were used for plying the carts or for cultivation of the lands of the institution. (6) There were 36 heads of cattle described as arrivals from Bombay. There were another 87 cows described as "danger"; the rest of the cattle (cows and bullocks) were 57 lame and blind, 177 weak, 51 infirm, quite infirm 80 and sick 108, the total of this category being 473; including the "danger" cows the total was 560. These animals depended entirely on the charity of the institution. The Tribunal found the activities of the institution in connection with its movable property and collection and sale of milk to be an industry while the maintenance of danger cows, blind, lame, infirm and sick, the dogs and other animals did not constitute an industry. As already noted, the application under Art. 227 by the Panjrapole to the Bombay High Court was dismissed summarily and therefore we do not have the benefit of a judgment of the High Court. As Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 7 the records stand we must proceed one the facts found by the Tribunal and such light as is thrown thereon by arguments of counsel. Before looking into the relevant authorities on the subject, we may note the points canvassed in support of or against the appeal by learned counsel on either side. Referring to the trust deeds it was argued on behalf of the appellant that the essential purpose of the institution was to keep and foster animals which were either rejected by their owners as old and infirm or of no use to them as suckling calves, dry -cows etc. It is not necessary to take into account the other animals which were maintained by the institution. Leaving out of account the number of dogs kept, the number of other animals was insignificant. It was argued that although the sale of milk produced a fair amount of income, certain portion of it was necessary for the maintenance of the sick and infirm animals and the sale of the balance of the milk ought to be regarded as incidental to the keeping of cows thrown on the hands of the institution and ought not to lead to an inference that the institution was pursuing an industry. With regard to the immovable properties, it was said that they had been purchased out of surplus funds in the hands of the insti- tution over 50 years back and on a conspirator of the acti- vities of the institution it should be held that it was merely doing charity to animals and it was not producing food or giving service to humans to constitute its activity as an industry within the meaning of s.2(1) of the Industrial Disputes Act. Learned counsel for the respondent drew our attention to certain facts which according to, him went to show that so far as the activity of keeping cattle, specially cows and she-buffaloes was concerned, there could be little doubt that it was pursued as an industry. He handed over two charts containing analysis of the cattle population as culled from the documents placed before the Tribunal by the institution itself. The total strength of cattle in all the four branches of the institution in the year 1958 was 1674, 1598 in the year 1959, 1533 in the year 1960 and 1488 in 1961 and 1459 in 1962. The sick, old and infirm cattle for the year 1958 was 456 or roughly 25 per cent of the total strength. Young animals numbered 243 and other cattle which were not at all sick was 975 in number. The percentage of sick, old and infirm cattle in the year 1959 was roughly 20 % in. the year 1960 and 1961, 10 per cent and in the year 1962 15%. The rest of the cattle according to counsel were neither old nor infirm but were either producing milk or being put to use immediately or capable of yielding milk or work in the future. Another chart handed over by him went to show that the total value of milk produced in the year 1958 was Rs. 1,53,849 and leaving out of account of Rs. 3,995 being the value of milk supplied to the sick cattle, the institution derived an in- come of Rs. 1,49,854/- from the sale of milk. The corres- ponding figures for 1959 were total sales Rs. 1,86,912, value of milk consumed Rs. 17,447, income from milk, Rs. 1,69,465. The figures for 1960 were Rs. 2,24,-118, Rs. 11,011 and Rs. 2,13,117/-; those for 1961 were Rs. 2,31,931, Rs. 8,836 and Rs. 2,23,095/-. The figures for the last year 1962 were Rs. 2,40,202, Rs. 10,159 and Rs. 2,30,043. Thus according to the above figures, the percentage of milk given to the animals out of the total production was 2 6 in 1958, 9 5 in 1959, 5 in 1960 and 4 in the years 1961 and 1962. Learned counsel drew our attention to the figures of expenses of tending the sick and infirm cattle either by employment of hospital workers or medical expenses and compared the same with the total expenses of the institution and the number of men employed. The value of medical relief to animals either by way of salary to workers, dearness allowance paid to them, medical expenses and feeding of milk to the animals for the Bombay Panjrapole in the year 1961 was Rs. 11,762, 'for Raita Rs. 5,551, for Chembur Rs. 5,028 and for Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 8 Bhiwandi Rs. 28,805. The expenses of feeding and maintenance of sick animals for the said branches were Rs. 1,825, 13,596, 7,554 and 81,464. But it is pertinent to note that medical expenses accounted for very small sums, namely, Rs. 1,267 for Bombay, Rs. 559 for Raita, Rs' 1,696 for Chembur and Rs. 552 for Bhiwandi. The figures of medical expenses for the year 1962 were equally negligible. The number of people employed for giving medical relief at the Bombay Panjrapole in the year 1961 was only 7, namely, a doctor, a dresser, 4 coolies and other workers and a sundry worker. Their total salary came to Rs. 6,000 besides dearness allowance of Rs. 2,448. Similarly at Raita there were a doctor, two coolies, two dressers and sundry workers and expenditure was only Rs. 552 out of the total expenditure on all these items Rs. 4,992. It was argued oil the basis of these figures that if the object of the Panjrapole was only to maintain and- treat the old, diseased or infirm or rejected cattle on its hands acquired from different sources, the number of men employed would be very small and the milk required for the sick and infirm cattle could be had from only a few milch cows and she-buffaloes. It was urged that the fact that a large number of milch cattle were to be found every year among the cattle population yielding milk regularly of the value of over Rs.. 2,00,000 for the last 3 or 4 years went to show that the institution was pursuing an activity mole or less like that of, a dairy farm. It was maintaining a number of stud bulls and had actually purchased one, the obvious object behind it being improving the cattle wealth of the institution by the production of good and healthy cattle, the females of which would come to yield milk in future. It was said that the value of milk sold could not be as high as disclosed by the figures unless the institution was getting a number of milch cattle every year to replace those which were going dry for the time being. This could only be possible if the institution was in a position to keep up its number of milch cattle from the young ones either given to the Panjrapole or those which were bred at the Panjrapole. The only difference between the Panjrapole and a well organised dairy farm was that the Panjrapole was not buying milch cattle of good quality nor destroying or getting rid of any which were found to become useless. As the objects of the institution did not permit it to get rid of any cattle it undoubtedly had to maintain whatever cattle came to it but nevertheless the activities displayed by the facts were enough to show that it was being run on the lines of a business or an undertaking, though -not of the normal type of a well organised dairy business. In our view the arguments of learned counsel for the respondent have considerable force. The main heads of the income of the institution were income from immovable properties, donation from charitably disposed members of the public and the sale of milk. No doubt the immovable property had been acquired many years back from the surplus funds in the hands of the trustees. These were old houses and buildings but the Panjrapole was maintaining them in tenantable condition by incurring considerable expenses every year over the repairs. The more significant factor was the steadily growing income from the sale of milk derived from milch cows and buffaloes, the number of which though not steady was always considerable. Regard must also be had to the written statement of the institution itself before the Tribunal showing that the Managing Committee of the trustees had decided some time back to upgrade the infirm cattle and rear them into good animals so as to get good and pure milk for the inmates of Panjrapole. In fact however the upgrading was to such an extent that the milk yielded always was far in excess of the needs of the inmates of the Panjrapole. Although the sale proceeds of the milk was never utilised nor was ever meant for the benefit or profits of the donors or trustees, the very production of it in such large bulk wholly unrelated to the needs of the sick cattle showed Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 9 that the institution was pursuing an activity with the central idea of obtaining a steady income therefrom. In our view, the facts justifiably lead to the conclusion that the institution deliberately diversified its objects from only tending to the sick, infirm or unwanted cattle by adopting the policy of keeping cattle not merely -for their own sake but for the sake of improving the cattle population committed to its care with an eye to serve human beings by making large quantities of good milk available to them and thereby getting an income which would augment its resources. It pursued its policy just as any dairy owner, would by having a few good quality bulls to impregnate the cows and thereby ensuring a steady production of milk and also improve the quality of the progeny. We have then to consider whether on the above facts an inference ought properly to be drawn that the activities of the Panjrapole constituted an industry. It is not necessary to go through the plethora of cases decided by this Court to find out whether the Tribunal had come to a proper conclusion. Although there is no decision of this Court arising out of the affairs of a Panira Dole, there are several dealing with the question as to whether hospitals constituted industries. The contention of learned counsel for the appellant W. as that the main and chief object of the appellant institution being the keeping and fostering of' animals incidental activities ought to be disregarded and the institution ought to be considered as a hospital. If the activities relating to the -production of milk could be said to be incidental to the maintaining of sick, infirm and diseased or rejected cattle, the argument would, in our opinion, rest on solid foundation. 2 1 4 At the time when the application under Art. 227 of the Constantine was presented before the Bombay High Court, the decision of this Court in State of Bombay v. The Hospital Mazdoor Sabha (1) held the field and it can be assumed that it was on the strength of this decision that the Bombay High Court did not feel called upon to examine the merits of the case by issuing a rule. In the 'Hospital Mazdoor Sabha's case (supra) the dispute arose out of the retrenchment of respondents 2 and 3 before this Court who' had been engaged as ward servants in the J.J. Group of Hospitals, Bombay under State control and management without payment of compensation as required by S. 25-F(b) of the Industrial Disputes Act. The decision of this Court shows that there was a group consisting of five hospitals under the administrative control of the Surgeon General of the appellant and its day to day affairs were conducted and controlled by a Superintendent who was a full-time employee of the appellant. The residential staff including the Resident Medical Officers, Horsemen, Nurses etc. were all full-time employees of the appellant and their salaries were drawn on the establishment pay bills of the appellant and paid entirely by the appellant. According to this Court : "This group serves as a clinical training ground for students of the Grant Medical College which is a Government Medical College run and managed by the appellant for imparting knowledge of medical, sciences leading to the Degrees of Bachelor of Medicine and Bachelor of Surgery of the Bombay University as well as various Post-Graduate qualifications of the said University and the College of Physicians and Surgeons, Bombay; the group is thus run and. managaed by the appellant to provide medical relief and to promote the health of the people of Bombay." On the question as to whether the activities of this group of hospitals would be covered by the definition of 'in- dustry' in s.2(j) of the Industrial Disputes Act, the Court ,observed (see-at p. 878) Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 10 "In considering the question as to whether the group of Hospitals run by the appellant undoubtedly (1) [1960] 2 S.C.R. 866. 21 5 for the purpose of giving medical relief to the citizens and for helping to impart medical education are an undertaking or not, it would be pertinent to enquire whether the activity of a like nature would be an undertaking if it is carried on by a private citizen or a group of private citizens. There is no doubt that if a hospital is run by private citizens for profit it would be an undertaking very much like the trade or business in their conventional sense..... Trust the character of the activity involved in running a hospital brings the institution of the hospital within s.2(j). Does it make any difference that the hospital is run by the Government in the interpretation of the word "undertaking" in s.2(j)? In our opinion, the answer to this question must be in the negative. It is the character of the activity which decides the, question as to whether the activity in question attracts the provision of s.2(j); who conducts the activity and whether it is conducted for profit or not do not make a material difference." As to the attributes which made the activity an under taking it was stated (see at p. 879) : "It is difficult to state these possible attributes denitely or exhaustively; as a working principle it may be stated that an activity systematically or habitually undertaken for the production or distribution of goods or for the rendering of material services to the community at large or a part of such community with the help of employees is an undertaking. Such an activity generally involves the co-operation of the employer and the employees; and its object is the satisfaction of material human needs. It must be organised or arranged in a manner in which trade or business is generally organised or arranged. It must not be casual or must it be for oneself nor for pleasure. Thus the manner in which the activity in question is organised or arranged, the condition of the co-operation between the employer and the employee necessary for its success and its object to render material service to the community can be regarded as some, of the features which are distinctive of activities,, 5-- -Ml 1245 Sup. Cl/71 to which s.2(j) applies. Judged by this test, there would be no difficulty in holding that the State is carrying on an undertaking when it runs the group of Hospitals in question." The recent decision of this Court in Safdar Jung Hospital, New Delhi v. K. S. Sethi and Management of M/s T.B. Hospital, New Delhi v. The Workmen (1) is a pointer in the contrary direction. There was also another appeal relating to the Kurji Holy Family Hospital. The Court proceeded to consider the general proposition whether a hospital could be considered to fall within the concept of industry in the Industrial Disputes Act and whether all hospitals of whatever description could be covered by the concept or only some hospitals under special conditions. According to this Court in Safdar Jung Hospital case ,'(see p.1412 paragraph 1.3) "an industry is to be found when the employers are carrying on any business, trade , under- taking, manufacture or calling of employers. If they are not, there is no industry as such." Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 11 The Court referred to the decision of this Court in Gymkhana Club Union v. Management (2) and the conclusion therein that : "Primarily, therefore, industrial disputes occur when the operation undertaken rests upon co,operation between employers and employees with a view to production and distribution of material goods, in other words, wealth, but they may arise also in cases where the co- operation is to reduce material services. The normal cases are those in which the production or distribution is of material goods or wealth and they will fall within the expressions, trade, business or manufacture." With regard to trade and business it was said : "Business too is a word of wide import. In one sense it includes all occupations and professions. But in the collocation of the terms and their defi- (1) A. I.R. 1970 S.C. 1407. (2) [1968] 1 S.C.R. 742. nitions these terms have a definite economic content of a particular type and all the authorities -of this Court have been uniformly accepted as excluding professions and are only concerned with the production, distribution and consumption of wealth and the production and availability of material services." With regard to the Hospital Mazdoor Sabha case (1) was remarked (see p. 1414) "The case proceeds on the assumption that there need not be an economic activity since employment of capital and profit motive were considered unessential. It is an erroneous assumption -that an economic activity must be related to capital and profit-making alone. An economic activity can exist Without the presence of both. Having rejected the true test applied in other cases before, -the test applied was 'can such activity be carried on private -individuals or group of individuals?' Holding that a hospital could be run as a business proposition and for profit, it was held that a hospital run by Government without profit must bear the same character. With respect, we do not consider this to be the right test. This test was employed to distinguish between the administrative functions of Government and local authorities and their functions analogous to business but it cannot be used in this context. When it was emphasised in the same case that the activity must be analogous to business and trade and that it must be productive ,of goods or their distribution or for producing ,material services to the community at large or a part of it, there was no room for the other proposition -that privately run hospitals may in certain circumstances be regarded as industries." This Court held that the Hospital Mazdoor Sabha case(1) "took an extreme view of the matter which was not justi- fied". With regard to the activities of the individual hospitals it was said the Safdar Jung hospital had not embarked on an economic activity which could be said to be analogous to trade or business. There was no (1) [1960] 2 S.-C. R. 866, evidence that it was more than a place where persons could get treated. This was a part of the functions of Government and ,the hospital was run as a Department of Government -and could not therefore be said to be an industry. Again, with regard to Tuberculosis hospital it was found not to be an independent institution but a part of the Tuberculosis Association of India. The hospital was wholly charitable and was a research institute. The dominant purpose of the hospital was research and training, but as research and Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 12 training could not be given without beds in a hospital, the hospital was run. According to this Court, treatment is thus a part of research and training. In these circumstances the Tuberculosis hospital could not be described as an industry. With regard to the Kurji Holy Family Hospital again it was found to be entirely charitable. It carried on the work of training, research and treatment; its income was mostly from donations and distribution of surplus as profit is prohibited. It could not therefore be an industry as laid down in the Act. Reference may also be made to the case of Lalit Hari Ayurvedic College Pharmacy v. Its Workers' Union (1). In this the appellate Tribunal found that the pharmacy run by the appellant sold medicines in the market and realised about Rs. one lakh per annum whereas in the hospital run by it about 30% of the medicines manufactured by it were consumed and about 70% were sold in the market. This judgment was delivered on the same date by the same Bench which decided the Hospital Mazdoor Sabha case (supra). On the facts found this Court held that there could be no doubt "that the activity of the appellant in running the pharmacy and the hospital was an undertaking under s.2(j) and was an industry". The only case of Panjrapole which appears to have come before the High Courts was that of the Madras Panjrapole v. Labour Court(2)which was the subject-matter of an industrial dispute referred to in the year 1958 by the State Government for adjudication by the Labour Court, Madras. This was decided after the Hospital Mazdoor, Sabha case. The facts referred to by the High Court were that the Madras Panjrapole was a charitable society (1) A.I.R. 1960] S.C. 1261. (2) [1960] 2 L.L.J. 686.. registered under the Societies Registration Act occupying an area of about Ac. 12-00 of land within the city of Madras on which the munificence of several donors had enabled the construction of shelters for animals as well as sanctuary for birds. The objects of the society, as stated in the memorandum of association, are protection, care and treatment of old, infirm and injured cows, calves, bullocks etc. and affording freedom to such animals from being slaughtered unnecessarily and to guarantee old-age relief to the old, infirm and unserviceable animals till they die of natural causes. To achieve these objects, the means envisaged to be adopted were : (a) maintenance of shelter-house for aged and unserviceable animals' (b) the feeding and treatment of all animals entrusted to the care of the society either by the owners anxious to pension their old animals or rescued by philanthropic persons from the hands of butchers and the protection of animals remanded by magistrates; (c) the breeding of bulls under ideal and sanitary conditions (d) the maintenance of a dairy farm with special attention being paid to proper feeding, accommodation and water supply, the proceeds of which will go to the benefit of the other animals of the Panjrapole; and (e) the bringing up of the calves of the young cows under healthy conditions. Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 13 The Court observed (see p. 689): " It is a matter of common knowledge that a number of dry cows in the City of Madras are sold away to butchers by the poor milkmen who could not support them. Butchers themselves offer tempting prices for such cows, a temptation which the poverty of the milkmen could not but lead him to succumb. Dry cows were admitted into the Panjrapole to prevent them from going into the slaughter house. Maintenance of the dry cows called for stud bulls Stud bulls were presented to the society by -the Government. In the course of time, the dry cows brought forth their progeny and began to yield milk. The Panjrapole was, therefore, in a position to sell milk yielded by the cows which were received by it with a view to protect them from the slaughter-house details of the sale amounts in respect of the milk produced shows that the institution had been receiving substantial sums every year by sale of milk." So for as the activities of the Madras Panjrapole and Bombay Panjrapole are concerned they are Practically identical except that in the present case the maintenance, of a dairy farm is not explicitly referred to anywhere but the facts as culled from the evidence makes the same only too obvious. There was however a certain difference in the case of the Madras Panjra-pole inasmuch as the Madras High Court found that (see p. 691) "During certain years, it even went a step further. The Panjrapole purchased cows, maintained a dairy farm and supplemented their own production of milk with out side milk and sold them. These activities would certainly partake the character of a business, though the profit of such business might have gone to the humanitarian activities undertaken by the society. But the activities have long ago ceased. What the society is now having is the -milk yielded by its own cows. Those cows are admittedly kept by the Panirapole till their lives. They are not sold.They are the property of the Panjrapole. The milk yielded by those cows could only be considered as an incidental product in the maintenance of the cows. The sale of cowdung cakes and menure and of the calves after the mother cows become dry are also incidental. It cannot be held that a trade or business is conducted by the institution." According to the learned single Judige who heard the peti- tion the activities of the Panjrapole had nothing to do with human needs. They were solely devoted to the needs of helpless animals; though incidentally such activities have a business tinge about them it cannot be said to be for human need or material welfare. The objects were mainly religious and humanitarian. Following the test laid down in the Hospital Mazdoor Sabha case the learned Judge was of opinion that there was no industrial dispute which could be referred by the State Government to the Labour court for adjudication. The case went in appeal to a Letters Patent Bench : Workmen Employed in Madras Panjrapole v. Madras Panjrapole (1). The Bench took a somewhat different view from that of the learned single Judge. It demurred to the observations of the trial Judge that "there is no element of trade or business involved in the various activities of the society". According to the Bench : Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 14 "These observations, however, do not extend to subsequent developments, the result of the growth of the institution, and its attempt to achieve self-sufficiency. There were (1) purchase and sale of milk, a fairly wide upon scale, (2) the maintenance of a dairy farm during a period of the history of the institution, and (3) similarly, the maintenance of stud bulls, to enable dry cows to conceive and bear calves." The Bench felt compelled to allow the appeal to the extent of modifying the writ of certiorari and laying down that the actual decision would have to be arrived at after the record of adequate evidence by the Labour court in the light of the principles formulated, the available evidence being both inadequate and contradictory. For the guidance of the Labour court the Bench observed Even if the institution at the inception, and as basically defined, be purely humanitarian,. non-industrial and not amenable to any of the tests. upon which the definition has been applied,, it cannot be gainsaid that, if the. institution had largely altered its complexion through the years, so as to have become a focus of economic production, the definition again night be applicable." The Bench also examined the question whether the activity of the Panjrapole was in essence religious, or spiritual, as according to it a temple or a church could not be considered to be an industry. (1) [1962]2 L.L.J. 472. The net result of the above seems to be that although the Bench was inclined to hold that the Madras Panjrapole at its inception was not an industry the complexion of its activities might have been altered by later developments so, as to render the institution as then organised an industry within the meaning of, the Act. Further according to the Bench individual units of the Organization (like the dis- trict dairy farm) might constitute an industry though the society itself may not be one. The matter came up again before the Madras High Court (see 1967-2 L.L.J. 399)., The Tribunal held in favour of the workmen and the learned Judge dismissed the application for the issue of a writ by the Panjrapole. The learned Judge referred to the reports of the institution in several years past from 1937 to 1957. He found that the object of the society had been amended in 1937 to enable it to receive young cows and charge fees from the owners. The idea of starting a dairy farm was for supporting the infirm cows, bullocks and horses and in pursuance of that idea stud bulls were acquired for improving the cattle breeding., The income from the sale of milk rose phenomenally reaching the figure of Rs. 60,000 in the year 1957. The learned Judge found himself unable to hold that maintaining cows and stud bulls and selling milk were only Subsidiary in nature to the humane the society, namely, to provide Shelter for the de- CrePit and useless and infirm animals. The learned Judge held that "if the Madras Panjrapole had confined itself to the objectives at its inception, namely, to give -protection to the old, infirm and decrepit animals, it could well be -con-tended that it was only for the purpose of satisfying purely spiritual needs, as it is common knowledge- that Hindus 'consider cow protection. as one of their religious duties. If -the Madras Panjrapole had not extended its activities, following 'the, authorities - cited above, would have had no hesitation in holding that it is not an industr) -A reading of the annual reports show that a large Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 15 number of high milk yielding cows and buffaloes were pur- ,chased, by the society and due to the successful working -of the dairy farm the Panjrapole was able to supply milk to various institutions .... The reports show that considerable profits were made by the Panjrapole, the sale of milk fetching a sum of Rs. 60,000 in the year 1957". In the result the petition was dismissed and the labour court was directed to determine the other issues. We have referred at some length to the Madras Panjle case to show the analogy of the activities of the radoras Panjrapole to the. Bombay Panjrapole. Save for the fact that the Madras Panjrapole definitely and expressly changed its objective by starting a dairy farm and purchasing mulch cows and stud bulls there is very little difference between the facts of the case before us from those in the Madras Panjrapole case. In the present case only one stud bull w s purchased but the activities pursued by the Bombay Panjrapole make it clear that they were pursuing the same kind of activity, namely, that of using ,stud bulls for the purpose of breeding healthy cattle including cows so as to be able to make a very sizable income from the sale of milk. For the last few years, from 1958 to 1962 the number of milch cows was always Considerable which could only be accounted for by the fact that from time to time the place of cows which had become dry was being taken up by cows fecundate by the bulls maintained for the purpose of keeping up a steady supply of milk. We have already referred to the fact that' the value of milk supplied to the sick and infirm cattle was infinitesimal compared to that sold in the market. The expenses incurred in connection with the treatment of sick and infirm animals was also negligible compared to the total expenses of the institution. The number of men employed for such treatment was very small at all times. The mere fact therefore that the Panjra pole never purchased milch cows and never purchased stud bulls except once makes no difference to the question as to whether their activity of maintaining cows and bulls could only be considered as an investment. It was certainly carried on as a business although it was not pursued in the same way as astute businessmen only out to make profit would, namely, get rid of the animals which were no longer fit for any Use. The value of the milk supplied for the last 3 or 4 years was well in excess of Rs. 2 lakhs per annum and this could only be possible if the cows and buffaloes had been kept and maintained not merely to keep them alive but with the idea of getting as much production out of them as possible. In this view of the matter, it is hardly necessary to consider the other cases which were cited at the Bar, namely, Gymkhana Club Union case (1), Cricket Club v. Labour Union (2) and Harinagar Cane Farm v. State of Bihar (1). It was remarked in the Gymkhana Club case that the activity of the club is conducted with the aid of employees, who follow callings or avocations and that the activities of the club was not a calling or business of its members, of Managing Committee and there was no undertaking analogous to trade or business. In the Cricket Club's case (2) the Court examined the different activities of the club and came to the conclusion that they did not lead to the inference that the club was carrying on an industry. On the facts of this case we hold that the activities of the Panjrapole as disclosed in this case constituted an industry within the meaning of section 2(j) of the Industrial Disputes Act and the appeal must therefore be dismissed with costs. Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 16 S.C. Appeal dismissed.. (1) [1968] 1 S.C.R. 742. (2) [1969] 1 S.C.R. 600.. (3) [1964] 2 S.C.R. 458. 225. Bombay Panjrapole, Bhuleshwar vs The Workmen And Another on 16 August, 1971 17 | {
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Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 Equivalent citations: 1971 AIR 2242, 1971 SCR (3) 646, AIR 1971 SUPREME COURT 2242, 1971 LAB. I. C. 1381, 1971 (1) LABLJ 224, 1972 (1) SCJ 674, 1971 3 SCR 646, 1971 SERV L R 219, 22 FACLR 188, 41 FJR 270 Author: C.A. Vaidyialingam Bench: C.A. Vaidyialingam, J.M. Shelat, Vishishtha Bhargava PETITIONER: WORKERS EMPLOYED IN HIRAKUD DAM Vs. RESPONDENT: STATE OF ORISSA AND ANR. DATE OF JUDGMENT02/02/1971 BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. SHELAT, J.M. BHARGAVA, VISHISHTHA CITATION: 1971 AIR 2242 1971 SCR (3) 646 1971 SCC (1) 583 ACT: Central Public Works Department Code, Paragraph 11--Word 'dismissed'- in paragraph, meaning of-Whether means dismissal for serious misconduct only or includes termination simpliciter. HEADNOTE: The construction of the Hirakud Dam was entrusted by the State of Orissa to the Central Water Irrigation and Navigation Commission as their agent. The Commission for this purpose employed a large number of persons in the worked-charged establishment of scales of, remuneration at the rate paid by the Central Public Works Department. Their service conditions were to be governed by the Central Public Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 1 Works Department Code of 1929. After completion of the first stage of the Hirakud project the State Government took it over from the aforesaid Commission. The employees of the work charged establishment were given an option to work for the State on the scales of remuneration and the conditions of service in the Code. However, since there was wide disparity between these employees and the work charged employees of the State's own Public Works Department, the services of the former were terminated Such of them who accepted reemployment were employed by the State on the terms and conditions of service of the State Public Works Department. They were given compensation for termination of service and one month's salary in lieu of notice. Subsequently they raised a dispute contesting the termination of their services by the State. The Industrial Tribunal held that under paragraph 11 of the Central Public Works Department Code which applied to them at the relevant time the employees were entitled to remain in service till the completion of the Project. The High Court in petitions under Art. 226 and 227 of the Constitution by the State held the termination justified under paragraph It of the Code because it provided inter alia that the members of the work charmed establishment were entitled if dismissed otherwise than for serious misconduct before the completion of the work in which they were engaged, to a month's notice or a month's pay in lieu of notice. Paragraph 11 also provided that the workers could resign after a month's notice or forfeiture of pay in lieu of one month's notice. In appeal by the employees against the High Court's judgment it was contended before this Court that 'dismissal' within the meaning of paragraph 11 was to be understood only as dis- missal for serious misconduct and not dismissal simpliciter. Support for this contention was sought from the fact that the word 'dismissal' as used in 'the Government of India Act, 1935, and in Art. 311 of the Constitution as well as the Service. Rules had been interpreted by the Courts to mean only dismissal by way of punishment. HELD : The word 'dismissal' used in the Government of India Act, 1935 as also in Art. 311 of the Constitution and the Service Rules has no doubt been interpreted to mean termination of a person's services by way of punishment. But there is clear indication in paragraph 11 of the Code that the word 'dismissal' has not been used to denote the termination of the services of an employee only as and by way of punishment. [654 F] 6 4 7 Having made provisions for the automatic termination of the services of an employee when the work comes to an end it is but natural that provisions should be made to terminate the services of an employee even when the work has not been completed If the employee wants to give up the job then under paragraph 1 1 he has to give a month's notice, tailing which he forfeits a month's pay in lieu or such notice.. Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 2 Having provided for the voluntary resignation by an employee even when the work has not been completed., it will be odd to hold that a similar right has not been given to the employer to terminate the services of a workman, even though the work has not finished. It will again be incongruous to hold that when a person is dismissed, though not for a serious misconduct, the workman will be entitled to a month's notice or a month's pay in lieu of notice, if otherwise there can be dismissal for a minor misconduct as and by way of punishment. No decision has laid down that even in case of dismissal a workman will be entitled to a months notice or a month's pay. The fact that paragraph 11 provides for giving a month's notice or a month's pay when a workman is dismissed otherwise than for serious misconduct indicates that the work 'dismissed' has not been used in the sense of termination of service by way of punishment alone but it covers also other cases of termination of the services of an employee even before the completion of the work. [654 H-655 G] The word 'dismissed' according to its dictionary meaning is 'to send away, to discard, to remove from 'Office or employment.......... The dictionary meaning makes it clear that in substance the word means 'termination of service'. The High Court was therefore right in holding that the expression 'dismissed' in paragraph 11 of the Code, has been used to take in the, termination of the services of the employees mentioned therein both as a measure of punishment for serious. misconduct as well as termination simpliciter of the services of an employee in which contingency one month's notice or a month's pay in lieu of notice is obli- gatory.[656 B; 658 D] Dr. Bool Chand v. Chancellor, Kurukshetra University, [1968] 1 S.C.R. 434, applied. Purshotam Lal Dhingra v. Union of India, [1958] S.C.R. 828, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1492 of 1966. Appeal by special leave from the judgment and order date April 5, 1968 of the Orissa High Court in O.J.C. No. 58 of 1965. M. K. Ramamurthi, A. K. Gupta, R. A. Gupta and Uma Datta, for the appellants. M. C. Bhandare, Santosh Chatterjee and R. N. Sachthey, for respondent No. 1. The Judgment of the Court was delivered by Vaidialingam J.-In this appeal by special leave the short question that arises for consideration is whether the State has got power to terminate the services of Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 3 any member of the work- charged establishment under paragraph 11 of the Central Public Works Department Code (hereinafter to be referred as the Code) on giving one month's notice or a month's pay in lieu of notice. The circumstances leading up to this appeal may be stated A decision was taken to construct three dams right across the Mahanadi river, one at Hirakud, the second at Tikerpara and the third at Naraj as a multipurpose measure for preventing flood ravage in the Delta area, generating electricity and providing irrigation. The construction of Hirakud Dam was entrusted by the State of Orissa to the Central Waterways, Irrigation and Navigation Commission as their agent. For the purpose of the construction of Hirakud Dam, the C.W.I.N. Commission employed a large number of persons in the work- charged establishment on scales of remuneration at the rate paid by the Central Public Works Department and the service conditions of the persons so employed were governed by the provisions contained in the Code. After completion of the first stage of the Hirakud Dam project, the State of Orissa decided to take over the said project from their agent the C.W.I.N. Commission with effect from April 1, 1960. The State further decided to proceed with the construction of second stage of the project through its own Public Works Department. An option was given by the State to the employees in the work charged establishment to decide whether they Would continue to work under the State on the same pay and allowances and subject to other conditions of service provided in the Code for the said work-charged establishment. The employees agreed to work under the State of Orissa and accordingly the employees. were allowed to continue under the State Government. The State, however, later on found that the pay, allowances and conditions of service between the work-charged personnel of the Hirakud Dam project who had been allowed to be continued and the work-charged personnel in the establishment of the State Public Works Department showed a marked difference giving rise to various complications. The Hirakud Control Board recommended to the State Government to terminate the services of the work-charged personnel of the Hirakund Dam by giving one month's notice with effect from March 31, 1963. Accordingly the State Government terminated the services of the said personnel with effect from March 31, 1963 by giving one month's notice; but the State also made it clear that such of those who elected to be re- employed on the scales of pay and conditions of service of the State Public Works Department would be so reemployed. On the issue of the notice by the State, 1200 out of 2300 personnel who had continued from before in the work-charged establishment left their services and the remaining 1 1 00 agreed to be reemployed on scales of pay and conditions of service of the State Public Work Department. The employees were paid an amount equal to what they would have received by way of retrenchment compensation or by way of wages in lieu of notice. Subsequently the personnel of the work-charged establishment raised a dispute contesting the termination of their services by the State. As conciliation failed, the Government by its order dated February 13, 1964 referred the dispute to the Industrial Tribunal Orissa for adjudication. The points referred for adjudication were : 1.Whether the Retrenchment of Workmen by the authorities of Hirakud Dam Project effected in pursuance of the decision taken by the Control Board, Hirakud Dam Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 4 Project on the 19th December, 1962, is valid and legal? If not, to what the workmen are entitled? 2.Whether the workers who are proposed to be retrenched in pursuance of the decision of the Control Board, Hirakud and are still continuing in Employment are entitled to their original conditions of service ? 3.Whether the workmen, who have completed three years of services or more should be confirmed in their respective posts ? The main stand taken by the employees before the Industrial Tribunal was that their service conditions being governed by the Code they are entitled to remain in service till the termination of the work connected with the Projects. The work connected with the Project not having come to an end, the State has no power to terminate their 'services. On the other hand, the State of Orissa took up the position that it has power under paragraph 1 1 of the Code they are entitled to remain in service till the termination of notice or one month's pay in lieu of notice even before the completion of the work. The Industrial Tribunal recorded broadly the following findings : (1) the action, of the State cannot be considered to be by way of retrenchment under the Industrial Disputes Act as this is not a case of discharge of surplus labour, (2) the mere fact that the employees have accepted the notice, pay or compensation does not stop them from challenging the legality of their termination, (3) paragraph 11 of the Code does not authorise the State to terminate the services of an employee before the work is completed. The said paragraph gives only a limited power to terminate the services of an employee by way of a punitive action taken as a measure of punishment. In this connection the Tribunal has placed considerable reliance on the expression 'dismissed' used in paragraph 11 of the Code, (4) as the work had not been completed and as the action had not been taken by way of punishment, the order of termination is without jurisdiction, (5) the termination of employment is arbitrary and anti-contractual, (6) the order of termination is invalid and inoperative. The contention raised by the State that the Project was not an industry was also overruled. The Tribunal ultimately held that the action taken by the Management of the Hirakud Dam Project in pursuance of the Notice dated February 9, 1963 was invalid and illegal and that the work-charged employees then working in different divisions of the Project and who had been recruited prior to April 1, 1960 are entitled to have their original conditions of service including scales ,of pay and dearness allowance. The Tribunal further held that the employees are entitled to continuity of service and that their services cannot be terminated before the completion of work except as a measure of punishment. The State challenged this award before the High Court of Orissa in Writ Petition (O.J.C. No. 58 of'1965) under Articles 226 and 227 of the Constitution. Though the State contended that the Hirakud Dam Project was not an industry and that the Tribunal has acted beyond the scope of reference when it gave certain directions regarding pay and allowances etc., ultimately these contentions were given up. The only contention pressed before the High :Court was that the Industrial Tribunal had committed an error of law in construing paragraph 11 of the Code when it Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 5 held that the ,State had no power during the progress of the work to terminate simpliciter the services of any of the work- charged employees. The High Court agreed with the contention of the State and held that under paragraph 11 of the Code, the State Government 'had power to terminate the services of an employee even during the progress of the work on giving one month's notice or one month's pay in lieu of notice. Mr. M. K. Ramamurthy, learned counsel for, the appellants,- contended that the construction placed by the High Court on paragraph 1 1 of the Code is incorrect. Ms contentions ran as follows : The employees in the work-charged establishment were entitled to continue in service till the work for which they have been employed was completed. For, serious misconduct the employer has got the power to dismiss such an employee without giving a month's notice or a month's pay in lieu of notice. But if an employee was being dismissed for reasons other than for serious misconduct, the employee is entitled to a month's notice or a month's pay in lieu of notice. There is no power in the employer to terminate simpliciter the services of an employee so long as the work has not been comPleted. The expression "dismissal" has always. been understood and interpreted by the courts as action taken against an employee by way of punishment and that expression cannot be interpreted to include _also the termination of the service of an employee otherwise than by way of punishment. Mr. Bhandari, learned counsel for the State, on the other hand, urged that paragraph 1 1 is really intended to govern the relationship between the employer and the employees of the work-charged establishment and the expression "dismissal" has not been used in the sense that action should necessary have been only as and by way 'of punishment. According' to the learned counsel the expression "dismissal" has been used in a loose sense meaning termination of the services of an employee either by way of punishment for misconduct or for any other reason, We are not inclined to accept the contention of Mr. Ramamurthy that the expression "dismissal" in paragraph 11 has been used to denote only action taken against a workman as and by way of punishment. No doubt, the expression has not been very happily used in the said paragraph., Paragraph 1 1 of the Code is as follows : "11. Members of the temporary and work- charged establishments, who are engaged locally, are on the footing of monthly servants. If they are engaged for a specific work, their engagement lasts only for the period during which the work lasts. If dismissed, otherwise than for serious misconduct, before the completion of the work for which they were engaged, they are entitled to a month's notice or a month's pay in lieu of notice; but otherwise, with or without notice, their engagement terminates when the work ends. If they desire to resign their appointments they must give a month's notice of their intention to do so, failing which they will be required to forfeit a month's pay in lieu of such notice. The terms of engagement should be clearly explained to men employed in the circumstances mentioned above." The following aspects emerge from paragraph 1 1 of the Code (i) the members of the temporary and work- charged establishments, are treated to be on the footing of monthly servants; Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 6 (ii)if they are engaged for specific work, their services last only for the period during which the 918 Sup CI/71 work lasts. To put it differently there will be automatic termination of the services of an employee when the specific work for which he was engaged is completed; (iii)before the completion of a work, a workman can be dismissed for serious misconduct. In such a case no question of giving a month's notice or a month's pay in lieu of notice arises; (iv) before the completion of the work, the workman can also be dismissed otherwise than for serious misconduct, in which case the workman will be entitled to a month's notice or a month's pay in lieu of notice; (v) in other cases the workman's services terminate when the work ends; (vi) if the workman desires to resign his appointment, he must give one month's notice of his intention to do so, failing which he will be required to forfeit a month's pay in lieu of such notice. That the above are terms of engagement of a workman, is clear from the concluding part of paragraph 11 to the effect that "the terms of engagement should be clearly explained to men employed in the circumstances mentioned above." The question that arises for consideration is about the con- notation of the expression "dismissed" used in paragraph 11. The contention of Mr. Ramamurthy that the expression "dismissed" has reference only to termination of the services of an employee as and by way of punishment is largely based upon the provisions contained in the Government of India Act and in Art. 311 of the Constitution. Based upon those provisions Mr. Ramamurthy claims that the expression "dismissal" is a technical word used in cases in which a person's services are terminated by way of punish- ment. Quite naturally he relied upon the Service Rules where the word "dismissal"', has been used to denote a major punishment inflicted upon an employee for misconduct. Mr. Ramamurthy, no doubt, is well-founded in his contention that the word "dismissal" used in the Government of India Act as also in the Constitution and the Service Rules has been interpreted to mean termination of a person's service by way of punishment. By section 45 of the Government of India Act, 1919 read with Part 1 of the second schedule to that Act, several sections includ- 6 5 3 ing. s. 96B were introduced in the Government of India Act, 1915. Among other things s. 96B provided that no person in the civil service of the Crown in India may be dismissed by any authority subordinate to that by which he was appointed. Section 96-B for the first time gave statutory recognition and force, to the English Common Law rule that the servants of the Crown held their Offices during the pleasure of the Crown. It also at the same time imposed one important qualification upon the exercise of the Crown's pleasure, namely, that a servant might not be dismissed by an authority subordinate to that by which he had been appointed. Section 96-B(1) was reproduced as sub-sections (1) and (2) of section 240 of the Government of India Act, 1935 and a new section was added to section 240 as sub-section (3). Sub-section (2) of section 240 provided that no person referred to in subsection (1) shall be dismissed from the service Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 7 of His Majesty by any authority subordinate to that by which he was appointed. Sub-section (3) provided that no such person shall be dismissed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. Then came our Constitution on January 26, 1950. Articles 311 (1) and(2) provided as follows "31 1 (1 No person who is a member of a civil service of the- Union or an all-India service or a civil service of a State or holds a civil post under the Union or a State shall be dismissed or removed by an authority subordinate to that by which he was appointed. (2) No such person as aforesaid shall be dismissed or removed or reduced in rank except after an inquiry in which he has been informed of the charge against him and given a reasonable opportunity of being heard in respect of those charges and where it is proposed, after such inquiry, to impose on him any such penalty, until he has been given a reasonable opportunity of making representation on the penalty proposed, but only on the basis of. the evidence adduced during such inquiry :" It will be noted that Art. 311 gives a twofold protection to persons who come within the article, namely, (i) against dismissal or removal by an authority subordinate to that by which they were appointed and (ii) as against dismissal or removal or reduction in rank without giving them a reasonable opportunity of showing cause against the action proposed to be taken in regard to them. Discussing the above provisions in Parshotam Lal Dhingra v. Union of India(1), this Court observed as follows "It follows from the above discussion that both at the date of the commencement of the 1935 Act and of our Constitution the words "dismissed", "removed" and reduced in rank", as used in the service rules, were all understood as signifying or denoting the three major' punishments which could be inflicted on Government ,servants. The protection given by the rules to the Government servants against dismissal, removal or reduction in rank, which could not be enforced by action, was incorporated in sub-ss. (1) and (2) of S. 240 to give them a statutory protection by indicating a procedure which had to be followed before the punishments of dismissal, removal or reduction in rank could be imposed on them and which could be enforced in law. These protections have now been incorporated in Art. 311 of our Constitution.......... Thus Under Art. 311 (1) the punishments of dismissal, or removal cannot be inflicted by an authority subordinate to that by which the servant was appointed and under Art. 311(2) the punishments of dismissal, removal and reduction in rank cannot be meted out to the Government servants without giving him a reasonable opportunity to defend himself." If the interpretation placed upon the word "dismissal" in the Government of India Act and the Constitution as well as the service rules is adopted for construing the said word in paragraph 11 of the Code, the contention of Mr. Ramamurthy will have to be, accepted. But there is a clear indication in paragraph 1 1 of the Code that the word "dismissed" has not been used to denote the termination of the services of an employee only as and by way of punishment. Paragraph 1 1, in our opinion, contains the terms of engagement of the workmen. In view of the very nature of the employment In the work which may either finish quickly or may take a considerably long time for completion, Paragraph 11 has been incorporated to govern the relationship between the Central Public Works Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 8 Department and a workman. In this case there is no controversy that even after the State took over the construction of the Project, relationship between the State and the employees is governed by Paragraph 1 1. Having made provisions for the automatic termination of the services of an employee, when the work comes to an end, it is but natural that provisions should be made to terminate the services of an employee even when the work (1) [1958] S.C.R. 820. 6 5 5 has not been completed. In this connection it should be noted that if the employee wants to give up the job, he has to give a month's notice, failing which he forfeits a month's pay in lieu of such notice. Having provided for the voluntary resignation by an employee even when the work has not been completed, it will be odd to hold,that a similar right has not been given to an employer to terminatethe services of a workman, even though the work has not finished. It is quite understandable that provisions should be made for dismissing an employee even before the completion of the work, for serious misconduct. In such a case, it is admitted by the learned counsel for the appellants, that the question of giving a month's notice or a month's pay in lieu of notice does not arise. In that contingency, it is easy to hold that the termination of the services of an employee is dismissal as and by way of punishment. Paragraph 1 1 further provides that if an employee is dismissed before the completion of the work otherwise than for serious misconduct, he will be entitled to a month's notice or a month's pay in lieu of notice. According to Mr. Ramamurthy, there is nothing incongruous in holding that when a workman is dismissed for a minor misconduct he will be entitled to a month's notice or a month's pay in lieu of notice. In our opinion it will be incongruous to hold that when a person is dismissed, though not for a serious misconduct but even for a minor misconduct, the workman will be entitled to a month's notice or a month's pay in lieu of notice, if otherwise there can be a dismissal for a minor misconduct as and by way of punishment. So far as we could see no decision has laid down that even in cases of dismissal a workman will be entitled to a month's notice or a month's pay. If it is a dismissal by way of punishment, no question of a month's notice or a month's pay in lieu of notice ever arises. The fact that Paragraph 1 1 provides for giving a month's notice or a month's pay when a workman is dismissed otherwise than for serious misconduct indicates that the word "dismissed" has not been used in the sense of termination of service by way of punishment alone but it covers also other cases of termination' of the services of an employee even before the completion of the work. Interpreted in this manner, the position will be that the services of an employee can be terminated as punishment for serious misconduct and the services of an employee can be terminated also for other reasons. If the services are terminated for other reasons. Paragraph 11 provides for giving a month's notice or a month's pay in lieu of notice. From the above reasoning it is clear that the word "dismissed" has been used loosely to denote both termination of service for misconduct by way of punishment and also termination of service simpliciter. 65 6 It must also be noted that the Code has been framed in 1929 long before the Government of India Act, 1935, came into force. In Burrows "Words and Phrases" the word "dismissal" has been stated to be a word of very ambiguous meaning and that it is merely a convenient expression for the termination of an employment whatever its nature may be. The word "dismissed" according to its dictionary meaning is "to send away, to discard, to remove from office or employment.......... The Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 9 dictionary,meaning makes it clear that in substance the word means "termination of service." In Dr. Bool Chand v. The Chancellor, Kurukshetra Univer- sity(1), the import of the expression "dismissed" came up for consideration before this Court. The appellant in that case, who was Professor and Head of the Department of Political Science in the Punjab University, was appointed on June 18, 1965, as the Vice-Chancellor of ' the Kurukshetra University. On March 31, 1966, the Chancellor of the University suspended the appellant from the office of Vice- Chancellor and by another order the appellant was required to show cause why his services as Vice-Chancellor be not terminated. The appellant after submitting his representation, filed a writ petition in the Punjab High Court for quashing the order dated March 31, 1966. On May 8, 1966, the Chancellor of The University, in exercise of the power under sub-cl. (vi) of cl. 4 of Sch. 1 to the Kurukshetra University Act, 1956, read with S. 14 of the Punjab General Clauses Act, 1898, passed an order termi- nating the services of the appellant as Vice-Chancellor with immediate effect. The writ petition was suitably amended challenging this order terminating the appellant's service as Vice-Chancellor. The relevant sub-clause of Cl. 4 of Schedule I of the Kurukshetra University Act provided that the Vice-Chancellor will hold the office ordinarily for a period of three years. One of the contentions raised before this Court was, that the Chancellor of the University had no power to terminate the services of a Vice-Chancellor before the expiry of the period for which he was appointed and that s. 14 of the Punjab General Clauses Act, 1898, while providing for dismissal did not empower the appointing authority to terminate the services of an officer. While holding that there was no express provision in the Kurukshetra University Act or the statutes thereunder dealing with the termination of the tenure of office of the Vice-Chancellor, this Court held "But on that account we are unable to accept the plea of the appellant that the tenure of office of a Vice-Chancellor under the Act cannot be determined before (1)[1968] 1 S.C. R. 434. 6 5 7 the expiry of the period for which he is appointed. A power to appoint ordinarily implies a power to determine the employment." Regarding the further contention that S. 14 of the Punjab General Clauses Act only empowers the appointing authority to dismiss an officer by way of punishment, but not to determine an employment this Court after referring to S. 14 observe as follows "But s. 14 of the General Clauses Act is a general provision : it does not merely deal with the Appointment of public servants. It deals with all appointments, and there is no reason to hold, having regard to the context in which the expression occurs, that the authority invested with the power of appointment has the power to determine employment as a penalty, but not otherwise. The expression 'dismiss' does not in its etymological sense necessarily involve any such meaning as is urged by counsel for the appellant. The implication that dismissal of a servant involves determination of employment as a penalty has been a matter of recent development since the Government of India Act, 1935 was enacted. By that Act certain restrictions were imposed upon the power of the authorities to dismiss or remove members of the civil service, from employment. There is no warrant however for assuming that in the General Clauses Act, 1898, the expression "dismiss" which was generally used in connection with the termination of appointments was intended to be used only in the sense of determination of employment as a measure of punishment." From the above extract it is clear that the word "dismissal" has to be understood in the context in which it occurs and that it denotes the determination of an employment as a penalty is a matter of Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 10 recent development since the Government of India Act, 1935 was enacted. In the case- before us, we have already pointed out that the Code has been framed as early as 1929 and there is no warrant ,for assuming that the expression "dismissed" has been used in the sense that the word was understood since the Government of India Act, 1935. Further the word 'dismissed' occurring in the context in which the said expression occurs in paragraph 1 1, as pointed out by us earlier, clearly denotes the termination of the services of an employee for serious misconduct and for other reasons. That expression is not used in the sense only to denote determination of employment as and by way of punishment. Mr. Ramamurthy raised the contention that even if there is power of termination simpliciter in the employer under Paragraph 11 , the High Court should not have interfered with the award of the Industrial Tribunal as the Tribunal has recorded a finding that the State has not acted bona fide. In support of this contention-, the learned counsel relied on the reasoning contained in paragraph 18 of the award. We have gone through the reasoning contained in the said paragraph and we do not find any finding recorded by the Tribunal that the State has not acted bona fide, when it passed an order terminating the services of the employees. On the other hand, what the Tribunal has held in the said paragraph is that the termination of the services of the employees is invalid and illegal as it is not warranted by Paragraph 11 of the Code and hence the order of termination is invalid in law and inoperative. There is absolutely no basis for the contention that these findings are to the effect that the action of the State is not bona fide. Thus the findings recorded by the Tribunal are findings on the basis of the interpretation placed by it on Paragraph 11 that the State has no power to terminate simpliciter the services of a work-charged establishment. Therefore, this contention of Mr, Ramamurthy has to be rejected. To conclude we are in agreement with the High Court in hold- ing that the expression "dismissed" in Paragraph II of the Code, has been used to take in the termination of the services of the employees mentioned therein both as a measure of punishment for serious misconduct as well as termination simpliciter of the services of an employee in which contingency one month's notice or a month's pay in lieu of notice is obligatory. In the result the appeal is dismissed but in the circumstances without any order as to costs. G.C. Appeal dismissed. 6 5 9 Workers Employed In Hirakud Dam vs State Of Orissa And Anr on 2 February, 1971 11 | {
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Commissioner Of Income-Tax, West ... vs Hind Construction Ltd. on 6 September, 1971 Equivalent citations: [1972]83ITR211(SC) Author: K.S. Hegde Bench: A.N. Grover, K.S. Hegde JUDGMENT K.S. Hegde, J. 1. Civil Appeal No. 1287 (NT) of 1971 is by special leave and Civil Appeal No. 2001 of 1968 is by certificate. Both these appeals arise from a reference made to the High Court of Calcutta under Section 66(2) of the Indian Income-tax Act, 1922. The facts of the case are fully set out in the statement of case. There is no need to restate them. The finding of the Tribunal was that there was no sale either at the time when the assessee inflated the price of the machinery which fell to its share at the time of the division or at the time when the new partnership was created. Same is the finding of the High Court. We agree with these findings. The machinery that fell to the share of the assessee was never sold. Therefore, there was no question of the assessee making any profit out of them. No one can sell his goods to himself. A sale contemplates a seller and a purchaser. If a person revalues his goods and shows a higher value for them in his books, he cannot be considered as having sold these goods and made profits therefrom. Nor can a person by handing over his goods to a partnership of which he is a partner and that as his share of capital be considered as having sold the goods to the partnership. It is difficult to appreciate the arguments advanced on behalf of the department that there was a sale either at the time when the assessee showed an inflated price of the machinery that fell to its share at the division or when that machinery was used as the capital of the new firm of which he was a partner. We see no substance in Appeal No. 1287 (NT) of 1971. This appeal is accordingly dismissed with costs. 2. Now coining to Civil Appeal No. 2001 of 1968, we revoke the certificate granted by the High Court as the same is not supported by any reason. Hence this appeal is not maintainable. It is dismissed but there will be no order as to costs. Commissioner Of Income-Tax, West ... vs Hind Construction Ltd. on 6 September, 1971 1 | {
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Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 Equivalent citations: 1971 AIR 1409, 1971 SCR 634, AIR 1971 SUPREME COURT 1409, 1971 LAB. I. C. 881, 1971 (1) LABLJ 557, 1973 BLJR 819, 1971 PATLJR 458, 1971 (1) SERVLR 175, 1971 SCD 769, 1970 PAT L J R 458 Author: C.A. Vaidyialingam Bench: C.A. Vaidyialingam, S.M. Sikri, G.K. Mitter, P. Jaganmohan Reddy, I.D. Dua PETITIONER: DEOKINANDAN PRASAD Vs. RESPONDENT: STATE OF BIHAR & ORS. DATE OF JUDGMENT04/05/1971 BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. SIKRI, S.M. (CJ) MITTER, G.K. REDDY, P. JAGANMOHAN DUA, I.D. CITATION: 1971 AIR 1409 1971 SCR 634 1971 SCC (2) 330 CITATOR INFO : R 1973 SC 834 (10) F 1976 SC 37 (22) F 1976 SC 667 (3) R 1978 SC 803 (30) F 1983 SC 130 (20) RF 1983 SC1134 (2) R 1984 SC1064 (10) RF 1984 SC1560 (3) R 1984 SC1855 (8) F 1984 SC1905 (2,2,3,5,6) F 1985 SC1196 (7) F 1987 SC 943 (8) F 1989 SC2088 (7) Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 1 ACT: Constitution of India, 1950, Art. 32-Right to pension, if property-Petition to enforce-Maintainability. Bihar Service Code, r. 76-Automatic termination without opportunity to show cause-If violates Art. 311. Bihar Pension Rules, r. 46-Scope of. HEADNOTE: The petitioner was a Deputy Inspector of Schools and a member of the Education department of the respondent-State. On September 2, 1953, the Director of Public Instruction passed an order directing a censure to be recorded in the character roll of the petitioner. On March 5, 1960, he was reverted to the Lower Division of the Subordinate Educational Service, as a result of an inquiry into certain charges. He filed a suit challenging the two orders. On August 5, 1961, the Munsiff passed an order restraining the respondent from enforcing the order dated March 5, 1960. On April 3, 1962, the temporary injunction was vacated by the Subordinate Judge. On April 11, 1963, the suit was decreed and the respondent was prohibited from enforcing the order dated March 5, 1960. This decree was set aside in appeal by the Subordinate Judge on June 24, 1964, and the petitioner's second appeal was dismissed by the High Court on February 11, 1965. On August 5, 1966, the Director of Public Instruction passed an order that the petitioner 'having not been on his duties for more than five years since March 1, 1960 has ceased to be in Government employ since March 2, 1965 under r. 76 of the Bihar Service Code.' The petitioner having completed 58 years of age addressed a letter to the Director of Public Instruction on July 18, 1967 requesting him to arrange for the payment of her. pension, and on June 12, 1968 the Director of Public Instruction passed orders stating that under r. 46 of the Bihar Pension Rules he was not entitled to any pension. The petitioner filed the present writ petition under Art. 32 challenging the various orders. HELD: (1) No relief could be granted in respect of the orders dated September 2, 1953 and March 5, 1960, as, (a) they were already covered by the decision of the High Court in second appeal. (b) no relief could be granted with respect to an order passed as early as 1953; and (c) the orders did not infringe any fundamental rights of the petitioner. [652G-H 653A-B] (2) The order dated August 5, 1966, declaring, under r. 76 of the Service Code that the petitioner had ceased to be in Government service should be set aside. [653-A-B] (a) The essential requirement for taking action under the said rule is that the government servant should have been continuously absent from duty for over five years. Under this rule it is immaterial whether absence from duty by the Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 2 government servant was with or without leave so long as it is established that he was absent from duty for a continuous period for over five years. Admittedly the petitioner, in the present case, was on duty till March 10, 1960 and he ceased to attend to his duty only from March 635 11, 1960. Therefore, the order stating that he 'ceased to be in government employ on March 2, 1965, was on the face of it erroneous.' [643C-D, E; 644A-C] (b) Assuming that the order should be read that the petitioner was not on his duty continuously for more than five years from March 11, 1960 till August 5, 1966 the date of the order even then, the order would be illegal. From August 5, 1961, the date of temporary injunction granted by the Munsiff till April 3, 1962, when that order was vacated by the Subordinate Judge, the Department did not allow the petitioner to join duty in the senior post in spite of several letters written by him. Again on April 11, 1963 when the Munsiff granted a decree in favour of the petitioner, the respondent did not obtain any stay order from the appellate court, and so, the decree of the trial court was in full force till it was set aside in appeal on June 24, 1964. During that period, that is, from April 11, 1963 to June 24, 1964 the petitioner wrote several letters requesting the respondent to permit him to join duty in the senior grade, but the respondent did not permit him to do so. Therefore, there was no question of the petitioner being continuously absent from service for over 5 years during the period referred to when he was willing but the respondent did not allow him to serve, and hence, r. 76 of the Service Code was not applicable. [644E-F; 645A-D,G; 646D-H; 647A-B,E-F] (c) Even if the r. 76 was applicable and it was a question of automatic termination of service, Art. 311 applies to such cases also. According to the respondents a continuous absence from duty for over five years apart from resulting in the forfeiture of the office also amounts to misconduct under r. 46 of the Pension Rules disentitling the office to receive pension. The respondent did not give an opportunity to the petitioner to show cause against the order proposed. Hence there was violation of Art. 311. [647GH ; 648D-E] Jai Shankar v. State of Rajasthan, [1966] 1 S.C.R. 825, followed. (3) The order dated June 12, 1968 stating that under r. 46 of the Pension Rules the petitioner was not entitled to any pension should also be set aside. [649C] Payment of pension under the rules does not depend upon the discretion of the State Government but is governed by the rules and a government servant, coming within those rules is entitled to claim pension. Under r. 46 a Government servant dismissed or removed for misconduct, insolvency or inefficiency is not eligible for pension. In the present case it was contended that the petitioner's absence for over Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 3 five years, amounted to misconduct and inefficiency in service. But when the order dated August 5, 1966 has been held to be illegal then the order dated June 12, 1968 based upon it also falls to the ground. [649B-C;D-H;65OA-B] (4) The grant of pension does not depend upon any order. It is only for the purpose of quantifying the amount having regard to the service and other allied matters that it may be necessary for the authorities to pass an order to that effect, but the right to receive pension flows to an officer not because of any such order but by virtue of the rules. The right of the petitioner to receive pension is property under Art. 31(1) and by a mere executive order the State had no power to withhold it. Similarly, the said claim is also property under Art. 19(1) (f). It, therefore follows, that the order dated June 12, 1968 denying the petitioner the right to receive pension affected his fundamental right and as such the writ petition was maintainable. [650G-H; 652B-C, D-F] K. R. Erry v. State of Punjab, I.L.R. [1967] Punjab & Haryana 279, (F.B) approved. 636 (5) The bar against the Civil Court entertaining any suit relating to the matters under the Pension Act does not stand in the way of a writ of mandamus being issued to the State to properly consider the claim of the petitioner for payment of pension according to law. JUDGMENT: ORIGINAL JURISDICTION: Writ Petition No. 217 of 1968. Petition under Art. 32 of the Constitution of India for the enforcement of fundamental rights. Bishan Narain, B. B. Sinha, S. N. Misra, S. S. Jauhar and K. K. Sinha, for the petitioner. B. P. Jha, for the respondents. The Judgment of the Court was delivered by Vaidialingam, J.-In this writ petition under Art. 32 of the Constitution, the petitioner prays for the issue of a writ to the respondents in the nature of Certiorari or any other appropriate writ, direction or order quashing four orders dated September 2, 1953, March 5, 1960, August 5, 1966 and June 12, 1968. He further prays for issue of a writ in the nature of a Writ of Mandamus directing the respondents to treat him as having retired at the age of 58 and to pay him the pension that he is entitled to. Though four orders are cought to be quashed, as we will show in due course, the grievance of the petitioner regarding the orders dated September 2, 1953 and March. 5, 1960 can no longer be considered by this Court in this writ petition. In consequence only the last two orders, mentioned above, survive for consideration. Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 4 We will refer briefly to the circumstances leading up to the passing of the orders, referred to above, in order to appreciate the circumstances under which the last two orders in particular came to be made as well as the ground of attack levelled against these orders. The petitioner joined service as an Assistant Teacher on September 1, 1928 in the Patna Practising School and was promoted as Sub-Inspector of Schools, Lower Division, in the Subordinate Educational Service from May 31, 1934. The petitioner later on was promoted as Deputy Inspector of Schools in Upper Division of the Subordinate Educational Service and was posted at Seraikella in the Singhbhum District in the Chhotanagpur Division, Bihar from November 1, 1949. The State of Seriakella having merged in the erstwhile province of Bihar, the provincial Government took over and assumed control directly of the education in the locality through its employees of the Education Department unlike other parts of, the province where the education was under the control and management of the District and Local Boards. The service rendered by the petitioner as Deputy Inspector of Schools, Seraikella was found satisfactory by the superior officers including the Director of Public Instruction and hence he was recommended to be appointed to a superior post of Education Officer in the Community Project. By about the end of 1951, he was transferred to Purulia in the district of Manbhum as Additional Deputy Inspector of Schools. The petitioner was later on transferred to Bettiah in or about May, 1953. At Bettiah the petitioner received a copy of the order dated September 2, 1953 from the Director of Public Instruction directing a censure to be recorded in the character roll of the petitioner based on the report of one Shri Kanhaya Lal, District Inspector of Schools, who, according to the petitioner, was inimically disposed towards him. The attempt of the petitioner to have the order dated September 2, 1953 cancelled proved unsuccessful. This is the first order that is sought to be quashed by the petitioner. The petitioner on the basis of certain allegations was placed under suspension on February 6, 1954 and relieved from his duty as Deputy Inspector of Schools, Bettiah. There was a charge sheet issued to the petitioner on March 16, 1954 and he was found guilty. But these inquiry proceedings were later on set aside and a fresh inquiry was ordered. In consequence the order of suspension was cancelled, but immediately thereafter a fresh inquiry was conducted in which he was again found guilty as per the report of the Inquiry Officer dated September 22, 1959. The Disciplinary Authority, who was the Director of Public Instruction. passed an order on March 5, 1960 accepting the finding of the Inquiry Officer recorded against the petitioner and held that the charges had been proved against him. Accordingly, by this order the petitioner was reverted, as punishment, to Lower Division of Subordinate Educational Service and also directing a censure entry to be recorded in Us personal character roll. This is the second order that is challenged in this writ petition. It is not necessary for us to deal in any detail about the first and the second order as both those orders are now concluded against the petitioner by the decision of the High Court. The petitioner filed title suit No. 86 of 1961 in the Court of the Munsif, III, Patna, for a declaration challenging the order dated March 5, 1960 as well as the inquiry proceedings on the basis of which the said order was passed. He also challenged the order of censure passed on September 2, 1953 and further incorporated in the order of March 5, 1960. Though the suit was contested by the respondents, it was ultimately decreed on April 11, 1963. The respondents filed title appeal No. 132/24 of 1963-64 before the Subordinate Judge, 11 Court, Patna, challenging the decree of the Munsif. On June 24, 1964 the appeal was allowed, with the result that the petitioner's title suit No. Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 5 86 of 1961 stood dismissed. The petitioner's Second Appeal No. 640 of 1964 was dismissed by the High Court on May 4, 1967. From these proceedings it is clear that the order of censure dated September 2, 1953 as well as of reversion dated March 5, 1960 have both been found to be correct by the High Court and it is no longer open to the petitioner to canvass those orders again. But it may be necessary for us to refer to certain proceedings connected with the title suit when we deal with the attack of the petitioner against the legality of the orders dated August 5, 1966 and June 12, 1968. When the order of reversion dated March 5, 1960 was passed, the petitioner was working as Deputy Inspector of Schools, Deoghar. The office of the Deputy Inspector of Schools was closed for Holi holidays from March 11, 1960 and the petitioner claims that he left the headquarters to go to Patna with the permission of the authorities. The order dated March 5, 1960 was received by him at Patna on March 23, 1960 when he was ill. He applied for leave. According to the petitioner, he obtained an order of temporary injunction on October 5, 1961 in his title suit No. 86 of 1961 restraining the respondents from giving effect to the order dated March 5, 1960 reverting him to the Lower Division in the Subordinate Educational service. Though he offered to join the post to which he was entitled originally, he was not allowed by the respondents to join the Upper Division of the Subordinate Educational Service. The action of the respondent in refusing to permit him to join duty was in flagrant violation of the order of temporary injunction granted by the Munsif, Patna. On August 5, 1966 the Director of Public Instruction passed an order that the petitioner "having not been on his duties for more than five years since March 1, 1960, has ceased to be in Government employ since March 2, 1965 under r. 76 of the Bihar Service Code". The petitioner made representations for cancellation of this order but without any success. This is the third order that is being challenged. The petitioner having completed 58 years of age, addressed a letter to the Director of Public Instruction on July 18, 1967 requesting him to arrange for the payment of the petitioner's pension. No reply was received by the petitioner for a long time inspite of repeated reminders. Ultimately on June 12, 1968 the Director of Public instruction passed orders on the petitioner's ,application dated July 18, 1967 regarding payment of pension. In this order it is stated that under r. 46 of the Bihar Pension Rules (hereinafter to be referred as the Pension Rules), the Department is unable to grant any pension to the petitioner. We will refer to this rule at the appropriate stage but it is enough to take note of the fact that under the said rule, no pension may be granted to a government servant dismissed or removed for misconduct, insolvency or inefficiency. According to the petitioner this order is illegal and void. This is the fourth order that is under challenge. According to the petitioner the order dated August 5, 1966 is an order removing him from service and it is illegal and void as it has been passed in contravention of Art. 311 of the Constitution. Further the order is also not legal and not warranted by the Rules for the reason that the petitioner had not been absent from duty for over five years continuously. According to the petitioner there is a further infirmity in the order as the respondents are inconsistent in their pleas regarding the date from which the period of continuous absence has to be calculated. This plea is based upon the different dates given in the order dated August 5, 1966 and the dates given in the counter- affidavit Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 6 filed on behalf of the respondents. The attack on the order dated June 12, 1968 is two fold, namely, (a) that it is not warranted by r. 46 of the Pension Rules under which it is purported to be passed; and (b) the petitioner's right to get pension is property and by the respondents not making it available to him, his fundamental rights guaranteed under Arts. 19(1)(f) and 31(1) of the Constitution, have been affected. The Assistant Director of Education has filed a counter affidavit on behalf of the respondents. According to the respondent the orders of censure passed on September 2, 1953 and of reversion dated March 5, 1960 are valid and legal and in passing those orders no violation of any rules has been made. The petitioner was given full opportunity to participate to the inquiry proceedings and it was after considering the report as well as the explanation furnished by the petitioner that the order of reversion was passed. The petitioner is not entitled to challenge any of those orders as they are concluded by the decision of the Patna High Court dated March 4, 1967 in Second Appeal No. 640 of 1964. Regarding the order dated August 5, 1966, it is admitted by the respondents that the petitioner was on duty till March 10, 1960. He ceased to attend office only from March 11, 1960. It is further admitted that it has been stated by mistake in the order that the petitioner has not been on duty for more than five years since March 1, 1960. The date "March 1, 1960 should be read as "March 11, 1960". The respondents dispute the averment of the petitioner that he left the headquarters from March .11, 1960 with the permission of the authorities. On the other hand, according to them, the petitioner had put in an application in the office of the Sub-Divisional Educational Officer for leave on March 11, 1960 and that he did not obtain any prior permission for leaving the headquarters. It is further averred that the order dated March 5, 1960 reverting the petitioner came into- effect immediately and the petitioner was also informed of the same. It is specifically pleaded by the respondent as follows: "In other words since 11-3-1960 till 5-8-1968 he was continuously not in service for more than 5 years. By virtue of rule 76 of Bihar Service Code of 1952 the petitioner ceased to be in the service of the Government as he remained absent from duty continuously for 5 years and this itself amounts to misconduct and inefficiency in the service. In the present case the provisions of article 311 do not apply to the- facts of this case because his services are not terminated on account of any charge but are automatically terminated by virtue of the statute i.e. rule 76 of the Bihar Service Code 1952. Article 311 applies where the services of a government servant are terminated in respect of any charge. But it does not apply where a government servant ceases to be a government servant by virtue of any statute." According to the respondent there has been no breach committed of Art. 311 of the Constitution when the order dated August 5, 1966 was passed on the basis of r. 76 of the Bihar Service Code, 1952 (hereinafter to be referred as the Service Code). It is to be noted at this stage that there is a variation regarding the dates of continuous absence for over five years mentioned in the order and in the counter- affidavit. They will be dealt with by us when the attack of the petitioner on the order dated August 5, 1966 is con- sidered. It is further admitted by the respondents that even after the Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 7 injunction order was passed by the Munsif, the Department was always insisting on the petitioner to join in the lower grade to which post he had been reverted and that the petitioner never joined that post. Dealing with the order dated June 12, 1968 in and by which the petitioner was informed that the Department was unable under r. 46 of the Pension Rules to grant him pension, the respondents state that the order is valid and fails squarely under the said rule. According to the respondents the order dated August 5, 1966 is an order removing the petitioner from service for not attending to his duty for more than five years and that by itself amounts to misconduct. Therefore, the petitioner was not entitled to claim any pension. There is also an averment to the effect that there is no question of any fundamental right of the petitioner being affected by the orders under attack and hence the writ petition is not maintainable. The petitioner has filed a rejoinder wherein he has pointed out the inconsistent dates given in the order dated August 5, 1966 and in the counter-affidavit filed on behalf of the respondents by the Assistant Director of Education. According to the petitioner in whatever manner the period is calculated either as per the dates given in the order or by the dates given in the counter-affidavit, rule 76 does not apply as he has not been continuously absent from duty for over five years. The petitioner further avers that he was absent from duty after taking the permission of the autho- rities. According to the petitioner he has not been continuously absent from duty for over five years if the period is properly calculated according to the various orders passed by the Munsif. Patna, in his title suit. According to the petitioner, when a court has restrained the respondents from giving effect to the order of reversion and when he offered to join duty in the post from which he was reverted, the respondents without any regard for the court orders, did; not permit him to join duty, but, on the other hand, insisted that he should join duty in the lower rank to which he had been reverted. This, according to the petitioner, is illegal. The petitioner further reiterates his allegation that he was entitled to pension and that withholding of the same affects his fundamental rights. According to the petitioner the respondents do not deny his right to get pension but, on the other hand, plead that as he has been removed from service by the order dated August 5, 1966, he is not entitled to pension by virtue of r. 46 of the Pension Rules. He further points out that as the order dated August 5, 1966 is illegal, the order dated June 12, 1966, which is based upon the earlier order, is also null and void. The questions that arise for consideration are whether the orders dated August 5, 1966 and June 12, 1968 are legal and valid. Before we consider that aspect, it is necessary to state that in order to sustain this petition under Art. 32, the petitioner will have to establish that either the order dated August 5, 1966 or June 12, 1968, or both of them affect his fundamental rights guaranteed to him. The order of August 5, 1966, according to the petitioner, is one removing him from service and it has been passed in viola- tion of Art. 311. That the said order is one removing the petitioner from service is also admitted by the respondents in paragraph 11 of the counter-affidavit filed on their behalf by the Assistant Director of Education. Assuming that the said order has been passed in violation of Art. 311, the said circumstance will not give a right to the petitioner to approach this Court under Art. 32. The stand taken by the petitioner is that his right to get 41-1 S.C. India/71 pension is property and it does not cease to be property on the mere denial or cancellation by the respondents. The order dated June 12, 1968 is one withholding the payment of pension or at any rate amounts to a denial by the respondents to his right to get pension. Either way, his rights to property are affected under Arts. 19(1)(f) and 31(1) of the Constitution. His right to pension cannot be taken away by an executive order. In the counter affidavit, the respondents do not dispute the rights of the petitioner Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 8 to get pension, but they take the stand that the order dated June 12, 1968 is justified by r. 46 of the Pension Rules. This aspect will be dealt with by us later. There is only a bald averment in the counter-affidavit that there is no question of any fundamental right and therefore this petition is not maintainable. As to on what basis this plea is taken, has not been further clarified in the counter- affidavit. But before us Mr. B. P. Jha, learned counsel for the respondents, urged that by withholding the payment of pension by the State, no fundamental rights of the peti- tioner have been affected. We are not inclined to accept the contention of Mr. Jha that no fundamental rights of the petitioner are affected by passing the order dated June 12, 1968. 'We will refer to the relevant Pension Rules bearing on the matter and also certain decisions. In our opinion, the right to get pension is "property" and by withholding the same, the petitioner's fundamental rights guaranteed under Arts. 19(1)(f) and 31(1) are affected. As the matter is being discussed more fully in the latter part of the judgment, it is enough to state at this stage that the writ petition is maintainable. Even according to the respondents the order dated June 12, 1968 has no independent existence and that order has been passed on the basis of the earlier order dated August 5, 1966. In our opinion, if the order dated August 5, 1966 cannot be sustained, it will follow that the order dated June 12, 1968 will also fall to the ground. Hence we will deal, in the first instance, with the validity of the order dated August 5, 1966. The full text of the order dated August 5, 1966 passed by the Director of Public Instruction, Bihar, is as follows: "Number-7 / 07 / 60 Edn. 3791 Sri Devaki Nandan Prasad, Sub-Inspector of Schools, Deoghhar, having not been on his duties for more than 5 years since 1-3-60 has ceased to be in Government employ since 2-3-65 under rule 76 of the Bihar Service Code. (Sd.) K. Ahmed Director of Public Instruction Bihar. Memo No. 3791 Patna, dated 5th August, 1966. Copy forwarded to Sri Devaki Nandan Prasad, New Yarpur, Patna for information." Rule 76 of the Service Code reads as follows: "Unless the State Government, in view of the special circumstances of the case shall otherwise determine, A Government servant after five years of continuous absence from duty, elsewhere than on foreign service in India, whether with or without leave, ceases to be in Government employ." The essential requirement for taking action under the said rule is that the government servant should have been Continuously absent from duty for over five years. Under this rule it is immaterial whether absence from duty by the government servant was with or without leave so long as it is established that he was absent from duty for a continuous period for over five years. We are referring to this aspect because it is the case of the petitioner that he availed himself of leave with effect from March 11, 1960 and he left the headquarters after obtaining the necessary sanction from his superior officers. On the other hand, it is the case of the respondents that the petitioner merely putting in an application for leave from March 11, 1960 left the headquarters without obtaining the prior permission of the superiors. It is not necessary for us to deal with this controversy, as under Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 9 the rules absence for the period stated therein, either with or without leave, are both treated on the same basis. According to the dates given in the order, the petitioner has not been on his duties for more than five years from March 1, 1960 and that he ceased to be in government employ from March 2, 1965. According to the petitioner this order is illegal because he was on duty till March 10, 1960 in which case continuous absence of five years would not be completed on March 2, 1965. But the more serious attack against this order is that there is no question of the petitioner not being on his duties continuously for more than five years. On the other hand, according to him, he has always been ready and willing to do his duty and the respondents have illegally prevented him from joining duty by ignoring orders of the civil court. In this connection, on behalf of the petitioner, Mr. Bishan Narain, learned counsel, has referred us to the details regarding the institution of the title suit No. 86 of 1961 by the petitioner as well as to certain orders passed by that court. He has also drawn our attention to the letters written by the petitioner to the authorities offering to work and the respondents not sending any reply and ultimately asking the petitioner to join duty in the reverted post, though the order of reversion has been declared, illegal by the Munsif, Patna. We have already referred to the averments in the counter-affidavit filed on behalf of the respondents. So far as this aspect is concerned, it is admitted in paragraph 8 of the counter-affidavit that the petitioner was on duty till March 10, 1960 and that he ceased to attend to his duty only from March 11, 1960. Therefore, the averment of the petitioner that he was on duty till March 10, 1960 is accepted as correct by the respondents. Therefore, it follows that even according to the respondents, the petitioner was absent from duty con- tinuously for more than five years only from March 11, 1960 and he ceased to be in government employ on March 2, 1965. Without anything more it can be easily said that this calculation is absolutely erroneous because from the dates mentioned above, the petitioner cannot be considered not to have been on duty for more than five years. There is a slight shift in the stand taken by the respondents in the counter-affidavit. While they admit that the date from which the period of absence should be calculated is March 11, 1960 and not March 1, 1960, they have stated that the petitioner. was absent from March 11, 1960 till August 5, 1966, the date on which the order was passed and hence he was continuously not in service for more than five years. That is even the outer period given in the order dated August 5, 1966, namely, March 2, 1965 is changed by the respondents to the date of passing of the order dated August 5, 1966. We will now proceed on the basis that the order dated August 5, 1966 should be read in such a manner that the petitioner was not on his duty continuously for more than five years from March 11, 1960 till August 5, 1966. If the, respondents are able to establish this circumstance, it is needless to state that r. 76 of the Service Code will come into operation irrespective of the fact whether the petitioner was absent with or without leave. According to the petitioner, he has not been continuously absent for over five. years even during the above period as stated by the respondents. It is now necessary to refer to certain proceedings connected with the title suit No. 86 of 1961 instituted by the petitioner in the Court of the Munsif III, Patna. In that suit the petitioner challenged the order dated March 5, 1960 in and by which he was reverted to the lower division of the Subordinate Educational Service and a censure was directed to be recorded against his character Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 10 roll. According to the respondents in this suit Me order of censure passed on September 2, 1953 was also challenged. On August 5, 1961, the Munsif passed an order restraining the present respondents from operating the punishment order passed on March 5, 1960 by the Director of Public Instruction on the petitioner till the disposal of the suit. It is now admitted by the respondents that the petitioner was on duty till March 10, 1960 and that he was absent only from March 11. 1960. That there was an order of temporary injunction passed by the court restraining the respondents from giving effect to the order of March 5, 1960 is not challenged in the counter-affidavit. According to the petitioner he went on October 13, 1961 to join his post from which he was illegally reverted, but in spite of the order of the Munsif, Patna, the respondents did not permit him to join duty. That he was prepared to join duty and work is clear from the letters written by the petitioner to the Director of Public Instruction on October 13, 1961, October 24, 1961 and November 1, 1961. There was no reply by the respondents. It is no doubt true that on April 3, 1962, the temporary injunction granted by the Munsif, Patna, was vacated by the Subordinate Judge. On April 11, 1963 the title suit No. 86 of 1961 instituted by the petitioner was decreed and the respondents were prohibited from enforcing the order dated March 5, 1960 reverting the petitioner from the senior grade to the lower grade of the Subordinate Educational Service. The petitioner again wrote a letter on April 18, 1963 to the Director of Public Instruction drawing the latter's attention to the decree passed in title suit No. 86 of 1961 and requesting him to permit the petitioner to join duty as Deputy Inspector of Schools. There was a reply on November 27, 1963 by the Director of Public Instructions to the effect that the plea of the petitioner has been considered at all levels of the Directorate and the Government. The petitioner was directed to report himself to the Regional Deputy Director of Education, Bhagalpur Division and to join duty in "Lower Division of Subordinate Educational Service". The letter proceeds to state "in case of disobedience of order you will be charged with insubordination". We are constrained to remark that the attitude taken in this letter on behalf of the State is not commendable at all. Admittedly there was a decree passed by the Munsif in title suit No. 86 of 1961 on April 11, 1963 restraining the respondents from giving effect to the order dated March 5, 1960 reverting the petitioner from the post of Deputy Inspector of Schools to the Lower Division of Subordinate Educational Service. Admittedly the respondents were parties to the said decree and they had not obtained any order of an Appellate Court staying the operation of the decree in the suit. The effect of the decree passed by the Munsif was that the petitioner was entitled to work in the original post which he was holding prior to his reversion. That these aspects have been missed by the respondents is evident from the reply of November 27, 1963 sent by the Director of Public Instruction. The petitioner sent a further letter dated December 6, 1963 in reply to the letter of the Director of Public Instruction dated November 27, 1963. In this letter the petitioner again referred to the decree of the Munsif, Patna, dated April 11, 1963 and pointed out that he was entitled to hold the original post which he was occupying prior to the order of reversion, which has; been directed not to be put into operation by the court. He further pointed out that the directions contained in the letter dated November 27, 1963 sent by the Director of Public Instruction was not in conformity with the decree of the Munsif. He further made a request that he should be allowed to join duty in the original post in the senior grade and also made a further request for payment of arrears of his salary. There was no reply by the respondents and the petitioner was not allowed to join duty as desired by him. The above correspondence is not at all disputed by the respondents. In fact they have admitted in the counter- affidavit that even after the order of injunction, the Department was always insisting on the petitioner joining duty as Sub-Inspector of Schools, that is, in the lower grade and that the petitioner Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 11 never joined duty in that post. To complete the narration on this aspect. the decree of the Munsif in favour of the petitioner restraining the respondents from enforcing the order dated March 5, 1960 was set aside on appeal by the Subordinate Judge on June 24, 1964 in title appeal No. 132/24 of 1963/64. The petitioner's Second Appeal No. 640 of 1964 was dismissed by the High Court on February 11, 1965. From the narration of the above facts, it will be clear that from October 5, 1961, the date of temporary injunction granted by the Munsif, till April 3, 1962, when the order of temporary injunction was vacated by the Subordinate Judge, the Department did not allow the petitioner to join duty in the senior post, which he was entitled to occupy by virtue of the order of injunction. We have already referred to the fact that the petitioner sent letters dated October 5, 1961, October 13, 1961, October 20, 1961 and November 1, 1961 expressing his readiness and willingness to work in the senior post. The respondents did not permit him to join duty. Therefore, it cannot be said that the petitioner was absent from duty during this period. Again on April 11, 1963, the Munsif granted a decree in favour of the petitioner in the suit. The respondents did not obtain any stay order from the Appellate Court. So the decree of the trial court was in full force till it was set aside on appeal on June 24, 1964. During the period April 11, 1963, June 24, 1964, the petitioner wrote several letters and to which we have made a reference earlier, requesting the respondents to permit him to join duty in the senior grade. The respondents did not permit him to join duty in the senior grade; but, on the other hand, insisted on the petitioner's joining duty in the lower grade on threat of disciplinary action being taken. This attitude of the respondents, we have already pointed out, was in flagrant violation of the order of the Munsif. Therefore, during the period April 11, 1963 to June 24, 1963, it cannot be said that the petitioner was absent from duty. Hence it will be seen that the claim made by the respondents in the counter- affidavit that the petitioner, since March 11, 1960 till August 5, 1966 was continuously not in service for over five years is fallacious. There is no question of the petitioner not being in continuous service for over five years during the period referred to above. On the other hand, the period during which it could be said ',,hat the petitioner was absent was from March 11, 1960, the date on which he claims to have gone on leave till October 5, 1961 when the order of temporary injunction was passed by the Munsif. From October 5, 1961 to April 3, 1962, we have already pointed out, the petitioner cannot be considered to have been absent from duty. Therefore, the continuity of absence is broken during this period. The petitioner can again be considered to have been absent from duty from April 3, 1962, the date on which the order of temporary injunction was vacated by the Subordinate Judge, till April 11, 1963, the date on which a decree was granted by the Munsif in favour of the petitioner. During this period he was absent. But again the continuity of absence is broken during the period April 11, 1963 the date of the decree of the Munsif, till June 24, 1964, the date when the Subordinate Judge reversed the decree of the trial court. We have already referred to the various letters written during this period by the petitioner as well as the reply sent by the Director of Public Instruction on November 27, 1963. During this period he cannot be considered to be absent from duty. The third period from which he can be again considered to be absent from duty is June 24, 1964, the date of the decree of the Subordinate Judge till August 5, 1966, the date on which the order was passed purporting to be under r. 76 of the Service Code. The above circumstances clearly show that the petitioner cannot be considered to have been continuously absent from duty for over five years during the period March 11, 1960 to August 5, 1966. if that is so, the essential condition for the application of r. 76 of the Service Code is lacking Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 12 and, therefore, it follows that the order dated August 5, 1966 is not supported by r. 76 of the Service Code. Therefore that order is illegal and has to be quashed. A contention has been taken by the petitioner that the order dated August 5, 1966 is an order removing him from service and it has been passed in violation of Art. 311 of the Constitution. According to the respondents there is no violation of Art. 311. On the other hand, there is an automatic termination of the petitioner's employment under r. 76 of the Service Code. It may not be necessary to investigate this aspect further because on facts we have found that r. 76 of the Service Code has no application. Even if it is a question of automatic termination of service for being continuously absent for over a' period of five years, Art. 311 applies to such cases as is laid down by this Court in Jai Shanker v. State of Rajasthan (1). In that decision this Court had to consider Regulation No. 13 of the Jodhpur Service Regulations, which is as follows: "13. An individual who absents himself without permission or who remains absent without permission for one month or longer after the end of his leave should be considered to have sacrificed his appointment and may only be reinstated with the sanction of the competent authority." It was contended on behalf of the State of Rajasthan that the above regulation operated automatically and there was no question of removal from service because the officer ceased to be in the service after the period mentioned in the regulation. This Court rejected the said contention and held that an opportunity must be given to a person against whom such an order was proposed to be passed, no matter how the regulation described it. It was further held "to give no opportunity is to go against Art. 311 and this is what has happened here". In the case before us even according to the respondents a continuous absence from duty for over five years, apart from resulting in the forefeiture of the office also amounts to misconduct under r. 46 of the Pension Rules disentitling the said officer to receive pension. It is admitted by the respondents that no opportunity was given to the petitioner to show cause against the order proposed. Hence there is a clear violation of Art. 311. Therefore, it follows even on this ground the order has to be quashed. The further question is about the legality of the order dated June 12, 1968 purporting to be passed under r. 46 of the Pension Rules. The petitioner wrote a letter dated July 18, 1967 requesting the Director of Public Instructions to arrange for payment of his pension as he had attained the age of superannuation. The order dated June 12, 1968 was passed in reply to the said request of the petitioner. In this order it is stated that under r. 46 of the Pension Rules, the Department is unable to grant pension to the petitioner. Rule 46 of the Pension Rules is as follows: "46. No pension may be granted to a Government servant dismissed or removed, for misconduct, insolvency or inefficiency, but to Government servants so dismissed or removed compassionate allowance may be granted when they are deserving of special consideration, provided that the allowance granted to any Government servant shall not exceed two-thirds of the pension which (1) [1966] 1 S. C. R. 825. Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 13 would have been admissible to him if he had retired on medical certificate." It will be seen that under the said rule a Government servant who has been dismissed, or removed for misconduct, insolvency or inefficiency is not eligible for pension. The respondents 'have admitted in their counter-affidavit that the order dated August 5, .1966 purporting to be under r. 76 of the Service Code is an order of removal and it is further pleaded by them that the petitioner's absence for over five years itself amounts to misconduct,duct and inefficiency in service. We have already held that the ,order dated August 5, 1966, is illegal. If that is so, it follows ,.that the petitioner has not been continuously absent from duty for over five years and he is not guilty of any misconduct or in-efficiency in service. Therefore, it will further follow that withholding of pension under the- order dated June 12, 1968 on the basis of r. 46 of the Pension Rules, is illegal. The respondents have not taken up the position that the offic ers like the petitioner are not entitled to pension. A reference to r. 5 of the Pension Rules shows that the officers mentioned therein are entitled to pension. There is no controversy that the petitioner is an officer in the Education Department of the Bihar 'Education Service. It is item No. 3 of the Schedule to r. 5. Rule 42 declares that every pension shall be held to have been granted Subject to the conditions contained in Chapter VIII. It is not the case of the respondents that Chapter VIII which applies to re-employment of pensioners, has any relevancy to the case on hand. We have already referred to r. 46. Under that rule a Government servant dismissed or removed for misconduct, insolvency or 'inefficiency is not eligible for pension. But that rule clearly con-templates that action by way of dismissal or removal in respect of the three matters mentioned therein has already taken place -according to law. The bar under r. 46 will operate only when the conditions mentioned therein are satisfied. In fact the consequences envisaged under the rule flow from the action already taken. Rule 129 provides for the payment of superannuation pension to a Government servant entitled or compelled by the ,rules to retire at a particular age. Rule 134 clarifies the payment of retirement pension to a Government servant permitted to retire after completing qualifying service for 30 years or any such less ,time as may for any special class of Government servants be prescribed. Rule 135 provides for Government servants mentioned in r. 5 to be entitled on their resignation being accepted to -a retiring pension after completing qualifying service of not less than 25 years. Rule 146 provides the scale of pension for Government servants mentioned in r. 5. We have only referred to -some of the important rules to show that the payment of pension does not depend upon the discretion of the State; but, on the other hand, payment of pension is governed by the Rules and a Government servant coming Within the Rules is entitled to claim pension. The order dated June 12, 1968 has to be quashed in view of the fact that the foundation for the said order is the one based on the order dated August 5, 1966, which has been quashed by us. When the order dated August 5, 1966 can no longer survive, the order dated June 12, 1968 quite naturally falls to the ground. The last question to be considered, is, whether the right to receive pension by a Government servant is property, so as to attract Arts. 19(1)(f) and 31(1) of the Constitution. This question falls to be decided in order to consider whether the writ petition is maintainable under Art. 32. To this aspect, we have already adverted to earlier and we now proceed to consider the same. Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 14 According to the petitioner the right to receive pension is property and the respondents by an executive order dated June 12, 1968 have wrongfully withheld his pension. That order affects his fundamental rights under Arts. 19(1)(f) and 31(1) of the Constitution. The respondents, as we have already indicated, do not dispute the right of the petitioner to get pension, but for the order passed on August 5, 1966. There is only a bald averment in the counter-affidavit that no question of any fundamental right arises for consideration. Mr. Jha, learned counsel for the respondents, was not prepared to take up the position that the right to receive pension cannot be considered to be property under any circumstances. According to him in this case, no order has been passed by the State granting pension. We understood the learned counsel to urge that if the State had passed an order granting pension and later on resiles from that order, the latter order may be considered to affect the petitioner's right regarding property so as to attract Arts. 19(1)(f) and 31(t) of the Constitution. We are not inclined to accept the contention of the learned counsel for the respondents. By a reference to the material provisions in the Pension Rules, we have already indicated that the grant of pension does not depend upon an order being passed by the authorities to that effect. It may be that for the purposes of quantifying the amount having regard to the period of service and other allied matters, it may be necessary for the authorities to pass an order to that effect, but the right to receive pension flows to an officer not because of the said order but by virtue of the Rules. The Rules, we have already pointed out, clearly recognise the fight of persons like the petitioner to receive pension under the circumstances mentioned therein. The question whether the pension granted to a public servant is property attracting Art. 31(1) came up for consideration before the Punjab High Court in Bhagwant Singh v. Union of India (1). It was held that such a right constitutes "property" and any interference will be a breach of Art. 3 1 (1) of the Constitution. It was further held that the State cannot by an executive order curtail or abolish altogether the right of the public servant to receive pension. This decision was given by a learned Single Judge. This decision was taken up in Letters Patent Appeal by the Union of India. The Letters Patent Bench in its decision in Union of India v. Bhagwant Singh (2)approved the decision of the learned Single Judge. The Letters Patent Bench held that the pension granted to a public servant on his retirement is "property" within the meaning of Art. 3 1 (1) of the Constitution and he could be deprived of the same only by an authority of law and that pension does not cease to be property on the mere denial or cancellation of it. It was further held that the character of pension as "property" cannot possibly undergo such mutation at the whim of a particular person or authority. The matter again came up before a Full Bench of the Punjab and Haryana High Court in K. R. Erry v. The State of Punjab (1). The High Court had to consider the nature of the right of an officer to get pension. The majority quoted with approval the principles laid down in the two earlier decisions of the same High Court, referred to above, and held that the pension is not to be treated as a bounty payable on the sweet will and pleasure of the Government and that the right to superannuation pension including its amount is a valuable right vesting in a Government servant. It was further held by the majority that even though an opportunity had already been afforded to the officer on an earlier occasion for showing cause against the imposition of penalty for lapse or misconduct on his part and he has been found guilty, nevertheless, when a cut is sought to be imposed in the quantum of pension payable to an officer on the basis of misconduct already proved against him, a further opportunity to show cause in that regard must be given to the officer. This view regarding the giving Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 15 of further opportunity was expressed by the learned Judges on the basis of the relevant Punjab Civil Service Rules. But the learned Chief Justice in his dissenting judgment was not prepared to agree with the majority that under such circumstances a further opportunity should be given to an officer when a reduction in the amount of pension payable is made by the State. It is not necessary for us in the case on hand, to consider the question whether (1) A. T. R. 1962 Punjab 503. (2) I. L. R. 1965 Punjab 1. (3) I. L. R. 1967 Punjab & Haryana 278 before taking action by way of reducing or denying the pension on the basis of disciplinary action already taken, a further notice to show cause should be given to an officer. That question does not arise for consideration before us. Nor are we concerned with the further question regarding the procedure, if any, to be adopted by the authorities before reducing or withholding the pension for the first time after the retirement of an officer. Hence we express no opinion regarding the views expressed by the majority and the minority Judges in the above Punjab High Court decision, on this aspect. But we agree with the view of the majority when it has approved its earlier decision that pension is not a bounty payable on the sweet will and pleasure of the Government and that, on the other hand, the right to pension is a valuable right vesting in a government servant. This Court in State of Madhya Pradesh v. Ranojirao Shinde and another (1) had to consider the question whether a "cash grant" is "property" within the meaning of that expression in Arts. 19(1)(f) and 31(1) of the Constitution. This Court held that it was property, observing "it is obvious that a tight to sum of money is property". Having due regard to the above decisions, we are of the opi- nion that the right of the petitioner to receive pension is property under Art. 3 1 (1) and by a mere executive order the State had no power to withhold the same. Similarly, the said claim is also property under Art. 19(1)(f) and it is not saved by sub-article (5) of Art. 19. Therefore, it follows that the order dated June 12, 1968 denying the petitioner fight to receive pension affects the fundamental right of the petitioner under Arts. 19(1)(f) and 31(1) of the Constitution, and as such the writ petition under Art. 32 is maintainable. It may be that under the Pension Act (Act 23 of 1871) there is a bar against a civil court entertaining any suit relating to the matters mentioned therein. That does not stand in the way of a Writ of Mandamus being issued to the State to properly consider the claim of the petitioner for payment of pension according to law. To conclude: No relief can be granted in respect of the orders dated September 2, 1953 and March 5, 1960 as they are already covered by the decision of the Patna High Court dated May 4, 1967 in Second Appeal No. 640 of 1967. Even assuming that the contention of the petitioner that the order dated September 2, 1953 was not the subject of adjudication in the litigation leading up to the decision of the High Court, in the second appeal, is correct, nevertheless, no relief can be granted as the order has been passed as early as 1953. Further, the representations made (1) [1968] 3 S. C. R. 489. by him for cancellation of the said order have been rejected long ago. Further, there is no infringement of any fundamental right of the petitioner by that order. The order dated August 5, 1966 declaring under r. 76 of the Service Code that the petitioner has ceased to be in government employ is set aside and quashed. The order dated June 12, 1968 stating that under r. 46 of the Pension Rules, the Department is unable to grant the petitioner pension is also set aside and quashed. As the petitioner himself claims that he has been retired from service on superannuation, a Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 16 writ of mandamus will be issued to the respondents directing them to consider the claim of the petitioner for payment of pension according to law. The writ petition is allowed to the extent indicated above. The petitioner is entitled to his costs from the first respondent, the State of Bihar. V.P.S. Petition allowed. Deokinandan Prasad vs State Of Bihar & Ors on 4 May, 1971 17 | {
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Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 Equivalent citations: 1973 AIR 1331, 1973 SCR (3) 691, AIR 1972 SUPREME COURT 1924, (1972) 1 SCC 308, 1972 SCC(CRI) 45, (1972) 1 SCJ 708 Author: P. Jaganmohan Reddy Bench: P. Jaganmohan Reddy, D.G. Palekar PETITIONER: DEB SADHAN ROY Vs. RESPONDENT: STATE OF WEST BENGAL DATE OF JUDGMENT07/12/1971 BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN PALEKAR, D.G. CITATION: 1973 AIR 1331 1973 SCR (3) 691 CITATOR INFO : D 1974 SC2337 (15) ACT: West Bengal (Prevention of Unlawful Activities) Act 1970--confirmation of Advisory Board's recommendation for detention beyond three months under s. 12 by State Government--Confirmation must be within three months of detention--Must be in writing--Must be communicated to detenu within reasonable time--Grounds of detention whether vague because they did not mention names of associates of petitioner in the acts alleged against him--Disturbance of public order in s. 3(2)(c)---What amounts to. HEADNOTE: The petitioner was arrested on January 29, 1971 in pursuance--of a detention order dated January 16, 1971 under the West Bengal (Prevention of Violent Activities) Act 1970. The State Government's order under s. 12 of the Act confirming the report of the Advisory Board recommending Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 1 detention of the petitioner for more than three months 'was passed on April 4, 1971 The order of configuration was communicate to the petitioner on August 26. 1971. In his petition under Art. 32 of the Constitution the petitioner urged; (i) that the order of confirmation under s. 12 should not only have been passed within three months of the deten- tion but also communicated to the petitioner within that period; (ii) the grounds of detention were vague; (iii) that the facts alleged did not amount to disturbance of public order. HELD : (i)(a) The confirmation. of the opinion of the Advisor Board to continue the detention beyond three months must be within threes months from the date of detention in conformity with the mandate in el. (4) of Art. 22 of the Constitution (Reasons discussed. [794 D] Dattatraya Moreshwar Pangarkar v. The State of Bombay,. & Ors., [1952] S.C.R. 612, distinguished. Kaur Singh v. The State, A.I.R. 1952, Pepsu 134, Dhadhal Kanthad Valeg v. Saurashtra State A.I.R. 1953 Sau. Umd Singh Narubho v. Stale, A.I.R. 1953, San. 51, Sangapua Mallappa Kodi & Ors. v. The State of Mysore & Ors., A.I.R. 1959, Mysore 7, Aswini Kumar Banerjee, v. The State & Ors., 1970-71 (Col. LXXV) Calcutta Weekly Notes-866, approved and applied. (b)The confirmation cannot purely be a mental act. a subjective one but must result in an objective action, namely, that it should be recorded in writing [795 C-D] Further, though there is no provision in the Act an order of confirmation, which has the effect of extending the period of detention beyond the mandatory period of three months, must be made known to the detenu. There is no warrant or justification for such an order remaining in the files of the executive without the same being communicated to the person most concerned-the detenu-whose freedom. has been objected to jeopardy. He is entitled to know that the Board have considered his representation, as well as his personal submissions if he has chosen to appear before it. and that it had been found that there was sufficient cause for his detention and that the State Government had agreed with it. The cow- 788 within a reasonable time. The effect of non-communication, however, may be an irregularity which does not make the detention otherwise legal, illegal [795 D-796 C] Mohammad Afzal Khan v. State of Jammu & Kashmir, [1957] S.C.R. 63, Achhar Singh v. State of Punjab, Petn. No. 359 of 1951-decided on 22-11-1951, Biren Dutta & Ois. v. Chief Commissioner of Tripura & Another, [1964] 8 S.C.R. 295, referred to. In the present case the order of confirmation by the State Government was made within three months of the order of detention. Although the communication to the detenu was after three months he was not shown to have been prejudiced Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 2 by it. [796 D] (ii) There was no validity in the petitioner's contention that the grounds of detention were vague because the names of his associates were not supplied. It was not necessary for the petitioner to make an effective representation to specify his associates because they may not have been known [797 E] (iii) In this case what is said to have been defiled by the petitioner and his associates is the statute of Rabindranath Tagore, a poet and sage Venerated by all in this country and affords sufficient ground for detention. The other grounds also directly connected the act with the disturbance of public order within the meaning of s. 3(2)(c) of the Act. [798 F] State of West Bengal v. Ashok Dey and Ors. etc., Crl. Appeal Nos. 217 to 233 of 1971-decided on 19-11-1971, Madhu Limaye v. Sub Divisional Magistrate Monghyr and others [1970] 3 S.C.R. 764 Dr. Ram Manohar Lohia v. State of Bihar and Ors,. [1966] 1 S.C.R 709, referred to. JUDGMENT: ORIGINAL JURISDICTION : Writ Petition No. 218 of 1971.. Under Art. 32 of the Constitution of India for a writ in the nature of habeas corpus) S. K. Mehta, for the petitioner. D.N. Mukherjee, G. S. Chatterjee and Sukumar Basu, for the respondent. The Judgment of the Court was delivered by P.Jaganmhan Reddy J. This petition under Article 32 challenges the detention under the West Bengal (Prevention of Violent Activities) Act, 1970 (hereinafter called 'the Act')'. It may be mentioned that this and other Writ Petitions were adjourned till the decision of this Court on the validity and vires of the Act which has now been decided in the State of West Betir gal v Ashok Dey & Ors. etc.etc(1) In that case it, has been held that the provisions of the Act do not contravene any of the mandates of the Constitution, as such this Petition and the others which had stood over till that decision have come up for consideration as to whether the detention ire legal. In this and other petitions three main contentions have been urged on behalf of the respective petitioners by Shri S. K. Mehta who is assisting us as Amicus Curiae. They are : (i) Whether the mandatory provisions of the, Act have been complied with; (ii) whether the grounds are irrelevant or vague and (iii) whether the State Government has confirmed the opinion of the Advisory Board that there was sufficient cause for detaining them within three months from the date of the detention and whether the communication to the detenue has been made within that period. We shall give the dates of relevant steps taken in respect of each of the detenues but before we do so it will be convenient to deal with the legal submissions in the light of which the facts of each case can be better appreciated. The mandatory requirements under the Act are that the order of detention Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 3 must be passed by the detaining authority, that it should be forthwith communicated under sub-sec. (4) of Section 1 to the State Government together with the grounds of detention. It is provided by Section 8 that the grounds of detention must be served on the detenue within 5 days from the date of detention, that these must be approved by the State Government within 12 days from that date and thereafter as soon as may be a report of this fact together with grounds and other particulars on which the order has been made should be made to the Central Government under clause (5) of Section 3 and that under Section 10 the State Government is required to place within 30 days from the date of detention before the Advisory Board (hereinafter called 'the Board') constituted under Section 9, the grounds of detention, the representation of the detenue, if any, along with the report made in case of a detention by an officer specified in sub-sec. (3) of Section 3. Thereafter it is incumbent on the Advisory Board after hearing the detenue in person, if he so desires, to report the State Government under Section 11 its opinion within ten weeks from the date of detention, as to whether or not there is sufficient cause for the detention of the person concerned. Under Section 12 where the Board is of opinion that there is sufficient cause for detention of a person, the State Government may confirm the detention order and continue the detention of the person concerned for such period as it thinks fit. In case the opinion of the Board is that there is no sufficient cause for detention the State Government shall revoke the detention order and cause the person to be released forthwith. The maximum period for which any person may be detained- in pursuance of any detention order which has been confirmed shall under Section 13, be twelve months from the date of detention, but the State Government can within that period notwithstanding that the order has been made by an officer specified in sub-section (3) of Section 3 revoke or modify the order of detention, which however, does not preclude it from making a fresh order under Section 3 against the same person in a case where fresh facts come into existence after the date of revocation or expiry provided either the State Government or the officer specified in subSection (3) of Section 3 as the case may be considers that such an order should be made. The learned Advocate for the Petitioner contends that the State Government must confirm the opinion of the Board that there is sufficient cause for the detention within three months from the date of detention and the confirmation should also be communicated to the detenu within that period. This submission is based on the analogy of the requirement of sub. sec. (2) of Section 12 where the State Government on receipt of the opinion from the Board that there is no sufficient cause for the detention has to revoke the order and direct the release of the detenue forthwith, which implies that the State Government should apply its mind immediately as soon as a report is received from the Board irrespective of whether in its opinion there is sufficient cause or not for the detention. The State Government he says has therefore to make up its mind to confirm the opinion and extend the period of detention immediately after the receipt of the report from the Board which under the provisions of the Act has to be within 10 weeks from the date of detention and in any case not later than three months. On behalf of the State however it is strenuously contended that there is no warrant for this submission as neither the Act nor clause (4) of Article 22 of the Constitution enjoins on the State Government the duty to confirm the Board's report within three months much less the duty to communicate such confirmation to the detenue. Relying on the decision of this Court in Dattatraya Moreshwar Pangarkar v. The State of Bombay & Ors.(1) he submits that all that is required is for the Board to submit its report within three months and thereafter the State Government may confirm the opinion and extend the period within a reasonable time. Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 4 It may be pertinent to refer to clause (4) of Article 22 of the Constitution under which no law providing for Preventive Detention shall authorise the detention of a person for a longer period than three months unless a Board consisting of persons who have or have been or are qualified to be appointed as Judges of the High Court, as referred to above, has reported within three months that there is in its opinion sufficient cause for such detention. It is evident from this provision that a law for Preventive Detention upto three months can be made under clause (4) subject to the limitation contained in clauses (5) to (7) of the (1) [1952] S.C.R. 612. Article. If a longer period of detention is to be provided for the law must subject to clauses (5) to (7) make provision for a reference to a Board as provided in clause (4) and for it to report on the sufficiency or otherwise of the detention which should be within three months from the date of determined. This requirement however is not insisted upon in cases where a law is made under sub-clause (a) of clause (7) of the said Article. In cases where the law provides for a reference to the Board or the receipt of its affirmative opinion the initial detention is only ten- tative for three months and only when the Board reports that there is sufficient cause for the detention that the question of confinnation and extension of the period beyond three months will arise. The mere fact that the provision of a law under Article 22(4) requires a reference to be made to the Board within a particular period or for the Board to make its report by a specified time is not enough. The State Government has to take action only after a report is received from the Board expressing its opinion as to the sufficiency or otherwise of the detention. If the opinion of the Board that there is sufficient cause is received after three months from the detention the detention will be illegal as it is a contravention of the mandatory provision of clause (4). In cases where the report is received within three months that there is no sufficient cause for detention but no action is taken thereon by the State Government to release the detenue or where its opinion is that there is sufficient cause, the detenue is neither automatically released nor is the period of his detention extended. It is therefore a crucial requirement of the Constitutional provision that the appropriate Government has to take action on the report of the Board, because as we said on that action would depend the revocation of the order and his release or the continuance of the detention beyond three months. In other words even where the Board is of opinion that there is sufficient cause the State Government is not bound to confirm that opinion. It can notwithstanding that opinion revoke the order. No doubt such a power can be exercised even after the confirmation of the order but that is not to deny the State Government the power to revoke the order even before confirming it. Viewed from any angle it is essential that the appropriate Government should take positive- action on the report of the Board which action alone determines whether the detention is to be terminated or continued. It would therefore prima facie appear that action should be taken immediately after the receipt of the opinion of the Board or at any rate within three months from the date a person is detained. It is for this reason after the Constitution every legislation dealing with Preventive Detention has made specific provision for confirmation and continuance of detention in view of the Constitutional mandate contained in Article 22(4). A period within which the appropriate Government has to make a reference to the Board, the period within which the Board has to make a report on the sufficiency of the ground for detention is provided for, which has been uniformly one month and ten weeks respectively-. The period of ten weeks for the submission of the report by the Board where Article Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 5 22(4) provides for twelve weeks is designedly fixed because that would give the appropriate Governments two weeks to confirm and extend the period or not to confirm. of course the opinion of the Board need not necessarily be given on the last day of the expiry of the ten weeks. It is quite possible that this information may be submitted to the appropriate Government well within ten weeks. In such cases a question whether the confirmation and extension has to be made by the appropriate Government within a reasonable period may arise for consideration, but in any case failure to confirm and extend the period within three months will result in the detention becoming illegal the moment the three months period has elapsed without such confirmation. Any subsequent action by the appropriate Government after the three months cannot have the effect of extending the period of detention. This view of ours is further fortified by Section 13 of the Act where the maximum period for which any person may be detained in pursuance of any detention order which has been confirmed under Section 12 shall be 12 months from the date of detention. This requirement would suggest that the extension of the period of detention beyond three months upto a maximum of 12 months is from the date of confirmation of the opinion of the Board which if unconfirmed would not extend the period beyond three months. If so at what point of time should that be confirmed ? It would be meaningless to suggest that the confirmation of the Board's opinion can take place beyond three months when the period of detention has come to an end and has not been extended by the want of it. Looking at it in a different way what these provisions amount to is that no person can be detained for any period beyond three months or for any period thereafter upto 12 months unless the Board's opinion is confirmed within three months. A similar view has been taken by the several Courts in this country right from 1952 onwards on Section 11 and 11 (A) of the Preventive Detention Act which is analogous to Section 12 and Section 13 of the Act. See Kaur Singh v. The State(1), Dhadhal Kanthad Valeg v. Saurashtra State(2), Umed Singh Narubha v. State(3). A Bench of the Mysore High Court in Sangappa Mallappa Kodli & Ors. v. The State of Mysore & Ors. (4). referred to these decisions. The learned Advocate General in (1) AIR 1952 Pepsu 134. (2) AIR 1953 Sau. 138. (3) AIR 1953 San. 51. (4) AIR 1959 Mysore 7. that case had contended on behalf of the State as was contended in the case before us on behalf of the State of West Bengal that the confirmation mentioned in Section 11 of the Preventive Detention Act was a mere formality and became redundant in view of the fact that the Government had already approved of the order of detention, because the word 'may' in Section 11 does not make the confirmation of the detention mandatory. It was further argued that there was nothing illegal in confirming the order of detention beyond the period of three months from the date of detention either under the Constitution or under the Act itself, because what the Constitution lays down is that unless the Board has made a report to the effect that there is sufficient cause for such detention within three months from the date of deten- tion, there can be no detention of a person under any law for a longer period than three months and nothing more, but it does not however say that the Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 6 order of confirmation has to be within three months from the date of detention. S. R. Das, C.J. rejecting this contention observed at page 9 : "In my opinion having regard to the different provisions of the Preventive Detention Act, the order of confirmation which the Government is required to make under Section 11 of the Act has to be made within a period of three months from the date of detention. In my opinion the contention of the petitioners on this part of their case finds support from the very sections of the Preventive Detention Act and particularly from the wording of sub- section (1) of Section 11 itself. That sub- section, to my mind, makes it clear that the confirmation order in question has to be made if the Government after receipt of the report from the Advisory Board decides to continue the detention and in view of the provisions of clause (4) of Article 22 of the Constitution such confirmation has to, be made within three months from the date of detention". The Calcutta High Court has recently construed the provi- sions of the Act Ashvini Kumar Banerjee v. The State & Ors. (1) 1, which we are now construing on the question whether the confirmation under Section 12(1) should be made within three months from the date of detention. It considered the several cases to which we have earlier referred and held that where there is a specified time provided for in clause (4) of Article 22 of the Constitution of India the concept of reasonable time cannot be introduced in interpreting the provisions of sub-sec. (1) to Sec. 12 of the Act. 'The absence of a time limit in express terms in the body of Section 12(1) of the Act does not render it to be (1) 1970-71 (Col. LXXV) Calcutta Weekly Notes-866. ambiguous and that the Board cannot be equated with the State Government because it can only advise and not act by way of passing an order of detention or continuing it thereafter. This is left to the over-riding discretion of the State Government. We agree with the views expressed in these cases. The case of Dattatreya Moreshwar Pangarkar(1) does not deal with this aspect. There the two questions which were con- sidered were (1) whether the order of confirmation was to be in writing and should be expressed in the form required by Article 166(1) of the Constitution, and (2) if a confirmation order is made by the, appropriate Government what is the period for which the detention has to be extended, that is does it have the effect of extending the period and if so for what period. That was a case under Section 11 ( 1 ) of the Preventive Detention Act. The majority Mahajan J, dissenting, decided that the omission to state the period of further detention while confirming the detention order under Section 11 (1) of the Preventive Detention Act could not render the detention illegal. In our view therefore the confirmation of the opinion of the Advisory Board to continue the detention beyond three months must be within three months from the date of detention in conformity with the mandate in clause (4) of Article 22. The next submission is that the confirmation should not only be in writing but it should be communicated to the determine within the period of three months from the date of detention. While we consider the former submission to be valid the latter has no justification. No doubt in Mohammed Afzal Khan v. State of Jammu & Kashmir(1), this Court had on the construction of Section 14 of the Jammu & Kashmir Preventive Detention Act had held that the Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 7 Section does not in terms provide for the making of a formal order but that was on the construction of a provision which is not in parimutuel of the provisions of the Act. Section 14 of the Jammu & Kashmir Preventive Detention Act does not provide for the confirmation of the Board's opinion because that was a provision made under clause 7 of Article 22 where it pro- vide for the detention or continuation in detention of a person without obtinig the opinion of a Board for a period longer than three months but not exceeding any years from the date of detention, where such a person is detained with a view to preventing hint from acting in a manner prejudicial to (i) the security of tile State, (ii) the maintenance of public order. on the question of the communication to detenue of the decision to continue his detention beyond three months, Das, C. j. said that there is no warrant for the proposition that the decision of the Government (1) [1952] S.C.R. 612. (2) (1957) S.C.R. 63. must be communicated to the detenue nor has it been shown how the communication of this decision would have been beneficial to the detenue. He referred to the case of Achhar Singh v. State of Punjab(1), where this Court had said that 'the omission to convey the order under Section 1 1 of the Indian Preventive Detention Act does not make the detention illegal or result in infringement of the petitioner's fundamental rights'. After referring to this decision this Court however, pointed out, if that be the position under Section 11 of the Indian Preventive Detention Act which provides for the making of a formal order all the more must the position be the same under Section 14 of the Jammu & Kashmir Preventive Detention Act which does not in terms require any formal order to be made. Whatever may be the position under the Jammu & Kashmir Act under the Act which we are considering as pointed out earlier the State Government has to confirm the opinion of the Board that there is cause for the detention of the person concerned which confirmation cannot purely be a mental act, a subjective one but must result in an objective action namely that it should be recorded in writing. Though there is no provision in the Act an order of confirmation which has the effect of extending the period of detention beyond the mandatory period of three months must be made known to the detenue, in our view there is no warrant or justification for an order confirming the detention on the opinion of the Board which has the effect of extending the period of detention remaining in the files of the executive without the same being communicated to the person most concerned-the detenue-whose freedom has been subjected to jeopardy, He is entitled to know that the Board had considered his representation as well as his personal submissions if he has chosen to appear before it and that it had been found that there was sufficient cause for his detention and that the State Government had agreed with it. In Biren Dutta & Ors. v. Chief Commissioner of Tripura & Another (2), another Constitution Bench of this Court had to consider this matter on the provisions of Rule 30(1) (b) and Rule 30A(8) :of the Defence of India Rules 1962. Gajendragadkar, J. speaking for the Court held that even those rules the authority exercising the power under rule 30A(8) should regard its decision clearly and unambiguously extending the Period of detention beyond six months which was the limit under those rules, for he observed, "After all, the liberty of the citizen is in question and if the detention of the detenue is intended to IV continued as a result of the deci- sion reached by the appropriate authority it should say so in clear and unambiguous terms". While the decision of the Government to confirm the opinion of the Board which according to (1) Petn. No. 359 of 1951-decided on 22-11-1951. (2) [1964] 8 S.C.R. 295. Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 8 the decision in Dattatraya Moreshwar Pangarkar(1), has the effect of extending the period of detention beyond three months is in consonance with the tenor of the Act as well as the provisions of the Constitution, there is nothing to warrant the submission that the order of confirmation and extension of the period of his detention should also be within three months from the date of detention. Nonetheless the communication must be within a reasonable time. What is a reasonable time must necessarily depend upon the circumstances of each case. The effect of noncommunication, however, may be an irregularity which does not make the detention otherwise legal, illegal. In Biren Dutta's case(1) the Court was of the view that though under Rule 30A(8) there is nothing to indicate that the appropriate authority should communicate to the detenue the decision to extend the period beyond three months, "it is desirable and it would be fair and just that such a decision should in every case be communicated to the detenue". In this case there is no allegation that the detenue suffered any prejudice by the delay and in the absence of such an allegation the State is justified in its submission that there may be sufficient grounds for the delay in not communicating it within a reasonable time should the communication itself be considered by this Court to be unduly delayed. We will now examine the merits of the case to determine whether the confirmation was made within three months from the date of the detention and whether the grounds of detention are irrelevant or vague. The order of detention was made by the District Magistrate, Bankura on 16-1-71 and petitioner was arrested on 20-1-71. On the same day he was served with the order and the grounds of detention. The District Magistrate made a report to the Government also on the same day which was approved by the State Government on 27-1-71 so that the mandatory provisions of the Act both in respect of the report to be made to the State Government within 5 days from the date of the order and the approval of the detention within 12 days from the date of detention were satisfied. On the 27th itself a report was made to the Central Government as required under section 13. The State Government placed the detention order, the grounds and the report etc. before the Advisory Board on the 18th February 1971 which is also within 30 days from the date of detention as required under section 10. The State Government rejected the representation made by the detenue on the 15th March'1971 and the Advisory Board submitted its report that there was sufficient cause.for his detention on the 23rd March 1971 which was confirmed on 8-4-71. In the note file of the Government which we (1) [1952] S.C.R. 612. (2) [1964] S.C.R.205. perused, though confirmation was recorded within three months, the communication was made later on the 26th August 1971. The mandatory provisions, therefore, are fully complied with. The next question is whether the grounds are vague and irrelevant. These are as follows:- (i) that on 7-1-71 night you and your associates including Somesh Chandra Deb mutilated the statue of the eminent Indian Poet Rabindra Nath Tagore installed in a public place at Boilapara in Bishnupur town and thereby caused insult to an object of public veneration. Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 9 (ii)That on 11-1-71 at about 01.45 hrs. you and your associates broke into the Post Office situated at Rashikguni in Bishnupur town and caused mischief to it by fire by destroying its official records by burning. It was contended that the associates of the petitioner have not been specified and therefore it will be difficult for the petitioner to make effective representation in respect thereof. We think there is no validity in this submission. Not only the dates and the time in each of the grounds have been mentioned but the acts of the petitioner have been specified in detail to enable him to make an effective representation. In our view it is not necessary for the petitioner to make an effective representation to specify all his associates because they may not have been known. The petitioner is being detained in respect of his acts and if in association with others he has acted in a manner prejudicial to the maintenance of the public order, his detention cannot be said to be illegal. It is again contended relying on Madhu Limaye v. Sub-Divi- sional Magistrate, Monghyr and others(1) and Dr. Ram Manohar Lohia v. State of Bihar and Ors.(2) that the acts specified in each of the grounds do not amount to disturbance of public order though they may affect law and order. This contention is equally untenable because section 3(2) of the Act defines the expression "acting in any manner prejudicial to the security of the State or the maintenance of public order" as given in sub-clauses (a) to (e) of the said sub- section. We are here in this case concerned with the definition given in section 3 (2) (c) which makes any act 'causing insult to the Indian National Flag or to any other object of public veneration whether by mutilating, damaging, burning, defiling, destroying or otherwise, or instigating any person to do so. The explanation to this sub-clause includes in the (1) [1970] 3 S.C.R. 746. (2) [1966] 1 S.C.R. 709. causing of insult to any object of public veneration, any portrait or statue of an eminent Indian, installed in a public place as a mark of respect to him or to his memory. The validity of subsection (2) of section 3 of the Act was challenged recently in the case of State of West Bengal v. Ashok Dey and others(3), but this Court held that it was valid. The challenge to clauses (a), (b), (d) and (e) dealing with disturbance of a public order in the State with respect to which it was said there can be no two opinions about the acts covered by these being likely to be pre- judicial to the maintenance of public order. In regard to clause (c) the argument that insulting the object of public veneration in privacy without the act causing insult being noticed by anyone who holds them in veneration could have no rational nexus with the disturbance of public order or security of State, was in the abstract described as attractive. In the light of the circumstances in which the Act was passed the mischief intended to be removed by this enactment and the object and purpose of enacting it, this Court held that clause (c) of subsection (2) considered in the background of sub-section (1) of section 3 can "be construed to mean, causing insult to the Indian National Flag or any other object of public veneration in such a situation as reasonably exposes the act, causing such insult to the view of those who hold these objects in veneration or to the public view and it would not cover cases where the Indian National Flag or other object of public veneration is mutilated, damaged, burned, defiled or destroyed completely unseen or when incapable of being seen by anyone whose feelings are likely to be hurt thereby. The act causing insult referred to in clause (c) must be such as would be capable of Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 10 arousing the feelings of indignation in someone and that can only be the case when in cult is caused in the circumstances just explained", and was accordingly restricted to such situation. The challenge there was negatived. In this case what is said to have been defiled by the petitioner and his associates is the statue of Rabindra Nath Tagore, a Poet and sage venerated by all in this country and affords a sufficient ground for detention. The other grounds also directly connect the act with the disturbance of public order. Having regard to the various references the detention of the petitioner in our view is not illegal and accordingly we dismiss this petition. G.C. Petition dismissed. (1) Cr. App. Nos. 217 to 233 of 1971 decided on 19-11-71. Deb Sadhan Roy vs State Of West Bengal on 7 December, 1971 11 | {
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Ram Tahal & Ors vs State Of U.P on 18 November, 1971 Equivalent citations: 1972 AIR 254, 1972 SCR (2) 423, AIR 1972 SUPREME COURT 254, 1972 SCD 76, 1973 MADLW (CRI) 110, (1972) 2 SCJ 303, 1972 MADLJ(CRI) 577, 1972 2 SCR 423 Author: P. Jaganmohan Reddy Bench: P. Jaganmohan Reddy, D.G. Palekar PETITIONER: RAM TAHAL & ORS. Vs. RESPONDENT: STATE OF U.P. DATE OF JUDGMENT18/11/1971 BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN PALEKAR, D.G. CITATION: 1972 AIR 254 1972 SCR (2) 423 1972 SCC (1) 136 ACT: Indian Penal Code (Act, 45 of 1860), ss. 34 and 149--Six persons named as the only members of unlawful assembly-Two acquitted Whether others can be convicted under s. 149--Conviction under s. 34--Conditions for. HEADNOTE: Six accused were charged with the offenses under ss. 148 and 302 and 307 read with s. 149 I.P.C., for having formed themselves into an unlawful assembly with the common object of demolishing a thatch belonging to the complainant and for causing death and injuries when resisted. The trial court convicted them. On appeal, two of the accused were ac- quitted and the appellants were convicted for offenses under ss. 148 and 304 and 307 read with s. 149., On the question of the validity of the conviction, HELD : (1) Before s. 149, which prescribes constructive Ram Tahal & Ors vs State Of U.P on 18 November, 1971 1 criminal liability for members of an unlawful assembly, can be called in aid, the court must find with certainty that there were at least five persons sharing a common object. It is possible in some cases that though five were un- questionably present the identity of one or more is in doubt in which case a conviction of the rest with the aid of s. 149 would be good. Therefore, it is not necessary that in every Case five persons must always be convicted before s. 149 can be applied. But in such a, case, the court must find with unerring certainty, that at least five persons were present. [426 H; 427 A-C] In the present case, the charge definitely named the four appellants who have been convicted, and the two who have been acquitted, a,% being the only members of the unlawful assembly. Since two of the named accused were acquitted the conviction of the other four under s. 148 and Es. 304 and 307 read with s. 149 cannot be sustained on the charge as framed. [427 F-H] (2) The appellants, however, were guilty of offenses under ss. 304 Pan 1 and 307 read with s. 34. The totality of the circumstances indicated that there was a preconcerted plan and a common intention to remove the thatch and to attack any person who resisted. [432 E-H] The common intention under s. 34, should be anterior in time to the commission of the crime showing a prearranged plan and prior concert., Generally, it has to be inferred from the acts or conduct of some or all the accused and the totality of relevant circumstances in the case, such as, the manner in which the accused arrived on the scene and mounted the attack, the determination and concert with which injuries were caused by one or some of them the acts done by others to assist those causing the injuries, and the concerted conduct subsequent to the commission of the offence as for instance that all of them left the scene of the incident together. [428 A-E] Dalip Singh & Ors. V. State of Punjab [1954] S.C.R. 145 Mohan Singh v. State of Punjab, [1962] Supp. 3 S.C.R. 848 and Krishna Govind Patil v. State of Maharashtra, [1964] 1 S.C.R. 678, followed. 424 JUDGMENT: CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 27 of 1969. Appeal by special leave from the judgment, and order dated .May 22, 1968 of the Allahabad High Court in Criminal Appeal No. 2636 of 1967 connected with Criminal Appeal No. 2602 ,of 1967. D. P. Singh, V. J. Francis and Suresh Prasad Singh, for the appellants. Ram Tahal & Ors vs State Of U.P on 18 November, 1971 2 O. P. Rana, for the respondent. The Judgment of the Court was delivered by P. Jagmohan Reddy, J. Six accused were charged with ,offenses under Section 302, read with Section 149, Section 307 read with 149 and Section 148 of the Indian Penal Code for having formed themselves into an unlawful assembly with the common object of demolishing the thatch of one Ram Badal, Complainant P.W. 1 on 30th November 1967 at about 9.30 a.m. at Mohalla Alawalpur, Qasba Utraula, District Gonda and for having committed the murder of Ram Harakh alias Harkhey and Jagga, the brother and mother-in-law respectively of said Ram Badal. It appears that Ram Badal had applied on 2-1-66 to the Notified Area Committee, Utraula for permission to construct a thatch on the parti land. Ram Tahal, accused filed an ,objection petition on 6- 1-66 objecting to the construction of the thatch on the ground that Ram Badal was constructing it on a public highway, but when these objections were being enquired into Ram Badal and Ram Tahal came to terms and entered into a compromise by and under which it was agreed that Ram Badal should leave six ft. wide passage between his house and the house of Gharib across the way. Notwithstanding this compromise it is alleged that accused Ram Tahal was not happy and during the Dussehra festival in October 1966 when he wanted to take the Ramlila Viman procession through that passage Ram Badal raised an objection on the ground that there was no precedent for taking such a procession. This dispute was however settled by the intervention of the Notified Area Committee which took an undertaking from the accused Ram Tahal that he would only take the Ranilila Viman procession through that way that year and in future when Ram Badal had completed his construction, the Ramlila procession could only be taken through the six feet wide passage that was being left, and if he could not do so, through that passage he will not have any right to take a procession. This settlement does not appear to have pacified Ram Tahal and it is stated that 10 or 11 days before the occurrence namely on the 19th November 1966 or 20th November 1966 after Ram Badal had constructed his Chhapar Ram Tahal asked him to pull it down and threatened him with consequences if he did not do so. Ram Badal however did not pull down his Chhapar. On the 30th November 1966 at about 9.30 a.m. Ram Tahal, his sons Prem, Mata Din, Pitamber, Pudki and his daughter Tara came to the Chhapar of Ram Badal armed and began to pull it down. Ram Tahal was armed with a Karpa, Prem and Pudki with Ballams, Pitamber and Mata Din with Lathis and Tara with a Bahangi which is a long pole on the two ends of which a weight is bound by ropes and it is carried by putting the pole on the shoulder. When these accused started pulling the Chappar down Ram Badal's brother Ram Harakh, the deceased, who was then present resisted the move of the accused and was beaten by the accused. On Ram Harakh raising an alarm Ram Badal, Ori Lal son of Ram Harakh, Ram Badal's mother-in-law Jagga who lived nearby, Sukhraj P.W. 3 wife's sister's son of Ram Badal rushed to the scene. They were also beaten by the accused. It is the case of the prosecution that Ram Badal had a lathi which he wielded to defend, but notwithstanding this, severe injuries were caused on Ori Lal, Jagga and Ram Harak and they all fell down and even after they had fallen down they had been struck. Accused Prem is said to have struck Jagga with his Ballam after she had fallen down. On Ram Badal and the injured persons raising an alarm Kallu, P.W. 2, Kunnu P.W. 6, Gopi P.W. 7, Bhagirath or Bhagi P.W. 8, Sri Kishan Lal, C.W. 1, Chhotu C.W. 2 and others came to the spot and on their intervention the accused ran away carrying their weapons with them. Jagga and Ram Harakh who were seriously injured were taken to the Police Station, Utraula accompanied by Sukhraj P.W. 3, while Ram Badal P.W. 1 went there on Rikshaw. On the way to the Police Station Jagga expired. Ram Badal, P.W. 1 lodged the First Ram Tahal & Ors vs State Of U.P on 18 November, 1971 3 Information Report at 10.32 a.m. on the same day at the Police Station which was six furlongs away from the place of the incident. In this report all the accused have been named. P.W. 13, the Station House Officer before whom F.I.R. was lodged started investigation and deputed constables for arresting the accused and sent Ram Badal, Ram Harakh, Ori Lal and Sukhraj to Utraula Dispensary where Dr. B. C. Paul, P.W. 12 medically examined and treated them. Subsequently on 5-12- 66 at about 3.15 p.m. Ram Harakh also died in the Hospital. Accused Ram Tahal and Mata Din were arrested on the same day i.e. 30th November 1966 at 3.30 p.m. Of these Ram Tahal was carrying a blood stained Karpa and wearing a blood stained Kurta while Mata Din was carrying a blood stained Lathi whose pieces were Exhibits 9, 10 and 11. There, were injuries found on both the above accused. Pitamber was arrested in the evening of the same day at 8.45 p.m. Ram Tahal and Mata Din were medically examined on 1-12-66 at the District Jail, Gonda and it was found that there were Ram Tahal 2 abrasion and one Traumatic swelling on the back of the left hand below the wrist. On Mata Din were found 3 abrasions, one abrased contusion and one lacerated wound on the right leg middle side. All the injuries on the accused were simple and could have been caused by a blunt weapon like a Lathi and were about two day,% old. Accused Prem and Pudki surrendered themselves on 6-12-66 before the Court while Tara surrendered on 23-12-66 after proceedings under Criminal Procedure Code were taken against her. The Additional Sessions Judge, Gonda convicted Ram Tahal of offence under section 148, 302/149, 307/149 I.P.C. and sentenced him to death under Sec. 302 read with 149 to 10 years rigorous imprisonment under Sec. 307/149 and to 2 years under section 148 I.P.C. Accused Mata Din, Prem, Pitamber, Pudki and Smt. Tara were convicted and sentenced to life imprisonment under Sec. 302/149, 10 years rigorous imprisonment under Sec. 307/149 and 2 years rigorous imprisonment under Section 148. Two appeals were filed against this-one by Ram Tahal and the other by the rest of the accused. In the latter appeal Pitamber and Pudki were given the benefit of doubt and were acquitted. The appeals of Ram Tahal and Prem, Mata Din and Tara were partly allowed and they were acquitted of the offenses under Sec. 302 read with 149 and instead the first two namely Ram Tahal and Prem were convicted under Sec. 304/149 and sentenced to life imprisonment. Appellants Mata Din and Tara were convicted under Sec. 304/149 I.P.C. and each of them sentenced to 10 years rigorous imprisonment. Convictions and sentences under the other sections namely under Sec. 307/149 and Sec. 148 I.P.C. against all the 3 accused were maintained but the sentences were directed to run concurrently. Against this Judgment the accused have appealed by special leave. The first question that has been urged before us is that none of the accused were charged for individual acts but were found guilty under Sec. 304 Part I read with Sec. 149 which requires the presence of five persons who share the common object, but since 3 of them were acquitted the conviction of the appellant is illegal. It is true that before See. 149 which prescribes vicarious or constructive criminal liability for members of an unlawful assembly which under Sec. 141 I.P.C. must consist of 5 or more persons can be called in aid the Court must find with certainty, as observed by Bose, J. in Dalip Singh & Ors. v. State of Punjab(1), that there were at least 5 persons sharing the common (1) [1954] (Vol.V) S.C.R. 145. Ram Tahal & Ors vs State Of U.P on 18 November, 1971 4 object. However, as pointed out in that case "A finding that three of them may or may not have been there betrays uncertainty on this vital point and it consequently becomes impossible to allow the conviction to rest on this uncertain foundation." While saying so it was also pointed out that it is not necessary that in every case 5 persons must always be convicted before Sec. 149 can be applied, because it is possible in some cases for Judges to conclude that though 5 were unquestionably there the identity of one or more is in doubt, in which case a conviction of the rest with the aid of Sec. 149 would be good. In such a case the Court must say so with unerring certainty. A 5-Judge Bench of this Court in Mahan Singh v. State of Punjab(1) has further reiterated this principle where it was pointed out that like Sec. 149 of the I.P.C. Sec. 34 of that Code also deals with cases of constructive liability but the essential constituent of the vicarious criminal liability under Sec. 34 is the existence of a common intention, but being similar in some ways the two sections in some cases may overlap. Nevertheless common intention, which Sec. 34 has as its basis, is different from the common object of unlawful assembly. It was pointed out that common intention denotes action in concert and necessarily postulates a prearranged plan, a prior meeting of minds and an element of participation in action. The acts may be different and vary in character but must be actuated by the same common intention which is different from some intention or similar intention. It was also held in Krishna Govind Patil v. State of Maharashtra(2), that it makes no difference whether the acquittal of some of the accused, was by giving them the benefit of doubt or on the ground that evidence was not acceptable. In either case they cannot be said to have conjointly acted with the accused who is said to have com- mitted an offence. If they did not act conjointly with him he could not have acted conjointly with them and he cannot therefore be convicted under Sec. 302 read with 34. The position in law is therefore clear and it appears to us that in so far as the conviction and sentence of the appellants under Sec. 148; 304 read with 149 or 307 read with 149 are concerned they cannot be sustained on the charge as framed against them which definitely named the 3 appellants as also the 3 acquitted accused as being members of an unlawful assembly, who had in the prosecution of the common object of such assembly, unlawfully demolished the thatch of Ram Badal and were guilty of an offence of rioting under Sec. 148 and of murder of Ram Harakh and Jagga under Sec. 302 read with 149 of the attempted murder of Ram Badal, Sukhraj and Orilal under Sec. 307 read with 149. (1) [1962] Suppl. (3) S.C.R. 848. (2) [1964] (1) S.C.R. 678. L500Sup.CI/72 While this is so the question is whether the convictions under Sec. 302 and 307 can be sustained on the ground that they had a common intention to commit the said offence. The learned Advocate for the Appellant strenuously contends that before the appellants can be convicted under the aforesaid section read with Sec. 34 it must be shown that they had a prior concert to commit the said offence which cannot be concluded on the facts of this case. There is no doubt that a common intention should be anterior in time to the commission of the crime showing a prearranged plan and prior concert, and though, it is difficult in most cases to prove the intention of an individual, it had to be inferred from the act or conduct or other relevant circumstances of the case. This inference can be gathered by the manner in which the accused arrived on the scene and mounted the attack, the determination and concert with which the beating was given or the injuries Ram Tahal & Ors vs State Of U.P on 18 November, 1971 5 caused by one or some of them, "he acts done by others to assist those causing the injuries the concerted conduct subsequent to the commission of the offence for instance that all of hem had left the scene of the incident together and other acts which all or some may have done as would help in determining the common intention. In other words, the totality of the circumstances must be taken into consideration in arriving at the conclusion whether the accused had a common intention to commit an offence with which they could be convicted. This Court had in Krishna Govind Patil's case already referred to earlier, held that the prearranged plan may develop on 'he spot during the course of the commission of the offence but the crucial circumstance is that the said plan must precede the act constituting the offence. If that be so before a Court can convict a person under Sec 302 or read with 34 of the I.P.C. it should come to a definite conclusion that the said person had a prior concert with one or more persons named or un- named for committing the offence. This being the approach it now remains to be seen whether the evidence in this case would justify a conviction of the accused under Sec. 304 and 307 read with Sec. 34 of the I.P.C. The High Court no doubt held that the witnesses did not give the origin of the fight and there was thus no independent evidence to prove that the fight started, because the appellants came and demolished part of the thatch. The High Court goes on to observe as follows : "To our mind, the quarrel being a sudden one and the injuries having been caused in the heat of passion, the case is covered by the Fourth Exception to section 300 I.P.C. From the injuries it cannot be said that the action of the appellants was usually cruel. Each one of the appellants appears to have caused not more than one or two injuries to the fighters on complainant's side but in view of the fact that the spear injuries were caused on the chest which caused the death of Smt. Jagga and Ram Harakh, we think that the appellants have committed culpable homicide not amounting to murder and are punishable under section 304 Part I read with S. 149 I.P.C." This finding in our view is not justified on the evidence. The Trial Court on an appraisal of the evidence has held that the accused Ram Tahal wanted to take the law into his own hands and along with his children had embarked upon the demolishing of the complainants Chhapar on that fateful day. It was contended that if he had such an intention he would have tried to demolish it immediately when it was been constructed but we agree with the Additional Sessions Judge that his no, doing so at that me when it was being constructed does no' preclude him from having that intention subsequently. According to P.W. 1, accused Ram Tahal had asked Ram Badal to pull it down and threatened him with consequences on his failure to do so. The dying declaration of Ram HaraKh also makes a reference about this dispute. The finding of the Investigating Officer on his local inspection shows that 2 Puras of Khar and 2 Korons were lying in the ground and a portion of Chhapar was pulled out. There was human blood found on the scene of the occurrence and certain pieces of Lathi and Bahangi were found thereon which were also sent to the Chemical Examiner and Serologist . The dying declaration of Ram Harakh to which the High Court does not make any reference much less gave any reason why that could not be relied upon shows that the marpit had started because the accused had pulled down the Chappar and on being asked not to pull down the Chappar they had struck him and other persons at that site. This statement is quite consistent with the evidence of Ram Badal and other eve witnesses of the occurrence that it was the accused who Ram Tahal & Ors vs State Of U.P on 18 November, 1971 6 were the aggressor and had come together armed with the weapons to which we have made reference. This would clearly indicate the common intention of all of them to achieve their object of pulling down the Chhapar and to do so with force, if resisted. If as a result of this aggressive action by the accused who started beating Ram Harakh and others including Ram Badal who came to defend their Chhapar from being demolished they had a right of private defence in exercise of which if they had caused some injuries to the accused side that does not exculpate the action of the accused. Even the High Court does not reject the evidence that the accused Ram Tahal was armed with Karpa, Prem was armed with Ballams, and Mata Din was armed with Lathis and Tara armed with Bahangi and had caused the death ,of two persons, and severe injuries to 3 others. It is true that according to the accused Ram Tahal the dispute of the Chhapar had nothing to do with the occurrence in question. Ms version in his statement under Sec. 342 before the Additional Sessions Judge was that when he got knocked over a brick of the Thiha and he dug out the brick Harkhey and Ram Badal ran to beat him. , He fell at the feet of Harkhey as to why he was calling his men for 3 Chhataks of brick bat. Thereupon Orilal, Harkhey, Ram Badal and Jagga went to beat him with Lathis. He shouted and raised an alarm when accused Mata Din and Prem came there with lathis and Tara with a Bahangi and they defended themselves and retreated to their Angan. In the Angan they had received 3 or 4 blows and they struck out in self defence. When they fell down Mata Din and he went to the Police Station Utraula. It was there that Kunnu announced that Jagga had expired. He (Ram Tahal) had a Karpa. Pitamber was in school and Pudki was grazing cattle at that time. Accused Mata Din and Prem had lathis. This version of Ram Tahal would corroborate the prosecution evidence that Ram Tahal was armed with a Karpa, Mata Din had lathi and Tara had a Bahangi though as far as the weapon in Prem's hand is concerned he does not admit that he had a Ballam in his hand. While we recognise that the statement of Ram Tahal either incriminating the other accused or in respect of the weapons in their hands, cannot be used against them, there is ample justification for the Trial Court relying upon the evidence of the prosecution witnesses in holding that Ram Tahal had a Karpa, Prem a Ballam, Mata Din a lathi and Tara a Bahangi. The nature of the injuries also to a large extent corroborate the evidence of the eye witnesses upon whom the Trial Court relied. As already pointed out while the injuries on accused Ram Tahal and Matadin were simple injuries which could be caused by blunt weapon, they are consistent with the evidence of P.W. 1 Ram Badal that he waived a stick in defence. As against this, the injuries on the complainant and the other injured on his side, indicate a much more severe action on the part of the accused and that also with dangerous weapons. Ram Badal had one lacerated wound on the front of the chin which could have been caused by some blunt weapons like a lathi and another punctured injury having the appearance of a cross of two lacerated wounds each 3/4" X 1`/2" on the left side of the back, with surgical emphysema round the wound which according to the Doctor could have been caused by some pointed weapon like the Karpa. Both these injuries were about 2 hours old at the time of the examination and could have been received about 9.30 a.m. that day, namely the day of the incident. Ram Harakh the deceased had 4 punctured wounds, two lacerated and one abrasion. The place where these injuries were given was : (1) a lacerated wound on the left side of the skull, (2) punctured wound on the left hypochondrium, 4" Ram Tahal & Ors vs State Of U.P on 18 November, 1971 7 below the nipple, (3) punctured wound on the left side of the chest below the axilla with surgical emphysema around the wound and irregular and ill-defined borders, (4) punctured wound on the upper part of the back in between the two axilla with surgical emphysema around the wound, (5) punctured wound in the shape of a cross of two lacerated wounds each 4/5", (6) abrasion on the right mandibular angle and (7) a lacerated wound on the back of the right ring finger at the middle. In the opinion of the Doctor, injuries 2, 3, 4 and 5 were grievous and had been caused by a pointed blade with cross section which could be the blade of Karpa. Injuries 1, 6 and 7 could be caused by a blunt weapon like a lathi. Orilal had 4 punctured wounds and 2 lacerated wounds. These were : (1) lacerated wound on the left side of the skull, (2) punctured wound on the left side of the face, (3) punctured wound on the front of the neck on the back of the chin, (4) lacerated wound on the cleft between the left middle and ring fingers, (5) punctured wound with appearance of a cross of two lacerated wounds on the chest. The margins were ill-defined, (6) punctured wound with the appearance of a cross of two lacerated wounds each 1/2" X 1/10" on the left side of the back at the middle near the spine with surgical emphysema round the wound. The opinion of the Doctor was that injuries 2, 3, 5 and 6 could be caused by a pointed blade which could be a blade of Karpa; the rest of the injuries could be caused by a blunt weapon like lathi. These injuries were also about 2 hours old. On Sukhraj P.W. 3 were found 2 punctured wounds and one bruise. These are: (1) punctured wound having the appearance of a cross of two lacerated wounds each 1/2" X 2/5" on the front of the left forearm, margins ill-defined and slightly inverted, (2) punctured wound having the appearance of a lacerated wound each 1/5"X 1/ 10" on the back of the left forearm and (3) a bruise 4" X 1" on the right side of the back in the middle. The medical evidence is that while injury No. 3 was simple injuries 1 & 2 were caused by some pointed blade with 4 edges and square cross section like Karpa. These injuries were also 2 hours old and could have been received at about 9.30 a.m. on the day of the incident. On the deceased Jagga there were two abrased contusions one on the upper part of the nose and the other below the left eye. A contusion on the left lower jaw and a stab wound with sharp margins 1/2" X 1/3" chest deep, below the inferior angle of the left scapula and 1" towards the outer part. Internal examination had revealed that in the left lung on the upper part of the lower lobe there was a stab wound 1/2" X 1/8" through and through around which there was 6 oz. of coagulated blood and on the left ventricle of the heart there was a stab wound 1/3" X 1/8". While the first 3 injuries had been caused by a blunt weapon like a Lathi injury No. 4 according to Doctor Gupta was caused by some sharp pointed weapon which could be a Ballam. These injuries clearly show that they must have been given by Ram Tahal who had a Karpa, Prem who had a Ballam and Matadin who had a Lathi. They caused injuries to five persons on the opposite side; on 4 of them severe injuries, of these two died. Ram Tahal & Ors vs State Of U.P on 18 November, 1971 8 There is also evidence to show that Tara was wielding a Bahangi and whether any of the injuries can be traced to her or not she was acting in concert with the others in furtherance of their common intention. Further when on the shouts for help given by the complainant and the injured, others came to their rescue, all of them ran away together. There is no justification therefore for holding as the High Court did that there was no evidence to show as to how the quarrel started. In our view the totality of the circumstances indicate without doubt the inference that there was a preconcerted plan and a common intention to remove the thatch and to attack any person if he resisted. The accused in the furtherance of that common intention began to remove the Chhapar and when Ram Harakh obstructed, they beat him and others who came to resist their attack and aggression. On these findings the Trial Court convicted them of the offenses of rioting, murder and attempted murder but since two of the accused had been totally acquitted of all charges and the others have been acquitted of the charge of murder and there is no appeal against these acquittals we are unable to say whether these findings by the High Court are justified. Nevertheless the appellants are clearly guilty of offenses under Sec. 304 Part I read with Sec. 34 and also Sec. 307 read with 34 and accordingly we so convict them and substitute these convictions for the convictions of which they were held guilty by the High Court which we have set aside. We however maintain the sentences awarded to them. On these findings Ram Tahal and Prem are sentenced to life imprisonment under Sec. 304 Part I read with 34 while Matadin and Smt. Tara are each sentenced to 10 years rigorous imprisonment for the same offence namely 304 Part I read with Sec. 34 I.P.C. Each of them is further sentenced to 10 years rigorous imprisonment for offence under Sec. 307 read with Sec. 34 I.P.C. The sentences on each of them are directed to run concurrently. The appeal is accordingly dismissed with the said modifications. V.P.S. Ram Tahal & Ors vs State Of U.P on 18 November, 1971 9 | {
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Standard Refinery & Distillery Ltd vs Commissioner Of Income-Tax, Calcutta on 18 January, 1971 Equivalent citations: 1971 AIR 2293, 1971 SCR (3) 378, AIR 1971 SUPREME COURT 2293, 1971 TAX. L. R. 1536 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: STANDARD REFINERY & DISTILLERY LTD. Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX, CALCUTTA DATE OF JUDGMENT18/01/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 2293 1971 SCR (3) 378 ACT: Income-tax Act (11 of 1922), s. 22(4)-Same business', tests for. HEADNOTE: The assessee owned a distillery and a refinery. In 1945, it obtained on lease the sugar factory belonging to another company, and during the period from January to April 1946, it purchased about 41,000 shares of the lessor company, and in April 1947, sold the entire block of shares. The transaction resulted in a loss. After setting off the loss against the other income for the assessment year 1948-49, the unabsorbed loss was carried forward under s. 24(2) of the Income-tax Act, 1922, to the assessment year 1949-50. But the assessee's claim to set off the loss pertaining to the share business against the profits in the sugar business was negatived by the Department, the Appellate Tribunal and Standard Refinery & Distillery Ltd vs Commissioner Of Income-Tax, Calcutta on 18 January, 1971 1 the High Court. In appeal to this Court, this Court reframed the question referred to the High Court as 'whether the business of dealing in shares and the business of manufacturing sugar etc. constituted the same business within the meaning of s. 24(2) of the Act,' and directed the Tribunal to submit a supplementary statement of case. The Tribunal submitted that the two businesses had a single trading and profit and loss account, that they had been dealt with by a common Organisation, that the transaction relating to shares was treated as part and parcel of the business of the assessee company, that a common fund was utilized for both businesses and that they were carried on in the same place of business. HELD : In determining whether two lines of business constitute the ',came business' within the meaning of s. 24(2), the income-tax authorities must consider the inter- connection, inter-lacing interdependence and unity furnished by the existence of common management, common business Organisation, common administration, common fund and a common place of business. Applying those tests the share transaction as well as the other business of the assessee should be considered as the 'same business.' [380 F-G] C.I.T., Madras v. Prithvi Insurance Co. Ltd., 63 I.T.R. 632, S.C. and Procedure Exchange Corpn. Ltd. v. C.I.T. Central Calcutta, 77 I.T.R. 739 S.C. followed. Satabganj Sugar Mills Ltd. v. C.I.T., Central Calcutta, 41 I.T.R., 72 S.C. and Scales v. George Thompson & Co. Ltd., 13 Tax Cas. 83, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1585 of 1968. Appeal from the judgment and order dated July 23, 1963 of the Calcutta High Court in Income-tax Reference No. 64 of 1958. S. C. Manchanda, Gobind Das and D. N. Gupta, for the appellant. S. Mitra, S. K. Aiyar and R. N. Sachthey, for the respondent- The Judgment of the Court was delivered by Hegde, J. This is an assessee's appeal. The assessee is a public limited company and the appeal relates to the assessment for the assessment year 1949-1950, corresponding to the accounting year which is the calendar year ending on December 3 1, 1948. The assesse company was incorporated in 1942. At the: beginning it owned a distillery at Unnao. It acquired a refinery in 1943. With effect from June 1, 1945, the assessee company obtained on lease the New Sawan Sugar and Gur Refining Co. During the period from January 29, 1946 to April 23, 1946, the assessee company purchased 41,300 shares of the said company for Rs. 12,17,006/-. On Standard Refinery & Distillery Ltd vs Commissioner Of Income-Tax, Calcutta on 18 January, 1971 2 April 30, 1947 the entire block of shares was sold to Produce Exchange Corporation Ltd. for Rs. 8,46,750/-. The transaction resulted in a loss of Rs. 3,70,356/This loss was treated by the assessee as a trading loss for the assessment year 1948-49. After setting_ off this loss against the other income of the assessee company, a loss of Rs. 2,27,085/was carried forward under s. 24(2) of the Income- tax Act, 1922 (to be hereinafter referred to as the Act) to the year 1949-50 and later years. The assessee claimed to set off this unabsorbed loss pertaining to the share business against its profits in the sugar business for the assessment year 1949-1950. The Income-tax Officer did not permit this set off. The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. In a further appeal, the Appellate Tribunal agreed with the conclusion reached by the Income-tax Officer. Thereafter at the in- stance of the High Court, the Appellate Tribunal stated a case under s. 66(2) of the Act on the following question of law : "Was there any evidence before the Tribunal on which it could hold that the business in dealing with shares was distinct and separate from the business of sugar manufacturing and distillery?" By its judgment dated April 23, 1963, the High Court answered the question in the affirmative and against the assessee. This appeal has been brought against the decision of the High Court after obtaining a certificate under s. 66(A) (2) of the Act. The appeal came up for hearing before this Court on February 6, 1969. After hearing the Counsel for. the parties this Court observed : In the present case however it is not possible for us to satisfactorily dispose of this appeal because the statement of the case submitted by the Tribunal is incomplete and has omitted to state material facts bearing upon the question referred. For instance, it is not clear as to whether the assessee aduced any evidence as to why it started purchasing the shares of the lessor company about six months after the commencement of the lease. It is also not stated by the Tribunal whether there is any evidence of inter-relation between the purchase of shares and the manufacture of sugar." In view of that conclusion this Court directed the Tribunal to submit a supplementary statement of case on some of the points formulated in the order. The Tribunal accordingly submitted a supplementary statement of case. Even after considering that supplementary. state- ment, this Court found itself unable to record its opinion on the question referred to. This Court was also of the opinion that the question which the Tribunal was directed to and did refer was defective and restricted the scope of the enquiry. It accordingly reframed the question as follows : "Whether the business of the company of dealing in shares and the business of manufacturing sugar and other commodities constitute the same business within the meaning of s. 24(2) of the Indian Income-tax Act, 1922, in force in the year of Standard Refinery & Distillery Ltd vs Commissioner Of Income-Tax, Calcutta on 18 January, 1971 3 assessment?" It further directed the attention of the Tribunal to the decision of this Court in Commissioner of Income-tax, Madras v. Prithvi Insurance Co. Ltd.(1) in order to assist the Tribunal to find out the relevant points for consideration. In the' order calling for a further supplementary statement, this Court observed "As pointed out by this Court in Commissioner of Income Tax, Madras v. Prithvi Ins. Co. Ltd. in determining whether two lines of business constitute the same business within the meaning of s. 24(2) of the Income-tax Act, the income-tax authorities must consider the inter-connection, interlacing, inter-depend- ence and unity furnished by the existence of common management, common business Organisation, common administration, common fund and a common place of business." The Tribunal has now submitted the second supplementary statement of case called for by this Court. The facts found by it are as follows : (1) There is a single trading and profit and loss account. In the same account the sales of spirit, sugar and molasses as well as stock and shares appear; 1. 3 I.T.R. 632. (2) The share transactions as well as the business has, been dealt with by a common Organisation, though, the sale of shares is a single transaction and the purchase of those shares is also more or less of the same character; (3) The business of the company as well as the transaction relating to the shares were attended to as part and parcel of the business of the assessee company;, (4) A common fund was utilised both for business purposes as well as for the purchase of shares. A part. of the over-draft of Rs. 6,80,046/- taken from the. bank on December 31, 1947 has been discharged from out of the income of the business; and (5) the share transaction work as well as the other business of the- assessee company were carried on in the same place of business. From the facts found by the Tribunal, it is clear that the share, transaction as well as the other businesses of the company were dealt with by a common management, common business organization, common administration, common fund and common place of business. It was urged by Mr. Mitra, learned Counsel for the Revenue that from the facts found by the Tribunal, it is not possible to conclude that there was any inter-connection, inter-lacing, interdependence and unity between the transactions of the assessee. company relating to the shares as well as its other business and therefore the two activities cannot be considered as-"the same business". He contended that this Court in Prithvi Insurance Co. Ltd's case(1) has accepted the correctness of the decision of the King's Bench in Scales v. George Thompson, Co., Ltd. ( 2 ) and in that case Rowlatt J. had held that before two or more businesses can be considered as 'the same business' they should not be easily separable and there must be a dovetailing of the one with the other. According to Mr. Mitra the transanctions relating to the shares could have been easily separated from the other business of' the company and therefore there is no inter-connection; Standard Refinery & Distillery Ltd vs Commissioner Of Income-Tax, Calcutta on 18 January, 1971 4 equally there is no interlacing because the share transaction business does not dovetail itself into the other business of the assessee company. Further there is neither inter- dependence or unity between the two businesses. The concepts of inter-connection and inter-lacing, inter- dependence and unity are not free of ambiguity. But this Court has laid down certain objective tests for finding out (1) 63 I.T.R. 632. (2) 13 Tav. Cases 83.. the existence of inter-connection, inter-lacing inter- dependence arid unity between two or more businesses. In Commissioner of Income-tax, Madras v. Prithvi Insurance Co. Ltd.(1), this Court ruled that inter-connection, inter- lacing, inter-dependence and unity were furnished by the existence of common management, common business Organisation, common administration, common fund and a common place of business. This conclusion was reiterated by this very bench in Produce Exchange Corporation Ltd. v. Commissioner of In come-tax, (Central Calcutta) (2). Therein the assessee company carried on business as a dealer in diverse ,commodities and also stock and shares. In the year of account 1949, it had suffered loss of Rs. 3,71,700/- in the sale of shares which the company claimed to carry forward and set off against the profits of subsequent years from transactions in other commodities. The Tribunal found that there was complete unity of control and shares were one of a number of commodities in which the company dealt in the ordinary course of business and that there was no element of diversity or distinction or separateness about the transaction in shares, and accordingly upheld the claim On a reference the High Court held that the essential matter to be considered was the nature of the two lines of business and not merely their unity of control and that therefore the Tribunal erred in holding that the whole trading activity formed one business. Reversing the decision of the High Court this Court ruled that the decisive test was unity of control and not the nature of the two lines of business. For the reasons mentioned above we allow this appeal, dis- charge the answer given by the High Court and answer the re- framed question in the affirmative and in favour of the assessee. The Revenue shall pay the costs of the assessee both in this Court and in the High-Court. V.P.S. Appeal allowed. (1) 63 I.T.R. 632. (2) 77 I.T.R. 739. Standard Refinery & Distillery Ltd vs Commissioner Of Income-Tax, Calcutta on 18 January, 1971 5 | {
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Indian Mica & Micanite Industries Ltd vs State Of Bihar & Ors on 2 April, 1971 Equivalent citations: 1971 AIR 1182, 1971 SCR 319, AIR 1971 SUPREME COURT 1182 Author: K.S. Hegde Bench: K.S. Hegde, S.M. Sikri, G.K. Mitter, A.N. Grover, P. Jaganmohan Reddy PETITIONER: INDIAN MICA & MICANITE INDUSTRIES LTD. Vs. RESPONDENT: STATE OF BIHAR & ORS DATE OF JUDGMENT02/04/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. SIKRI, S.M. (CJ) MITTER, G.K. GROVER, A.N. REDDY, P. JAGANMOHAN CITATION: 1971 AIR 1182 1971 SCR 319 CITATOR INFO : R 1973 SC 724 (30) AFR 1980 SC 1 (13) R 1980 SC1008 (18) R 1981 SC1863 (23,28) RF 1990 SC1927 (41,67,68,74,88) RF 1992 SC 165 (50) ACT: Bihar and Orissa Excise Act, 1915, s. 90 and rules made thereunder, r. 111-Levy of licence fee for possession of liquor-Whether fee commensurate with service rendered by State-Immunity from prosecution on payment of licence fee-If quid pro quo. Indian Mica & Micanite Industries Ltd vs State Of Bihar & Ors on 2 April, 1971 1 HEADNOTE: The appellant was using denatured spirit in the manufacture of micanite. It challenged the vires of r. III- of the Rules framed under s. 90 of the Bihar and Orissa Excise Act, 1915, by which a fee for a licence to possess denatured spirit was imposed. The. High Court upheld the levy as a fee for services rendered by the Government. In appeal to this Court, HELD: (1) Denatured spirit being intoxicating liquor (though unfit for human consumption), the State Legislature has power to levy a fee. But, before the levy can be upheld as a fee it must be shown that the levy was a quid pro quo for services rendered by the Government. An arithmetic exactitude is not expected but correlationship of a general character must be established. [32ID-F] in the present case, the only services rendered were that the Excise Department was maintaining an elaborate staff for the purpose of ensuring that denaturing was done properly by the manufacturer and for, the purpose of seeing that the subsequent possession of the denatured spirit was not misused by converting the denatured spirit into alcohol fit for human consumption. [326H; 327A-B] (a) So far as the manufacturing process is concerned the appellant had nothing to do with it. It was only a purchaser of the denatured spirit and hence the cost of supervising the manufacturing process or any assistance rendered to the manufacturers could not be recovered from consumers like the appellant. Further, under, r. 9 the. actual cost of supervision of the manufacturing process was required to be born by the manufacturer and there could not be a double levy in that ergard [327B-C] (b) Assuming that the possession of the denatured spirit in the hands of various persons required close and effective supervision because of the risk being converted into. potable liquor, in Providing against misuse the State was not rendering any service to the consumer. [327D] (c) The appellant had alleged that the State was collecting the amount without rendering any service in return. The correlationship between the services rendered and the fee levied is essentially a question of act. Prima facie in the present case the levy was excessive, even if the state could be said to be rendering some service to the licensees. The State was in possession of material from which ' the correlationship between the levy and the services rendered could be, established at least in a general way, but the State had not placed' any material before the Court. Therefore, the levy under the impugned 'rule could not be justified, [327E-G] 320 Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [1954] S.C.R. 1005, Mahant Sri Jagannath Ramanuj Das & Anr. v. Indian Mica & Micanite Industries Ltd vs State Of Bihar & Ors on 2 April, 1971 2 State of Orissa & Anr., [1954] S.C.R.. 1046, Ratilal Panachand Gandhi v. State of Bombay & Ors., [1954] S.C.R. 1055, Hingir Rampur Coal Co. Ltd. v. State of Orissa & Ors., [1961] 2 S.C.R. 537, H. B. Sudhundra Thirtha Swamiar v. Commissioner of Hindi,( Religious and Charitable Endowments, Mysore, [1963] Supp, 2 S.C.R. 302. Corporation of Calcutta & Anr. v. Liberty Cinema, [1965] 2 S.C.R. 477 and Delhi Cloth JUDGMENT: [1970] 2 S.C.R 348, followed. (2) The High Court erred in observing that when the manufacturers wanted to keep in their possession a large quantity of denatured spirit for manufacturing purposes, they wanted a privilege and immunity from prosecution, that the payment of the requisite licence fee was for that purpose and that it operated as the quid pro quo. [325C-D] (a) The granting of a license generally does not confer any privilege or benefit on anyone, except in those cases, where a permit or licence is granted to someone to exploit Government property. The requirement to take a licence is prescribed to safeguard public interest by regulating a trade,. business or profession and not as a source of revenue. [325F-G] (b) What is made punishable is either a person's failure to take a licence or a breach of the conditions of the licence, and the Government could not barter away its duty to prosecute an offender for consideration.. Any fee levied could only be for services rendered. [325E-F] [Since the State may suffer considerable financial loss the matter was. remanded to the High Court with further opportunity to the State to place the necessary material and show the correlationship.] [328A] & CIVIL APPELLATE JURISDICTION : Civil Appeal No. 770 of 1967. Appeal from the judgment and order dated September 14, 1966 of the Patna High Court in Civil Writ Jurisdiction Case No- 887 of 1965. Sarjoo Pravad, K. K. Sinha and B. B. Sinha, for the appellant. S. C. Agarwala, R. K. Garg, V.J. Francis, Narayana Netter and S. P. Singh, for the respondents. The Judgment of the Court was delivered by Hegde J. In this appeal by certificate. the vires of Rule III of the Rules framed under Section 90 of the Bihar and Orissa Excise Act, 1915 is in issue. 'The. appellant, Indian Mica & Micanite Industries contends that the said Rule is ultra vires the Constitution. The High Court of Patna rejected that contention. In the High Court various contentions came up for considera- tion. The High Court has come to the conclusion that the levy made under the impugned rule is a fee. That finding was not challenged before us by any of the parties. Therefore all that we have to see is whether the fee levied is, within the permissible limit. In other words whether there, is sufficient quid pro quo for the levy in question. The appellant is a consumer of denatured spirit. It purchases denatured spirit from the wholesalers or the manufacturers for the purpose of manufacturing micanite. The Bihar and Orissa Excise Act, 1915 (Bihar & Orissa Act 2 of 1915) came into force on January 19, 1916. In pursuance of Indian Mica & Micanite Industries Ltd vs State Of Bihar & Ors on 2 April, 1971 3 the provisions of that Act the impugned Rule was framed by the Board of Revenue for levying licence fee. The fee for the licence to possess denatured spirit in 1919 was only Rs. 2 per annum irrespective of the quantity in the possession of a person. This' rate continued to be in force till 1937. At this stage it may be remembered that under sub-section (2) of Section 143 of the Government of India Act, 1935, the Provinces were authorised to continue to levy tax, duties, cesses or fees which were being lawfully levied prior to the commencement of that Act. Under the 1935 Act as under our present Constitution, the power to levy duties on alcoholic liquor fit for human consumption was allocated to the Provincial Legislature whereas the power to levy duty on alcoholic liquor not fit for human consumption was allocated to the Central Legislature. Denatured spirit though an alcoholic liquor is not fit for human 'consumption. The power to levy duty on the same was and is given to the Central Legislature. But the same being intoxicating liquor, the Provincial Legislature under the 1935 Act and at present the State Legislature has power to levy fee. The power of- any Legislature to levy fee is conditioned by the fact that it must by and large a quid pro quo for the services rendered. If a levy purporting to be a fee is found to be an exaction without doing any service, or if it is found that the levy is wholly disproportionate to the services rendered then the levy becomes invalid. The distinction between fee and levy' came up for the first time for consideration by this Court in The Commissioner, Hindu Religious Endowments' Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(1). Therein this Court speaking through Mukherjea, J. (as he then was) quoted with approval the definition of 'tax' given by Latham C. J. of the High Court of Australia in Matthews v. Chicory, Marketing Board.(2) In that case the learned Chief Justice observed : " "A tax" is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered." (1) [1954] S.C.R. 1005. (2) 60 C.L.R. 263. 21-1 S. C. India/71 Dealing with the distinction between "tax" and "fee" Mukherjea J. observed thus in the above- mentioned case. "It is said that the essence of taxation is compulsion, that is to say, it is imposed under statutory power without the tax-payer's consent and the payment is enforced by law. The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. This is expressed by saying that the levy of tax is for the purposes of general revenue, which when collected forms part of the public revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said no element of quid pro quo between the tax payer and the public authority. Another feature of taxation is that as it is a part of the common burden, the quantum of imposition upon the tax payer depends generally upon his capacity to pay. Coming now to fees, a "fee" is generally defined to be a charge for a special service rendered to individuals by some governmental agency. The amount of fee levied is supposed to be based on the expenses incurred by the government in rendering the Indian Mica & Micanite Industries Ltd vs State Of Bihar & Ors on 2 April, 1971 4 service, though in many cases the costs are arbitrarily assessed. Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay. These are undoubtedly some of the general characteristics, but as there may be various kinds of fees, it is not possible to formulate a definition that would be applicable to all cases. If, as we hold, a fee is regarded as a sort of return or consideration for services rendered, it is absolutely necessary that the levy of fees should on the face of the legislative provision, be correlated to the expenses incurred by government in rendering the services." The same view was reiterated by this Court in Mahant Sri Jagannath Ramanuj Das and anr. v. The State of Orissa and anr.0 and in Ratilal Panchand Gandhi v. The State of Bombay and ors. (2). The nature of "a fee" again came up for consideration before this Court in The Hingir Rampur Coal Co. Ltd. and ors. v. The State of Orissa and ors.(3) Therein this Court observed that (1) [1954] S.C.R. 1046. (2) [1954] S.C.R. 1055. (3) [1961] 2 S.C.R. 537. -although there can be no generic difference between a tax and a fee since both are compulsory exactions of money by public authorities, there is this distinction between them that whereas a tax is imposed for public purposes and requires no consideration to support it, a fee is levied essentially for services rendered and there must be an element of quid pro quo between the person who pays it and the public authority that imposes it. While a tax invariably goes into the consolidated fund, a fee is earmarked for the specified services in a fund created for the purpose. Whether a cess is one or the other would naturally depend on the facts of each case. If in the guise of a fee, the Legislature imposes a tax, it is for the Court on a scrutiny of the scheme of the levy, to determine its Teal character. The distinction is recognised by the Constitution which while empowering the appropriate Legislatures to levy taxes under the Entries in the three lists refers to their power to levy fees in respect of any such matters, except the fees taken in court, and tests have been laid down by this Court for determining the ,character of an impugned levy. In determining whether a levy is a fee the true test must be whether its primary and essential purpose is to render specific services to a specified area or class, it being of no consequence that the State may ultimately and indirectly be benefited by it. In H. H. Sudhundra Thirtha Swamiar v. Commissioner for ,Hindu Religious and Charitable Endowments, Mysore,(1) this Court was called upon to consider whether the levy impugned in that case could be justified as a fee. It upheld the levy which was an annual contribution levied under the amended Section 76(1) of the Madras Religious Endowments Act, 1951 on the ground that those contributions when collected went into a separate fund and not to the consolidated fund of the State and were earmarked for defraying the expenses for the services rendered. .Further they were not even payable to the government but payable to the Commissioner and were levied not as a tax but only as a fee. Therein this Court further observed that a fee does not cease to be of that character merely because there is an element of compulsion in it, nor is it a postulate of a fee that it must have direct relation to the actual service rendered. Absence of uniformity is not a criterion on which alone it can be said that the levy is of the nature of a tax. Indian Mica & Micanite Industries Ltd vs State Of Bihar & Ors on 2 April, 1971 5 In Corporation of Calcutta and anr. v. Liberty Cinema the validity of the levy made under Section 548 (2) of the Calcutta Municipal Act 1951 came up for consideration. Therein this ,Court held that the levy in question is not a "fee and return for services" as the Act does not provide for any services of a special (1) [1963] Supp. 2 S.C.R. 302. (2) [1965] 2 S.C.R. 477. kind being rendered resulting in benefits to the person on whom it 'is imposed. Section 527 (43) permits by-laws to be framed for regulating the inspection, supervision and control, among others, of cinema houses but it is not obligatory to make such by-laws and therefore, there maybe no services to render. Even the bylaw made provides only, for inspection, and the work of inspection done by the appellant was only to see that the terms of the licence were observed by the licensee-, It was not a service to him,. and so, no question arises of correlating the, amount of levy to the costs. of any service. The levy therefore is not a fee and must be tax. In Delhi Cloth & General Mills Co. Ltd. v. Chief Commis- sioner, Delhi and ors.,(1) the validity of a levy as a fee came up for consideration by this Court. Therein this Court speaking through Grover, J. (one of us) laid down that in each case when the question arises whether the levy is in the nature of a fee the entire scheme of the statutory provisions, the duties and obligations imposed on the inspecting staff and the nature of the work done by them will have to be examined for the purpose of determining the rendering of the services which would make the levy a fee. After examining the various provisions of the Factories Act, 1948 and the rules framed this Court came to the conclusion that a large number of provisions of the Act, particularly in the Chapters dealing with safety involve a good deal of technical knowledge and in the course of their discharge of duties and obligations the Inspectors are expected to give proper advice and guidance so that there may be due compliance with the provisions of the Act. On certain occasions the factory owners are bound to receive a good deal of benefit by being saved from the consequences. of the working of dangerous machines or employment of such processes as involve danger to human life by being warned at the proper time as to the defective nature of the machinery or of the taking of precautions which are enjoined under the Act. Similarly if a building or a machinery or plant is in such a condition that it is dangerous to human life or safety the Inspector by serving a timely notice on the manager saves the factory owner from all the consequences of proper repairs not being done in time to the building or machinery. In that case the High Court found that 60% of the amount of licence fees which were being realised was actually spent on services rendered to the factory owners. That finding was accepted by this Court and on the basis of that finding this Court upheld the validity of the levy. From the above discussion it is clear that before any levy can be upheld as a fee, it must be shown that the, levy has reasonable correlationship with the services rendered by the Government. In (1) [1970] 2 S.C.R. 348. other words the levy must be proved to be, a quid pro quo for the services rendered. But in these matters it will be impossible to have an exact correlationship.The correlationship expected is one of a general character and not as of arithmetical exactitude. Let us now proceed to consider whether the levy under the impugned rule can be justified as a fee on the basis of the law as enunciated by this Court. Indian Mica & Micanite Industries Ltd vs State Of Bihar & Ors on 2 April, 1971 6 But before doing so, it is necessary to dispose of one of the grounds on which the High Court upheld the levy. In paragraph 8 of the High Court's judgment, it is observed: "........ when a manufacturer wants to keep in his possession large quantity of denatured spirit for manufacturing purposes, he wants a special privilege or concession of immunity from prosecution. For that purpose he has to obtain a licence or a pass on payment of requisite fees. 'There is thus a quid pro quo element and the immunity from prosecution is in the nature of a special benefit or privilege." The implication of this observation is somewhat astounding. These observations imply that the government can barter away its duty to prosecute an offender for consideration. The requirement to take a licence is prescribed to safeguard public interest and not as a source to gather revenue. What is made punishable is either a person's failure to take the required licence ,or the breach of the conditions of the licence; Otherwise there would be no sanction behind the rule requiring to take a licence. Generally speaking by granting a licence the State does not confer any privilege or benefit on any one. All that it does is to regulate a trade, business or profession in public interest. There may be cases where a government which is the owner of a particular property may grant permit or licence to someone to exploit that property for his benefit. Such a right may be given for consideration. It is only in those cases that a licence or a permit is a conferment of a benefit or a privilege and not in the case of grant of a licence for carrying on any ordinary trade, business or profession. If it is otherwise the State can sell the right to practice the profession of law in courts or to practice the profession of medicine or any of the other numerous professions, at exorbitant prices or may even put up those rights for auction to be given to the highest bidder. Nothing so bad can be within the contemplation of our laws. We are inclined to think that the learned Judges of the High Court have misunderstood the observations of Seligman quoted in the Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(1) to the effect that it is a special benefit accuring to the individual which is the reason for the payment of fee. Let us now consider whether in the present case the State is proved to have been rendering any service to the appellant in lieu of the fee levied and further whether if it does render any service whether there is reasonable correlationship between the services rendered and the fee levied. In other words whether the fee levied can be considered as a quid pro quo for the services rendered. The averments of the respondents in their counter-affidavit that are relevant on this aspect of the case are those found in paragraph 10 of the counter-affidavit. They read : " To denature spirit and issue it to Licensees, proper supervision and control is needed vide Board's rules 63 to 68 at page 177 to 181 of Excise Manual Volume 11. There is every risk that any person may attempt to render denatured spirit fit for human consumption which is punishable under section 49 of the Excise Act. Besides the above rules of the Board certain instructions have been issued in paragraph 187 to 196 of the Excise Manual, Volume III (page 67-71) for the process of denaturing and issue of denatured spirit to the licensees. State Government have to employ supervisory staff and chemical examiner to carry out these obligations of Indian Mica & Micanite Industries Ltd vs State Of Bihar & Ors on 2 April, 1971 7 Supervision and control. It may be added that Excise Department does not only supervise and control these intoxicating liquors in the interest of public policy but renders services to the petitioner by getting alcohol manufactured at the distillery by supplying raw materials like molasses and coal to these distilles at controlled cheap rates. This is the only reason of getting spirit distillery at a very cheap cost by the licensees including the petitioner. And hence levy of fee by the Excise authorities is not a duty or tax but it is clearly fee in return for services rendered as well as for proper supervision, control and regulation of an activity which the legislature desires to control." According to the finding of the High Court the only services rendered by the Government to the appellant and to other similar licensees is that the Excise Department have to maintain an elaborate staff not only for the purposes of ensuring that denaturing (1) [1954] S.C.R. 1005. is done properly by the manufacturer but also for the purpose of seeing that the subsequent possession of denatured spirit in the hands either of a wholesale dealer or retail seller or any other licensee or permit-holder is not misused by converting the denatured spirit into alcohol fit for human consumption and thereby evade payment of heavy duty. So far as the manufacturing process is concerned, the appellant or other similar licensees have nothing to do with it. They are only the purchasers of manufactured denatured spirit. Hence the cost of supervising the manufacturing process or any assistance rendered to the manufacturers can- not be recovered from the consumers like the appellant. Further under rule 9 of the Board' rules, the actual cost of supervision of the manufacturing process by the Excise Department is required to be home by the manufacturer. There cannot be a double levy in that regard. In the opinion of the High Court the subsequent transfer of denatured spirit and possession of the same in the hands of various persons such as whole-sale dealer, retail dealer or other manufacturers also requires close and effective supervision because of the risk of the denatured spirit being converted into potable liquor and thus evading heavy duy. Assuming this conclusion to be correct, by doing so, the State is rendering no service to the consumer. It is merely protecting its own rights. Further in this case, the State which was in a position to place material before the Court to show what services had been rendered by it to the appellant and other similar licensees, the costs or at any rate the probable costs that can be said to have been incurred for rendering those services and the amount realised as fees has failed to do so. On the side of the appellant, it is alleged that the State is collecting huge amount as fees and that it is rendering little or no service in return. The correlationship between the services rendered and the fee levied is essentially a question of fact. Prima facie, the levy appears to be excessive even if the State can be said to be rendering some service to the licensees. The State ought to be in possession of the material from which the correlationship between the levy and the services rendered can be established at least in a general way. But the State has not chosen to place those materials before the Court. Therefore the levy under the impugned Rule cannot be justified. In this Court Counsel for the State prayed for an opportunity to place material to show that the levy in question is not disproportionate to the value of the services rendered by the State. Ordinarily we would not have acceded to that request coming at such a late stage, particularly in view of fact that the legal position had been clarified by a long chain of decisions of this Court. There is no doubt that Indian Mica & Micanite Industries Ltd vs State Of Bihar & Ors on 2 April, 1971 8 the State has failed to place the necessary material before the Court to justify the levy. But the fact remains that because of the negligence of those in-charge of the defence of the State, the State may suffer considerable, financial loss, if we hold that the impugned Rule is void. Hence we are constrained to give the State a further chance to prove its case. In the result we allow the appeal, sat aside the order of the High Court and remit the case to the High Court for disposal according to law in the light of this decision. A further opportunity be given to the State to place material before that court to show that the value of the services rendered by the State has reasonable correlationship with the fee charged. If the State adduces additional evidence, the appellant be given an opportunity to rebut the same. As the further enquiry is necessitated because of the negligence of the State, it should pay the costs of the appellant both in this Court and in the High Court and bear its own costs up to this stage. V.P.S. Appeal allowed. Indian Mica & Micanite Industries Ltd vs State Of Bihar & Ors on 2 April, 1971 9 | {
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Ganesh Prasad Dube vs State Of Bihar And Others on 16 February, 1971 Equivalent citations: 1972 AIR 2396, 1971 SCR (3) 726, AIR 1972 SUPREME COURT 2396 Author: C.A. Vaidyialingam Bench: C.A. Vaidyialingam, A.N. Ray PETITIONER: GANESH PRASAD DUBE Vs. RESPONDENT: STATE OF BIHAR AND OTHERS DATE OF JUDGMENT16/02/1971 BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. RAY, A.N. CITATION: 1972 AIR 2396 1971 SCR (3) 726 1971 SCC (1) 691 ACT: Practice-Grant of Certificate by High Court-Application under Arts. 132(1) and 133(1) (a) to (c) of Constitution- Procedure to be followed by High Court. HEADNOTE: The appellant, who was acting as Director of Public Instruction, challenged an order posting him as Director of State Institute of Education by a writ petition in the High Court, on various grounds. It was dismissed. He applied for grant of certificate to appeal to this Court under Arts. 132(1) and 133(1)(a) to (c) of the Constitution. The High Court held that Art. 133(1)(a) did not apply, did not consider whether Arts. 133 (1) (c) and 132 were applicable, doubted whether Art. 133 (1) (b) would apply, but ultimately granted a certificate under Art, 133(1). Ganesh Prasad Dube vs State Of Bihar And Others on 16 February, 1971 1 On the question whether the certificate was properly granted. HELD : As the High Court has not properly considered the application for grant of certificate,under Arts. 132(1) and 133(1)(b) and (c), it will have to be remanded to be considered by the High Court afresh. The High Court, in the fresh order to be passed, must clearly indicate ,under what particular Article or clause of the Article the certificate is granted [733 A-C] Saya Narain Prasad v. State of Bihar [1970] 2 S.C.R. 275 and M/s Krishna Gyanodaya Sugar Ltd. v. The State of Bihar and Ors. A.I. R. 1970 S.C. 2041, followed. JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1256 of 1969. Appeal from the judgment and order dated February 17, 1969 of the Patna High Court in Civil Writ Jurisdiction Case No. 153 ,of 1969 with Civil Miscellaneous Petition No. 4499 of 1969. Application by respondent No. 1 for revocation of the certificate granted by the High Court under Art. 133(1)(b) of the Constitution. S. T. Desai, Tarkeshwar Dayal and S. N. Prasad, for the appellant. L. M. Singhvi and U. P. Singh, for respondents Nos. 1 and 3 to 5. 7 27 Basudeva Prasad, Nawal Kishore Prasad Sinha and U. P. Singh, for respondents Nos. 2 and 6 to 10. The Judgment of the Court was delivered by- Vaidialingam, J.-In this appeal, on certificate, the appellant challenges the order dated February 17, 1969 of the Patna High Court dismissing summarily C.W.J.C. No. 153 of 1969 filed under Art. 226 of the Constitution. The appellant was appointed by the order dated March 21, 1968, by the State of Bihar temporarily to act as Director of Public Instruction, Bihar. On the date of the said appointment the appellant was the Director of State Institute of Science. In the endorsement in this order,'-it was stated that the appellant's appointment as Director of Public Instruction has been made by promotion on a temporary basis for a period not exceeding six months in anticipation of the concurrence of the Public Service Commission. By order dated November 18, 1968, the State Government passed an order posting the appellant as Director of State Institute of Education. It is stated in the said order that the appellant had been officiating in the post of Director of Public Instruction by virtue of the order dated March 21, 1968. The appellant filed C.WJ.C. No. 153 of 1969 before the High Court challenging this order of November 18, 1968 on various grounds. He had also alleged mala-fides in the passing of the said order. In the view that we take that the order of the High Court granting the certificate has to be Ganesh Prasad Dube vs State Of Bihar And Others on 16 February, 1971 2 remitted for fresh consideration, we do not propose to refer to the various grounds of attack made by the appellant in his writ petition before the High Court. The High Court by its order dated February 17 1969 has taken the view that as the appellant's appointment as Director of Public Instruction was on a temporary basis for a period not exceeding six months in anticipation of the concurrence of the Public Service Commission, the Public Service Commission, which was subsequently consulted did not give its concurrence to the appointment of the appellant as Director of Public Instruction and therefore, the government passed the impugned order dated November 18, 1968 posting the appellant as Director. State Institute of Education. As the appellant was appointed purely on a temporary basis, he has no right to claim the post. The High Court has further expressed the view that it is not satisfied prima facie that there was any mala-fides on the part of the Public Service Commission in not giving its concurrence to the appointment of the appellant or on the part of the government in not appointing the appellant as Director of Public Instruction. A further contention taken on behalf of the appellant that the impugned order was not in conformity with the decision of the Council of Ministers, was rejected by the High Court. On this reasoning the High Court held "as no prima facie case has been made out for interference with the order of the Government, as contained in Annexure 1, this application is summarily rejected". Annexure 1, in the above quotation was the impugned order dated November 18, 1968. It may be noted that the writ petition was dismissed without issuing notice to the State and other respondents therein. On behalf of the appellant Mr. S. T, Desai, learned counsel, attempted to argue on merits by urging that the High Court, in view of the allegations made by the appellant in the writ petition, was not justified in rejecting the petition summarily. The learned counsel also attempted to argue that even on the basis of the materials placed before the court, the order is unsustainable. On behalf of the first respondent, State of Bihar, C.M.P. No. 4498 of 1969 has been filed for revoking the certificate granted by the High Court under Art. 133(1)(b) of the Constitution. Dr. L. M. Singhvi, learned counsel for the State, therefore, raised preliminary objection that the certificate granted by the High Court is not valid and as such it should be revoked. If the certificate is revoked, as prayed for by the State, the counsel urged, then there will be no need to go into the merits of the appeal, sought to be canvassed by Mr. S. T. Desai, learned counsel for the appellant. As the preliminary objection has to be first dealt with it is now necessary to refer to the order of the High Court granting the certificate. After dismissal of the writ petition by the High Court, the appellant filed an application (Supreme Court Appeal No. 42 of 1969) for grant of certificate of fitness to appeal to this Court. That application, no doubt, was opposed by the present respon- dents. The High Court by its order dated March 13, 1969 granted the certificate to the effect "that the requirement of valuation to enable the petitioner to get a certificate is fulfilled under Article 133(1) of the Constitution." From the order of the High Court it is seen that the, application for the grant of certificate was made under Arts. 132(1) and 133(1) of the Constitution. So far as Art. 133(1) was concerned, the request for certificate was made under- clauses (a) and (c) and not under clause (b). But, however, during the course of arguments, the appellant's counsel relied on clause (b) of Art. 133(1) and that was permitted by the High Court. Therefore, ultimately the certificate was prayed for under Art. 132(1) and Art. 133(1) clauses (a) to (c). After 'discussing the case of the appellant, the High Court held that in a case of this nature the 7 29 salary or allowances attached to the office of Ganesh Prasad Dube vs State Of Bihar And Others on 16 February, 1971 3 the appellant cannot be considered to be the subject matter of dispute- within the meaning 1 of clause (a) of Art. 133(1) of the Constitution. According to the High Court, the subject matter of the dispute is the right to continue in office and not the right to get the salary if he is allowed to continue in office. In this view the High Court held that the appellant cannot be granted a certificate under clause (a) of Art. 133(1). The High Court then considered the question of granting a certificate under clause (b) of Art.- 133(1) of the Constitution. The High Court was of the view that it is perhaps possible to hold that the emoluments attached to the office can be taken into consideration for the purpose of valuation under clause (b). The High Court has expressed the view that the future emoluments which an incumbent of an office will be, getting, if he succeeds in getting the office, will be the property respecting which some claim or question will be directly involved in the judgment sought to be appealed against provided it is a property. But, however, the High Court entertained a doubt whether the emoluments which became payable to an incumbent of the office in future, if an incumbent does not lose The office, due to any other reason, other than the subject matter of the dispute in the case, can be said to be property within the meaning of clause (b). But inspite of all these doubts, the High Court held that certificates have been granted by the High Court of Patna in several cases and then finally concluded "...but for the purpose of determination of the question of valuation it is legitimate to assume in his favour that he claims a right to the office of the Director of Public Instruction which could have brought him the emoluments for a period of 3 years 3 months, if he succeeds." Ultimately the High Court certified that the requirements of valuation to enable the appellant to get a certificate is fulfilled under Art. 1 3 3 ( 1 ) of the Constitution. Dr. L. M. Singhvi's contention is that the certificate granted by the High Court is not valid. His argument ran as follows The High Court has not granted the certificate under Art. 1 3 3 ( 1) (c); the High Court has categorically held that the appellant cannot be granted a certificate under Art. 133 (1) (a). Though the concluding part of the order granting the certificate states that it has been granted under Art. 133(1), in the circumstances mentioned above, it is clear that the certificate has been granted only under Art.' 1 3 3 (1 ) (b). This is on the ground that the appellant claimed his right to the office of the Director, Public Instruction, which would have brought him the emoluments re- ferred to by him for a period of 3 years and three months, if the impugned order had not- been passed. This method of valuation for the purpose of clause (b) is not correct. We are to state that the appellant had claimed that on the date of the impugned notification, he was getting a monthly salary of Rs. 1950/-. The post of Director of Public Instruction was in the scale of Rs. 1850-100-2250. He was entitled to get an annual increment of Rs. 100/-. But for the impugned order the appellant claimed that he would have continued in service for a period of 3 years and 3 months before attaining the age of superannuation, and as such during this period he would have earned a salary of Rs. 83,000/-. Mr. S. T. Desai, learned counsel for the appellant urged that the grant of a certificate under clause (b) of Art.- 33(1) is correct. In the alternative he contended that as the claim made by the appellant for grant of a certificate under Art. 132(1) and under Art. 13 3 (1 ) (e) has not been at all discussed or Ganesh Prasad Dube vs State Of Bihar And Others on 16 February, 1971 4 decided by the High Court and, if it is held that the certificate as now 'granted is not valid, the High Court may be required to consider the grant of a certificate under Arts. 132(1) and 133(1)(c). Mr. Desai also urged that as very serious allegations of mala-fides in the passing of the impugned order have been made by the appellant, the High Court was not justified in rejecting the writ petition summarily without issuing notice to the respondents. He contended that all the material records bearing on the matters arising for consideration are available in this Court and in view of this circumstance, he requested that the hearing of the appeal may be proceeded with by this Court. We are not inclined to agree with Mr. Desai that if the certificate granted by the High Court is not valid, this Court can proceed to hear the appeal on merits. Mr. Desai relied on the decision of this Court reported in Century Spinning and Manufacturing Company Ltd. and another v. The Ulhasnagar Municipal Council and another(1) in support of his contention that the High Court was not justified in dismissing the writ petition summarily. It is no doubt true that in the above decision it has been held that though the High Court has a discretion to decline to exercise its extra-ordinary jurisdiction under Art. 226, nevertheless, the discretion is to be judicially exercised and if the petitioner makes a claim which is frivolous, vexatious or prima facie unjust, the High Court may decline to entertain the petition. But if a party claims to be aggrieved by the unlawful, arbitrary (1) [1970] 1 S.C.C. 582. or unjust order of a public body or authority, he is entitled to a hearing of his petition on merits and the High Court will not be justified in dismissing such a petition in limine. Following the above decision in M/s Exen Industries v. The Chief Controller of Imports and Exports and others(1), Mitter J., speaking for the Court set aside the order of the High Court dismissing the writ petition in limine with the following observations : "However the High Court though competent to decline to exercise its extraordinary jurisdiction under Art. 226 of the Constitution when it finds that the petition is frivolous or without substance should not throw it out in limine if a prima facie cage for investigation is made out. The High Court can reject a petition in limine if it takes the view that the authorities whose acts were called in question had not acted improperly or if it felt that the petition raised complicated questions of fact for determination which could not be properly adjudicated upon in a proceeding under Art. 226 of the Constitution." Similarly in Gyan Chand and others v. State of Haryana and others (2 ) where allegations of mala-fides have been made and a writ petition was dismissed in limine by the High Court, this Court set aside the order and remanded the matter for a fresh consideration after calling upon the authorities concerned to file a return. The above decisions are of no assistance to the appellant as the orders of remand were passed in those appeals which came to this Court either on a proper certificate issued by the High Court or on special leave granted by this Court. In all those cases there was a proper appeal pending before this Court in which merits of the points raised for decision in the appeal were gone into and suitable directions were given therein. Ganesh Prasad Dube vs State Of Bihar And Others on 16 February, 1971 5 If the certificate granted by the High Court, as contended by Dr. Singhvi, is invalid, then the appeal before us is an incompetent appeal and no direction on merits-can be given by this Court on such an incompetent appeal. There can be no controversy that if the certificate is not valid, the only course open to this Court will be to dismiss the appeal. Dr. Singhvi urged that the grant of' certificate under Art.' 133 (1) (b) in this case is not justified because the method of valuation adopted by the High- (1) C.A. No. 971 of 1967 decided on 22-1-1971. (2) C.A. No. 64 of 1970 decided on 21-8-1970. 73 2 Court is not correct. In this context Dr. Singhvi relied on the decisions of this Court in Chhitarmal v. M/s Shah Pannalal Chandulal(1) and Satyanarain Prasad v. State of Bihar(1) regarding the test to be applied for the purpose of granting a certificate under clause (a) or (b) of Art. 133(1). Dr. Singhvi also relied on the first of the above references, in support of his contention that in the absence of a valid certificate, the appeal is incompetent and it has to be dismissed. Mr. S. T. Desai, learned counsel for the appellant, urged that the High Court has not properly considered the claim made by the appellant for a certificate under Arts. 132 (1) and 133 (1) (b) and (c). Article 132(1) has not been considered at all nor has the High Court considered clause (c) of Art. 133 (1) (c). Even with regard to clause (b), the High Court has given a very halting finding. Therefore, the counsel urged that the High Court may be required to consider the application for grant of a certificate afresh. It is not necessary at this stage to consider whether correct principles have been applied by the High Court in granting the certificate under Art. 13 3 (1 ) (b). As we have pointed out earlier, it has expressed doubts here an& there and it has granted the certificate under that clause on the ground that the Patna High Court has granted certificates under similar circumstances. As the High Court is being required to consider this matter afresh, we do not think it necessary to express any opinion on this aspect. Admittedly the High Court has not considered the question whether the appellant wig be entitled to a certificate under Art. 132 ( 1 ) or Art. 13 3 ( 1 ) (c). It was pointed out to us on behalf of the respondent that the High Court did not consider the grant of a ,certificate under clause (c) of Art. 133(1) as no argument was advanced by the appellant that the case involves a substantial question of law as to the interpretation of the Constitution. No ,doubt there is such a passing remark in the order of the High ,Court, but as the matter has to be reconsidered by the High Court, it is desirable that the claim of the appellant under this clause is also considered by the High Court. We have already referred to the fact that even clause (b) has been considered only in a very halting manner by the High Court. Therefore, the position is that the certificate as granted by the High Court is not a valid certificate and as such the appeal must be held to be incompetent. But the matter does no rest there. In cases where the claim for certificate made on other clauses or under other Articles have not been considered at all, this Court has directed the High Court to consider the question whether a case has been made out for issue ,of a certificate under such other provisions. (Vide Satyanarain (1) [1965]2 S.C.R. 751. (2) [1970] 2 S.CC 275. Prasad v. State of Bihar(1)and M/s Shree Krishna Gyanodaya Sugar Ltd. v. The State of Bihar and others(1). As the High Court has not properly considered the applica- tion filed by the appellant, that is, Supreme Court Appeal No. 42 of 1969, before the High Court for grant of the certificate, that application will be taken up by the High Court afresh. The High Court will consider whether the Ganesh Prasad Dube vs State Of Bihar And Others on 16 February, 1971 6 appellant is able to satisfy the court that he is eligible to got a certificate under Art. 132(1) or under Art. 13 3 ( 1 ) (b) or (c) of the Constitution. It is not necessary for the High Court to consider whether the certificate is to be granted under clause (a) of Art. 13 3 ( 1 ) as that question is already concluded against the appellant in its order dated March 13,1969. The High Court in the fresh order to be passed must clearly indicate under what particular Article or clauses of the Article, the certificate is granted. We are constrained to make this remark because in the present order the High Court has merely stated that the certificate is issued under Art. 133(1). As already a long time has elapsed, the High Court is required to dispose of the said application as expeditiously as possible within a period not exceeding two months from the date of receipt of this order by the High Court. Subject to the observations contained above, the appeal is dismissed. There will be no order as to costs in this appeal. V.P.S. Appeal dismissed. (1) [1970] 2 S.C.C. 275. (2) A.I.R. 1970 S.C. 2041. Ganesh Prasad Dube vs State Of Bihar And Others on 16 February, 1971 7 | {
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Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 Equivalent citations: 1972 AIR 425, 1972 SCR (1)1055, AIR 1972 SUPREME COURT 425 Bench: S.M. Sikri, J.M. Shelat, A.N. Ray, I.D. Dua, Subimal Chandra Roy, D.G. Palekar PETITIONER: JAGANNATH ETC. ETC. Vs. RESPONDENT: AUTHORISED OFFICER, LAND REFORMS & ORS. ETC. DATE OF JUDGMENT11/10/1971 BENCH: MITTER, G.K. BENCH: MITTER, G.K. SIKRI, S.M. (CJ) SHELAT, J.M. RAY, A.N. DUA, I.D. ROY, SUBIMAL CHANDRA PALEKAR, D.G. CITATION: 1972 AIR 425 1972 SCR (1)1055 1971 SCC (2) 893 CITATOR INFO : RF 1974 SC1300 (43) RF 1975 SC1389 (27) RF 1975 SC2299 (606) R 1978 SC 916 (4) RF 1979 SC 25 (38) ACT: Constitution of India, 1950, Arts. 31-B, 39 and Ninth Schedule and Seventh Schedule, List II, entry 18 and List III, entry 42 Madras Land Reforms (Fixation of Ceiling on Land) Act, 1961-Struck down as violative of Art. 14-Act included in Ninth Schedule-Effect on validity--Whether State Legislature competent to enact the Act. Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 1 HEADNOTE: The Madras Land Reforms (Fixation of Ceiling on Land) Act, 1961, was an Act to provide for fixation of ceiling on agricultural land holdings and for certain other matters connected therewith in the State of Madras. Its validity had been challenged by earlier writ petitions filed, in this Court on the ground that its provisions violated Arts. 14, 19 and 31(2) of the Constitution and this Court held that its pivotal provisions violated Art. 14 and therefore struct down the entire Act as unconstitutional. Similar attacks had been made on several other acts of other States imposing ceilings on holding of land, and in order to shield these Acts against such attacks Parliament passed the Constitution (Seventeenth Amendment) Act, 1964. By that amendment several Acts were included in the Ninth Schedule to the Constitution including the Madras Act. The Madras Act was again challenged on two grounds; namely (1) the Act having been struck down as invalid by this Court it was non est, and was void ab initio and Art. 31-B could not validate it without the State Legislature reenacting its provisions, and (2) the Act was incompetent for want of legislative power in the State. HELD : Art. 31-B and the Ninth Schedule as they stood after the 7th amendment must be taken to have cured the defect, if any, in the various Acts mentioned in the said Schedule as regards any unconstitutionality alleged on the ground of infringement of fundamental rights; and, by the express words of Art.. 31-B such curing of the defect took place with retrospective operation from the dates on which the Acts were put on the statute book. These Acts, even if void or inoperative at the time when they were enacted by the reason of infringement of Art. 13(2) of the Constitution, assumed full force and vigour from the respective dates of their enactment after their inclusion in the Ninth Schedule read with Art. 31-B of the Constitution. Besides, the States could not, at any time, cure any defect arising from the violation of the provisions of Part III of the Constitution. Therefore, the objection that the Madras Act should have been re-enacted by the Madras Legislature after the Seventeenth Amendment came into force cannot be accepted., [1070 B-E] State of Maharashtra v. Patilchand, [1968] 3 S.C.R. 712, Bhikaji Narain Dhakras & Ors. v. State of Madhya Pradesh & Anr., [1955] 2 S.C.R. 589, M, P. V. Sundararamier & Co. v.' State of Andhra Pradesh, [1958] S.C.R. 1422 and State of Uttar Pradesh v. H. H. Maharaja Brijendra Singh, [1961] 1 S.C.R. 363, followed. Sajjan Singh v. State of Rajasthan, [1965] 1 S.C.R. 933, Behra Khrushed Pesikaka v. State of Bombay, [1955] 1 S.C.R. 613, Saghir 1056 Ahmed v. State of U.P. [1955] 1 S.C.R. 707 and Deep Chand v. Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 2 State of A Uttar Pradesh & Ors. [1959] Supp. 2 S.C.R. 8, refereed to. (2) Entry 18 in List II of the Constitution like any other entry in the three lists only gives the outline of the subject matter of legislation field of legislation governed by the entry is not to be narrowed down in and the words in the entry are to be read in their widest amplitude. The any way unless there is anything in. the entry itself which defines the limits thereof. Entry 18 is meant to confer the widest powers on the State Legislature with regard to rights in or over land and such rights are not to be measured by or limited to the rights as between landlords and tenants or the collection of rents. The words which follow the ex- pression 'rights in or over land', in the entry are merely by way of illustration. The specification itself shows that the genus of the rights mentioned is not the one which landlords have vis-a-vis their tenants or vice versa. All kinds of legislation regarding transfers and alienations of agricultural land which may affect the rights therein of landlords and tenants are envisaged by the entry as also improvement of land and colonisation of such land. If the State Government seeks to enforce a measure by which the condition of barren or unproductive lands can be improved it can do so even if the measure curtails the rights of the landlords and tenants. If the State wants to enforce a measure of acquiring lands of people who hold areas over a certain ceiling limit so as to be able to distribute the same among the landless and other persons, to give effect to the directive principles in Art. 39(b) and (c) of the Constitution, it is not possible to say that the same would be outside the scope of Entry IS in List II read with Entry 42 in List III. Such a measure can aptly be described as a measure of agrarian reform or land improvement in that persons who have only small holdings and work on the lands themselves would be more likely to put in greater efforts to make the land productive than those who hold large blocks of land and are only interested in getting a return without much effort. The measure does not transgress the limits of the legislative field because it serves to remove the disparity in the ownership of land. Persons who lose the ownership of land in excess of the ceiling imposed are compensated for the lands acquired by the State and distributed among others. Acquisition of land would not directly be covered by Entry 18 but read with Entry 42 in List III the State has competence to acquire surplus land so as to give effect to the policy in Art. 39 of the Constitution. [1072 G-H; 1073 A-F] Sri Ram Ram Narain Medhi v. State of Bombay, [1959] Supp. 1 S.C.R. 489, Atma Ram v. State of Punjab & Ors. [1955] 1 S.C.R. 743, Sonapur Tea Co. Ltd. v. Mst. Mazirunnessa, [1962] 1 S.C.R. 24 and State of Maharashtra v. Patilchand, [1968] 3 S.C.R. 712, followed. Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 3 JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 247 to 257, 1061, 552, 623, 700, 701, 714, 1260, 1261 and 1696 of 1967. Appeals from the judgment and orders dated the July 18, 19, 29, 1966, of the Madras High Court in Writ Petitions Nos. 1971 of 1965 etc. V. Vedantachari, K. C. Rajappa and K. Jayaram, for the appelants (in C.As. Nos. 247 to 257 and 714 of 1967). K. Jayaram for R. Gopalkrishnan, for the appellants (in C.As. Nos. 562, 700, 701, 1260, 1261 and 1969 of 1967). V. Vedantachari and K. Rajendra Chowdhary, for the appel- lants (in C.A. No. 623 of 1967). K. Jayaram for R. Thaigarajan, for the appellants- (in C.A. No. 1061 of 1967). S. Govind Swaminathan, Advocate-General, Tamil Nadu, S. Mohan and A. V. Rangam, for the respondents (in all the appeals except C.A. No. 562/67). L. M. Singhvi, S. Mohan and A. V. Rangam, for the respon- dents (in C.A. No. 562 of 1967). Niren De, Attorney-General, V. A. Seyid Muhammad and S. P. Nayar, for the Attorney-General. G. S. Chatterjee, for the Advocate-General, West Bengal. O. P. Rana, for the Advocate-General, Uttar Pradesh. M. C. Setalvad, M. C. Bhandare and B. D. Sharma., for the Advocate-General, Maharashtra. K. M. K. Nair, for the Advocate-General, Kerala. K. Baldev Mehta, for the Advocate-General, Rajasthan. K. Jayaram for R. Gopalkrishnan, for intervener No. 1. J. B. Dadacharji, 0. C. Mathur, Ravinder Narain and Bhuvanesh Kumari, for intervener No. 2. The Judgment of the Court was delivered by Mitter, J. In all the above matters there is Common attack on the validity of the Madras Land Reforms (Fixation of Ceiling on Land) Act, 1961. The Act received the assent of the President on the 13th April, 1962 and was published in the official gazette on the 2nd May, 1962. It is styled "An Act to provide for fixation of ceiling on agricultural land holdings and for certain other matters connected therewith in the State of Madras". The preamble to the Act shows that it was passed in furtherance of the directive principles of State policy as embodied in Art. 39 of the Constitution and in particular, clauses (b) and (c) thereof, namely, that the ownership and control, of the material resources of the community were to be so distributed as best to subserve the common good and that the operation of the economic system did not result in the concentration of wealth and means of production to the common detriment. The Act sought to achieve this by acquiring agricultural land from persons owning large holdings of it and distributing the same to the landless and other persons so as to reduce the disparity in the ownership thereof. This was attempted to be brought about by fixing a ceiling on the holdings of agricultural land holdings so as to render the surplus available for distribution. Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 4 The scheme of the Act in a nut-shell is as follows. By- Chapter 11 of the Act containing sections 5 to 18 provision is made for the fixation of ceiling of land holdings, furnishing of return by persons holding land in excess of the limits specified, preparation and publication of draft statements as regards land in excess of the ceiling area, exclusion of certain land from calculation of ceiling area and acquisition of surplus land after the publication of the final statement as envisaged in the Chapter. In particular, s. 5 fixes the ceiling on holdings of land of every person and every family. S. 7 provides that subject to the provisions of Chapter VIII no person shall be entitled to hold land in excess of the ceiling area. Sections 3 to 16 provide for submission of return, obtaining of particulars and determination of the surplus land, of a person S. 18 provides for publication of notification by the Government to the effect that the surplus land is required for a public purpose. Chapter III of the Act provides for ceiling on future acquisitions, enquiries into the bona fides and validity of transfers between the date of the commencement of the Act and the notification thereafter, and the effect of certain future transfers. Chapter VI provides for determination of compensation for land acquired by Government under the provisions of the Act. Section 50-the' opening section in Chapter VI-provides for payment of compensation according to the rates specified in Schedule III to every person whose right, title and interest is acquired by Government under Chapter 11. S. 55 provides for payment of compensation either in cash or in bonds or partly in cash and partly in bonds. Chapter IX provides for exemptions in certain cases from. the provisions of the Act. Chapter XIII provides for disposal of the land acquired by the Government under the Act. Section' 3 is the definition section. Under cl. (7) thereof ceiling' area means the extent of land which a person is entitled to hold under, section 5. By cl. (11) 'the date of commencement of the Act' was fixed as the 6th April, 1960 i.e. the date on. which the Madras Land Reforms (Fixation of Ceiling on Land) Bill, 1960 was published in the official gazette. A "family" for the purpose of the Act is given an artificial definition in cl.(14). It means in relation to any person, the wife or husband as the case may be, of such person and his or her- (i) minor sons and unmarried daughters, and (ii) minor grandsons and unmarried grand- daughter,,, in the male line, whose father and mother are dead. .lm0 Under the Explanation to the clause 'minor sons' and 'minor, grandsons' are not be include sons or grandsons- (i) between whom and the other members 'of the family, a partition by means.of a registered instrument has taken place; or (ii) in respect of whose family properties a preliminary decree for partition has been passed; before the commencement of the Act. Under cl. (19) 'to hold land' means with its grammatical variations and cognate expressions, to own land as owner or to possess or enjoy land as possessory mortgagee or a tenant or as intermediate or in one or more of those capacities. Under cl. (34) ' person' includes any trust, company, family, firm, society or association of individuals, whether incorporated or not. Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 5 Under cl. (45) "surplus land" means the land held by a person in excess of the ceiling area and declared to be surplus land under ss. i2, 13 or 14. The Act was challenged by writ petitions filed in 'his Court in 1963 (A.-P. Krishnaswamy Naidu v. State of Madras(1) on the ground that its provisions violated Arts. 14, 19 and 31(2) of the Constitution. The first attack was at s. 5 of the Act laying down the ceiling area and the second, at s. 50 of the Act read with Schedule III thereof which provided for compensation. It was urged that than Act was not protected under Art. 31-A of the Constitution relying on the judgment of this Court in Karimbil Khunhikonian v. State of Kerala (2) . This Court held that the definition of 'family' in s.3(14) was artificial and resulted in discrimination between persons equally circumstanced thus violating Art. 14. The Court also held that the provisions contained' in s. 50 of the Act read with Schedule III with respect to com- pensation were also discriminatory and these two sections viz., ss. 5 and 50, being the pivotal provisions of the Act the whole Act had to be struck down as unconstitutional. The judgement was rendered on 9th March, 1964. it appears that similar attacks had been made not only to the. above Madras Act but to several Acts of other States imposing ceilings on the holding of and attempting to effect similar agrarian reforms. To shield these Acts against such attacks Parliament passed the Constitution (Seventeenth Amendment) Act on the 20th June 1964. The statement of objects and reasons for the Act shows that inasmuch as : ",Several State Acts relating to land reform were struck down on the ground that the provisions of those (1) [1964] 7 S.C.R. 82. (2) [1962] Suppl. (1) S.C.R. 829. Acts were violative of articles 14, 19 and 31 of the Constitution and that the protection of article 31-A %as not available to them", it was 'proposed to amend the definition of "estate"-in article 31A of the Constitution by including therein lands held under ryotwari settlement as also other lands in respect of which provisions are normally made in land reform enactments' and it was .also "proposed to amend the Ninth Schedule by including therein certain State enactments relating to land reform in order to remove any uncertainty or doubt that may arise in regard to their validity". Accordingly Parliament passed the Seventeenth Amendment Act effecting change not only in Art. 31-A of the Constitution by adding a proviso after the existing proviso in clause (1) but also substituting a new sub-clause (a) clause (2) and in-eluding in the Ninth Schedule no lass than forty four Acts of different States of which item 46 was the Act struck down by ,this Court. The Seventeenth Amendment Act was itself challenged in the case of Sajjan Singh v. State of Rajasthan(1). A number .of writ petitions were filed in this Court under Art. 32 of the Const itution in the year 1966, Golaknath v. Punjab(2), challenging not only the validity of the Constitution Seventeenth Amendment Act of 1964 but also Constitution Fourth Amendment Act, 1955 and Constitution First Amendment Act, 1951 in so far as they affected the petitioners' fundamental rights. The first petition in that group of cases was filed by a group of persons against an order made by the Financial Commissioner, Punjab holding that an area of 418 standard acres was surplus in the hands of the petitioners under the provisions of the Punjab Security of Land Tenures Act X of 1953 read with s. 10-B thereof. Five learned Judges of this Court held all the amendments to be Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 6 valid, while four others concurred in the judgment delivered by Subba Rao, C.J. holding that although the above Amendment Acts abridged ,the scope of the fundamental rights thus violating article 13 of the Constitution they could not be struck down because of the earlier decisions of this Court to the contrary. One learned Judge took the view that the fundamental rights were outside the amendatory process if the amendments sought to abridge or take away any of those rights : but the First, Fourth and Seventh Amendments being part of the Constitution, by acquiescence for a long time could not be challenged and they contained authority for the Seventeenth Amendment. The judgements in Golaknath's case (supra) were rendered on 27th February, 1967. (1) [1965] 1 S.C.R. 933. (2) [1967] 2 S.C.R. 762. In the meanwhile a large number of writ petitions were filed. in the Madras High Court in the years 1964 and 1965 cliallenging the validity of the Madras Act of 1961 and the main attack on, the Act was two-fold. It was urged that the Act having been struck down as invalid by this Court in Krishnaswami' Naidu's case(1) it was non est and,was void ab initio and Art. 31-B could not validate it without a separate Validating Act being passed by the Madras Legislature, and, secondly, the Act was incompetent for want of legislative power of the State. The Second attack was levelled on a wide front before the Madras High Court, but before us learned counsel did not go as far in his. challenge to the legislative competence of the State to pass the Act. On the first point, learned counsel's contention may be sum- marised as follows. He urged that this Court having declared the Ceiling Act of 1961 void under the provisions of Art. 13 subcl. (2) of the Constitution we must proceed on the basis that the legislation was void ab initio inasmuch as it did not lie within the power of the State to make any law which abridged the rights conferred by Part III of the Constitution. In other words, it was said that the measure was non est or still-born and any validating measure could not instil life therein. It was argued that the effect of the Act being struck down by this Court was as if it had been effeced from the statute book and to make any such Act operative. it was necessary not only to give it the protection against violation of fundamental rights as was sought to be done by Art. 31-B but to get the State of Madras to re-enact the provisions thereof. Learned counsel drew our attention to several decisions of this Court in support of his argument and we shall take note of them in the order in which they were placed before US. The first case referred to was Behram Khrushed Pesikaka v. The State of Bombay ( 2 ). In this case the main question turned on the interpretation of the Bombay Prohibition Act XXV of 1949 and the effect of striking down some of the provisions therein by this Court in The State of Bombay & Anr. v. F. N. Balsara(3) In Balsara's case this Court had held that the provisions of the Act including clause (b) of section 13 in so far as they affected, the consumption or use of liquid medicinal and toilet preparations containing alcohol, were invalid and save the provisions expresssly mentioned the rest of the Act was valid. It was also held that the decision declaring some of the provisions of the Act invalid did not affect the validity of the rest of the Act. The effect of (1) [1964] 7 S.C.R. 82. (2) [1965] 1 S.C.R. 613. (3) [1951] 1 S.C.R. 682. partial declaration of the invalidity of s. 13(b) had to be considered by a Constitution Bench of this Court in Pesikaka's case (supra). According to Mahajan C. J. who delivered 'the opinion of the Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 7 majority Judges (see p. 654) : "The constitutional invalidity of a part of section 13 (b) of the Bombay Prohibition Act having been declared by this Court, that part of the section ceased to have any legal effect in judging cases of citizens and had to be regarded as null and void in determining whether a citizen was guilty of an offence." His Lordship also observed that in India there was no scope for the application of the American doctrine enunciated by Willoughby that the declaration by a court of unconstitutionality of a statute which was in conflict with the Constitution affected the parties only and there was no judgment against the statute. The American doctrine was held not to be applicable to India in view of Art. 141 of the Constitution under which the law declared by the Supreme Court is to be binding on all courts within ,,the territory of India. According to his Lordship : "........ once a law has been struck down as unconstitutional law by a Court, no notice can be taken of that law by any Court, and in every case an accused person need not start proving that the law is unconstitutional." It is however to be noted that Das, J. (as he then was) took :.a different view and pointed out that the section i.e. section 13, in its entirety was still enforceable against all non-citizens. He found himself unable to accept the proposition put forward by Field J. in Norton v. Shelby County(1) that a law declared to be unconstitutional was to be treated as inoperative as though it had never been passed. In particular he relied on the fact 'that the Bombay Act was a pre-Constitution Act and was certainly valid before the 26th November, 1950. In Saghir Ahmed v. The State of U.P. & Ors.(2) the second ,case referred to, this Court had to consider the effect of the amendment of Art. 19(6) of the Constitution by the Constitution First Amendment Act of 1951 which enabled the State to carry on any trade or business either by itself or through corporations owned and controlled by the State to the exclusion of private citizens wholly or in part. It is to be noted that this provision of Art. 19(6) which was introduced by the amendment of the Constitution in 1951 was not in existence when the LT.P. Road .Transport Act (Act II of 1951) was passed and it was held that the amendment of the Constitution which came later could not (1) 30 L. Ed.178. (2) [1955] 1 S.C.R. 707. be invoked to validate an earlier legislation which must be regarded as unconstitutional when it was passed. In delivering the judgment of the Court, Mukherjea J. remarked (see at p. 728) "The amendment of the Constitution which came later,cannot be invoked to validate an earlier legislation which must be regarded as unconstitutional when it was passed." Counsel relied particularly on the following passage. from Cooley's Constitutional Limitations (Vol. I. p. 384 note) quoted by Mukherjea, J. " a statute void for unconstitutionality is dead and cannot be vitalised by a subsequent amendment of the Constitution removing the constitutional objection but Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 8 must be re- enacted." Strong reliance was placed on certain observations of this Court in Deep Chand v. The State of Uttar Pradesh and others(1). In Deep Chand's case the constitutionality of the U.P. Transport Service (Development) Act, 1965, the validity of the scheme of nationalisation framed and the notifications issued by the State Government thereunder were challenged. Subba Rao, J. (as he then was) who spoke for the Judges constituting the majority discussed in detail the distribution of legislative powers under the Constitution and the effect of any statute offending Art. 13. He posed the question : if Arts. 245 and 13 (2) define the ambit of the power to legislate, what is the effect of a law made in excess of that power? According to him the American Law gave a direct and definite answer to this question. He quoted from Cooley in his "Constitutional Limitations' (Eighth Edition, Vol.I) at p. 382 where the learned author said: "When a statute is adjudged to be unconstitutional, it is as if it had never been.... And what is true of an act void in toto is true also as to any part of an act which is found to be unconstitutional, and which, consequently is to be regarded as having never, at any time been possessed of any legal force." The learned Judge also quoted from Rottschaefer on Con- stitutional Law at V. 34 : "The legal status of a legislative provision in so far as its application involves violation of constitutional provisions, must however be determined in the light of the theory on which Courts ignore it as law in the (1) [1959] Suppl. 2 S. C.R. 8. decision of cases in which its application produces unconstitutional results. That theory implies that the legislative provision never had legal force as applied to cases within that clause." The learned Judge analysed the decisions of this Court in a number of cases and summarised the result thereof in the following propositions (see at p. 40) : "(i) Whether the Constitution affirmatively confers power on the legislature to make laws subject-wise or negatively prohibits it from infringing any fundamental right they represent only two aspects of want of legisla- tive power; (ii) the Constitution in express terms makes the power of a legislature to make laws in regard to the entries in the List of the Seventh Schedule subject to the other provisions of the Constitution and thereby circumscribes or reduces, the said power by the limitations laid down in Part HI of the Constitution; Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 9 (iii) it follows from the premises that a law made in derogation or in excess of that power would be ab initio void wholly or to the extent of the contravention as the case may be; and (iv) the doctrine of eclipse can be invoked only in the case of a law valid when made but a shadow is cast on it by supervening constitutional inconsistency or supervening existing statutory inconsistency; when the shadow is removed the impugned Act is freed from all blemish or infirmity." Applying the aforsaid principles to the case, before the Court the learned Judge held that the validity of the Act could not be tested on the basis of the Constitution (Fourth Amendment) Act, 1955 but only on the terms of the relevant articles as they existed prior to tile amendment. It must be noted that Das, C.J. with whom Sinha, J. con- curred did not think fit to embark upon the discussion of the question, namely, whether the provisions of part III of the Constitution enshrining the fundamental rights were mere checks or limitations on the legislative competency conferred on Parliament and whether the doctrine of eclipse was applicable only to pre-Constitution laws or those which fell under Art. 13(2) of the Constitution. The Seventeenth Amendment Act, 1964 came up for con- sideration in the case of Sajjan Singh v. State of Rajasthan (1) [1965] 1 S.C.R. 933 Among the points there canvassed in support of the petitions under Art. 32 of the Constitution was one based on the plea that the Seventeenth Amendment was a legislative measure in respect of land and since. Parliament had no right to make a law in respect of a land, the Act was invalid; and since the Act purported to set aside decisions of court of competent jurisdiction it was unconstitutional. Although the Court upheld the validity of the amendment, a doubt was expressed by Mudholkar. J. as to whether Parliament could validate a State law dealing with land. According to the learned Judge only that legislature has power to validate a law which has a power to enact the law. On behalf of some of the respondents and the intervener, the Attorney-General of India, it was argued that no re- enactment of the Act was necessary. Our attention was drawn to the wide scope of Art. 31-B which sought to cure the defect, if any, in the Acts specified in the Ninth Schedule on the ground that any such Act or any provision thereof was inconsistent with or took away or abridged any of the rights conferred by any provisions of Part III of the Constitution. The words of Art. 31-B, it was argued, made it amply clear that this was sought to be done not only prospectively but retrospectively by the use of the words "None of the Acts........ shall be deemed to be void or ever to have become void on the ground of the inconsistency mentioned." The removal of the defect was to have effect "Notwithstanding any Judgment, decree or order of any court or tribunal to the contrary." In other words, this meant that if the defect in any such Act had been the subject matter of any decision of a court of law and any provision of the Act had been held to be void as being inconsistent with Part III of the Constitution such judgment decree or order was not to be operative on the provisions of the Act. In effect, it was contended that the inclusion of an Act in the Ninth Schedule to the Constitution read with Art. 31-B overrode and rectified all defects in the Act because of inconsistency of any provision therein with any of the fundamental rights conferred by Part III of the Constitution, as from the, date of the commencement of the Constitution,, no matter whether the defect had been pointed out in any judgment of a court of law and the Act held to be void on that ground. Counsel for the respondent and the interveners drew our attention to the dicta of learned Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 10 Judges of this Court in several decisions which according to them fortified their contention. The first case refereed to by the learned Attorney-General was that of 16-119SupCI/72 State of Maharashtra v. Patilchand(1) where the judgment of a Bench of Seven Judges of this Court was delivered by our present Chief Justice. The Act impugned there was the Maharashtra State Agricultural Lands (Ceiling on Holdings) Act, 1961. as amended by Act 13 of 1962. The preamble to that Act is practically identical with that of the Madras Act which is under consideration in this case. It was contended on behalf of the appellants there that Art. 31-B did not protect from challenge on the ground of violation of fundamental rights the provides of the Acts amending Agricultural Lands (Ceiling on Holdings) Act, 1961 as originally enacted and that the Seventeenth Amendment Act in spite of the decision in Golaknath's case (supra) was in- invalid. Negativing these contentions it was said (see at p. 719) "...... the High Court was right in holding that Art-31-B does protect the impugned Act from challenge on the ground of violation of fundamental rights. There is no doubt that Art-31-B should be interpreted strictly. But even interpreting it strictly, the only requirement which is laid down by Art. 31-B is that the Act should be specified in the Ninth Schedule." Section 28 of the Act which was the main target, of attack and which the High Court had originally found as violating Art.14 of the Constitution was held to be protected under Art. 31-B from the ground of attack based on infringement of Art. 14. In Bhikaji Narain Dhakras & others v. The State of MadhyaPradesh & Ant-.(1) the petitioners who carried on their business as stage carriages operators of Madhya Pradesh for a number of years challenged the validity of the C.P. & Berar Motor Vehicles (Amendment) Act, 1947 which amended the Motor Vehicles Act, 1939 and conferred extensive powers on the Provincial Government including the power to create a monopoly of the motor transport business in its favour to the exclusion of all motor transport operators. In exercise of the powers conferred by the new s. 43 (1) (iv) a Notification was issued on 4th February, 1955 declaring the intention of the State Government to take 'up certain routes. The petitioners contended that with the commencement of the Constitution the Act became void under the provisions of Art. 13(1) and reliance was placed on the decision of Shagir Ahmad v. The State of U.P. (supra). The contention put forward on behalf of the respondents was that the Constitution (First Amendment Act, 1951 and the Constitution (Fourth Amendment) Act,, 1955 had the effect of removing the inconsistency and the Amending Act III of 1948 became operative again. It was argued on behalf of the petitioners that the impugned Act being void (1) [1968] 3 S.C.R. 712. (2) (1955) 2 S.C.R. 589. under Art. 13(1) was dead and could not be revivified by any subsequent amendment of the Constitution but had to be re- enacted. This contention was turned down in the unanimous decision of this Court. It was said that the Act : "did not become void independently of the Existence of the rights guaranteed by Part Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 11 111. In other words, on and after the commencement of the Constitution the existing law, as a result of its becoming inconsistent with. the provisions of article 19 (1) (g) read with clause (6) as it then stood, could not be permitted to stand in the, way of the exercise of that fundamental right. Article 13 (1) by reason of its language cannot be read as having obliterated the entire portion of the inconsistent law or having wiped it out altogether from the statute book. Such law existed for all past transactions and for en- forcement of rights and liabilities accrued before the date of the Constitution, as was held in Keshavan Madhava Menon's case(1)." It was also observed that the "American authorities can have no application to our Constitution. All laws, existing or future, which are inconsistent with the provisions of Part III of our Constitution are by the express provision of article 13, rendered void 'to the extent of such inconsistency'. Such laws were not dead for all purposes...... It is true that as the amended clause (6) (of art. '19) was not made retrospective the impugned Act could have no operation as against citizens between the 26th January 1950 and the 18th June 1951 and no rights and obligations could be founded on the provisions of the impugned Act during the said period whereas the amended clause (2) by reason of its being expressly made retrospective had effect even during that period. But after the amendment of clause (c) the impugned Act immediately became fully operative even against citizens." In M. P. V. Sundararmier & Co. v. The State of Andhra Pradesh(1) Venkatarama Aiyar J. speaking for the majority of of the Court discussed at some length the different aspects of the unconstitutionality. of a statute. Speaking for the Court he said (at p. 1468). "In a Federal Constitution where legislative powers are distributed between different bodies, the competence of the legislature to enact a particular law must depend (1) [1951] S.C.R. 228. (2) [1958] S.C.R. 1422. upon I whether the topic of that legislation has been assigned by the Constitution Act to that legislature. Thus, a law of the State of an Entry in List I, Schedule VII of the Constitution would be wholly incompetent and void. But the law may be on a topic within its competence, as for example, an Entry in List II, but it might infringe restrictions imposed by the Constitution on the character of the law to be passed as for example, limitations enacted in Part 111, of the Constitution. Here also, the law to the extent of the repugnancy will be void Thus, a legislation on a topic not within the competence of the legislature and a legislation within its competence but violative of constitutional limitations have both the same reckoning in a court of law; they are both of them unenforceable. But does it follow from this that both the laws are of the same quality and character, and stand on the same footing for all purposes',' This question has been the subject of consideration in numerous decisions in the American Courts, and the preponderance of authority is in favour of the view that while a law on a matter not within the competence of the legislature is a nullity, a law on a topic within its competence but repugnant to the constitutional prohibitions is only unenforceable. This distinction has a material bearing on the present discussion. If a law is on a field not within the domain of the legislature it is absolutely null and void, and a subsequent cession of that field to the Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 12 legislature will not have the effect of breathing life into what was a still-born piece of legislation and a fresh legislation on the subject would be requisite. But if the law is in respect of a matter assigned to the legisl ature but its provisions disregarded constitutional pr ohibitions, though the law would be unenforceable by re- ason of those prohibitions, when once they are removed, the law will become effective without reenactment." The learned Judge drew support for his, conclusion from Willoughby on the Constitution of the United States, Vol. I p. 11 and Cooley on Constitutional Law at p. 201. In The State of Uttar Pradesh & ors. v. H. H. Maharaja Bri- jendra Singh(1) the respondent challenged the constitutionality of the U.P. Land Acquisition (Rehabilitation of Refugees) Act, 1948 by way of a writ petition to the High Court and ;though the court dismissed the petition it held that two provisos to s. 11 of the Act were invalid as they offended s. 299 (2) of the Government (1) [1961] 1 S.C.R. 363. India Act. Subsequently the Constitution (Fourth Amendment) Act, 1955 included the U.P. Act in the Ninth Schedule as item, 15. The State of U.P. contented that the inclusion of this Act in the Ninth Schedule protected it under Art. 31 B of the Constitution from any challenge under s. 299(2) of the Government of India Act. The Court--turned down the argument on behalf of the respondent that the amendment of the Constitution which came after the decision of the Allahabad High Court could not validate the earlier legislation which, at the time when it was passed was un- constitutional. Relying on the decision of this Court in Saghir Ahmad v. The State of U.P. (supra) it was said that the provisions of the Act have been "specifically saved from any attack on their constitutionality as a consequence of Art. 31-B read with the Ninth Schedule, the effect of which is that the Act cannot be deemed to be void or ever to have become void on the ground of its being hit by the operation of the Government of India Act." It has to be noted that although in Golaknath's case (supra) five learned Judges of this Court speaking through Subba Rao, C.J. were of the view that the Constitution Seventeenth Amendment Act infringed Art. 13 (2) of the Constitution, yet on the basis of the earlier decisions of this Court the same was held to be valid. It was said that:-- "As the Constitution (Seventeenth Amendment), Act holds the field, the validity of the two impugned Acts, namely, the Punjab Security of Land Tenures Act X of 1953, and the Mysore Land Reforms Act X of 1962, as amended by Act XIV of 1965, cannot be questioned on the ground that they offended Arts. 13, 14 or 31 of the Constitution." The learned Chief Justice also made it clear (see at p. 814) that the "decision will not affect the validity of the Constitution (Seventeenth Amendment) Act, 1964, or other amendments made to the Constitution taking away or abridging the fundamental rights." Wanchoo, J. (as he then was) speaking for himself and two other Judges observed that a constitutional invalidity could not be cured by State Legislatures in any way but could( only be cured by Parliament by Constitutional amendment. In our view, although decisions of the American Supreme Court and the comments of well known commentators like Willoughby and Cooley have great persuasive force, we need not interpret our Constitution by .too much reliance on them. Nor is Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 13 it necessary to scrutinise too closely the decisions wherein views appear to have been expressed that a law which is void under Art. 13 (2) is to be treated as still-born. Equally unfruitful would it be to consider the doctrine of eclipse. Apart from the question as to whether fundamental rights originally enshrined in the Constitution were subject to the amendatory process of Art. 368 it must now be held that Art. 31-B and the Ninth Schedule have cured the defect, if any, in the various Acts mentioned in the said Schedule as regards any unconstitutionality alleged on the ground of infringement of fundamental rights, and by the express words of Art. 31-B such curing of the defect took place with retrospective operation from the dates on which the Acts were put on the statute book. These Acts even if void or inoperative at the time when they were enacted by reason of infringement of Art. 13(2) of the Constitution, assumed full force and vigour from the respective dates of their enact- ment after their inclusion in the Ninth Schedule read with Art. 31 B of the Constitution. The States could not, at any time, cure any defect arising from the violation of the provisions of Part III of ,the Constitution and therefore the objection that the Madras Ceilings Act should have been re-enacted by the Madras Legislature after the Seventeenth Constitutional Amendment came into force cannot be accepted. On the other point as to the competency of the State legislature, Mr. Vedantachari drew our attention in particular to the following provisions in the Act :- "5. (1 ) (a) "Subject to the provisions of Chapter VIII, the ceiling area in the case of every person and, subject to the provisions of sub-sections (4) and (5) of Chapter VIII, the ceiling area in the case of every family consisting of not more than five members, shall be 30 standard acres. (b) The ceiling area in the case of every family consisting of more than five members shall, subject to the provisions of sub- sections (4) and (5) of Chapter VIII, be 30 standard acres together with an additional 5 standard acres for every member of the family in excess of five. (2) For the purposes of this section, all the lands held individually by the members of a family or jointly by some or all of the members of such family shall be deemed to be held by the family. 3 (a) in calculating the extent of land held by a member of a family or by an individual person, the share of the member of the family or of the individual person in the land held by an undivided Hindu family, a Marumakkattayam tarward, an Aliyasanthana family or a Nambudiri Illom shall be taken into account. (b) In calculating the extent of land held by a family or by an individual person, the share of the family or of the individual person in the land held by a firm, a society or association of individuals (whether incorporated or not) or by a company (other than a non-agricultural company) shall be taken into account. 7. On and from the date of the commencement of this Act, no person shall except as otherwise provided in this Act, but subject to the provisions of Chapter VIII, be entitled to, hold land in excess Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 14 of the ceiling area Provided that in calculating the total extent of land held by any person, any extent in excess of the ceiling area and not exceeding half an acre in the case of wet land and one acre in the case of dry land shall, irrespec- tive of the assessment of such land, be excluded." He also drew our attention to section 8 which required every person who held land in excess of 30 standard acres to furnish to the authorised officer a return containing the particulars specified in s. 10 which directed the authorised officer to prepare a draft statement in respect of each person owning or deemed to have held land in excess of the ceiling area. He argued that legislative measure of this type were not covered by Entry 18 in List II which runs as follows : "Land, that is to say, rights in or over land, land tenures, including the relation of landlord and tenant, and the collection of rent; transfer and alienation of agricultural land; land improvement and agricultural loans; colonization." Counsel urged that the State could not frame a law under which the holding of two persons could be lumped up for working out the area which the said persons could be permitted to hold. He contended that the property of two individuals could not be treated together for the purpose of acquisition by the State by resort to the fiction of "holding land" in s. 3 (19) of the Act and in any event Entry 18 of List II did not comprehend such a power. He referred us to the American decision in Hoeper v. Tax Commission(1) where it was held that the husband could not, consistently with the due process and equal protection clauses of (1) 284 U.S. 206-221. the 14th Amendment, be taxed by a State on the combined total of his and his wife's income as shown by separate returns whether her income is her separate property and, by reason of the ,tax being graduated, its amount exceeded the sum of the taxes which would have been due had their separate incomes been separately assessed. Counsel also referred us to the decision in Balaji v. Income Tax Officer(1) and the contention there put forward that Entry 54 in the Federal Legislative List of the Government of India Act, 1935 did not confer on the legislature any power to tax (a) on the income of B and therefore sub-s. (3) of s. 16 of the Incometax Act, 1922 was ultra vires the legislature. It is necessary to note that this Court left the question open as it felt that the petition in his Court under article 32 of the Constitution could be satisfactorily disposed of on a narrower basis although the Court approved of the view expressed in Sardar Baldev Singh v. Commissioner of Income- tax (2) that Entry 54 should be read not only as authorising the imposition of a tax but also as authorising an enactment which prevented the tax imposed being evaded. Counsel also referred to the case of Diamond Sugar Mills Ltd. & A nr. v. The State of Uttar Pradesh & Anr. (1) where it was held that the premises of a factory was not a local area within the meaning of Entry 52 in List II of the Seventh Schedule and a law relating to "taxes on the entry of goods into a local area for consumption, use or sale therein" did not authorise the State to impose a cess on the entry of cane into the premises of a factory for such use, consumption etc. The American decision is hardly in point and so far as the three Indian cases are concerned, they turned on the scope of Entries with which we are not concerned in this case. We were also referred to the observations of this Court in Kavalappara Kottarathil Kochuni v. State of Madras(1) that individual proprietary rights were Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 15 ordinarily to be respected unless a clear case is made out for their restriction. In our view, Entry 18 in List II like any other Entry in the three Lists only gives the outline of the subject matter of legislation and therefore the words in the entry are to be construed in their widest amplitude. The field of legislation covered by the entry is not to be narrowed down in any way unles there is anything in the entry itself which defines the limits thereof. Entry 18 (1) 43 I.T.R. 393. (2)40. I.T.R.560,615 (S.C) (3) [1961] 3 S.C.R, 242. (4) [1960] 3 S.C.R. 887, 927, 928. in our opinion is meant to confer the widest powers on the State Legislature with regard to rights in or over land and such rights are not to be measured by or limited to the rights as between landlords and tenants or the collection of rents. The words which follow the. Expression "rights in or over land" are merely by way of illustration. The specification itself shows that the genus of the rights mentioned is not the one which landlords have vis-a-vis their tenants or vice versa. All kinds of legislation regarding transfers and alienations of agricultural land which may affect the rights therein of landlords and tenants are envisaged by the entry as also improvement of land and colonisation of such land. If the State Government seeks to enforce a measure by which the condition of barren or unproductive lands can be improved, it can do so even if the measure curtails the rights of landlords and tenants over them. If the State wants to enforce a measure of acquiring lands of people who hold areas over a certain ceiling limit so as to be able to distribute the same among the landless and other persons, to give effect to the directive principles in. Art. 39 (b) and (c) of the Constitution, it is not possible to say that the same would be outside the scope of Entry 18 in List II read with Entry 42 in List III. Such a measure can aptly be described as a measure of agrarian reform or land improvement in that persons who have only small holdings and work on the lands themselves would be more likely to put in greater efforts to make the land productive than those who held large blocks of land and are only interested in getting a return without much effort. The measure ,does not transgress the limits of the legislative field because it serves to remove the disparity in the ownership of land. Persons who lose the ownership of lands in excess of the ceiling imposed are compensated for the lands acquired by the State and distributed among others. Acquisition of land would not directly be covered by Entry 18 but read with Entry 42 in List III the State has the competence to acquire surplus land so as to give effect to the policy in Art. 39 of the Constitution. This is not the first occasion when a measure of such kind has been challenged before this Court. In Sri Rain Ram Narain Medhi v. The State of Bombay(1) challenge was made to the vires of the Bombay Tenancy and Agricultural Lands (Amendment) Act, 1956 which was an Act further to amend the Bombay Tenancy and Agricultural Lands Act, 1948. The preamble to the Act showed that it was a measure for ensuring full and efficient use of land for agricultural purposes rendered necessary on account of the neglect of a landholder or disputes between a land- holder and his- tenants to the prejudice of the cultivation of the landlord's estate. The attack on the Act was made on the (1) (1959) Supp. S.C.R. 489. ground that it was beyond the ambit of Art.-31-A of the Constitution and was therefore vulnerable as infringing the fundamental rights enshrined in Arts. 14, 19 and 31. It was contended on behalf of the Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 16 State that it was a piece of legislation for extinguishment or modification of rights in relation to an estate within the definition of Art.-31-A of the- Constitution. Referring to the principles laid down by the Federal Court in United Provinces v. Atiqa Begum(1) and by this Court in Navinchandra Mafatlal v. The Commissioner.- of Income-tax, Bombay City(2) it was observed by this Court that in construing the words in a constitutional enactment conferring legislative power, the most liberal construction should be put upon words so that the same may have effect, in their widest amplitude. It was held that having regard to the above principle of construction the impugned Act was covered by Entry 18 in List II of the Seventh Schedule and was a legislation with reference to land within the competence of the State Legislature. In Atma Ram v. The State of Punjab & Ors. (3) the petitioners challenged the constitutional validity of the Punjab Security of Land Tenure Act X of 1953 as amended by Act XI of 1955, providing for security of land tenure and other incidental matters. The impugned Act limited the area which might be held by a land owner for the purpose of self- cultivation and thereby rendering some area surplus to be utilised for resettling ejected tenants. S. 18 of the Act conferred upon the tenants the right to purchase from the land-owners the lands held by them and thus themselves become the land-owners on prices which would be below the market value. It was held by this Court that "rights in or over land" and "land tenures" occurring in Entry 18 in List II were sufficiently comprehensive to include measures of land-tenure reforms, such as the impugned Act sought to achieve. The validity of the Assam Fixation of Ceiling on Land Hold- ings Act 1 of 1957 came up for consideration in Sonapur Tea Co. Ltd. v. Must. Mazirunnessa(4). S. 4 of the Act prescribed a ceiling on existing holdings and s. 5 empowered the appropriate authorities to call for submission of returns by persons holding lands in excess of the ceiling. S. 8 empowered the State Government to acquire such excess lands by publishing in the official gazette a notification to the effect that such lands were required for public purpose, and such publication was to be conclusive evidence of the notice of acquisition to the person or persons holding such lands. It was contended on behalf of the appellants there that the pith and substance of the Act and its main object was to acquire the (1) [1940] F.C.R. 110, 134 (2) [1955] 1 S.C.R. 829, (3) [1955] 1 S.C.R. 748. (4) (1962) 1 S.C.R. 24. property and dispose of it at a profit. Rejecting this contention it was observed by this Court (see p. 731) that : "The whole object of the Act which is writ large in all its provisions is to abolish the intermediaries and leave the lands either with the tiller or the cultivator It was also observed : "The State is paying compensation to the persons dispossessed under the principles prescribed by S. 12; amongst the persons entitled to such compensation tenants are included, and when the State proceeds to Settle lands on tenants it expects them to pay a fair amount of price for the land and put a ceiling on this price and it shall never exceed the amount of compensation payable in respect of the said land. In our opinion this provision is very fair and reasonable and it would be idle to attack it as a piece of colourable legislation. Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 17 Lastly, reference may be made to the case of State of Maha- rashtra v. Patilchand (supra) which has been already noted. There the Maharashtra State Agricultural Lands (Ceiling on Holdings) Act 1961 as amended by Act 13 of 1962 was upheld, on the ground that it was enacted for securing the distribution of agricultural land to subserve the common good by imposing a ceiling and also ensuring that the persons to whom surplus lands had been granted after the same had vested in the State Government should supply sugarcane at fair prices. The impugned Act, apart from s. 28 already referred to, was held to be covered by Entry 18 in List II and s. 28 was held as within the ambit of Entry 35 of List II dealing with "Works, lands and buildings vested in or in the possession of the State". In the result, we hold that as the attacks on the rivers of the Madras Ceilings Act fail, the appeals must be dismissed but without any costs. In all cases Where, the Madras High Court did not think fit to deal with the merits of the case as regards the application of the Madras Ceilings Act to the particular facts of a case, it will be open to the appellants to canvass the same before the appropriate forum. V.P.S. Appeals dismissed-. Jagannath Etc. Etc vs Authorised Officer, Land Reforms & Ors. ... on 11 October, 1971 18 | {
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The State Of Gujarat vs Adam Fateh Mohmed Umatiya And Ors. on 4 March, 1971 Equivalent citations: (1971)3SCC208, 1971(III)UJ466(SC), AIRONLINE 1971 SC 19 Author: A.N. Ray Bench: A.N. Ray, C.A. Vaidialingam JUDGMENT A.N. Ray, J. 1. This is an appeal by special leave from the judgment dated 8 and 9 February, 1968 of the High Court of Gujarat acquitting accused No. 1, 2, 3, 4 and 7 of the charge levied against them and setting aside the conviction Under Section 302 read with Section 149 and Section 34 and Sections 147 and 148 of the Indian Penal Code and the sentence of imprisonment passed by the Sessions Judge. 2. The appellants were accused No. 1, 2, 3, and 4 and 7. They were charged for having formed an unlawful assembly with the common object and intention of killing five persons, namely, Allauddin Allimohmed Marodia, Allauddin Nasir Kadiwalla, Suleman Janmohmed Sunsara, Suleman Vazir Mukhi and Noormohmed Ibrahim Badarpura and in the prosecution of that common object and intention accused No 1 had armed himself with a gun accused No. 2 with an axe & knife, accused No. 3 with an axe, accused No. 4 with a dharia and thus committed an offence punishable Under Section 302 read with Section 34, Section 302 read with Section 149 and Sections 147 and 148 of the Indian Penal Code. Accused No. 1 was also individually charged for committing the murders of the aforementioned five person. Accused No. 2, 3, 4 and 7 were charged for causing injuries to all the five persons with axe and dharia and thus each of them was charged for having committed an offence punishable Under Section 302 of the Indian Penal Code. Accused No. 1 was further charged for an offence punishable Under Section 25(1)(a) of the Indian Arms Act and accused No. 3 and 4 were charged for robbing the wrist-watches of the deceased and thus having committed an offence punishable Under Section 404 of the Indian Penal Code. 3. The accused belonged to a sect called "Barelvi". The five deceased belonged to sect called "Dev-Bandhi". There were religious differences between the two sects. The Dev-Bandhis believed that God is the only one omniscient while the other sect believed that the Prephet is also omniscient along with God. The Dev-Bandhis had followers of about 50 to 60 families. The Barelvis had many followers of about 300 to 400 families. The two sects belonged to village Basu in the Vadgam Taluka of the Banaskantha District in Gujarat There was a waqf in the village and trustees were appointed The State Of Gujarat vs Adam Fateh Mohmed Umatiya And Ors. on 4 March, 1971 1 regarding the management of the properties. One of the trustees was father of accused No. 1. There was another trustee of the Dev-Bandhis There was one Maulvi who belonged to the Barelvis. The followers of the Dev-Bandhis wanted a separate teacher for their children. The two sects were at logger heads. 4. In the year 1966 a case under Chapter VIII of the CrPC in relation to security for the peace and for good behavior was filed against the Dev-Bhandhis and accused No. 1 and 2 figured as opponents along with others, The 5 deceased were also figuring as opponents in another case under the same Chapter which had been filed in the same Court of the instance of the followers of the Barelvis. The hearing of the cases was fixed on 18 January, 1967. The 5 deceased came in a jeep. Their case was adjourned till 25 January, 1967. Those 5 persons after finishing their works in Court went to their village Bhagat about 8 miles away from Basu. About 10 p.m. they left for their village Basu. The accused lay in wait for those 5 persons. Altogether there were 8 accused. They shot the five dead with gun and inflicted injuries with sharp edged weapons and brutally murdered them The brother of the deceased Allauddin Alimohmed heard on 18 January, 1967 that there was some quarrel at village Basu. On his way from Changa to Basu he saw 5 dead bodies. Three were in a jeep and two were lying on the road near the jeep He thereafter informed his brother Valimohmed and another person called Kadivala what he had seen. Valimohmed then left village Basu to file a complaint. Accused No. 1 and 2 were arrested on 20 January, 1967 Accused No. 3 and 4 were arrested on 21 January, 1967. Accused No. 7 was arrested on 23 January 1967. 5. The Sessions Judge came to the conclusion that accused No. 1, 2, 3, 4 and 7 were guilty of offences punishable Under Section 302 read with Section 149 and Section 302 read with Section 34 and of offences punishable Under Sections 147 and 148 of the Indian Penal Code and sentenced each one of the accused to undergo rigorous imprisonment for one year for an offence Under Section 147 of the Indian Penal Code and to undergo rigorous imprisonment for two years for an offence punishable Under Section 148 of the Indian Penal Code and imprisonment for life for offences Under Section 302 read with Sections 149 and 34 of the Indian Penal Code. Accused No. 1 was also sentenced 10 undergo imprisonment for one year for an offence Under Section 25(1) of the Indian Arms Act. Accused No. 3 and 4 were convicted Under Section 404 of the Indian Penal Code and each one of them was sentenced to undergo imprisonment for one year. 6. Accused No. 1, 2, 3, 4 and 7 filed an appeal to the High Court of Gujarat. The State of Gujarat filed a revision application for enhancement of sentence passed against accused No. 1, 2, 3, 4 and 7 on the proud that normally the sentence for causing pre-meditated murder could only be the sentence of death. 7. The High Court held that the prosecution failed to prove that accused No. 1, 2, 3, 4 and 7 were guilty of the charge levied against them. The appeal of accused No. 1, 2, 3, 4 and 7 was allowed. The order of conviction and sentences was set aside. The accused were set at liberty. The application of the State for enhancement of sentence was dismissed. 8. Counsel for the State contended that direct evidence of eye-witness Soma Bhema connected accused No 1, 2, 3 and 7 with crime and the discovery of various incriminating articles by accused The State Of Gujarat vs Adam Fateh Mohmed Umatiya And Ors. on 4 March, 1971 2 No. 1, 2, 3. and 4 afforded direct circumstantial evidence connecting the accused with the offence. Counsel for the State did not reply on the extra judicial confession of accused No. 7 to incriminate him. 9. Soma Bhema was a rustic agriculturist. The High Court said that the conduct of Soma Bhema is not giving information to the police rendered his evidence unreliable. Soma Bhema said that on the date of the occurrence he was working with Nura Miyanji whose field was near the scene of occurrence. Nura Miyanji belonged to the Dev-Bandhi sect. Soma Bhema was sleeping and he heard a gun shot. He got up. He went to the hedge called ''Chhinda". He heard another shot He said that one light of the jeep was on and he saw some persons near the jeep He also said that 6 or 8 persons were beating these sitting in the jeep. He recognised accused No. I, 2, 3 and 7. He said that accused No. 1 had a gun and he saw accused No. 1 firing. Accused No 2 had an axe. Accused No. 3 had an axe and accused No. 7 had a dharia. The Sessions Judge did not rely on the version of Soma Bhema. 10. The High Court found the discrepancies in the evidence of Bhema Soma to be first regarding the time at which he heard the gun shot; secondly whether he had seen the incident in the moon-1ight or in the light of the motor car or both; and, thirdly, the distance between the place where the offence was committed and the opening of the hedge from where Soma Bhema was alleged to have seen the assailants. 11. In the High Court it was said that Soma Bhema did not depose exactly about the time because he was a rustic agriculturist. It was also said that there was no enmity between Soma Bhema & the accused. Both the Sessions Judge and the High Court on appreciation of evidence did not rely on his evidence, The various inconsistencies in the evidence of Soma Bhema in the light of his subsequent conduct particularly when he did not give any information to the police about the incident indicate not only the infirmities but also the unreliability of Soma Bhema as an eye-witness. The finding by the Sessions Court as well as the High Court on the credibility of Soma Bhema does not call for any interference on any question of law. 12. In the circumstantial evidence the gun figures prominently. The gun was discovered by accused No. 1 who showed his willingness to find out the gun which he had hidden in the 'Guvar' crop of Nura Pira Choudhary. Accused No. 1 led the police and the Panch witness to the place who found out a gun from the heap of crop. The gun was article No. 31. The prosecution also relied upon the find of empty cartridge, misfired cartridges and a broken sheet of the jacket of the bullet. On behalf of the accused it was challenged that the empty cartridges Article 29 and 86 were discovered in consequence of any statement given by accused No. 2. The High Court found that the empty cartridges were merely reoccurred by the police and the prosecution did not prove that the empty cartridges were recovered at the instance of the accused No. 2. 13. The prosecution relied on the evidence of Vishnu Dhekane. He worked as a foreman in the Chief Inspector of Armaments at Kirkee. The Crime Branch, Ahmedabad sent him the rifle, one damaged metal piece being the jacket cap of the bullet, one misfired cartridge, 4 empty fired cartridges and a piece of lead. The police sent him 5 test cartridges out of which two were misfired and there were fired cartridges. His evidence was that the rifle had a magazine which contained 5 cartridges. He The State Of Gujarat vs Adam Fateh Mohmed Umatiya And Ors. on 4 March, 1971 3 took photographs of the empty test cartridges fired in his office as also of two empty cartridges sent by the police. One of the bullets could not be produced by him because he could not get it. Two cartridges which were fired had two bullets. The jacket of one of the bullets was in tact. By bullet the witness meant the jacket and the lead piece was inside the jacket. 14. Fire arms are broadly divided into two main classes. Smooth base arms and rifle arms are the two types. Shot gun belong to the first type. Rifles, revolvers, automatic and self-1oading pistols belong to the second type. The barrel of the second type has spiral grooves for accuracy and penetrating power. The thumb point of the gun and the grooves are taken into consideration for establishing the identity of the rifle in question. The expert witness said that the rifle in the present case had 6 grooves with right hand twist. There is a bolt face to the rifle. The bolt meant portion at the top of the bolt. The bold, extractor and ejector formed the magazine which contained the cartridges. The witness said that the bold face of the rifle in the present case had a peculiar defect and because of that defect the base of the cartridge loaded in the rifle would have peculiar marks of identification. It was also his evidence that tiger of the rifle in the present case was defective. These defects in the rifle, according to the witness, produce peculiar marks on the empties. His evidence was that when he loaded the rifle with test cartridges and when it was fired he found a circular cut on the base of the cartridge & the striker hit made a peculiar mark on the center of the cartridge. Each rifle, according to the expert, has its own peculiar defect and the marks which are found on the cartridges will not be found if similar cartridges are fired from any other rifle. His evidence was that he compared the marks on the test cartridges with those of the empty cartridges and in his opinion the empty cartridges were fired from the rifle. His reasoning was that the test fired cartridges and the empty cartridge showed matching in the bold face impression and striker scrape. 15. The evidence of the expert that empty cartridges were fired from the rifle was based on three principal reasons. First that there was a circular or arch-1ike mark at the base of the cartridges and the corresponding part of the rifle had a peculiar defect and it was because of this defect that there was semicircular mark. He said that he saw with naked eyes the arch like scrapping on the base of the cartridges on account of defect of the bolt face and he compared those marks with the test cartridges and found them similar. The second reason was that there were bulge marks on test cartridges and the bulge marks on the empty cartridges were similar. The third reason was that dents were noticed on the bulge of the test fired cartridges. According to the expert, there were two small roundish striker's indentations or dents on the bulge in the test cartridges. Those dents were caused by some protruding portion of the striker. According to the expert, that distinct indentation mark was a peculiarity of each rifle. The expert did not take any photograph of the misfired cartridge or of misfired test cartridges for comparison. Yet he gave an opinion that bold face impressions and striker scrape of misfired cartridge were smaller to those of test fired cartridges. 16. The first reason that the empty cartridges had a arch-1ike mark at base of the cartridges was not accepted by the High Court because the mark on the rifle which was called "family thumb mark" could be found on cartridges fired from the guns which were manufactured in the same batch. Barrnd in his book. "The Identification of Firearms and Forensic Ballistics, 3rd Edition, 1956 at pages 133 and 134" said that "the chief risk connected with the family likeness lies in the original tool makings only being partially obliterated by subsequent work, and when this occurs it is possible The State Of Gujarat vs Adam Fateh Mohmed Umatiya And Ors. on 4 March, 1971 4 to mistake some very pronounced mark or marks for the one and only "thumb mark" of some particular weapon. Such pronounced marks are easily photographed and tend to attract attention away from the more insignificant, finer, and less visible tool marks left by the work subsequent to the original cuts. It is these finer markings which are of primary and vital, importance, and any identification based solely on one or two major markings without any finer striations as well should he regarded with suspicion. So the possibility of the existence of a family likeness or thumb-mark must be kept in mind, and when some very pronounced and obvious tool cuts have been found to leave their imprint on the base of a fired cartridges the investigator should not jump at conclusions to rapidly, but should search carefully for same finer imprints which will possibly be of more value in determining the true thumb-mark of the weapon which fared the cartridge". The expert witness said that he did not carry out any experiment with the gum of the same make or batch with similar cartridges. It could not be proved beyond doubt that the empty cartridges were fired from the rifle. 17. The expert gave the opinion that the empty cartridges were fired from the rifle because of the arch-1ike projection on the base of the cartridges produced by the defect in the rifle. The expert took photographs of two out of the four empty cartridges. He also took photographs of the test cartridges. He compared the photographs of the empty and the rest cartridges and come to the conclusion that marks seen on the photographs were similar. He however did not take photographs of the misfired cartridge.lt was also his evidence that the marks on the test bullet were indistinct and therefore it was not possible to compare satisfactorily the marks on the bullets which had been sent by the police to him. He could not say that the jacket cap of the bullet sent by the police was a bullet which had been fired from the rifle. 18. The witness further said that he did not compare the marks of misfired cartridge with those of the empty cartridges. The witness said that the striker scrapes on the test cartridges and on the empty cartridges were not identical but similar. The witness also said that when a striker strikes the cap normally the mark would be circular In the empty cartridges the mark would be circular. In the empty cartridges the mark was of an eye-1ike shape and the witness said that it was because of a defect in the gun. In the photographs of the empty cartridges there was on the cap a mark which was roughly raundish. The witness said that the entire bulge was called the scrape. The differences between the test cartridges and empty cartridges were vital and varied. The photographs of the test cartridges and of the empty cartridges revealed that there were black spots on the test cartridges which did not tally with the black spots on the empty cartridges. The witness admitted that photographs were necessary for comparison. He took no photographs of the misfired test cartridge. Burrard in his book at page 175 states that evidence of identification unsupported by photographs is nothing more an expression of opinion. The evidence does not establish that test cartridges and empty cartridges were fired from the same weapon or that the misfired cartridge was fired from the same weapon. 19. The second reason given by the expert witness that bulge marks on test cartridges and bulge marks on the empty cartridges were similar but not the same cannot establish that the empty cartridges were fired from the rifle. The bulge marks on the empty cartridges were of the shape of an eye The expert witness did not take composite photographs of the empty cartridges superimposed by the test cartridges. The photographs which were taken were not taken in the same condition of The State Of Gujarat vs Adam Fateh Mohmed Umatiya And Ors. on 4 March, 1971 5 light. The High Court looked at the enlarged photographs but found it difficult to say that the bulge marks on the test cartridges and the empty cartridges were the same. 20. The third reason given by the expert witness was that there were two small roundish striker's indentations or dents on the bulge of the test cartridges which were caused by some protruding portion of the striker. The expert did not find any dents on the empty cartridges. His evidence was that the indentation mark was the peculiarity of the rifle. The expert could not give any reason for the presence of dents on the test cartridges and the absence of dents on the empty cartridges. If indentation marks were different at the base of the cartridges that would show that they were not fired from the same weapon. The evidence of the expert cannot, therefore, be relied upon to hold that the empty cartridges were fired from the rifle in question. 21. The High Court rightly held that the prosecution evidence failed to prove that the empty cartridges or misfired cartridge or the jacket of the cap of the bullet sent by the police were fired from the rifle. It is true that accused No. 1 made a statement relating to the discovery of the rifle but that would not be sufficient to connect accused No. 1 with the crime. 22. With regard to accused No. 2 it was said that he discovered the empty cartridges and discovered the knife stained with human blood. The High Court found that the seizure of empty cartridges was not a discovery which could connect accused No. 2 with the crime. Similarly, the knife was found out but it could not be said to be discovered, The knife was found on the shelf. Any one could have found out the knife. It would not be a discovery until it was found on making search for a thing which was secretly concealed. The High Court rightly said that accused No. 2 did not discover the knife. 23. The prosecution case against accused No. 3 was that he led the Panch witness and found out the axe which was stained with human blood. The other piece of evidence relied on by the prosecution was that accused No. 3 discovered a watch belonging to Allauddin Alimohmed. The High Court found that accused No. 3 had discovered the axe, but held that it was not an incriminating circumstances against the accused. The High Court came to the conclusion that the prosecution failed to prove that the watch discovered by accused No. 3 belonged to the deceased Allaudd in Alimohmed. In order to prove that the watch belonged to Allauddin the prosecution relied on the evidence of Kun-varbai wife of the deceased, Rasirahmad son of the deceased, Adam Haji brother-in-1aw of the deceased, Daud Alimohmed, brother of the deceased and Daud Jiva and Suleman Valimohmed, the watch repairer as also Ismail Abdul-gani; the original owner of the watch. The High Court said that the witnesses were shown the watch and were then asked questions as to whether they could identify the watch and such identification was found by the High Court not to be reliable. 24. Most of the witnesses were interested. None of the witnesses could give any reason for identifying the watch. The repairer said that the mark "ARS" was put by him on each watch, and the mark was found on that watch. If he put the mark on all watches repaired by him he could give no reason to say that the watch belonged to Allauddin. Ismail who purchased the watch said that the number of the watch was 4411 but he could give the number only after the watch was shown to him in the witness box. The watch was therefore not proved to belong to Allauddin. The State Of Gujarat vs Adam Fateh Mohmed Umatiya And Ors. on 4 March, 1971 6 25. The prosecution was against accused No. 4 is that he discovered watches belonging to Noormohmad Ibrahim and Alladdin Nasir Kadivala from inside the Kuran at his house, Ibrahim's watch was identified by his wife and a few other witnesses including Residmiyan, the watch repairer. The High Court did not rely on their evidence because most of the witnesses were interested and they could give no reasons for identifying the watch. The watch repairer said on seeing the watch and the mark "H-4718" that the mark was the same which he had mentioned in his bill. He cancelled the bill and did not keep a duplicate of it. Evidence of this type in utterly unconvincing. Yusuf Nazir brother of Kadivala said that his watch and Kadiwala's watch were of the same make and bore consecutive marks. It might to be a strange coincidence about the consecutiveness of the numbers of the two watches but that would not prove that it belonged to Kadiwala. The watch repairer identified the watch because of the initials "ARS', appearing on the watch. These initials were of the watch repairer Suleman. He might have repaired the watch but it would not prove the watch to be of Kadiwala. 26. The High Court rightly acquitted the accused. The appeal is therefore dismissed. The accused are set at liberty. The State Of Gujarat vs Adam Fateh Mohmed Umatiya And Ors. on 4 March, 1971 7 | {
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State Of Tamil Nadu vs Thirumagal Mills Ltd. Etc on 17 November, 1971 Equivalent citations: 1972 AIR 1148, 1972 SCR (2) 395, AIR 1972 SUPREME COURT 1148, 1972 TAX. L. R. 1944, 1972 2 SCR 395, 29 STC 290, 1972 2 SCJ 324 Author: A.N. Grover Bench: A.N. Grover, K.S. Hegde PETITIONER: STATE OF TAMIL NADU Vs. RESPONDENT: THIRUMAGAL MILLS LTD. ETC. DATE OF JUDGMENT17/11/1971 BENCH: GROVER, A.N. BENCH: GROVER, A.N. HEGDE, K.S. CITATION: 1972 AIR 1148 1972 SCR (2) 395 1972 SCC (1) 176 CITATOR INFO : RF 1973 SC1045 (3) F 1985 SC1748 (6) ACT: Madras General Sales Tax Act, 1959, s. 2(d) as amended by Madras General Sales Tax (Second Amendment) Act, 1964-If retrospective-- Effect of s. 9. HEADNOTE: The assessee was a spinning mill. It opened a fair price shop to provide an amenity to its workmen so that commodities may be made available to them at fair prices. For the assessment year 1960-61 the assessing authority under the Madras General Sales Tax Act, 1959, included in the assessee's turnover the sale value of groceries sold in State Of Tamil Nadu vs Thirumagal Mills Ltd. Etc on 17 November, 1971 1 the fair price shop. The Tribunal held in favour of the assessee and the High Court, on reference, found that the assessee was not carrying on 'business' within the meaning of the Act in the fair price shop and confirmed the orders. In appeal to this Court it was contended that the Second Amendment Act. 1964, substituted a new definition of 'business' in the Act, which, read with s. 9 of the Act, had retrospective effect. Dismissing the appeal, HELD : Validation of tax which has been declared to be illegal may be done only if the ground of illegality or invalidity are capable of being removed and are in fact removed. The Legislature can give its own meaning and interpretation of law under which the tax was collected and by legislative flat make the new meaning binding upon the courts. [399 C-D] But in the present case, none of the methods for validating a tax has been adopted. Although the definition of 'business' was amended it was not made retrospective by the usual words that it should be deemed to have been always substituted nor was any other language employed to show that the substantive provision was being amended retrospectively. On the contrary, the definition of the word 'business' was amended only prospectively. In the absence of retrospective effect being given to the definition, s. 9 was of no avail to the Revenue. [399 E-G] State of Tamil Nadu v. M. Rayappa Gounder, A.I.R. 1971 S.C. 231, Shri Prithvi Cotton Mills v. Broach Borough Municipality, [1970] 1 S.C. R. 388; 79 I.T.R. 136, followed. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1454 of 1969 and 148 of 1971. Appeals by special leave from the judgments and orders dated April 6, 1967 and January 22, 1969 of the Madras High Court in Tax Cases Nos. 152 of 1964, and 300 of 1968 respectively. S. T. Desai and A. V. Rangam, for the appellant (in both the appeals) --L500 Sup.CI/72 K. Parasaran, T. Vadivel, R. Shanmughan and K. Jayaram, for the respondent (in C.A. No. 1454/69). T. A. Ramachandran, for the respondent (in C.A. No. 148/71). B Sen, S. P. Mitra and G. S. Chatterjee, for intervener (in C.A. No. 1454 of 1969). The Judgment of the Court was delivered by Grover, J. These appeals by special leave from a judgment of the Madras High Court involve a common question. The facts in the first of these appeals may be stated. The assessee, who is the respondent herein, is a spinning mill manufacturing cotton yarn. It was assessed to sales tax under the Madras General Sales Tax Act, 1959, hereinafter called the 'Act'. For the assessment year 1960-61 the assessing authority included in the taxable State Of Tamil Nadu vs Thirumagal Mills Ltd. Etc on 17 November, 1971 2 turnover certain amounts representing the sale value of foodgrains and groceries sold in the fair price shop run by the mills and the amount realised by sale of articles of food in the canteen which was run for its employees. The assessee filed an appeal questioning its liability to pay tax on these items The appellate authority dismissed that appeal. The assessee thereupon filed a further appeal to the Sales tax Appellate Tribunal which allowed the appeal and directed that the turnover in question be deleted. The Revenue went up in revision to the High Court of Madras. A division bench of that court dismissed the revision. The Appellate Tribunal had found that the fair price shop and the canteen were run exclusively for the benefit of the employees and there was no profit motive in running the same. The High Court referred to the relevant statutory provisions and expressed the view that the primary requisite of 'business' as defined by the Act should be a trade or commerce or adventure in the nature of trade or commerce. Presence or absence of profit was not material but the activity must be of a commercial character in the course of trade or commerce. It was found that the assessee had not been carrying on business in the fair price shop. The High Court looked into the articles of association of the assessee and found no article empowering it to carry on business in fair price shop. The assessee had opened that shop only to provide an amenity to its workmen so that commodities may be made available to them at fair prices. According to the High Court if as a matter of fact, some profit accrued that would be wholly immaterial because the assessee never intended to run the fair price shop as a business having an element of commercial activity. Section 2 of the Act 'gives the definitions. The definitions of "business" given in cl. (d), of "dealer" as given in cl. (g) and of "sale" as given in cl. (n) are reproduced below: (d) "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern." (g) "dealer" means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration and includes- (i)..................... (iii) a commission agent, a broker or a del credere agent, or an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal. (iv) (n) "sale" with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of business for cash or for deferred payment or other valuable consideration, and includes a transfer of property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge". State Of Tamil Nadu vs Thirumagal Mills Ltd. Etc on 17 November, 1971 3 By the Madras General Sales Tax (Second Amendment) Act, 1964, clause (d) of s. 2 was substituted by the following clause "business" includes- (i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern and (ii) any transaction in connection with or incidental or ancillary to, such trade, commerce, manufacture,, adventure or concern". Section 9 validated the levy and collection of certain taxes in the following terms : S.9. "Notwithstanding anything contained in any judgment, decree or order of any Court, no levy or collection of any tax under the provisions of the principal Act and of rules made thereunder in respect of sales in the course of business, whether or not it is carried on with a motive to make gain or profit shall be deemed to be invalid or ever to have been invalid on the ground only that such levy or collection was not in accordance with law and such tax levied or collected or purporting to have been levied or collected shall, for all purposes, be deemed to be and always to have been validly levied or collected and accordingly-- (a) all acts, proceedings or things done or taken by the State Government or by any officer of the State Government or by any other authority in connection with the levy or collection of such tax shall, for all purposes, be deemed to be, and to have, always been, done or taken in accordance with law; (b) no suit or other proceedings shall be maintained or continued in any Court against the State Government or any person or authority whatsoever for the refund of any tax so paid; and (c) no Court shall enforce any decree or order directing the refund of any tax so paid; (d) any such tax levied under the principal Act, before the commencement of this Act but not collected before such commencement or any such tax leviable under the Principal Act but not levied before such commencement may be collected (after levy of the tax wherever necessary) in the manner provided in the principal Act)". It has not been contended before us on behalf of the Revenue that the turnover of the sales by the fair price shop and the canteen could be included in the taxable turnover according to the definition of "business" as it stood in the original Act. The contention raised is that S. 2 of the Second Amendment Act 1964 substituted the new definition of "business" with retrospective effect. This result flows, it is said, from the language of S. 9 although in S. 2 of that Act no such language has been used as can give retrospective operation to the amendment made. We are unable to agree that State Of Tamil Nadu vs Thirumagal Mills Ltd. Etc on 17 November, 1971 4 S. 9 by itself would make the definition of "business" as substituted in s. 2 retrospective. In State of Tamil Nadu & Another v. M. Rayappa Gounder etc.(1) s. 7 of the Madras Entertainment Tax (Amendment) Act 1966 which was similar to S. 9 mentioned above came up for consideration. The question was whether the assessments were validly protected by that section. Reliance was place on certain decisions of this Court which laid down that it is open to the legislature within certain limits to amend the provisions of the Act retrospectively and to declare what the law shall be deemed to have been but it was not open to the legislature to say that a judgment of a court properly constituted and rendered shall be deemed to be ineffective. Hence it was held that the impugned assessment in that case could not be sustained. The principle which has been laid down clearly is that validation of tax which has been declared to be illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed. Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is achieved by reenacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the reenacted law. The legislature can give its own meaning and interpretation of the law under which the tax was collected and by legislative fiat make the new meaning binding upon the courts. None of these methods has been adopted in the present case. [see Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality & Ors.(2)]. Although the definition of "business' was substituted by the Second Amendment Act of 1964 it was not made retrospective by the usual words that it should be deemed to have been always substituted nor was any other language employed to show that the substantive provision, namely, the definition of "business" was being amended retrospectively. Section 9, therefore, can be of no avail to the Revenue. It has been pointed out that in the other decision rendered by this Court in which similar validation provision appeared the substantive section had not been amended at all. That, in our judgment will not make any difference because the essence of the matter is that the definition of the word "business" which was material was amended only prospectively and not with retrospective effect. It is common ground and has not been disputed that if retrospective operation is not given to S. 2(d) of the Second Amendment Act 1964 the Revenue must fail in these appeals. We may add that we have not considered the question of the liability of the assessee to be Assessed subsequent to the amendment made by the Second Amendment Act of 1964. In the result the appeals are dismissed with costs. V.P.S. Appeals dismissed. (1) A.I.R. 1971 S.C. 231. (2) [1970] 1 S.C.R. 388; 79 I.T.R. 136. State Of Tamil Nadu vs Thirumagal Mills Ltd. Etc on 17 November, 1971 5 | {
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Chandrika Prasad Singh And Ors. vs The State Of Bihar on 7 September, 1971 Equivalent citations: AIR1972SC109, 1972CRILJ22, (1972)4SCC140, 1972(4)UJ43(SC), AIR 1972 SUPREME COURT 109, 1972 4 SCC 140, (1972) 1 SCJ 492, 1972 MADLJ(CRI) 271 Bench: I.D. Dua, J.M. Shelat, S.C. Roy JUDGMENT 1. The five appellants in this appeal by special leave were tried along with ten others in the court of the Sessions Judge, Mirzapur for various, offence. Chandrika Prasad Singh, appellant No. 1 in this Court, was charged under Section 302, I.P.C. for committing the murder of one Ram Sajjan Singh. fie was also charged, along with the renaming co-accused, under Sections 302/149, I.P.C. for the same murder. All the accused were further charged under Section 379, I.P.C. All the five appellants, along with some others out of the accused persons, were in addition charged under Section 148, I.P.C. Seven accused per-10ns, none of whom is before us, were separately charged under Section 147, I.P.C. Appellant Raj Nandan Singh, Bilat Singh, Ram Binod Singh were separately charged under Section 324, I.P.C. for voluntarily causing simple hurt to Shri Sambhu Prasad Singh. The trial court convicted Chandrika Prasad Singh under Section 302, I.P.C. and sentenced him to imprisonment for life because the murder was not considered to be a premeditated one. While dealing with the charge under Section 302/149, IPC the trial court felt that the five appellants, along with Ram Narain Singh who were members of an unlawfully assembly, knew that at least hurt was likely to be caused in the rioting in prosecution of the common object of the said assembly. They were, therefore, convicted under Sections 326/149, I.P.C. instead of under Sections 302/149 and sentenced to 5 years' rigorous imprisonment each. Nine accused out of the 15 were given benefit of doubt and acquitted. 2. On appeal to the High Court by the six convicted persons Ram Narain Singh was also given benefit of doubt by that court. He was, therefore, acquitted. The appeal on behalf of the present 5 appellants was dismissed. In this Court the main argument addressed on behalf of the appellants was that Chandrika prasad Singh was not present at the spot and with respect tot he other appellants the material on the record did not show any overt act on their part with the result that they were also entitled to benefit of doubt and, therefore, to acquittal. 3. The High Court dealt with the argument on the plea of Chandrika Prasad Singh's alibi in the following manner: On the behalf of Chandrika Prasad Singh eight witnesses were examined. His main plea was that on the third December, 1964 he was examined by D.W. 1 Dr. Jamuna Prasad Rai as he had some urinary trouble. He was referred to another Doctor and D.W. 5 Dr. S.S. Tripathy, examined his blood and stool on the 5th December, 1964. Chandrika Prasad Singh And Ors. vs The State Of Bihar on 7 September, 1971 1 D.W. 4 Dr. V.N. Singh did the operation. This operation was in the nature of phimosis Another witness D.W. 6 was examined to say that Chandrika Prasad Singh had taken a room on rent from 4th to 12th December, 1964 but he could not say defininitely whether Chandrika Prasad Singh was seen by him in the night of the 5th December or in the morning of the 6th December. The learned Sessions Judge has discussed the evidence of these wit nesses in detail in paragraph 44 of his judgment and came to the conclusion that even taking the evidence of these defence witness at its face value it could not be conclusively proved that Chandrika Prasad Singh could not be present "at the time of the occurrence a the place of occurrence. The most important point in the plea alibi was the time of the actual examination of blood and urine a; well as the operation but this was not indicated anywhere in the evidence. This village is connected with Darbhanga by a pitched road and buses ply at short intervals. So, in my opinion, the learned Sessions Judge was right in disbelieving the plea of alibi put forth by Chandrika Prasad Singh. The conclusion of the High Court is not tainted with any infirmity justifying re-examination of the evidence by this Court on special leave and interference with those conclusions. The onus to establish alibi was on Chandrika Prasad Singh and we do not find any cogent ground for disagreeing with the High Court that this onus has not been discharged on the evidence on the record. 4. Regarding the other appellants the High Court has observed: The learned Sessions Judge has not accepted the story of common object of the assembly to take forcible possession of the paddy crop and the land because he found that this plot was in possession of the accused persons, one of them being Ramdeo Singh. But the common object of the assembly developed on the spot when Ram Sajjan Singh and Shambhu Prasad Singh came to protest against the harvesting of paddy. Most of the appellants had indulged in overt acts and had actually assaulted Ram Sajjan Singh and Shambhu Prasad Singh. So their conviction under Section 326 read with Section 149 of the Indian Penal Code must be said to have been correctly arrived at. The argument that no overt act has been proved against the appellants 2 to 5 and, therefore, they are entitled to be acquitted is difficult to sustain. As observed by the High Court, most of the appellants had indulged in overt acts and had assaulted Ram Sajjan Singh. If the other appellants were members of the assembly, the unlawful common object of which developed at the spot and they continued as its members, then, they are clearly liable to be proceeded against and convicted. It has not been shown that the High Court is wrong in its observation on the material on the record and we have not been persuaded to disagree with that Court. From the finding of the High Court it is clear that these appellants were present at the spot at the time of the occurrence not merely as passive or innocent spectators without intending to share the common object of the assembly; nor did they happened to be there out of idle Chandrika Prasad Singh And Ors. vs The State Of Bihar on 7 September, 1971 2 curiosity, content by merely gazing on, having nothing to do with the assault. 5. We are, therefore, unable to hold that their conviction is illegal or not sustainable on the material on the record. This appeal accordingly fails and is dismissed. Chandrika Prasad Singh And Ors. vs The State Of Bihar on 7 September, 1971 3 | {
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M/S. Basti Sugar Nulls Co. Ltd. And Ors vs Commissioner Of Income-Tax, Delhi & ... on 24 September, 1971 PETITIONER: M/S. BASTI SUGAR NULLS CO. LTD. AND ORS. Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX, DELHI & RAJASTHAN DATE OF JUDGMENT24/09/1971 BENCH: ACT: Income-tax Act, 1922, s. 66-Reference to High Court- Tribunal's findings of fact whether arrived at without consideration of materials on record-Tribunal need not refer In its order to insignificant evidence. HEADNOTE: The three appellant companies were controlled by G. Another company which was the selling agent of the three appellant companies was also controlled by G. The question in income- tax proceedings was whether the commission paid to the selling agent was a deductible item. In the original assessments for 1947-48 in the cases of the three appellants the Income-tax Officer allowed the deduction but later he issued notices under s. 34 of the Income-tax Act, 1922 on the footing that in the circumstances of the case the commission was not allowable since the selling agent rendered no service whatsoever so as to earn any commission. In making the assessment under s. 34 it was so held by him. In the appeals filed by the Appellant companies, the Appellate Assistant Commissioner gave some relief by allowing deduction in respect of sums paid directly as commission to some sub-agents, but on the main question relating to the amounts paid to the selling agent he agreed with the Income-tax Officer. The contention that action could not be taken under s. 34(1) (c) was also rejected. The Appellate Tribunal took the same view. The appellants then asked the Tribunal to refer four questions to the High Court under s. 66(1) of the Act. The Tribunal rejected the applications. The High Court under s. 66(2) directs the Tribunal to refer the fourth question relating to the applicability of s. 34 but held the other three questions to be question of fact. In appeal before this Court against the order of the High Court it was contended that the M/S. Basti Sugar Nulls Co. Ltd. And Ors vs Commissioner Of Income-Tax, Delhi & ... on 24 September, 1971 1 Tribunal had erred in not taking into account the evidence of two witnesses produced by the appellants, as also two receipts showing payments made to some sub-agents by the selling agent. The High Court's view that it is not every piece of evidence available on record that must be dealt with by the Tribunal was questioned. HELD : The criticism that the evidence of the two witnesses produced by the appellants was not considered as such by the Tribunal was only technically correct. The Tribunal had not referred to witness R by name but had referred to the relationship between the selling agent and the firm of which R was a proprietor, as well as to the effect of a telegram which was claimed to show privity of contract between the selling agent and R's firm. Therefore it could not be said that the Tribunal had not considered R's evidence. As to the other witness S, his evidence had only to be read to be rejected; the Tribunal had moreover given reasons for not acting on his evidence. The two receipts relied on by the appellants lost all significance after the rejection of the evidence of the two aforesaid witnesses. Obviously in view of the other evidence against the appellants the Tribunal did not think it worthwhile to refer to the two receipts. [893 H; 894 E; 895 C] It must accordingly be held that the finding of Tribunal was based on material on the record and that the finding was such which could an the 888 evidence be reasonably reached. The High Court was hence justified in holding that the first three questions were questions of fact and in declining to give a direction to the Tribunal to refer those questions. [895 G] Udhavdas Kewalram v. C.I.T., Bombay City,- [1967] 66 I.T.R. 462, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1364 to 1373 of 1967. Appeals by special, leave from the judgment and order dated March 14, 1967 of the Delhi High Court in Income-tax Cases Nos. 25-D of 1965 etc. V. S. Desai A. K. Verma and B. D. Shingari, for the appel- lants (in all the appeals). R.H. Dhebar, B. B. Ahuja and R. N. Sachthey, for the res- pondent (in all the appeals). The Judgment of the Court was delivered by Vaidialingam, J. These ten appeals, by special leave, are directed against the common _judgment and order dated March 14, 1967 of the Delhi High Court declining to direct the Income-tax Appellate Tribunal, Delhi Bench, to refer along with the statement of case, questions Nos. 1 to 3 enumerated in their applications. M/S. Basti Sugar Nulls Co. Ltd. And Ors vs Commissioner Of Income-Tax, Delhi & ... on 24 September, 1971 2 The reference was asked for by the three different Companies by whom the above appeals are filed in respect of Income-tax Case No. 26-D of 1965 connected with I.T.C. Nos. 21-D to 29- D of 1965 arising from a common order of the Income-tax Appellate Tribunal, Delhi Bench. As the facts in the case and questions of law sought to be referred were common, the following tabular statement will give an idea of the appeals filed by the three Companies, who are the appellants together with the particulars regarding the years of assessment and Income-tax case numbers -------------------------------------------------------------- C..A. No. I.T.C. No. Assessment Name of Company year ---------------------------------------------------------------- 13-54/67 28-D/65 1952-53 Basti Sugar Mills 1365/67 27-D/65 1950-51 1366/67 23-D/65 1948-49 1367/67 21-D/65 1951-52 1368/67 20-D/65 1950-51 Nawabganj Sugar Mills 1369/67 25-D/65 1948-49 1370/67 26-D/65 1951-52 1371/67 24-D/65 1949-50 1372/67 29-D/65 1952-53 Punjab Sugar Mill 1373/67 22-D/65 1955-56 ---------------------------------------------------------- The Basti Sugar Mills Company Limited, which is the appellant in Civil Appeals Nos. 1364 to 1367 owned two sugar factories at Basti and Waltharganj. It is their case that for the purpose of selling their output of sugar they appointed Selling agents at a commission of -0-12-0% of all sales of sugar effected through the agents. Their Selling agent prior to 1944 was M/s Gursarandas Kapur & Sons at Kanpur. On July 26, 1944 by a resolution of the Board of Directors, the Company appointed M/s Gokul Nagar Sugar Mills Co. Ltd. as the Selling agents at -0-12-0% commission. In the course of the original assessment for the years 1947-48, which was completed on March 10, 1950, the Income-tax Officer called upon the said Company to furnish details of the items of work done by M/s Gokul Nagar Sugar Mills Co.' Ltd. as Selling agents. The Company informed the Income-tax Officer that the said Selling agents have been doing the work that they were expected to, do and they in turn had appointed sub-agents on commission basis for effecting sales at various places. The Income-tax Officer accepted this explanation and allowed, by order dated June 21, 1949 a deduction for Rs. 47,921/- paid as commission to the selling agents. But when the assessment proceedings for the assessment year 1952-53 in respect of Nawabganj Sugar Mills Co. Ltd. was being dealt with, the Income-tax Officer took the view that the selling commission should not be allowed and accordingly issued a notice dated March 29, 1954, under S. 34(1) (a) of the Income-tax Act, 1922 (hereinafter- to be referred as the Act). The Company filed a return under protest. Regarding Nawabganj Sugar Mills Company Ltd., which is appellant in- Civil Appeals Nos. 1368-1371 of 1967 the facts are also more or less identical except that for the assessment year 1948-49, the Income-tax Officer by his order dated February 28, 1951 allowed a deduction of Rs. 60,980/- as the amount paid as ,commission to the selling agents M/s Gokul Nagar Sugar Mills Co. Ltd. For the assessment year 1949-50 also the commission paid to the said selling agent was allowed as deduction. But for the assessment year 1952- 53 the Income-tax Officer issued a notice dated January 19, 1957 requiring the said Company to explain why the amount of commission claimed to have been paid by them to the selling agents should not be disallowed. M/S. Basti Sugar Nulls Co. Ltd. And Ors vs Commissioner Of Income-Tax, Delhi & ... on 24 September, 1971 3 The facts relating to M/s Punjab Sugar-Mills Company Ltd., which is the appellant in Civil Appeals Nos. 1372 and 1373 of 1967 are also identical except that in the course of assessment for the assessment year 1947-48, the commission of Rs. 37,978/paid to the same selling agent namely, Gokul Nagar Sugar Mills Company Ltd. was allowed as per order dated February 27, 1950. But when dealing with the case of Nawabganj Sugar Mills Co. Ltd. for the assessment year 1952-53, the Income-tax Officer took the view that the selling agency commission claimed to be paid to the selling agents should not be allowed. Hence he issued a notice to the Company under s. 34(1) (a) of the Act and the company filed a return under protest. It may be stated that the managing agent of all the three appellant companies are M/s Narang Brothers Ltd. and their Chairman was. Dr. Gokulchand Narang. The selling agent of the three appellants is also the commission agent, namely, M/s Gokul Nagar Sugar Mills Co. Ltd. The controversy before the Income-tax authorities related to the claim made by all the appellants for deducting, an expenditure of the business of the companies, the selling agency commission paid to M/s Gokul Nagar Sugar Mills Company Ltd. In respect of some years the jurisdiction of the Income-tax Officer to Lake action under s. 34 of the Act was also challenged. In respect of the assessment year 1952-53 relating to Nawab- ganj Sugar Mills Co. Ltd., the evidence, both oral and documentary, was let in by the assessee that M/s Gokul Nagar Sugar Mills Co. Ltd. were the selling agents and that the commission paid to them as selling agents should be deducted as business expenditure. 'The evidence so let in was treated as common in respect of the claims made by all the three appellants. The Income-tax Officer held that all the three companies were controlled and supervised by Dr. Gokulchand Narang. He further held that M/s Gokul Nagar Sugar Mills Co. Ltd., the selling agent, was also controlled and supervised by Dr. Gokulchand Narang. Though M/s Gokul Nagar Sugar Mills Co. Ltd. was appointed as selling agent by a resolution dated July 26, 1944, the, latter rendered no service whatsoever so as to earn any commission. In this connection the Income- tax Officer referred to various items of evidence that were placed before him by the parties. Ultimately, he found that the amount claimed to have been paid as selling agent commission cannot be deducted as an item of business expenditure. In all the appeals filed by the/three Companies, the Appellate Assistant Commissioner gave some relief by allowing deduction in respect of sums paid directly as commission to some subagents. But on the main question relating to the amount paid to M/s Gokul Nazar Sugar Mills Co. Ltd., the Appellate Assistant ,Commissioner also agreed with the Income-tax Officer. The contention that action could not be taken under s. 34 (1 ) (c) was also rejected. The Income-tax Appellate Tribunal, Delhi Bench, by its common order dated December 31, 1962 after a consideration of the materials on record and the reasons given by the Income-tax Officer and the Appellate Assistant Commissioner, rejected the claim made by the appellants in respect of the commission said to have been paid to the selling agent M/s Gokul Nagar Sugar Miffs Co. Ltd. The view of the Appellate Tribunal is that no evidence has been placed by the appellants to show that M/S. Basti Sugar Nulls Co. Ltd. And Ors vs Commissioner Of Income-Tax, Delhi & ... on 24 September, 1971 4 M/s Gokul Nagar Sugar Mills Co. Ltd. had really acted as selling agent and that on the other hand the appellants themselves have been directly dealing with several sub-agents. In.fact, the finding of the Appellate Tribunal was that there was no privity of contract between the appellants and M/s Gokul Nagar Sugar Mills Co. Ltd. On this reasoning the Appellate Tribunal also agreed with the findings recorded by the two officers that no claim for deduction in respect of selling agent commission can be allowed. The Appellate Tribunal also held that the action taken under s. 34 was justified. The result was that all the appeals filed by the three Companies were dismissed. The assessee companies filed applications before the Appellate Tribunal under s. 66(1) to state a case and refer the following four questions to the High Court. "1. Whether in the facts and circumstances of the case, the Tribunal was justified in holding that no services Were rendered by M/s Gokul Nagar Sugar Mills Co. Ltd. to M/s Nawabganj Sugar Mills Co. Ltd. 2. Whether in holding as they have done, the Tribunal was justified in giving its decision with out taking into account the statement of Shri Ram Sahai Dhir and the receipts showing the commission paid to M/s Gursarandas Kapur and some sub-agents of the recipient company. 3. Whether in view of the facts and in the circumstances of the case the Tribunal has rightly concluded that Dr. Sir G. C. Narang signed letters acting as the Chairman of the Nawabganj Sugar Mills Co. Ltd. when he had no capacity to deal with the sub-agents in that capacity. 4. Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the provisions of S. 34(1) (a) were rightly invoked." By its order dated February 19, 1965 the Appellate Tribunal rejected the said applications on the ground that no question of law arose from the-order of the Tribunal and that the decision of the Tribunal was exclusively on facts. 8 9 2 The appellants filed applications before the Delhi High Court under s. 66(2) of the Act, to direct the Income-,tax Appellate Tribunal to refer the four questions, enumerated above. The High Court, by its order dated March 14, 1967, directed the Income-tax Appellate Tribunal to state a case and refer question No. 4 alone, but rejected the applications of the appellants in so far as they related to questions Nos. 1 to 3. The view to the High Court is ,,that the points covered by the questions Nos. 1 to 3 are all on facts and that in the face of the findings recorded by the Appellate Tribunal, no question of law arose for consideration. Mr. V. S. Desai, learned counsel for the appellants, urged that the Income-tax Appellate Tribunal, which is the final authority on facts, has not taken into account the material evidence adduced by the parties. He ,further urged that the appellants had adduced the evidence of certain witnesses to establish that M/s Gokul Nagar Sugar Mills Co. Ltd. were the selling agent and the persons who gave evidence had been appointed as sub-agents by them and that commissions were also paid to them by the selling agent. Particularly, the counsel pointed out that the evidence of Ram Sahai Dhir and Shiv Nand Verma has not at all been adverted to by the Appellate Tribunal. The counsel also urged M/S. Basti Sugar Nulls Co. Ltd. And Ors vs Commissioner Of Income-Tax, Delhi & ... on 24 September, 1971 5 that certain receipts produced Nos. 948 dated April 24, 1946 and 298 dated February 13, 1947 showing the payments made by M/s Gokul Nagar Sugar Mills Co. Ltd. as commission to their sub- agents have not been even referred to by the Appellate Tribunal. The counsel further pointed out that even the High Court has held that the Income-tax Appellate Tribunal has made-no reference to 'the evidence of the two witnesses, nor has it adverted to the receipts claimed to have been given by the sub-agents. The High Court's view in this regard that it is not every piece of evidence available on record that must be dealt with by the Appellate Tribunal, is strenuously criticised by Mr. V. S. Desai. The counsel relied on the decision of this Court in Udhavdas Kewalram v. Commissioner of Income-tax, Bombay City(1) where it has been held that the Tribunal has to act judicially and consider all the evidence in favour and against the assessee and that an order recorded on a review of only a part of the evidence and ignoring the remaining evidence, cannot be regarded as conclusively determining the questions of fact raised before the Tribunal. Mr. Desai, hence urged that the High Court was not justified in declining to direct the Appellate Tribunal to refer questions Nos. 1 to 3. Mr. R. H. Dhebar, learned counsel for the Department has re- ferred us to the findings recorded by the Income-tax Officer, the Appellate Assistant Commissioner as well as the elaborate discussion contained in the order of the Appellate Tribunal, and (1) [1967] 66 I.T.R. 462. pointed out that all relevant material on record has been taken into account by all the authorities, including the Appellate Tribunal and that the appellants can have no grievance in that regard. All material facts have been considered and findings have been recorded on facts against the appellants that M/s Gokul Nagar Sugar Mills Co. Ltd. rendered no service whatsoever as selling agent and that the materials on record conclusively establish that the appellants themselves were dealing with their sub-agents direct. The learned counsel further pointed out that the Income-tax Officer summoned Dr. Gokul Chand Narang under s. 37 of the Act to produce the correspondence with the sub- agents as well ,as the sugar mills. Only 13 letters spread over a period of three years written by Dr. Gokul Chand Narang in his personal capacity and in the letter heads of M/s Gokulchand Ram Sahai were produced. None of the replies to those letters from the sub-agents were produced. The counsel finally urged that the order of the High Court declining to direct the Appellate Tribunal to refer questions Nos. 1 to 3 is correct. We are of the opinion that there is no substance in these appeals. We have gone through the orders of the Income-tax Officer, the Appellate Assistant Commissioner, as well as the Income-tax Appellate Tribunal. No doubt, there is a resolution produced by the appellants dated July 26, 1944 in and by which the sugar selling agency of Nawabganj Sugar Mills Co. Ltd. is given to M/s Gokul Nagar Sugar Mills Co. Ltd. on -0-12-0% There is no other evidence to show the nature of the arrangement or as to how exactly this resolution is To be carried out. A reading. of questions Nos. 1 to 3 clearly shows that the points raised therein are purely questions of fact. But as the contention of Mr. V. S. Desai is that certain material facts have not been considered at all by the Tribunal and hence the findings arrived at by it cannot be conclusive, in view of this infirmity, we will refer to the evidence on record not with a view to decide whether the Tribunal has properly appreciated the evidence but to see whether there was evidence to support the M/S. Basti Sugar Nulls Co. Ltd. And Ors vs Commissioner Of Income-Tax, Delhi & ... on 24 September, 1971 6 findings recorded by the Tribunal and whether that finding could on that evidence be reasonably reached. We have already referred to the resolution dated July 26, 1944. The first criticism of Mr. V. S. Desai is that the evidence of sub-agents appointed by the selling agent has not been considered by the Appellate Tribunal. The two witnesses in this regard are Ram Sahai Dhir and Shiv Nand Verma. The contention of Mr. V. S. Desai that the evidence of Ram Sahai Dhir has not been considered, as such, by the Appellate Tribunal, is only technically correct because it is seen from the order of the Appellate Tribunal that it has referred to the relationship between the appellants and a company known as M/s Ramdev and Corn- pany. Ram Sahai Dhir in his evidence has clearly stated that he is the sole proprietor of M/s Ramdev and Company. He has further stated that after he got the subagency from M/s Gokul Nagar Sugar Mills Co. Ltd. he along with his brother and son formed a partnership for this purpose. in the name of M/s Ramdev and Company. The Appellate Tribunal in paragraph of its order has considered a telegram sent on September 1, 1948 to M/s Ramdev and Company by the Chairman of Nawabganj Sugar Mills Co. Ltd. That telegram states that the agency of M/s Gursardndas Kapur and Sons has been terminated and M/s Ramdev and Company is asked to sell and freely secure challans. Ram Sahai Dhir in his evidence has stated that M/s Gursarandas Kapur and Sons were the selling agent of the appellants originally and that he started his own sugar business in or about 1947. Therefore, the telegram, as held by the Appellate Tribunal, clearly shows that the appellants were having direct dealings with Ramdev and Company and that M/s Gokul Nagar Sugar Mills Co. Ltd. is no where in the picture. This telegram also shows that this privity of contract between the appellants and Ramdev and Company will not be there if Ramdev and Company were the sub-agents appointed by M/s Gokul Nagar Sugar Mills Company Ltd. Therefore, it is clear that the relationship between the appellants and M/s Ramdev and Sons of which Sri Ram Sahai Dhir is the sole proprietor has, been considered by the Appellate Tribunal. Regarding Shiv Nand Verma, his evidence has only to be read to be rejected. Even according to the appellants M/s Gokul Nagar Sugar Mills Company Ltd. was appointed as Selling Agent only by the resolution dated July 26 1944. Apart from the very contradictory answers given by this witness, he has categorically stated in answer to a specific question put by the appellants that lie, was appointed even in 1942 as sub- agent by M/s Gokul Nagar Sugar Mills Company Ltd. on a commission of -0-4-0%. This evidence is absolutely false and of no use to support the case of the appellants because in 1942 M/s Gokul Nagar Sugar Mills Company Ltd. was not in the picture. The evidence of this witness does not establish that M/s Gokul Nagar Sugar Mills Company Ltd. had appointed him as their sub-agents and were paying him commission, in their capacity as the selling agent of the appellants. The Appellate Tribunal has referred to the evidence of Shiv Nand Verma given before the Income-tax Officer and it has also noted the reasons for not acting on that evidence. Therefore, it is not as if that the Appellate Tribunal was not conscious of this evidence, on record which is absolutely valueless so far' as the appellants are concerned. Regarding the receipts Nos. 948 dated 24-4-1946 and 298 dated February 13, 1947, it is no doubt true that they have not 89 5 been specifically adverted to by the Appellate Tribunal. But it is rather surprising that the appellants should be able to produce only these two receipts when they claim that M/s Gokul Nagar Sugar Mills Company Ltd. has been acting as their selling agent from 1944. M/S. Basti Sugar Nulls Co. Ltd. And Ors vs Commissioner Of Income-Tax, Delhi & ... on 24 September, 1971 7 Further the persons who are mentioned there as sub-agents have not at all given evidence before the Income-tax authorities. Those receipts lose all significance especially when the evidence of Ram Sahai Dhir and Shiv Nand Verma who claim to have been appointed as sub- agents by the selling agent has been rejected by the Appellate Tribunal. Obviously, in view of the other evidence against the appellants, the Appellate Tribunal did not think it worthwhile to specifically refer to these two receipts on record. But the non-reference to these two receipts cannot be. said to have in any manner vitiated the conclusion arrived at by the Appellate Tribunal. As we have stated earlier, we have only referred to these items of evidence on record to show that the finding of the Appellate Tribunal are based on the material on record and that the finding is such which could on that evidence be reasonably reached. The statement in the order of the High Court that the Appellate Tribunal has not referred to the evidence of Ram Sahai Dhir as such is prima facie correct. But the High Court missed the crucial fact that his evidence is really as proprietor of M/s Ramdev and Company and the relationship between this company and the appellants has been considered by the Appellate Tribunal. As laid down by this Court in, Udhavdas Kewalram v. Com- missioner of Income-tax, Bombay City-1(1) the Income-tax Appellate Tribunal has to act _judicially in the sense that it has to consider with due care all material facts and the evidence in favour of and against the assessee and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law. From the discussion contained above it is clear that it cannot be said that the Appellate Tribunal in the case before us has omitted to consider any material fact or any material piece of evidence. To conclude we are in agreement with the findings of the High Court that no point of law arises out of questions Nos. 1 to 3 and the High Court was _justified in declining to give direction to the Appellate Tribunal to state a case and refer those questions. In the result the judgment and order of the High Court dated March 14, 1967 are confirmed and the appeals are dismissed with one set of costs to the respondent. G.C. Appeals dismissed. (1) [1967] 66 I.T, R. 462. M/S. Basti Sugar Nulls Co. Ltd. And Ors vs Commissioner Of Income-Tax, Delhi & ... on 24 September, 1971 8 | {
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Narayanswami vs State Of Maharashtras on 30 April, 1971 Equivalent citations: 1971 AIR 1789, 1971 SCR 588 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: NARAYANSWAMI Vs. RESPONDENT: STATE OF MAHARASHTRAS DATE OF JUDGMENT30/04/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 1789 1971 SCR 588 1971 SCC (2) 182 ACT: Code of Criminal Procedure, 1898-Section 479A sub-section (1)-- Reasonable opportunity of being heard contemplated by section not mandatory. HEADNOTE: The requirement under sub-section (1) of section 479A of the Code of Criminal Procedure, of giving the witness an opportunity of being heard after the recording of the necessary findings and before making the complaint is not mandatory. That step is required to be taken only if the court thinks fit-a matter left to the discretion of the trial court. The prosecution of the appellant is therefore not vitiated because such an opportunity was not given. [594F-G] Dr. B. K. Pal Chaudhry v. The State of Assam, [1960] 1 S.C.R. 945 and Dr. Kuppa Goundan and Anr. v. M.S.P. Rajesh, [1966] Supp S.C.R. 373, distinguished. Rukmani Bai v. G. R. Govindaswamy Chetty, [1963] M.L.J. 421 and Re: Javvaji Uthanna, A.I.R. 1964 A.P. 368, referred Narayanswami vs State Of Maharashtras on 30 April, 1971 1 to. [In the instant case adequate opportunity was given to the appellant, before the findings were recorded to show cause why he should not be prosecuted. Therefore the Court did not find it necessary to express any opinion as to the correctness of the observations of the Madras and Andhra Pradesh High Courts in Rukmani Bai v. Govindaswamy Chetty and In re Javvaji Uthanna that even though sub-section (1) does not mandatorily require that any opportunity should be given to the person complained against there is no reason why the principle of audi alteram partem should not apply.] [595D-E] JUDGMENT: CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 3 of 1969. Appeal by special leave from the Judgment and Order dated September 2, 4, 1968 of the Bombay High Court, Nagpur Bench in Criminal Appeal No. 74 of 1968. W. S. Barlingay and A. G. Ratnaparkhi, for the appellant. P. K. Chatterjee and S. P. Nayar, for the respondent. The Judgment of the Court was delivered by Hegde, J.--The only substantial question that arises for decision in this appeal by special leave is as to whether the requirements of Section 479-A of the Code of Criminal Procedure have been complied with before instituting the complaint from which this appeal arises and if they have not been complied with whether the prosecution is vitiated ? In July 1965, there was a dacoity within the limits of Rail- way Police Station, Nagpur. Several properties belonging to the Railways were stolen in the course of that dacoity. During the investigation of that offence, the Railway Police sought the assistance of the local police. Inspector Khandagale (D. W. 1) who was incharge of the Tehsil police station directed the appellant, the Sub-Inspector working under him to assist the Railway Police in the investigation of the case. Part of the investigation was carried on by the appellant. Two of the persons arrested in connection with that dacoity were Ambadas and Deorao. They are said to have made certain statements on July 21, 1965. It is further alleged that in pursuance of the information given by Deorao, the police in the presence of the Panchas recovered certain properties. The concerned panchnama was attested by two witnesses viz. Pochanna and Abdul Gani. After the investigation a charge-sheet was filed against several persons including Ambadas and Deorao accusing them of the commission of an offence under Section 395, I. P. C. After preliminary enquiry the case was committed to the court of Sessions, Nagpur and was tried before the Additional Sessions Judge, Nagpur as Sessions Trial No. 8 of 1966 on his file. The trial of the case commenced on June 6, 1966. Pochanna, one of the Panch witnesses was examined on June 9, 1966. He did not support the prosecution. Abdul Gani, the other Panch witness also had been cited as a witness but he was not present in court on June 9, 1966. On June 10, 1966, one person who claimed himself to be Abdul Gani, who had attested the panchnama. was examined. He deposed that he had attested the panchnama and that he was present at the time Narayanswami vs State Of Maharashtras on 30 April, 1971 2 the recoveries were made. On June 11, 1966, the appellant was examined. The appellant deposed that the person examined on the previous day was Abdul Gani and that person had attested the panchnama in question. Thereafter the case took a new turn. It appears that the accused came to know that the person examined on June 10, 1966 was not Abdul Gani but one Dilawar and that the real Abdul Gani had migrated from Nagpur and settled down at Rajnandgaon. On enquiry their Counsel, Mr. Ingle came to know that Dilawar who posed himself as Abdul Gani was involved in a criminal case pending in the Munsiffs court in Nagpur. After ascertaining all the facts. Mr. Ingle filed an application before the learned trial Judge alleging that the witness who posed himself as Abdul Gani and spoke in support of the recovery panchnama was an imposter and that he was not the real attestor to the panchanmma Therein he further stated that the name of that person was Dilawar and be was the son of one Munirsha. Thereafter the learned trial judge recalled the said witness and further examined him on June 14, 1966, At that time the witness confessed that he was not Abdul Gani and that he did not attest the panchnama, but he had been compelled by the appellant to depose falsely. After the examination of this witness, the learned trial judge being prima facie of the opinion that the appellant had given perjured testimony and that he has fabricated false evidence, issued a notice to the appellant to show cause why he should not be prosecuted for perjury and for fabricating false evidence for the purpose of the case. The appellant showed cause on June 16, 1966. In the statement filed by him he again asserted that the person examined on June 10, 1966 was Abdul Gani, the attestor of the panchnama. He denied the fact that the said witness is Dilawar. He went further and averred that the witness had been purchased by the accused and that he has deposed falsely that he is not Abdul Gani. Thereafter the appellant was recalled and further examined. During the course of his examination he reiterated the stand taken by him in his written statement. In the course of his cross-examination, it was elicited from him that he knew the person concerned for over three years, thereby the possibility of the appellant giving incorrect evidence due to misconception was ruled out. After the appellant was reexamined, the accused produced a person in court who according to them was the real Abdul Gani. That person deposed that he is Abdul Gani and that he was the person who had attested the panchnama. The learned trial Judge took his sample signatures and compared the same with the signature found on the panchnama. He found them to tally with one another. After the conclusion of the trial, the learned trial judge acquitted all the accused and directed the prosecution of Dilawar and the appellant under Sections 195 and 196, I. P. C. At this stage it may be noted that in the course of his judgment in the dacoity case, the learned trial judge gave a finding that Dilawar and the appellant intentionally gave false evidence in the case and further the appellant had intentionally fabricated false evidence for the purpose of being used in that case. He also opined that for the eradication of the evils of perjury and fabrication of false evidence and in the interest of justice it is expedient that Dilawar and the appellant should he prosecuted for the offences committed by them. On the basis of that complaint, the appellant and Dilawar were tried, convicted and sentenced to suffer rigorous imprison- ment for three years. The appellant was convicted both for perjury as well as for fabricating false evidence. Under each head, he was awarded a sentence of three years rigorous imprisonment but the two sentences were ordered to run concurrently. Dilawar did not appeal against his conviction and sentence. The applellant appealed against to the High Court of Maharashtra. His appeal was summarily dismissed. Thereafter he appealed to this Court after obtaining special leave. In that appeal this court came to the conclusion that the High Court should not have :summarily dismissed the appeal as arguable questions of fact and law arose for consideration. It accordingly set aside the order of the High Court Narayanswami vs State Of Maharashtras on 30 April, 1971 3 and remitted the case to the High Court with a direction tore-admit the appeal and dispose of the same according to law. Accordingly the appeal was again heard by the Nagpur Bench of the Maharashtra High Court. The appeal has again been dismissed by the High Court. We have now to consider the correctness of the decision of the High Court. So far as the merits of the case are concerned, there is little to be said in favour of the appellant's case. There is hardly any doubt that Dilawar had posed himself as Abdul Gani. It is also clear from the evidence on record and from the circumstances of the case that the appellant was responsible for inducing Dilawar to pose as Abdul Gani. All that was said in favour of the appellant by Dr. Barlingay, his learned Counsel was that the possibility of the appellant innocently thinking that Dilawar was the real Abdul Gani cannot be ruled out. We are unable to accept this contention. It is clear from the admissions made by the appellant during the Sessions Trial which admissions have been brought on record as evidence in the present case that he knew Abdul Gani very well. Therefore there was no occasion for him to make any mistake. The appellant had strongly asserted in his statement in reply to the show cause notice as well as in his deposition in court that the person who was examined on June 10, 1966 was the real Abdul Gani and that he was the person who had attested the panchnama. Under these circumstances, the plea that the appellant gave evidence under an erroneous impression cannot be entertained. It is clear that the appellant has no regard for truth. We also do not find any merit in the contention that the explanation given by the appellant in the dacoity case as well as his evidence in that case are inadmissible, in the present proceedings. Admissions made in the explanation given and in the deposition are relevant and admissible in the present case. An admission is a substantive evidence, though it is open to the person who made the admission to show that the fact admitted is not correct. In the absence of any such proof the admission has to be considered as an important piece of evidence. As mentioned at the outset the only important question for decision in this appeal is whether the requirements of Section 479- A. Code of Criminal Procedure have been complied with before filing the present complaint. Section 479-A was incorporated into the Code of Criminal Procedure by Act 26 of 1955. That section reads : "479-A. Procedure in certain cases of false evidence. (1) Notwithstanding anything contained in sections 476 to 479 inclusive when any Civil, Revenue or Criminal Court is of opinion that any person appearing before it as a witness has intentionally fabricated false evidence for the purpose of being used in any stage of the judicial proceeding, and that, for the eradication of the evils of perjury and fabrication of false evidence and in the interests of justice, it is expedient that such witness should be prosecuted for the offence which appears to have been committed by him, the Court shall, at the time of the delivery of the judgment or final order disposing of such proceeding, record a finding to that effect stating its reasons therefore and may, if it so thinks fit, after giving the witness an opportunity of being heard, make a complaint thereof in writing signed by the presiding officer of the, Court setting forth the evidence which in the opinion of the Court is false or Narayanswami vs State Of Maharashtras on 30 April, 1971 4 fabricated and forward the same to a Magistrate of the first class having jurisdiction and may if the accused is present before the Court, take sufficient security for his appearance before such Magistrate and may bind over any person to appear and give evidence before such Magistrate : Provided that where the Court making the com- plaint is a High Court the complaint may be signed by such officer of the Court as the Court may appoint. Explanation.-For the purposes of this sub- section, a Presidency Magistrate shall be deemed to be a Magistrate of the first class. (2) Such Magistrate shall thereupon proceed according to law and as if upon complaint made under Section 200. (3) No appeal shall lie from any finding recorded and complaint made under sub- section(1). (4) Where, in any case, a complaint has been made under sub-section (1) and an appeal has been preferred against the decision arrived at in the judicial proceeding out of which the matter has arisen the hearing of the case before the Magistrate to whom the complaint was forwarded or to whom the case may have been transferred shall be adjourned until such appeal is decided ; and the Appellate Court, after giving the person against whom the com- plaint has been made an opportunity of being heard, may, if it so thinks fit, make an order directing the withdrawal of the complaint; and a copy of such order shall be sent to the Magistrate before whom the hearing of the case is pending. (5) In any case, where an appeal has been preferred from any decision of a Civil, Revenue or Criminal Court but no complaint has been made under sub-section (1), the power conferred on such Civil, Revenue or Criminal Court under the said sub-section may be exercised by the Appellate Court; and where the Appellate Court makes such complaint, the provisions of sub-section (1) shall apply accordingly, but no such order shall be made, without giving the person affected thereby an opportunity of being heard. (6) No proceedings shall be taken under Section 476 to 479 inclusive for the prosecution of a person for giving or fabricating false evidence, if in respect of such a person proceedings may be taken under this section". This section was introduced into the Code with the idea of eradicating to the extent possible the evils of perjury and fabrication of false evidence a widespread evil that is corroding our judicial system. The then existing procedure in the matter of prosecuting those who give false evidence or use fabricated evidence in judicial proceedings was found to be tardy and ineffective. Therefore power was given both to the trial court as well as to the appellate court to forthwith complain against witnesses guilty of perjury or fabricating false evidence without having recourse to the procedure laid down in Sections 476 to 479 of the Code of Criminal Procedure. But at the same time the Narayanswami vs State Of Maharashtras on 30 April, 1971 5 legislature felt that before proceeding against those persons the court must form an opinion that the witness has either given intentionally false evidence or has intentionally fabricated false evidence and further must form an opinion that it is expedient in the interests of justice that the witness should be prosecuted for the offence committed by him. It is clear from the findings given by the learned trial Judge in the dacoity case that he had come to a prima facie conclusion that the appellant had given false evidence and further that he had intentionally fabricated false evidence for the purpose of being used in that case. He had also come to the conclusion that for the eradication of the evils of perjury and fabrication of false evidence and in the interests of justice, it was expedient that the appellant should be prosecuted for the offences committed by him. Thus far there is no difficulty. But according to the appellant, the complaint is vitiated because after arriving at the findings in question and before filing the complaint, the learned Sessions Judge had not given him an opportunity to show cause why complaint should not be filed against him. As seen earlier he had given an opportunity to the appellant at an earlier stage to show cause why he 38-1 s. c. India/71 should not be prosecuted for giving false evidence and for fabricating false evidence. But we are told that the requirement of giving a notice to show cause why a complaint should not be filed. after the required findings are given and before making the complaint is mandatory and failure to do so has vitiated the prosecution. Let us now proceed to consider whether this contention is well founded. The material portion of Clause (1) of Section 479-A is : ".................... when any Civil, Revenue or Criminal Court is of opinion that any person appearing before it as a witness has intentionally given false evidence in any stage of the judicial proceeding or has intentionally fabricated false evidence for the purpose of being used in any stage of the judicial proceeding and that for the eradica- tion of the evils of perjury and fabrication of false evidence and in the interests of justice, it is expedient that such witness should be prosecuted for the offence which appears to have been committed by him, the court shall at the time of the delivery of the judgment or final order disposing of such proceeding, record a finding to that effect stating its reasons therefore and may if it so thinks fit, after giving the witness an opportunity of being heard make a complaint thereof in writing............... it (emphasis supplied) This provision clearly shows that what is mandatory is that the judge must give a finding that the witness has intentionally given false evidence in the proceeding before him or has intentionally fabricated false evidence for purposes of being used in that proceeding and that for the eradication of the evils of perjury and fabrication of false evidence and in the interests of justice, it is expedient that the witness should be prosecuted for the offence in question. Giving of an opportunity to the witness to show cause against the contemplated complaint is not mandatory. That step is required to be taken only if the court thinks fit-a matter left to the discretion of the trial court. This position is made further clear when we go to sub- section (5) of Section 479-A. This sub-section empowers the appellate court to make a complaint against a witness whom it thinks is guilty of perjury or guilty of fabricating false evidence to be used in the proceedings before it. It provides that where the appellate court proposes to make a complaint "the provisions of sub-section (1) shall apply accordingly but no such order shall be made without giving the person affected thereby an opportunity of being heard". Narayanswami vs State Of Maharashtras on 30 April, 1971 6 (emphasis supplied) In other words in the case of the trial court a discretion is given as to whether an opportunity should be given or not before filing a complaint to show cause against the proposed complaint but so far as the appellate court is concerned the giving of an opportunity to the witness to show cause against the contemplated complaint is made mandatory. The reason for this distinction is understandable. So far as the trial court is concerned, it is the court that has seen the witness and observed his demeanour. Therefore the legislature evidently thought that the question whether a witness should be given a further opportunity to show cause why complaint should not be filed against him may be left to the discretion of that court but the appellate court having no such opportunity, the legislature evidently thought that an opportunity should be given to the witness to show cause against the contemplated complaint. The conclusion arrived at by us accords with the view taken by the High Court of Madras in Rukmani Bai v. G. R. Govindaswamy Chetty(1) and by Andhra Pradesh High Court in Rc. Javvaji Uthanna(2). In those two decisions even after coming to the conclusion that Clause (1) of Section 479-A does not mandatorily require that any opportunity should be given to the person complained against to show cause against the contemplated complaint, the courts took the view that all the same notice should be issued as there is no reason why the well-known and well accepted principle of audi alteram partem should not apply. In this case it is not necessary to express any opinion as to the correctness of these observations. As seen earlier adequate opportunity had been given to the appellant to show cause against the proposed complaint. Dr. Barlingay, learned Counsel for the appellant placed reliance on two decisions of this Court namely in Dr. B. K. Pal Chaudhry v. The State of Assam(3) and Kuppa Goundan and anr. v. M. S. P. Rajesh(4) in support of his contention that after giving the, ;findings required under Section 479-A(1) and before filing the complaint, the court is bound to give the person concerned an opportunity to show cause against the proposed complaint against him. Neither of the two decisions bear on the question of law in issue. In Dr. B. K. Pal Chaudhry's case(1), the complaint was filed by the appellate court and not by the trial court. All that was held by this Court in that case is that it was the duty of the court acting under sub-sections 1 and 5 of Section 479-A of the Code of Criminal Procedure to record a finding that in its opinion intentionally false evidence has been given and for the eradication of the evils: of perjury and in the interests of justice, it (1) [1963] M.L.J. 421; (2) A.I.R. 1964 A.P. 368. (3) [1960] 1 S.C.R. 945. (4) [1966] Supp. S.C.R. 373, is expedient that there should be a prosecution for the offence and also to give the person against whom it is intended to proceed a hearing before making the complaint in respect of the offence. In Kuppa Goundan's case(5) the scope of sub-section (6) of Section 479-A, Code of Criminal Procedure came up for consi- deration. That case has nothing to do with the scope of sub-section (1) of Section 479-A. The observations made in those cases. must be read in the context in which they were made. In those cases this Court did not consider the scope of Section 479-A(1). In the result this appeal fails and the same is dismissed. K.B.N. Appeal dismissed. (1) (1966) Supp. S.C.R. 373. Narayanswami vs State Of Maharashtras on 30 April, 1971 7 | {
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R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 Equivalent citations: 1972 AIR 451, 1972 SCR (2) 580, AIR 1972 SUPREME COURT 451, 1972 LAB. I. C. 285, 1972 (1) LABLJ 231, 41 FJR 249, 24 FACLR 169, 1972 2 SCR 580, 1972 (1) SCJ 301 Bench: S.M. Sikri, J.M. Shelat, I.D. Dua PETITIONER: R. B. BANSILAL ABIRCHAND MILIS CO. LTD. Vs. RESPONDENT: LABOUR COURT NAGPUR & ORS. DATE OF JUDGMENT25/11/1971 BENCH: MITTER, G.K. BENCH: MITTER, G.K. SIKRI, S.M. (CJ) SHELAT, J.M. DUA, I.D. CITATION: 1972 AIR 451 1972 SCR (2) 580 1971 SCC (2) 154 CITATOR INFO : E 1972 SC1579 (4,6) R 1978 SC 275 (5) D 1988 SC1618 (7) ACT: Industrial Disputes Act-S. 33C(2)-Whether Labour Court has jurisdiction to entertain application for lay-off compensation under s. 33C(2). HEADNOTE: A textile mill in Madhya Pradesh employed about a thousand workers. The mill was owned by a firm, the appellant in the Second Appeal. A fire broke out in the Mill doing appreciable damage to some of the machines. From a letter of the Insurance company, the extent of the damage caused, was ascertained to be about Rs. 37,420/-. In terms of the R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 1 last notice given by the employers the mills did not commence work but instead, the management transferred the mills to the company which had been incorporated on 8th December 1959. From the facts it was clear, that the damage to the machinery was insignificant as against the total assets transferred to the company and the damage was not such that it was not possible to run the mills at all. Respondents 2 to 346 in the Second Appeal applied under s. 33C(2) of the Industrial Disputes Act to the Labour Court claiming lay-off compensation for the period they remained idle. The Labour Court held that there had been a lay-off within the meaning of s. 2(K-KK) of Industrial Disputes Act and except 'badli' workers the employees were entitled to compensation for the full period of 18 months. The appellants in both the appeals, filed writ petitions before the High Court for quashing the order of the Labour Court and the High Court raised several issues and ultimately remanded the matters back to the Labour Court for recording fresh evidence as to whether the applicants presented themselves for work at the appointed time at least once a day within the meaning of S. 25E(ii). On the application of the appellants the High Court granted certificates under Art. 133 (1) (a) of the Constitution. The point urged by the appellants was that if a claim is made on the basis of a lay off and the employer contends that there was no lay off but closure it is open to a labour court to entertain an application under s. 33C(2). It is more so when the dispute was not between a solitary workman on the one hand and the employer on the other but a whole body of workmen ranged against their employer who was faced with numerous applications before the labour court for computation of benefit in terms of money. Dismissing the appeals, HELD : (i) From the facts and circumstances of the Case, it was clear that the business of the company was continuing. They, in fact, continued to employ several employees and their notices say that some portion of the mills would continue to work. The Labour Court's jurisdiction could not be ousted by a mere plea denying the workmen's claim to the computation of benefit in terms of money. The Labour Court must go into the matter and come to a decision as to whether there was really a closure or a lay off. If it took the view that there was a lay-off, it would be acting within its jurisdiction if it awarded compensation in terms of the provisions in Ch. VA. The High Court is right in upholding the decision of the Court. [591 E-H] 581 (ii) Section 33C(2) takes within the purview, rases of workmen who claim that the benefits to which they were entitled should be computed in terms of money, even though the right to the benefit on which their claim is based, is disputed by their employers. In other words, the Labour Court may enquire into all such acts or disputes which are R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 2 incidental to the main dispute, [588 C-D] (iii) Section 25C provides for the measure of compensation to be awarded in cases of lay off of workers. The claim to compensation of every workman who is laid off is one which arises under the statute itself and s. 25C, provides for a benefit to the workman which is capable of being computed in terms of money under s. 33C(2), of the Act. The scheme of the Act is that an individual workman can approach a labour court for computation of compensation in terms of s. 25C of the Act and he is not concerned to see whether other co-workers will adopt the same course or not. The fact that a number of workers make claims of identical nature cannot make any difference to the individual workman who prefers the claim, The mere fact that a large number of persons makes a claim, of the same nature against the employer does not change the nature of the dispute so as to take it out of the pale of s. 7 of the Act and render the dispute one which can only be dealt with by an industrial tribunal. [588 E-H] Central Bank of India Ltd. v. P. S. Rajagopalan, [1964] 3 S.C.R. 140, followed., Mining Engineer v. Rameshwar, [1968] 1 S.C.R. 140, U.P. Electric Supply Co. v. R. K. Shukla, [1970] 1 S.C.R. 507, Ramkrishna Ramnath v. Presiding Officer, Nagpur, [1970] 2 L.L.J. 306 and Sawatram Mills v. Baliram, [1966] 1 S.C.R. 764, referred to and distinguished. JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2136 and 2295 of 1966. Appeals from the judgment and order dated February 2, 1965 of the Bombay High Court, Nagpur Bench in Special Civil Applications Nos. 246 of 1964 and 84 of 1963 respectively. G. B. Pai, P. C. Bhartari, J. B. Dadachanji, 0. C. Mathur and Ravinder Narain, for the appellant (in C.A. No. 2136 of 1966). S. V. Gupte, C. N. Nagle and A. G. Ratnaparkhi, for the appellant (in C.A. No. 2295 of 1966). M. C. Bhandare, F. P. Sathe, Praveen Pareek, Vineet Kumar and Indira Jai Singh, for respondents Nos. 131 to 142, 144 to 478, 480 to 488, 490 and 492 (in C.A. No. 2136 of 1966). The Judgment of the Court was delivered by Mitter, J. The main question in these two appeals by certi ficate is, whether the Labour Court bad jurisdiction to entertain the application for lay-off compensation under s. 33-C(2) of the Industrial Disputes Act. The appellant in the first appeal is a limited company which is now under liquidation while the appellant in the second is a partnership firm, the respondents in the two appeals being the Labour Court and different groups of workmen. R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 3 The facts are as follows. In Hinganghat there was a textile mill known as R. B. Bansilal Abirchand Mills which used to employ about 1000 men. The mill was owned by the firm, the appellant in the Second appeal. A fire broke out in the mill on March 27, 1959 doing appreciable damage to some of the machines. The employers put up a notice under their Standing Order No. 19 on March 28, 1959 to the effect that the fire of the previous night had caused heavy loss and extensive damage to the departments rendering the mill's working impracticable until necessary repairs and adjustments were carried out. The employees were however to note that the folding and workshop departments would continue to work as usual and notice of resumption of mill's working would be posted after necessary adjustment and repairs were carried out. This was followed by a second notice issued on April 2, 1959 to the effect that the pre- liminary survey of the fire have in conjunction with the insurance companies had shown that over 60 per cent of the machines in the carding. fly frame and Ring frame departments had been damaged and that the damage to the bulk of these machines was such that they might require complete replacement. It was further announced that in the circumstances the Management had no alternative but to declare stoppage of work of all the productive departments of the mills. Although it is not possible to be precise as to the extent of the damage caused, a fair idea of it can be had from a letter of Hukumchand Insurance Company Ltd. dated August 28, 1959 stating that the loss to buildings, machinery and accessories had been determined at Rs. 22,624/- by the surveyors. It appears that on 27th April 1960 the representatives of the insurance companies had agreed to re- assessment increasing the figure for repairs to Rs. 37,420/-. The third notice put up by the firm on April 29, 1960 gave no indication of the date of completion of the repairs. On September 13, 1960 the firm notified that the departments of the mills which had remained unproductive since 28th March, 1959 were expected to commence working on or about 30th September, 1960. The firm did not however work the mills in terms of the last notice but transferred the same to the company which had been incorporated on 8th December, 1959. It appears that the consideration for the transfer was Rs. 34,75,000/- made up of Rs. 11,50,000/- being the value of the immovable properties and Rs. 23,25,000/- being the value of movable properties. Compared to the second figure, the damage to the machinery as assessed by the insurance companies is insignificant. The first notice of 28th March, 1959 brings out the fact that the work in the mill as a whole was not. brought to a stand still and that it was to continue as usual in the folding and workshop departments. According to the second notice, the preliminary survey had shown that over 60 per cent of the machines in only three departments, namely, carding, fly frame and ring frame, had been damaged and that complete replacement of some of the above might be necessary. The notices do )not make out the case that the damage was such that it was not possible to run the mills it all. Towards the end of 1961 and the be-inning of 1962, respon- dents 2 to 346 in Civil Appeal No. 2295 of 1966 presented applications under s. 33-C(2) of the Industrial Disputes Act to the Labour Court at Nagpur claiming to have been laid-off from 28th March 1959 to 30th September, 1960. The appellants in the second appeal filed a written statement before the Labour Court contending inter alia that the Labour Court had no jurisdiction under s. 33-C(2) and that the parties had to work out R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 4 their rights within the four corners of the State Act i.e. the C.P. and Berar Industrial Disputes Settlement Act, 1947. By order dated 30th November, 1962 the preliminary objection as to jurisdiction of the employers was rejected by the Labour Court. On this, the appellants preferred an application under Art. 226 of the Constitution of India before, the Bombay High Court. By a common judgment rendered on 25th August, 1962 the High Court rejected the contentions of the appellants that the claim under the Industrial Disputes Act was not maintainable because of the operation of the State Act and further held that the Labour Court was competent to adjudicate on the merits of the claim of the workers even where the employer disputed not only the jurisdiction of the said court but also disputed that there was any lay-off as claimed and that the applicants were not workmen within the meaning of the Act. The appellants who were petitioners before the High, Court did not proceed further in the matter by applying for a certificate that the case was fit for appeal to this Court. By order dated November 30, 1962 the Labour Court dismissed as barred by the principles of res judicata 125 applications of some of the workers who had previously applied to the Labour Court at Bombay and whose applications had been subsequently dismissed by the Labour Judge, Bombay on the ground of lack of jurisdiction under s. 33-C of the Industrial Disputes Act. The claim dismissed related to the period between March 28, 1959 and May 2, 1960. The Labour Court allowed the claims relating to the period from May 3, 1960 to September 30, 1960 and ordered the issue of certificates of recovery under s. 33-C of the Act. Respondents 2 to 493 in Appeal No. 2136/1966 filed appli- cations under S. 33-C in the Labour Court at Nagpur claiming lay-off compensation for the period 28th March, 1959 to September 30, 1960. The Labour Court held by order dated February 29, 1964 that there had been a lay-off within the meaning of s. 2(kkk) of the Industrial Disputes Act and that the employees were entitled to compensation for the full period of 18 months but workers who were "badli" workers were not entitled to such compensation. The appellants in both the appeals preferred writ petitions before the High Court-of Bombay for quashing the order of the Labour Court. The two writ petitions were disposed of by the High Court by a common judgment on February 2, 1965. Before the High Court four main points were raised, namely 1. Whether having regard to the circumstances and the established facts there had been a lay-off within the meaning of the expression in s. 2(kkk) ? 2. If there had been a lay-off, whether compensation under s. 25-C read with S. 25-E of the Act was payable to the workers, also whether the workers were not entitled to compensation because of non-fulfilment of conditions prescribed in S. 25-E ? 3. Whether badli workers were entitled to lay-oil' compen- sation? and 4. Whether the quantum of compensation would be governed by the first proviso to S. 25-C or whether s. 25-C(ii) would be applicable entitling the workers to compensation for the full period of the lay-off i.e. 28-3-59 to 30-9-1960 ? On the first question the High Court held that "by every indication and circumstance and by express declaration of its management it was a running industry", meaning thereby that there was no closure. On the second question, the High Court held that the Labour Court should have considered whether the workmen had proved that they had R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 5 presented themselves for work or not in terms of S. 25-E to be able to claim compensation under s. 25-C, excepting with regard to three workmen who cave clear evidence on the point. It also held that badli labour were not entitled to lay-off compensation. It turned down the contention that compensation was claimable only in terms of the Standing Orders of the Mill. In the result the High Court remanded the matters 'back to the Labour Court for recording fresh evidence on behalf of both the parties on the following issue : Do the applicants prove that they presented themselves for work at the appointed time at least once a day within the meaning of s. 25- E(ii)? On the applications of the appellants, the High Court granted certificates under Art. 133(1) (a) of the Constitution. Before us learned counsel for the respondents Mr. Bhandare sought to resist the main contention of the appellants by urging that the decision of the High Court in 1962 operated as res judicata in the present appeals. He said that it was open to the appellants to challenge the conclusion of the High Court arrived at in 1962 by moving the High Court by an application for the issue of a certificate of fitness for appeal to this Court and in the event of refusal thereof, to ask for special leave of this Court. In the absence of such applications the determination of the High Court in 1962 had become final and the question as to jurisdiction could not be canvassed again. We do not think it necessary to go into this question as the matter can be disposed of even on the basis that it is open to the appellants to raise the question of jurisdiction before this Court although the point was not expressly taken in the grounds for leave to appeal to this Court before the High Court. The substantial point of Mr. Gupte appearing for one set of appellants was that it being the case of the employers that there had been a closure of the mills the dispute could not be adjudicated upon by a Labour Court and was entertainable only by an Industrial Tribunal under the provisions of s. 10(1) (d) of the Act. Mr. Gupte drew our attention to various sections of the Act in support of his contention that an "industrial dispute meant primarily a dispute or difference between employers on the one hand and employees on the other connected with the employment or non-employment or the terms of employment etc. of any person. He urged that the basic underlying idea was that to be an industrial dispute the dispute had to be one which affected the employee,; ,-is a class as pitted against their employers. He argued that individual workman could only approach the Labour Court for lay-off compensation when prima facie there was no question of closure of the industry by the employers and drew our attention to the definition of 'lay-off' ins.2(kkk). According to him in a situation like the present where the inability on the part of the employer to give employment was not limited to a handful of persons but extended to the employees wholesale arising out of a calamity it could not be said that there had been a lay-off of the employees. Although the word 'closure' is not defined in the Act, counsel argued that the expression would aptly describe the condition prevailing in the mills as a result of the fire on March 27, 1959. R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 6 We find ourselves unable to accept Mr. Gupte's contention. We may in this connection refer to the relevant provisions in the Act. The authorities under the Act are specified in different sections of Chapter II containing ss. 3 to 9. Under s. 7 it is open to the appropriate Government by notification in the Official Gazette constitute one or more Labour Courts for the adjudication of industrial disputes relating to any matters specified in the Second Schedule and for performing such other functions as may be assigned to them under the Act. Under s. 7-A the appropriate Government may, by notification, constitute one or more Industrial Tribunals for the adjudication of industrial disputes relating to any matter, whether specified in the Second Schedule or the Third Schedule. In the Second Schedule are set forth certain matters in items 1 to 5 which are within the jurisdiction of a Labour Court and item 6 gives the Labour Court jurisdiction to deal with "all matters other than those specified in the Third Schedule". The Third Schedule contains 11 items of which item 10 reads : "Retrenchment of workmen and closure of establishment". Lay-off is not expressly covered by either of the two Schedules. It would therefore be a matter covered by the Second Schedule tinder item 6 thereof. S. 10 (1) (c) enables the appropriate Government when it is of opinion that an industrial dispute exists or is apprehended inter alia, to refer the dispute or any matter appearing to be connected with, or relevant to, the dispute, if it relates to any matter specified in the Second Schedule to a Labour Court for adjudication. So far as an Industrial Tribunal is concerned,, the appropriate Government may under s. 10(1)(d) make reference to it not only in cases covered by the Second Schedule but also those included in the Third Schedule except that when the dispute relates to any matter in the Third Schedule and is not likely to affect more than one hundred workmen, the appropriate Government may, if it thinks fit, make a reference to a Labour Court tinder cl. (c). According to Mr. Gupte, Chapter V-A of the Act introduced in the year 1953 providing for claims being preferred by individual workmen to compensation could only be resorted to when the dispute was such as would not call for a reference under S. 10 (1) (d). He urged further that it being open to the Central Government to amend the Second and the Third Schedules by issue of notification under s. 40 of the Act, so long as the said Schedules stood unaltered, it should be presumed that the legislature did not intend a Labour Court to exercise its jurisdiction in cases where there was a serious question of closure of an establishment put forward by the employers. All this, argued counsel, went to show that if the essential nature of the dispute was a difference between the employer on the one hand and a very large body of workmen on the other, the employer making an assertion involving a matter covered by the Third Schedule to the Act, it would not be open to the workmen to prefer claims individually under s. 33-C. The ambit of s. 33-C has been examined by this Court on a number of occasions and reference may usefully be made to some of the authorities in this connection to find out whether the Labour Court was within its jurisdiction to entertain the applications which were followed by the writ petitions to the Bombay High Court. in Central Bank of India Ltd. v. P. S. Rajagopalan(1) the legislative history of s. 33-C was gone into at length and the R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 7 conclusion of this Court on the scope thereof was as follows (see p. 150) "The legislative history to which we have just referred clearly indicates that having provided broadly for the investigation and settlement of industrial disputes on the basis of collective bargaining, the legislature recognised that individual workmen should be given a speedy remedy to enforce their existing individual rights, and so inserted s. 33-A in the Act in 1950 and added s. 33-C in 1956. These two provisions illustrate the cases in which individual workmen can enforce their rights without having to take recourse to s. 10(1) of the Act, or without having to depend upon their Union to espouse their cause. Therefore, in construing s. 33-C we have to bear in mind two relevant considerations. The construction should not be so broad as to bring within the scope of s. 33-C cases which would fall under s. 10(1). Where industrial disputes arise between employees acting collectively and their employers, they must be adjudicated upon in the manner prescribed by the Act, as for instance, by reference under s. 10(1). These disputes cannot be brought within the purview of s. 33-C. Similarly, having regard to the fact that the policy of the Legislature in enacting s. 33-C is to provide a speedy remedy to the individual workmen to enforce or execute their existing rights, it would not be reasonable to exclude from the scope of this section cases of existing rights which are sought to be implemented by individual workmen." Turning down the contention put forward on behalf of the em- ployers there that computation under s. 33-C(2) would only be (1) [1964] 3 S.C.R. 140. possible where the right of the workman to receive the benefit was not disputed, it was said : "The claim under S. 33-C(2) clearly postulates that the determination of the question about computing the benefit in terms of money may, in some cases, have to be preceded by an enquiry into the existence of the right and such an enquiry might be held to 'be incidental to the main determination which has been assigned to the Labour Court by sub-s. (2). As Maxwell has observed " where an Act confers jurisdiction, it impliedly also grants the power of doing all such acts, or employing such means, as are essentially necessary to its executions" Accordingly it was held that s. 33-C(2) took "within the purview cases of workmen who claimed that the benefit to which they are entitled should be computed in terms of money, even though the right to the benefit on which their claim is based is disputed by their employers". Following the above decision, it was held in Mining Engineer v. Rameshwar(1) that sub-s. (2) of s. 33-C was not confined to cases arising under an award, settlement or even under the provisions of Chapter V-A of the Act and the benefit provided in the bonus scheme under the Coal Mines Provident Fund and Bonus Schemes Act, 1948 would be covered by sub-s. (2). Section 25-C provides for the measures of compensation to be awarded in cases of lay-off of workers. S. 25-F of the Act however provides inter alia that no compensation shall be paid to a workman who has been laid-off if he does not present himself for work at the establishment at the appointed time during the normal working hours at least once a day. R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 8 The claim to compensation of every workman who is laid-off is one which arises under the statute itself and s.. 25-C provides for a benefit to the workman which is capable of being computed in terms of money under S. 33-C(2) of the Act. The scheme of the Act being to enable a workman to approach a Labour Court (oil computation of the compensation claimed by him in terms of s. 25-C of the Act he is not concerned to see whether other co-workers will or will not adopt the same course. The fact that a number of workers make claims of identical nature i.e. to compensation for lay-off, arising out of the same set of facts and circumstances cannot make any difference to the individual workman who prefers the claim. The mere fact that a large number of persons makes a claim of the same nature against the employer, does not change (1) [1968] 1 S.C.R. 140. the nature of the dispute, so as to take it out of the pale of s. 7 of the Act and render the dispute one which can only be dealt with by an Industrial Tribunal to which reference can be made by the appropriate, Government. Reference was however made to the decision of U.P. Electric Supply Co. v. R. K. Shukla(1) in aid of the contention for the appellants that if the dispute touches a matter in the Third Schedule the Labour Court will not have jurisdiction to. deal with it. In this case the State Electricity Board, U.P. took over the undertaking of the company from September 16, 1964 in exercise of power under sec. 6 of the Indian Electricity Act, 1910 and under the provisions of the appellants' licences. As a result thereof, the company ceased to carry on the business of generation and distri- bution of electricity thereafter. On September 16, 1964 the Board issued letters of appointment to the employees of the appellant in the posts and positions which they had previously held. According to the respondents they were not given credit for their past services with the company. All the workmen of the two undertakings were taken over in the employment of the Board with effect from September 17, 1964. 443 workmen employed in the Allahabad undertaking filed applications before the Labour Court under s. 6-H(2) of the U.P. Industrial Disputes Act, 1947 for payment of retrenchment compensation and salary in lieu of notice. The orders for payment of retrenchment compensation were resisted by the company inter alia on the ground that the workmen were )not in fact retrenched and in any event since they were admitted to the service of the Board on terms not less favorable than those enjoyed before, the company was under no liability to pay retrenchment compensation and the Labour Court was incompetent to entertain and decide the applications for awarding such compensation. On the above facts the Court in the appeal by special leave observed "the Company had expressly raised a contention that they had not retrenched the workmen and that the workmen had voluntarily abandoned the Company's service by seeking employment with the Board even before the Company closed its working." Reliance was however placed on certain passages in the judgment at p. 513 and at p. 517 which according to counsel for the appellants went to show that when the factum of retrenchment is questioned, there is a dispute which is 'exclusively within the competence of the Industrial Tribunal. These observation cannot be considered binding on us as all the aspects were not placed before the Court then. Reference was also made to the case of Ramakrishna Ramanath v. Presiding Officer, Nagpur(2). In that case the appellant bad (1) [1970] 1 S-C.R. 507. 7-L643 Sup. CI/72 (2) (1970) 2 L.L.J. 306. issued a notice in writing on the 1st July 1958 following the issue of a notification by the Government of Bombay under S. 5 (2) read with s. 5(1) of the Minimum Wages Act, 1948 to the R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 9 effect that it had been forced to close its factory as from the 1st of July 1958 by the action of the Bombay Government in issuing the said notification inasmuch as minimum rates of wages made payable as from 1st July, 1958 were so excessive and unworkable that it was impossible for any employer to give effect to them and the notification had made the working of the business a financial impossibility. The workers were also informed that the closure of the business would continue as long as the notification dated 11th June, 1958 continued in force. The Government of Bombay withdrew the notification after some time and the appellants started to work the factory from 10th August, 1958 taking in all employees who were there before 1st July. The respondent No. 2 put in an application before the Presiding, Officer, Labour Court Nagpur on 5th November, 1963 claiming Rs. 334.80 on account of retrenchment compensation and one month's pay in lieu of notice. The appellant put in its written statement, inter alia, contending that the said respondent was not an employee but an independent contractor and that there had been no closure of the business to attract s. 25-FFF of the Act and that in any event the dispute could not be referred to a Labour Court. In the appeal by special leave to this Court it was contended, inter alia, (a) that the dispute did not fall within the jurisdiction of the Labour Court but within that of an Industrial Tribunal, (b) that there was really,-no closure of the appellant's business but only a lock out or a temporary stoppage of work not attracting the operation of s. 25-FFF and (c) that in order that the respondent could claim. the benefit of 25-F it was obligatory on her to show that she had worked for 240 days in each year of service for which the claim was made. This Court found that the appellant had not taken the plea in its written statement and that there had been a lay-off- or a lock-out and that it had only submitted that the closure in accordance with the notice did not fall within the scope of s. 25-FFF of the Act. By issues 6 and 7 the appellant raised questions as to whether the closure had resulted in the retrenchment of the applicant and whether the closure was beyond the control of the employer. No dispute was raised about the factum of closure. Strangely enough it was urged before this Court that "there could be no closure because the appellant was ,merely protesting against irresponsible action of the Government action and had no intention to close the business permanently." The Court found that the question of lock-out was not mooted when the issues were settled nor had any plea been taken that there had been a temporary cessation of work under Standing Order No. 11. In our view, the observations in this case do not help the appellants before us. In Sawatram Mills v. Baliram(1) the claim of the workmen for lay-off during a certain period before the Second Labour Court Bombay was resisted inter alia on the ground that the said court had no jurisdiction as the dispute fell to be tried under the C.P. and Berar Industrial Disputes (Settlement) Act, 1947, and, secondly, the application under s. 33-C was incompetent because it was not a claim for money due and calculations had to be made for ascertaining the sum due. On a construction of the sections of the industrial Disputes Act this Court held that : "Compensation for lay-off could only be determined under Chapter V-A of the Industrial Disputes Act and the workmen were entitled under s. 3 3 C (1) to go before the Second Labour Court to realise moneys due from their employers under Chapter V-A." The Court also negatived the contention that the Industrial Disputes Act did not apply but the C.P. and Berar Industrial Disputes (Settlement) Act did as the State Act made no mention of lay-,off or R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 10 compensation for lay-off. The other argument was rejected following the judgment in Kays Construction Co. (P) Ltd. v. State of U.P. & ors. In substance the point urged by the appellants was that if a claim is made on the basis of a lay-off and the employer contends that there was no lay-off but closure, it is not open to a labour court to entertain an application under s. 33-C(2). The more so it was stated, when the dispute was not between a solitary workman on the one hand and the employer on the other but a whole body of workmen ranged against their employer who was faced with numerous application-, before the Labour Court for computation of benefit in terms of money. As has been said already, the Labour Court must go into the matter and come to a decision as to whether there was really a closure or a lay-off. If it took the view that there was a lay-off without any closure of the business it would be acting within its jurisdiction' if it awarded compensation in terms of the provisions of Chapter V-A. In our opinion the High Court's conclusion that "In fact the business of this Company was continuing. They in fact continued to employ several employees. their notices say that some portions of the mills would continue to work" was unexceptionable. The notices which we have referred to can only lead to the above conclusion. The Labour Court's jurisdiction could not be ousted by a mere plea denying the workman's claim to the computation of ,lie benefit in terms of money: the (1) [1966] I S.C.R, 764. (2) [1965] 2 S.C.R. 276. Labour Court had to go into the question and determine whether, on the facts, it had jurisdiction to make the computation. It could not however give itself jurisdiction by a wrong decision on the jurisdiction plea. Appearing for the appellant in Civil Appeal No. 2136/66 Mr. Pai contended that his clients' liability would only commence after the 1st October, 1960 when it started to run the mill. This point had not been canvassed before the High Court and consequently we cannot entertain it. In the second case Mr. Gupte argued that although his client did not raise the question of liability before, there was no question of any concession and he should be allowed to contest his liability on the basis of the application preferred for urging additional grounds before this Court. As this point was not urged in the court below this application must be refused. The last point urged was that in view of Standing Orders 19 and 21 the quantum of compensation had to be scaled down or measured in terms of the Standing Order 19 the employer could, in the event of fire, breakdown of machinery etc. stop any machine or machines or department or departments wholly or partially or the whole or a part of the establishment for any period, without notice and without compensation in lieu of notice. Under Standing Order 21, any operative played off under Standing Order 19 was not to be considered as dismissed from service but as temporarily unemployed and was not to be entitled to wages' during such unemployment except to the extent mentioned in Standing Order No. 19. The High Court rightly turned down the contention in view of S. 25-J of the Act under which the provisions of Chapter V-A are to have effect notwithstanding anything inconsistent therewith contained in any other law including Standing Orders made under the Industrial Employment (Standing Orders) Act, 1946. R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 11 These appeals were originally heard by a Bench of five, Judges including S. C. Roy, J. who expired a few days back. The above judgment was concurred in by our late colleague. We however gave a further hearing to the parties at which nothing was addressed to us to make us change our opinion already formed. In the result, the appeals fail and are dismissed with costs. One set of hearing fee. S.C. Appeals dismissed. R. B. Bansilal Abirchand Milis Co. Ltd vs Labour Court Nagpur & Ors on 25 November, 1971 12 | {
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State Of West Bengal vs North Adjai Coal Co. Ltd. on 8 January, 1971 Equivalent citations: (1971)1SCC309, [1971]27STC268(SC), AIRONLINE 1971 SC 24 Author: J.C. Shah Bench: J.C. Shah, A.N. Grover, K.S. Hegde JUDGMENT J.C. Shah, C.J. 1. Section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941, provides : (2) In this Act the expression 'taxable turnover' means in the case of a dealer who is liable to pay tax under Section 4 or under Sub-section (3) of Section 8, that part of his gross turnover during any period which remains after deducting there from (a) his turnover during that period on.... (v) sales of goods which are shown to the satisfaction of the Commissioner not to have taken place in West Bengal, or to have taken place in the course of inter-State trade or commerce, within the meaning of Section 3 of the Central Sales Tax Act, 1956, or in the course of import of the goods into, or export of the goods out of, the territory of India, within the meaning of Section 5 of that Act. 2. The respondent-company carries on the business of a colliery. Pursuant to an agreement between the Government of India and the Government of Pakistan, the former agreed to release certain quantities of coal for consumption in East Pakistan. The respondent-company delivered coal to the Fuel Inspector, Eastern Bengal Railway, East Pakistan, of the total value of Rs. 88,929-10-0. In respect of this supply of coal, bills were drawn by the respondent in the name of the Deputy Coal Commissioner (P), Ministry of Steel and Mines, Government of India. Under an arrangement between the Government of India and the Government of Pakistan, the price of coal so supplied was to be realized by the Government of India from the Government of Pakistan. In respect of this supply, the tax authorities of the State of West Bengal levied sales tax under the Bengal Finance (Sales Tax) Act, 1941. The contention raised by the respondent-company that it was exempt from liability to pay sales tax under Section 5(2)(a)(v) was rejected by the Sales Tax Officer and by the Deputy Commissioner in appeal. Without invoking the revisional jurisdiction of the Board of State Of West Bengal vs North Adjai Coal Co. Ltd. on 8 January, 1971 1 Revenue, the respondent moved a petition before the High Court of Calcutta under Article 226, challenging the levy. The petition filed by the respondent was dismissed by a Single Judge, but on appeal under the Letters Patent, the claim was allowed and the High Court declared that the respondent was exempt from liability to pay sales tax in respect of coal supplied to the Government of Pakistan. Against that order of the High Court, this appeal has been filed by the State of West Bengal. 3. It is urged in the first instance that the High Court was incompetent to entertain the writ petition because the respondent had failed to exhaust the statutory remedies permissible under the Bengal Finance (Sales Tax) Act. It was submitted that a revision application lay to the Board of Revenue, and without moving the Board of Revenue, the respondent could not file a petition before the High Court. There is no substance in this contention. It is true that normally before a petition under Article 226 of the Constitution is entertained, the High Court would insist that the party aggrieved by the order of a quasi-judicial tribunal should have recourse to the statutory authorities, which have power to give relief. But that is a rule of practice and not of jurisdiction. In appropriate cases, the High Court may entertain a petition even if the aggrieved party has not exhausted the remedies available under a statute before the departmental authorities. In the present case, in the view of the High Court a case was made out for its interference with the order passed by the Deputy Commissioner, and we see no reason to hold that the High Court had not properly exercised jurisdiction in this case. The facts were apparently not in dispute, and the only question was whether in the facts and circumstances of the case, the respondents were entitled to the exemption claimed by them. In the circumstances the High Court cannot be said to have acted improperly in entertaining the petition. 4. It was then urged that there was no contract of sale between the respondent and the Pakistan Government, and that there was a contract between the Government of India and the respondent, and, on that account, the respondent was not entitled to the exemption claimed. It is difficult to appreciate the argument. The questions in dispute were whether there was a sale, and if so, whether the sale was exempt from liability to pay tax. Without deciding whether there was a sale by the respondent to the Government of India or to the Government of Pakistan, it is sufficient for the purpose of this case to observe that the sale if any was by virtue of Section 5(2)(a)(v) exempt from liability to sales tax under the Bengal Finance (Sales Tax) Act, for it was a sale in the course of export. No argument was advanced before us which would justify us in taking a different view. 5. The appeal, therefore, fails and is dismissed. The respondents have not appeared. There will be no order as to costs. State Of West Bengal vs North Adjai Coal Co. Ltd. on 8 January, 1971 2 | {
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Vegoils Private Lemited vs The Workmen on 10 September, 1971 Equivalent citations: 1972 AIR 1942, 1972 SCR (1) 673, AIR 1972 SUPREME COURT 1942, 1972 LAB. I. C. 760, 1971 2 LABLJ 567, 1973 (1) SCJ 471, 1972 (1) SCR 673, 24 FACLR 4, 40 FJR 101 Author: C.A. Vaidyialingam Bench: C.A. Vaidyialingam, P. Jaganmohan Reddy PETITIONER: VEGOILS PRIVATE LEMITED Vs. RESPONDENT: THE WORKMEN DATE OF JUDGMENT10/09/1971 BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. REDDY, P. JAGANMOHAN CITATION: 1972 AIR 1942 1972 SCR (1) 673 1972 SCC (2) 724 ACT: Industrial Dispute-Abolition of Contract Labour-Principles to be followed-Effect of the Contract Labour (Regulation and Abolition) Act (Central Act 37 of 1970) and the Maharashtra Mathadi, Hamal and other Mannual Workers (Regulation of Employment and Welfare) Act 30 of 1969. HEADNOTE: The appellant--a private limited company-carried on the business of' manufacturing edible oils, soaps and certain by-products. In connection with its business the appellant employed about 700 permanent workmen. However for loading and unloading seed and oil cake bags and for feeding the hoppers in the solvent extraction plant the appellant employed labour through a contractor. The workmen in an industrial dispute claimed inter alia that the work of loading and unloading seed bags as well as that of feeding Vegoils Private Lemited vs The Workmen on 10 September, 1971 1 the hoppers was of a perennial nature and therefore in respect of these contract labour should be abolished. The Industrial Tribunal on considering the evidence before it held that the work of feeding the hoppers could not be said to intermittent and sporadic as claimed by the appellant; it was on the other hand closely connected with the principal activity of the appellant. In similar plants in the region the work of feeding the hoppers was carried on by permanent workmen. On the basis of these factors the Tribunal held that the appellant also should carry out this work through permanent workmen. In the matter of loading and unloading of seed and cake bags the Tribunal held that these activities were also closely connected with the main industry and the work was of.a permanent character. The Tribunal noted that the comparable units in the same region carried on the work of loading and unloading through contract labour, but nevertheless, on the view that contract labour must be discouraged, the Tribunal held that in this respect also the appellant must employ only permanent workmen. The Tribunal referred to the Contract Labour (Regulation and Abolition) Act 1970, (Central Act 37 of 1970) and the Maharashtra Mathadi Hamal and Other Manual Workers (Regulation of Employment and Welfare) Act 30 of 1969 and observed, that these two enactments also supported its view. In appeal by special leave before this Court the appellant apart from questioning the Tribunal's decision on merits challenged the jurisdiction of the Tribunal to consider the question of abolition of contract labour in view of the provisions of the aforesaid two Acts. HELD: (i) The Industrial Tribunal acquired jurisdiction to entertain the dispute in view of the reference made by the State Government on April 17, 1967. Admittedly on that date neither Central Act 37 of 1970 nor, Maharashtra Act 30 of 1969 had been passed. Even during the proceedings before the Tribunal the appellant raised no objection after the passing of the two enactments that the Tribunal had no longer jurisdiction to adjudicate upon the dispute. Under these circumstances the Tribunal had to adjudicate upon the point referred to it having due regard to the principles laid down by the Courts, particularly this Court governing the abolition of contract labour. [689 E-G] (ii) Central Act 37 of 1970 had received the President's assent before the passing of the Tribunal's award but it came into force after the. 9-L3SupC.I./72 674 said award. The State Act had come into force before the passing of the award. Though the contention that the Tribunal lost jurisdiction to consider the question of contract labour in view of these enactments could not be accepted this Court would be justified when dealing with this appeal to give effect particularly to the provisions of the Central Act having due regard to the clearly expressed intention of the legislature in the said Act regarding the Vegoils Private Lemited vs The Workmen on 10 September, 1971 2 circumstances under which contract labour can be abolished. [689 C-D; 690 B] (iii) Even according to the evidence of the appellant's witnesses it was clear that the feeding of hoppers in the solvent extraction plant was an activity closely and intimately connected with the main activity of the appellant, namely, crushing oil cakes and oil seeds for extraction of oil and other chemical production. Excepting for a few days this work had that by employing contract labour for this purpose the appellant would be enabled to keep down the costs on the ground that there would not be sufficient work for all the workmen if permanent labour was employed. There was no wrong approach by the Tribunal in this regard. Further the award of the Tribunal abolishing the contract labour in respect of feeding the hoppers was fully justified because it was in accordance with the principles laid down by this Court and substantially incorporated in ,Cis. (a) to (d) of s. 10(2) of the Central Art. The Tribunal's direction in this regard must therefore be upheld.. [680 C-F; 681 A-B; 694 C-D] (iv) However the Tribunal's direction to the appellant not to engage :any labour through a contractor for the work of loading and unloading after May 1, 1971 must be set aside. The Central Act had come into force on February 10, 1971. Under s. 10 of the said Act the jurisdiction to decide matters connected with prohibition of contract labour is vested in the appropriate Government. Therefore with effect from February 10, 1971 it is only the appropriate Government that can prohibit contract labour by following the Procedure and in accordance with the provisions ,of the Central Act. The Industrial Tribunal in the circumstances had no ,jurisdiction, though its award was dated November 20, 1970, to give a ,direction in that respect which becomes enforceable after the date of the ,coming into force of the Central Act. In any event, such a direction contained in the award could not be enforced from a date when abolition of contract labour can only be done by the appropriate Government in accordance with the provisions of the Central Act. [692 A-D] Further under cl. (c) of s. 10(2) of the Central Act one of the relevant factors to be taken into account is to consider, when contract labour regarding any particular type of work is proposed to be abolished, whether that type of work is done ordinarily through regular workmen in the establishment, or an establishment similar thereto. In the present case similar establishments, as noted by the Tribunal, employed contract labour for loading and unloading. The evidence also showed that the work of loading and unloading required varying numbers of workmen from day to day justifying the employment of contract labour under the ,.principles laid down by this Court. [693 E] The Standard-Vacuum Refining Co. of India Ltd. v. Its Workmen & Ors., [1960] 3 S.C.R. 466, Shibu Metal Works v. Vegoils Private Lemited vs The Workmen on 10 September, 1971 3 Their Workmen, [1966] 1 L.L.J. 717 and National Iron and Steel Co. Ltd. and Ors. v. The State of West Bengal and Anr., [1967] 2 S.C.R. 391 referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION Civil Appeal No. 620 of 1971. 970, of the Industrial Tribunal, Maharashtra, Bombay in Refeence (I.T.) No. 110 of 1967. G. B. Pai, P. N. Tiwari and 0. C. Mathur, for the appellant. The respondent did not appear. The Judgment of the Court was delivered by Vaidialingam J. This appeal, by special leave, is, directed against the award (Part.-I) dated November 20, 1970 of the Industrial Tribunal, Maharashtra, Bombay in Reference (I.T. No. 110 of 1967). The reference was made by notification dated April 17, 1967 and three questions were referred for adjudication. We are not concerned in these proceedings with the subject matter of dispute relating to demand Nos. 2 and 3. Part I of the award, against which this appeal is preferred, related to demand No. 1, which was as follows: "Demand No. 1--Abolition of contract system: The Company shall abolish the contract system in whatever form and in any department of the company existing at present and the workmen employed by the contractors shall be treated as the Company's regular employees and all the benefits of service conditions and wages available to the company's employees will be extended to them." It will be seen that the above demand consisted really of two parts : (a) that the contract system should be abolished, and (b) that the workmen employed by the contractor should be treated as the appellant's regular employees with all the benefits of service conditions that are available to the regular employees of the Company. The original parties to the reference were the Swastik Oil Mills Ltd., Wadala, Bombay and the workmen employed therein as represented by the Dyes and Chemical Workers Union. Prior to its incorporation in 1968, the appellant Company was carrying on business of manufacturing edible oils, soaps and its by products such as glycerine and deoiled cake meal in the name of Karamchand Premchand Private Limited. In or about March, 1970 the latter firm was taken over by the appellant Company. The said business was originally carried on by Swastik Oil Mills Limited, which by the orders of the High Courts of Bombay and Gujarat was amalgamated with Karamchand Premchand Private Limited on April 18, 1967. Since the taking over of the said Karamchand Premchand Private Limited by the, Vegoils Private Limited, namely, the appellant, the Vegoils Private Lemited vs The Workmen on 10 September, 1971 4 latter has been carrying on the said business. In connection with its business, the appellant employs about 700 permanent workmen at its factory in Wadala,, Bombay. According to the appellant, it has been employing for more than 30 years a contractor for loading, unloading, weighing and stacking materials and bags and feeding the hoppers. It may be mentioned at this Stage that the workmen had raised a dispute under demand No. 1 regarding the abolition of the contract system of employing labour in the two departments of the appellant, namely, (i) in the canteen section, and (ii) in the seeds godown and the solvent extraction plants section. But before the Industrial Tribunal the Union did not press their demand for abolition of contract labour in respect of the canteen section. As a consequence the Industrial Tribunal in the award has rejected the claim of the Union for abolition of the contract system in the canteen section. There fore, we will make no further reference to the stand taken by the parties regarding this section, in our judgment. We will now refer to the stand taken by the appellant and the Union regarding the abolition of contract labour in respect of seeds godown and the solvent extraction plants. The stand taken by the Union in its statement of claim dated May 30, 1967 was briefly as follows : The Company had work in this section which was of a regular and continuous nature. The work in that section was not intermittent or accidental type. The work required to be performed is of loading and unloading seed bags and also to feed the hoppers for the requirements of solvent extraction plants. The product left after the process of solvent extraction also is to be filled in gunny bags. All these items of work are of a permanent nature and was being regularly carried out by the contractor's workmen by employing on an average more than 200 workmen. The work being of a continuous nature is being carried out throughout the year. Further, this type of work is an essential part of the solvent extraction unit. As the jobs were essentially connected with the day to day work of the Company, and as they were continuous, the employment of a contractor for getting these types of work done, is nothing but an unfair labour practice adopted by the appellant. The employment of contract labour has been disapproved by the various Committees and Commissions. This Court has also discussed and laid down principles regarding the employment of contract labour. The labourers working under a contractor were at his mercy and were not getting the benefits which the permanent employees of the appellant Company are normally entitled to. To avoid giving the benefit to such workmen, the Company has adopted the device of having the work done by contract labour. The demand for abolition of contract labour is fair and reasonable and as such the demand has to be acceded to. In the written statement dated July 22, 1967, which was originally filed by the Swastik Oil Mills Limited,, the Company took up the following contentions : Wherever the work was of a perennial nature, the Company has been having that work done only by its permanent employeesBut where certain items of work were of Vegoils Private Lemited vs The Workmen on 10 September, 1971 5 intermittent and sporadic nature and irregular in its working, to ensure efficiency, economy and proper working, the appellant had to engage contract labour. In respect of the seeds godown and solvent extraction plants, the appellant classified the type of work into four parts : (i) unloading of seeds and cake bags from railway wagons and motor trucks and stacking the same in the godown for easy identification in separate lots, (ii) loading of deoiled cake meal bags into motor lorries and wagons whenever they had to be despatched from the factory, (iii) feeding of cake in the hopper which in turn feed the solvent extraction plants through a system of long screw conveyors and other necessary equipment; and (iv) filling, weighing and stacking ,of small bags. The full particulars regarding the type of work involved in the above four items were given. All these items of work were of an intermittent and irregular nature. The loading and unloading in wagons and trucks was not a regular affair but dependent on the availability of railway wagons and trucks. The feeding of cakes into hoppers and filling up deoiled cakes were also of an irregular and intermittent nature. In view of these circumstances, it was not possible to employ permanent workmen to carry out the said items of work. Further, legislation regarding the regulation and abolition of contract labour was being contemplated by the Central Government and the State of Maharashtra. Various charts relating to the approximate number of workmen employed, their hours of work as well as the days on which they were employed for these items of work by the contractor, were also given. In view of the peculiar type of these items of work, the demand of the Union for abolition of contract labour was not justified. The Industrial Tribunal considered the demand under two heads : (i) the abolition of contract labour, and (ii) treating the workmen employed by the contractor as regular employees of the Company and giving them all the benefits of service conditions which the permanent employees were entitled to. So far as the second part of the above demand is concerned, the Industrial Tribunal rejected the Union's claim. According to the Industrial Tribunal the Union has not placed any material nor made-out any case justifying this part of the claim. In this connection the Industrial Tribunal relied upon the evidence of the contractor Shri Giri, as well as the documents filed by him,, and has come to the conclusion that the persons working under the contractor were not his permanent employees and that, on the other hand, they were free to go and work on any day under anybody else. In view of this circumstance, the Industrial Tribunal held that there was no relationship of permanent employees between the contractor and the labour force engaged by him for the daily work which he had to get done under the contract. Hence this part of the claim to treat the contractor's workmen as regular employees of the Company was rejected. Regarding the first part of the demand, namely, abolition of contract labour, the appellant adduced volume of evidence, oral as well as documentary. The documentary evidence consisted of various charts prepared not only by the appellant but also by the contractor, Shri Giri, giving particulars about the number of workmen Vegoils Private Lemited vs The Workmen on 10 September, 1971 6 employed, the hours of work done by them, as well as the days on which there was no work at all to be done. Some of the officers of the appellant Company as well as the contractor gave evidence regarding the manner in which the work was done in the seeds godown and the solvent extraction plants. In particular, the appellant led evidence to show that the work of loading and unloading in wagons and lorries was not of a continuous nature. The arrival of wagons on any particular day was uncertain. Nevertheless, the contractor has to be ready to clear the wagons as and when it arrives within the time allowed by the railway authorities, otherwise heavy demurrage had to be paid. While on certain days no wagon at all will arrive, on certain other days suddenly a large number of wagons will arrive necessitating the clearance of the goods promptly and immediately for which purpose the contractor was always having workmen ready to meet the situation. This type of work, according to the appellant company, could be done efficiently and promptly only by a contractor. The Union, on the other hand, placed reliance upon the charts furnished by The appellant and the contractor and pleaded that the work was of a continuous and perennial nature, which could be very efficiently discharged by the permanent employees of the appellant Company. The Union also referred to the practice obtaining in certain other companies doing similar business in the area and pointed out that the type of work that was being done by the appellant through a contractor was being done in those concerns by their permanent workmen. The Industrial Tribunal considered the affidavit filed , by Vallabhdas A. Parikh, who was at the material time the Production Director of the Swastik Oil Mills, But he was not available, for giving evidence, hence the Company relied on the affidavits filed by Anirudhha R. Shah, the Head Time- keeper and Ramanlal M. Desai, who was incharge as 'the Head of the Department of the solvent section, crushing section, refinery and refined filling sections of the appellant. Further the business Manager of the appellant Sri Rajnikant C. Nanavati had also filed an affidavit. 'the, contractor Giri also gave evidence on behalf of the appellant. Such of those witnesses who had given affidavits supporting the claim of the appellant were cross-examined by the Union. The Industrial Tribunal placed reliance on the evidence of Ramanlal M. Desai, who was the Head of the Department of the Solvent section. This witness gave particulars regarding the approximate number of days that the solvent extraction plant worked in the years 1967, 1968 and 1969. From his evidence it was clear that out of 365 days in 1967, the plant did not work for 65 days because of nonavailability of raw materials and it had to be closed for general cleaning and repairs for about 23 days. Similarly it remained close, for 6 days due to holidays and for 8 days due to power failure. During all the other days the plant was working. The position in 1968 and 1969 was more or less substantially similar. Even in cross-examination Ramanlal M. Desai admitted that the solvent extraction plant was working for about 300 days out of 365 days in the year and that the solvent extraction plant was working in three shifts. The contractor Giri also gave evidence regarding the number of workmen Vegoils Private Lemited vs The Workmen on 10 September, 1971 7 engaged by him regarding the solvent extraction plant. The Industrial Tribunal is of the view that the work of filling the hoppers, in view of the evidence referred to above, cannot be said to be intermittent or sporadic. On the other hand, feeding of hoppers in the solvent ex- traction plant is intimately and closely connected with the principal activity of the appellant, namely, that of crushing oil cakes and oil seeds for extraction of oil and other chemical productions. In- this view, the Industrial Tribunal held that the work of feeding the hoppers and other allied process connected, with the filling of bags with deoiled cakes must be considered to be a necessary and integral part of the industry carried on by the appellant. The Industrial Tribunal is also of the view that the work of feeding the hoppers and other activities connected with the same are of a permanent nature. In consequence, the Industrial Tribunal held that there was no justification for the appellant to employ contract labour for this purpose. Mr' G. B. Pai, learned counsel, for the appellant, no doubt,. attacked this finding of the Industrial Tribunal. According to the learned counsel the evidence in this regard has not been properly appreciated and the Industrial Tribunal committed an error in holding that the work connected with feeding of the hoppers and other activities connected with the same are of a permanent and perennial nature. The Union, though served, has not chosen to appear in this appeal. But Mr. Pai has drawn our attention to all the relevant materials on record. We are not inclined to accept the contention of Mr. Pai that the direction given, by the Industrial Tribunal abolishing the contract labour regarding the work of feeding the hoppers and other allied activities incidental and connected therewith is in any manner erroneous. The direction given in this regard, in our opinion, is fully justified. Even according to the evidence of the appellant's witnesses, referred to above, it is clear that the feeding of hopoers in the solvent extraction plant is an activity closely and intimately connected with the main activity of the appellant, namely, crushing oil cakes and oil seeds for extraction of oil and other chemical production. Excepting a few days, as already referred to above, this work has to go on continuously almost Throughout the year. From this it follows that this item of work is incidental to the nature of the industry carried on by the appellant, which must be done almost every day and there should be no difficulty in having regular workmen in the employment of the appellant to do this type of work. It is not as if that the work is of an intermittent or temporary nature or so little that it would not be possible for the appellant to employ full time workmen for this purpose. Further, it cannot also be said that by employing con-tract labour for this purpose, the appellant could be enabled to keep down the costs on the ground that there would not be sufficient work for all the workmen if permanent labour was employed, There is also on record the statement Ex. C, filed on behalf of the appellant. That statement gives the items of work got done by the contract labour by three other concerns, namely, M/s Godrej Soap Works, M/s Tata Oil 'Mills and M/s. Hindustan Lever. From the said statement it is seen that feeding of cakes in the hoppers is done by contract labour in the Vegoils Private Lemited vs The Workmen on 10 September, 1971 8 appellant Company and M/s Godrej Soap Works. That work is done by the departmental workmen in M/s. Tata Oil Mills, M/s. Hindustan Lever does not have any solvent extraction plant, but the work of feeding the seeds. in the hoppers, filling of cakes in the bags and stitching cake bags and stacking those bags are done by departmental workmen. Therefore, from this it follows that the feeding of hoppers is an essential part of the industry carried on by the appellant and that it could "very well be done by the departmental workmen as is being done by M/s Tata Oil Mills and M/s Hindustan Lever. In view of all these circumstances pointed out above the direction of the Industrial Tribunal regarding this aspect is not erroneous. In fact Mr. Pai ,himself felt considerable difficulty in satisfying us that there has been any wrong approach made by the-Industrial Tribunal, in this regard. Further, the direct-ion given by the Industrial Tribunal abolishing the contract labour in respect of feeding the hoppers is quite in accordance with the principles laid down by this Court in various decisions. Those principles will be referred to by us when considering the direction given by the Industrial Tribunal abolishing the contract labour regarding loading and unloading of seeds bags in wagons and trucks. The Industrial'Tribunal considered the evidence of the, appellant's witnesses regarding loading and unloading of seeds and cake bags from railway wagons and motor trucks and stacking the same in the godowns as well as the loading of deoiled cake meal bags in the motor lorries and wagons whenever required to be dispatched from the factory. Here again the Industrial Tribunal is of the view that these activities are also closely connected with the main industry carried on by the appellant and that the said work is also of a permanent character. This item of work forms an integral part of the process of the industry itself. On this reasoning, the Industrial Tribunal held that those activities also could be carried on by the appellant by its permanent workmen. The industrial Tribunal no doubt, noted that from Ex. C it is clear that the work of loading and unloading of seed bags, cake bags from wagons and lorries is being done in all the firms, namely, M/s Godrej Soap Works, M/s Tata Oil Mills and M/s Hindustan Lever, situated in the same area including the appellant, were got done by contract labour. But, nevertheless,, the Industrial Tribunal is of the view that the contract labour will have to be dis- couraged. The Industrial Tribunal also referred to a statement filed by the appellant Ex. C9. The said exhibit is as follows "EMPLOYMENT POSITION-LOADING AND UNLOADING CONTRACTOR Month No.of- Total- Aver- Total- Maxi- Mini- Total- emplo- Man- age- work- mum- mum amount yees on days atten ing emplo emplo paid to roll dance days yed per yed per cont- per day day day ractor March, 1967 67 1176 47 25 51 41 11,183.05 April, 1967 64 1188 47 25 56 43 11,300.02 May, 1967 63 6124548 46 55 43 12,510.40 June, 1967 82 1669 64 26 76 46 11,358 ;00 for the Swastik Oil Mills Ltd., Sd. V. A. Parikh, Vegoils Private Lemited vs The Workmen on 10 September, 1971 9 Production Director." From the above figures furnished by the appellant, the Industrial Tribunal is of the view that the average number of employees on the roll were between 63 and 82 per month and that the total man-days ranged between 1188 to 1669 per month. The average attendance per day again ranged between 46 to- 47 per day. From this statement the Industrial Tribunal drew an inference that the total number of working days in every month was between 25 or 26 while the minimum and maximum persons employed per day fluctuated between 41 and 46 at the minimum and between 51 to 76 at the maximum. The Union also placed very strong reliance on this document. Ex. C9 in support of its contention that the work of loading and unloading is of a permanent nature and that it could be done by the permanent employees of the Company. The Industrial Tribunal accepted this contention of the Union and ultimately held that even in respect of this item of work, the contract labour should be abolished. It must also be pointed out that the Industrial Tribunal has referred to two enactments : (1) passed by the Parliament and (2) by the Maharashtra State Legislature, to which we will refer later. It is the view of the Industrial Tribunal that these two enactments also support its view that the contract labour should be abolished as far as possible. Ultimately, the Industrial Tribunal directed the appellant not to engage any labourer through a contractor for the work of loading and unloading also with effect from the date after the termination of the present contract between the employer and the contractor, that is, after May 1, 1971. Mr. G. B. Pai, has very strenuously attacked this finding of the Industrial Tribunal. Learned Counsel raised three contentions : (1) The Tribunal had no jurisdiction, lo consider the question of abolition of contract labour in view of the Contract Labour (Regulation & Abolition) Act, 1970, (Act 37 of 1970) (hereinafter to be referred as the Central Act) and The Maharashtra Mathadi, Hamal and Other Manual Workers (Regulation of Employment and Welfare) Act, 1969, (Act 30 of 1969) (hereinafter to be referred as the State Act); (2) even on the basis of the principles laid down by this Court, the direction to abolish contract labour in respect of loading and unloading is erroneous in law, and (3) the finding that contract labour should be abolished in this regard is opposed to the evidence and the practice obtaining in other industries in the same area. Before we deal with the contention regarding jurisdiction of the industrial Tribunal based upon the Central Act and Maha- rashtra Act, we will refer to the principles laid down by this Court in considering the question of abolition of contract labour which is the subject of the second contention of Mr. Pai. According to the learned counsel, the principles laid down by this Court have been ignored when the Industrial Tribunal directed abolition of contract labour regarding loading and unloading. There has been. a consistent demand by the labour for abolishing the system of contract labour and that has given rise to certain industrial adjudications, the correctness of which has corn,-- up for consideration before this Court. In The Standard-Vacuum Refining Co. of India Ltd. v. Its Workmen and others(1) two questions arose, namely, (1) whether a dispute raised by the permanent workmen regarding abolition of contract labour is an industrial dispute under s. 2(k) of the Industrial Disputes Act, and (2) whether the directions given by the Industrial Tribunal abolishing the contract system was justified. We are not concerned with the first aspect, referred to above, in the case before us. Regarding the second aspect, the Industrial Tribunal had in that case abolished the contract system obtaining in the particular establishment. This Court after refering to Vegoils Private Lemited vs The Workmen on 10 September, 1971 10 the recommendations of the Royal Commissions on Labour, as well as the opinion expressed by several Labour Inquiry Committees appointed in different States, has expressed the opinion that in a given case the Industrial Tribunal should nest its decision not merely on theoretical or abstract objections to contract labour but also on the terms and conditions on which contract labour is, employed and the grievance made by the employees in respect thereof. In that case this Court further held that the contract labour was doing an itself of work which was incidental to the manufacturing process, which was carried on by the company and that type of work was necessary and also of a perennial nature which had to be done every day. It was also noted I that such type of work was generally done by the workmen in other industries in the area by the regular employees of the employer. In view of all these circumstances it was held by this Court that there should be no difficulty in having the said type of work getting done by regular workmen of the employer. It was also emphasised that the matter would be different if the work was of an intermittent or temporary nature or was so little that it would not be possible to employ full time workmen for the purpose. This Court approved the decision of the Industrial Tribunal abolishing contract labour in the above circumstance. The said principles laid down in the above decision have been referred to with approval and adopted in Shibu Metal Works v. Their Workmen 2 ) . The abolition of contract labour by the Industrial Tribunal Was also approved in. this case. In National Iron and Steel Co. Ltd. and others v. The State of West Bengal and another(3) after quoting with approval (1) [1960] 3 S.C.R. 466 (3) [1967] 2 S.C.R. 391. (2) [1966] 1 L.L.J. 717. the principles laid down by this Court in The Standard- Vacuum Refining Co. of India Ltd. v. Its Workmen and others(-'), this Court afirmed the decision of the Industrial Tribunal abolishing ,contract labour on the ground that the employment of contract labour would not have served to keep down the costs of the employer on the ground that there would not be sufficient work for the workmen if permanent labour was employed. From the principles laid down by this Court and referred to above, it is clear that if the work for which contract labour is employed is incidental to and closely connected with the main activity of the industry and is of a perennial and permanent nature, the abolition of contract labour would be justified. It is also open to the Industrial Tribunal to have regard to the practice obtaining in other industries in or about the same area. It may be pointed out that most of the principles laid down by this Court have been given due regard in the Central Act, to which we will refer im- mediately. In our opinion, Mr.Pai is justified in his contention that the principles laid down by this Court,, though adverted to by the Tribunal, have not been given due regard, when it gave a ,direction regarding abolition of contract labour regarding loading and unloading. We will be discussing this aspect a little more ;elaborately when we deal with the third contention of Mr. Pai on merits. Now coming to the first contention, it is necessary to refer to the material provisions of the two enactments. The Central Act received the assent of the President on September 5, 1970 and came into force on February 10, 1970. Therefore, at the time when the award was passed, the Act had received the assent of the President, though it had not come into force, but the State Act had been passed on June 13, 1969 and we are informed that it had come into force even before the date of the award. Vegoils Private Lemited vs The Workmen on 10 September, 1971 11 The Central Act, as its preamble shows, was to regulate the employment of contract labour in certain establishments and to provide for the abolition in certain circumstances and for matters connected therewith. Under sub-s. (4) of s. 1, the Act applies to the establishments mentioned therein as well as to every contractor who employs the number of workers referred to in cl. (b). There is no controversy that the Act applies to the appellant establishment. Section 2 defines the various expression. Expressions "appropriate Government" "contract labour" "contractor" "establishment" & "principal employer" are all defined in cls. (a) (b) (c) (e) and (g) respectively of sub-s. (1) of s. 2. Chapter 11 deals with the Advisory Board. Section 3 (1 ) provides for the Central vernment constituting ,the Central Advisory Contract Labour hard, to advise the Central Government with regard to matters sing out of the Administration of the, Act. Sub-s. (2) provides, the composition of the said Board, and from cl. (c) it 'is seen at among other persons, the, said Board is to consist of the representatives of the contractor, workmen and the industries concern Under the proviso to sub- section (3) the number of members nominated to represent the workmen shall not be less than the, member of members nominated to represent the principal employers and the contractors. Section 4 deals with the constitution of a hilar Advisory Board by the State Government. The said State advisory Board is also to consist among other persons, of the representatives of the industry, the contractor and the workmen. proviso to sub-section 3 of s. 4 similar to the proviso to subsection (3) of s. 3 has also been enacted. Chapter III deals with the registration of establishments employing contract labour. Sections 6 to 15 are in this Chapter, section 6 deals with the appointment of registering officers by the appropriate Government by notification in the Official Gazette. section 7 makes it compulsory on the part of every principal employer of an establishment to which the Act applies to make an' application to the registering officer within the time prescribed for Registration of the establishment. Section 8 deals with revocation registration in the circumstances mentioned therein. Section dealing with the effect of non- registration prohibits the principal employer of an establishment to which the Act applies from employing contract labour if the establishment has not been registered under s. 7 within the time prescribed or in the case of an establishment in respect of which registration has been revoked under s. 8, Section 10 which prohibits the employment of contract labour and which, in our opinion, is an important provision is as follows Section 10: Prohibition of employment of contract labour.- (1) Notwithstanding anything contained in this Act, the appropriate Government may, after consultation with the Central Board, or,, as the case may be, a State Board, prohibit, by notification in the Official Gazette, employment of contract labour in any process, operation or other work in any establishment. (2) Before issuing any notification under sub-section (1) in relation to an establishment, the appropriate, Government shall have regard to the conditions of work and benefits provided for the contract labour in that es- tablishment and other relevant factors, such as- (a) whether the process, operation or other work is incidental to, or necessary for the industry, trade, business, manufacture or occupation that is carried on in the establishments; Vegoils Private Lemited vs The Workmen on 10 September, 1971 12 (b) whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation carried on in that establishment; (c) whether it is done ordinarily through regular workmen in that establishment or an establishment similar thereto; (d) whether it is sufficient to employ considerable number of whole-time workmen. Explanation.-If a question arises whether any process or operation or other work is of perennial nature, the decision of the appropriate Government thereon shall be final." The following points emerge from S. 10(1) the appropriate Government has power to prohibit the employment of contract labour in any process,: operation or other work in any establishment; (2) Before issuing a notification prohibiting contract labour, the appropriate Government has to consult the Central or State Board, as the case may be, which we have already pointed out, comprises of the representatives of the workmen, contractor and the industry; (3) Before issuing any notification under sub-section (1), prohibiting the employment of contract, labour, the appropriate Government is bound to have regard not only to the conditions of work and benefits provided for the contract labour in a particular establishment, but also other relevant factors enumerated in cls. (a) to (d) of sub- section (2); and (4) under the Explanation which really relates to cl. (b), the decision of the appropriate Government, on the question whether any process operation or other work is of perennial nature, shall be final. Chapter IV deals with licensing of contractors. Two sections in this Chapter have to be noted, namely, ss. 11 and 12. Section 11 deals with the appointment of licensing officers by the appropriate Government for the purpose of Chapter IV. Sub-section (1) of S. 12 prohibits a contractor to whom. the Act applies, from undertaking or executing any work' through contract labour except under and in accordance with the licence issued in that behalf by the licensing officers. Sub-section (2) of s. 12 provides for a licence issued to a contractor containing conditions relating to hours of work, fixation of wages and other essential amenities in respect of contract labour, which the appropriate Government may deem fit to impose by the rules made under s. 35. Sections 13, 14 and 15 relate to the procedure for the grant of licence, revocation, suspension and amendment of licences and appeals by persons aggrieved by the orders made under ss. 7, 8, 12 and 14. Chapter V deals with the welfare and, health of contract labour. There are provisions made for the establishment of Can.teens and Rest Houses and to provide other facilities to the contract labour by the contractor. Section 20 casts a liability on the principal employer to provide the amenities referred to under ss. 16, 17, 18 and 19 for the benefit of contract labour employed in his establishment, if the contractor fails to provide those amenities. That section also enables the principal employer, if it provides those amenities, to recover from the contractor expenses so incurred by him. Section 21 makes the Contractor responsible for payment of wages to the contract labour. Sub-section (2) of s. 21 makes it obligatory on every principal employer to nominate a representative duly authorised by him to be present at the time of disbursement of wages by the contractor. The said sub-section also casts a duty on such representative to certify the amounts paid as wages as prescribed by the rules. Vegoils Private Lemited vs The Workmen on 10 September, 1971 13 Sub-section (4) makes the principal' employer liable to pay wages in full or the unpaid balance due, as the case may be, in case the contractor fails to make the payment within the period prescribed. it also enables the principal employer to recover from the contractor the amount so paid to the labour. Chapter VI provides for penalty for any person contravening any provision of the Act or the Rules. Chapter VII deals with Miscellaneous matters. Section 29 makes it obligatory on a principal employer and contractor 'to maintain the registers and records as provided therein. Section 30 provides that the Central Act shall have effect notwithstanding anything inconsistent therewith contained in any other law or in the terms of any agreement or contract of service or in any standing orders applicable to the establishment whether made before or after the commencement of the Act. No doubt the said section also saves any agreement or contract or standing order, where under, the contract labour gets more benefits than those conferred on them under the Act. Section 35 gives power to the appropriate Government to make rules for carrying out the purpose of the Act and also in respect of various other matters mentioned in cls. (a) to (p) of sub-section (2). The State Act, as we have already mentioned, was passed on June 13, 1969 and had already come into force when the award was passed. The State, Act is an Act for regulating the employment of unprotected manual workers employed in certain employments in the State of Maharashtra, to make provision for their adequate supply and proper and full utilization in such employments, and for matters connected therewith. It purports to be an Act for regulating employment of unprotected manual workers and to make better provisions for their terms and conditions of their employment as also for their welfare, health and safety measures. Sub-section (3) of s. 1 makes the Act applicable to the employments specified-in the Schedule. Item No. 5 of the Schedule is as follows "5-Employment in markets, and factories and other establishments, in connection with loading, unloading, stacking, carrying, weighing, measuring or such other work including work preparatory or incidental to such operations carried on by workers not covered by any other entries in this Schedule." From the above it will be seen that employment in factories and other establishments in connection with loading, unloading, stacking etc. are within the ambit of the Act. Section 2 defines the various expressions. The expressions contractor", "employer" " establishments, "Principal employerScheme", "unprotected worker" and "work' are defined in cls.(2), (3), (4), (7), (10), (11) and (12) respectively of s. 2.Section 3 provides for the State Government framing a schemefor registration of employers and unprotected workers and to provide for the terms and conditions of work of such unprotected workers as well as for their general welfare in the employment. The, scheme so framed may provide also for the various matters mentioned in cls. (a) to (1) of sub-section (2) section 4 empowers the states government after consultation with the advisory committee to make one or more schemes for any scheduled employement or group of employments. Section 5 makes the decision of the State Government in respect of any question arising whether any scheme apply any class of unprotected workers or employers, final. But the State Government should arrive Vegoils Private Lemited vs The Workmen on 10 September, 1971 14 at a decision after consulting the Advisory Committee constituted under s. 14. Section 6 deals with the establishment of a Board by the State, Government for any scheduled employment in any area. Sub-section (3) dealing with the composition of the Board provides that representation be given to employers, unprotected workers and the state Government. Section 14 provides for the State Government constituting an Advisory Committee to advise upon such matters arising out of the administration of the Act or any Scheme made under the Act. Section 21 saves the rights and privileges of the unprotected workers employed in any scheduled employment of the rights and privileges that he was entitled to on the date of the Act coming into force any other law, contract, custom or usage. This right is saved notwithstanding anything contained in the Act. Section 25 makes void any contract or agreement whereby an unprotected worker relinquishes any right conferred by or accruing to , him under the Act or the Scheme. The said provision applies both to the contract or the agreement made either before or after the commencement of the Act. The question naturally arises what is the effect of the Central and the State Acts regarding the jurisdiction of the Industrial Tribunal to entertain and adjudicate upon a dispute regarding abolition of contract labour. The Central Act had received the assent of the President on September 5, 1970 before the date of the award, though the said Act has come into force only with effect from February 10, 1971. The State Act was already in force at the time when the award was passed. Though we are not inclined to accept the extreme contention of Mr. Pai that the Industrial Tribunal in view of these two enactments, had no jurisdiction to adjudicate upon the dispute regarding, abolition of contract labour, nevertheless, we are of the view that those two enactments, which are now in force, have to be taken into account in considering whether the award of the Industrial Tribunal regarding abolition of contract labour in respect of loading and unloading operations has to be sustained. The Industrial Tribunal acquires jurisdiction to entertain the dispute in view of the reference made by the State Government on April 17, 1967. Admittedly 'on that date none of these enactments have been passed. Even during the proceedings before the Industrial Tribunal, there is no indication, that the appellant raised an objection after the passing of the enactments that the Tribunal has no longer jurisdiction to adjudicate upon the dispute. Under those circumstances, the Tribunal had to adjudicate upon the point referred to it having due regard to the principles laid down by the courts, particularly this Court governing the abolition of contract labour. It may be that in future if a reference is proposed to be made or actually made by the authorities concerned regarding abolition of contract labour for adjudication by the Industrial Tribunal it may be open to the persons concerned to resist the reference on the ground that the jurisdiction to consider such matters and prohibiting contract labour is now vested with the appropriate Government under the Central Act. In fairness to the Industrial Tribunal it must be stated that it has referred to these two enactments. But the Industrial Tribunal has proceeded on the basis that the effect of these two enactments 10-L3Sup.C.I./72 is to abolish contract labour which is consistent with the recommendations made by the Royal Commission and the various Committees constituted by the States. No doubt, there is a reference by the Industrial Tribunal to s. 10 of the Central Act dealing with prohibition of employment of contract labour, but in our opinion, the Industrial Tribunal has misapplied those provisions when it directed abolition of contract labour regarding loading and unloading operations. We are of the opinion that we will be justified when dealing with this appeal to give effect particularly to the provisions of the Central Act having due regard to the clearly expressed intention of the legislature in the said Act regarding the circumstances under which a contract labour can be Vegoils Private Lemited vs The Workmen on 10 September, 1971 15 abolished. The main grievance of the Union was that the conditions of employment of the persons working under a contractor were entirely different from that of the workmen under the permanent employ of the appellant and in order to improve the conditions of service of contract labour, the latter must be treated as the appellants regular employees with all benefits of service conditions etc. We have referred to the various provisions of the Central Act and, in our opinion, it has elaborately regulated the employment of contract labour. It has also made provisions for improving the ser- vice conditions of contract labour. 'An establishment has been prohibited from employing contract labour unless it gets it registered under s. 7. The said Act has also provided for licensing of contractors and casts an obligation on the contractors to provide the amenities and proper wages to the contract labour. It has cast an obligation on the principal employer to provide amenities to the contract labour, if the contractor fails to provide the same. Even in respect of payment of wages, the principal employer has to nominate a representative to be present when the contractor disburses the wages to the contract labour. In fact, 'it makes it obligatory on the principal employer to pay the wages or any deficiency in wages in consequence of default committed by the contractor. Contravention of the provisions of the Act by any person including the principal employer has been made A penal offence' The said Act specifically deals with the Central Government and the State, Government: constituting the Central Advisory Board and the. State Advisory Board respectively. Those Boards consist of representatives of the workmen, industry and of the contractor. Section 10 dealing with prohibiting employment of contract labour gives power to the appropriate Government to prohibit employment of contract labour in any process, operation or other work in any establishment. But before issuing a. notification prohibiting the employment of contract labour, the appropriate Government is bound to consult the Central Board or the State Board, as the case may be. That means the representatives of the contractor, the workmen and of the industry will have a voice in expressing their views when the Board concerned is being consulted With regard to a proposal to prohibit contract labour. Sub-section (2) lays down the various matters, which are, considered to be relevant factors, to be taken into account by the appropriate Government before. a notification prohibiting contract labour is issued. The appropriate Government is bound ,to have regard also to the conditions of work and benefits provided for the contract labour in the establishment. The Explanation which has to be read along with cl. (b) of subsection (2) makes final the decision of the appropriate Government regarding the question whether any process, or operation or other work is of a perennial nature. We are emphasising the provisions of s. 10 to highlight the point that a particular authority acting in a particular manner has been given the power and jurisdiction to decide whether contract labour has to be prohibited in. any establishment. Before such a- decision is taken, the representatives of the workmen, contractor and the industry have an opportunity to express their opinion. The more important aspect to be noted is the provision in the Explanation which makes the decision of the appropriate Government final, on the question, whether any process or operation or work is of a perennial nature. We have already extracted the whole of s. 10 and one of the relevant factor is that contained in cl. (b) of sub-s. (2) in respect of which the Explanation makes the decision of the appropriate Government final. The appropriate Government. when taking'- action under s. 10 will have an overall picture; of the industries carrying on similar activities I and decide whether contract Vegoils Private Lemited vs The Workmen on 10 September, 1971 16 labour is to be abolished in respect 'of any of the activities of that industry. Therefore, it, is reasonable to conclude that the jurisdiction 'to sbide about the Abolition of contract labour, or to put it differently, to prohibit the- employment of, contract labour is now to be done in accordance 'with' S. 10. Therefore, it is proper that the question whether- the contract labour regarding loading and unloading in the industry of the appellant is to be abolished or not, is left to be dealt with the appropriate Government under the, Act,, if it becomes necessary. On: this ground, we are of the opinion that the direction of the Industrial Tribunal in this 'regard all have to be set aside. The Maharashtra, Act also, as we have pointed out applies to employment in factories and other establishments in connection with loading and unloading etc. But, the said Act deals with different aspects, and that? Act; also has the effect of improving the conditions of both- unprotected worker and the worker as defined in the Act. But the provisions, more directly,in point, as pointed out above are above contained in the Central Act." The legality of the direction given by the Industrial Tribunal abolishing contract labour in respect of loading and unloading from May 1, 1971 can also be considered from another point of view. The Central Act, as mentioned earlier, had come into force on February 10, 1971. Under s. 10 of the said Act tin jurisdiction to decide matters connected with prohibition of contract labour is now vested in the appropriate Government. Therefore, with effect from February 10, 1971, it is only the appropriate Government that can prohibit contract labour by following the procedure and in accordance with the provisions of the Central Act. The Industrial Tribunal, in the circumstances, will have no Jurisdiction, though its award is dated November 20,1970, to give a direction in that respect which becomes enforceable after the date of the coming into force of the 'Central Act. In any event, 'Such a direction contained in the award cannot be enforced from a date when abolition of contract labour can only be done by the appropriate Government in accordance with the provisions of the Central Act. In this view also it must be held that the direction of the Industrial Tribunal abolishing contract labour with effect from May 1, 1971 regarding loading and unloading cannot be sustained. In the view that we have expressed above that the direction of the Industrial Tribunal will have to be set aside, it may not be really necessary to consider elaborately the third contention of Mr. Pai, which is really an attack against the decision of the Industrial 'Tribunal on merits. The learned counsel has taken us through the various items of evidence on record. The appellant has filed various charts relating to several periods showing the number of days in a month when the work of loading and unloading from wagons and trucks was done by the contractor as also the volume ,of work done together with particulars regarding days when there was absolutely no work. The contractor Giri has also given evidence in this behalf and has also filed statements giving particulars similar to the charts filed by the appellant. As a specimen we will only refer to the period commencing from March to June, 1967. A glance through the statement reveals that in March the work load ranges from 200 bags on 3rd to 14700 on the 30th. Similarly, in April 228 bags were handled on 3rd and about 13704 bags were dealt with on the 17th. Similarly in May, on the 9th, 10405 bags were handled whereas on 29th only 400 bags were handled. In June, on 9th 9600 bags were dealt with and on 26th 142 bags were, handled. These figures show the sharp difference in the nature of work that has to be done. We can also state that for these four months on 29th a total of 3200 bags were handled and, on 17th about 35714 bags were dealt with. These figures, which have been taken as illustrative clearly show the drastic variation in the nature of work that had to be done Vegoils Private Lemited vs The Workmen on 10 September, 1971 17 by the con,tractor regarding loading and unloading of wagons and trucks. We have only given some illustrative figures and even during the intervening days there is a very wide discrepancy in the total number of bags dealt with. There is also evidence on record to, show that on some days no wagons or trucks are available. That means there will be no work of loading and unloading on those days; whereas on certain other days a number of wagons and trucks suddenly arrive, which means that there must be workmen ready to clear the goods within a specified time. It is also seen from Ex. C. 8 that the goods are allowed to be cleared from the railway wagons free of demurrage within five hours after the. arrival of the wagons. After the expiry of five hours, demurrage is. charged by the railway at 10 paise per hour per tonne on the carrying capacity of the wagon. The contractor Giri has stated that he has to keep in readiness the necessary workmen anticipating the arrival of wagons on any date or at any time of the day and if the goods are not cleared within live hours, heavy demuxrage will. have to be paid. Ex. C, to which we have already referred to shows that the work, of loading and unloading of seed bags and cake bags from lorries and wagons are done by contract labour by the three other concerns in the area, namely, M/s Godrej Soap Works, M/s Tata Oil Mills and Mys Hindustan Lever. At this stage it may be mentioned that under cl. (c) of s. 10(2) of the Central Act, one of the relevant factors to be taken into account is to consider, when contract labour regarding any particular type of work is proposed to be abolished, whether that type of work is, done ordinarily through regular workmen in that establishment or an establishment similar thereto. When it is shown that in similar establishments this type of work is not ordinarily done through regular workmen, but by contract labour, that is a circumstance which will operate in favour of the appellant. The evidence on the side of the appellant is to the effect that ,the work of loading and unloading in trucks and wagons is not of a perennial and permanent nature so as to justify the appellant maintaining a permanent staff for that purpose. On the other hand, their evidence is that this type of work is of an intermittent and temporary nature and so little, that it would not be possible and profitable to employ full time workmen for the purpose and that this type of work is being done in the other concerns in the area through contract labour. These facts have not been seriously disputed by the Union. The Union has placed reliance on Ex. C. 9, a statement fur- nished by the appellant. We have earlier given a full extract of Ex. C. 9. The Union appears to have pressed into service that exhibit to show that the work of loading and unloading is of a continuous and perennial nature. No doubt, a perusal of Ex. C. 9, without anything more, may give the impression that the work of loading and unloading is a continuous activity of a permanent nature. Unfortunately, the appellant does not appear to have impressed upon the, industrial Tribunal the fact that the particulars mentioned in Ex. C. 9 deal with the entire work done by the contractor on the basis of the contract entered into by him. The current contract in favour of the contractor is dated May 28., 1970. The previous contractors have been more or less substantially on the same lines as the present contract. The contractor has undertaken to do twenty types of jobs referred o in the contract for which the rate of payment has also been specified. They include feeding the hoppers and doing other work incidental to and closely related to the work of feeding the hoppers. We have already held that the Industrial Tribunal was justified in abolishing contract labour in respect of the work relating to feeding the hoppers. Though the Central Act has come into force, we have confirmed that part of the award regarding feeding of hoppers because we are satisfied that the, principles laid down by this Court and substantially incorporated Vegoils Private Lemited vs The Workmen on 10 September, 1971 18 in cls. (a) to (d) of S. 10(2) have been properly taken into account by the Industrial Tribunal. Ex. C. 9 is a chart relating to all the twenty items of jobs, which the contractor had to do under the contract. The Industrial Tribunal has proceeded on the basis that Ex. C. 9 relates only to the contract work of loading and unloading, which we have already shown is erroneous. Therefore, even on merits the direction of the Industrial Tribunal abolishing contract labour regarding loading and unloading cannot be sustained. in the result, the award of the Industrial Tribunal directing the appellant not to engage any labour through a contract for the work of loading and unloading is set aside and to that extent the appeal is allowed and the award of the Industrial Tribunal will stand modified. As the Union has not appeared before us to contest the appeal, there will be no order as to costs. G.C. Appeal allowed. Vegoils Private Lemited vs The Workmen on 10 September, 1971 19 | {
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Manhar Lal Bhogilal Shah vs State Of Maharashtra on 5 April, 1971 Equivalent citations: AIR1971SC1511, 1971CRILJ1157, 1983(13)ELT1450(SC), (1971)2SCC119, 1971(SUPP)SCC359, [1971]SUPPSCR359, AIR 1971 SUPREME COURT 1511, 1975 BOM LR 730 Bench: S.M. Sikri, G.K. Mitter, K.S. Hegde, P. Jaganmohan Reddy, A.N. Grover JUDGMENT Grover, J. 1. This is an appeal by certificate from a judgment of the Bombay High Court upholding the conviction and sentence of the appellant under Section 167(81) of the Sea Customs Act, 1878, hereinafter called the 'Act' and Section 120B of the Indian Penal Code read with the aforesaid section and Section 5 of the Import and Export (Control) Act 1947. The main point for determination is whether Section 187-A of the Act is unconstitutional on the ground that it is violative of Article 14 of the Constitution. The facts to the extent they are necessary may be set out. 2. The appellant carried on business in the name of M/s. Jaihind Ex-Import Coporation as its sole proprietor. He also carried on business as a partner in another firm run under the name and style of Alram Optics (India) Corporation. The offices of the two firms were situate at New Charni Road, Bombay. According to the case of the prosecution the appellant with the object of defrauding the Government of customs duty payable on certain goods and with a view to evading prohibition imposed on the import of such goods was a party to criminal conspiracy, some of the other parties being M/s. O. & K. Heydegger and M/s. Winter Optics in West Germany. The conspiracy was stated to have been entered into for the purpose of acquiring possession of contraband goods such as spectacle frames, welding glasses etc. The import of spectable frames was totally prohibited and the import of welding glasses was greatly restricted. It was alleged that in pursuance of the conspiracy the appellant imported three consignments by three different ships; the first one arrived by s.s. Bialy-stock and the other two came on September 22, 1960 and March 5, 1960 by two other ships s.s. Fraunfels and s.s. Laurenskerk. Out of the four cases which arrived in the first consignment two cases contained contraband goods. As regards the other two consignments one case in each consignment contained goods the import of which was prohibited. The modus operandi was highly ingenious and interesting but we need not recapitulate the same. 3. The defence of the appellant was that it was owing to the mistake of shippers that the cases containing contraband goods arrived. It may be mentioned that no bill of entry was lodged by the Manhar Lal Bhogilal Shah vs State Of Maharashtra on 5 April, 1971 1 appellant regarding the cases which contained contraband goods of the first consignment and the other consignment which were not got cleared. The learned Presidency Magistrate found the appellant guilty and sentenced him to six months' rigorous imprisonment and a fine of Rs. 1000 for each of the four charges directing the substantive sentences to run concurrently. The appellant filed an appeal to the High Court and the State preferred a petition for revision for enhancement of the sentence. The High Court dismissed both the appeal and the revision. The High Court further directed that the contraband goods should stand confiscated in favour of the Government of India. 4. During the pendency of the appeal in this court a petition was filed on behalf of the respondent (Cr. Misc. Petition No. 362/70). It was prayed therein that a Constitutional point as to the vires of Section 187A read with Section 167(81) of the Act be allowed to be raised. Thereupon the Division Bench made an order that the appeal be placed before a larger bench. The question being one of Constitutional validity of Section 187A of the Act counsel for the appellant has addressed arguments before us with our permission on the aforesaid point. It has been contended inter alia that the offences of smuggling of goods and in particular the acts with which the appellant has been charged could be dealt with by the customs authorities by proceeding under Section 167(8) of the Act as well as in the alternative or in addition by instituting a prosecution in a criminal court by filing a complaint under Section 187A read with Section 167(81) of the Act. The former can result only in the imposition of a fiscal penalty not exceeding three times the value of the goods and confiscation of the goods themselves. The latter can result in a sentence of imprisonment upto two years or fine or both. Thus it has been left to the unfettered and unguided discretion of the customs authorities to proceed against certain persons under Section 167(8) and others under Section 167(81) or under both the sections. In a large number of cases no criminal prosecutions were filed at all and proceedings under Section 167(8) alone were taken which resulted in imposition of penalties. This leads to discrimination and has actually resulted in discrimination. 5. We may now refer to Section 187A of the Act. It provides that no court shall take cognizance of any offence relating to smuggling of goods punishable under item 81 of the Schedule to Section 167 except upon complaint in writing made by the Chief Customs Officer or any other officer of customs not lower in rank than an Assistant Collector of Customs. Items 8 and 81 of Section 167 to the extent they are material are as follows:- Offences Section of this Penalties Act to which offence has Reference 8. If any goods the importation 18 & 19 Such goods shall be liable of which is for the time being to confiscation; and any prohibited or restricted by or under person concerned in any Chapter IV of this Act, be imported such offence shall be into or exported from India contrary liable to a penalty not to such prohibition or restrictions: exceeding three times the or value of the goods or If any attempt be made so to not exceeding one thousand import or export any such goods; rupees." or..." 81. If any person knowingly, General Such person shall on conviction and with intent to defraud the before a Magistrate Government of any duty payable be liable to imprisonment thereon, or to evade any prohibition for any term or restriction for the time not exceeding two years. being in force under or by virtue or to fine, or to both." of this Act with respect thereto acquires possession or, or is in any way concerned in Manhar Lal Bhogilal Shah vs State Of Maharashtra on 5 April, 1971 2 carrying, removin, depositing, harbouring, keeping or concealing or in any manner dealing with any goods which have been unlawfully removed from a warehouse or which has not been paid or with respect to the importation or exportation of which any prohibition or restriction is for the time being in force as aforesaid; or..." Even though item 8 of Section 167 does not employ the word "knowingly" which is to be found in item 81 international smugglers are bound to be covered by both the items. The argument on behalf of the appellant is based on there being no guidelines in Section 187A in the matter of filing a complaint for an offence under item 81. It is suggested that if there is a option to the officers mentioned therein to file a complaint or not to file the complaint then there will be clear infringement of Article 14. Counsel for the appellant has gone to the extent of submitting that the power to give sanction or to make a complaint without any guidelines would itself be hit by Article 14. 6. Our attention has been invited to Ravala Corporation (P) Ltd. and Ors. v. Director of Enforcement, New Delhi [1971] 1 S.C.R. 639 in which one of the points canvassed was that Section 23(1)(b) of the Foreign Exchange Regulation Act 1947 as amended by the Foreign Exchange Regulation (Amendment) Act 1957 was violative of Article 14 of the Constitution inasmuch as it provided for punishment severer than the punishment or penalty provided for the same acts under Section 23(1)(a) of that Act. It was pointed out in the judgment of this court that two different proceedings could be token for contravention of certain provisions of the aforesaid Act. Under Section 23(1)(a) a person was liable to a penalty only and that penalty could not exceed three times the value of foreign exchange in respect of which contravention had taken place or Rs. 5,000 whichever was more. That penalty could be imposed by adjudication made by the Director of Enforcement in the manner provided in Section 23(D) of the said Act. The alternative punishment provided by Section 23(1)(b) upon conviction by a court was a sentence of imprisonment for a term which could extend to two years or with fine or with both. The argument that the section laid down no principles for determining when a person concerned should be proceeded against under Section 23(1)(a) and when under Section 23(1)(b) and that it was left to the arbitrary discretion of the Director of Enforcement to decide which proceeding should be taken was repelled by relying on the provisions of Section 23D. Under that section the Director of Enforcement was first to hold an inquiry for the purpose of adjudging whether there had been contravention under Section 23(1)(a) and if he was satisfied that the person had committed a contravention he could impose a penalty provided thereby. According to the proviso, however, if at any stage of the enquiry he was of the opinion that having regard to the circumstances of the case the penalty would not be adequate he was bound to make a complaint in writing to the court instead of imposing any penalty himself. 7. Counsel for the appellant has laid peat emphasis on the absence of any such provision in the Act as was to be found in Section 23D of the Foreign Exchange Regulation Act 1947. But it is significant that under the aforesaid enactment the proceedings could be taken in the alternative and the punishment also could be imposed only in the alternative and any person guilty of contravention could not be made liable for a penalty provided by Section 23(1)(a) as also imposed a sentence of imprisonment under Section 23(1)(b). According to the provision of Section 167, items 8 and 81 of the Act there is no choice in the matter of imposing penalty or punishment. If a person is found Manhar Lal Bhogilal Shah vs State Of Maharashtra on 5 April, 1971 3 guilty a penalty can be imposed under item 8 and he will also be liable to criminal prosecution and conviction if his case is covered by item 81 of that section. 8. In numerous Acts provisions are found according to which no court can take cognizance unless either sanction is granted by the competent authority for the prosecution of an accused person or a complaint in writing is made by an officer or authority empowered in that behalf. Nothing is indicated or expressly stated in most of the provisions as to the circumstances in which sanction should be withheld or granted or a complaint should be instituted or not. One of such provisions came up for examination in Gokulchand Dwarkadas Moraka v. The King . Under Clause 23 of the Cotton Cloth and Yarn Control Order 1943 no prosecution for contravention of any of the provisions of the Order could be instituted without the previous sanction of the Provincial Government etc. It was laid down that in order to comply with the provisions of Clause 23 it must be proved that the sanction was given in respect of the facts constituting the offence charged. Counsel for the appellant has relied a great deal on the following observations of their lordships: They can refuse sanction on any ground which commends itself to them, for example that on political or economic grounds they regard a prosecution as inexpedient. It is argued that if the same wide latitude is given to the customs officers mentioned in Section 187A they can import even political or economic considerations for not filing a complaint although a person is liable to criminal prosecution for an offence under Section 167(81). We consider it unnecessary to pronounce, with respect, on the correctness or otherwise of the above observations. We have no doubt that the authorities concerned are expected to take into account the changed conditions obtaining after the enforcement of our Constitution which guarantees fundamental rights including Article 14. They are bound to examine the facts of a particular case and then decide whether prosecution should be launched or not. 9. Even if any policy or guidelines have to be found they can certainly be discovered from the object, purpose and scheme of the Act. The preamble reads: "Whereas it is expedient to consolidate and amend the law relating to the levy of Sea Customs duties it is enacted as follows". Chapter IV deals with prohibitions and restrictions on importations and exportation and Chapter V, with levy of and exemption from customs duties. Elaborate provisions have been made to ensure that goods do not escape the levy of duty and that the prohibitions and restrictions which have been imposed on importation and exportation are rigidly enforced. Chapter XVI provides for offences and penalties and Section 167 therein is an omnibus section which contains 81 items dealing with offences and penalties. Chapter XVII contains procedural provisions relating to offences, appeals etc. Section 187A appears in this Chapter. 10. The procedural provisions must be read in the light of the object and purpose of the Act. While deciding whether a complaint should be instituted for an offence which is covered both by items 8 and 81 of Section 167 a customs officer must take into account the enormity and magnitude of the contravention and the evidence which is available. It is possible that in certain cases the evidence may not be sufficient for taking the matter to a criminal court and in view of the entire facts a Manhar Lal Bhogilal Shah vs State Of Maharashtra on 5 April, 1971 4 complaint may not be lodged for contravention of offence under item 81 but in all cases the customs officers have to act in a reasonable and bona fide manner and they cannot just discriminate between similar cases according to their whim and fancy. For if that is done it is always open to a person against whom complaint has been instituted to challenge their exercise of discretion in appropriate proceedings. We are fortified in the view that we are taking by the following observations in Matajog Dobay v. H.C. Bhari , where the argument that Section 197 of the Criminal Procedure Code vested an absolutely arbitrary power in the Government to grant or withhold sanction at their sweet will and pleasure was considered: If the government gives sanction against one public servant but declines to do so against another, then the government servant against whom sanction is given may possibly complain of discrimination. But the petitioners who are complainants cannot be heard to say so for there is no discrimination as against any complainant. It has to be borne in mind that a discretionary power is not necessarily a discriminatory power and that abuse of power is not to be easily assumed where the discretion is vested in the government and not in a minor official. The officer who is authorised to make the complaint under Section 187A of the Act is the Chief Customs Officer or any other officer of customs not lower in rank than the Assistant Collector of Customs authorised by the Chief Customs Officer. These officers cannot be regarded to be minor officials and they hold responsible positions in the hierarchy of customs authorities. In Niemla Textiles Finishing Mills Ltd. v. The 2nd Industrial Tribunal [1957] S.C.R. 335 the validity of the Industrial Disputes Act 1957 including Section 10 was challenged, inter alia on the ground that the appropriate government had unregulated and arbitrary power to discriminate between different parties and it was open to it to refer the industrial dispute to a Board for promoting the settlement or a Court of Inquiry or the Industrial Tribunal and that there were no guidelines as to which class of cases were to be referred to one or the other. It was pointed out by this court that the purpose sought to be achieved by the said Act had been well defined in the preamble to it. The provisions sufficiently indicated the purpose and scope of the enactment as also the industrial disputes which might arise between the employers and their workmen which had to be referred for settlement to the various authorities under the Industrial Disputes Act. The achievement of one or other objects in view by such reference to the Board of Conciliation or Court of Enquiry or Industrial Tribunal must guide and control the exercise of the discretion and there was no question of the government being in a position to discriminate between one party and the other. In our judgment the ratio of this decision appositely applies to the present case. The object and purpose of the Act has already been noticed as also its scheme and the relevant provisions. The power conferred by Section 187A has to be exercised for effectuating the object and purpose of the Act keeping in view the entire scheme. It cannot, therefore, be said that any unguided discretion or power has been conferred of the nature which would come within the inhibition of Article 14. The principal contention of the learned counsel for the appellant based on Article 14 must fail. Manhar Lal Bhogilal Shah vs State Of Maharashtra on 5 April, 1971 5 11. On the merits counsel for the appellant has brought to our notice the various facts and circumstances relating to the case. We are satisfied that the High Court rightly upheld the conviction for the offences in question but taking into consideration every aspect of the matter we consider that the sentence of imprisonment already undergone by the appellant together with the fine which has been imposed apart from the order relating to the confiscation of goods will serve the ends of justice. 12. The appeal is consequently allowed only to the extent that the sentence of imprisonment for each offence is reduced to one already undergone. In all other respects the appeal shall stand dismissed. The bail bonds of the appellant, who was ordered to be released on bail, shall stand discharged. Manhar Lal Bhogilal Shah vs State Of Maharashtra on 5 April, 1971 6 | {
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Commissioner Of Income Tax, West Bengal ... vs Bengal River Steam Service Co. Ltd., ... on 5 August, 1971 Equivalent citations: AIR1971SC2114, [1971]82ITR41(SC), (1972)3SCC243, AIR 1971 SUPREME COURT 2114, 1971 TAX. L. R. 1371 Author: K.S. Hegde Bench: A.N. Grover, K.S. Hegde JUDGMENT K.S. Hegde, J. 1. This is an appeal by certificate under Section 66-A(2) of the Indian Income-tax Act, 1922 (in brief 'the Act') arising from the decision of the High Court of Calcutta in Income tax Reference No. 18 of 1958 on its file. Therein two questions of law were referred to the High Court for its opinion. They are: 1. Whether on the facts and in the circumstances of this case, the amount of Rs. 3,43,138/-received by the assessee was derived from a source of category of transaction mentioned in Item 5(g) of the schedule to the Agreement for the Avoidance of Double Taxation of Income between India and Pakistan? and 2. If the answer to the above question be in the negative, then whether the aforesaid sum fell under item 9 of the Schedule of the aforesaid Agreement. 2. The High Court agreeing with the tribunal's findings answered the first question in the affirmative and consequently declined to answer the second question. Aggrieved by that decision the Department has brought this appeal. 3. The respondent-assessee carried on the. business of plying river boats before the partition of India. Herein we are concerned with the income earned by the assessee in the assessment year 1947-48, the relevant accounting year being the calendar year 1946. In that accounting year the Government requisitioned certain boats belonging to the assessee on charter basis. The statement of the vessels so chartered and income received therefrom during the year was placed before the tribunal. But it is not necessary to refer to the same as it has no bearing on the question of law that we are called upon to decide. The assessee's registered office was in Calcutta. It is said that during the accounting year in question, the assessee received Rupees 3,43,138/-as 'Hire' for the boats requisitioned by the Government. But the traffic originated in the areas which are now a part of Commissioner Of Income Tax, West Bengal ... vs Bengal River Steam Service Co. Ltd., ... on 5 August, 1971 1 Pakistan. The question for consideration is whether the receipt of Rs. 3,43,138/-can be brought to tax in this country. For deciding that question, it is necessary to refer to a few more facts: In order to avoid Double Taxation of Income, profits and gains because of the partition of India, the Government of India entered into an Agreement with Pakistan in 1947 in exercise of the powers conferred on it by Section 49(AA) of the Act, Section 11(A) of the Excess Profits Tax Act, and Section 18A of the Business Profits Act, 1947 as adapted. That Agreement to the extent material for our present purpose reads thus: Whereas the Government of the Dominion of India and the Government of the Dominion of Pakistan desire to conclude an agreement for the avoidance of double taxation of income chargeable in the two dominions in accordance with their respective laws: Now therefore, the said two Governments do hereby agree as follows: Article I. xx xx xx Article II. xx xx xx Article III. xx xx xx Article IV. Each Dominion shall make assessment in the ordinary way under its own laws; and, where either Dominion under the operation of its laws charges any income from the sources or categories of transaction specified in column 1 of the Schedule to this Agreement (hereinafter referred to as the Schedule) in excess of the amount calculated according to the percentage specified in columns 2 and 3 thereof, that Dominion shall allow an abatement equal to the lower amount of tax payable on such excess in their Dominion as provided for in Article VI Article V xx xx xx Article VI (a) For the purposes of the abatement to be allowed under Article IV or V, the tax payable in each Dominion on the excess or the doubly taxed income as the case may be, shall be such proportion of the tax payable in each Dominion as the excess or the doubly taxed income bears to the total income of the assessee in each Dominion. (b) xx xx xx Article VII xx xx xx Article VIII xx xx xx Article IX xx xx xx THE SCHEDULE (see Article IV) __________________________________________________________________________________ Source of income or nature of trans-Percentage of income which each Remarks. action from which income is derived. Dominion is entitled to charge under the agreement. _______________________________ (1) (2) (3) (4) __________________________________________________________________________________ 1. x x x 2. x x x 3. x x x 4. x x x 5. Income from 'business' or "other source": (a) ... ... (b) ... ... (c) ... ... (d) ... ... (e) ... ... (f) ... ... (g) Transport Ships ... 100 per cent., by the Dominion in Nil by the which the truffle originates. other. 6. x x x 7. x x x ___________________________________________________________________________________ 1 2 3 4 ___________________________________________________________________________________ 8. x x x 9. Any income derived from a ... 100 per cent, by the Dominion in Nil by the Commissioner Of Income Tax, West Bengal ... vs Bengal River Steam Service Co. Ltd., ... on 5 August, 1971 2 source or category of trans-which the income actually accrues other. actions not mentioned in or arises. any of the foregoing items of this Schedule. ___________________________________________________________________________________ 4. It appears from the statement of the case that the assessee earned Rs. 3,43,138/-in Calcutta and Rs. 7,296/-in Narayan Ganj (now in Pakistan) from out of the hire received from the Governments in respect of the boats chartered by them. The Income-tax Officer held that the amount of Rs. 3,43,138/-so received was income earned in Indian Dominion and therefore liable to be brought to tax in this country. In so doing he applied the provisions of Item 9 of the Schedule to the Agreement for Avoidance of Double Taxation. According to the assessee his case fell within item 5(g) and not item 9. The Income-tax Officer did not accept that contention. In appeal the Appellate Assistant Commissioner agreed with the conclusions reached by the Income-tax Officer but the Income-tax Appellate Tribunal differed from the view taken by the Income-tax Officer, and the Appellate Assistant Commissioner. It came to the conclusion that the receipt in question fell within item 5(g) of the Agreement and therefore it is not liable to be taxed in this country as admittedly the traffic originated in areas which are now part of Pakistan. As mentioned earlier the High Court agreed with the view taken by the tribunal. 5. It was urged on behalf of the Department by the learned Solicitor-General that there is a distinction between the "Hire" and "Freight". According to him item 5(g) of the Agreement deals only with "Freight" whereas any "Hire" received would come within item 9. We see no basis for this subtlety. Quite plainly item 5 deals with transport by ships, air and road. Herein we are dealing with income realised as a result of the transport by ships. Item 5(g) does not make any distinction between "Hire" and "Freight". It deals with all types of transport by ships. Item 9 is a residuary clause. That item will be attracted only if the income, profit or gains earned or received cannot come within any other item. As mentioned earlier, the income with which we are concerned in this case plainly comes within item 5(g). We agree with the Tribunal and the High Court that the receipt with which we are concerned in this case comes within item 5(g). 6. For the reasons mentioned earlier, we are of opinion that the High Court correctly answered the questions referred to it. 7. In the result this appeal fails and the same is dismissed with costs. Commissioner Of Income Tax, West Bengal ... vs Bengal River Steam Service Co. Ltd., ... on 5 August, 1971 3 | {
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Workmen Of William Jacks & Co. Ltd., ... vs Management Of William Jacks & Co. Ltd., ... on 28 April, 1971 Equivalent citations: 1971 AIR 1821, 1971 SCR 540, AIR 1971 SUPREME COURT 1821, 1971 LAB. I. C. 1124, 1971 (1) LABLJ 503, 1971 U J (SC) 622, 22 FACLR 302, 39 FJR 399 Bench: J.M. Shelat, I.D. Dua PETITIONER: WORKMEN OF WILLIAM JACKS & CO. LTD., MADRAS Vs. RESPONDENT: MANAGEMENT OF WILLIAM JACKS & CO. LTD., MADRAS DATE OF JUDGMENT28/04/1971 BENCH: BHARGAVA, VISHISHTHA BENCH: BHARGAVA, VISHISHTHA SHELAT, J.M. DUA, I.D. CITATION: 1971 AIR 1821 1971 SCR 540 1972 SCC (3) 140 ACT: The Payment of Bonus Act (21 of 1965), s. 23, Second Schedule, item 2(c) and Third Schedule, item (1)-Advance made by head office to branch office-Interest paid by branch office--If deductible expenditure in calculating profit and loss of branch office-Provision for gratuity etc.--Diffe- rence between provision and reserve-Provision when deductible--Deductible income tax calculated without taking into account bonus payable--if correct--Payment of Bonus (Amendment) Act (8 of 1969)-Effect of. HEADNOTE: The appellants workmen of the respondent claimed that for the two years 1964 and 1965 they were entitled to bonus at the maximum rate of 20% of their annual wages while the respondent contended that there was no available surplus and consequently the liability to pay bonus for these two years Workmen Of William Jacks & Co. Ltd., ... vs Management Of William Jacks & Co. Ltd., ... on 28 April, 1971 1 could not exceed the minimum of 4% of the wages. The management, inter alia, claimed deductions: (1) with respect to interest charged by the London office on advances made by the London office to the respondent-branch during those two years; (2) provision for gratuity and other contingencies; and (3) income tax calculated without taking into account the bonus which would be payable to the workmen. The Tribunal allowed the claims. In appeal to this Court, HELD: (1) (a) The amounts claimed as interest are really payments by the branch of the company to its head office. A payment of interest could be justified only on the basis that the head office was a creditor and the branch office a debtor.,. But a company could not be a creditor and its own debtor simultaneously. The interest paid really represented amounts of money transferred by the respondent-branch to the head office, and similarly, the advances made by London office to the respondent-branch were amounts which continue to be used by the company for its own business at a different place. [544F] (b) This is also made manifest by the proviso to item 1 of the Third Schedule to the Act. In the deduction of the current liabilities any amount shown as payable by a company to its head-office whether towards any advance made by the head-office or otherwise, or any interest paid by the company to its head-office is not to be treated as a deductible liability, because, the advance made by the head office is also treated as a part of the investment by the company. [545D] (c) Under s. 23 of the Payment of Bonus Act, 1965, there is a presumption as to the correctness of the statements and particulars contained in the balance-sheet and the profit and loss account of a company, if the accounts had been properly audited by qualified auditors. The presumption, however, is confined to the accuracy of the statements and particulars contained in the balance sheet and the profit and loss account. If any item in the accounts is wrongly shown as expenditure, when on the face 541 of it is not so, the court is not! bound to hold that. the method adopted 'in preparing the accounts is correct simply because the auditors raised no objection. [544H-545C] Therefore, in the calculation of gross profits for purposes of bonus the sums deducted as interest for the two years must be added back since they were wrongly shown as deductible expenditure in calculating the profit and loss. (2) The provision for gratuity, and other contingencies such as furlough salary, passage, service and commission. in the present case, was made in respect of existing and known liabilities, though, in some cases the exact amount could not be ascertained. It was not a case where it was an anticipated loss or anticipated expenditure which would arise in the future. Such provision is, not a reserve at Workmen Of William Jacks & Co. Ltd., ... vs Management Of William Jacks & Co. Ltd., ... on 28 April, 1971 2 all and it could not be added back under item 2(c) of the Second Schedule to the Act. It was therefore rightly shown by the respondent as a deductible expenditure in calculating profit and loss. [547D] Metal Box Co. v. The Workmen, [1969] 1 S.C.R. 750, followed. (3).The calculation of the amount of income-tax shown as expenditure, without taking into account the bonus which would be payable to the workmen under the Act, was correctly done in accordance with the decision of this Court in the Metal Box Company case.: In that case, the question was determined on the interpretation of ss. 6(c) and 7 of the Act, and the amendments made by the Payment of Bonus (Amendment) Act,, 1969 do not make any change in the law bearing on the question, as laid down by this Court. [547G] JUDGMENT: CIVIL APPELLATE Jurisdiction : Civil Appeal No, 1700 of 1968. Appeal by special leave from 'the Award dated March 9, 1968 of the Industrial Tribunal, Madras in Industrial Dispute No. II of 1957. M. K. Ramamurthi, I. Ramamurthy, Vineet Kumar and Shyamala Pappu, for the appellants. M. C. Chagla and D. N. Gupta for the respondent. The Judgment of the Court was delivered by Bhargava, J.--This appeal by special leave is directed against an Award of the Industrial Tribunal, Madras, in a dispute relating to payment of bonus under the Payment of Bonus Act, 1965 (No. 21 of 1965) (hereinafter referred to as "the Act"). The respondent in the appeal is the employer, William Jacks & Co. Ltd., Madras, while the appellant is the William Jacks & Co. Employees' Union, Madras, representing the workmen employed by the respondent. The appellant claimed that, for the two calendar years 1964 and 1965, the workmen were entitled to bonus at the maximum rate of 20 per cent of their annual wages while the respondent Co. put forward the case that there was no available surplus and, consequently, the liability to pay bonus for these two years could not exceed the minimum of 4 per cent of the wages. It may be mentioned that the respondent Co. is a Bench of, William Jacks & Co. Ltd. registered in England with its Head Office in London. It appears that in India this Company has three offices. One is in Calcutta which also functions at the Regional Head Office for all the three Branches in India. The other two Branches are in Bombay and in Madras, the latter being the branch to which the dispute about bonus related. The Company is carrying business as engineers, manufacturers, representatives and general merchants. The business of the Company includes the buying of locally manufactured machinery and other products and selling them to both private and public sector industries. The income of the Company is derived primarily from the sale of imported and indigenous goods at a profit. In addition, the Branch at Madras earns commission credited by London Office on direct shipments from London to customers within the areas served by the Madras Branch, as well as commission on sale of indigenous products, repairs and servicing of equipment sold and by local purchase and sale. These features of the business have been Workmen Of William Jacks & Co. Ltd., ... vs Management Of William Jacks & Co. Ltd., ... on 28 April, 1971 3 enumerated by us as they may have bearing on some of the questions raised in this appeal. During the hearing of the reference before the Tribunal, the Company filed its balance-sheets, profits, and loss account, and calculations of available surplus in accordance with the provisions of the Act and its schedules showing that there was no available surplus, so that bonus in excess of 4 per cent was not payable by it. These calculations were challenged on various grounds before the Tribunal, but none of them was accepted and the Award was based on the calculations filed on behalf of the Company. In this appeal before us, learned counsel appearing on behalf of the appellant has challenged the calculations in respect of seven different items, and we proceed to deal with them in the order in which they were argued by him. The first claim on behalf of the appellant was that there should be an add back of an estimated sum of Rs. 40,000 / which was received as direct commission paid by the manufac- turers to the London Office for the benefit of the Branch at Madras, in calculating the gross profits on the basis of which available surplus is to be worked out. On this point, the Tribunal in its award did not give any specific finding, though, after mentioning this argument raised before it, the Tribunal still proceeded to accept the Company's account disregarding this objection. The only evidence on this point is found in the statement of the Company's witness, M. W. 1, Thiru S. S. Mani, who stated that the direct commission received by this Company relating to this Branch is credited in the accounts of this Branch. The amount of commission received by the Company is included under the head "Commission" in the Profit and Loss Account. In 1964, the sum of Rs. 8,80,504/- and, in 1965, the sum of Rs. 7,46,391/include the direct commission. 'According to his evidence, therefore, the direct commission has already been taken into account in calculating the gross profits, and no question can arise of any add back. There is no cross-examination on this point on behalf of the appellant, nor has any evidence been led by the appellant to show that the statement of this witness is incorrect. In the circumstances, this claim has to be rejected. The second item claimed is add back in respect of handling charges which were included by the London Head Office in the :invoices for goods sent to Madras. The argument was that a proportionate amount of administrative (overhead) expenses of the Head Office in London allocable to the Madras Branch have already been deducted as expenditure in accordance with item 6(e) of the second Schedule to the Act, and the further debit of the handling charges amounted to double deduction. This argument proceeds on the basis that handling charges, which are included by the London Head Office in the various invoices, form part of the administrative (overhead) expenses of that office. There is no justification for such an assumption. The only evidence on this point is again that of M. W. 1, Mani. He clearly stated that, in the accounts.no sum is shown for handling charges as an expenditure as such. The handling charges are only mentioned in the.invoices received from the London Office for goods sent to India. These refer to the amount of handling charges incurred by the London Commercial Departments and an these amounts are recoverable from the customers in India along with the sale price. He added that the administrative (overhead) expenses of the Head Office do not include any portion of the London Commercial Departments expenses. Thus, it is clear that these handling charges have no connection with the administrative (overhead) expenses of the Head office which are taken into accou nt under item 6(e) of the Second Schedule. The actual expenses incurred b y various Commercial Departments of the Company in England in handling the particular goods are added in the invoices to the cost of those goods and are realised as part of the sale price. There is no separate entry of Workmen Of William Jacks & Co. Ltd., ... vs Management Of William Jacks & Co. Ltd., ... on 28 April, 1971 4 handling charges as an expenditure in the accounts of the Company. Consequently, there can &rise no question of making any addition in respect of these handling charges while calculating gross profit. The third item is in %respect of the Director's and General Manager's Office expenses in Calcutta amounting to Rs. 44,768/for the year 1964 and Rs. 50,848 /- for the year 1965. The Office in Calcutta, as we have indicated above, is a sort of common office supervising the business of the Company at all the three places in Calcutta, Bombay and Madras. The expenditure of this Regional Office is of the same nature as the administrative (overhead) expenses of the Company in London. These sums which have been shown as expenses in the accounts in the Madras Branch are amounts allocable to that Branch. This has been again proved by the same witness, M. W. 1, Mani. There is no cross-examination and no evidence to show that the case put forward by him is incorrect. In the circumstances, this objection also fails. The fourth objection, on which greatest emphasis was laid by learned counsel for the parties, relates to the question of interest charged by the London Office. in the sum of Rs. 1,00,657 / for 1964 and Rs. 1,65,255/- for 1965 on advances made by the London Office to this Branch at Madras during these years. It was urged that, having regard to the proviso to item 1(iii) of the Third Schedule to the Act, this interest should be disallowed. It, however appears to us that the question of this interest should be examined from a different aspect and that is whether this interest can be held to be 'a legitimate item of expenditure in calculating the profit and loss of the 'Company at Madras. It is clear that these amounts have been paid by the Branch at Madras to Head Office in London and represent interest which the London Office demanded from the Madras Branch on the advances made by the former to the latter. These payments are, thus, by a Branch of the 'Company to its Head' Office. The Head Office and the Branch Office both belong to the same Company. Such a payment of interest could be justified only on the basis that the London Office was the creditor and the Madras Branch the debtor in respect of the advances on which the interest has been claimed by the London Office. On the face of it, a Company cannot be a creditor and its own debtor simultaneously. No relationship of creditor and debtor can exist between two different Offices of the same Company. The interest paid merely amounts to money transferred by the Madras Branch o the Head Office and, similarly, advances made by the London Office to the Madras Branch are amounts which continue to be used by the Company for its business at a different place. Learned counsel appearing for the Company drew our attention to section 23. of the Act, under which there is a presumption as to the correctness of statements and particulars contained in the balance-sheet and profit and loss account of a Company if they had been properly audited by qualified auditors, and urged that, since the interest charged by the Head Office to the Branch Office at Madras was accepted as a proper expenditure for calculation of profit and loss account by the auditors, the Court under section 23 must accept that it was correctly shown as an expenditure. The presumption under section 23 is confined to the accuracy of the statements and particulars contained in the balance-sheet and the profit and loss account. If any item in the accounts is wrongly shown as expenditure when, on the face of it, it is not so, the Court is not bound to hold that the method adopted in preparing the accounts is correct simply because the auditors raised no objection. While the interest was paid on advances not made by a creditor to a debtor, but by the Company's one office to another, the money purported to be transferred as interest cannot be held to be an expenditure incurred by the Branch paying it to the other. In fact, there are indications in the Act itself to support the view that such advances made to one office by another of the same Workmen Of William Jacks & Co. Ltd., ... vs Management Of William Jacks & Co. Ltd., ... on 28 April, 1971 5 Company cannot be treated as liabilities. This is made manifest by the proviso to item 1 of the Third Schedule. Under this item, every Company, other than a banking company, is allowed a return on paid up equity share capital and on reserves shown in its balance-sheet. The proviso then deals with the case of a foreign Company and permits a deduction of 8.5 per cent on the aggregate of the value of the not fixed assets and the current assets of the company in India after deducting the amount of the current liabilities. In deduction of the current liabilities, however, any amount shown as payable by the Company to its Head Office, whether towards any advance made by the Head Office or otherwise, or any interest paid by the Company to its Head Office, is not be treated as a liability. The reason very clearly is that the object of the deduction under item 1 of the Third Schedule is to permit a Company a return on money invested by it for its business as a prior charge when calculating the surplus for purposes of bonus. In the case of an Indian Company, this object is achieved by giving a return of 8-5 per cent on the equity share capital and 6 per cent on reserves. In the case of a foreign Company, the same object is served by working out the difference between the total of fixed assets and current assets, and the current liabilities, which will represent the actual value of the net holdings of the Company as its investment. The advances made by the Head Office to a Branch Office are not deductible as liabilities, because that amount is also treated as a part of the investment by the Company on which the Cornpany should be given the return of 8.5 per cent. It does not, therefore, partake of the nature of a loan on which interest can be charged by the Head Office from the Branch Office. The principle of calculation laid down in item 1 of the Third Schedule, thus, recognises the position that the Head Office and the Branch Office do not function as creditor and debtor when only interest could be legitimately charged by the Head Office from 35-1 S.C. India/71 the Branch Office. In calculation of the gross profit for purposes of bonus, therefore, the two sums of Rs. 1,00,657/- for 1964 and Rs. 1,65,255/- for 1965 must be added back on the basis that they are wrongly shown as expenditure deductible in calculating profit and loss. The fifth objection relates to a sum of Rs. 11,747/- in 1964 and Rs. 7,251/- in 1965 shown as expenses incurred in the Jax Board Factory on the ground that the Jax Board Factory had ceased to function for these two years. It is, no doubt, true that M. W. 1, Mani, admits that the Jax Board Factory had no production in those two years; but there is nothing to show that the Factory had completely ceased to function. The expenses are actual expenses in the factory during those two years as certified by the Auditors and there is no material on the basis of which it can be held that these expenses were not incurred. This objection, therefore, fails. The sixth claim on behalf of the appellant is that the provision for gratuity and other contingencies should also be added back as representing "other reserves" under item 2(c) of the Second Schedule to the Act. The other contingencies referred to relate to provision made for furlough salary, passage, service and commission. All these items are clearly in respect of liabilities which had already accrued in the years in which the provision was made. They are not in respect of anticipated liabilities which may arise in future. The principles on which these have been calculated were explained by the same witness M. W. 1, Mani. In the case of gratuity, for example, provision has been made in respect of the employees on the basis of the amount of service put in by them up to the years to which the accounts relate. In some cases, of course, where the exact liability was not ascertainable, provision has been made on the basis of the estimated existing liability. Such provision is quite different and distinct from a reserve. This Court in Metal Box Co. of India Ltd. v. Their Workmen(1) held: Workmen Of William Jacks & Co. Ltd., ... vs Management Of William Jacks & Co. Ltd., ... on 28 April, 1971 6 "The distinction between a provision and a reserve is in commercial accountancy fairly well-known. Provisions made against anticipated losses and contingencies are charges against profits and, therefore, to be taken into account against gross receipts in the Profit and Loss account and the balance- sheet. On the other hand, reserves are appropriations of profits, the assets by which they are represented being retained to form part of the capital employed in the business. Provisions are usually (1) [1969] 1 S. C. R. 750. shown in the balance-sheet by way of deductions from the assets in respect of which they are made whereas general reserves and reserve funds are shown as part of the proprietor's interest : (See Spicer and Peglar's Bookkeeping and Accounts, 15th ed. p. 42). An amount set aside out of profit and other surpluses, not designed to meet a liability contingency commitment or diminution in value of assets known to exist at the date of the balance-sheet is a reserve but an amount set aside out of profits and other surpluses to provide for any known liability of which the amount cannot be determined with substantial accuracy is a provision. (See William Pickles Accountancy, Second Edn., 192, Part III, cl. 7, Sch. VI to the Companies Act, 1956 which defines provision and reserve.) " The provision for gratuity, furlough salary, passage, service and commission in the present case was all made in respect of existing and known liabilities, though, in some cases, the amount could not be ascertained with accuracy. It was not a case where it was an anticipated loss or anticipated expenditure which would arise in future. Such provision is, therefore, not a reserve at all and cannot be added back under item 2(c) of the Second Schedule. The last ground for challenge of the award relates to the deduction for income-tax. In the present case, the amount of income-tax shown as expenditure has been calculated without taking into account the bonus which would be payable to the workmen under the award. The point raised that it should be calculated after taking into account the bonus is fully met by the decision of this Court in the case of Metal Box Co. of India(1). That case clearly lays down that, in calculating the income-tax deductible in working out the gross profit, the bonus which would be payable under the Act is not to be taken into account and the tax must be worked out ignoring that bonus at the rates applicable in the relevant years. Learned counsel for the appellant, however, drew out attention to the amendment made subsequently by Parliament in the Act by the Payment of Bonus (Amendment) Act 8 of 1969, and urged that this amendment should be treated as the parliamentary exposition of the law which was interpreted by this Court in the case of Metal Box Co. of India(1). In that case, the question was determined by interpretation of only sections 6(c) and 7 of the Act. The Amendment Act 8 of 1969 makes no substantial changes in either of these two sections. In fact, section 6 remains unmended and in section 7, the only amendment is that the principles laid down in that section are to be applied not only in respect of section 6(c), but also other sections of the Act. This change became (1) [1969] 1 S.C.R. 750. Workmen Of William Jacks & Co. Ltd., ... vs Management Of William Jacks & Co. Ltd., ... on 28 April, 1971 7 necessary, because amendment was made in section 5 of the Act by making certain additions which referred to direct tax, including income-tax. That amendment in section 5 has no bearing at all on the question whether income-tax to be taken into account in calculation should be worked out after taking into account the bonus payable under the Act or without having regard to it. Consequently, there is no reason for us to differ from the view expressed by this Court in Metal Box case(1). This ground of challenge also, therefore, fails. As a result, we hold that the Tribunal was right in accepting the calculations made by the Company, except in respect of the interest paid on advances made by the Head Office to the Branch at Madras. The interest shown as expenditure in the accounts has to be added back, as indicated by us above, and the available surplus for purposes of calculation of the bonus payable as well as for purposes of set on or set off must be amended accordingly. We leave this calculation to the Tribunal. With this partial amendment in the award, the appeal is dismissed. In the circumstances of this case, we make no order as to costs. V.P.S. Appeal dismissed. (1) [1969] 1 S.C.R. 750. Workmen Of William Jacks & Co. Ltd., ... vs Management Of William Jacks & Co. Ltd., ... on 28 April, 1971 8 | {
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Sahodara Devi & Ors vs Government Of India & Anr on 26 March, 1971 Equivalent citations: 1971 AIR 1599, 1971 SCR 230, AIR 1971 SUPREME COURT 1599 Bench: J.M. Shelat, I.D. Dua PETITIONER: SAHODARA DEVI & ORS. Vs. RESPONDENT: GOVERNMENT OF INDIA & ANR. DATE OF JUDGMENT26/03/1971 BENCH: BHARGAVA, VISHISHTHA BENCH: BHARGAVA, VISHISHTHA SHELAT, J.M. DUA, I.D. CITATION: 1971 AIR 1599 1971 SCR 230 ACT: Cantonment Land Administration Rules, 1937, r. 27-Power under rule to grant lease whether discretionary-Use of word 'May', effect of. HEADNOTE: The appellant filed a petition under Art. 226 of. the Constitution against the refusal of the Defence Ministry to `execute a lease under r. 27 of the Cantonment Land Administration Rules, 1937 in respect of a bungalow situated in a cantonment area, on occupancy land held on 'old grants lease'. The single Judge directed the respondents to execute the lease but the Division Bench held that the power to grant a lease under r. 27 was discretionary. The Division Bench therefore set aside the orders of the single Judge and issued orders to the respondents to reconsider the request of the appellants for grant of lease under r. 27 and Sch. VII of the Rules in accordance with law.. With certificate the present appeal was filed in this Court. The Sahodara Devi & Ors vs Government Of India & Anr on 26 March, 1971 1 only question for consideration was whether the appellants were entitled to a direction against the respondents to issue a lease to them under r. 27 and Sch. VIl of the 1937 Rules. HELD:Rule 27 only confers a power in general on the Military Estates Officer to grant leases and, by using the word 'may', it clearly gives, him discretion to grant leases in suitable cases. There is the further circumstance that the exercise of the power by the Military Estate Officer has been made subject to the approval of the Central Government or such other authority as the Central Government may appoint for that purpose. The power of the Military Estates Officer being subject to such discretionary approval or disapproval of another authority cannot possibly be held to be required to be exercised in all cases without any discretion. [234G235A] In the present case therefore the High Court in directing a reconsideration of the case in accordance with law was quite correct, so that the application of the appellants must be decided afresh after keeping in view the principle that the power to grant a lease under r. 27 is discretionary, but the refusal should only be in suitable cases where sufficient reasons exist for the purpose. [235C] Sardar Govindrao & Ors. v. State of Madhya Pradesh, [1965] 1 S.C.R. 678, distinguished. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2246 of 1969. Appeal from the judgment and decree dated April 11, 1969 of the Allahabad High Court in Special Appeal No. 469 of 1968. Yogeshwar Prasad, S. K. Bagga and S. Bagga, for the appellants. V. A. Seyid Muhammad and S. P. Nayar, for the respondents. The Judgment of the Court was delivered by Bhargava, J--The appellants are admittedly the joint owners of Bungalow No. 45, situated along Tagore Road, in the Cantonment of Kanpur. These premises are recorded in the General Land Register of the Cantonment as occupancy land on old grant terms. It appears that the words "old grant terms" referred to rants made by the Government under the General Order of the Governor-General in Council dated 12th September, 1836. Subsequently, the first Act to be passed in respect of these lands was the Cantonments Act No. 13 of 1889. This was followed by Cantonments Act No. 15 of 1910 and Cantonments Code, .1912. These were amended by Cantonments Act No. 2 of 1924 which still continues to be in force. On the 26th June, 1925, Rules were framed for the first time under section 280 of the Cantonments Act of 1924, regulating administration of Cantonment lands. These Rules were, however, superseded by fresh Rules by Government notification dated 23rd November, 1937. The new Rules are described as "Cantonment Land Administration Rules, 1937". Under these Rules, a provision was made in rule 27 Sahodara Devi & Ors vs Government Of India & Anr on 26 March, 1971 2 for regularisation of old grants by issue of fresh leases. The appellants did not have any documents to show how the original title of their predecessors was acquired in respect of these lands. The earliest document, which, the appellants could produce, was a sale-deed executed by Ram Nath and others, sons of Roop Kishore, in favour of Dost Mohammad Estate, on the 8th September, 1943. This document recited that Roop Kishore, the father of vendors Ram Nath and others, purchased the property in various installments by documents executed between the years 1901 and 1908. The appellants acquired the rights to the Bungalow by a sale- deed executed in their favour by Dost Mohammad Estate on 30th April, 1958. After taking this sale-deed, they applied for mutation to Cantonment authorities; but objections were raised and the authorities did not agree to mutate the names of the appellants until the appellants agreed to give an undertaking to be bound by the terms of the Governor- Generals Order of September 12, 1936. Their names were then mutated on 13th September, 1961, which. had to be followed by a deed of admission executed by the appellants on 15th September, 1961. Subsequently, the appellants approached the authorities to get their rights defined and to have their possession regularised under r. 27 of the Rules of 1937. The request not having been granted, the appellants, on 12th April, 1966, moved the Military Estates Officer, Lucknow for the same, purpose and, according to the appellants. no attention was paid lo this request of theirs. On 15th 'October, 1966, they sent a reminder to the Military Estates Officer, Lucknow and, in addition, requested him to supply them with a form prescribed by Schedule V of the Rules of 1937. It may be mentioned that the lease under r. 27 was required to be executed in the form in Schedule VII and not in Schedule V. On 25th October, 1966, the Military Estates Officer wrote to the appellants to collect the form from, the Cantonment Executive Officer, Kanpur Cantonment, who was the Agent of the Military Estates Officer and to submit it, after completion, to the Military Estates Officer, Lucknow, along with a site plan. The letter contained an additional sentence that this reply sent also disposed of the earlier letter of the appellants dated 12th April, 1966. The appellants had also, in the meantime, moved the Defence Ministry by a letter dated 27th, August, 1966, for grant of a lease under r. 27 read with Schedule VII of the Rules of 1937, quoting an instance of one Mr. Packwood, resident of Kanpur Cantonment, in whose case a similar lease had already been issued. By the letter dated 25th October, 1966, the Joint Secretary to the Defence Ministry informed the appellants that a lease under r. 27 and Sch. VII could not be granted; but, if the appellants so desired, the Government were prepared to consider their case under r. 28(1) and Schedule VIII of those Rules. The appellants made a representation against this letter by a letter dated 1st November, 1966; but, when no reply was received, they gave a notice to the Government on 28th February, 1967, to execute the lease in two months under r. 27 and Sch. VII. Again, there was no reply and, thereupon, the appellants moved a petition under Art. 226 of the Constitution in the High Court of Allahabad on 18th, March, 1967, seeking a writ of mandwnus directing the Military authorities to issue a lease to them under r. 27 and Sch. VII. The petition was heard by a single Judge of the High Court and he issued a direction to the respondents to grant a lease as prayed. He rejected the plea of the respondents that the case fell within Rules 16 to 26 and 28 and not under Rule 27. The respondents appealed to a Division Bench which agreed with the learned single Judge that rules 16-26 and 28 were inapplicable to the case of the appellants. It was, however, of the view that, though, the case was covered by r. 27, that rule did not contain any mandatory provision requiring a lease to be given in all cases of old grants and that there was a discretion vested in the authorities acting under that rule not to give a lease in suitable cases. It was also held that the appellants had no right to claim such a lease under that rule. Consequently, the Division Sahodara Devi & Ors vs Government Of India & Anr on 26 March, 1971 3 Bench set aside the direction of the single Judge and issued orders to the respondents to reconsider the request of the appellants for grant of lease under r. 27 and Sch. VII of the Rules in accordance with. law. It is against this order that the appellants have come up to this Court by certificate under Art. 133(1)(b). of the Constitution. In this appeal, we are concerned with only one single point relating to the nature of the direction contained- in r. 27 of the Rules of 1937 The concurrent decision of the single Judge and the Division Bench, holding that rules 16-26 and 28 are inapplicable, has not been challenged in this case before us. The only point that has been canvassed is whether the appellants are entitled to a direction against the respondents to issue a lease to them under r. 27 and Sch. VII of the Rules of 1937. Rule 27 of the Rules of 1937 is as follows:- "27. Special Lease for the Regularisation of Old Grants.Notwithstanding anything contained in rules 16 to 26 the Military Officer in any case where a site is held without a regular lease, may, on application by the holder, grant, with the approval of the Central Government or such other authority as the Central Government may appoint for this purpose, a lease of the said land in the form set out in Schedule VII." In this Rule, thus, the power to grant a lease for regularisation of old grants has been given to the Military Estates Officer by using the word "may", and the power is further subject to the approval of the Central Government or such other authority as the Central Government may appoint for the purpose. In view of this language used, we think that the High Court was quite fight in holding that this rule does not envisage a mandatory direction to the Military Estates Officer to grant a lease in all cases where the question of regularisation of old grants arises. Normally, the, word "may" is used to grant a discretion and not to indicate a mandatory direction. Had the, intention been that the Military Estates Officer must grant a lease in all cases, the word used would have been "shall" instead of "may". It is true that the word "may", in some context, has been interpreted as containing a mandatory direction and the authority given the power has to exercise that power unless there be special reasons. Such a case came before this Court in Sardar Govindrao and Others v. State of Madhya Pradesh (1). That was a case where a rule relating to grant of money or pension was sought to be enforced. This Court held:- "This is an instance where, on the existence of the condition precedent, the grant of money or pension becomes obligatory on the Government notwithstanding that in s. 5(2) the Government has been given the power to pass such orders as it deems fit and in sub-s. (3) the word "may" is used.- The word "may" is often read as "shall" or "must" when there is something in the nature of the thing to' be done which makes it the duty of the (1) [1965] S.C.R. 678 Person on Whom the power is conferred to exercise the Power. Section 5(2) is discretionary because it takes into account all cases which may be brought before the Government of persons c raising to be adversely affected by the provision of s. 3 of the Act. Many such persons may have no claims at all although they may in a general way be said to have been adversely affected by s. 3. if the power was to be discretionary in every case there was no need to Sahodara Devi & Ors vs Government Of India & Anr on 26 March, 1971 4 enact further than sub-s. (2). The reason why two sub-sections were enacted is not far to seek. That Government may have to select some for consideration under sub-s. (3) and some under s. 7 and may have to dismiss the claims of some others requires the conferment of a discretion and sub-s. (2) does no more than to give that discretion to Government and the word "may" in that sub-section bears its ordinary meaning. The word "may" in sub-s. (3) has, however, a different purport. Under that sub-section, Government must, if it is satisfied that an institution or service must be continued or that there is a descendant of a former ruling chief, grant money or pension to the institution or service or to, the descendant of the former ruling chief, as the case may be. of course, it need not make a grant if the person claiming is not a descendant of a former ruling chief or there is other reasonable ground not to grant money or pension.. But, except in those cases where there are good grounds for not granting the pension, Government is bound to make a grant to those who fulfill the required condition and the word "may" in the third sub-section though apparently discretionary has to be read as "must". It may be noticed that, in that case, the word "may" as used in the general sub-s. (2) was not held to indicate a mandatory direction. It was only in sub-s. (3), because of the special context, that 'the Court held that the word "may" was equivalent to " shall" or "must". In the case before us, rule 27 only confers a power in general on the Military Estates Officer to grant leases and, by using the word "may", it clearly gives him discretion to grant it in suitable cases. There is further the circumstance that the exercise of the power by the Military Estates Officer has been made subject to the approval of the Central Government or such other authority as the Central Government may appoint for that purpose. If the power had to be exercised by the Military Estates Officer in all cases, its being made subject to the approval of another authority would be meaningless. When a rule envisages approval of the proposed action of the Military Estates Officer, it also implies that his action can be disapproved. This approval or disapproval will necessarily be at the discretion of the Central Government or the authority appointed by it for that purpose. The power of the Military Estates Officer being subject to such discretionary approval or disapproval of another authority cannot possibly be held to be required to be exercised in all cases without any discretion. The Division Bench was, therefore, perfectly correct in holding that the power under r. 27 is a discretionary power, and both the Military Estates Officer as well as the Central Government or the other authority appointed by it for that purpose in exercising their power have the discretion in suitable cases not to proceed under this rule. The High Court, in directing a reconsideration of the case in accordance with law, was, therefore, quite correct, so that the application of the appellants must be decided afresh, after keeping in view the principle that the power to grant a lease under rule 27 is discretionary ; but the refusal should only be in suitable cases where sufficient reasons exist for that purpose. The appeal fails and 'is dismissed. In the circumstances of this case, we make no order as to costs. G. C. Appeal dismissed. Sahodara Devi & Ors vs Government Of India & Anr on 26 March, 1971 5 | {
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Commissioner Of Sales Tax, Madhya ... vs M/S. Amarnath Ajitkumar Of Bhind, ... on 20 September, 1971 Equivalent citations: 1972 AIR 38, 1972 SCR (1) 828, AIR 1972 SUPREME COURT 38, 1972 4 SCC 347, 1972 TAX. L. R. 1636, 1972 (1) SCR 828, 1972 JABLJ 989, 1973 MPLJ 169, 1972 (1) SCJ 419, 1974 SCC (TAX) 33, 1972 28 STC 702, 28 S T C 702 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: COMMISSIONER OF SALES TAX, MADHYA PRADESH Vs. RESPONDENT: M/S. AMARNATH AJITKUMAR OF BHIND, MADHYAPRADESH DATE OF JUDGMENT20/09/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1972 AIR 38 1972 SCR (1) 828 ACT: Madhya Bharat Sales Tax Act, Samv. 2007, s. 12(1) and Madhya Pradesh Sales Tax Act, 1959, ss. 39(2) and 52-Assessment under former Act Larger period for revision of assessment by Commissioner provided in latter Act-If could be availed of. HEADNOTE: Section 12(1) of the Madhya Bharat Sales Tax Act, Samv. 2007 prohibits the Commissioner of Sales-tax from revising an order of assessment which had been made more than two years previously, while s. 39(2), of the Madhya Pradesh, Sales Tax Act, 1959, which came into force on April 1, 1959 and which repealed the Madhya Bharat Act, permits the Commissioner to revise an order till the expiry of three years from the date Commissioner Of Sales Tax, Madhya ... vs M/S. Amarnath Ajitkumar Of Bhind, ... on 20 September, 1971 1 of the order sought to be revised. The assessee was a registered dealer under the Madhya Bharat Act. For the period from July 1, 1957 to 31st March, 1958 he submitted returns. The Assistant Commissioner of Sales Tax passed an assessment order on November 28, 1961. On October 30, 1964, the Commissioner of Sales Tax initiated proceedings tinder s. 39(2) of the Madhya Pradesh Act for revising the assessment made. The assessee contended that as the assessment related to the period when the Madhya Bharat Act was in force the revision of the assessment was governed by s. 12(1) of that Act, and therefore, the Commissioner could not have revised the order of assessment after the expiry of two years after the assessment was made. The High Court, in reference, held that, in view of s. 52 of the Madhya Pradesh Act, the governing provision was s. 12(1) of the Madhya Bharat Act. Dismissing the appeal to this Court, HELD:(1) The proviso to s. 52(1) of the Madhya Pradesh Act, provides that the repeal of the Madhya Bharat Act shall not affect any right already acquired or accrued there. The effect of s. 12 ( 1 ) of the Madhya Bharat Act is that after the time prescribed in that provision the Commissioner could not revise the order of assessment either to the prejudice of the assessee or of the Revenue. 'Me section thus conferred a right both on the assessee as well as on the Department to see that an order of assessment is not revised to their prejudice after two years from the date of the assessment order. Therefore, the effect of s. 52(1) of the Madhya Pradesh At, is that all assessments which include reassessments, should be in accordance with the repealed Act. [835 B-E] Sales Tax Officer Circle I, Jabalpur v. Hanuman Prasad 19 S.T.C. 87 and Swastik Oil Mills Ltd. v. H. B. Munshi, Dy, Commissioner of Sales Tax, Bombay, 21 S.T.C. 383, followed. (2)The second part of the proviso no doubt provides that any action taken under the repealed Act shall, in so 'far as it is not inconsistent with the provisions of the latter Act, be deemed to have been done under the latter Act. But there is undoubtedly a conflict between s. 12(1) of the Madhya Bharat Act and s. 39(2) of' the Madhya Pradesh Act. Therefore, the Revenue cannot call in aid the second part of the proviso. [835 E-H] 829 JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 367 of 1969. Appeal by special leave from the judgment and order dated October 28, 1968 of the Madhya Pradesh High Court in Misc. Civil Case No. 188 of 1967. Commissioner Of Sales Tax, Madhya ... vs M/S. Amarnath Ajitkumar Of Bhind, ... on 20 September, 1971 2 I. N. Shroff, for the appellant. The respondent did not appear. The Judgment of the Court was delivered by Hegde, J. This appeal by special leave arises from the deci- sion of the Madhya Pradesh High Court in a reference under s. 44 of the Madhya Pradesh Sales Tax Act, 1959. The reference was made by the Board of Revenue. After stating the case, the Board of Revenue referred the following question to the High Court for its opinion. "Whether on the facts and circumstances of the case the Commissioner of Sales Tax acted illegally in exercising his powers' of revision under section 39(2) of the Madhya Pradesh General Sales Tax Act, 1958 in respect of the assessment order dated 28-12-1,961 which was passed in respect of the returns submitted on 30-1-1958 and 17-6-1958 and on the basis of the notice in form XI issued on 29-8-1961 ?" The High Court answered that question in the affirmative and in favour of the assessee. Aggrieved by that order, the Commissioner of Sales Tax, Madhya Pradesh has come up in appeal to this Court. The assessee, M/s. Amarnath Ajitkumar was a registered dealer under the Madhya Bharat Sales Tax Act, Samv. 2007. For the period from July 1, 1957 to 31st March, 1958, the period with which we are concerned in this appeal, the assessee submitted its return for the second and third quarters on January 30 , 1958 and for the fourth quarter on 17th June 1958. These returns were made under s. 9(3) of the Central Sales Tax Act, 1956. The sales tax concerned in the present case was that leviable under the Central Sales Tax Act, 1956. But the procedure to by adopted in the matter of assessment and collect-ion was that prescribed in the Madhya Bharat Sales Tax Act Samv. 2007. The Madhya Bharat Act was repealed by the Madhya Pradesh General Sales Tax Act, 1959, which came into force on April 1, 1959. Thereafter the Assistant Commissioner of Sales Tax, issued a notice in form XI of the Madhya Pradesh Sales Tax (Central) Rules, 1959 on August 29, 1961. That Officer passed the assessment order on November 28, 1961. On October 30, 1964, the Commissioner of Sales Tax initiated proceedings under s. 39(2) of the M.P. Sales Tax Act, 1959 for revising the assessment made. After notice to the dealer the Commissioner on April 15, 1965 revised the assessment and enchanced the same by a sum of Rs. 993.06 paise. The assessee's appeal to the Board of Revenue was dismissed on June 20, 1966. Both before the Commissioner as well as the Board of Revenue, the assessee contended that as the assessment related to the period when Madhya Bharat Sales Tax Act, Samv. 2007 was in force, the revision of that assessment is governed by s. 12(1) of that Act and not s. 39(2) of the M.P. Act, 1959. It was urged on its behalf that under the Madhya Bharat Act, the Commissioner could not have revised the order of assessment after the expiry of two years after the assessment was made. Hence the Commissioner was not competent to revise the assessment. The Commissioner as well as the Board of Revenue rejected that contention. They came to the conclusion that it was open to the Commissioner to take action under S.39(2) of the M.P. General Sales Tax Act, 1959 in the matter of revising the assessment. The High Court did not agree with that view. It held that in view of s. 52 of the 1959 Act, the governing provision in the matter of revising the assessment was s. 12(1) of the Madhya Bharat Act. Commissioner Of Sales Tax, Madhya ... vs M/S. Amarnath Ajitkumar Of Bhind, ... on 20 September, 1971 3 The only question that we have to decide is whether in the facts and circumstances of the case, the Commissioner could have exercised his power under S. 39(2) of the M.P. Sales Tax Act, 1959. Section 12(1) of the Madhya Bharat Act provides "The, Commissioner may in his discretion at any time suo moto or being moved by the assessing authority, call for and examine the records of any proceedings under this Act and if he considers any order is illegal or improper or erroneous in so far as it is pre- judicial to the interests of the revenue he may pass orders as he thinks fit : Provided that no order shall be passed prejudicial to a dealer without giving him an opportunity of hearing; Provided further that the Commissioner shall not revise an order which has been made more than two years previously." From the second proviso, it is clear that the Commissioner is precluded from revising an order which had been made more than two years previously. That proviso did not lay down any rule of limitation. But it took away the power of the Commissioner to revise any assessment after the prescribed period. Thereafter the assessment became final and conclusive as against the Department as well as the assessee, unless it was liable to be changed under some other provision of the Madhya Bharat Act. Section 39(2) of the M.P. Sales Tax Act of 1959 says "The Commissioner may of his own motion or on information received call for and examine the record of any proceeding under this Act if he, considers that any order passed therein by any person appointed under section 3 to assist him is erroneous in so far as it is prejudicial to the interests of the revenue, he may after giving the dealer an opportunity of being heard and. after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment; Provided that no proceedings shall be initiated under this sub-section after the expiry of three years from the date of the order sought to be revised.......... The M.P. Sales Tax Act, 1959 which repealed the Madhya Bharat Act by s. 52 therein provided the following repeal and saving provisions. "52(1). The Central Provinces and Berar Sales Tax Act, 1947, the Madhya Bharat Sales Tax Act, Samv. 2007, the Central Provinces and Berar Sales Tax Act, 1947 as extended to Vindhya Pradesh and Bhopal region and as in force in those regions immediately before the commencement of this Act and the Rajasthan Sales Tax Act, 1954, as in force in Sironj region, are hereby repealed : Provided that such repeal shall not affect the previous operation of the said Acts or any right, title, obligation or liability already acquired, accrued, or incurred thereunder, and subject thereto, anything done or any action taken (including any Commissioner Of Sales Tax, Madhya ... vs M/S. Amarnath Ajitkumar Of Bhind, ... on 20 September, 1971 4 appointment, notification, notice, order, rule, form, regulation, certificate or licence) in the exercise of any power conferred by or under the said Acts shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken in the exercise of the powers conferred by or under this Act, as if this Act were in force on the date on which such thing was done or action was taken; and all arrears of taxes and other amounts due, at the commencement of this Act may be recovered as if they had accrued under this Act." The High Court came to the conclusion that in view of the ,decisions of this Court in The Sales Tax Officer Circle 1, Jabalpur v. Hanuman Prasad(1) and The Swastik Oil Mills Ltd. v. H. B. Munshi, Dy. Commissioner of Sales Tax, Bombay, (2) the Commissioner was incompetent to revise the order because of s. 12(1) of the Madhya Bharat Act read with S. 52(1) of the M.P. Sales Tax Act, 1959. Hanuman Prasad's case (supra) arose out of M.P. Sales Tax Act, 1959. Therein in respect of a period governed by the Central Provinces and Berar Sales Tax Act, 1947, the assessee therein filed its return and a notice in form XII was issued to him on March 10, 1959. The assessee's turnover was assessed by an order dated May 23, 1959. But in the meantime, M.P. Sales Tax Act, 1959 came into force on April 1, 1959. The Commissioner sought to revise the order of assessment on the ground that a portion of assessee's turnover had escaped assessment. The question arose whether he had to exercise his powers within the time fixed by the Berar Sales Tax Act, 1947 or that fixed under M.P. Sales Tax Act, 1959. The specific question that arose for decision in that case was whether the Commissioner's power to revise had to be exercised in accordance with s. 11A(1) of the Central Provinces and Berar Sales Tax Act, 1947, as contended by the assessee or under s. 19(1) of the M.P. Sales Tax Act, 1959 as contended by the Department. That question was examined by this Court from several angles. One of the tests applied was what is the effect of s. 52 of the M.P. Sales Tax Act, 1959. Dealing with that aspect, this Court observed at p. 90 of the report "It was under section 52 of the new Act that the repealed Act was repealed, and that section itself, under the proviso laid down that such repeal shall not affect the previous operation of the said Act or any right, title, obligation or liability already acquired, accrued or incurred thereunder. There was also the further addition that subject thereto, anything done or any action taken (including any appointment, notification, notice, order, rule, form, regulation, certificate or licence) in the exercise of any power conferred by or under the said Act, shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken in exercise of the powers conferred by or under this Act, as if this Act were in force on the date on view of this proviso it has to be held that when this new which such thing was done or action was taken. In (1) 19 S.T.C. 87. (2) 21 S.T.C. 383, Act came into force on 1st April, 1959, all rights, title, obligation or liability already acquired, accrued or incurred under the repealed Act by the respondent remained unaffected and intact. The rights and liabilities, which had been acquired or incurred under the repealed Act, included the right or liability to be assessed in accordance with the provisions of the repealed Act in respect of turnover of sales effected during the time when that Act was in force." Agreeing with the High Court this Court held in Hanuman Prasad's(1) case that the Commissioner could not have revised the order of assessment after the period prescribed in the repealed Act. One of the reasons given in support of that conclusion is that "the rights and liabilities, which had been acquired or Commissioner Of Sales Tax, Madhya ... vs M/S. Amarnath Ajitkumar Of Bhind, ... on 20 September, 1971 5 incurred under the repealed Act, included the right or liability to be assessed in accordance with the provisions of the repealed Act, in respect of turnover of sales effected during the time when that Act was in force". The expression assessment includes re- assessment.. Swastik oil MillS(2) case is a converse case. Therein the assessee was assessed to sales tax under the Bombay Sales Tax Act, 1946, for the periods 1st April 1948 to March 31, 1950 and April 1, 1950 to March 31, 1951. On January 7, 1963, Deputy Commissioner initiated proceedings under s. 31 of the Bombay Sales Tax Act, 1 1953 proposing to revise the order of the Assistant Collector of Sales Tax in so far as he had allowed deduction in respect of the entire goods despatched by the assessee to its branches'in other states overlooking the provisions of proviso (b) to rule 1 (ii) under section 6 (3) of the Act of 1946 as amended in 1949. The question was whether the Deputy Commissioner could-take advantage of the longer period prescribed under the Bombay Sales Tax Act, 1946 or whether he was required to exercise his powers within the shorter period fixed under the 1953 Act. Bombay High Court as well as this Court came to the conclusion by applying the provisions in s. 7 of the Bombay General Clauses Act (1 of 1904) that the Deputy Commissioner was entitled to exercise his power of revision within the period prescribed under the repealed Act. Section 7 of the Bombay General Clauses Act provides "where this Act or any Bombay Act or Maharashtra Act, made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not (c)affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed. (1) 19 S.T.C. 87. (2) 21 S.T.C. 383. (e)affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act had not been passed" Dealing with the scope of those provisions this is what this Court observed : "Very clearly, the repeal of the Act of 1953 by the Act of 1959 did not affect the rights and liabilities of the assessee to tax under the Act of 1953 or the Act or 1946 in respect of the turnover which became liable to sales tax under the Act of 1946. The effect of clause (e) of section 7 of the Bombay General Clauses Act further is that any legal proceeding in respect of levy, imposition or recovery of that tax is to continue and any fresh investigation, legal proceeding or remedy could be instituted as if there had been no repeal by the Act of 1959. Consequently, the repeal of the Act of 1953 did not in any way affect the power of the Deputy Commissioner to institute proceedings for revision suo motu against the Commissioner Of Sales Tax, Madhya ... vs M/S. Amarnath Ajitkumar Of Bhind, ... on 20 September, 1971 6 appellate order of the Assistant Collector which had been passed in exercise of his powers under the Act of 1946. It is true, as urged by Mr. Desai in the alternative, that, in fact, the proceedings should have been taken not under section 31 of the Act of 1953, but under section 22 of the Act of 1946. That is so, because, when the Act of 1946 was repealed by the Act of 1953, similar provisions were made in the Act of 1953 to continue in force the provisions of the Act of 1946 in respect of rights and liabilities which may have accrued or have been incurred under the Act of 1946. Section 48(2) and section 49(1) clearly contained provisions indicating that, in respect of a liability to tax under the Act of 1946, the rights and liabilities of the assessee had to be determined in accordance with the provisions of the Act of 1946 and all legal proceedings or remedies in respect thereof had also to be taken under the same Act. Consequently the Deputy Commissioner in seeking to exercise revisional powers against the order of the Assistant Collector passed under the Act of 1946, had to proceed under section 22 of the Act of 1946. That, however, is not at all material, because the provisions of section 22 of the Act of 1946 are quite similar to those of section 31 of the Act of 1953. The mere incorrect mention of section 31 of the Act of 1953 in the notice is immaterial. The Deputy Commissioner has the jurisdiction and power to revise the order under section 22 of the Act of 1946 and, consequently the proceedings initiated by him are not without jurisdiction." Now coming back to s. 52 of the M.P. Sales Act of 1959, the proviso to s. 52(1) provides that the repeal of the Madhya Bharat Act shall not affect any right already acquired or accrued thereunder. The question is whether the bar on the power of the Commissioner from exercising the powers under s. 12(1) of the Madhya Bharat Act after the prescribed period did create a right in favour of the assessee ? The effect of that provision is that after the time prescribed in that provision, the Commissioner could not revise the order of assessment to the prejudice of the assessee. Similarly he could not revise the order of assessment to the prejudice of the Revenue. Section 12(1) conferred a right both on the assessee as well as on the Department to see that an order of assessment is not revised to their prejudice after a particular date. We fail to see why s. 12(1) of the Madhya Bharat Act should not be considered as conferring on the assessee a right to see that the assessment made against him is not altered to his prejudice after a particular date. That is a valuable right. The effect of s. 52 (1) of M.P. Sales Tax Act, as seen earlier is that all assessments, which includes reassessments should be in accordance with the repealed Act. The second part of that proviso says that subject to what has been provided in the first part of the proviso, anything done or any action taken including an order in the exercise of any of the powers conferred by or under the repealed Act, shall, in so far as it is not inconsistent with the provisions of the M.P. Sales Tax Act, 1959 be deemed to have been done in the exercise of powers conferred by or under that Act as if that Act were in force on the date on which such thing was done. There is undoubtedly a conflict between s. 12(1) of the Madhya Bharat Act and s. 39(2) of the M.P. Sales Tax Act, 1959. The former provision prohibits the Commissioner from revising an order which has been made more than two years previously and the latter provision permits him to revise the order till the expiry of three years from the date of the order sought to be revised. Therefore the Revenue cannot call into aid the second part of the proviso. The resulting position is that the governing provision Commissioner Of Sales Tax, Madhya ... vs M/S. Amarnath Ajitkumar Of Bhind, ... on 20 September, 1971 7 would continue to be s. 12(1) of the Madhya Bharat Act. For the reasons mentioned above this appeal fails and the same is dismissed. Respondent is ex-parte. No costs. L 3 Sup C.I./72-2500-5-10-72-GIPF. of the Act of 1953. The mere incorrect mention of section 31 of the Act of 1953 in the notice is immaterial. The Deputy Commissioner has the I jurisdiction and power to revise the order under section 22 of the Act of 1946 and, consequently the proceedings initiated by him are not without jurisdiction." Now coming back to s. 52 of the M.P. Sales Act of 1959, the proviso to s. 52(1) provides that the repeal of the Madhya Bharat Act shall not affect any right already acquired or accrued thereunder. The question is whether the bar on the power of the Commissioner from exercising the powers under s. 12(1) of the Madhya Bharat Act after the prescribed period did create a right in favour of the assessee ? The effect of that provision is that after the time prescribed in that provision, the Commissioner could not revise the order of assessment to the prejudice of the assessee. Similarly he could not revise the order of assessment to the prejudice of the Revenue. Section 12(1) conferred a right both on the assessee as well as on the Department to see that an order of assessment is not revised to their prejudice after a particular date. We fail to see why s. 12(1) of the Madhya Bharat Act should not, be considered as conferring on the assessee a right to see that the assessment made against him is, not altered to his prejudice after a- particular date. That is a valuable right. The effect of s. 52(1) of M.P. Sales Tax Act, as seen earlier is that all assessments, which includes reassessments should be in accordance with the repealed Act. The second part of that proviso says that subject to what has been provided in the first part of the proviso, anything done or any action taken including an order in the exercise of any of the powers conferred by or under the repealed Act, shall, in so far as it is not inconsistent with the provisions of the M.P. Sales Tax Act, 1959 be deemed to have been done in the exercise of powers conferred by or under that Act as if that Act were in force on the date on which such thing was done. There is undoubtedly a conflict between s. 12(1) of the Madhya Bharat Act and s. 39(2) of the M.P. Sales Tax Act, 1959. The former provision prohibits the Commissioner from revising an order which has been made more than two years previously and the latter provision permits him to revise the order till the expiry of three years from the date of the order sought to 'be revised. Therefore the Revenue cannot call into aid the second part of the proviso. The resulting position is: that, the governing provision would continue to be s. 12 (1) of the Madhya Bharat Act. For the reasons mentioned above this appeal fails and the same is,dismissed. Respondent is ex-parte. No costs. V.P.S. Appeal dismissed-. Commissioner Of Sales Tax, Madhya ... vs M/S. Amarnath Ajitkumar Of Bhind, ... on 20 September, 1971 8 | {
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Mohan Lal vs Anandibai And Ors. on 3 March, 1971 Equivalent citations: AIR1971SC2177, (1971)1SCC813, [1971]3SCR929, AIR 1971 SUPREME COURT 2177 Bench: I.D. Dua, J.M. Shelat JUDGMENT V. Bhargava, J. 1. This appeal by special leave has been filed by Mohan Lal who purchased the property in dispute from the original owner, Bhiwa, by means of two sale-deeds Exhibits D-1 and D-2 both dated 13th May, 1951. The properties were already mortgaged in favour of the appellant by two earlier mortgage-deeds executed on 23rd March, 1949 and 26th June, 1949 respectively. The plaintiff-respondents claimed that the two sale deeds were collusive transactions between Bhiwa and the appellant and that, in any case, Bhiwa had no right to sell these properties to the appellant, as the respondents had become owners of these properties prior to the execution of the sale-deeds. The four plaintiff-respondents are the daughters of Bhiwa by two wives, one of them being Smt. Hendri. According to their case, Bhiwa sold two of his malik-makbuza fields having an area of 11.33 acres by sale-deed Ext. D-31 to his wife Smt. Mendra and to his nephew. Barshya, each of the vendees getting a half share \n those fields. Later, Barshya re-conveyed his share to Bhiwa On 20th July, 1921. With regard to the share sold to Smt. Mendra, disputes arose between her and Bhiwa. Bhiwa. consequently, filed a suit in the year 1941 for cancellation of the sale-deed Ext. D-31 and for a declaration that he was the owner of the entire fields. The suit was compromised and a decree was passed giving Smt. Mendra the right of ownership to the share in those two fields. According to the plaintiff-respondents this share of Smt, Mendri was gifted by her to the plaintiff-respondents by two gift deeds Exts. P-1 and P-2 dated 3rd October, 1948 and 28th October, 1948. The title to the property to the extent covered by these two gift deeds was claimed by the plaintiff-respondents on the basis of those deeds. In addition, a deed of gift Ext. P-3 was executed by Bhiwa himself in favour of the plaintiff-respondents on 2nd May, 1951, and this covered the entire property in respect of which sale-deeds were later executed by Bhiwa in favour of the appellant on May 13. 1951. On the basis of this gift-deed, the plaintiff-respondents claimed title to the entire property sold to the appellant by the A two sale-deeds, so that claim in respect of part of the property was based on both the gift-deeds executed by Smt. Mendri, as well as the gift-deed executed by Bhiwa. Since the appellant came into possession under the two sale-deeds, the plaintiff-respondents brought a suit for declaration of their title and possession. 2. The trial Court held that the gift-deed Ext. P-3 executed by Bhiwa was fraudulent and, consequently, not binding on the appellant. The gift-deeds Exts. P-1 and P-2 executed by Smt. Mendri were held to be vaild. The plea of the plaintiff-respondents that the sale-deeds Exts. D-1 and Mohan Lal vs Anandibai And Ors. on 3 March, 1971 1 D2 in favour of the appellant were not genuine was rejected. In respect of the property gifted by Mendri, the trial Court further recorded the finding that Mendri had not lost her right prior to the execution of the sale-deeds. This finding had to be given, as the appellant relied on the fact that there were proceedings under Section 145 of the CrPC between Bhiwa and Smt. Mendri after the compromise in Bhiwas suit recognising Mendri's right to l/4th share in the two fields. In those proceedings, the entire fields were declared to be in possession of Bhiwa and a direction was made by the Magistrate to Mendri to file a suit for getting her l/4th share partitioned. No such suit was filed within the period of three years as required by Article 47 of the Indian Limitation Act, 1908. It was, therefore, urged that Mendri lost her right to the fields, so that the two deeds of gifts executed by her in favour of the plaintiff-respondents could not convey any title to them. 3. Against this judgment the trial Court, an appeal was filed by the plaintiff-respondents, while a cross-objection was filed by the defendant-appellant. The appeal and the cross-objection were heard by the Second Additional District Judge, Bhandara. The appeal by the plaintiff-respondents related to the property in respect of which their claim had been disallowed by the trial Court. while the appellant in the cross-objection challenged the decree in favour of the respondents in respect of l/4th share of Smt. Mendri. The 2nd Additional District Judge dismissed the appeal of the respondents and allowed the cross-objection of the appellant. The appellant's cross-objection was allowed on the ground that Mendri had lost her right to the property before executing the gift-deeds in favour of the respondents on account of her failure to file a suit for partition or possession within three years after the order of the Magistrate under Section 145 of the CrPC. The respondent's appeal was dismissed affirming the findings of the trial Court, but on two additional grounds. One ground was that the gift-deed executed by Bhiwa in favour of the plaintiff-respondents was in fact ante-dated and had been executed after the 13th May, 1951, so that it was fraudulent and was intended to defeat the sale in favour of the appellant. The second ground was that the suit of the plaintiff-respondents was barred by the principle of res judicata in view of an inter-parties judgment in Civil Suit No. 42-A of 1952 which did not exist during the pendency of the suit in the trial Court and was delivered while the appeal was pending in the appellate Court. 4. Against this decree passed by the first appellate Court, second appeal was filed before the High Court of Bombay. The High Court held that both the lower courts had committed an error in deciding the case on the ground of fraud or ante-dating in respect of the gift-deed of Bhiwa dated 2nd May, 1951, because no such case was put forward in the pleadings before the trial Court. The findings that the gift-deed was fraudulent and antedated were set aside and the gift-deed was, consequently, held to be valid. On the question of res judicata, the High Court came to the view that the material, which was placed before the first appellate Court to decide this quesion, was not sufficient, though the first appellate Court was justified in entertaining this plea, because the judgment in Civil Suit No. 42-A of 1952 came into existence for the first time during the pendency of the appeal. Consequently, the High Court, while setting aside the decree passed by the first appellate court dismissing the respondents' suit, passed an order of remand permitting parties to make amendments in their pleadings in respect of this plea of res judicata, and directing the trial Court to consider-prayer for allowing other amendments, but added a condition that amendments with respect to pleas of fraud, collusion or antedating in respect of the gift deed dated 2nd May, 1951 executed by Bhiwa in favour of the respondents were not to be permitted. It is against this order of Mohan Lal vs Anandibai And Ors. on 3 March, 1971 2 the High Court that the present appeal has been brought up to this Court by the defendant-appellant. 5. The main point urged on behalf of the appellant was that the High Court was not justified in setting aside the findings of the first appellate Court that the gift-deed dated 2nd May, 1951 was fraudulent and ante-dated, as there were sufficient pleadings to justify this point being entertained by that Court. In support of this plea, our attention was drawn to paras 6 and 17 of the written statement of the appellant. In para. 6, the pleading was that Bhiwa was all along in possession of the lands and the contentions of the plaintiffs to the contrary were denied. There was no valid transfer by Bhiwa before 13th May, 1951 in favour of the plaintiffs as alleged. It was denied again that plaintiffs were in possession of the lands covered by the sale-deeds executed by Bhiwa in favour of the defendant, and a suit for mere injunction was incompetent. The pleading in para. 17 was that Bhiwa and Mendri had been engaged for the past many years in litigation and the present plaintiffs had colluded with Bhiwa in seeking to set at naught the sale deed made by him in favour of the defendant which gave him a discharge of his liability and a release of estate from debt validly taken by him. Plaintiffs were thus not entitled to succeed. In the pleadings contained in these two paragraphs, we are unable to find any indication that the appellant wanted to put forward the case that the gift deed executed by Bhiwa was antedated and that, in fact this gift deed was executed after 13th May, 1951 and subsequently to the sale deeds in favour of the appellant. The collusion alleged in para. 17 did not purport to have any relationship with the deed of gift. That collusion between the plaintiff-respondents and Bhiwa was alleged to have been for the purpose of setting at naught the sale deed in favour of the appellant. There is indication that even the parties and the trial Court did not understand these pleadings as containing a plea that the gift deed was antedated and fraudulent in the sense of having been executed to defeat and delay the creditors of Bhiwa. No issue was framed on the question of fraud or antedating. learned Counsel for the appellant relied on issues 4, 12 and 13 to urge that such pleas were covered by the issues. These issues are as follows: (4)(a) Whether on 2-5-1951, Bhiwa made the gift of 5.661/2 acres of land held in malik-makbuza rights and 2.8 acres of occupancy land in favour of the plaintiff ? (b) Whether Bhiwa executed the gift deed in favour of the plaintiff ? (c) Whether the plaintiffs accepted the gift and acquired possession of the property ? (12) Whether the plaintiffs have brought this suit in collusion with Bhiwa ? If so, its effect ? (13) Whether on 13-5-1951. Bhiwa was not the owner of the fields and he could not convey good title to the land in favour of the defendant ? None of these issues appears to us to contain any suggestion that the gift deed by Bhiwa was executed to defeat find delay the creditors, or it was antedated. Issue 4(a) only challenges the execution of the gift itself; but there is no suggestion that the execution was either antedated or fraudulent. Issue No. 12, which seems to have been framed on the basis of the pleadings in para. 17 Mohan Lal vs Anandibai And Ors. on 3 March, 1971 3 of the written statement, specifically charges the plaintiffs with bringing the suit in collusion with Bhiwa. The collusion mentioned in para. 17 was thus interpreted to refer to collusion in bringing the suit and not in execution of the deed of gift Ext P. 3. Issue No. 13 only challenges the title of Bhiwa at the time of execution of the sale deeds in favour of the appellant and can, therefore, have no relation at all to the fraud or antedating in respect of the gift deed Ext. P-3. It is, thus, clear that the pleadings were never interpreted up to the stage of the trial as containing any allegation of fraud or antedating in relation to the gift deed Ext. P. 3. Even in the course of evidence, no questions were put on behalf of the appellant to the witnesses of the plaintiffs suggesting such fraud or antedating, though questions were asked in respect of the proper and valid execurtion the gift deed. It appears that, for the first time, the question of the gift deed being fraudulent must have been raised before the trial Court in the course of arguments after parties had already concluded their evidence, because the trial Court, in the judgment dealing with issues Nos. 12 and 13, proceeded to record a finding that the gift deed Ext. P.-3 was executed by Bhiwa fraudulently in order to defraud his creditOrs. On the face of it, there was no justification for the trial Court to go into this question and record this finding when there were no pleadings in respect of it and, even during the course of trial, evidence was not led with the object of meeting such a plea. The first appellate Court committed a similar error in affirming this finding recorded by the trial Court. In fact, it proceeded to commit a greater error in going into the question whether the gift deed was antedating having been executed after 13th May, 1951. Such a plea of antedating, it seems, was raised for the first time before the appellate Court in the course of arguments. There is nothing on the record to show that any such case was put forward at any earlier stage. The consequence is that the plaintiff-respondents had no warning that such a case was being put forward and had no opportunity of tendering evidence to meet these objections. In respect of the plea of fraud, evidence could have been given that Bhiwa had other properties, so that no question of defrauding the creditors could arise. Both those courts also lost sight of the fact that, on the record, the appellant was shown to be the only creditor of Bhiwa; there were no other creditOrs. As a creditor, he could not be defrauded, because his loans were secured by the mortgage deeds dated 23rd March, 1949 and 26th June, 1949. A gift by Bhiwa in respect of properties already mortgaged could not in any way defeat or delay the mortgagee's right, because the donee under the gift deed could only take the properties subject to the mortgages. The transfer by the deed of gift could not in any way affect the mortgagee's rights under the mortgages. The finding about fraud recorded by the trial Court as well as the appellate Court was therefore, on the face of it, totally unjustified, and the High Court was right in holding that they committed this error, and setting aside their finding. 6. So far as the plea of antedating of the gift-deed Ext. P-3 accepted by the appellate Court is concerned, the position is still worse. There was no suggestion at all that the gift deed was antedated either in the pleadings or in the course of evidence. No such suggestion was put forward to any witness of the plaintiff-respondents, nor was any statement made in this behalf by any witness of the appellant. The point was not even argued before the trial Court. It was not mentioned in any form before the appellate Court. It appears to have been raised for the first time in the course of arguments in the appeal, without notice C to the other party. The point was again decided on the basis of the evidence which came in incidentally when parties were examining witnesses in respect of the issues framed by the trial Court. Only two circumstances were relied upon by the appellate Court to record this finding of antedating. One was that the gift deed was registered on 23rd August, Mohan Lal vs Anandibai And Ors. on 3 March, 1971 4 1951, even though it was executed on 2nd May, 1951, and no explanation was forthcoming for this inordinate delay. The second circumstance was that the petition-writer, who scribed the deed of gift, did not produce his register of documents required to be maintained by him under the rules, which was held to raise a presumption that, if that register had been produced, it would have shown that the gift deed was not written out on 2nd May, 1951. So far as the first circumstance is concerned, since no issue was framed, no occasion arose for the plaintiff-respondents to give evidence to explain the delay in registration. No question was put to any witness of the plaintiff-respondents why this delay had occurred The plea depended on questions of fact in respect of which evidence could have been given and facts elicited. Such a plea could not be considered for the first time at the appellate stage when the party concerned had no earlier warning and did not have any opportunity to give evidence explaining the reason for the delay. The second circumstance for holding against the respondents appears to be based on a misunderstanding of the position of law. The register of the petition-writer was not a document maintained by or in the possession of the respondents. They were not responsible for its non-production. No presumption could be raised against them for failure of its production by the petition-writer. At best, the non-production could affect the value of the evidence of the petition-writer. Even if his evidence was not relied upon, no finding of antedating could be given when there was no assertion and. no evidence on behalf of the appellant to show that the gift deed had been ante-dated and had been executed after 13th May, 1951. The finding recorded was clearly without any evidence altogether. The High Court was, therefore, quite correct in setting aside this finding also. 7. Counsel for the appellant relied on four decisions of this Court in respect of his argument that the High Court was not justified in rejecting the case of fraud and antedating, which had been accepted by the first appellate Court, merely on the ground of want of pleadings. The first case referred to is Kidar Lall Seal and Anr. v. Hari Lall Seal [1952] S.C.R. 179, where Bose, J., with whom Fazl Ali, J. agreed, said : 'I would be slow to throw out a claim on a mere technicality of pleading when the substance of the thing is there and no prejudice is caused to the other side, however clumsily or inartistically the plaint may be worded. In any event, it is always open to a Court to give a plaintiff such general or other relief as it deems just to the same extent as if it had been asked for, provided that occasions no prejudice to the other side beyond what can be compensated for in costs. The principle enunciated has no applicability to the facts of the case before us. As we have already indicated, the pleadings did not contain any reference at all to the question of the sale deed being fraudulent or antedated. Instead of the substance of the pleas being there, there was no hint at all of these objections in the pleadings. The next case relied upon is Nagubai Ammal and Ors. v. B. Shama Rao and Ors. [1956] S.C.R. 451. That case related to a plea of Us pendens. The argument was that no plea of lis pendens was taken in the pleadings and, consequently, the evidence bearing on that question could not be properly looked into, and no decision could be given based on the documents that the sale was affected by lis. The plea was not accepted on the ground that: Mohan Lal vs Anandibai And Ors. on 3 March, 1971 5 that rule has no application to a case where parties go to trial with knowledge that a particular question is in issue, though no specific issue has been framed thereon, and adduce evidence relating thereto. In the case before us, we have already shown that parties did not go to trial on the issue of fraud and antedating in respect of the gift deed Ext. P-3, nor did they adduce evidence relating to any such pleas. The third case relied upon by learned Counsel is Kunju Kasavan v. M.M. Philip, I.C.S. and Ors. . In that case, a contention was put forward that a notification or deposition of witnesses could not be looked into when there was no proper plea or issue about the exemption. The question was whether a particular notification had exempted one Bhagavathi Valli from the provisions of Part IV of the Ezhava Act. The Court held that this question was properly gone into and expressed its views in the following words : We do not think that the plaintiff in the case was taken by surprise. The notification must have been filed with the written statement, because there is nothing to show that it was tendered subsequently after obtaining the orders of the court. The plaintiff was also cross-examined with respect to the address of Bhagavathi Valli, and the only witness examined on the side of the defendant deposed about the notification and was not cross-examined on this point. The plaintiff did not seek the permission of the court to lead evidence on this point. Nor did he object to the reception of this evidence. Even before the District Judge, the contention was not that the evidence was wrongly received without a proper plea and issue but that the notification was not clear and there was doubt whether this Bhagavathi Valli was exempted or not. The parties went to trial fully understanding the central fact whether the succession as laid down in the Ezhava Act applied to Bhagavathi Valli or not. The absence of an issue, there-fore, did not lead to a mistrial sufficient to vitiate the decision. Again, it is manifest that, in that case, parties had gone to trial consciously on that question and had given evidence, while the only omission was in the pleadings. In the case before us, we have already held that there was not merely omission in the plead-ings, but, in fact, the question of fraud and antedating was never the subject-matter of any evidence and no party was ever conscious in the trial that such questions are going to be decided by the Court. The last case relied upon is Union of India v. Khas Karanapura Colliery Ltd. . In that case, this Court held that certain processes ancillary to the getting, dressing or preparation for sale of coal obtained as a result of the mining operations were being carried on. This conclusion was resisted on the. plea that, in the writ petition, no specific case was pleaded under the second part of Sub-section (4) of Section 4 and, therefore, it was not open for the Court to consider that aspect of the case. The Court said : We are unable to accept this contention. It is true that the pleadings on this point are rather vague; but all the facts necessary for determining that question are before the court. That aspect of the case appears to have been fully argued before the High Court Mohan Lal vs Anandibai And Ors. on 3 March, 1971 6 without any objection. The High Court has considered and decided that question. Hence the appellant cannot now be permitted to contend that for want of necessary pleadings that question cannot be gone into. The circumstances of that case are again quite different from those in the case before us. In that case, all the facts necessary for determining the question were before the Court, while, in the present case, such facts could not come in, because the parties, at the time of trial, were not aware that these pleas of fraud and antedating are going to be considered by the courts. None of the cases relied upon by learned Counsel affects the view taken by us that, in the present case, the High Court was fully justified in setting aside the findings of the appellate Court on the question of fraud and antedating. 8. learned Counsel for the appellant also referred to the plea of limitation in respect of the right of Smt. Mendri through whom also title was claimed by the plaintiff-respondents in respect of some of the properties in suit. That plea becomes immaterial because, even if the gift deeds executed by Smt. Mendri are disregarded, the title to those properties was acquired by the respondents through the gift-deed Ext. P-3 executed by Bhiwa himself and the earlier title claimed need not, therefore, be gone into. 9. Lastly, counsel urged that now that the suit has been remanded to the trial Court for reconsidering the plea of res-judicata the appellant should have been given an opportunity to amend the written statement so as to include pleadings in respect of the fraudulent nature and antedating of the gift deed Ext. P-3. These questions having been decided by the High Court could not appropriately be made the subject-matter of a fresh trial. Further, as pointed out by the High Court, any suit on such pleas is already time-barred and it would be unfair to the plaintiff-respondents to allow these pleas to be raised by amendment of the written statement at this late stage. In the order, the High Court has stated that the judgments and decrees and findings of both the lower courts were being set aside and the case was being remanded to the trial Court for a fresh decision on merits with advertence to the remarks in the judgment of the High Court. It was argued by learned Counsel that, in making this order, the High Court has set aside all findings recorded on all issues by the trial Court and the first appellate Court. This is not a correct interpretation of the order. Obviously, in directing that findings of both courts are set aside, the High Court was referring to the. points which the High Court considered and on which the High Court differed from the lower courts. Findings on other issues, which the High Court was not called upon to consider, cannot be deemed to be set aside by this order. Similarly, in permitting amendments, the High Court has given liberty to the present appellant to amend his written statement by setting out all the requisite particulars and details of his plea of res judicata, and has added that the trial Court may also consider his prayer for allowing any other amendments. On the face of it, those other amendments, which could be allowed, must relate to this very plea of res judicata. It cannot be interpreted as giving liberty to the appellant to raise any new pleas altogether which were not raised at the initial stage. The other amendments have to be those which are consequential to the amendment in respect of the plea of res judicata. Mohan Lal vs Anandibai And Ors. on 3 March, 1971 7 10. In support of the argument that the appellant should be allowed to amend his pleadings in respect of fraud and antedating also, reliance was placed on the decision of this Court in L.J. I Leach and Co. Ltd. v. Jar dine Skinner and Co. [1957] S.C.R. 438, where an amendment was allowed at a very late stage by this Court. The Court held : The plaintiffs seek by their amendment only to claim damages in respect of those consignments. The prayer in the plaint is itself general and merely claims damages. Thus, all the allegations which are necessary for sustaining a claim for damages for breach of contract are already in the plaint. What is lacking is only the allegation that the plaintiffs are, in the alternative, entitled to claim damages for breach of contract by the defendants in not delivering the goods. 11. The dictum in that case has no application to the case before us in which there are no allegations or pleadings in the written statement in respect of the new pleas sought to be raised by amendment. Reference was also made to the decision of this Court in A.K. Gupta and Sons v. Damodar Valley Corporation where the principle laid down was that : the general rule, no doubt, is that a party is not allowed by amendment to set up a new case or a new cause of action particularly when a suit on the new case or cause of action is barred. But it is also well recognised that where the amendment does not constitute the addition of a new cause of action, or raises a different case, but amounts to no more than a different or additional approach to the same facts, the amendment will be allowed even after the expiry of the statutory period of limitation. In the case before us, this principle, instead of helping the appellant, goes against him. In this case, the pleas of fraud and antedating in respect of the gift deed Ext. P-3 raise entirely new causes of action and a case quite different from that pleaded in the original written statement. It is not a case of a different or additional approach to facts already given in the written statement. These cases do not, therefore, help the appellant and would not justify our permitting amendment of the written statement at this late stage by varying the order of the High Court. 12. The appeal fails and is dismissed with costs in this Court. Mohan Lal vs Anandibai And Ors. on 3 March, 1971 8 | {
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Sriram Narayan Medhi vs State Of Maharashtra on 4 May, 1971 Equivalent citations: 1971 AIR 1992, 1971 SCR 661, AIR 1971 SUPREME COURT 1992, 1972 MAH LJ 168 Author: P. Jaganmohan Reddy Bench: P. Jaganmohan Reddy, S.M. Sikri, G.K. Mitter, C.A. Vaidyialingam, A.N. Ray PETITIONER: SRIRAM NARAYAN MEDHI Vs. RESPONDENT: STATE OF MAHARASHTRA DATE OF JUDGMENT04/05/1971 BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN SIKRI, S.M. (CJ) MITTER, G.K. VAIDYIALINGAM, C.A. RAY, A.N. CITATION: 1971 AIR 1992 1971 SCR 661 ACT: Bombay Tenancy & Agricultural Lands (Amendment) Act, 1964 (Maharashtra Act 31 of 1965)-Validity of amendments challenged under Arts. 19 and 31 of the Constitution-Act whether protected from such challenge by Art. 31A. HEADNOTE: The Bombay Tenancy & Agricultural Lands Act, 1948 was passed in furtherance of the State's policy of social welfare and to give effect to agrarian reform. By the Constitution First Amendment Act 1951 the said Act was included in the Ninth Schedule and came within the purview of Art. 31B of the Constitution. In 1956 the State Legislature in order to implement the Directive Principles of State Policy passed the Bombay Tenancy and Agricultural Lands (Amendment) Act Sriram Narayan Medhi vs State Of Maharashtra on 4 May, 1971 1 which came into force on 1st August 1956. The main effect of the amendments made by the 1956 Act was that on 1st April 1957 every tenant was subject to other provisions deemed to have purchased from his landlord free of all encumbrances, the land held by him as a tenant. The erstwhile landlord remained entitled only to recover the price fixed under the provisions of the Amendment Act in the manner provided therein i.e. by a tribunal. The Amendment Act was challenged by a petition under Art. 32 but this Court held that it was protected by Art. 31A. Further changes in the Act were made by the impugned Act, namely, the Bombay Tenancy and Agricultural Lands (Amendment) Act, 1964. In a petition under Art. 32 of the Constitution it was contended that these changes had affected the petitioner's right to property in that he had neither the right to recover the price of the land deemed to be purchased by the tenant nor any hope of recovering it through the procedure prescribed by the impugned Act within a reasonable time. It was urged that there was no time fixed for the tribunal to determine that it had failed in the efforts to recover the amount under the Revenue Recovery Act so that the tenant purchaser could be evicted. The provisions of the Act were also attacked as unreasonable. The question that fell for consideration was whether the impugned Act was protected by Art. 31A. HELD: Once it has been held that Art 31A applies to an Act the petitioner cannot complain that his rights under Arts. 14, 19 and 31 of the Constitution have been infringed. The protection is available not only to Acts which come within its terms but also to Acts amending such Acts to include new items of property or which change some detail of the scheme of the Act provided firstly that the change is not such as would take it out of Art. 31A or by itself is not such as would not be protected by it and secondly that the assent of the President has been given to the amending statute. So long as the amendment also relates to a scheme of agrarian reform providing for the acquisition of any estate or of any right thereunder or for extinguishment or modification of such right the mere transfer of the tenure from one person to another or the payment of the price in instalment or even the postponement of payment by a further period cannot be challenged under Arts. 14, 19 and 31. [666H] 662 In the present case the impugned legislation had merely amended the Provision which related to the recovery of the amounts from the tenant who had become purchaser and the postponement of the time of ineffectiveness of sale till the tribunal has tried and failed to recover the amount from the tenant purchaser., This had not in any way affected the main purpose of the Act or the object which it seeks to achieve nor did the amendments effected thereby take the provision out of the protection given to it under Art. 31A of the Sriram Narayan Medhi vs State Of Maharashtra on 4 May, 1971 2 Constitution. [667B-C] The petition must accordingly be dismissed.. Sri Ram Ram Narain Medhi v. State of Bombay, 119591 1 Supp. S.C.R. 489, referred to and held inapplicable. JUDGMENT: ORIGINAL JURISDICTION: WRIT PETITION No. 254 of 1968. Petition under Art. 32 of the Constitution of India for the enforcement of fundamental rights. V. M. Tarkunde, V. M. Limaye and S. S. Shukla for the petitioners. V. S. Desai, M. C. Bhandare and S. P. Nayar, for the res- pondent. The Judgment of the Court was delivered by P. Jagamohan Reddy, J.-The petitioner challenges the vires of the Bombay Tenancy and Agricultural Lands (Amendment) Act, 1964 (Maharashtra Act XXXI of 1965) (hereinafter referred to as the 'impugned Act'). The parent Act is the Bombay Tenancy and Agricultural Lands Act 1948 (Bombay Act XLVII of 1948) (hereinafter referred to as 'the parent Act'). In 1956 the State Legislature amended the parent Act by Bombay Tenancy and Agricultural Lands (Amendment) Act 1956 (Bombay Act XIII of 1956) (hereinafter referred to as 'the Amendment Act') which came into force on 1st August 1956. The State of Bombay undertook legislation in furtherance of its policy of social welfare and to give effect to agrarian reform. The parent Act was passed by the Bombay State Legislature in order to amend the law which governed the relationship between the landlord and tenants of agricultural lands, the object sought to be achieved being as indicated in its preamble that "on account of the neglect of a landholder or disputes between the landlord and his tenants, the cultivation of his estate has as a result suffered or for the purposes of improving the economic and social conditions of peasant or ensuring the full and efficient use of land for agriculture, it is expedient to assume management of estates held by the landholders and to regulate and impose restrictions on transfer of agricultural lands, dwelling houses, sites and lands appurtenant thereto belonging to or occupied by agriculturists, agricultural labourers and artisans in the province of Bombay and to make provisions for certain other purposes". By the Constitution first Amendment Act 1951 the parent Act was included in the Ninth Schedule and came within the pur- view of Art. 31B of the Constitution. In 1956 the State Legislature in order to implement the directive principles of the State Policy set out in Aft. 38 and 39 of the Constitution of India by seeking to promote the welfare of the tenants, the landless peasants and labourers and to enable them to acquire land and with a view to bring about equitable distribution of ownership of land, passed the amendment Act which received the assent of the- President on March 16, 1956. This Act made further changes in the relationship of landlord and tenants which were more drastic. The main effect of the amendments of Section 32 to 32-B was that on the 1st April 57 (hereinafter referred to as the tiller's day) every tenant was, subject to the other provisions deemed to have purchased from his landlord free of all encumbrances subsisting thereon, on the said day, the land Sriram Narayan Medhi vs State Of Maharashtra on 4 May, 1971 3 held by him as a tenant subject to certain conditions (vide Section 32). The tenant under Section 32-A was deemed to have purchased the land up to the ceiling area. It was further provided by Section 32-B that if a tenant held the land partly as owner and partly as tenant, but the area of the land held by him as owner is equal to or exceeds the ceiling area he shall not be deemed to have purchased the land held by him as a tenant under Section 32. Section 32-E provided that the balance of any land after the purchase by the tenant under Section 32 shall be disposed of in the manner laid down in Section 15 as if it were land surrendered by the tenant. Section 32-F further provided that in the case of disabled landholders namely minors, widows or persons subject to any mental or physical disability or where the tenants are equally disabled as aforesaid or where they are members of the Armed Forces, the tiller's day was postponed by one year after the cessation of disability. As a result of the Amendment Act, on the 1st of April, 1957 the relationship of landlord and tenant came to an end, the landholder ceased to be a tenure-holder and the title thereto was vested in the tenants defeasible only on certain specified contingencies. The relationship of landholder and tenant was thus transformed into a relationship of a creditor and debtor, the erstwhile landlord being entitled only to recover the price fixed under the provisions of the Amendment Act in the manner provided therein under Section 32G read with 32H, the price which. was to be paid by the tenant Was to be determined by the tribunal as soon as may be after the tiller's day and in the manner provided thereunder subject however to the amount so determined not being less than 20 times and not more than 200 times of the assessment. An appeal against the decision of the Tribunal was provided to the State Govt. under Section 32-J. The mode of payment by the tenant of the price fixed by the Tribunal is prescribed under Section 32-K which shall be payable in annual instalments not exceeding 12, with simple interest at 4-1/2% per annum, on or before the said dates as may be prescribed by the Tribunal and 'the tribunal shall direct that the amount deposited in lumpsum or the amount of instalments deposited shall be paid to the former landlord. The landlord however did not have the right to recover the amount by recourse to a Court of law. The only way in which he could recover it if the instalments were not duly paid by the tenant voluntarily was by an application to the concerned authorities under the Revenue recovery Act to recover it as arrears of land revenue (Section 32-L) which provision it may be stated was subsequently deleted by the impugned Act under Section 32-M. On the payment of the price either in lumpsum or of the last instalment of such price the tribunal was required to issue a certificate in the prescribed form to the tenant purchaser in respect of the land, which certificate shall be the conclusive evidence of purchase. If the tenant fails to pay the lumpsum within the period prescribed for, or is at any time in arrears of four instalments the purchase was to be ineffective and the land was to be put at the disposal of the Collector and any amount deposited by such tenant towards the price of the land was to be refunded to him. It 'is important to note that Section 32-P provides that if the tenant fails to exercise his right to purchase or the sale becomes ineffective on account of default of payment of purchase price the tenant shall be evicted and the land shall be surrendered to the former landlord. Sections 32-Q and 32-R provide that the amount of purchase price was to be applied towards the satisfaction of debts and the purchaser was to be evicted from the land purchased by him as aforesaid if he fails to cultivate the land personally. The Amendment Act was challenged by a petition under Art. 32 but this Court held that it is protected by Art. 31A of the Constitution and is therefore valid. We shall presently refer to that Sriram Narayan Medhi vs State Of Maharashtra on 4 May, 1971 4 decision but the petitioner's grievance is against the changes that have been affected by the impugned Act in the law as it stood after Amendment Act. It is the contention of the learned Advocate for the Petitioner that he changes that transgress the fundamental rights of the petitioner are (1) that if the tenant does not pay the instalments by the end of twelve years but before the end of the period he makes an application that he is at the time incapable of paying the arrears within the time and pays one instalment together with the interest on the total amount of one year's instalment, the period of payment is extended by another 12 years. (2) where he fails to pay the price in lumpsum or is in arrears of four instalments where the number of instalments fixed is four or more and the purchase has thereby become ineffective even then if he was in possession of the land on the 1st of May '65 and files an application within six months therefrom or from the date of default of the payment of price in lumpsum or of the last instalment whichever is later and applies to the tribunal to condone the default on the ground that there being sufficient reason as he was incapable of paying the price in lumpsum or the instalment within the time, the tribunal can if it is satisfied condone the default and allow further time, in the case of payment of lumpsum one year and for payment of arrears in the case where payment is by instalments by increasing the total number of instalments to sixteen. (3) Even when the arrears are not paid as required under the law during the extended period and sale becomes ineffective and the tenant purchaser has nevertheless continued in possession, the landlord has no right to have the tenant purchaser evicted, till the tribunal admits that it has failed to recover the amount of the purchase price. Shri Tarkunde contends that these changes have effected the petitioner's right to property in that he has neither the right to recover the amount through a Court of law nor has he any hope of recovering it through the procedure prescribed by the impugned Act within any reasonable time; that in spite of the fact that under the previous law the sale had become ineffective under 32-H or 32-G by the default of the tenant purchaser to pay the price the Collector under 32-P was required to give possession to the landlord but under the impugned Act that right has become illusory because the landholder has no effective remedy either to recover the amount or to recover the land and that all that the tenant has to do is to sit tight, he need not apply for extension nor need he pay the instalment nor is there any time fixed for the tribunal to determine that it has failed in the efforts to recover the amount under the revenue recovery Act. No distinction in fact, it is said, has been made between a person who is unable to pay and one who will not pay. In view of these contentions 'it is necessary to point out that this very petitioner had challenged the constitutionality of the Amendment Act in Sri Ram Ram Narain Medhi v. State of Bombay (1) on the ground that it was beyond the competence of the legislature; that legislation not being protected by Art. 31(A) had infringed Arts. 14, 19 and 31 of the Constitution; and that it was a piece of colourable legislation vitiated in part by excessive (1) [1959] 1 Suppl. S. C. R. 489. delegation of legislative power to the State. On behalf of the Respondent, it was urged that the impugned legislationfall within entry 18 in List II of the Seventh Schedule to the Constitution, that it provided for the extinguishment or modification of rights to estates and was as such protected by Art. 31-A of the Constitution and that there was no excessive delegation of legislative power. This Court held (1) that the legislation fell within entry 18 of List II and therefore the legislature was competent to enact the Amendment Act; (2) that the word estate applied to landholders as defined by Section 2(5) of the Bombay Land Revenue Code which is equally applicable to tenure holders and Sriram Narayan Medhi vs State Of Maharashtra on 4 May, 1971 5 occupants of unalienated lands; (3) that the word 'landholder' as defined in Section 2(9) of the parent Act made no distinction between alienated and unalienated lands and showed that the interest of the landholder fell within the definition of 'estate' contained in Section 2(5) of the Bombay Land Revenue Code ; (4) that there was no warrant for the proposition that extinguishment or modification of any rights in estates as contemplated by Art. 3 1 A(.1) (a) of the Constitution must mean only what happened in the process of acquisition of any estate or of any rights therein by the State. The language of the Article was clear and unambiguous and showed that it treated the two concepts as distinct and different from each other, and (5) that Sections 32 to 32-R of the Amendment Act contemplated the vesting of title in the tenure on the tiller's day defeasible only on certain specified contingencies and intended to bring about an extinguishment or modification of rights in the estate within the meaning of Art. 31A(1)(a) of the Constitution. For the aforesaid reasons it was held that the Amendment Act was not vulnerable as being violative of Arts. 14, 19 and 31 of the Constitution. This decision concludes the most important question whether the petitioner's fundamental rights are infringed under Arts. 14, 19 and 31 as the parent Act as well as the amending Act is now protected by Art. 31A of the Constitution. Neither the question of discrimination nor of compensation or its adequacy can be gone into nor can the unreasonableness of the provisions under which the landlords title has been extinguished nor the manner in which the price is to be paid can be challenged. Once it has been held that Art. 31A applies the petitioner cannot complain that his rights under Arts. 14, 19 and 31 of the Constitution have been infringed. This protection is available not only to Acts which come within its terms but also to Acts amending such Acts to include new items of property or which change some detail of the scheme of the Act provided firstly that the change is not such as would take it put of Art. 31A or by itself is, not such as would not be protected by it and secondly that the assent of the President has been given to the amending statute. To put it differently as long as the amendment also relates to a scheme of agrarian reforms providing for the acquisition of any estate or of any right thereunder or for extinguishment or modification of such right the mere transfer of the tenure from one person to another or the payment of the price in instalment or even the postponement of payment by a further period cannot be challenged under Arts. 14, 19 and 31. In this case we have noticed that the impugned legislation has merely amended that provision which related to the recovery of the amounts from the tenant who has become purchaser and the postponement of the time, of ineffectiveness of sale till the tribunal has tried and failed to recover the amount from the tenant purchaser. The only way under which the petitioner could have recovered the amounts under the Amendment Act was by an application to the Collector under the Revenue Recovery Act for collecting it as arrears of land revenue but that provision under Section 32-L has now been deleted. While the vesting of the title of the tenure in the erstwhile tenant is still defeasible only on certain specified contingencies as was before the impugned Act it only modified the previous provisions to the extent that the erstwhile tenant has been given the benefit of having the payment postponed or instalments increased by requiring the tribunal to make an enquiry as to whether there were sufficient reasons for the tenant purchaser making a default and if it is satisfied to condone the delay and extend the period of payment. It also vested in the tribunal instead of the Collector the power to make the recovery on behalf of the landholder. It may also be noticed that under the impugned Act the sale still becomes ineffective as was under Sriram Narayan Medhi vs State Of Maharashtra on 4 May, 1971 6 the amendment Act when the amount is not recovered with this difference that under the former it has to be shown that the tenant purchaser was not in a position to pay. No doubt before the impugned Act, if the tenant-purchaser did not pay, the Collector could take action under the revenue recovery Act to recover the amount and if he did not recover it the sale became ineffective and the landlord could be put in possession by evicting the tenant purchaser provided he was entitled to get possession of it under the Act, as when his holdings do not come within the ceiling. The basic position still remains the same after the impugned Act and there is nothing in the Amendment Act which is destructive of the scheme of agrarian reform which the legislation seeks to implement and which is protected under Art. 31A of the Constitution. This view of ours is amply borne out also by the statement of objects and reasons which impelled the legislature to state the difficulty that was being felt in the implementation of the agrarian land reforms and indicate how it sought to find a remedy and got over it. This is what was stated "According to provisions of Section 32-K, 32-L and 32-M of the Bombay Tenancy Agricultural Land Act 1942; it is left to the tenant to deposit with the tribunal the purchase of the land which is deemed to have been purchased by him under Section 32 of that Act. If he fails to deposit the price in lumpsum or instalments the purchase becomes ineffective and under Section 32-P the tenant can be summarily evicted from the land. It has been brought to the notice of the Government that in the case of an Act a large number of tenants specially belonging to the Scheduled Caste and Scheduled Tribe, the purchase is in danger of being ineffective for failure to deposit the sale price on due dates. It is noticed that these tenants being illiterate and socially backward have failed to deposit the amount more out of ignorance than willful default. Unless therefore immediate steps are taken to provide for recovery of purchase price through Government agency a large number of tenants are likely to be evicted from their lands due to purchase becoming ineffective. This will result in defeating the object of the tenancy legislation. To avoid this result, it is therefore considered that the agricultural lands tribunal showed be empowered to recover the, purchase price from tenants as arrears of land revenue and until the tribunal has failed to recover the purchase price, the purchase should not become ineffective. It is also considered that the benefit of these provisions should be given to tenants whose purchase has already become ineffective but who have not yet been evicted from their lands under Section 32-P. This bill is intended to achieve these objects". We do not therefore think that the impugned Act has in any way affected the main purpose of the Act or the object which it seeks to achieve nor do the amendments effected thereby take the provisions out of the protection given to it under Art. 31A of the Constitution. Shri Tarkunde has referred us to the case of Maharana Shri Jayvantsinghji Ranmalsinghji etc. v. The State of Gujarat (1) in support of his contention that the Sriram Narayan Medhi vs State Of Maharashtra on 4 May, 1971 7 impugned Act infringes Art. 19(1)(f) of the Constitution and is not saved by clause 5 thereof as the provisions of the said Act are unreasonable in that the indefinite postponement of the recovery of the price makes the payment thereof illusory, and even after the sale has become ineffective the landholder is not entitled to recover the land. What fell for determination in the case referred to was whe- ther as a result of the provisions of the Bombay Land Tenure (1) [1966] Supp. S.C.R. 411. Abolition Laws (Amendment) Act 1958, particularly under Sec- tions 3 and 4 read with Section 6 thereof certain non- permanent tenants were deemed to have become permanent tenants as from the commencement of the Bombay Taluqdari Tenure Abolition Act 1949 and thereby became entitled to acquire the tenure on payment of 6 times the assessment or 6 times the rent instead of atleast the minimum of 20 times to 200 times the assessment which right infringed the fundamental right of the landlord to acquire hold and dispose of property. This result it was contended had substantially deprived the petitioners of the right which they acquired on the tiller's day by reason of the provisions contained in Section 32 and other provisions in the parent Act as amended from time to time. The majority held that the provisions of Sections 3, 4 and 6 of the Bombay Land Tenure Abolition Laws (Amendment) Act, 1958 insofar as they deemed some tenants as permanent tenants in possession of Taluqdari land were unconstitutional and void in that under the guise of changing the definition of a permanent tenant and changing a rule of evidence, it really reduced the purchase price that the petitioners were entitled to receive from some of their tenants on the 'tiller's day' under Section 32-H of the parent Act. It would appear from the Judgment of S. K. Das, J. speaking for himself and Sinha C.J., that the constitutional validity of the relevant provisions of the Taluqdari Abolition Act 1949 and the parent Act read with the Amendment Act had not been challenged before them. The decision of Dhirubha Devisingh Gohil v. The State of Bombay (1) and Shri Ram Ram Narain Medhi v. The State of Bombay (1) were cited as upholding the constitutionality of the relevant provisions of those 2 Acts. After pointing out that what has been challenged before them was the constitutional validity of the Bombay Act LVII of 1958 particularly the provisions 3, 4 and 6 of that Act, and referring to the earlier decision that this Court had held that Sections 32 to 32-R of parent Act read with the Amendment Act were designed to bring about an extinguishment or in any event a modification of the landlords rights in the estate within the meaning of Art. 31A(1)(a) of the Constitution, it was observed that the right which the petitioners got of receiving the purchase price was undoubtedly a right to property guaranteed under Art. 19(1)(f) of the Constitution and was not saved by clause 5 thereof nor are the cases before them protected by Art. 31A. S. K. Das, J. gave the following reasoning for the aforesaid conclusion at page 438-439 : "The petitioners have three kinds of tenants--permanent tenant protected tenants, and ordinary tenants. On (1) [1955] 1 S.C.R. 691. (2) [1959] Suppl. 1 S.C.R. 489. April 1, 1957, the petitioners ceased to be tenure holders in respect of all tenants other than permanent tenants and became entitled only to the purchase price under' s. 32H. If any tenant claimed on that date that he was a permanent tenant, he had to establish his claim in accordance with s. 83 of the Revenue Code. Such a claim could be contested by the tenure-holder whenever Sriram Narayan Medhi vs State Of Maharashtra on 4 May, 1971 8 made by the tenant. But by the impugned Act 1958, all this was changed, and unless the tenure holder made an application within six months of the commencement of the impugned Act, 1958, he was not in a position to say that a particular tenant who was in possession of tenure land for continuous period aggregating twelve years on and before August 15, 1950, was not a permanent tenant. We are unable to hold that the six months' limit imposed by s. 5 of the impugned Act, 1958, is in the circumstances, a reasonable restriction within the meaning of Art. 19(5) of the Constitution." The decision in the above case is clearly inapplicable to the facts and circumstances of the case before us and consequently in the view we have taken this petition is dismissed with costs. G.C. Petition dismissed. Sriram Narayan Medhi vs State Of Maharashtra on 4 May, 1971 9 | {
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Commissioner Of Income-Tax, West ... vs Central India Industries Ltd on 7 September, 1971 Equivalent citations: 1972 AIR 397, 1972 SCR (1) 619, AIR 1972 SUPREME COURT 397, 1972 TAX. L. R. 174 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: COMMISSIONER OF INCOME-TAX, WEST BENGAL Vs. RESPONDENT: CENTRAL INDIA INDUSTRIES LTD. DATE OF JUDGMENT07/09/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1972 AIR 397 1972 SCR (1) 619 ACT: Income tax Act 1922, s. 16(2)--Parent company distributing dividend to assessee company partly in cash and partly in scrips-In computing income of assessee company from dividend said scrips whether to be valued at face value or market value-Considerations. HEADNOTE: The assessee company was holding certain shares in an investment company which was its parent company. The amount of dividend receivable by the assessee company was paid to it partly in cash and partly in share scrips of two other companies. The relevant assessment year was 1959-60. For the purpose of assessment under the Income-tax Act, 1922 the Income-tax Officer valued those shares as per their market value on the date on which those shares became the assets of the assessee company. He therefore added to the amount of Commissioner Of Income-Tax, West ... vs Central India Industries Ltd on 7 September, 1971 1 dividend purported to have been declared a sum of Rs. 61,500/- in computing the assessable income of the assessee company. The Appellant Assistant commissioner upheld the order of the Income-tax Officer and rejected the contention of the assessee company that those shares should be valued as per their face value. The Tribunal allowed the assessee's appeal on the grounds that : (i) the distribution of share scrips was not a distribution of dividend, (ii) the share scrips received by the assessee company had been valued at their face value in the hands of the parent company for the purpose of assessment of its profits and (iii) the assessee company had not sold the shares and so there could be no profit in respect of those shares. The High. Court accepted the first two grounds relied on by the Tribunal. In addition it relied on the circumstance that under s. 18(5) of the Act, the assessee can get refund of tax only on the basis on which the parent company was taxed. The certificate granted by the High Court for appeal to, this Court was found to be invalid because it did not give any reasons. This Court however allowed the revenue to appeal by special leave. On behalf of the respondent assessee it was submitted that on a proper interpretation of the relevant provisions of the Income-tax Act, 1922 the scheme of the Act in the matter of levying tax on dividend income was that the Income-tax Officer should adopt a uniform method in assessing both the company declaring dividend as well as its shareholders who receive the dividend. HELD : (i) It is well settled by the decision in Kantilal Manilal's case that dividend need not be distributed in money only. It may be distributed by delivery of property or right having monetary value., [623 B] Kantilal Manilal and Ors. v. Commissioner of Income-tax, Bombay North, Kutch and Saurashtra, Ahmedabad, 67 I.T.R. 315, applied. Further the question whether a dividend has been lawfully distributed or not is also irrelevant in the matter of bringing the dividend declared to tax so long as the distributing company passes a resolution distributing dividends. In so doing the distributing company may act illegally and thereby incur penalties. But yet the amount so distributed as dividend is assessable in the, hands of receiver of the dividend in view of s. 16(2) which provides that for the purpose of inclusion in the total income of an 620 assessee, any dividend shall be deemed to be income of the previous year in which it is paid. [623 C-D] Kishnichand Chellaram and Ors. v. Commissioner of Income- tax, Bombay, 36 I.T.R. 640, relied on. (ii)It is well known that the face value of shares need not be their real value at a given point of time. It would be wrong to say that when shares are distributed as dividend, the person who receives them gets only their face value in Commissioner Of Income-Tax, West ... vs Central India Industries Ltd on 7 September, 1971 2 terms of money. What he really receives is the market value of those shares as on the date he 'became entitled to those shares. The value of the shares distributed does not depend on the valuation made by the distributing company. The income earned by an assessee has to be determined by the authorities under the Act and not by a third person. If it is otherwise several companies may distribute their dividend in kind and undervalue the goods distributed and thereby facilitate evasion of tax by their share-holders. [623 G-624 B] (iii)The question whether the shareholder retains those shares or sells them to others at profit or loss is irrelevant. An income does not cease to be an income merely because the person who receives it retains it in his hands. The fact that he receives it in kind does not make any difference in principle. The Tribunal went wrong in thinking that as the assessee company had retained those shares in its own hands those shares should be valued at their face value. [623 E-H] (iv)The Tribunal and the High Court also went wrong in holding that it was not open to the authorities under the Act to value the shares differently in the hands of the assessee company when they had valued them at their face value in assessing the parent company. The assessee company could not insist that the error should also be carried to the assessment of the assessee company. No one gets any vested right in an erroneous order. [624 G-H] (v)Because of erroneous valuation of the shares in the hands of the parent company, the assessee may conceivably get a lesser amount as refund under s. 18(5) but that circumstance could not alter the levy to be imposed on the assessee company. There is no provision in the Act which makes the assessment of income dependent on refund. The provisions relating to assessment are independent of refund through the provisions relating to refund may depend on assessment. [625 E-G] The appeal must accordingly be allowed. JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2347 of 1968 and 1175 of 1971. Appeals by certificate/special leave from the judgment and order dated November 15, 1967 of the Calcutta High Court in Income-tax Reference No. 155 of 1963. S.T. Desai, B. B. Ahuja, R. N. Sachthey and B. D. Sharma, for the appellant (in both the appeals). B.Sen, N. R. Khaitan, B. P. Maheshwari and Krishna Sen, for the respondent (in both the appeals). Commissioner Of Income-Tax, West ... vs Central India Industries Ltd on 7 September, 1971 3 The Judgment of the Court was delivered by Hegde, J. These appeals arise from the decision of the High. Court of Calcutta in a Reference under s. 66(1) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as the Act). That was a Reference made by the Income-tax Appellate Tribunal, 'A' bench, Calcutta. In that Reference after stating the case, the Tribunal referred the following question for obtaining the opinion of the High Court. "Whether on the facts and in the circumstances of the case the Tribunal rightly excluded the sum of Rs. 61,656/- from being assessed as an extra dividend income of the assessee." The High Court answered that question in the affirmative. Aggrieved by that decision, the Commissioner of West Bengal has brought Civil Appeal No. 2347 of 1968 on the strength of the certificate issued by the High Court under s. 66-A(2) of the Act. But the certificate given by the High Court is not supported by any reason. Hence the same cannot be held to be a valid certificate. Because of the invalidity of the certificate that appeal must be held to be not maintainable. In order to get over this difficulty, the, Commissioner moved this Court for special leave to appeal against the judgment of the High Court. Special Leave asked for was granted after condoning the delay in filing the appeal and the appeal arising therefrom was numbered as Civil Appeal No. 1175 of 1971. The assessee is a company. Herein we are concerned with its assessment for the assessment year 1959-60, the relevant previous year ending on March 31, 1959. The assessee company was holding 458,071 shares In Pilani Investment Corporation Ltd. (which will hereinafter be referred to as the "parent company"). As per the resolution of the parent company declaring the dividends, the assessee company became entitled to receive on November 18, 1958 dividend amounting to Rs. 1,83,228/40 Np. That was at the rate of 40 N.P. per share. The amount of dividend receivable by the assessee company was paid to it partly in cash and partly in share scrips. It may be noted at this stage that the parent company is an investment company. The share scrips delivered to the assessee company were of M/s. Gwalior Rayon and Silk Manufacturing Co. Ltd. and Hind Cycles Ltd. The Income-tax Officer valued those shares as per their market value on the date on which those shares became the assets of the assessee company. The market value of those shares on that date was Rs. 2,44,526/-. He, therefore, added to the amount of dividend purported to have been declared, a sum of Rs. 61,500/- in computing the assessable income of the assessee ,company. Aggrieved by that order, the assessee company went ,up in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner upheld the order of the Income-tax Officer and rejected the contention of the assessee company, that those shares should be valued as per their face value. Thereafter the assessee company took up the matter in second appeal to the Appellate Tribunal. The Tribunal allowed the assessee's appeal. It held that in order to bring any distribution within the category of dividend, it must be proved as a fact that what was distributed by the company was its accumulated profits. The Tribunal appears to have been of the view that the distribution of share scrips was not a distribution of profits. Hence their value cannot be considered as dividend. One other reason which persuaded the Tribunal to accept the appeal of the assessee company was that the share scrips received by the assessee company had been valued at their face value in the hands of the parent company 'for the purpose of assessment of its profits. The Tribunal thought that it was impermissible for the Income-tax Officer to value those shares in one manner in the hands of the parent company and in another manner in the hands of the assessee company. Yet another Commissioner Of Income-Tax, West ... vs Central India Industries Ltd on 7 September, 1971 4 consideration that weighed with the, Tribunal was that the assessee company had not sold those shares. Therefore it made no profits in respect of those shares. So long as it retained those shares in its ,own hands, it cannot be said that it made any profits in respect of those shares as it cannot be said that it sold those shares to itself for a higher price. The High Court accepted the first two grounds relied on by the Tribunal. In addition it relied on the circumstance that under s. 18(5) of the Act, the assessee can get refund of tax only on the basis on which the parent company was taxed. Before proceeding to examine the correctness of the conclu- sions reached by the Tribunal and the High Court, it is necessary to note at this stage that one other firm which was a shareholder of the parent company is Ujjain General Trading Society (P) Ltd. During the assessment year 1959- 60. the assessment year with which we are concerned in these appeals in accordance with the aforementioned resolution dated November 18, 1958, that Company had also been paid dividend by the parent company partly in cash and partly in shares of Gwalior Rayon and Silk Manufacturing Co. Ltd. and Hind Cycles Ltd. In the assessment of that firm also, the question arose whether it was open to the Income-tax Officer to value the shares distributed to that company at a price higher than its face value. The facts of this case and that, case are identical. Therein the Appellate Tribunal (a different Tribunal) held that it was permisible for the Income- tax Officer to do so. In appeal the Madhya Pradesh High Court upheld the decision of the Tribunal-see Ujjain General Trading Society (P) Ltd. v. Commissioner of Income-tax, Delhi(1). Thus, on the same question of law two different High Courts have arrived at two different conclusions. It is now well settled by the decision of this Court in Kantilal Manilal and ors. v. Commisioner of Income-tax, Bombay North, Kutch and Saurashtra, Ahmedabad(1) that dividend need not be distributed in money only. It may be distributed by delivery of property or right having monetary value. Further, the question whether a dividend has been lawfully distributed or not, in the matter of bringing the dividend declared to tax is also irrelevant so long as the distributing company passes a resolution distributing dividends. In so doing, the distributing company may act illegally and thereby incur penalties. But yet the amount so distributed as dividend is assessable in the hands of the receiver of the dividends in view of S. 16(2) which provides that for the purpose of inclusion in the total income of an assessee, any dividend shall be deemed to be income of the previous year in which it is paid. This position is made clear by the decision of this Court in Kishinchand Chellaram and ors. v. Commissioner of Income-tax Bombay(3). Therefore the question whether dividend distributed by the parent company was out of the profits of that company or not is immaterial though in view of s. 205 of the Companies Act, 1956 and S. 2(6A) of the Act, only the profits earned in the year of assessment and the accumulated profits could have been distributed as dividends. All that we have to see is as to what is the income received by the assessee company in the shape of dividends. We have earlier seen that the income received by the assessee company need not be in the shape of cash only. It may also be some other property or right which has monetary value. Therefore when dividend is received in kind, in order to find out the true income received by an assessee, the property that has been received by him has to be valued on the basis of its market value. Otherwise it is not possible to compute the income received by him. It is well known that the face value of shares need not be their real value at a given point of time. The market price of particular shares may be very much more than their face value or very much less. It would be wrong to say that when shares a-re distributed as dividend, the person who receives them gets only their Commissioner Of Income-Tax, West ... vs Central India Industries Ltd on 7 September, 1971 5 face value in terms of money. What he really receives is the market value of those shares as on the date he became entitled to those shares. The value of (1) 67 I.T.R. 315. (2) 41 T.T.R. 275. (3)46 T.T.R. 640. the shares distributed does not depend on the valuation made by the distributing company. The income earned by an assessee has to be determined by the authorities under the Act and not by a third person. If it is otherwise several companies may distribute their dividends in kind and under- value the goods distributed and thereby facilitate evasion of tax by their share holders. Acceptance of such a contention will be destructive of ,the very basis of taxation of dividends. The question whether the shareholder- retains those shares or sells them to others at profit or loss is irrelevant. An income does not cease to be an Income merely because the person who receives it retains it in his hands. The fact that he receives it in kind makes no difference in principle. What is brought to tax in the concerned assessment year is theincome received by the assessee and not the profits earned by himby dealing with that income. In our opinion, the Tribunal went wrong in thinking that as the assessee company had retained those shares in its own hands those shares should be valued at their face value. At this juncture, it is necessary to mention that in some previous years also the parent company had distributed a portion of its share holding as dividend to its share holders. It appears, in those years the market value of those shares was less than their face value and the parent company valued those shares for the purpose of its income tax on the basis of market value and not according to their face value. The parent company appears to believe in the saying "Heads I win tails you loose". But that is only by the way. The only question that we have to decide is what is the income received by the assessee company during the assessment year in question-the income in the real sense. On this question there can be no two answers and the only answer is that the income received by it is the cash amount received plus the value of the shares received-the real value of the shares as on the date the asesssee company became entitled to it. Both the Tribunal and the High Court have attached con- siderable importance to the fact that while assessing the parent company, the assessing authority had valued those shares at their face value. That being so, they have opined that it was not open to the authorities under the Act to value those shares differently in the bands of the assessee company. Here again we are unable to appreciate their reasoning. Ile fact that the Department incorrectly valued those shares in the hands of the parent company does not confer a right on the assessee company to insist that the error should also be carried to the assessment of the assessee company. No one gets a vested right in an erroneous order. Because of erroneous valuation of the shares in the hands of the parent company, the assessee may conceivably get a lesser amount as refund under s. 18(5) but that circumstance cannot alter the levy to be imposed on the assessee company. Mr. B. Sen, learned Counsel for the assessee company, tried to give a different shape to the case in the course of his argument. He, in our opinion , rightly did not base his arguments on thegrounds relied on by the Tribunal and the High Court. On theo ther hand, he contended that on a proper interpretation of therelevant provisions of the Act, it would be seen that the schemeof the Act, in the matter of levying tax on dividend income is that the Income- tax Officer should adopt a uniform method in assessing both the company declaring dividends as well as its shareholders who receive the dividend. In support of this theory of his he relied on ss. 12(1-A), 16(2), 18(5), 20 and 35 (9) of the Act. Dividend is treated as income in view of Commissioner Of Income-Tax, West ... vs Central India Industries Ltd on 7 September, 1971 6 S. 12(1-A). Net dividend received by the shareholder is grossed up for inclusion in the total income of the assessee under s. 16(2). Section 18(5) provides for refund of the tax paid on the dividend income by the company which has distributed dividend. Section 20 provides for the issuance of a certificate showing the gross dividend, tax payable on that dividend and the net dividend. Section 35(9) empowers the Income-tax Officer to recover from the person who receives dividend the tax in respect of the same, payable by the company which distributed the dividend but in fact not paid by that company within the prescribed time. On the basis of these provisions, he urged that if the dividend paid in kind is valued in one manner in the hands of the company which distributed it and in a different manner in the hands of the person who received it, then the assessee will not be able to get the refund to which he would have been entitled to had that property been valued properly in the hands of the distributing company. Therefore, he urged that we must spell out the scheme put forward by him. Ingenious, though the argument is, it rests on no foundation. There is no provision in the Act which makes the assessment of income dependent on refund. The provisions relating to assessment are independent of refund though the provisions relating to refund may depend on assessment. Equitable considerations are not relevant in interpreting the provisions of a taxing statute, apart from the fact the equity pleaded in this case is remote possibility. None of the provisions relied on by Mr. Sen afford any basis for the scheme sought to be established by him. In our opinion the High Court erred in answering the question referred to it in the affirmative and in favour of the assessee. For the reasons' mentioned above we discharge that answer and answer that question in the negative and in favour of the Department. L 3Sup.C.T./-/2 costs. Civil Appeal No. 2347 of 1968 is dismissed as being not maintainable but without any order as to costs. G.C, C.A. No. 1175 of 1971 allowed. C.A. No. 2347 of 1968 dismissed. Commissioner Of Income-Tax, West ... vs Central India Industries Ltd on 7 September, 1971 7 | {
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Som Nath vs Union Of India & Anr on 25 May, 1971 Equivalent citations: 1971 AIR 1910, 1971 SCR 848 Author: P. Jaganmohan Reddy Bench: P. Jaganmohan Reddy, G.K. Mitter, C.A. Vaidyialingam PETITIONER: SOM NATH Vs. RESPONDENT: UNION OF INDIA & ANR. DATE OF JUDGMENT25/05/1971 BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN MITTER, G.K. VAIDYIALINGAM, C.A. CITATION: 1971 AIR 1910 1971 SCR 848 1971 SCC (2) 387 ACT: Prevention of Corruption Act (2 of 1947), s. 5(1)(c)-Scope of. Sanction for prosecution-Principles for granting. Practice and Procedure-Duty of prosecution to examine all witnesses Scope of. HEADNOTE: The appellant who was a Major in the Military Engineering Service, was in charge, of the expansion work of an air strip and was given possession of the land acquired for that purpose, along with valuable crops standing on the land. He postponed giving delivery of the land to the contractor for the extension work. Instead, he allowed one of the owners of the land to cut the crop and take it away without in an way accounting for it. A charge-sheet was filed against the appellant under s. 5(1) (c) and s. 5 (1)(d) read with s. 5(2) of the Prevention of Corruption Act, 1947. He was aquitted of the offence under s. 5(1) (d) but was convicted Som Nath vs Union Of India & Anr on 25 May, 1971 1 for the offence under s.5(1)(C)and the conviction was confirmed by the High Court. In appeal to this Court, it was contended inter alia (1) that the sanction given by the Government or his prosecution did not cover the trial of the charge under s. 5(1) (c); and (2) the prosecution did not examine all the witnesses necessary to unfold the story of the prosecution. HELD: (1) For a sanction to be valid it must be established that the sanction was given in respect of the facts constituting the offence with which the accused is proposed to be charged. It is desirable that the facts should be referred to in the sanction itself. If they do not appear on the face of it, the prosecution must establish aliunde by evidence that those facts were placed before the sanctioning authority. The sanction must disclose that the sanctioning authority had fully applied its mind to them and the sanction should be correlated to the particular offence or offences with which the amused is charged or convicted. [852E-F] In the present case, the facts which the Government considered for the purpose of granting sanction were :(a) that the appellant was a public servant entrusted with crops standing on the land acquired for the extension of an air field, (b) that by abusing his position as a public servant he allowed standing crop to be cut from the said land, (c) that by corrupt or illegal means and by abusing his position as a public servant he obtained pecuniary advantage of about Rs. 2,000 as the value of the crops that were cut from the land and that he dishonestly or fraudulently misappropriated the same by converting it into his own use. Under s. 5(1) (c) of the Act a public servant shall be said to have committed the offence of misconduct-in his duties if he dishonestly allows any other person to convert to his own use property which is entrusted to the said public servant. The facts which have been set out in the order granting the sanction are sufficient to indicate that the authorities granting the sanction had the 849 offence under s. 5(1)(c) in their contemplation. In fact, the order specifically mentions that provision while granting sanction. Even if there was an inference or implication that the persons cutting the crops were abetting the appellant in the offence the sanction could not be held to be bad on that account. [854D, 855D] Bhagat Ram v. State of Punjab, A.I.R. 1954 S.C. 621, Madan Mohan Singh v. State of U.P. A.I.R. 1954 S.C. 637, Gokul Chand Dwarkadas Morarka v. The King, A.I.R., [1948] P.C. 82 and Jaswant Singh v. State of Punjab, [1958] S.C.R. 762, referred to. (2)With reference to each one of the person who, according to the appellant, should have been called as witnesses there was already evidence relating to the particular matter about which those persons would have given evidence. In the Som Nath vs Union Of India & Anr on 25 May, 1971 2 circumstances the non-examination of other witnesses, without anything more, could not be treated as a defect in the prosecution. [863G] JUDGMENT: CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.102 of 1969. Appeal by special leave from the judgment and order dated April 9, 1969 of the Punjab and Haryana High Court in Criminal Appeal No. 1055 of 1966. Frank Anthony and K. B. Rohatgi, for the appellant. H. R. Khanna and R. N. Sachthey, for the respondents. The Judgment of the Court was delivered by Jaganmohan Reddy, J.-This Appeal is by Special leave against the Judgment of the High Court of Punjab and Haryana confirming the conviction of the accused under Section 5(1)(c) of the Prevention of Corruption Act 1947 as also the sentence awarded by the Sessions Judge of one year's Rigorous Imprisonment and a fine of Rs. 2500, in default six months Rigorous Imprisonment. The facts of the case in brief are that in view of the Chinese invasion Air Field at Sirsa required to be extended for which purpose the Ministry of Defence, Govt. of India took steps to acquire some lands of agriculturists pursuant to which a Notification dated November 27, 1962 was issued under Section 4 of the Land Acquisition Act 1884 for acquiring 51.79 acres of land situated in the State of Ahmedpur. On the next day another Notification was issued under Section 6 of the Land Acquisition Act on November 28, 1962 and in view of the emergency action under Section 17 was taken for obtaining possession of the land With a view to its development. The lands which were acquired belonged to several land holders including Moti Ram and P.W. 12 Kewal Chand. The Collector gave his award on 26-2-63 (Ex. P. 26) in respect of these lands, which actually measured 49.47 54-- S. C. India/71 acres, at Rs. 1350 per acre amounting to Rs. 66,784.50 np. Apart from this amount compensation was also awarded for standing crop amounting to Rs. 11,073.13 np. Before the land was actually acquired the Appellant who was a Major in the Military Engineering-Service was working as a Garrison Engineer and was inching of the extension. He had in anticipation of acquisition and execution of the work appointed A. B. Ranadive, P.W. 14 as Assistant Garrison Engineer who was to be responsible, for all the matters connected with the acquisition of land, demarcation of boundaries as an Engineer Inching for execution of the contract and responsible for the maintenance of the Air Field. The work of the extension of aerodynamic was entrusted to one Telu Ram, P.W. 8 Contractor, with whom the trusted to M.E.S. Department entered into an agreement on December 3, 1962. This agreement was signed both by the Appellant and P.W. 14. The work according to that agreement was to be done in 2 phases-first phase was to commence on 10th January 1963 and was to be completed by 9th October 1963. After the completion of the first phase the second phase was to start on 10th October 1963 and completed by 9th May 1964. Pursuant to this agreement it is said that -symbolic possession of the land which was acquired was taken over by the Tehsildar on 1st Som Nath vs Union Of India & Anr on 25 May, 1971 3 February 1963, after which at any rate it appears from Ex. P. 24 that actual possession of this land was handed over by the said Tehsildar on 13th February 1963 to the appellant. The receipt Ex.P.24. 24 bears the signature of N. L. Handa, the Tehsildar and of Sukhchain Lal jain, P.W. 11 on behalf of the Military Estate Officer and the Appellant. From this receipt it is evident that possession of 50.12 acres was handed over by the Tehsildar and taken over by the Appellant and the Military Estate Officer Sukhchain Lal Jain. The case of the prosecution initially was that after the land so acquired with the standing crop was taken possession of by the Appellant he sold the crop to Moti Ram and Kewal Chand for Rs. 2500 and facilitated the cutting and taking away of the crop by postponing the handing over of the possession to the contractor till the 5th April 1963 and misappropriated the money. In respect of this allegation the First Information Report (Ex. P. 29) was issued on 14-1-64 in which the following statement is relevant:- "It is alleged that Major Som Nath accused who is a Garrison Engineer Sirsa Air Field subsequently sometime in the months of March and April 1963 permitted the removal of the standing crop valued at Rs. 11073-13 by Shri Moti Ram and Kewal Chand etc., after, accepting illegal gratification of Rs. 3000 from them. Major Som Nath did not account for this amount in the Govt. Revenues., He thus. abused his position as a public servant and caused pecuniary advantage to said Shri Moti Ram and Kewal Chand by giving them standing crops worth Rs. 13,000 for a consideration of. Rs. 3,000 only, which amount he accepted for his personal use and thereby also abused his official position and obtained pecuniary advantage, for himself in a sum of Rs. 3000. The facts disclose the commission of the offence of criminal misconduct as defined in Section 5(1)(d) read with Section 5(2) of the Prevention of Corruption Act 1947 by Major Som Nath accused. A regular case, is therefore registered and entrusted to Inspector Baldev Rai Handa for investigation." After this F.I.R. certain statements were recorded by the Military authorities being DA to DE,DM, DM/ 1, DN & DL of Mani gain, Mulkh, Raj, Ganpat Ram, Telu Ram, Kewal Chand and Sukhchain Lal Jain. A chargesheet was filed against the Appellant under Section 5 (1) (c) and 5 (1) (d) read with 5 (2) of the Prevention of Corruption Act on 5-8-1966 after obtaining sanction from the Govt. of India, Ministry of Home Affairs on llth April, 1966 as per Ex. P.23. The Special Judge acquitted the Appellant of the second charge namely that being a public servant he had by corrupt or illegal means or by otherwise abusing his position as a public servant obtained for himself a sum of Rs. 2,500 from Moti Ram of Sirsa for cutting the crops and thereby committed ,offence under Section 5(1)(d) punishable under Section 5(2). The accused was however convicted under the first charge for an offence under Section 5(1)(c) in that he being a Garrison Engineer incharge of the Air Field Sirsa and in that capacity entrusted with standing crops of Sarson, Gram and Lusan on 30 acres of land a part of 49 acres of land acquired by the Govt. and which had been valued at Rs. 11,073.13 by the Revenue authorities, dishonestly or fraudulently allowed Moti Ram of Sirsa to misappropriate the said standing crop and thereby contravened Section 5(1)(c) of the Prevention of Corruption Act punishable with Section 5(2) of that Act. Against that conviction and sentence he Som Nath vs Union Of India & Anr on 25 May, 1971 4 -appealed to the High Court which maintained the conviction and sentence. The learned Advocate for the Appellant has meticulously taken us through the entire documentary and oral evidence and commented at length upon the various contradictions and incongruities in the case of the prosecution with a view to establishing that when the Appellant took possession of the land there was no crop standing on it-that tile possession of the land 'was in fact delivered to Telu Ram, Contractor on 10-1-1963; that the said Contractor had admitted 'that possession of the entire land was received by him; that he carried on the construction work in extending the Aerodrome; that 200/250 donkeys were also used for doing the work by reason of which the crop was damaged before Tehsildar had put the Appellant in possession of the land and as a matter of fact there was no crop thereon when he got the possession of the land. It was also contended that the High Court had not considered the contradictions in the earlier statement made by some of the witnesses to the Military authorities and that it relied on many of the documents for affirming the conviction of the Appellant without their actually being put to, him under Section 342. Before we consider these contentions it is necessary to determine another submission of the learned Advocate for the Appellant which goes to the root of the jurisdiction of the Court to try the offence, under Section 5(1)(c). If this contention is valid then the conviction of the accused cannot stand and therefore it is necessary to deal with this matter first. It may be mentioned that though a complaint was made in the application for a certificate for leave to appeal to this Court that the learned Single Judge of the High Court should have acquitted the Appellant on the sole ground that there was no proper sanction for the prosecution of the Appellant under Section 5(1) (c) of the Prevention of the Corruption Act, this question does not seem to have been urged before the High Court. In any case we do not think that there is any validity in the submission that the sanction given by the Govt. of India does not cover the trial of the charge under Section 5(1)(c) of the Prevention of Corruption Act. For a sanction to be valid it must be established that the sanction was given in respect of the facts constituting the offence with which the accused is proposed to be charged. Though it is desirable that the facts should be referred to in the sanction itself, nonetheless if they do not appear on the face of it, the prosecution must establish aliunde by evidence that those facts were placed before the sanctioning authorities. It is therefore necessary to first examine the order of sanction to ascertain on what facts it has been accorded. The sanction that has been accorded is in the following terms: 11th April 1966. "Whereas it is alleged that Major Som Nath...... while functioning as Garrison Engineer, M.E.S., Air Field at Sirsa from 13-2-63 to 54-1963 by corrupt or illegal means or by otherwise abusing his position, as such public servant, obtained pecuniary advantage of Rs. 2500 for allowing the standing crops to be cut from the land acquired for the extension of Air Field Sirsa; and or he dishonestly or fraudulently realised and misappropriated Rs. 2500 during the aforesaid period as the value of the crops cut from the land acquired for the extension of Air Field Sirsa, which crops had been entrusted to him as a public servant and he instead of depositing the said sale price into the Govt. Treasury converted it to his own use; Som Nath vs Union Of India & Anr on 25 May, 1971 5 And whereas the said acts of Major Som Nath.. constituted offences punishable under Section 5(2) of the Prevention of Corruption Act, read With Section 5 (1) (c) and (d) (Act No. 11 of 1947) of the said Act and Section 409 of the I.P.C. And whereas the Central Govt. after fully and carefully examining the materials before it in regard to the said allegations and circumstances of the case, consider that Major Som Nath...... should be prosecuted in a court of law for the said offences. Now therefore, the Central Govt both hereby accord sanction under Section 197-Code of Criminal Procedure (Act No. 5 of 1898) and Section 6(1)(a) of the Prevention of Corruption Act, 1947 (Act II of 1947) for the prosecution of Maj. Som Nath for the said offences and for any other offences punishable under the provision of law in respect of the aforesaid acts by the Court of competent jurisdiction. By order and in the name of the President. Sd/- (A. P. Veera Raghavan) Deputy Secretary to the Govt. of India." From the above order it is apparent that the facts which the Central Govt. considered for the purposes of according sanction were (a) that the Appellant as a public servant was entrusted with crops situated on the land acquired for the extension of Air Field, Sirsa ; (b) that by abusing his position as a public servant he allowed the standing crops to be cut from the said land ; (c)that by corrupt or illegal means and by abusing his posi- tion as a public servant he obtained pecuniary advantage Of Rs. 2500as the value of the crops to be cut from the land and/or he dishonestly or fraudulently misappropriated that sum by converting it into his own use instead of depositing the said sale price in the Govt. Treasury. On these facts and after applying its mind as spoken to by P.W. 10 Kalra the Government accorded its, sanction for prosecution of the offences punishable under Section 5(2) read with Section 5(1)(c) and 5(1)(d). The question therefore Would be whether these facts were sufficient to sustain the sanction under 5(1)(c) even if the charge under 5(1)(d) had failed. This question in turnwill depend upon what are the ingredients of the offences under 5(1)(c) and (d) read with Section 5(2). Under 5(1)(c)-A Public servant is said to commit the offence of misconduct in the discharge of his duty if he dishonestly or fraudulently misappropriates or otherwise converts for' his own use any property entrusted to him or under his control as a public servant or allows any other person so to do, and under (d) if he by corrupt or illegal means or by otherwise abusing his position as a public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage. It would be seen therefore that under Section 5(1)(c) a public servant will be said to commit the offence of misconduct in hi& duties if he dishonestly allows any other persons to convert to his own use property Which is entrusted to the said public servant The facts which have been set out in the order granting the sanction certainly are sufficient to indicate that the authorities granting the sanction Som Nath vs Union Of India & Anr on 25 May, 1971 6 had the offence under Section 5(1)(c) also in their contemplation. In fact the order specifically mentions thisprovision while granting sanction. We should have thought this Was an obvious conclusion but the learned Advocate for the Appellant strenuously contended that the charge against the Appellant was of a motiveless offenceand in any case the facts as disclosed show that not only at thetime when the First Information Report was given but even at the time when sanction was accorded that the prosecution wag merely concerned with the charge that the appellant bad allowed the crops to be cut on the condition that Rs. 2500 will be paid and received the money and misappropriated or converted it tohis own use by not paying it into the Govt. treasury. There is therefore no basis for sanction for a charge under Section 5(1)(c). it is further contended that the stand taken by the prosecution was that 'the persons who we're permitted to cut the crops bad' not committed any offence. If so a charge under Section 5(1)(c) would implicate those persons also in the commission of an offence which certainly would not have, been in the contemplation of the authorities granting the sanction. In support of this contention three decisions have been cited before us namely Bhagat Ram v. State of Punjab(1), Madan Mohan Singh V. State of U. P. and Gokulchand Dwarkadas Mordrka v. The King (1) A. I.R. 19-54 S. C. 621. (3) A. 1. R. 1948 Privy Council 82. (2) A. I.R. 1954 _.C. 637. Bhagat Ram's case was not concerned with the sanction but only with the question, whether the offence could be altered to one of abetment of an offence of Section 409 I.P.C. from one under Section 409 simpliciter. It was held that an alteration of the Appellant's conviction' under Section 409 I.P.C. into one of abetment thereof would imply a definite finding against the subordinate Judge who is not before the Court and as such it would be unfair to make such an alteration. We do not see how this case can assist the appellant because in the first ace there is no question of an alteration, of the charge and secondly the circumstance that someone who is not a public servant abetted the appellant is hardly relevant. But even so the offence with which the appellant is charged under Section 5(1)(c) does not necessarily involve ,An abetment with the person whom he had dishonestly allowed to- cut and take away the crop. For instance it is quite possible that the person whom he allowed to cut the crop may be his own relation or friend in whom he may be interested and who may, however, not know that the accused was doing something dishonest in permitting him to cut the crop. in any case the facts which have been stated, in the sanction clearly indicate that the appellant has dishonestly allowed the crops to be cut so that there is no question of any inference or implication that the persons cutting the crops were abetting him in the offence. Even if it were so the sanction cannot be held to be had on that account. Gokulchand Dwarkadas's case also is of no assistance to the appellant because in that case the sanction did not disclose the facts on which it was given but merely sanctioned the prosecution for a breach of certain provisions, Sir John Beamont delivering the Judgement of the Judicial Committee, observed at page 84: Som Nath vs Union Of India & Anr on 25 May, 1971 7 "But if the facts constituting the offence charged are not shown on the face of the sanction, the prosecution must prove by extraneous evidence that those, facts were placed before the sanctioning authority...... Nor, in their Lordships' view, is a sanction given without reference to the facts constituting the offence a compliance with the actual terms of cl. 23. Under that clause sanction has to be given to a prosecution for the contravention of any of the provision of the Order. A person could not be charged merely with the breach of a particular provision of the Order; he must be charged with the commission of certain acts which constitute a breach, and it is to that prosecution that is for having done acts which constitution breach of the Order-that the sanction 'is required. In the present case -there is nothing on the face ,of the sanction, and no extraneous evidence, to show that the sanctioning authority knew the facts alleged to constitute a breach of the Order, and the sanction is invalid." The case of Jaswant Singh v. The State of Puniab(1) was also cited by the Respondent's advocate in support of the conten- tion that the trial of two offences requiring sanction was not valid. In that case sanction was given under Section 6 of the Prevention of Corruption Act 47 for the prosecution of the appellant for having received illegal gratification from one Pal Singh. He was charged with and tried for two offences under Section 5(1) (a) of the Act for habitually accepting or obtaining illegal gratification and under Section 5(1)(d) for receiving illegal gratification from Pal Singh. The Session Judge had found that both charges were proved. While in Appeal the High Court held that the Appel- lant could neither be tried nor convicted of the offence under 5(1)(a) as no sanction had been given in respect of it but upheld the conviction under Section 5(1)(d) for which sanction had been given. A perusal of the sanction would show that the sanctioning authority had applied their mind to only one instance but the prosecution were seeking to make the sanction cover the offence of a habitual bribe taker which clearly implies that the sanctioning authorities must consider the number of instances when the accused took bribes and on what occasions as would justify a charge of his being a habitual bribe taker. Sinha, J, as he then was while dismissing the appeal observed at page 766:- "In the present case the sanction strictly construed indicates the consideration by the sanctioning authority of the facts relating to the receiving of the illegal gratification from Pal Singh and therefore the appellant could only be validly tried for that offence. The contention that a trial for two offences requiring sanction is wholly void, where the sanction is granted for one offence and not for the other, is in our opinion unsustainable. Section 6(1) of the Act bars the jurisdiction of the Court to take cognizance of an offence for which previous sanction is required and has not been given. The prosecution for offence under S. 5(1)(d) therefore is not barred because the proceedings are not without previous sanction which was validly given for the offence of receiving a bribe from Pal Singh, but the offence of habitually receiving illegal gratification could not be taken cognizance of and the prosecution and trial for that offence was void for want-of sanction which is a condition precedent for the Courts taking cognizance of the offence alleged to be committed and therefore the Som Nath vs Union Of India & Anr on 25 May, 1971 8 High Court has rightly set aside the conviction for that offence." (1) [1958] S. C. R. 762. These cases instead of supporting the contention of the learned Advocate amply demonstrate that the facts which formed the basis of the sanction and which was accorded after the sanctioning authority had fully applied its mind to them, should be correlated to the particular offence or offences with which the accused is charged or convicted. In our view there is no justification for holding that the conviction under Section 5(1)(c) read with 5(2) is bad for want of the requisite sanction. Now on the merits of the case as we said earlier the learned Advocate for the appellant has referred to the evidence in meticulous detail and has commented thereon, at length but this Court ordinarily does not reappropriation the evidence with a view to arriving at its own finding as if it was a Court of fact and does not ordinarily upset the findings of the High Court which has on an evaluation of the evidence affirmed the trial court's conviction and sentence. It has been contended firstly that the High Court was in error in relying on certain evidence for convicting the accused which was not put to him. Secondly the evidence that was necessary to unfold the story of the prosecution has not been produced by the prosecution but the Trial Court and the High Court ignored this lacunas in the prosecution case. Thirdly the Judgments show that there was utter confusion in respect of the date on which possession of the acquired land was given to the Appellant and the date on which it was given to the Contractor for carrying on the work, as also in respect of the fact whether there was any crop standing when the Appellant took possession of the land and at what period of time the crop was cut and the work commenced. Before we deal with the contentions urged on behalf of the Appellant it is necessary to have a clear picture of certain broad features of the case. The Air strip which was being extended is in one straight line with Taxi-ways. P.W.14 Ranadive tells us that if one were to go from the entrance of Air Field to the acquired land one would have to pass through RD 4500 to 1200. The acquired land extended from RD 1200 to RD 00. According to P.W. 8 Telu Ram, he acquired possession of the land of the length from RD 4500 to RD 1200 on 10th January 1963 and that tile possession of the acquired land was not delivered to him as it had not been acquired by that time. Ex. DO review report which is headed Technical Administration Contract shows that the date of review was 9th February 1963. In this document the date of the conclusion of the contract is given as 3rd December'62 and date of commencement of work as 10th January'63, date of completion of 1st phase 9th October, '63 and second phase 9th May 1964. To the Question "Have all sites- been handed over on due date" the answer shown- was an affirmative 'yes'. There is However nothing in this document to show what is the site of' which possession was handed over to and taken by Telu Ram on 10th January '63. It is not the case of the Appellant that acquisition of the land on which the crop was standing had taken place nor could possession of it been handed over to him because he denies that there was any crop on the land when the possession of the land was handed over to him. That there was crop on 'the land is amply born out by a letter of the Appellant dated 12th February 1963 addressed to Mr. G. L. Nagpal, Sub-Divisional Magistrate, Sirsa. In this letter he says: - "12th Feb. 1963. Som Nath vs Union Of India & Anr on 25 May, 1971 9 My dear Mr. Nagpal, I am writing to you With regard to. acquisition of land for Sirsa Airfield. As, you know, the Additional Deputy Commissioner, Hissar will be visiting his location on 13th Feb. 1963. The Military Estates Officer, Delhi, Mr. K. K. Gamkhar will also be here on 13th morning., It is desirable that entire proceedings With regard to acquisition of land and determining compensation for standing crops for the total area of 39.58 acres in Mirpur and Ahmadpur villages tire finalised an this date. As I have told you personally, we are keen to finalise the proceedings for the total area to be acquired by us and not by phses. This is interest of the project. I therefore request you to issue suitable instructions to, your staff so that all the relevant papers may be suitably prepared." Even if Exhibit DQ gave a correct picture, it could be in relation to the airstrip already in existence, as this would be necessary for a contractor who is charged with duty to carry out extension work to go on the site collect materials and get everything ready to execute his contract. In fact as we have noticed earlier this is what Telu Ram says in his evidence, namely that on loan January'63 no delivery of possession of the remaining land other than RD 4500 to 1200 (the land in which there is the existing run-way) was given. It was then that he wrote on 23-1-1963 as per Ex. 8 to the Assistant Garrison Engineer complaining that the possession of the whole of the land had not been delivered to him. A copy of this letter was sent to the Garrison Engineer-the Appellant. This letter shows two things (a) that complete site 4500 to 0 ft. has not yet been handed over "as it was presumed that the possession of the land could not be had so for" and (b) that as levels have not been given, the final excavation of the foundation cannot be done and all subsequent operations are therefore withheld. This letter clearly indicates that some excavation was being done as otherwise there is no meaning in saying that final excavation cannot be done. This Is also consistent with the other evidence that some work was in progress Which gain is in accord with the evidence of Telu Ram P.W. 8 that he got the possession of RD 4500 to RD 1200. The extension of the Airstrip would mean that the existing Airstrip is being extended, so that the initial work can be started and continued on the existing Airstrip. It is not as if the existing Airstrip ends at the boundary of RD 4500 to RD 1200, so that the work of extension can go on in the existing Airstrip even before possession of the acquired land was given. This is further confirmed by a perusal of the letter written by the Appellant to Telu Ram P.W. 8 in reply to his letter dated 28th February'63 (not produced) that "Necessary possession of the, runway and taxi track has already been given to you. You are therefore requested to set out the work and get the same approved by the Engineer- in-charge before starting the work". This shows that no work had in fact been undertaken on the land acquired and also that possession of the existing runway and track had already been given. Nothing is specifically mentioned about possession of the acquired land being given to him on that date. The work on that land is only at the stage of getting approval. Now the next question is When was the possession of the acquired land obtained by the Appellant and when did he deliver it to P.W. 8. P.W. 14, says that symbolic possession was delivered to him in respect of the acquired land on the 1st February'63. It would however appear from Exh. P. 24 that Som Nath vs Union Of India & Anr on 25 May, 1971 10 actual possession was delivered to the Appellant on 13th February '63 as per the delivery receipt executed by him, the Tehsildar and P.W.11, a representative of the Military Estate office and that even according to his letter already referred to Ex. P.13 there wag standing crop on the land as otherwise there is no meaning in the Appellant saying therein that it is desirable that entire proceedings with regard to acquisition of land and determining compensation for standing crops for' the 'total area of 39- 58 acres are finalised on the 13th February. There is also credible evidence that possession of the acquired land was not handed over to the contractor till late in, March '63 though, it was handed over to and, taken over by the Appellant on 13-2-63. The Khasra Girdawari Ex. P.3 would show that there was a crop of Sargon (Mustard) Gram and Lusan, at any rate on 20th March 63 at a time when the land has been shown therein to have been in possession of the Military authorities. Ex. P. 2 is a certified copy by the Tehsildar dated 18-9-63 which shows that as per the Girdawari on 20-3-63 crops were standing on the lands in the village Ahmedpur acquired by the Military authorities for Sirsa 3 Airfield construction, the details of which were that the total land acquired for Airfield 49 acres, the land on which crops were standing in good condition 23 acres and the land on which crops were standing in damaged condition 7 acres and uncultivated land 19 acres. Mani Ram Patwari had stated that by the 20th March 1963 some ground had been cleared. Sukhchain Lal Jain P.W. 11 who had also come to obtain possession on behalf of the Military Estate Officer had said that he had seen some part of the crops had been cut by 13-2-1963, but was not aware who had cut them. This evidence, however, does not assist the accused. At the most it shows that a small portion of the crops were cut but it is apparent that that has not been taken into account by the Collector in assessing the value of the crop because it is on that day that crops were inspected for that purpose and subsequently the Agricultural Officer also had in his letter dated 18-2-63, which has been cited in the award Ex. P. 26 intimated that on inspection the crops were found to be very good. He had also given the approximate yield and the rate at which the crop can be valued with which the Collector agreed and awarded compensation. It is therefore clear that in estimating the crop, the small portion of the land where crops were stated to have been cut by the 13-2-63 even if true could not have been taken into account. It may also be stated that the Contractor had written to the, Garrison Engineer on 28-2-63 requesting him to hand over immediately the possession of the remaining portion of the land so that excavation work is not held up. He also inform in that letter that the excavation in all available portions of the taxi track and runway has been completed. This again does not specifically refer to the land which is being acquired. At any rate on the 23rd March, 1963 P.W. 8 has again written to the Garrison Engineer namely the Appellant that the excavation of the taxi track could not be proceeded with for want of alignment to be given which was pending for want (because) of standing crops, in the land, the possession of which has not been given so far. Thereafter the following pertinent statement appears namely- "Now, today I find that the crops have been completely cut and as such it is requested that further necessary action in the matter of giving the alignment and possession of land may please be taken at your end." On the 6th April, 1963 he has again written to the Garrison Engineer saying as follows:- "You have verbally asked me now to take the site after the crop is cut and the necessary marking of the alignment has been taken in hand but this handing over has Som Nath vs Union Of India & Anr on 25 May, 1971 11 not been shown on the site order book by the A.G.E. (B/R) despite my request. He may please be asked to complete this formality without any loss of time." In reply the Appellant states in his letter Ex. P. 12 dated the 10th April "The matter has already been discussed with you and finalised. No further action is required to be taken". It can be seen from the above that the appellant is reluctant to reply in writing as to what he is asking the contractor to do under verbal orders while the contractor for safeguarding his position is insisting on having it in writing. The Trial Court as well as the High Court are in our view, justified in holding that crops of Sarson, gram and lusan were standing on the land acquired by the Military for extension of the Aerodrome. It will also justify the conclusion that they were there at any rate till the 20th March 1963 and according to the letter of the contractor (P.W. 8) on 23-3-63 they were completely cut. In so far as handing over of the possession of the land to the Contractor (P.W. 8) is concerned, the Trial Court and the High Court are equally justified in coming to the conclusion that the accused had not delivered the possession of the land to the contractor till quite late as would appear from the letter of P.W. 8 dated the 5th April, 1963. We are aware of the argument addressed before us that some of the witnesses had said that the water channels had been closed in February 1963 and therefore no crop could thereafter have been standing on the land and must have been destroyed. There is also the further argument that some of the statements recorded by the Military authorities were not taken into account, as the High Court had thought that since the deponents denied the contents the officers who recorded the statement might have been called to show that they were properly recorded. The learned advocate for the respondent also tried to support the stand taken by the High Court. It 1is true that when a witness has admitted having signed his previous statements that is enough to prove that some statement of his was recorded and he had appended his signature thereto. The only question is, what use can be made of such statements even where the witness admits having signed the statements made before the Military Authorities. They can at best be used to contradict in the cross-examination of such a witness when he gives evidence at the Trial Court of the accused in the manner provided under Section 145 of 'the Evidence Act. If it is intended to 'contradict the'- witness by the writing, the attention of the witness should be called before the writing can be proved to those parts of it which are to be used for the purpose of contradicting him. If this is not done, the evidence of the witnesses cannot be assailed in respect of those statements by merely proving that the witness had signed the document. When the witnesses are contradicted by their previous statements in the manner aforesaid, then that part of the statements which has been put to the witness will be considered along with the evidence to assess the worth of the witness in determining his veracity. The whole of the previous statement however cannot be treated as substantive evidence. We do not find that the assessment of the evidence by the Trial Court and the High Court even in the light of such of those previous statements that have been put to the witnesses in the manner stated above is in any way unjustified. It is said that some of the documents i.e. Ex. 8, 10 and 11 have not been put to the witnesses even though the Court relied upon them. Ex. P.8 as already noticed is the letter of Telu Som Nath vs Union Of India & Anr on 25 May, 1971 12 Ram Jain to the Assistant Garrison Engineer and P. 10 is the letter of Telu Ram Jain to the Garrison Engineer. Both these related to possession of the acquired land not being given to him. In the examination of the accused under Section 342 the Special Judge in our view did put all the circumstances against the accused which formed the basis of the conviction. He was asked about the symbolic delivery of possession, the handing over of the actual possession of the land on 13-2-63 and the existence of crops on the date when possession was delivered on 16-2- 63. He was asked about Telu Ram's evidence and also that he had given possession of the land RD 1200 to RD 00 to the contractor after the crop had been cut. The letter Ex. P. 13 was also put to him and he was asked about the existence of the crops. It cannot, therefore be said that circum- stances appearing against the accused which have formed the basis of the conviction had not been put to him. The appellant has denied that there was any standing crop on the land acquired on any date after 13-2-63. On the other hand, he emphatically asserted that at the time when the possession was delivered to him on 13-2-63 there was also no crops standing on the acquired land. This statement is clearly false as it is against credible documentary evidence at a time when there was no possibility of any charge being levied against the appellant. It is also incorrect because the ,contractor did not work on the acquired land since 1-2- 63 that position is reflected in the review report initiated by the A.G.E. on 9-2-63 (vide Ex. DQ). The appellant's statement is therefore belied by the documentary evidence which shows unmistakably that there was on 13-2-63 bumper crops of different varieties standing,on the land which was valued thereafter and compensation assessed. We do not therefore think that there is any justification in the criticism that circumstances appearing in the several documents have not been put to him. It is lastly contended that certain witnesses who would be necessary to unfold the prosecution story have not been called and.in spite of the Court directing the production, of the usufruct register it was not produced. These omissions it is submitted by the learned advocate has prejudiced the accused. As the learned advocate for the respondent rightly pointed out with reference to each one of the persons who, it was claimed, should have been called, that there was already evidence relating to the particular matter about which the person specified was sought to be called. For instance, it is said that Gamkhar, Military Estate officer was not produced to prove the receipt Ex. P. 24. But this was not necessary because Gamkhar was not present nor did he sign the receipt. The person who had signed the receipt is Sukhchain Lal Jain and he was examined as P.W. 11. Similarly, it is said that the Tehsildar N. L. Handa has not been produced. But when the prosecution relies upon the proof of Ex. P. 24 as also to establish that there was standing crops on the land when the possession was delivered on 13-2-63 on certain witnesses who were present on the respective occasions, the non- examination of other witnesses without anything more cannot be treated as defect in the prosecution. Before the High Court also this grievance was aired but that Court also likewise found no justification in it. We are therefore not impressed with this argument. On' a careful consideration of the evidence both oral and documentary it is established that the Appellant who was in charge of the expansion work on the air-strip was given possession of the land acquired for that purpose on 13-2-63, that there was standing thereon, a bumper crop of Sarson, gram and Lusan on that day, that he was therefore entrusted with this crop, that he postponed giving delivery of the land to the contractor till, at any rate after the 23rd March, 1963 and before the 6th April, Som Nath vs Union Of India & Anr on 25 May, 1971 13 1963 and that he allowed the crop to be cut and taken away without in any way accounting for it which shows that it was done dishonestly and raudulently. The fact that otwithstanding overwhelming evidence particularly of his own admission at the time he denies that there were ever any crops when delivery of possession of the land acquired was taken by him, further reinforces the conclusion that he allowed the crops to be cut away with dishonest or fraudulent motive. We do not think in these circumstances there is any justification whatever for interfering with the concurrent findings of the Trial Court and the High Court that the Appellant is guilty of an offence under Section 5(1)(c) read with Section 5(2) of the Prevention of Corruption Act and consequently the appeal is. dismissed. V.P.S. Appeal dismissed. Som Nath vs Union Of India & Anr on 25 May, 1971 14 | {
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State Of Madras vs Cement Allocation Co-Ordinating ... on 1 September, 1971 PETITIONER: STATE OF MADRAS Vs. RESPONDENT: CEMENT ALLOCATION CO-ORDINATING ORGANISATION DATE OF JUDGMENT01/09/1971 BENCH: ACT: Madras General Sales Tax Act 1959 and Rules-Agent a 'dealer' under s. 2(9)-Packing materials deductible from total turnover under r. 6(c) (II)-Agent selling cement on behalf of principal-Price of packing material shown separately in bills--Agent is entitled to some exemptions as principal- Deduction in respect of packing material when can he claimed. HEADNOTE: The assessee (respondent herein) was the selling agent of a cement company. Under s. 2(g) of the Madras General Sales Tax Act, 1959 the term 'dealer' is defined to include a commission agent. in February 1967 the Deputy Commercial Tax Officer, Lalgudi. asked the assessee to show cause why its turnover relating to the price of the packing material used in packing the cement sold 'should not be included in its taxable turnover under the Madras General Sales Tax Act, 1959. The assessee thereupon moved the High Court under Art. 226 of the Constitution. In its petition the assessee averred that its rights were the same as those of its principal and since the price of packing material was separately shown in the bills the same was deductible from the total turnover in view of r. 6(c) (ii) of the Rules under the Act. The High Court held that the assessee was entitled to deduct from its total turnover the turnover relating to the packing charges if its principal would have been entitled to deduct the same had the principal sold the cement in question directly. The question whether in the present case the principal was so entitled was not decided by the High Court. The State appealed to this Court. HELD : Under the general law the agent merely represents the principal. Therefore while functioning within the scope of the agency he can exercise all the rights which his State Of Madras vs Cement Allocation Co-Ordinating ... on 1 September, 1971 1 principal could have exercised. This provision must hold good even under the Madras General Sales Tax Act unless otherwise provided therein. The fact that for the purpose of that Act an agent is considered as a dealer does not alter the legal position in other respects. Excepting to the extent otherwise provided in the Act the agent must be held to represent his principal while dealing with the goods of his principal; he merely steps into the shoes of his principal. He is entitled to the same exemptions as his principal would have got had he dealt with the concerned goods himself. The decision of the High Court to this effect was correct. [550 H-551 B; 552 E] [The question whether the principal in the present case was entitled to the exemption claimed having been left open by the High Court, this Court did not find itself called upon to decide that question. However it drew the attention of the assessing authority to the principles laid down by this Court in the case of the Hydrabad Deccan Cigarette Factory.] [551 C] Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh, S.T.C. 17 p. 624, referred to. 549 JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2300 of 1968. Appeal from the judgment and order dated October 18, 1967 of the Madras High Court in Writ Petition.No. 637 of 1967. Bishan Narain and A. V. Rangam, for the appellant. S. T. Desai and B. P. Maheshwari, for the respondent. The Judgment of the Court was delivered by Hegde, J. This appeal by certificate arises from the decision of the High Court of Madras in Writ Petition No. 637 of 1967. The petitioner before the High Court is M/s. Cement Allocation Coordinating Organization, a selling Agent of Dalmia Cement (Bharat) Ltd. That Organization will be hereinafter 'referred to as the 'assessee'. On February 28, 1967 the Deputy Commercial Tax Officer, Lalgudi wrote to the assessee to show cause why its turnover relating to the price of the packing materials used in packing the Cement sold should not be included in its taxable turnover. The assessee instead of showing cause against that proposal moved the High Court of Madras under Article 226 of the Constitution to direct the assessing authority not to include that turnover in its taxable turnover. The High Court entertained that Writ Petition. It would have been proper if the High Court had directed the assessee to put forward its case before the authorities under the Madras General Sales Tax Act 1959. Now that the High Court had entertained the Writ Petition and gone into the merits of the case, it serves no useful purpose to refuse to go into the merits of case. In its Writ Petition the assessee had definitely averred that it was functioning as the agent of Dalmia Cement (Bharat) Ltd. and its rights are the same as that of its principal. It was further alleged in the Writ 'Petition that when cement was sold in packages, the packing charges were separately shown in the bill,,, issued to the buyers. On these grounds the assessee claimed that it is entitled to deduct State Of Madras vs Cement Allocation Co-Ordinating ... on 1 September, 1971 2 those charges from its total turnover in view of rule 6(c) of the Rules framed under the Madras, General Sales Tax Act, 1959. The plea of the assessee that it was the Agent of Dalmia Cement (Bharat) Ltd. during the relevant period was not denied in the return filed by the State of Tamil Nadu. It was also not denied that the assessee had shown the packing charges separately in the bills issued by it to the Purchasers of cement. On the basis of those admitted facts the High Court came to the conclusion that the assessee is entitled to deduct from its total turnover the turnover relating to the packing charges if its principals would have been entitled to deduct the same had they sold the cement in question directly. The operative portion of the High Court reads thus: "The petition is allowed but with no costs. We may, however, add that the order We have made in this petition does not in any way prevent the assessing authority from examining the question, after giving a fresh notice, whether the principal himself would be disentitled to exclusion of the value of the packing materials in determining the chargeable turnover." It is against this order that the State of Madras has come up in appeal to this Court. The charging section under the Madras General Sales Tax Act, 1959 is section 3. It brings to all taxable turnover of a dealer as defined in the Act. The expression "dealer' is defined in section 2 (g). Because of section 2(g)(iii) a Commission agent is also considered as a 'dealer' for the purpose of the Madras General Sales Tax Act, 1959. Hence the taxable turnover of a Commission agent is liable to be brought to tax. The only other provision that we need refer is rule 6 of the Rules framed under the Act. That rule reads : "The tax or taxes under section 3, 4 or 5 shall be levied on the taxable turnover of the dealer. In determining the taxable turnover, the amounts specified in the following clauses shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer :- (c) all amounts falling under the following two heads, when specified and charged for by the dealer separately, without including them in the price of the goods sold (i) freight; and (ii) charges for packing, that is to say, cost of packing materials and cost of labour and other such like services." The first question that we have to consider is whether an agent of a principal who is also a dealer under the Act is entitled to the same rights as his principal has under the Act. Under the general law the agent merely represents his principal, Therefore, while functioning within the scope of the agency he can exercise all the rights which his principal could have exercised. In fact, in the case of an ordinary agency, the agent merely acts for Ms principal. This provision must hold good even under the Madras General Sales Tax Act unless otherwise provided therein. The fact that for the purpose of that Act an agent is considered as a dealer does not alter the legal position in other State Of Madras vs Cement Allocation Co-Ordinating ... on 1 September, 1971 3 respects. Excepting to the extent otherwise provided in the Madras General Sales Lax Act the, agent must he, held to represent his principal white dealing with the goods of his principal; he merely steps into the shoes of his principal. He is entitled to the same exemptions as his principal would have got had he dealt with the concerned goods himself. Agents are considered as dealers under the tax so as to effectively enforce the provisions of the Act. But that provision does not convert an agent into a principal for all purposes under the Act. But the question whether the principal is entitled to the exemption claimed has been left open by the High Court. That question has to be decided after going into the facts of the case. How than question should be, decided has been laid down by this Court in Hydrabad Deccan Cigarette Factory v. The State of Andhra Pradesh(1). Therein this Court has ruled that it is for the department to establish that a particular turnover constitutes a part or whole of the taxable turnover. For establishing that fact the department may call upon the assessee to produce before it such material which the assessee has in his possession or under his control. The department before coming to the conclusion that a particular turnover is taxable must take into consideration all the facts and circumstances of the case. On the question whether certain packing charges are exempt from tax, the authorities under the Act before deciding that question have to take into consideration the various aspects mentioned in that judgment. This is what the Court observed therein: "In the instant case, it is not disputed that there were no express contracts of sale of the packing materials between the assessee and its customers. On the facts, could such contracts be inferred ? The authority concerned should ask and answer the question whether the, parties in the instant case, having regard to the circumstances of the case, intended to sell or buy the packing materials, or whether the subject matter of the contracts of sale was only the cigarettes and that the packing materials did not form part of the bargain at all, but were used by the seller as a conven- ient and cheap vehicle of transport. He may also have to consider the question whether, when a trader in cigarettes sold cigarettes priced at a particular figure for a specified number and handed them over to a customer in a cheap card-board container of insignificant value, lie intended to sell the cardboard container and (1) STC 17 p. 624. the customer intended to buy the same'. It is not possible to state as a proposition of law that whenever particular goods were sold in a container the parties did not intend to sell and buy the container also. Many cases may be visualized where the container is compa- ratively of high value and sometimes even higher than that contained in it. Scent or whisky may be sold in costly containers. Even cigarettes may be sold in silver or gold caskets. It may be that in such cases the agreement to pay an extra price for the container may be more readily implied. In the present case, if we may say so with respect, all the authorities, including the High Court, dealt with the question as a question of law without considering the relevant factors which would sustain or negative any such agreement. The determining factor in all such cases is whether the buyer directly or by implication agree to buy and the seller to sell, separately the packing material. In this case we are not called upon to go into that question. We merely indicated the approach as a matter of guidance. The question for decision by us lies within a narrow compass and that question is whether the, assessee is entitled to claim exemption in respect of packing charges if his principal could have State Of Madras vs Cement Allocation Co-Ordinating ... on 1 September, 1971 4 claimed it had it sold the cement itself. On that question, we agree with the view taken by the High Court. For the reasons mentioned- above, this appeal fails and the same is dismissed. No costs. G.C. Appeal dismissed. 1340Sup.CI/71-2500-(Sec.VII)-26-9-72-GIPF. State Of Madras vs Cement Allocation Co-Ordinating ... on 1 September, 1971 5 | {
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Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 Equivalent citations: 1971 AIR 681, 1971 SCR (3) 324, AIR 1971 SUPREME COURT 681 Author: J.C. Shah Bench: J.C. Shah, K.S. Hegde, A.N. Grover PETITIONER: DAYARAM & ORS. Vs. RESPONDENT: DAWALATSHAH & ORS. DATE OF JUDGMENT08/01/1971 BENCH: SHAH, J.C. (CJ) BENCH: SHAH, J.C. (CJ) HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 681 1971 SCR (3) 324 1971 SCC (1) 358 ACT: Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act 1, of 1951-SS. 3, 14-S. 14 scope of-Section only intended to determine the Proprietary rights in the land qua the State-Dhanora-Zamindari- Succession by lineal primogeniture-'Nearest male relative' does not mean eldest male relative. HEADNOTE: Under the Chanda Patent and the terms recorded in the Wajibul-Arz the Dhanora Zamindari was impartible and on the death of the holder it devolved upon his eldest son and in the absence of a legitimate or an adopted son it devolved upon the nearest male relative. The succession to the Zamindari was subject to the power of the Governor to dispossess a person found unfit to observe the conditions of loyalty, good police administration and improvement of the Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 1 estate. The respondent instituted an action for possession of certain immovable properties including the zamandari and for recovery of compensation, in respect of malguzari lands, paid to the appellants in consequence of the enactment of the Madhya Pradesh Abolition of Proprietary Rights (Estate, Mahals, Alienated Lands) Act, 1951. They claimed the Zamindari relying upon the rule of primogeniture and other estates as devisees under a Will. The trial court decreed the suit and the High Court affirmed the decree with slight modifications. in the appeal to this Court the appellants urged that (1) the Zamindari devolved on the death of the holder on the male relative who is senior most in age and not the eldest member in the senior line; (2) by the order of the Governor the Zamindari was conferred upon the first appellant as he was found suitable to hold the zamindari and since the Government had the power to determine inheritance and the right to remove a person, the holder of the zamindari had merely a life interest; and (3) the compensation officer had decided by his order under s. 14 of the Act that compensation in respect of malqutari land was payable to the first appellant and since no suit was filed by the plaintiffs for setting aside that decision within the period specified, the order of the compensation officer became final and conclusive. HELD : (1) By the use of the expression "the nearest male relative" the test of propinquity alone may be applied and when there are two or more claimants equally removed from the common ancestor the eldest male member in the senior most line will be preferred. The contest between the parties had to be adjudged in the light of the rules of lineal primogeniture governing an impartible estate. In determining a single their according to the rules of primogeniture the class of heirs who would 325 be entitled to succeed the property if it were partible must be ascertained first, and then the single heir applying the special rule must be selected. By the expression "nearest male relative" it was not intended to confer be estate upon the eldest male relative of the Zamindar. The High Court was, therefore, right in holding that the Zamindari devolved upon the first respondent to' the exclusion of the first appellant. [333 C-F] (2) The power vested in the Governor to take extraordinary steps to protect the interest of the zamindari by the removal of the holder did not restrict the title of the zamindar to a mere life interest. The power had to be exercised in accordance with the custom of the family and an order by the Governor purporting to exercise powers under the Chanda Patent contemplated a quasi judicial inquiry. The order does not show that any inquiry was made for determining the rights of the contesting claimants. [334 G] (3) Section 14 of Act 1 of 1951 does not invest the compensation officer with jurisdiction to determine Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 2 competing claims of persons claiming proprietary rights to the property vested in the Government by the operation of s. 3 of the Act. Section 14 is intended to determine only the proprietary rights in the land qua the State. [339 D-E] JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2433 of 1966. Appeal from the judgment and decree dated August 2, 1965 of the Bombay High Court, Nagpur Bench in Appeal No. 113 of 1959 from original decree. V. S. Desai, V. N. Swamy, K. Rajendra Chaudhuri and K. R. Chaudhuri, for the appellants. M. N. Phadke and A. G. Ratnaparkhi, for the respondents. The Judgment of the Court was delivered by Shah, C.J. Dawalatshah and Ranwirshah-sons of Pratapshah- instituted an action in the Court of the Additional District Judge Chanda, for a decree for possession of property immovable (including the Zamindari of Dhanora) and movable specified in the Schedules annexed to the plaint, and for an order for payment of mesne profits and also for recovery of the amount of compensation in respect of certain lands received by the defendants from the- Government of Madhya Pradesh and for an order declaring their right to receive the balance of compensation remaining to be paid. The plaintiffs relied upon the following genealogy Gangashah Niru Bhakta Sakru Kajur Raju Thakur Thakur Thakur ThakurThakur Sitaram Tanba Chatturshah Thakur Thakur (dead) Nilkanthshah Pratapshah Dawaltshah Ranwirshab Gulab Lallshah (Platff (Platff. Shah dead) No. 1) No. 2) (dead) Hanmantrao Amarshah Basu Chandarshah Karanshah Niranshah Died Dec. 9, (dead) (dead) 1950) Diwakarrao (Died Sept., 8,1932) Ballarshah Karansbah Dayaram Indersbah (Deft. dt. No. 1) (Deft. No. 2) Govinda Budha Rama Laxman (dead,) The plaintiffs claimed that the property in suit originally belonged to Gangashah. Gangashah had five sons: Hiru, Bhakta, Sakru, Kajur and Raju. The branches of Sakru and Kajur became extinct a long time ago. The branch of Hiru (who was the eldest among the five sons of Gangashah) because extinct with the death of Amarshah on December 6, 1950. The plaintiffs claimed the Zamindari held by Amarshah relying upon the rule of primogeniture, and the other estate of Amarshah as devisees under the will of Amarshah executed on December 3, 1950. They submitted that the Dhanora Zamindari was granted to Sitaram ancestor of Amarshah as an impartible estate, devolving by the rule of primogeniture; that the Zamindari on that account devolved on the death of Amarshah upon Pratapshah and that on the death of Pratapshah and Zamindari devolved upon the first plaintiff. The plaintiffs also claimed that the other property including Malguzari lands devolved upon them under a will executed on December 3, 1950 whereby Amarshah devised his estate in their favour. Accordingly the first plaintiff claimed that he was entitled to the Zamindari on the death of Pratapshah on January 27, 1951 and the plaintiffs claimed the other estate of Amarshah as devisees under his will. The plaintiffs submitted that Dayaram the first defendant took wrongful possession of the Zamindari and other property, movable and immovable of Amarshah. The defendants by their written statement maintained that the genealogical table set up by the plaintiffs was incorrect, that by the order of the Governor of Madhya Pradesh dated November 9, Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 3 1951, the Zamindari was conferred upon the 1st defendant Dayaram as he was found suitable to hold the, Zamindari and the decision of the Governor was binding upon the plaintiffs; that the decision of the Compensation Officer regarding Malguzari lands which vested in consequence of the enactment of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals Alienated Lands) Act 1 of 1951, had become binding and conclusive against the plaintiffs because no suit challenging the deci- sion was instituted within two months from the date thereof and the plaintiffs were on that account not entitled to claim the compensation paid or payable in respect of the Malguzari lands; that Amarshah did not execute the will set up by the plaintiffs; and that Amarshah had made a will dated December 8, 1950 under which his estate was devised in favour of the defendants. The Trial Court held that the Dhanora Zamindari was impar- tible and was governed by the rule of primogeniture and Pratapshah father of the plaintiffs being the eldest member of the seniormost branch from among the descendants of the common ancestor Gangashah was entitled to the Zamindari; that the plaintiffs were entitled to receive compensation in respect of the Malguzari lands and the decision of the Compensation Officer did not operate to deprive the plaintiff of the right to those lands or compensation payable in respect thereof; that the will set up by the plaintiffs dated December 3, 1950 was genuine and the plaintiffs were under the will entitled to the estate devised in their favour by Amarshah; that the will dated December 8, 1950, set up by the defendants was "a fabricated will" and conferred no right or title upon the defendants; and that the genealogical table set up by the plaintiffs represented the true relationship between the descendants of Gangashah. In appeal by the defendants, the High Court of Bombay con- firmed the decree of the Trial Court with a slight modification. The High Court held that the genealogical table set up by the plaintiffs was correct, that according to the custom governing succession Dhanora Zamindari devolved upon Pratapshah on the death of Amarshah, and on the death of Pratapshah the first plaintiff became entitled to the Zamindari, that the order of the Governor recognising Dayaram as Zamindar was not binding and conclusive, for it was not shown that in making the order the Governor had acted in exercise of the power conferred by the Chanda Patent; that the order was contrary to the customs and the law governing the Zamindari; that the-decision of the Governor did not oust the jurisdiction of the the Civil Court; that the will dated December 8, 1950 set up by the defendants was not genuine and the will set up by the plaintiffs dated December 3, 1950, was genuine; and that the plaintiffs' suit with regard to Malguzart lands was not barred by the decision of the Compensation Officer. The High Court accordingly confirmed the decree passed by the Trial Court in respect of the Zamindari replying upon the rule of inheritance incorporated in the Wazibul-Arz of the Chanda District and by' succession under the will dated December 3, 1950 in respect of the other property except as to certain occupancy lands held by Amarshah. With certificate granted by the High Court the defendants have appealed to this Court. Certain concurrent findings on which not much argument was advanced at the Bar may first be set out. The High Court agreeing with the Trial Court on appreciation of evidence held that the genealogy set up by the plaintiffs represented the true relationship between the parties. Again the High Court agreeing with the Trial Court held that the will dated December 3, 1950 set up by the plaintiffs was genuine while the will dated December 8, 1950 set up by the defendants was not genuine. The argument that the High Court did not give due weight to certain important circumstances in reaching their conclusion relating to the will set up by the plaintiff is without Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 4 substance. The circumstances relied upon are that the writing instrument with which the body of the will was written and the writing instrument with which Amarshah, it was claimed, signed or executed the will were different, that the will was not registered, that the appearance of the will was suspicious, that the will was unnatural because it devised the estate in favour of the plaintiffs after giving a life interest in favour of the testator's widow Ratnabai, that the will had not been produced before the revenue authorities and before the Com- pensation Officer when disputes in relation to the estate of Amarshah were pending before those authorities, and that it was produced for the first time nearly seven years after the death of Amarshah, and that the scribe who wrote the will did not belong to the village to which Amarshah belonged. The Trial Court and the High Court have reached the conclusion that on the circumstances no suspicion as to the genuineness of the will dated December, 1950 arose. It may be noticed that the plaintiffs were, at the date of their father's (Pratapshah's) death minors, and soon after Pratapshah's death, their mother abandoned them and re- married. Thereafter no one a tended to the pending litigation. Failure to produce the will before the revenue authorities was therefore not a circumstance in the view of the High Court, which militated against the genuineness of the will. In the view of the Courts absence of registration, appearance of the will, the contents thereof, the dispositions, thereunder, and the fact that the writer of the will belonged to another village did not in the- circumstances of the case give rise to any suspicion. We do not think that sitting in appeal we would be justified in interfering with the conclusion recorded by the Trial Court and confirmed by the High Court on what is essentially a conclusion on a question of fact. The will set up by the defendants is not proved to be a genuine will executed by Awarshah. This again is a concurrent finding of the two Courts and must be accepted in this Court. No, argument has been advanced' to pursuade us to take a different view. The rights of the parties must be adjudged in the light of these findings. The dispute between the parties relates to three set of properties- (a) Dhanora Zamindari (b) Malguzari lands; (c) Occupancy lands and movables. The ancestors of the parties held an extensive Zamindari in the Chanda District. After the advent of the British rule, in that region, the revenue authorities commenced settlement operations. An inquiry was held by the Settlement Officer in connection with the lands held by the family of the parties and statements of some members were recorded. Chattarshah s/o Kajur stated that the Zamindari of Dhanora was standing in the name of his cousin Sitaram and that all the members of the family were joint and maintained themselves out of the income from the Zamindari. In his statement Sakru admitted that the rule of primogeniture prevailed in the family. He stated that Hiru was his eldest brother and Sitaram was the son of Hiru and the Zamindari was recorded in the name of Sitaram according to Awwal Haqq i.e. rule of primogeniture from ancient times, even though he was senior in age, and that there was no quarrel between him and Sitaram and that he and Sitaram Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 5 were living jointly and were taking the income from the Zamindari. The Settlement Officer made an order on November 2, 1867 that the "Zamindari is of ancient tenure and the present Zamindar Sitaram Thakur has proved his right to be Zamindar. Subject to the conditions to be embodied in patent of proprietary right. I confer proprietary right in the Zamindari of Dhanora on Sitaram Thakur". The Settlement Officer observed that conferment of proprietary rights was subject to conditions to be embodied in a patent of proprietary rights. It may reasonably be inferred that a formal grant was made in favour of Sitaram. The form of the grant which is known as "Chanda Patent" is reproduced in Aitchison's "Collection of Treaties, Engagements and Sanads" Vol. II, pp. 573-574. Under the Chanda Patent it :was declared that the tenure shall be indivisible, and non- transferable (save to to the nearest male heir the transfer in such case being subject to the approval of the Chief Commissioner) the land shall be held by one person, the Zamindar or Zamindarin for the time being and shall be held on conditions of (i) loyalty (ii) good police administration and (iii) improvement and cultivation of the estate. Clauses V, VI, VII of the grant relating to succession to the Zamindari held under the Patent : "V. Subject to the provisions contained in Clause VI, the order of succession shall be as under :- On the death of the Zamindar, the estates shall devolve upon his eldest son. In default of a son, and when adoption has not taken place, the succession should preferably devolve on the nearest male kinsman, the widow receiving a suitable Maintenance. VI. In the event of the first in order of succession being, in the opinion of the local Government, unfit to carry out the conditions of Clause IV, the Zamindaree 'shall devolve upon the nearest heir who possesses the required qualification. VII. The Zamindar, in the case of gross misconduct, shall be liable to removal by the local Government; and if such removal be ordered, the succession shall take place as if the Zamindar removed had died." Tenure of the grant is entered in the Wajibul-arz. The relevant recitals in the Wajibul-arz are as follows PART-1 Rights and liabilities of Zamindar in relation to Government. (1) Watan Zamindar's Watan is not partible and it cannot be given to anyone other than quite close (the nearest), male heir. Changes taking place in this way should have sanction of the Governor-in Council. The Zamindari shall be in the name of only one person and the Zamindari has been granted to the Zamindar in possession at present on the conditions of this remaining loyal to the Government, managing his estate properly and improving the cultivation. (2) Heirs On the death of Zamindar the estate shall devolve upon his eldest son. If there is no legitimate or adopted son, it shall devolve upon a very close (the nearest) male relative. If there arises a dispute regarding right of inheritance, the Governor-in Council will decide it in accordance, with the custom in that family. If the Governor-in-Council finds that the first heir is unable to abide by the conditions stated in BAB Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 6 (clause). the Zamindari shall be granted to a quite close (the nearest) male heir possessing the necessary qualifications. (3) Dispossessing the Zamindar and forfeiting his rights. Governor-in-Council may dispossess the Zamindar on account of his behaviour and bad administration. Such dispossession may be for a few days or permanent. If it is for a few days, the Deputy Commissioner will manage the Zamindari on behalf of the Zamindar and if the order of dispossession is permanent, the Zamindar shall so to say be deemed to have died and the heir will get the right." The entries in the Wajibul-arz substantially reproduce the terms of the Chanda Patent as set out in Vol. II of Aitchison's "Collection of Treaties, Engagements and Sanads". One Major C. B. Lucie Smith made a report relating to the Land Revenue settlement of the Chanda District, Central Pro- vinces, 1869. At pp. 179 to 180 Major Lucie Smith has referred to the Zamindarees of the Chanda District. He has stated under the head "Zamindarees". "The Zamindarees were settled by me; and in order to explain the principles of settlement adopted if will be necessary to touch first upon the questions of tenure and history. The weight of testimony goes to show that the Zamindars are the descendants of men on whom were conferred tracts of country, more or less wild with the object of their being brought under cultivation and order maintained. Naturally, . . . . while, the law was weak and its administrators distant the Zamindar, as the lord on the spot, exercised large powers but powers apparently never recognised by either the Gand or the Maratta Government. He was undoubtedly regarded as a noble, bound to furnish a small contingent when required by his sovereign ; but there is nothing to warrant to the supposition that he possessed an absolute right in the soil; indeed, as far as my experience goes, such a right is foreign to the ideas of the races of this part of India. The rulers of the day evidently made and unmade Zamindars at their pleasure;........... Under these circumstances it appeared that the Chanda Chiefs, though the Nobles of the Country, possessed no absolute rights in the soil, and that it rested with Government to confer it; and in conferring it, to prescribe such conditions as might be deemed fitting. A scheme of conditions to be embodied in the, patent of proprietary right, and in the administration paper of the Zamindarees, was therefore drawn up, based upon the usages actually existing from ancient times; and, with one exception, the proposed arrangements were sanctioned in their entirety by the Government of India, who directed that they were to be taken as a general model for those to be applied to the Zamindarees of the Bala ghat district and to the non- feudatory Zamindarees of Chutteesgurh. The provision not approved as that on the death of a Zamindar, the estate should in default of a son, devolve upon his widow. This code of succession has obtained among the Chanda Chiefs from time immemorial, and is the rule not only among them but Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 7 among all classes of landholders in the district. It suits especially the character of the Gond women......... Government, however, after weighing the arguments urged', decided that it was conducive to the interests of the Zamindarees that the, succession should devolve only upon a male member of the family, and the clause was altered accordingly." Pratapshah and the 1st defendant Dayaram were descendants of Gangashah and they were related to Gangashah in the same degree. But Pratapshah was the descendant of Bhakta, and Dayaram was the descendant of Raju. Bhakta was the elder of the two brothers. It is recited in the Wajibul-arz that the Dhanora Zamindari is impartible, that on the death of the holder it devolves upon his eldest son and in the absence of a legitimate or an adopted son it devolves upon the nearest male relative. Devolution of, the Zamindari closely resembles the traditional rule of liberal primogeniture. If the holder dies leaving him surviving no son legitimate or adopted, the Zamindari devolves upon a descendant from the common ancestor of the nearest degree and in the event of there more, descendants from the common ancestor being in the same degree, the descendant in the senior line is preferred. Succession to the Zamindari is subject to the power of the Governor to dispossess a person found unfit to observe the conditions of loyalty, good police administration and improvement and cultivation of estate. But if the nearest in the line of succession is not selected the estate must be given to the nearest heir who has the prescribed qualifications and is a successor to the Zamindar. When the Zamindar is removed, succession takes place as if the Zamindar so removed had died. By the use of the expression "nearest male relative" the test of propinquity alone may be applied and when there are two or more claimants equally removed from the common ancestor the eldest male member in the senior most line will be preferred. In adjudging the plaintiffs claim the Court must determine whether Pratapshah-father of the plaintiffs, was the nearest male relative of Amarshah. On the death of Amarshah there were two male relatives they were Pratapshah father of the plaintiffs and the 1st defen- dant Dayaram. The contest between them had to be adjudged in the light of the rules of lineal primogeniture governing an impartible estate which are well-established : Succession is governed by the rules which governs succession to partible property subject to such modifications only as flow from the character of the impartible estate; the only modification which impartibility suggests in regard to the right of succession is the existence of a special rule for the selection of a single heir when there are several heirs of the same class who would be entitled to succeed to the property if it were partible under the general Hindu law; and in the absence of a special custom, the rule of primogeniture furnishes a ground of preference. Subramanya Pandya Chokka Talawar v. Siva Subramanya Pillai(1). In determining a single heir according to the rule of primogeniture the class of heirs who would be entitled to succeed to the property if it were partible must be ascertained first, and then the single heir applying the special rule must be selected. Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 8 Counsel for the first defendant submitted that under the terms of the Chanda Patent the Zamindari devolves on the death of the holder on the male relative who is the senior most in age, and not on the eldest member in the senior line. There is nothing in the Chanda Patent which supports that contention. By the use of the expression "nearest male relative" the rule of primogeniture is prescribed, it is not intended to confer the estate upon the eldest male relative of the Zamindar. Counsel also submitted that under the terms of the Chanda Patent and the terms recorded in the Wajib-ul-arz the Governor having the right to determine inheritance and the right to remove a person who is not loyal or does not manage the property or does not improve the cultivation or who is guilty of bad behaviour or bad administration, it must be assumed that the holder of the Zamindari has merely a life interest and on the death of the holder, the Governor re- grants the land consistently with the rules of succession according to the law and custom amongst the members of the family but subject to the dominant purpose of good administration and loyalty to the Government. Counsel for the first defendant relied upon certain circumstances which he claimed established that the interest of the Zamindar was restricted to his life and on his death there was resumption and re-grant of the Zamindari by the Governor. Counsel submitted that the Zamindari was impartible and develoved upon the nearest male heir, that the sanction of the Governor was necessary for transfer, and also for recording inheritance, that loyalty, good management and improvement of cultivation were the conditions for holding the lands and that if the behaviour of the Zamindar was found unsatisfactory or that he was not capable of good adminis- tration he was liable to be removed. On that ground, said Counsel, the Government alone was competent to decide a dis- pute arising out of inheritance. But the power to take extraordinary steps to protect the interest of the Zamindari by the removed of the holder does not restrict the title of the Zamindar to a mere life interest. The incidents of the tenure are restrictions on the estate of the Zamindar, but those restrictions do not make him a mere life-tenant. Under the Chanda Patent the lands of the Zamindari held by the family were confirmed in 1867 in favour of Sitaram. On his (1)I. L. R. 17 Mad. 316 at p. 325. death they devolved upon Hanmantrao. There is no evidence that any fresh grant was made. On the death of Hanmantrao the lands devolved upon his son Diwakarrao who died on September 8, 1932. On the death of Diwakarrao dying without leaving any male descendant there arose a dispute between Pratapshah and Amarshah. Pratapshah claimed to be the adopted son of Diwakarrao and on that ground entitled to take the Zamindari. An inquiry was held and it was decided that Pratapshah failed to prove the adoption set up by him. On the death of Amarshah again without leaving any male lineal descendant disputes arose. The evidence is not clear as to whether any formal grant was issued in favour of Sitaram. There is no evidence that recognition of the heirs of the successive Zamindars was accompanied by the issue of fresh patents or grants. Succession was merely recognised by the revenue authorities. The argument that the grant was for life of the grantee is therefore not supported by the terms of the Chanda Patent, nor by the entries in the Wajib- ularz. nor by the history of the Zamindari. The right to determine inheritance it is true vests in the Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 9 Governor but the power is exercisable in accordance with and not in violation of the custom of the family. In determining the heir the Governor is not granting afresh the Zamindari; he merely determines the successor in accordance with the custom of the family. The right of the Governor to remove a holder who is disloyal or does not manage his estate properly or does not improve cultivation or is otherwise of "bad behaviour" or guilty of bad administration, does not involve a condition that the interest of the Zamindar is only for his life. When a holder of the Zamindari is removed, the Governor is bound to hand over the Zamindari to the next heir in the order of succession if the Zamindar removed had died and the heir will get the right. Counsel, then contended that in any event the decision of the Governor in 1950 declaring Dayaram to be the successor on the death of Amarshah was 'binding and conclusive and could not be reopened. Counsel urged that Pratapshah and the 1st defendant Dayaram were related to the common ancestor in the same degree, and it was open to the Governor to select one of the two members of the family related to the last holder in the same degree even though the person selected did not belong to the senior-most line. But if succession to the Zamindari is governed by the rule of lineal primogeniture, selection of a member of a branch in preference to a member of the senior branch would be plainly illegal. Again, the evidence does not warrant the view that the Governor purported to pass any order in pursuance of the provisions of the Chanda Patent or the rules of succession recorded in the Wajib-ul-arz. The order of the Governor is in the form of a memorandum addressed to the Deputy Commissioner, Chanda, ,dated November 9, 1951 and it states that "Government are pleased to recognise Shri Dayaram Bapu son of Ballarshah Bapu Raj Gond as the Zamindar of Dhanora Zamindari in the Carchiroli tahsil of the Chanda District till the date of vesting of the Zamindari in the State Government". There is no evidence that the Governor made any enquiry to determine the successor of Amarshah. An order by the Gover- nor purporting to exercise powers under the Chanda Patent con-templates a quasi-_judicial inquiry. The order does not show that any inquiry was made for determining the rights of the contesting claimants or that any notice was issued to them or that they were heard before the Governor decided the issue. There is nothing in the pleadings in that behalf. The Governor is invested with quasi-judicial power, and if there be a dispute. the dispute must be decided after holding an inquiry, and the decision must be reached consistently with the rules of natural justice and in accordance with the custom of the family. A bald statement that the "Government are pleased to recognise Dayaram Bapu son of Ballarshah Bapu as the Zamindar of Dhanora Zamindari" does not disclose the reason for rejecting the claim of Pratapshah who according to the custom of the family was "the nearest male relative". There is no evidence on the record that the Governor was even aware that there were other claimants and if he was aware what their claims were and that the Governor had considered those claims before recognizing the claim of Dayaram. In the 'absence of any evidence that the order was made by the 'Governor in exercise of the power conferred by the Chanda Patent it is unnecessary to consider whether any order made by the Governor is in exercise of the powers 'of the patent excludes the jurisdiction of the civil court. The Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 10 decision of Governor was apparently reached without any inquiry and was plainly contrary to the rules of Hindu Law and the custom of the family in the light of which alone the Governor was by the express mandate competent to adjudicate the claim. It is true that there were mutation proceedings in regard to the Zamindari before the Naib Tahsildar Garchiroli Tahsil. The Naib Tahsildar by his order dated May 9, 1951 held that the dispute relating to the mutation was raised by Pratapshah, that Amarshah had died issueless, that the genealogical tree set up by Daulatshah son of Pratapshah was incorrect being unsupported by reliable evidence,, that copies of settlement of 1867 were mere statements of interested persons, that the genealogical tree filed by Dayaram resembled the genealogical tree filed by Pratapshah and was held to be genuine; that Amarshah had clearly admitted in his statement that Dayaram was entitled to succeed to the Zamindari after him and that Dayaram was the nearest male kinsman to the deceased Amarshah. This decision of the Naib Tahsildar proceeded upon a genealogy produced by Dayaram which on the findings of the Trial Court as well as the High Court in this case is incorrect. The decision of the Naib Tahsildar in a mutation proceeding even as a piece of evidence has little evidentiary value when it is founded on a material piece of evidence which was untrue. The proceedings were carried in appeal before the Deputy Commissioner. The Deputy Commissioner confirmed the order by his decision dated August 8, 1951. He also accepted the genealogy set up by Dayaram and held that there were no other nearer male descendants in the branch and that Pratapshah was one degree more removed than Dayaram. In view of the infirmity attaching to the genealogy relied upon by the Revenue Officer that decision has also little evidentiary value. The orders passed by the Governor and the revenue authori- ties do not exclude the jurisdiction of the civil court to decide the question of kinship. In that view we agree. with the High Court that the Zamindari originally confirmed in favour of Sitaram must according to the tenure as recorded in the Wajib-ul-arz devolve upon the first plaintiff Dawalatshah to the exclusion of the first defendant Dayaram. The right in Malguzari land was since the death of Amarshah extinguished by the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act 1 of 1951. The Malguzari lands are by the devise contained in the will dated December 3, 1950 given to the plaintiffs. Compensation in respect of the lands would therefore belong to the plaintiffs. But it is urged that notwithstanding the devise, because of the order of the Claim Officer under Section 14 of Act 1 of 1951, the plaintiffs were not entitled to agitate the question of heirship. It is enacted by s. 3 of the Act that on and from a date to be specified by a notification by the State Government in that behalf, all proprietary rights in an estate, mahal, alienated village or alienated land as the case may be, in the area specified in the notification, vesting in a proprietor of such estate, mahal, alienated village, alienated land, or in a person having interest in such proprietary right through the proprietor, shall pass from such proprietor or such other person to and vest in the State for the purposes of the State free of all encumbrances. Section 4 sets out of the consequences of the vesting of the land in the Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 11 Government by N-irtue of the notification issued under s. 3. Section 8 provides for assessment of compensation payable to every proprietor, who is 8-L807SupCI/71 divested of proprietary rights. The compensation is to be, determined in accordance with the rules contained in Sch. 1. Section 12 requires that a proprietor who is divested of proprietary rights by virtue of a notification issued under s. 3 shall, within such period as may be prescribed, file a statement of claim in the prescribed form and specify the particulars mentioned therein. Section 13 authorises the Compensation Officer to determine the amount of compensation. Section 14 provides: "(1) If during the course of an enquiry by the Compensation Officer, any question is raised regarding the proprietary right in any property divested under Sec. 3 and such question has not already been determined by a court of competent jurisdiction, the Compensation Officer shall proceed to enquire summarily into the merits of such question and pass such orders as he thinks fit." (2) The order of the Compensation Officer under sub-section (1) shall not be subject to any appeal or revision, but any party may, within two months from the date of such order, institute a suit in the civil court to have the-order set aside, and the decision of such court shall be binding on the Compensation Officer, but subject to the result of such suit, if any, the Compensation Officer shall be final and conclusive". Counsel for Dayaram urged that the Compensation Officer had decided by his Order dated August 30, 1951 that compensation in respect of the Malguzari land was payable to Dayaram and since no suit was filed by the plaintiffs for setting aside that decision, the order of the Compensation Officer became final and conclusive and could not be reopened in a suit filed more than six, years after that date. We are unable to accept that contention. The Compensation Officer is entitled to decide a question only regarding the proprietary right in the property divested under S. 3. He is not concerned with determination of any question relating to a private dispute between two or more persons who make competing claims in the matter of compensation, relying upon their respective titles. A question regarding the pro- prietary rights may in ordinary course be raised only in a claim against the State, and if that claim be decided against the claim-' ant in a summary inquiry held by the Compensation Officer, a suit to set aside the decision must be filed within two months from that date and if no suit is filed, the order becomes final and conclusive. S. 14 was enacted with a view to put an end to disputes with regard to the claims to proprietary rights which by virtue of the notification issued under s. 3 are extinguished. It is not intended by an Order under section 14 to determine complicated questions of title by the adjudication of a revenue officer in a summary inquiry without even a right of appeal and to make his adjudication conclusive unless a suit be filed within two months from the date of the order. That is also clear from the terms of s. 35(7) of Act 1 of 1951 which provides "The payment of compensation under this Act to the creditors of a proprietor or to the proprietor in accordance with the prescribed manner shall be a full discharge of the State Government from all liability to pay compensation for the divesting of proprietary rights, but shall not prejudice any rights in respect of the said rights to which any other person may be entitled by due process of law to enforce against the person to whom compensation has been paid as aforesaid". The Civil Court is declared competent to determine disputed questions with regard to title to Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 12 'compensation. We agree With the High Court that s. 14 of Act 1 of 1951 does not invest the Compensation Officer. with jurisdiction to determine competing claims, of persons claiming proprietary rights to the property vesting in the Government by the operation of s. 3 of the Act. Section 14 is intended to determine only the proprietary rights in the land, qua the State. Finally it was urged that the Trial Court granted Rs. 10,000/as mesne profits, and even though- the, High Court disallowed the claim of the plaintiffs with regard to certain items no reduction was made in the total amount of mesne profits awarded corresponding to the claim disallowed. Counsel for the plaintiffs concedes that the High Court was in error in not reducing the amount of mesne profits awardable to the plaintiffs. He agrees that instead of the figure of Rs. 10,000/- awardable to the plaintiff Rs. 8,000/- should be substituted. We modify the mesne profits awarded. Subject to this modification, this appeal fails and is dismissed with costs. K.B.N. Appeal dismissed. Dayaram & Ors vs Dawalatshah & Ors on 8 January, 1971 13 | {
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Regional Provident Fund Commissioner, ... vs Shri T. S. Hariharan on 1 April, 1971 Equivalent citations: 1971 AIR 1519, 1971 SCR 305, AIR 1971 SUPREME COURT 1519, 1971 LAB. I. C. 951, 1971 (1) LABLJ 416, 39 FJR 233, 22 FACLR 260 Author: I.D. Dua Bench: I.D. Dua, J.M. Shelat PETITIONER: REGIONAL PROVIDENT FUND COMMISSIONER, ANDHRA PRADESH Vs. RESPONDENT: SHRI T. S. HARIHARAN DATE OF JUDGMENT01/04/1971 BENCH: DUA, I.D. BENCH: DUA, I.D. SHELAT, J.M. BHARGAVA, VISHISHTHA CITATION: 1971 AIR 1519 1971 SCR 305 1971 SCC (2) 68 CITATOR INFO : D 1987 SC 447 (12) ACT: Employee's Provident Fund Act, 1957, s. 1(3)(a) & (b)- Employment of more than 20 persons-Casual labour whether to be included for determining number of employees-Minimum period of employment whether can be laid down. HEADNOTE: The respondent ran a hotel. Due to failure of water supply he had to employ some persons to bring water from the tank for a short period. .The Provident Fund Commissioner sought to enforce the provisions of the Employees' Provident Funds Act, 1957, and the Provident Fund Scheme, 1952, against him. Regional Provident Fund Commissioner, ... vs Shri T. S. Hariharan on 1 April, 1971 1 The respondent thereupon filed a writ petition in the High Court. It was held by the High Court that employment of more than twenty persons for a short period did not bring an establishment within the proviso of s. 1(3) (a) & (b) of the Act. II It was also held, that only those employees should be taken into consideration who were in employment for the full period of one year. While, thus laying down the legal position the High Court left it to the authorities Under the Act to apply the law to. the facts of each case and dismissed the respondents petition. The Provident Fund Commissioner appealed to this Court for further clarifica- tion. HELD:Considering the language of s. 1(3)(b) in the light of the provisionsof s: 16 and s. 1(5) as *OIL as the general scheme and object of the Act itwould appear, that employment of a few persons on account of some: emergency or for a every short period necessitated by some abnormal contingency which is not, a regular feature of the business' of the establishment and which does not reflect its business prosperity or its financial capacity or stability from which it can reasonably be concluded that the establishment can in the normal way bear the burden of the contribution towards the provident fund under the Act, would not be covered by the definition. The word 'employment' must therefore. be construed as employment in the regular course of business of the establishment, such employment obviously would not include employment of a few persons for a short period on account of some passing necessity or some temporary emer- gency beyond the control of the company. The High Court was right in holding so. But it went wrong, in holding that the section contemplated the required number of persons to Work in the establishment continuously for one year. It was difficult to impute to the Legislature an intention to exclude from the application of, them Act an establishment which regularly employs for its general business the required number, of persons for a major part of the year say for. 360 days every year ' the employment of the required number does not extent merely because to full one year Therefore the question must be determined in each case on its own peculiar facts. [313C-G] JUDGMENT: CIVIL APPELLATE JURISDICTION: civil Appeal No. 1128 of 1967. 20-1 S.C. India/71 Appeal from the judgment and order dated September 1, 1964 of the Andhra Pradesh High Court in Writ Petition No.907 of 1963. L. M. Singhvi and S.P. Nayar, for the appellant The respondent did not appear. Regional Provident Fund Commissioner, ... vs Shri T. S. Hariharan on 1 April, 1971 2 The Judgment of the Court was delivered by Dua, J.-The appellant in this appeal by certificate granted by the Andhra Pradesh High' Court oft February 25, 1965 under Art. 133 (1) (b) of the Constitution is the Regional Provident Fund Commissioner, Andhra Pradesh. A large number, of writ petitions. by various parties were filed in the High Court praying for writs in the nature of mandamus directing the. appellant to-forbear from enforcing or taking other proceeding under the provisions of the Employees' Provident Funds Act, 1957 (hereinafter called the Act) and, provident Fund Scheme,' 1952. With 'the exception of perhaps one writ petition, all the rest, including W. P. 907 of 1963 presented by T. S. Hariharn, Proprietor, New Cochin Cafe, Ongole, respondent in; this Court were dismissed. Certificates under Article. 133 (i) (b) of the Constitution were secured by the appellant in almost all the cases but. the present is the only appeal which now survives, all the rest having been dismissed for non-prosecution. The writ, petition of the respondent was dismissed which means that the final order made by the High, Court was in favour of the appellant. The only grievance raised by the appellant's learned counsel in this court was that the High- Court bad in the course of its judgment expressed the view that Clause (a),and (b)of sub-section (3) of Section I of the Act do not cover casual labour and since this expression of opinion which he considers to be legally erroneous would be binding on the appellant in administering the Act, it was necessary to have the correct legal position enunciated by this Court. According to the appellant's learned counsel the following passages in the judgment of the High Court clearly bring out the arguments both for and against the legal position canvassed by him:-- "We have next reconsider whether clauses (a) and (b) of Section 1(3) are wide enough to cover casual labour.the work of an establishment even for a day or a fraction thereof. This argument is sought to be reinforced; by the unreported judgment of a Division Bench of the Madras High It is maintained by the learned Government Pleader that` requirement as to the numerical strength is satisfied is twenty persons are engaged in connection with The other passage occurs a little lower down in that judgment "Section 19-A also seems to strengthen our view. A doubt as to the number of persons employed in an establishment could arise only if the employment of twenty persons in the establishment were a normal feature. A legitimate doubt cannot, be said to arise if the condition as to the number is satisfied if twenty persons work in the establishment even for a day or two. It is not necessary for us to labour this point any further as we feel that the provisions of the Act are inapplicable to establishments which do not employ twenty or more persons,to work therein for a period of one year. It follows that 'casual labour'- falls outside the scope of section 1(3). The fact that the casual labour is engaged by. or, through a contractor does not make any different for the decision of the question, the only criterion being whether they were casual laborers or not. On this discussion, it follows that the establishments whose employees do not, come upto twenty,, excluding casual laborers do not fall within the purview 'of Section 1(3) and so the, provisions of the Scheme cannot be applied to them. The respondents will. therefore, examine this question in the light of these decide whether the Scheme should be applied these establishments excluding casual labour." Regional Provident Fund Commissioner, ... vs Shri T. S. Hariharan on 1 April, 1971 3 The appellant's learned counsel had at one stage of his arguments stated that his client was anxious merely to steer clear of the observations made by the High Court that "the provisions of the Act are inapplicable to establishments which do not employ 20 or more persons to work therein for a period of one year." But while citing certain decided cases he did appear to canvas for the wide proposition that employment of a person for however short a period would be employment for the purpose of determining the number of persons,employed as contemplated by Section 1 (3) (a) and (b) of the Act. He relied on the Bench decision of the Madras High Court reported Messrs East.-,India Industries (Madras) v. Regional P. F: Commissioner(1) (this decision was also cited in the High Court as an unreported judgment) and pressed us to uphold the reasoning adopted therein. The question requiring our determination is a very short one. As there is no representation on behalf of the respondent in this Court and, therefore, we do not have the benefit of the respondent's point of 'view we propose to confine ourselves strictly to the (1) [1964] 1 L. L. J. 441 limited question of the scope of clauses (a) and (b) of sub- section (3) of Section I and this judgment is not intended to be considered as expressing any opinion on other controversial aspects. Before considering the relevant provisions of the Act it may be pointed out that according to the respondent's writ petition presented in the High Court in August, 1963, the New Cochin Cafe (treated as a hotel) was started in Ongole town on November 20, 1956 and the respondent usually employed only 18 or 19 persons. In 1961 there was total failure of rains,in the Ongole region and that town was particularly hard hit. The respondent had, to employ two or three persons on contract basis. for supplying water to the hotel. Those persons were engaged from June to September, 1961. The appellant has not questioned the correctness of these assertions for the purpose of this appeal. Let us now examine the relevant provisions of the Act. The Act was brought on 'the statute book for providing for the institution of provident fund for the employees in factories and other 'establishments. The basic purpose of providing for provident funds appears to be to make provision for the future of the industrial worker after his retirement or for his dependants in case of his early death. To achieve this ultimate object the Act is designed to cultivate among the workers a spirit of saving something regularly, and also to encourage stabilisation of a steady labour force in the industrial centres. This Act has since its initial enactment been amended several times to extend its scope for the benefit of industrial workers. We are, however, concerned with the Act as it stood in 1962 when notice was sent by the appellant to the respondent stating that the provisions of the Act had been made applicable to his establishment. Sections 1 (3) (a) and (b), 4 and 5 may now be reproduced "Section 1 (3) Subject to the provisions contained in section 16, it applies. (a) to every establishment which is a factory engaged in any industry specified in Schedule 1 and in which twenty or mom persons are employed, and (b) to any other establishment employing twenty or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette, specify in this behalf Provided that the Central Government may, after giving not less than two months' notice of its intention so to do, by notification in the Official Gazette, apply the provisions of this Act to any establishment employing such number of persons less than fifty as may be specified in the Regional Provident Fund Commissioner, ... vs Shri T. S. Hariharan on 1 April, 1971 4 notification. Sub-Section 4 "Notwithstanding anything contained in sub- section (3) of this section or subsection(1) of section 16, where it appears to the Central Government , whether on an application; made to it in this behalf or otherwise, that the employer and the majority of employees in relation to any establishment have agreed that the provisions of this Act should be made applicable to the establishment it may by notification in the Official Gazette, apply the provisions of this Act to that establishment." Sub-Section 5 "An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty Provided that where, for a continuous period of not less than one year the number of persons employed therein has been less than, fifteen the employer in relation to such establishment may cease to give effect to the provisions of- this Act and any scheme framed thereunder, with effect from the beginning of the month following the expiry of the said period of one year, but he shall, within one month, of the date, of such cessation, intimate, by. registered post, the. fact thereof to such authority, as may be specified by appropriate Government in this behalf." The original Act was applicable to establishments which were factories engaged in the six industries specified in Schedule 1 but as a result of persistent demands for extension of provident fund benefits to all industrial workers, the Act was amended' in 1956 by Act 94 of 1950 so as to enable its extension ,to other establishments as well. .,Earlier, it may be pointed out, it was amended in 1953. It is unnecessary to give the details of the various amendments. We now turn to the relevant definition clauses contained in Section 2. These definitions are subject to the context providing otherwise. In Clause (f) "employee is, defined to mean any person who is employed for wages in any kind of work manual or otherwise in or in connection with the work. of an establishment and who gets his wages directly or indirectly from the employer and includes any person employed by, or through a contractor in or in connection with the work of the establishment. Clause (h) defines "Fund" to mean the provident fund established under a Scheme.' "Member" is defined in Clause (j) to mean a member of the Fund and "Scheme" is defined in Clause (1) to mean a scheme framed under the Act. Section 5 provides for the framing of a scheme called the Employees' Provident Fund Scheme by the Central Government. Section 6 makes provi sion for- contribution by the employer and the employee to the Fund. Section 14 provides penalties for evasion of payments under the Act or the Scheme. Section 16 Which excludes from the applicability of the Act establishments belonging to Government or local authority and also infant factories, reads "16. Act not to apply to establishments belonging to Government or local authority and also to infant industries This Act shall not apply-- (a) to any establishment registered under the Cooperative Societies Act,, 1912, or under any other law for the time being in force in any State relating to cooperative societies employing less than fifty persons and Working without the aid of powers; or Regional Provident Fund Commissioner, ... vs Shri T. S. Hariharan on 1 April, 1971 5 (b) to any other establishment employing fifty or more persons or twenty or more, but less than fifty persons until the expiry of three years in the case of the former and five years in the case of the latter, from the date on which the establishment is, or has been, set up. Explanation.--For the removal of, doubts, it is hereby declared that an establishment shall not be deemed to be newly set up merely by reason of a change in its location. (2)If the Central Government is of opinion that having regard to, the financial position of any class of establishment or other circumstances of the case, it is necessary or expedient so to do, it may, by notification in the Official Gazette, and subject to such conditions as may be specified in the notification, exempt that class of estab- lishments from the operation of this Act for such period as may be specified in the notification." Section 17 invests in the appropriate Government power to exempt certain establishments from the operation of all or any of the provisions of any scheme. Section 19-A vests in the Central Government power to remove difficulties by making necessary provision or giving directions not inconsistent :with the provisions of the Act. The order of the Central Government made under Section 19-A for removing doubts and difficulties is clothed with finality. The narrow question which directly arises for our conside- ration is whether Clause (b) of sub-section (3) of Section 1 when it speaks of the establishment employing 20 or more persons means that the person so employed may be employed by the establishment for any purpose whatsoever and for however short a duration or that the employment must be for some minimum period in the establishment. The language used in the clause does not give any clear indication., We have, therefore, to construe this word in the light of the legislative, scheme, the object and purpose of enacting this clause and the ultimate effect of adopting one or the other construction. The relevant sections of the statute have already been reproduced. Section 16 which has already been get out in extenso seems to us to throw considerable light on the point raised., it may be recalled that this section excludes from the applicability of the Act establishments belonging to the Government and to local authorities and infant establishments. It is, therefore, obvious that this Act is intended to apply only where ;in establishment has attained sufficient financial stability and is prosperous enough to be able to afford regular contribution provided by the Act. Contribution by the employer is an essential part of the statutory scheme for effectuating the object of inducing the workmen to save something regularly. The establishment, therefore, must possess stable financial capacity to bear the burden of regular contribution to the Fund under the Act. In this connection it may be recalled that by virtue of Section 1 (5) an establishment to which the Act is applied continues to be governed by the Act notwithstanding that the number of persons employed by it 'at any time falls below the required number. This liability to be governed by the Act ceases only if the terms of the Proviso to Section 1(5) are complied with. The financial capacity of the establishment to bear the burden must, therefore, have, some semblance of a reasonably long term stability. In other words, the employment of requisite number of persons must be dictated by the normal regular requirement of the establishment reflecting its financial capacity and stability. It, therefore, follows from this that the number of persons to be considered to Regional Provident Fund Commissioner, ... vs Shri T. S. Hariharan on 1 April, 1971 6 have been employed by an establishment for the purpose of this Act has to be determined by taking into account the general requirements of the establishment for its regular work which should also have a commercial noxus with its general financial capacity and stability. This seems to us to be the correct approach under the statutory scheme. To accede to the appellant's argument would lead to some Startling consequences. By way of illustration, if for the purpose of extinguishing accidental fire an establishment is compelled to employ a few persons for about a couple of hours, even then, however weak and unstable its general financial capacity, the establishment would be covered by the Act and would have to contribute towards the 'provident fund for the benefit of its regular ,employees, of course, excluding those whose services were utilised for a short while for extinguishing the fire. In this illustration we are assuming that the employees would have no objection to being governed by the Act. This, in our opinion, could never have been the intention of the legislature. Similarly, we find it difficult to impute to the legislature an intention to exclude from the application of the Act an establishment which regularly employs for its general business the required number of persons for a major part of the year, say, for 360 days every year, merely because the ;employment of the required number does not extend to full one year. Both the extreme views, the one canvassed on behalf of the appellant and the other postulated in the observation of the High Court that the required number of persons must continuously work in the establishment for one year, do not conform to the ,scheme and object of the Act and are, therefore, unacceptable. Considering the language of Section 1 (3) (b) in the light of the foregoing discussion it appears to us that employment of a few persons on account of some emergency or for a very short period necessitated by some abnormal contingency which is not a regular feature of the business of the establishment and which does not reflect its business prosperity or its financial capacity and stability from which it can reasonably be concluded that the establishment can in the normal way bear the burden of contribution to-wards the provident fund under the Act would not be covered by this definition. The word "employment" must, therefore, be construed as employment in the regular course of business of the ,establishment; such employment obviously would not include employment of a few persons for a short period on account of some passing necessity or some temporary emergency beyond the control of the company. This must necessarily require determination of the question in each case on its own peculiar facts. The approach pointed out by us must be kept in view when determining the ,question of employment in a given case. The appellant's learned counsel argued that in the present case ,the respondent has to employ a few persons every year regularly from June to September for supplying water to the hotel because ,of failure of rains. This, according to him, would be a regular ,employment and the High Court was wrong in holding to the contrary. There is no finding of the High Court to this effect and indeed no attempt was made before also to substantiate this bald assertion We are, therefore, unable to accept this contention on, the present., record. The general approach of the High Court to the problem raised in this case seems.to us to be, broadly speaking, correct; so is its final conclusion. ,The only observation of the-High 'Court which required consideration is that the sub-section in question contemplates the required number of per-. sons to work in the establishment continuously for one year. On this point we have clarified the legal position. As the High Court has dismissed the writ petition after clarifying the points of law raised leaving it to the appropriate authority to finally decide the controversy on a Regional Provident Fund Commissioner, ... vs Shri T. S. Hariharan on 1 April, 1971 7 consideration of all the facts and circumstances we do not propose to say anything more in this appeal which has, been heard ex parte. , With the aforesaid clarification of the legal. position we. dismiss this appeal. As there is no representation. on behalf of the respondent there will be no order as to costs. G.C. Appeal dismissed.- Regional Provident Fund Commissioner, ... vs Shri T. S. Hariharan on 1 April, 1971 8 | {
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Polychem Limited vs R.D. Tulpule, Industrial Tribunal, ... on 15 March, 1971 Equivalent citations: 1972 AIR 1967, 1972 SCR (3) 855 Author: I.D. Dua Bench: I.D. Dua, C.A. Vaidyialingam, G.K. Mitter PETITIONER: POLYCHEM LIMITED Vs. RESPONDENT: R.D. TULPULE, INDUSTRIAL TRIBUNAL, BOMBAY &ANR. DATE OF JUDGMENT15/03/1971 BENCH: DUA, I.D. BENCH: DUA, I.D. VAIDYIALINGAM, C.A. MITTER, G.K. CITATION: 1972 AIR 1967 1972 SCR (3) 855 1972 SCC (1) 885 ACT: Labour- Law-Wage policy-Fixation of allowance-Principles to be considered. HEADNOTE: The demand for vacation allowance of the workmen of the appellants, at the same rate as was granted to the higher staff, was granted by the Industrial Tribunal. The Tribunal decided the question on the basis that the appellant- employer had the financial capacity to stand the burden of such allowance being granted to the workmen at the rate claimed. Allowing the appeal and remanding the matter to be considered afresh by the Tribunal, HELD : (1) The ultimate object of industrial adjudication in this country is to help the growth and progress of national economy; and for realising that object, industrial disputes Polychem Limited vs R.D. Tulpule, Industrial Tribunal, ... on 15 March, 1971 1 are settled on principles of fair play and justice harmonising the conflicting claims of capital and labour with full awareness of socioeconomic trends of thought. industrial law in this country, is therefore, expected to effectively secure, to the workers, conditions of service reasonably conducive to the improvement of their social and economic standard of living and their moral and material development. The industrial labour problems in this coun- try, having their roots in the historical background of social, economic and political conditions have, little in common with such problems in the United States or other developed countries. Therefore, the American lines of thought should not be too readily and indiscriminately followed, [861 D-G] (2) Wage policy relating to workmen is a complex and sensitive of public policy, because, the relative status of workmen in the society, their commitment to industry, their attitude towards the management, their motivation towards productivity, and their standard and way of life are all conditioned by wages. It is not a purely economic policy in which an employer and an employee alone are interested, but the consumer and the society at large and a fortiori the State, are also vitally interested. No wage policy can ever be applied in vacuum in disregard of the realities of the social and economic conditions in our country Considering the question of wages 'in the background of the Directive Principles in the Constitution, a wage structure should serve to promote a fair remuneration to labour ensuring due social dignity, personality and security, a fair return to capital, and strengthen incentives to efficiency,without being unmindful of the legitimate interests and expectations of the consumer in the matter of prices. Guided by this principle, if the financial capacity of an industry permits the workers should be allowed a due share in the prosperity of the industry to which they have contributed by their labour, so as to enable them, within reasonable limits to improve their standard of living. [863 D-H] (3) But in the present case, the Tribunal had committed a serious error in not considering the other allowances and amenities allowed to, 856 respondents-workmen, and comparing their total wage packet with the total wage packet of those employees to whom the allowancer had been allowed when determining the question. The difference between the amenities allowed to the workmen and to the staff to whom vacation allowance has been granted must in law and justice be looked into and the question then decided whether or nor the present workmen's demand is justified. [863 H-864 A, B-C] The principle of region-cum-industry has no doubt to kept ill view but then the comparable industries in the region have to co nsidered from all the relevant aspects which have been laid down by this Court in various decisions. The fact that in the refineries in Polychem Limited vs R.D. Tulpule, Industrial Tribunal, ... on 15 March, 1971 2 the region similar allowance is granted as a result of settlement cannot, on that account alone be considered to be irrelevant, because, that may appropriately indicate that the demand of the workmen in those industries not considered, unjust. [864 B-D] The total Wage packet of the various categories of employees in the appellant's industry itself, including the question of the nature of their duties and functions. however, deserves to be given primary importance. so that. there is no reasonable chance of heart burning and discontentment amongst the different categories of workmen on account of differential treatment which, though seemingly justifiable may, in real effect be discriminatory. [864 D-F] Remington Rand of India Limited v. The Workmen, C.A. Nos. 856 of 1968, 1475 of 1968 and 2129 of 1968 decided on December 10, 1969. Alembic Chemical Works Co. Ltd. v. The Workmen, [1961] 3 S.C.R. 297, Delhi Cloth & General Mill.,; Co. Ltd. v. Workmen, [1969] 2 S.C.R. 307, J. K. lron & Steel Co. Ltd. v. The Iron & Steel Mazdoor Union Kanpur, [1955] 2 S.C.R. 1315 and Express News Paper (P) LTD v. union of lndia [1959] S.C.R. 12, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2162 and 2163 of 1970. Appeals by Special Leave from the Award dated June 9, 1970 ,of the Industrial Tribunal Maharashtra, Bombay in References (I.T.) Nos. 284 of 1968 and 19 of 1969. S.V. Gupte, Mahesh Bhatt, Sunanda Bhandare and P. H. Parekh, for the appellant (in both the appeals). K.Rajendra Chowdhary, for respondent No. 2 (in both the appeals). The Judgment of the Court was delivered by Dua, J. The short but important point raised in these two appeals by special leave relates to the validity of that part of the award of the Industrial Tribunal, Maharashtra, Bombay, by which the demand for vacation allowance of the workmen of the appel- lant-, Messrs Polychem Ltd., Bombay, at the same rate as is granted to its higher staff both at the head office and at its Chambur plant, was allowed. These two appeals are directed against the impugned award in two references under S. 1 0 ( 1 ) (d) of the Industrial Disputes Act, 1947, one of which (Ref. No. 284 of 1968) related to, the demands of the head office staff and the other (Reference No. 19 of 1969) to the workmen of Chembur plant. The impugned portion of the award dated June 9, 1970. reads as under "The only other demand which is now common to both the references is the demand for the vacation allowance. It appears that the company pays to its officers or other staff drawing Rs. 600 and more as basic wage one month's salary for vacation in case his leave exceeds 15 days and is not accumulable. The demand of the workmen is that the minimum should be Rs. 300 and the maximum Rs. 2,000. It is pointed out for the company that this was refused by the Tribunals in Burmah Shell and Voltas. The Union on the other hand contended that it was allowed in the banks and refineries by settlements though refused by the Tribunals. The plea of discrimination, it was Polychem Limited vs R.D. Tulpule, Industrial Tribunal, ... on 15 March, 1971 3 pointed out, has been rejected by the Tribunals (see Parke Davis, I.C.R. 1966 p. 151 and Alembic Chemical, [1961] 1 L.L.J. P. 328). 1, however, feel that this company can afford to pay this allowance to its workmen and avoid dissatisfaction. In socialistic countries this is considered as an amenity to the workmen which should be provided such as subsidized or free vacation at health resorts. The ideal of wage fixation is the living wage while the national ideal was envisaged in the constitution is a socialistic state. The company can join others as the trend seems to be appearing in this region. It ensures a more contented and healthy workmen. I therefore award vacation allowance to the workmen at the same rate as the staff with the same conditions." The appellant's learned counsel, Shri S. V. Gupte, challenged this portion of the award on the ground that there is no evidence in support of the conclusions arrived at by the Tribunal and that it proceeds on grounds which are irrelevant and contrary to the settled principles relating to industrial disputes. Nowhere in the region is vacation allowance granted in similar industries and there is thus no comparable instance, contended the counsel, adding that the senior assistants in the present case had also not pressed their claim to vacation allowances. It was further urged that workmen in the appellant's industry get various other amenities like,. dearness allowance, according to the revised textile rates, overtime wages, lunch allowance (not allowed to officers), gratuity (with qualifying period of 5 years as against 15 years for officers), uniforms and medical facilities. Our- attention was drawn, to a prepared' statement produced before us on behalf of the appellants for showing the difference in the pay packet of Workmen employed at the appellant's head office as a result of the award given in Reference No. IT 284/68. The respondent did not accept this statement saving that it was based on the interpretation placed by the appellant to support its case. In regard to overtime allowance and other facilities referred to by Shri Gupte. the learned counsel relying, inter alia, on another statement relating to facilities accorded to the workmen in 1970-71produced before us, submitted that the workmen were getting numerous other benefits not available to officers. This submission Was however, sought to be founded on material not on the court record. The learned counsel strongly contended that the real criterion should have been to look to the overall pay structure of the workmen in the light of the standard prevailing in similar industries in the same region. Mere capacity of the appellant to pay should not be the sole criterion, he added. Reference was made to the decision of this Court in Remington Rand of India Limited v. The Workmen (1) where it was observed : "As regards the first ground it is true that in the present case there was no question of the company being unable to bear the additional burden of lunch allowance. But the fact that an employer is able to bear the burden is not the criterion. The foundation of the principle of industry-cum-region is that as far as possible there should be uniformity of conditions of service in comparable concerns in the industry in the region so that there is no imbalance in the conditions of service between workmen in one establishment and those in the Test. The danger otherwise would be migration of labour to the one where there are more favourable conditions from those where conditions are less favourable. Therefore, the mere fact that a particular concern can bear an additional liability would by itself be no ground to impose upon it such extra obligation. Equally important is the fact that the wage structure prevailing in the appellant company is undisputably fair and the dearness allowance paid to the Polychem Limited vs R.D. Tulpule, Industrial Tribunal, ... on 15 March, 1971 4 workmen has been, as aforesaid, linked with the index of cost of living. These must take care of the rise in the cost of living from time to time. If, therefore, the company were to be compelled to pay lunch allowance to ail (1). C,A, Nos. 856 of 1968, 1475 of 1968 and 2119 of 1968 decided on December 10, 1968. workmen including those who work at the offices it would in fact mean a,, double provision for, the, constituent of the cost of food already provided for in the wage scales and the rates, of dearness allowance. The force of this aspect was recognised by this Court in Mcleon & Co. Ltd. v. Workmen(1)". It was said on behalf of the respondents that in the case cited there was no discriminatory treatment in the same concern among the employees of different grades of salaries at the same place. The requirements of providing lunch to those who could not return to the office from outdoor work outside the city limits as was the fact in the cited case, according to, the respondents, furnish a distinguishing feature in that case from the present. Next reliance was placed by Shri Gupte on the following observations in Alembic Chemical Works Co. Ltd. v. The Workmen ( 2) "Then it is urged that the provision made by the award for privilege leave introduces discrimination between the clerical staff covered by the present reference and operatives covered by the earlier awards made by the samee Tribunal. We were told that operatives had made a similar claim for privilege leave before the same Tribu nal, and the said claim had been rejected. The argument is that the provision for privilege leave made by the present award would create discontent amongst the operatives to whom similar leave has been denied, and that would disturb industrial peace. We are not impressed by this argument. It is not seriously disputed that a distinction has generally been made between operatives who do manual work and clerical and other staff; in fact the appellant's standing orders themselves make different relevant provisions for the two categories of its employees. It is also not disputed that in practice such distinction is made by comparable concerns, and awards based on the same distinction are generally made in respect of the two separate categories of employees. We are, therefore, unable to appreciate the argument that. in granting privilege leave to the present staff the Tribunal has either overlooked its earlier award or has made a decision which suffers from the vice of discrimination. The practice prevailing in comparable concerns and the trend of awards both seem to show that a distinction is generally made between the two, categories of employees, and since the said distinction is perfectly justifiable no question of discrimination can arise." (2) [1961] 3 S.C.R. 297 at 300. According to the respondents the distinction between operatives doing manual work and clerical and other staff may be justified but that is not the case here. Besides, in the reported case, this Court, in its concluding part said, that it was not satisfied that any case for interference under Art. 136 had been made out whereas in the present case the appellant wants this Court to interfere and reverse the impugned part of the award on the ground that it is grossly erroneous and unjust. Reference was then made on behalf of the appellant to the decision in Delhi Cloth & General Mills Co., Ltd., v. Workmen(1), emphasis being laid on the following passage at p. 327 : Polychem Limited vs R.D. Tulpule, Industrial Tribunal, ... on 15 March, 1971 5 "But in the branch of law relating to industrial relations the temptation to be, crusaders instead of adjudicators must be firmly resisted. It would not be out of place to remember the statement of the law made in a different context-but nonetheless appropriate here-by Doughlas, J., of the Supreme Court of the United States in United Steel Workers of America v. Enterprise Wheel and Car Corporation (2): "....... as arbitrator.... does not sit to dispense his own brand of industrial justice. He may of course look for guidance from many sources, yet his award is legitimate only so long as it draws its essence from the collective bargaining agreement. When the arbitrator's words manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the award.' We may at once state that we are not for a moment suggesting that the law of industrial relations developed in our country has proceeded on lines parallel to the direction of the law in the United States." The respondent, on the other hand, laid more emphasis on the last portion of the above observations, submitting that the problems of our country in regard to labour welfare at the present stage of our industrial development, particularly in the background of our egalitarian socialistic pattern of society as visualised in our Constitution, are materially different from the labour problems requiring solution in the developed American society under that country's constitution. The following passage from pp. 326-327 from he D.C.M.'s case(1) is also worth quoting: "We consider it right to observe that in adjudication of industrial disputes settled legal principles have little play : the awards made by industrial tribunals, are often the result of ad hoc determination of disputed questions, (1) [1969]2S.C.R.307. (2) [1960] 363 U.S. 593. and each determination forms a precedent for determination of other disputes. An attempt to search for principle from the law built up on those precedents is a futile exercise. To the Courts accustomed to apply settled principles to facts determined by the application of the judicial process, an essay into the unsurveyed expanses of the law of industrial relations with neither a compass nor a guide, but only the pillars of precedents is a disheartening experience. The Constitution has however invested this Court with power to sit in appeal over the awards of Industrial Tribunals which are, it is said, founded on the somewhat hazy background of maintenance of industrial peace which secures the prosperity of the industry and improvement of the conditions of work-men employed in the industry, and in the absence of principles precedents may have to be adopted guides-somewhat reluctantly to secure some reasonable degree of uniformity of harmony in the process." In our view the ultimate object of industrial adjudication in our country is to help the growth and progress of national economy and for realising that object the industrial disputes are settled on principles of fairplay and justice, harmonising the conflicting claims of capital and labour with full awareness of the current of socioeconomic trends. of thought. Our industrial law, is there,fore, expected to effectively secure to the workers conditions of service reasonably conducive to the improvement of their social and economic standard of living, and their moral and material Polychem Limited vs R.D. Tulpule, Industrial Tribunal, ... on 15 March, 1971 6 development. The existing peculiar problems, relating to industrial labour in our country, having, their roots in the historical background of our social, economic and political conditions have little in common with the current labour problems of America or other developed countries. We must, therefore, guard ourselves against the temptation of too readily and indiscriminately following the American line of thought. Shri Gupte next referred us to the decision in J. K. Iron & Steel Co. Ltd. v. The Iron & Steel Mazdoor Union, Kanpur(1) relying on the following passage at p. 1 32 "In Bharat Bank Ltd. v. Employees of Bharat Bank Ltd.(2) this Court held by a majority that though these Tribunals are not Courts in the strict sense of the term they have to discharge quasi-judicial functions and as such are subject to the overriding jurisdiction of this Court under article 136 of the Constitution. Their powers are derived from the statute that creates them and they have to function within the limits imposed there (1)[1955]2S.C.R.1315. (2) [1950] S.C.R. 459, 497. 9-L1061SupCI/72 and to act according to its provisions. Those provisions invest them with many of the 'trappings' of a court and deprive them of 'arbitrary or absolute discretion and, power. There is, in our opinion, an even deeper reason which is hinted at in the judgment of Mahajan J., (as he then was) at page 500 where he says 'that 'benevolent despotism is foreign to a democratic Constitution'. That, in our opinion, is the heart of the matter." To give relief to the workmen merely because the appellant can bear the financial burden is, according to Shri Gupte, it by these observations. According to the respondents, on the other hand, the observations relied upon leave to be construed in their own context and so read they do not prohibit the, industrial adjudication from granting just and fair remuneration to the labour in lieu of its contribution to the prosperity of the industry, provided the employer can, consistently with its own fair and just claim in lieu of its contribution to the prosperity of the industry and without detriment to its maintenance and betterment, bear the financial burden. The respondents', learned counsel Shri Chaudhri drew our attention to the admitted act, that, in the case of, Burmah Shell, Esso and Caltex Refineries, vacation allowance (which was considered to be identical with travelling allowance) was gianted to the Workmen by way of Settlement and submitted. that these industries, though different being refinties, are in the same region and the general standard 'of. remunerate of, Workman in that region performing similar duties and, functions should not. be materially different. The fact, that those industries granted such allowance by settlement shows that such a demand by the workman has not been considered by those industries to be unjustor unacceptable. Harmonious standardisation of wages in a region in the absence of markeddiff erence in the character of the duties and functions of labouraccording to the resPondents, reduces the factors contributingdiscontentment and promotes the chances of the workers'commitment to the industry whereas unjustified differential-treatmeant tends to serve as a potential source of industrial unrest. Shri Chaudhri also referred us to the decision in Express Newspapers: (P) Ltd. v. Union of India(1) where at p. 81 it is observed "It will be seen from this summary of the concepts of the living wage held in various parts of the world-that there is general agreement that the living Wage should enable the, male earner to provide for himself and his family not merely the bare essentials of food, clothing and, shelter but a measure of frugal comfort including education for the children, protection against ill-health,, (1)[1959] S.C.R. 12. Polychem Limited vs R.D. Tulpule, Industrial Tribunal, ... on 15 March, 1971 7 requirements of essential social needs, and a measure of insurance against the more important misfortunes including old age. Article 43 of our Constitution has also adopted as one of the Directive Principles of State Policy that : 'The State shall endeavour to secure, by suitable legislation or economic Organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life, and full enjoyment of leisure and social and cultural opportunities. . . .' This is the ideal to which our social welfare State has to approximate in an attempt to ameliorate the living., conditions of the workers." Shri Gupte, however, emphasised that in India living wage on standard prevalent in more advanced countries is not possible the present level of our national income. Wage policy relating to, workmen appears to be a co complex and sensitive area of public policy. The reason is plain. The relative status of workmen in the society, their commitment to industry andtheir attitude towards, the management, their motivation towardsproductivity and their standard and way of life, are all con by wages. It is according no a purely economic policy in which the employer and the employee alone are interest-, ed. Besides the worker and the management, the consumer and the society at large and a fortiori the State, are also vitally, interested, and no wage policy can ever be applied in vacuum in disregard of the realities of the social and economic, conditions in our country. Considering the question of wages in the background of the Directive Principles enshrined in our Constitution a wage structure should serve, to promote, a fair remuneration to labour ensuring due social dignity, personality and security, a fair return to capital, and strength incentives to efficiency without being unmindful of the legitimate interest and expectation of the consumer in the, matter of prices. Guided by this principle, if the financial capacity of the industry permits, the workers should, broadly speaking, be allowed their due share in the prosperity of the industry, to which they have contributed by their labour so as to enable them, within reasonable limits, to improve their standard of living. Turning now to the facts of the present case we are clearly of the view that the Tribunal has committed a serious error in not considering the other allowances and amenities allowed to the respondents-workmen, and comparing their total wage packet with the total wage packet of those employees to whom the allowance in question has been allowed, when determining this question. The Tribunal has virtually decided the question in issue exclusively on the basis that the employer has the financial capacity to stand the burden of such allowance being granted to the workmen at the same rate as the higher staff, with the same conditions. The difference between the amenities allowed to the workmen and to the staff to whom the vacation allowance is granted must in law and justice be looked into and the Polychem Limited vs R.D. Tulpule, Industrial Tribunal, ... on 15 March, 1971 8 question then decided whether or not the present workmen's demand is justified. The principle of region-cum-industry has no doubt to be kept in view but then the comparable industries in the region have to be considered from all the relevant aspects which have been laid down by this Court in various decisions to which it is unnecessary to refer, the principle being well settled. The fact that in, the refineries in the region similar allowance isgranted as a result of settlement cannot, on that account alone,be considered to be irrelevant because that may appropriately indicate that the demand of the workmen in those industries was not considered unjust. But to what extent that should weigh with the Tribunal is for the Tribunal to decide in the light of all the relevant circumstances. The, total wage packet of the various categories of employees in the appellant's industry itself, including the question of their nature of duties and functions, however, deserves to be given primary importance so that there is no reasonable, chance of heart-burning and discontentment amongst the different categories of workmen on account of the differential treatment which, though seemingly justifiable, may, in real effect. be discriminatory., The importance of appropriate standardisation of wages in the appellant-industry on a proper consideration of the duties and functions of the different categories of employees must be kept in view in deciding the present dispute. We would accordingly allow the Appeals, set aside the award and remit the case back to the Tribunal with a direction to decide the dispute after considering all the relevant factors as suggested. In the peculiar circumstances of the case there is no order as to costs. V.P.S. Appeals allowence Polychem Limited vs R.D. Tulpule, Industrial Tribunal, ... on 15 March, 1971 9 | {
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Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 Equivalent citations: 1972 AIR 793, 1972 SCR (1) 408, AIR 1972 SUPREME COURT 793, 1972 (1) SCR 408 1975 BOM LR 355, 1975 BOM LR 355 Author: D.G. Palekar Bench: D.G. Palekar, S.M. Sikri, A.N. Ray PETITIONER: MUNICIPAL CORPORATION FOR GREATER BOMBAY AND ANR. Vs. RESPONDENT: ADVANCE BUILDERS (INDIA) PVT. LTD. & OTHERS DATE OF JUDGMENT25/08/1971 BENCH: PALEKAR, D.G. BENCH: PALEKAR, D.G. SIKRI, S.M. (CJ) RAY, A.N. CITATION: 1972 AIR 793 1972 SCR (1) 408 1971 SCC (3) 381 CITATOR INFO : D 1972 SC 935 (8) R 1976 SC2243 (23) ACT: Town Planning Act, 1954, ss. 51, 53, 54 and 55-Duty of Corporation to remove unauthorised huts on allotted private plots. Practice and Procedure-Writ of mandamus issued by High Court Interference by Supreme Court. HEADNOTE: In August 1958, the State Government sanctioned a final town planning scheme-The Bombay Town Planning Scheme, Santa Cruz, No. VI and directed that the scheme should come into force from 1st January 1959. As part of the scheme there was a Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 1 Redistribution and Valuation Statement and to the Statement some Notes were appended. Note 11 provided that 'all huts, sheds, stables and Such other temporary structures including those which do not conform to the regulations of the scheme are required to be removed within one year from the date the final scheme comes into force.' In pursuance of the scheme plots were allotted, Ind the respondents became the owners of certain plots. Huts, sheds and stables had been built on those plots by slum dwellers., Since the appellant- Corporation took no action for implementing the scheme, the respondents, from whom betterment charges were being recovered by the appellant, called upon the appellant to implement it by removing the Slums, etc., and to provide roads and drains as directed in the scheme. The appellant however, remained inactive, and the respondents filed a petition for the issue of a mandamus to the appellant and the High Court allowed the petition. In appeal to this Court, on the questions : (1) Whether the appellant was bound in law to remove the structures out the private plots of the respondents in so far as they contravened the Town Planning Scheme, and (2)whether a writ of mandamus could issue at the instance of the respondents when they had collected rents from the Occupants of the hut- ments, etc. HELD : (1) Under s. 51(3) of the Town Planning Act, 1954, the final scheme as sanctioned by the Government has the same effect as if it were enacted in the Act. The scheme and its regulations must, therefore. be read as supplemental to the Act., Under s. 53, all rights in the original plots of the private owners would determine, and if, in the scheme, reconstituted or final plots are allotted to them, they shall become subject to the rights settled by the Town Planning Officer in the final Scheme. The fact that the final plots coincided with the original plots of the) private owners would not make any difference. Under s. 54 the local authority has to see whether any person is occupying any land in disregard of the rights determined under the scheme, and if he does so, he is to be summarily evicted by the local authority. Under s. 55(1)(a) every building ,or work which is in contravention of the town planning scheme, wherever it may be in the area under the scheme, Could be removed, Pulled down ,or altered by the local authority which-alone is named as the authority for that purpose. [414 D-E; 415 A-B, C-D. H; 416 F-F; 417 G] 409 In the present case, note 11 refers not merely to huts, sheds, stables which do not conform to the regulations of the scheme, but also to all huts, sheds, stables and such other temporary structures; and whosoever the owner or occupant may be, he is required to remove it within one year from the date the final scheme came into force.. Hence, if the owner or occupant did not so remove he would be contravening the provisions of the scheme and thereupon the Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 2 local authority will have the power under s.55 (1) (a) to remove or pull them down. The note takes note of the fact that the occupants of the hutments will be dishoused and makes provision for allotment of land to such dishoused persons. [416 F; 417 B-C] Therefore, it is the primary duty of the Corporation as the local authority to remove all offending huts, etc., in the whole area under the scheme and not merely from those areas which are allotted to the Corporation. That the respondent could, by having recourse to law, eject the slum dwellers and remove their huts would not be a relevant consideration since the duty is imposed by the Act on the appellant.. Further, there is no provision in the Act which requires owners of the plots to, take action against the hutment dwellers. [419 D-E; 421 F-G] The Maharashtra Regional and Town Planning Act. 1966, which came in to force during the pendency of the petition in the High Court has provisions corresponding to the 1954-Act which are practically of the same content. Hence the position is the same under the 1966-Act also. [419 E-F, G-H; 420 C-D] (2) Since development and planning is primarily for the benefit of public, the Corporation is under an obligation to perform its duty in accordance with the provisions of the Act. A mandamus may hence be, issued to the appellant ordering that to be done which the statute requires to be done. [420 E-F] In the present case, the High Court exercised its discretion in directing the issue of the writ and this Court, in appeal by special leave, will not ordinarily question that discretion. The mere fact that the owners of the plots received some amounts from the hutment dwellers by way of compensation or rent would not import any disqualification for issuing a mandamus at their instance. [421 A, F] Queen v. The Church Wardens of All Saints, Wigan, (1875-76) 1 A.C. 611 and Queen v. Garland, (1869-70) 5 Q.B. 269, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1121 of 1970. Appeal by special leave from the judgment and order dated' April 24, 1969 of the Bombay High Court in Appeal No. 2 of 1967. Niren Den, Attorney-General, M. C. Bhandara, P. C Bhartari, J. B. Dadachanji, O. C. Mathur and Ravinder Narain., for the appellants. S. V. Gupte, S. J. Sarabjee, B. R. Agarwala and A. J. Rana,, for respondent no. 1. Sharad Monohar and Urmila Sirur, for the interveners. Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 3 The Judgment of the Court was delivered by Palekar. J. This is an appeal by special leave from an Order of the High Court of Bombay dated 24th April, 1969 in Appeal No. 2 of 1967, substantially confirming the order passed by a single Judge of that Court in Writ Petition No. 474 of 1965. The appellants before this Court are the Bombay Municipal Corporation and the Municipal Commissioner of Bombay, and the respondents are the owners of 41 final plots Nos. 106 to 116 and 118 to 147 under the Bombay Town Planning Scheme, Santacruz VI. The area under the Town Planning Scheme, with which we are now concerned, originally fell within the municipal limits of the Bandra Municipal Committee. That Committee, by a resolution dated 15th June, 1948, declared its intention to frame a Town Planning Scheme under section 9(1) of the Town Planning Act, 1915. Thereafter, the Municipal Committee was abolished and the area of that municipality was absorbed within the limits of the Bombay Municipal Corporation. The Corporation, which. for the purpose of the Act, now became the local authority. applied to the Government, and on 7th May, 1951, the Government of Bombay sanctioned the making of the Scheme. On 30th April, 1963, a draft scheme was, prepared and published as required by the Act and it was duly sanctioned by the Government on 6th May, 1954. On 17th August, 1954, an Arbitrator was appointed to finalize the scheme and the Arbitrator formulated the final Scheme and published the same in the, Official Gazette, forwarding, at the same time, the Scheme to the President of the Tribunal appointed under section 32 of the Act. In the meantime, the Town Planning Act, 1915 was replaced by the Town Planning Act, 1954 which came into force on 1st April, 1957. Under section 90 the new Act, the final Scheme already formulated was adopted for continuance and implementation. Finally, on 21st August, 1958, the final Scheme was sanctioned by the Government which directed that the Scheme should come into force from 1st January, 1959. The Scheme, as already stated, was known as the Bombay Town Planning Scheme, Santacruz No. VI and covered an area .of about 160 acres divided into two parts by the Chodbunder Road which ran from south to north. We are not concerned here with the western part. We are concerned with the eastern part, the total area of which was about 54 acres. A part of this area belonged to the N. J. Wadia Trust. In a Trust Petition made to the High Court, a Receiver was appointed on 8th February. 1948 of this trust property. It appears that unauthorised huts, sheds and stables had been built in this area and the whole of it was full of slums, the removal of which was one of the objects of introducing the Town Planning Scheme. As the Arbitrator has stated in his Final Scheme, : "The Final Scheme as now drawn up provides for the construction of new roads with necessary storm-water drains on the sides of the roads, certain public sites within the area such as School, Playground, Market, Maternity Home etc. The construction of new roads, the provision of public sites and the removal of slums will provide for the development of this part of the Suburb on proper lines." In pursuance of the Scheme, the part of land, which belonged to N. J. Wadia Trust and which was now in the possession of the Receiver, became a part of the Scheme and, under the Scheme, a number of final plots were allotted to the Receiver. On 31st July, 1962, the Receiver transferred a total area of 69,625 sq. yards comprised in 41 final plots being Nos. 106 to 116 and 118 to 147 to respondents 1 to 3 and one Cardi. Cardi sold his plots in due course to respondents 4 and 5. So, Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 4 between the five respondents, they became the owners of the above 41 final plots. As already noted, the Scheme came into force on 1st January, 1959 and, though, under the Scheme, a period of 2 to 3 years had been allowed for the purpose of implementing the Scheme, no action was taken by the Corporation, perhaps due to the resistance offered by the slum-dwellers. The respondents, from whom the betterment charges, etc. were being recovered by the Corporation, called upon the Corporation to implement the Scheme by removing slums, sheds and temporary structures and also to provide roads and drains as directed in the Scheme. The Corporation, however, remained inactive and, hence, respondents 1 to 3 filed Writ Petition No. 474 of 1965 on the Original Side of the High Court on 13th October, 1965.By this petition, respondents 1-3 prayed to the Court : (1) to issue a writ of mandamus or a writ in the nature of mandamus against the appellants directing them to construct the roads and drains as indicated in the Town Planning Scheme and to complete the same for use within such time as may be fixed by the Court, and (2)to issue a writ of mandamus or any other appropriate writ directing the appellants to remove all the huts. sheds, stables and temporary structures from the 41 plots referred to above. The learned Judge held that, under the Town Planning Act and the Scheme, it was the primary responsibility of the Corporation, which was the local authority, to implement the Scheme and, accordingly, the writs as prayed were substantially granted. In appeal, the Appellate Bench of the High Court confirmed the order of the learned Judge with only minor variations. Hence, the present appeal. The controversy between the parties has been narrowed down in this Court. The learned Attorney-General, who appeared on behalf of the appellants, did not dispute that, so far as the roads and drains are concerned, it was-the primary obligation of the Municipal Corporation to provide the same in accordance with the Scheme. He also agreed that, if there were any unauthorised structures, huts, sheds and the like on any part of the plots which vested in the Corporation for a public purpose, the same were liable to be removed by the Corporation. His chief contention, however, is that the Corporation owed no duty to remove the un- authorised structures situated in the private plots of the owners who, in his submission, were solely responsible to remove them. In any event, he further submitted, since the petitioners and their predecessors had authorised these structures and collected rent from the owners or occupants of these structures, a writ of mandamus at their instance should not, in the discretion of the Court, be granted. The point of substance in this appeal is whether the Munici- pal Corporation, as the local authority under the Act owed a duty to remove the unauthorised structure, even though those structures were on private final plots of the respondents. That the respondents could, by having recourse to law, eject the slum dwellers and remove the huts and structures would no,- be a relevant consideration if, under the Act and the Scheme, the duty was imposed on the local authority. The Scheme had been framed with a view to clear the area of slums. In fact, Note 11 attached to the Redistribution Statement under the Scheme directs that "all huts, sheds, stables and such other temporary structures including those which do not conform to the regulations of the Scheme, shall be removed within one year from the date the Final Scheme comes into force. Persons thus dishoused will be given a preference in the allotment of land or accommodation in Final Plot No. 16." We will have occasion to consider this Note No. 11 at a later stage; but what is to be noted now is that the slums were to be cleared and the dishoused persons were to be accommodated in final plot No. 16 which was specifically allotted to the Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 5 Corporation. Before turning to the provisions of the Act and the Scheme for the determination of the issue before us, it may be necessary to note here that the writ issued by the learned single Judge with regard to these huts, sheds and structures was clarified in appeal by limiting the writ as follows:- "that the respondents 1 and 2 (the present appellants) do remove within one year from today all unauthorised huts, sheds, stables and other temporary structures standing and lying on the petitioners' (the present respondents) said forty-one final plots." We asked Mr. Gupte, learned counsel for the respondents, as to what exactly was meant by the term "unauthorised"-whether it meant not authorised by the owners of the plots or not authorised by the Municipal Corporation or something else. He informed us that the relief that he really wanted was in terms of section 55 of the Act which gives the power to the local authority to remove, pull down or alter any building or other work which contravenes the Town Planning Scheme. If any of the structures or huts and sheds, etc. which were situated in these 41 plots did not contravene the Town Planning Scheme, he did not and could not ask for a writ of mandamus for the removal of the same. In view of this submission, the controversy is further narrowed down and the only question. with which we are now concerned, is whether the Corporation is bound under the law to remove such of the structures, sheds and huts situated in the respondents' plots in so far as. they contravene the Town Planning Scheme. In our opinion, the Corporation is so bound. It is not necessary to go through the several provisions of the Town Planning Act. There can be no doubt that the Corporation, as the local authority, is wholly responsible for the preparation and implementation of every development plan. The preamble shows that the Town Planning Act, 1954, which was intended to be a consolidating and amending Act relating to town planning, was enacted with a view to ensure that Town Planning Schemes are made in a proper manner and their execution is made effective. It was, therefore, necessary to provide that the local authority shall prepare a development plan for the entire area within its jurisdiction. By section 3 of the Act, the local authority is required to carry out a survey of the area within its jurisdiction within a certain time and publish a development plan. In due course, such a development plan is sanctioned by the Government; but, in the meantime, by section 12 of the Act, stringent restrictions are placed on the property owners in the matter of development of or construction on their private properties as soon as the local authority declares its intention to prepare a development plan. After the development plan is finally sanctioned by the Government, the next step is for the local authority to make one or more Town Planning Schemes as provided in section 18. The 8--LI340Sup.CI/71 rest or the Act is mostly concerned with the preparation of the Town Planning Schemes and s. 2 9 (1) (a) provides that, after the local authority has declared its intention to make a scheme under section 22, no person shall, within the area included in the scheme, erect or proceed with any building or work or remove, pull down, alter, make additions to, or make any substantial repair to any building, part of a building, a compound wall or any drainage work or remove any earth, stone or material, or subdivide any land, or change the user of any land or building unless such person has applied for and obtained the necessary permission of the local authority. These restrictions, though very stringent, are obviously in the interest of the preparation of the. Town Planning Scheme, because, if structures come up when the scheme is being prepared, the whole object of town planning will be frustrated. The Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 6 Arbitrator appointed under the Scheme has to lay out the roads, the drains and make provision for public places such as gardens, hospitals and the like and, if private owners start erecting structures of more or less permanent nature, the cost of the Scheme might become prohibitive and the Scheme itself will flounder. Such is the importance of the Final Scheme as sanctioned by the Government that, under s. 51(3), the Town Planning Scheme has the same effect as if it were enacted in the Act. The Scheme naturally deals with the disposition of the land in the whole area. Titles are displaced and regulations are made with directions as to how the whole of the Scheme is to be implemented. The Arbitrator appointed under the Scheme has to lay out enacted in the Act. Against this background, we have to determine the question in issue before us. The important provisions, bearing upon the controversy, are sections 53, 54 and 55 of the Act. Section 53 provides :- "On the day on which the final scheme comes into force,-- (a) all lands required by the local authority shall, unless it is otherwise determined in such scheme, vest absolutely in the local authority free from all encumbrances; (b) all rights in the original plots which have been reconstituted shall determine and the reconstituted plots shall become subject to the rights settled by the Town Planning Officer." It will be seen that all lands in the area which is subject to the Scheme, to whomsoever they might have originally belonged, would absolutely vest in the local authority if, under the Scheme, the same are allotted to the local authority. As a necessary corollary to this, all rights in the original plots of the private owners would determine and if, in the Scheme, reconstituted or final plots are allotted to them, the same shall become subject to the rights settled by the Town Planning Officer in the Final Scheme. The original plots of one owner might completely disappear, being allotted to the local authority for a public purpose. Such a private owner may be paid compensation or a reconstituted plot in some other place may be allotted to him. This reconstituted plot may be also made subject to certain other rights in favour of others as determined by the Town Planning Officer. In other cases, the original plot of the owner may be substantially cut down and he may be compensated elsewhere by being allotted a smaller or a bigger piece of land in a reconstituted plot. The learned Attorney-General pointed out that, so far as the present case is concerned, the final plots coincide with the original plots of the private owners. That may be so; but that consideration is irrelevant for a proper construction of the statute. It is inherent in every town planning scheme that titles are liable to be displaced and an owner may get a reconstituted plot which belonged, prior to the Final Scheme, to some other owner. In such a case, if the original plot belonging to 'A' was not encumbered by any. unauthorised huts and 'A' is allotted in the Scheme a reconstituted plot of another, encumbered or littered over with unauthorised sheds and huts, would it be just to say that 'A', who is to be put into possession under the Scheme, of the reconstituted plot, should take legal action for the ejectment of the hutment-dwellers ? For aught we know he may be non-suited on the ground of limitation or adverse possession. In any case, the Scheme will on the one hand, put an innocent owner to undeserved trouble and, on the other, not achieve the object of removing the Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 7 hutment- dwellers as speedily as possible, thus frustrating the very object of town planning. It is not as if such a situation was not visualised by the Legislature, because the very next section, viz., section 54 gives ample powers to the local authority to do the needful. That section says :- "On and after the day on which the final scheme comes into force any person continuing to occupy any land which he is not entitled to occupy under the final scheme may, in accordance with the prescribed procedure, be summarily evicted by the local authority." All that the local authority has to see for the purpose of section 54 is whether any person is occupying any land in disregard of the rights determined under the final scheme and, if he does so, he is to be summarily evicted by the local authority. Section 55 is more explicit on the question. Sub-section (1) is as follows:-- "(1) On and after the day on which the final scheme comes into force the local authority may after giving the prescribed notice and in accordance with the provisions of the scheme- (a)remove, pull down, or alter any building or other work in the area included in the scheme which is such as to contravene the scheme or in the erection or carrying out of which any provision of the scheme has not been complied with; (b) execute any work which it is the duty of any person to execute under the scheme in any case where it appears to the local authority that delay in the execution of the work would prejudice the efficient operation of the scheme." Sub-clause (a) of the sub-section gives the local authority power to remove, pull down or alter any building or other work in the whole of the area included in the scheme if such building or work contravenes the scheme, or if, in the erection or carrying out of the building or work, the provision of the scheme has not been complied with. In short, every building or work, which is in contravention of the Town Planning Scheme, wherever it may be in the whole of the area under the Scheme, could be removed pulled down or altered by the local authority which alone is named as the authority for that purpose. For example, the Scheme in this case, by its Note 11, requires that all huts, sheds, stables and such other temporary structures, which do not conform with the Scheme, are liable to be removed within one year of the Scheme which is regarded under s. 51(3) as part of the Act. If the owner or occupant of the temporary structure does not remove the structure within one year, the local authority is empowered to do that. Sub-clause (b) takes care of any work which, under the Scheme, any private person is liable to execute in a certain time. If there is delay in the execution of the work, the local authority is given the power to execute the work. The question then would arise : at whose cost this work is to be executed ? For that, provision is made in sub-s. (2) which is as follows:-- "(2) Any expenses incurred by the local authority under this section may be recovered from the persons in default or from the owner of the plot in the manner provided for Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 8 the recovery of sums due to the local authority under the provisions of this Act." The expenses incurred by the local authority in this connection are recoverable from the person in default, viz., the person indicated in the Scheme and who has defaulted in executing the work. To make sure that the expenses are recovered, sub-.S. (2) makes them recoverable not merely from the p erson in default, but also from the owner of the plot. Disputes are likely to arise whether any building or work contravenes a Town Planning Scheme and, so, provision is made for the same in sub-section (3) which is as follows :- " (3) If any question arises as to whether any building or work contravenes a town planning scheme, or whether any provision of a town- planning scheme is not complied with in the erection or carrying out of any such building or work, it shall be referred to the State Government' or any officer authorised by the State Government in this behalf and the decision of the State Government or of the officer, as the case may be shall be final and conclusive and binding on all persons." It will, thus, be seen that section 55 provides a self- contained code by which buildings and works situated in the whole of the area under the Scheme are liable to be removed or pulled down by the local authority if those buildings or works contravene the Town Planning Scheme. A proper implementation of the Scheme would undoubtedly entail considerable cost, but provision for the same is made in Chapter VIII of the Act, section 66 of which provides for the recovery of what are commonly known as betterment charges. The costs of the scheme are to be met wholly or in part by a contribution to be levied by the local authority for each plot included in the Final Scheme calculated in proportion to the increment which is estimated to accrue in respect of such plot by the Town Planning Officer. The whole scheme or the Act, therefore, and especially sections 53 to 55 leave no doubt that it is the primary duty of the local authority to remove all such buildings and works in the whole of the area which contravene the Town Planning Scheme. The Scheme and the regulations made thereunder must be read as supplemental to the Act and, when that is done, there is no room for any doubt whatsoever that the local authority is entirely responsible for removing the huts, sheds, stables and other temporary structures which contravene the Town Planning Scheme. The Scheme gives a statement of works to be constructed under the Scheme which comprises a number of roads and the drainage system. The Scheme then specifies which final plots under the Scheme are reserved for public or municipal purposes. In the section dealing with the regulations controlling the development of the area under the Scheme, the various final plots are mentioned and directions have been given as to how they are to be utilised. Regulation 6 is as follows :- "No hut or shed whether for residential user or otherwise, or temporary moveable shops on wheels or such other temporary structures shall be allowed within the area of the Scheme." Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 9 It is possible to construe this regulation as prospective in operation, because regulation 9 provides that any person contravening any of the aforesaid regulations or any of the provisions of the Scheme is liable to be prosecuted and fined. As a part of the Scheme, there is a Redistribution and Valuation Statement which shows which are the original plots, who were the owners thereof, whether those plots were encumbered or leased out, who the mortgagees and lessees were, what is the number of the reconstituted or the final plot allotted to such owners, what contributions have to be made by the owners and what additions or deductions are to be taken into account while deciding the contributions. In the case of some of the final plots, certain rights are given and liabilities imposed and, in suitable cases, compensation also is directed to be paid. And, then, to this Redistribution and Valuation Statement, eleven Notes are appended which are important Note 1 says that all rights of mortgagors or mortgagees if any, existing in the original plots are transferred to their corresponding final plots. Note 2 deals with the rights of lessors and lessees in the original plots. By Note 3, all rights of passage hitherto existing are extinguished. By Note 4, agreements in respect of original plots are transferred to the final plots. By Note 5, the tenures of all original plots are transferred to the corresponding final plots. Note 6 permits the original plot-owners to remove their detachable material on the plot if they are deprived of the same. They are required to remove their wire-fencing, compound wall, sheds, huts or other structures. They can do so within three months from the date on which the final Scheme comes into force, the idea being that the final plots must be clean plots for being allotted to another under the Scheme. This permission under Note 6 has been given not because the local authority has no power to remove wire-fencing, huts, sheds, etc.; that power is there as already shown under section 55. But this is a concession made in favour of the owner. Since the owner is required to remove himself from this plot, he is permitted to take away whatever material he could easily remove. And, then, Note 11, to which reference has already been made, provides that all huts, sheds, stables and such other temporary structures including those which do not conform to the regulations of the Scheme, are required to be removed within one year from the date the final Scheme comes into force. The Note refers not merely to huts, sheds, stables which do not conform to the regulations of the Scheme, but also to all huts, sheds, stables and such other temporary Structures. Whosoever the owner or the occupant of the same might be, he is required to remove the same within one year from the date the Final Scheme comes into force. This is an important regulatory provision which has the effect as if enacted in the Act. If the owner or the occupant of these huts, sheds and stables does not remove the same within one year from the date this final Scheme comes into force, he would be contravening the provisions of the Scheme and, thereupon, the local authority will have the power under section 5 5 (1) (a) to remove or pull down these huts, sheds, stables, etc. Note 11 has taken due note of the fact that, if the huts, sheds, stables, etc. are demolished, the owners or occupants thereof will become dishoused. Hence, further provision is made that persons thus dishoused will be given preference in the allotment of land or accommodation in Final Plot No. 16 allotted to the Corporation. In other words, it is implicit in this Note that the Corporation may not hesitate to pull down or remove these huts and sheds, etc., because provision is already made for allotment of land in the Corporation's Plot. The Note, therefore, indirectly establishes that it is the primary duty of the Corporation as the local authority to remove all offending huts, sheds, stables and temporary structures in the whole area under the Scheme and not merely from those areas which are allotted to the Corporation under the Scheme. Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 10 Our attention was invited by the learned Attorney-General to the Maharashtra Regional and Town Planning Act, 1966 which came into force on 11 th January, 1967. The Act came into force when the present litigation was pending in the High Court; but it does not appear that any reference was made to the provisions of that Act. It is a more comprehensive legislation with regard to development and planning than the Bombay Town Planning Act, 1954 to the provisions of which we have already made a reference. By section 165(1) of the Maharashtra Regional and Town Planning Act, 1966, the Bombay Town Planning Act, 1954 is repealed; but, by virtue of sub- s. (2) of section 165, all Schemes finalised under the Bombay Town Planning Act, 1954 are deemed to have been framed under the corresponding provisions of this Act and the provisions of this Act shall have effect in relation thereto. The more important provisions of the Bombay Town Planning Act, 1954, to which a reference has been made by us above. were sections 53, 54 and 55. The corresponding provisions in the new Act are sections 88, 89 and 90. Section 53 consisted of two clauses (a) and (b). They are the same as the first two clauses (a) and (b) of the corresponding s. 88. One% more clause (c) is added which provides that the Planning Authority shall hand over possession of the final plots to the owners to whom they are allotted in the final Scheme. The Planning Authority is the same as the local authority under the Bombay Town Planning Act, 1954--in the present case, the Bombay Municipal Corporation. There was no specific provision in section 53 directing the local authority to hand over possession of the ,'final plots; but, in our opinion, that was implicit in the Scheme when the original plots were reconstituted and the reconstituted plots were allotted to the owners of the original plots. Clause (c) of section 88, therefore, merely clarifies what was implicit in section 53 of the old Act. Section 54 of the old Act corresponds to sub-s. (1) of section 89 of the new Act. Sub-s. (2) of section 89 is a new provision which makes it obligatory upon the Commissioner of Police and the District Magistrate to assist the Planning Authority in evicting per- sons from the final plots when there is unlawful opposition to the same. Section 55 of the old Act corresponds to section 90 of the new Act and is practically the same in content. In our opinion, therefore, there is nothing in the new Act which requires us. to reconsider the above finding. It is clear, therefore, on a consideration of the provisions of the Bombay Town Planning Act, 1954 and especially the sections of that Act referred to above, that the Corporation is exclusively entrusted with the duty of framing and implementation of the Planning Scheme and, to that end, has been invested with almost plenary powers. Since development and planning is primarily for the benefit of the public, the, Corporation is under an obligation to perform its duty in accordance with the provisions of the Act. It has, been long held that, where a statute imposes a duty the performance or non-performance of which is not a matter of discretion, a mandamus may be granted ordering that to be done which the statute requires to be done (See Halsbury's Laws of England, Third Edition, Vol. II, p. 90). It was, however, contended by the learned Attorny-General that, after all, a writ of mandamus is not a writ of course or a writ of right but is, as a rule, a matter for the discretion of the court. That is undoubtedly the case. It is pointed out by Lord Hatherley in The Queen v. The Church Wardens of All Saints, Wigan and Others(1), that upon a prerogative writ there may arise many matters of discretion which may induce the Judges to withhold the grant of it- matters connected with delay, or possibly with the conduct of the parties; but, as further pointed out by his Lordship, when the Judges have exercised their discretion in directing that which is in itself lawful to be done, no other Court can question that discretion in so directing. In the present case, the High (1) [1857-76] 1 A.C. 611. Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 11 Court has exercised its discretion in directing the issue of the writ and this Court, in an appeal by special leave, will not ordinarily question that discretion. In The Queen v. Garland and Another(1) which was cited by the learned Attorney-General before us, mandamus was refused practically on the ground that the petitioners therein had not come before the Court with clean hands. In that case, the trustee,-, proved the will of the testator, but not claim themselves to be admitted to the copyholds, though they were bound to do so, and called upon the lord of the manor to admit the infant heir by his guardians. The lord refused. If the trustees had done their duty by admitting to the copyholds, the lord would have been entitled to a double fine instead of a single fine on the admittance of the heir. In these circumstances, the Court refused a mandamus to compel the lord to admit the heir as, in the opinion of the Court, the effect of granting it would be to enable the trustees to evade payment of a double fine, and to commit a breach of trust by not acquiring themselves the legal estate in the copyholds. Nothing of that nature to disqualify-the respondents in this case for a writ in their favour has been pointed out to us. The only submission of the learned Attorney-General is that so far as the huts, sheds, etc., which are within the final plots of the respondents are concerned, they must be 'Presumed to be therewith the permission of the respondents or their predecessors-in-title, -specially when it is known that some fee, compensation or rent was recovered by them from the owners or occupants of these huts and sheds. It is not the case that the petitioners, while, on the one hand, asking for a mandamus against the Corporation, are resisting the enforcement of the Scheme through the owners and occupants of the slums on the other. If the owners of these final plots merely recovered some amounts from the hutment- dwellers by way of compensation or rent, that act cannot be regarded as importing any disqualification for the purposes of mandamus. After all, their' land was being used by others and, perhaps, the respondents are also liable to pay local taxes. We have not been shown one provision in the whole of the Act which requires the owners of the plots to take any action against the hutment-dwellers. The Scheme came into force in 1959 and it is an admitted fact that, till 1964, nothing at all was done by the Corporation to implement the Scheme. The respondents served notices on the Corporation to enforce the Scheme, but, for one reason or the other, the Corporation merely stalled effective action. We do not, therefore, think any adequate reasons have been given for refusing the writ. In the result, the appeal is liable to be dismissed with only the following modification in the Appellate Court's Order:- (1) [1869-70] 5 Q.B. 269. For the following words: "that the respondents 1 and 2 do remove within one year from today all unauthorised huts, sheds, stables and other temporary structures standing and lying on the petitioners' said forty-one final plots" the following should be substituted :- Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 12 "that the respondents 1 and 2 do remove within one year from today all such huts, sheds, stables and other temporary structures standing or lying on the petitioners' said forty-one final plots as contravene the Scheme or in the erection or carrying out of which any provision of the Scheme has not been complied with." Subject to this modification in the Order, the appeal is dismissed with costs.. Since a stay had been granted by this Court, it would be necessary to allow reasonable time for compliance by the appellants. The periods already given by the trial Court, as modified by the Appellate Court, shall be counted from the date of this judgment. V.P.S. Appeal dismissed. Municipal Corporation For Greater ... vs Advance Builders (India) Pvt. Ltd. & ... on 25 August, 1971 13 | {
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Girdhari Lal Gupta vs D.H. Mehta And Anr. on 18 February, 1971 Equivalent citations: AIR1971SC2162, (1971)3SCC189, [1971]3SCR748, 1971(III)UJ376(SC), AIR 1971 SUPREME COURT 2162, 1973 MADLW (CRI) 183, 1971 3 SCR 748, 1971 U J (SC) 376, 1971 CRI APP R (SC) 235 Author: S.M. Sikri Bench: S.M. Sikri JUDGMENT S.M. Sikri, CJ. 1. We disposed of Criminal Appeals Nos. 211 and 212 of 1959 by our judgment dated August 18, 1970, whereby the appeals of Girdharilal Gupta, and Bhagwandeo Tewari against their convictions were dismissed. Girdharilal Gupta put in this review petition stating that the counsel had omitted to bring to our notice the provisions of Section 23C(2) of the Foreign Exchange Regulation Act, 1947-hereinafter referred to as the Act-which has a vital bearing on-the case. The judgment in Criminal Appeal No. 211 of 1959 has, therefore, been re-opened. We may mention that Bhagwandeo Tiwari has not filed a review petition against his conviction, upheld by this Court. 2. Mr. Daphtary contends that on the facts, as found by us, the appellant, Girdhari Lal Gupta, does not come within the purview of Section 23C(1) or Section 23C(2) of the Act. Sections 23C(1) and 23C(2) read as follows : 23C. (1) If the person committing a contravention is a company, every person who, at the time the contravention was committed, was in-charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly : Provided that nothing contained in this Sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention. 23C. (2) Notwithstanding anything contained in Sub-section (1), where a contravention under this Act has been committed by a company and it is proved that the contravention has taken place with the consent of connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to Girdhari Lal Gupta vs D.H. Mehta And Anr. on 18 February, 1971 1 be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.-For the purposes of this section,- (a) "company" means any body corporate and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm. 3. Mr. Daphtary contends that there is no evidence to show that the appellant was in charge of the conduct of the business of the firm at the relevant time and therefore, Section 23C(1) does not apply. He further says that as the appellant was abroad, the contravention took place without his knowledge. We may mention, however, that the defence that he was abroad at the relevant time was not taken in the courts below. At the time of the last hearing learned Counsel produced the passport of the appellant before us from which it appears that he was abroad at that time and came back a few days after the alleged contravention. 4. Mr. Daphtary further contends that Section 23C(2) also does not apply because there is no evidence that the contravention took place with the consent or connivance of, or was attributable to any neglect on the part of, the appellant. He referred to us a number of authorities of the High Courts in India which have interpreted similar provisions and we shall refer to them later. 5. It seems to us quite clear that Section 23C(1) is a highly penal section as it makes a person who was in-charge and responsible to the company for the conduct of its business vicariously liable for an offence committed by the company. Therefore, in accordance with well-settled principles this section should be construed strictly. 6. What then does the expression "a person in-charge and responsible for the conduct of the affairs of a company mean" ? It will be noticed that the word 'company' includes a firm or other association and the same test must apply to a director in-charge and a partner of a firm in-charge of a business. It seems to us that in the context a person 'in-charge' must mean that the person should be in over all control of the day to day business of the company or firm. This inference follows from the wording of Section 23C(2). It mentions director, who may be a party to the policy being followed by a company and yet not be in-charge of the business of the company. Further it mentions manager, who usually is in charge of the business but not in over-all-charge. Similarly the other officers may be in charge of only some part of business. 7. In State v. S.P. Bhadani . Kanhaiya Singh, J., in construing a similar provision of the Employees Provident Fund Act (1952). Section 14A-held that the first Sub-section would be confined only to officers in the immediate charge of the management of the company. Later he observed that "it is, therefore, manifest that all the officers of the company not in direct charge of the management of the business are immune from the liability for the offence, unless they have contributed to its commission by consent, connivance or neglect." Girdhari Lal Gupta vs D.H. Mehta And Anr. on 18 February, 1971 2 8. In R.K. Khandelwal v. Stated [1964] 62 A.L.J. 625 D.S. Mathur, J., in construing Section 27 of the Drugs Act, 1940, a provision similar to the one we are concerned with, observed : There can be directors who merely lay down the policy and are not concerned with the day to day working of the Company. Consequently, the mere fact that the accused person is a partner or director of the Company, shall not make him criminally liable for the offences committed by the Company unless the other ingredients are established which make him criminally liable. 9. In The Public Prosecutor v. R. Karuppian A.I.R. [1058] Mad. 183., Somasundaram, J., while dealing with a case arising under the Prevention of Food Adulteration Act, 1954 (Section 17(1)) observed that the Secretary of the Co-operative Milk Society, on the facts of the case, could not be held to be a person in charge of the Society. On the facts of that case the business of selling milk was done by the clerk of the Society and the Secretary was only an honorary Secretary and was not coming to the Society daily. 10. The only evidence led by the prosecution on this part of the case was of one Sohan Lal Gupta who is a broker. He stated in examination-in-chief: Who exactly the proprietors of the said firm are. I cannot say. But I can say this much that whenever I had been there I was referred to Girdharilal Gupta (accused fro. 2) and Puranmal Jain (accused No. 3) as the Maliks of the firm. I see accused No. 2 Girdharilal Gupta in court (identified him). I know that Bhagwandeo Tewari (accused No. 4) is the Cashier of that firm. I see him here in court (identifies accused No. 4). I know of another employee of the firm; the manager, Jagdish Prasad. I know another employee of the firm : the accountant, Shyamlal. 11. The appellant in his statement under Section 342, Cr.P.C. stated thus : You ask me, Sir, if I have to say anything about the evidence led in this case to the effect that I happen, to be a partner of accused No. 1 firm. To that, Sir, my answer is that I am. The evidence to that end is correct. I shall only add that I alone look after the affairs of this firm. 12. Mr: Daphtary says that on this evidence it cannot be held that the appellant was incharge of the conduct of the business. We are unable to agree with him on this point. The appellant has himself stated that he alone looked after the affairs of the firm. This means that he is in charge of the business of the firm within the meaning of the section though there may be a Manager working under him. 13. The question then arises whether the appellant was in charge of the conduct of the business of the firm at the time the contravention was committed. He was not physically present in Calcutta at the time of the commission of the offence and the prosecution evidence shows that one Jagdish Girdhari Lal Gupta vs D.H. Mehta And Anr. on 18 February, 1971 3 Prasad was the manager of the firm. It is true that the onus of proving that the appellant was in charge of the conduct of the business of the company at the time the contravention took place lies on the Prosecution, but when a partner in charge of a business proceeds abroad it does not mean that he ceases to be in charge, unless there is evidence that he gave up charge in favour of another person, Therefore, we must hold that the appellant was in charge of the business of the firm within the meaning of Section 23C(1). 14. But while imposing sentence a Court might take notice of the fact that a person is being vicariously punished for an offence and if he shows that it is possible that the contravention of the Act took place without his knowledge or neglect a sentence of imprisonment may not be imposed. In this case he was abroad at the time of contravention and it is possible that the contravention took place without his knowledge or because of lack of diligence. It seems to us that on the facts of this case a sentence of fine of Rs. 2,000/-will meet the ends of justice. 15. The learned Counsel for the respondent State urges that this is not a case fit for review because it is only a case of mistaken judgment. But we are unable to agree with this submission because at the time of the arguments our attention was not drawn specifically to Sub-section 23C(2) and the light it throws on the interpretation of Sub-section (1). 16. In the result the review petition is partly allowed and the judgment of this Court in Criminal Appeal No. 211 of 1969 modified to the extent that the sentence of six months' rigorous imprisonment imposed on Girdharilal is set aside. The sentence of fine of Rs. 2,000/-shall, however, stand. Girdhari Lal Gupta vs D.H. Mehta And Anr. on 18 February, 1971 4 | {
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Commissioner Of Income Tax, Madhya ... vs Hukamchand Mohanlal on 17 September, 1971 Equivalent citations: 1971 AIR 2591, 1972 SCR (1) 786 Author: A.N. Grover Bench: A.N. Grover, K.S. Hegde PETITIONER: COMMISSIONER OF INCOME TAX, MADHYA PRADESH,NAGPUR Vs. RESPONDENT: HUKAMCHAND MOHANLAL DATE OF JUDGMENT17/09/1971 BENCH: GROVER, A.N. BENCH: GROVER, A.N. HEGDE, K.S. CITATION: 1971 AIR 2591 1972 SCR (1) 786 CITATOR INFO : D 1991 SC 70 (3) ACT: Income Tax Act, 1961, s. 41(1)- Assessee successor in business to her deceased husband--Amount received by assessee by way of remission of sales tax paid by husband -If liable to tax in the hands of the assessee under s. 41(1). HEADNOTE: The assessee who was successor-in-business to her deceased husband was sought to be taxed under s. 41 (1) of the Income-tax Act, 1961, in respect of certain amount received by her by way of remission from the sales tax recovered from her husband. On the 'question whether the amount was assessable under s. 41(1) of the Act. HELD : Section 41(1) does not apply, because, the assessee who is sought to be taxed is not the assessee contemplated by the section. If the husband of the assessee had been Commissioner Of Income Tax, Madhya ... vs Hukamchand Mohanlal on 17 September, 1971 1 alive and had received the amount which had been remitted during his life time he would certainly have been liable to pay tax under the provisions of s. 41(1). But the husband having died the Revenue could not take any advantage of its provisions. The Act does not contain any provision making a successor-in-business or the legal representative of an assessee to whom an allowance has already been granted liable to tax under s. 41(1) in respect of the amount remitted and received by the successor or the legal representative. [788 C-D, 789 A-B] C.I.T., Bombay City v. Amarchand N. Shroff 40 I.T.R 59 and C.I.T Bombay v. James Anderson, 51 I.T.R. 345, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2421 of 1968. Appeal from the judgment and order dated January 31, 1967 of the Madhya Pradesh High Court in Misc. Civil Case No. 88 of 1966. R. N. Sachthey and B. D. Sharma, for the appellant. Rameshwar Nath and Swaranjit Sondhi, for the respondent. The Judgment of the Court was delivered by Grover, J. This is an appeal by certificate from a judgment of the Madhya Pradesh High Court in an Income tax Reference. The Reference related to the assessment made on the assessee for the year 1962-63 for which the accounting period was the year ending March 31, 1962. The assessee carried on business as sole, selling agent of M/s. Mohanlal Hargovindas, Jabalpur. The assessee succeeded to this business on the death of her husband on or about February 17, 1960. It would appear that M/s. Mohanlal Hargovindas had recovered a certain amount towards sales-tax from the assessee's husband relating to the period January 26, 1950 to March 31, 1951. In an appeal filed by the said firm, however, the Assistant Commissioner of Sales Tax remitted the sum of Rs. 24,341/- so recovered by the firm by an order dated November 31, 1960. Consequently M/s. Mohanlal Hargoving das refunded that amount to the assessee by means of a draft dated October 31, 1961. This draft was received by the assessee on November 9, 1961 which fell in the accounting period. The Income tax Officer sought to tax this amount under the provisions of s. 41 (1) of the Income tax Act 1961, hereinafter called the 'Act'. He did not accede to the contention of the assessee that the income, if at all, was the income of the assessee's deceased husband and not her income. The Appellate Assistant Commissioner dismissed the appeal filed by the assessee. The Tribunal acceded to the contention of the assessee that since the allowance or deduction in question had been obtained by a different assessee, namely, her husband she was not liable to pay tax on that amount under s. 41 (1) of the Act. The Tribunal was moved by the Commissioner of Income tax for stating a case and referring the following question to the High Court : "Whether the sum of Rs. 24,341 was liable to tax under s. 41 (1) of the Income tax Act, 1961 ?" Commissioner Of Income Tax, Madhya ... vs Hukamchand Mohanlal on 17 September, 1971 2 The High Court answered the question in favour of the assessee. Section 41(1) is in the following terms:- "41 (1) Where an allowance or deduction, has been made in the assessment for an year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not". As pointed one by the High Court under the general law if a trading liability has been allowed as a business expenditure and, if this liability is remitted in any subsequent year the amount remitted cannot be taxed as income of the year of the remission nor can the account for the year id which the liability was allowed be reopened or adjusted. Section 41(1) was enacted to supersede this principle but this section can apply only to the a In the present case if the husband of the assessee had been alive and had received the amount which had been remitted during his lifetime he would certainly have been liable to pay tax under the provisions of S. 41(1). But Kanhaiyalal having died and his widow being the assessee she cannot possibly be brought within the section. Section 2(7) of the Act defines the word "assessee". The definition is very general and assessee is stated to mean a person by whom income tax or super tax or any other sum of money is payable under the Act and includes every person as mentioned in clauses (a), (b) and (c). The assessee, in the present case, does not fall within any of those clauses. There is no specific provision in the Act under which it can be said that the assessee is a person by whom income tax is payable on the amount of Rs. 24,341/- which came to her by way of remission on account of what had transpired in the lifetime of her husband. The Act does not contain any provision making a successor in business or the legal representative of an assessee to whom an allowance has already been granted liable to tax under s. 41(1) in respect of the amount remitted and received by the successor or the legal representative. The only provision which relates to the liability of the legal representative is s. 159 of the Act. Sub-section (1) thereof provides that where a person dies his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died in the like manner and to the same extent as the deceased. The corresponding provision in the Income tax Act 1922 was s. 24B. In Commissioner of Income tax Bombay v. Amarchand N.,' Shroff (1) it was laid down by this Court that s. 24B did not authorise the levy of tax on receipts by the legal representative of a deceased person in the year of assessment succeeding the year of account being the previous year in which such person died. The assessee had ordinarily to be a living person and could not be a dead person. By S. 24B the legal personality of the. deceased assesses was extended for the duration of the entire previous year in the course of which he died. The income received by him before his death and that received by his legal representative after his death but in that previous year became assessable to income tax in the relevant assessment year. Any income received in the year subsequent to the previous year or the Commissioner Of Income Tax, Madhya ... vs Hukamchand Mohanlal on 17 September, 1971 3 accounting year could not be called income received by the deceased person. Thus the provisions of s. 24B did not extend to tax liability of the estate of a deceased person beyond the previous or the accounting year in which that person Income tax, Bombay v. James Anderson(1). Indeed the learned counselfor the Revenue did not and could not rely on the provisions of s. 159 of the Act in the present case nor was any reliance (1)1. T. R. 59. (2) 51 1. T. R. 345. placed on any other section in the Act apart from s. 41 (1). The, question referred is also based on that very section. That section, in our opinion cannot possibly apply to the present case because the assessee who is now sought to be taxed is not the assessee contemplated by that section. The assessee within s. 41 (1), namely, Kanhaiyalal having died the Revenue could not take any advantage of its provisions. The High Court rightly observed that the question whether the amount of Rs. 24,341/- was liable to tax as the personal income of the assessee did not arise in the present case in which the sole point to be decided was whether that amount was assessable in the assessee's hands under s. 41 ( 1 ) of the Act. We, therefore, entirely concur in the view of the High Court and agree with the answer returned by it. In the result the appeal fails and it is dismissed with costs. K.B.N. Appeal dismissed. Commissioner Of Income Tax, Madhya ... vs Hukamchand Mohanlal on 17 September, 1971 4 | {
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Mahadeo Hari Lokre vs The State Of Maharashtra on 23 November, 1971 Equivalent citations: AIR1972SC221, 1972CRILJ49, (1972)4SCC758, 1972(4)UJ250(SC), AIR 1972 SUPREME COURT 221, 1972 4 SCC 758, 1972 ALLCRIR 119, 1972 MPLJ 609, 1972 ACJ 185, (1972) 1 SCJ 485, 1972 MADLJ(CRI) 270 Author: D.G. Palekar Bench: D.G. Palekar, P. Jaganmohan Reddy JUDGMENT D.G. Palekar, J. 1. This appeal by special leave arises out of an order of conviction and sentence passed by the learned Presidency Magistrate, IV Court, Ciragaum, substantially confirmed in appeal by the High Court of Bombay. The appellant was convicted under Section 304A IPG and sentenced to one year's rigorous imprisonment and a fine of Rs. 2, 000/ -. In appeal the fine was reduced to Rs. 1,500/-. 2. The facts are that the deceased Ravikant Vasant Mhatre and his friend Vijay Kumar, P.W. 2 were standing at the Western Corner of the first Panjrapole Lane, C.P. Tank Road eating pan at a pan shop at about 11.00 P.M. on 18 10.1966. The C.P. Tank Road runs from South to North and is about 40' wide. The first Panjrapole Lane meets it on the Eastern side as shown in the sketch Ext. D The two friends may be taken to the roughly standing near about the point B in the sketch. After eating pan, Ravikant said that he would go home, for which purpose, it appears, he first crossed over to the Western Side of the G.P. Tank Road. P.W. 2 Vijay kumar lost sight of him but about half a minute later he heard a commotion Sp he turned back and saw that a double decker Bus of the B.E.S.T. was standing on the road Going nearer, he found that his friend Ravikant was lying on the left side of the Bus his left palm and part of the face smashed. Ravikant was removed to the Hospital where he died on 21.10 1966. One other gentleman named Dayanand Tukaram Shinde, P.W 1 was sanding at the point C He claims to have seen how the accident occurred and it was he who gave the First Information in this case. According to the F.IR. filed by that witness, Dayanand was walking along the CP. Tank Road from South to North and he was thrown down by the Bus which came from behind. The Bus was also plying from South to North The accused was the Driver of the Bus. He had put on the brakes immediately after the impact and the Bus came to a halt within 4 or 5J. The High Court came to the conclusion that it was not possible to say that the Driver was rash in driving the Bus, but in its opinion the appellant was criminally negligent in not keeping his eyes on the road while driving the vehicle through a busy locality. On that ground the conviction recorded by the Mahadeo Hari Lokre vs The State Of Maharashtra on 23 November, 1971 1 Magistrate was confirmed by the High Court. 3. The High Court agrees that it could not be said that the appellant was driving the Bus at high speed. Being a busy locality at that time of the night, that was not possible. The High Court also agrees that the Bus was being driven on its correct side, considerable distance away from the footpath. In fact the impact took place about 14' away from the Western edge of the road. So the question is how this accident happened appellant's case is that he was driving the bus neither rashly nor negligently and that the deceased Ravikant came suddenly and slipped under the bus. The speed of the bus was just 10 miles an hour. 4. It must be said that there is really no good evidence on the side of the prosecution to show how exactly the accident took place All that P.W. 2 Vijay Kumar, the friend of the deceased, was able to say was that the deceased left him at point B. Since the deceased came under the left front wheel, it can be only inferred that he must have crossed the road to the Western Side. That seems to be borne out by the F.I.R. of P.W.l Dayanand who says that when he was standing near point C he saw Ravikant going by the C.P. Tank Road towards tin batti, that is, towards the North and at that time he saw the bus dashing against him with its left side mudguard. The High Court has, in one place, held that while Ravikant was going along the road from South to North he was suddenly dashed by the bus coming from behind. In the first place, it is rather difficult to hold that Ravikant would be walking in that street from South to North some 14' away from the Western Korb of the road. Secondly in his evidence before the Court Dayanand, P.W 1 did not stick to this case in the F.I.R. He stated that Ravikant was actually crossing from the Western side of the road to the Eastern Side of the Road If that is true, it will only mean that Ravikant was not dashed from behind as he was going towards North but the impact took place when he was going towards North but the impact took place when he was crossing the road from West to East. The High Court was not quite clear on the point and so it observed at another place "that was precisely the reason why he (appellant) could not see the man walking ahead of him or trying to cross the road in front of his bus " If Ravikant was walking along the street in front from South to North and the bus was coming from behind, it can be legitimately said that the Driver of the Bus would see him in front ahd if be dashed against Ravikant as he was walking along, that would undoubtedly amount to negligence on the part of the Driver. It may have been, perhaps fool-hardy on the part of Ravikant to walk in the middle of the road about 14' away from the Korb. But that would not justify the Bus Driver knocking him down after taking due note that he was walking straight in front of the Bus But the case assumes a different complexion of we agree with the sole eye witness in the case Dayanand P.W. 1 that at the time if the impact Ravikant was actually crossing the road from West to East. That would mean that if Ravikant suddenly crossed the road from West to East without taking note of the approaching bus there was every possibility of his dashing against the bus with out the Driver becoming aware of his crossing till it was too late. If a person suddenly crosses the road the Bus Driver, however slowly may be driving may not be in a position to save the accident. Therefore, it will not be possible to hold that the Bus Driver was negligent. 5. In the result, therefore, the appeal will have to be allowed. The order of conviction and sentence is set aside and the appellant is acquitted. Fine, if paid, shall be refunded, Bail bond to be cancelled. Mahadeo Hari Lokre vs The State Of Maharashtra on 23 November, 1971 2 | {
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Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 Equivalent citations: 1972 AIR 591, 1972 SCR (2) 752, AIR 1972 SUPREME COURT 591, 42 COM CAS 245, 1972 2 SCR 752, 1974 MADLW (CRI) 91, 1972 (1) SCJ 714 Author: Hans Raj Khanna Bench: Hans Raj Khanna, S.M. Sikri, J.M. Shelat, I.D. Dua PETITIONER: BARIUM CHEMICALS LTD. & ANR. Vs. RESPONDENT: SH. A. J. RANA & ORS. DATE OF JUDGMENT07/12/1971 BENCH: KHANNA, HANS RAJ BENCH: KHANNA, HANS RAJ MITTER, G.K. SIKRI, S.M. (CJ) SHELAT, J.M. DUA, I.D. CITATION: 1972 AIR 591 1972 SCR (2) 752 1972 SCC (1) 240 CITATOR INFO : RF 1987 SC1109 (26) ACT: Foreign Exchange Regulations Act, 1947 (VII of 1947)--Sub-section (2) of S. 19--"Considers it necessary or expedient," scope of--Application of mind regarding necessity to obtain and examine all the documents mentioned in the order necessary condition---The order must specify the "information, book or other document." Administrative law--"Central Government considers it necessary or expedient," scope of--Foreign Exchange Regulation Act, 1947, S. 19(2). Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 1 HEADNOTE: After this Court's decision in the Bariumn Chemicals Ltd. v. The Company Law Board [1966 3 S.C.R.] quashing the order of the Company Law Board passed under Cl. (b) of s. 237 of the Companies Act, 1956, the Court ordered that all the books papers and other documents seized under the order of the Board be deposited in Court and that the appellants would be entitled to receive them from the custody of the Court. On May 22, 1966, an order was passed under s. 19(2) of the Foreign Exchange Regulation Act, 1947, stating that "the Central Government considers it necessary to obtain and examine certain Papers and documents" and requiring the appellant company and/or its Managing Director to furnish to the Enforcement Officer the documents specified in the sche- dule to the Order on obtaining the same from the custody of the Court. The first six items in the Schedule related to five letters and one telegram While the seventh item mentioned all other books papers and other documents relating to the appellants in the custody of the Court. Sub-section (2) of s. 19 of the Foreign Exchange Regulation Act provides : "Where for the purpose of this Act the Central Government or the Reserve Bank considers it necessary or expedient to obtain and examine any information, book or other document in the possession of any person or which in the opinion of the Central Government or the Reserve Bank it is possible for such person to obtain and furnish. the Central Government or, as the case may be, the Reserve Bank may, by order in writing, require any such person (whose name shall be specified in the order) to furnish, or to obtain and furnish, to the Central Government or the Reserve Bank or any person specified ill the order with such information, book or other document." The appellants filed petitions under article 226 of the Constitution in the High Court to quash the Order dated May 22, 1966 on the ground. Matter alia, that the order was not in conformity with the requirements of sub-s. (2) of s. 19 . The High Court dismissed the petition. In appeal by special leave, HELD : The impugned order is liable to be quashed on the ground that it does not satisfy the requirements of sub- section (2) of s. 19 of the Act. (i) The occasion for the exercise of the power under the sub-section arises when the Central Government considers it necessary, or expedient for the purpose of the Act to obtain and examine any information. book or 753 document. It is only when the said requirement is satisfied that the central Government can proceed in the manner indicated in the subsection. [760 H] (ii) The Word "considers it necessary" postulate that the authority concerned has thought over the matter deliberately and with care and it has been found necessary as a result of Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 2 such thing to pass the order. Therefore, due application of the mind regarding the necessity to obtain and examine the documents in question is sine qua non for the making if the order. [761 D] (iii) A necessary. corollary is that mind has to be applied with regard to the necessity to obtain and examine all the documents-mentioned in the order. An application of the mind with regard to the necessity to obtain and examine only a few of the many documents mentioned in the order, while there has been no such application of mind in respect of the remaining documents, would not be sufficient compliance with the requirements of the statute. [761 G] (iv) The language of s. 19(2) of the Act points to the conclusion that while an order under it may be made with respect to "any information, book or other document" it is essential that "such information book or other documents" should be specified in the order. The word "such" points to the necessity of specifying the information book or other document in the order. The fact that penal consequences follow from noncompliance with an order made under sub-section (2) of s. 19 also highlights the importance of specifying the information book or other document in the order. [762 A] (v) In the present case the fact that an omnibus order was made in respect of all documents relating to the appellants, which were in the custody of the Registrar under the orders of this Court, including some of the documents which have not even been the remotest bearing on the matters covered by the Act, goes to show that there was no due application of the mind by the authority concerned. The element of due care and attention Which is an essential ingredient of the phrase "considers it necessary" is lacking in this case. [763 E] Seth Durgaprasad etc. v. H. R. Gomes, [1966] 2 S.C.R. 991; M. P. Sharma and others v. Satish Chandra, District Magistrate, Delhi and others, [1954] S.C.R. 1077; Income-tax officer, Special Investigation Circle-B Meerut v. M/s. Seth Brothers and others r [1970] S.C.R. 601; held inapplicable., JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1452 and 1453 of 1971. Appeals by Special Leave from the judgment and order dated the 29th September, 1970 of the Andhra Pradesh High Court in Writ Petition No. 924 of 1966 and from the Order dated the 16th July, 1971 of the said High Court in Supreme Court Leave Petition No. 121 of 1971. S. Sorabjee, B. Datta, D. Bhartucha, J. B. Dadachanji, O. C. mathur and Ravinder Narain, for the Appellants (in both the Appeals). Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 3 M. C. Chagla and Porus. Mehta, for Respondents Nos. 1 to 3 (in both the Appeals). Porus A. Mehta, for Respondent No. 4 (in both the Appeals). The Judgment of the Court was delivered by Khanna, J. This judgment would dispose of two Civil Appeals Nos. 1452 and 1453 of 1971 which have been filed by special leave by the Barium Chemicals Ltd. and its Managing Director, Shri P. N. Balasubramanian. Appeal No. 1452 is directed against the judgment of the Andhra Pradesh High Court whereby the appellants' petition under Art. 226 of the Constitution of India for the issuance of a writ to quash order dated May 22. 1966 under section 19(2) of the Foreign Exchange Regulation Act, 1947 (Act VII of 1947) (hereinafter referred to as the Act) and other consequential reliefs was dismissed. The other appeal is directed against the order of the High Court refusing to certify the case to be fit for appeal to the Supreme Court under Articles 132 and 133 of the Constitution against the aforesaid judgment. The respondents impleaded are (1) Shri A. J. Rana, Deputy Director, Enforcement Directorate, Ministry of Finance, (2) Shri R. C. Dutt, Secretary to the Government of India, Ministry of Finance, (3) Shri M. L. Wadhwa, Enforcement Officer, Enforcement Directorate and (4) Union of India. through the Secretary of Finance. The first appellant was registered as a public limited com- pany in 1961 with its registered office at Ramavaram in Andhra Pradesh. The second appellant, who is the sole proprietor of a concern named Trans world Trades, was appointed the Managing Director of the appellant company. On May 19, 1965. an order was issued on behalf of the Company Law Board under clause (b) of section 237 of the Companies Act, 1956 appointing four persons as inspectors to investigate the affairs of the appellant company on the ground that the Board was of the opinion that there were circumstances suggesting that the business of the appellant company was being conducted with intent to defraud its creditors, members or other persons and that the persons concerned in the management of the affairs of the company had in connection therewith been guilty of fraud, misfeasance and other misconduct towards the company or its members. The above order was made on behalf of the Board by Shri Dutt respondent, who was at that time the Chairman of the Company Law Board. In pursuance of the above order, searches were conducted at Hyderabad, Ramavaram, New Delhi and Wellington and a #number of documents were seized. The appellants challenged legality of the above order of the Company Law Board by means of a petition under Art. 226 of the Constitution of India in the Punjab High Court. One of the grounds taken by the appellants in that petition was that the impugned order had been issued mala fide at the instance of Shri T. T. Krishnamachari, who was hen Finance Minister and who, according to the appellants, had a bias against appellant No. 2. The second ground on which the order of the Company Law Board was assailed was that there was no material on the basis of which such an order could have been made. Some other grounds were also taken but we are not Concerned with them. The above petition was dismissed by the Punjab High Court and thereupon the appellants came up in appeal to this Court. It was held by this Court that the appellants had failed to show that the impugned order had been passed mala fide. The impugned order, however, was set aside by the majority on the ground that the facts mentioned in the affidavit filed on behalf of the respondents could not reasonably suggest that the business of the appellant company was being conducted to defraud the creditors, members or other persons or that the management was guilty of fraud towards the company or any of its members. As the facts mentioned in the said affidavit were found to be extraneous to the matters mentioned in clause (b) of section Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 4 237 of the Companies Act, the impugned order was held to be ultra vires that section. The above judgment of this Court was pronounced on 4th of May, 1966. On 6th May 1966, the appeal was posted for directions in respect of the documents which had been seized. This Court then passed an order that "the respondents (1 & 3-7) will deposit in this Court all the books, papers and other documents that they have seized under the order that has been quashed by our judgment in this case, within ten days from today. They also give an undertaking that they will not inspect those papers while in their possession, and after a fortnight from today, the appellants will be entitled to receive them from the custody of this Court without further orders." In pursuance of the above order, the seized documents were. deported on 19th of May 1966 with the Registrar of this Court. An application thereafter was field in this Court by Shri P. R. Krishnan, Assistant Director in the Enforcement Directorate, praying for a direction to the Registrar of the Court to accept service of an order under section 19(2) of the Act and to hand over the documents in the custody of the Registrar to the Enforcement Directorate. The said application was disposed of without any specific orders. On 22nd of May 1966, the following order was issued by respondent No. 1 - "No. V(358)65 (Part File) (i) ENFORCEMENT DIRECTORATE MINISTRY OF FINANCE Department of Revenue & Insurance Government of India Grams 'DIRENTFERA' Reserve Bank Building 2nd Floor New Delhi- 1. WHEREAS for the purposes of the Foreign Ex- change Regulation Act, the Central Government considers it necessary to obtain and examine certain papers and documents belonging to Shri P. N. Balasubramanian, The Barium Chemicals Ltd., and the Trans world Trades and documents and papers pertaining to the aforesaid concerns including the documents specified in the schedule hereunder. AND WHEREAS, the documents specified in the schedule are at present in the custody of the Registrar of the Supreme Court of India under an order dated 6th May, 1966 passed by the of 1966 (Barium Chemicals Limited Vs. Company Law Board). AND WHEREAS, the aforesaid documents are likely to be handed over to M/s. The Barium Chemicals Ltd., and/or Shri P. M. Balasubramanian by the Registrar of the Supreme Court of India under the aforesaid order of the Supreme Court dated 6th May, 1966. AND WHEREAS, Shri P. N. Balasubramanian is in. control of the Barium Chemicals Ltd., and Transworld Trades and is in a position to obtain and furnish the aforesaid documents. NOW THEREFORE, in exercise of the powers under section 19(2) of the Foreign Exchange Regula- tion Act, 1947, the Central Government hereby requires the said Shri P. N. Balasubrimanian and/'or the Barium Chemicals Ltd., to furnish to Shri M. Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 5 L. Wadhwa, Enforcement Officer, Enforcement Directorate, Ministry of Finance, Department of Revenue and Insurance, New Delhi, the said documents (as per schedule attached to this order) on obtaining the same from the Registrar of the Supreme Court. Dated at New Delhi this 22nd day of May One thousand nine hundred and sixty six. (A. J. RANA) (Deputy Director) Enforcement Directorate, Ministry of Finance, Directorate of Revenue & Insurance Government of India." Attached to the order was the following schedule - "1. Letter sent by Bank of Scotland, Piccadilly, Circus Branch 16-18, Piccadily London W,I. in February, 1964 to Mr. P. N. Balasubramanian, The Barium Chemicals Ltd. 2. Letter dated 20-5-1965 from L. A. Mitchell Ltd. Chemical Engineers, Harvester House, 37, Peter Street, Manchester-2 to Mr. P. N. Balasubramanian, The Barium Chemicals Ltd. 3. Letter dated 28-5-1962 from Mr. P. N. Subramanian to Sir Charles Chominglan Kt. 93, Iverna Court London WG. 4. Letter dated 21-11-1961 from Transworld Trades signed by L. A. Shandero, Director of Agencies to L. A. Mitchell Ltd., Harvester House, 37, Peter Street, Manchester-2. 5. Copy of telegram dated 24-7-61 from P. N. Balasubramanian, 186-Golf Links, New Delhi- 3 to Lt. Mitchell, Inspection Manchester England booked at C.T.O. New Delhi. 6. Letter dated 30-6-1961 from L.A. Mitchell Ltd. Chemical Engineers, Harvester House, 37, Peter Street,, Manchester-2 to Mr. P. N. Balasubramanian, Transworld Trades, 186 Golf Links, New Delhi-3. 7. All other books, papers and other documents relating to Shri P. N. Balasubramanian Transworld Trades and the Barium Chemicals Ltd., in the possession of the Registrar of the Supreme Court of India under an order dated 6th May 1966 passed by the Hon'ble Supreme Court of India in Civil Appeal No. 381 of 1966 (Barium Chemicals Ltd., Vs. Company Law Board and others)." The order was addressed to the appellant company. Another copy of the order was addressed to appellant No. 2. The appellants thereupon filed petition under Art. 226 of the Constitution of India in the Andhra Pradesh High Court for the issuance of a writ, as mentioned earlier, to quash the order dated May 22, 1966 and other consequential reliefs. One of the grounds taken by the appellants for assailing the impugned order was that the order had been passed mala fide at the instance of Shri Dutt respondent, who was previously Chairman of the Company Law Board and was at the time of the passing of the impugned order Secretary to the Government of India, Ministry of Finance, Department of Revenue and Insurance. It was stated that Shri Dutt in conspiracy with his subordinates wanted to wreak vengeance against the appellants as the earlier order made by him Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 6 under clause (b) of section 237 of the Companies Act had been quashed by the Supreme Court. Shri Dutt was also stated to be inimical to the appellants because of publication of certain articles against him. Another ground taken by the appellants was that Shri Rana. respondent No. 1, was not competent to make the impugned order and the same was not in conformity with Art. 77 of the Constitution. The order was also stated to be ultra vires section 19(2) of the Act, as the conditions precedent to the making of the order were non-existent. Ground further was taken that the provisions of section 19(2) of the Act were violative of Articles 14, 19(1) (f) and (g) and 20(3) of the Constitution. The above grounds were controverted by the respondents and the affidavits of Shri Rana and Shri Dutt respondents as also those of Shri Jasjit Singh, Joint Secretary in the Ministry of Finance (Department of Revenue and Insurance), Shri Venkataraman, Director of Enforcement and Shri T. P. Singh, Secretary of the Ministry of Finance were filed in opposition to the petition. According to the case of the respondents, Shri Dutt had nothing to do with the issuance of the impugned order and he was never consulted by Shri Rana or the Joint Secretary concerned or any other officer in that connection. It was further stated that the impugned order was the result of consultation which the Director of Enforcement and Shri Jasjit Singh had with the then Finance Minister, Shri Sachindra Choudhuri. There was no legal infirmity, according to the respondents, in the impugned order. The order was,. it was added, in conformity with the requirements of section 19(2) of the Act and Art. 77 of the Constitution. The learned Judges of the High Court held that the charge of mala fide against Shri Dutt must fail as he had nothing to do with the issuing of the impugned order. It was further held that necessary material had been placed before the Finance Minister with a view to enable him to form an independent opinion as to the necessity of issuing the impugned order under section 19(2) of the Act. The contention that the impugned order was not in conformity with section 19 (2) of the Act was repelled. Shri Rana respondent. it was further held, was authorised to sign on behalf of the President. The impugned order as such was found to be in conformity with Art. 77 of the Constitution. The appellant did not press the ground that section 19(2) of the Act was violative of Articles 14, 19(1) (f) and (g) and 20(3) of the, Constitution in view of an earlier decision of this Court but reserved the right to agitate the question in appeal in this Court. The High Court also overruled an objection taken on behalf of the respondents relating to territorial jurisdiction. In the result, the petition, as stated earlier, was dismissed. Before proceeding further, it may be mentioned that the Act was enacted, as according to its preamble, "it is expedient in the economic and financial interests of India to provide for the regulations of certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion". Section 19 of the Act confers power to call for information. Sub-section (2) of that section, with which we are concerned, reads as. under :- "2. Where for the purpose of this Act the Central Government or the Reserve Bank considers it necessary or expident to obtain and examine any information, book or other document in the possession of any person or which in the opinion of the Central Government or the Reserve Bank it is possible for such person to obtain and Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 7 furnish, the Central Government or, as the case may be, the Reserve Bank may, by order in writing, require any such person (whose name shall be specified in the order) to furnish, or to obtain and furnish, to the Central Government or the Reserve Bank or any person specified in the order with such information, book or other document." Various contentions have been advanced in appeal by Mr. sorabji on behalf of the appellants but it is not necessary to deal with all of them, as in our opinion, the impugned order is liable to be quashed on the short ground that it does not satisfy the requirements of section 19(2) of the Act. Sub-section (2) of section 19 of the Act has been reproduced above and its perusal shows that the sub-section consists of two parts. The first part mentions the occasion or the circumstance in which an order under the subsection can be made, while the second part deals with two contingencies and provides for the form and mode of the order in which it should be made to suit ,each contingency. The two parts of the sub-section are : 1. Where for the purpose of the Act the Central Government or the Reserve Bank considers it necessary or expedient to obtain and examine any information, book or other document. 2(a) In case the said information, book or document is in the possession of any person, the Central Government or as the case may be, the Reserve Bank may, by order in writing, require such person to furnish to the Central Government of the Reserve Bank or any person specified in the order such information, book or other document. (b) In case, however, the information.. book or document is not in the possession of the person to whom the order is addressed, but it is possible in the opinion of the Central Government or the Reserve Bank, for such person to obtain and furnish that information, book or other document, the Central Government or the Reserve Bank may, by order in writing, require such person to obtain and furnish to the Central Government or the Reserve Bank or any person specified in the order such information, book or other document. It would, therefore, follow that the power under the above provision can be exercised either by the Central Government or by the Reserve Bank. The occasion for the exercise of this power Would arise when either of them, viz., the Central Government ,or the Reserve Bank, considers it necessary or expedient for the purpose of the Act to obtain and examine any information, booker document. It is only when the said requirement is satisfied that the Central Government or the Reserve Bank, as the case may be, can proceed in the manner indicated above in clause 2(a) or 2(b). We are in the present case not concerned with the Reserve Bank nor with the situation wherein it was considered expedient to obtain and examine any information, book or other document. The impugned order purports to have been made by the Central Government because, according to it, the Central Government considered it necessary for the purpose of the Act to obtain and examine the papers and documents specified in the schedule to the order. The question which arises for determination is whether the authority concerned applied its mind so as to show that the Central Government considered it necessary for the purpose of the Act to obtain and examine the papers Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 8 and documents specified in the schedule. The words 'considers it necessary' postulate that the authority concerned has thought over the matter deliberately and with care and it has been found necessary as a result of such thinking to pass the order. The dictionary meaning of the word 'consider' is 'to view attentively, to survey, examine, inspect (arch), to look attentively, to contemplate mentally, to think over, meditate on, give heed to, take note of, to think deliberately, be think oneself. to reflect' (vide Shorter Oxford Dictionary). According to Words & Phrases-Permanent Edn: Vol. 8A to 'consider' means to think with care. It is also mentioned that to 'consider' is to fix the mind upon with a view to careful examination; to ponder; study; meditate upon, think or reflect with care. It is, therefore, manifest that careful thinking or due application of the mind regarding the necessity to obtain and examine the documents in question is ,vine que non for the making of the order. If the impugned order were to show that there has been no careful thinking or proper application of the mind as to the necessity of obtaining and examining the documents specified in the order, the essential requisite. to the makings of the order would be held to be non-existent. A necessary corollary of what has been observed above is that mind has to be applied with regard to the necessity to obtain and examine all the documents mentioned in the order. An application of the mind with regard to the necessity to obtain and examine only a few of the many documents mentioned in the order, while there has been no such application of mind in respect of the remaining documents, would not be sufficient compliance with the requirements of the statute. If, however, there has been consideration of the matter regarding the necessity to obtain and examine all the documents and an order is passed thereafter, the Court would stay its hand in the matter and would not substitute its own opinion for that of the authority concerned regarding the --necessity to obtain the documents in question. The language of section 19(2) of the Act points to the conclusion that while an order under it may be made with respect to .any information', book or other document, it is essential that such information, book or other document should be specified in the order. This is apparent from the concluding part of the said .sub-section wherein there is reference to 'such information, book or other document. The word 'such' points to the necessity of specifying the information, book or other document in the order. It is, no doubt, true that the order can relate to a large number of books, documents or information, it is all the same impera- tive that the same should be particularized in the order. According to sub-section (1-A) of section 23 of the Act, if any person contravenes any of the provisions of this Act or of any rule, direction or order made thereunder, for the contravention of which no penalty is expressly provided, he shall, upon conviction by a ,court, be punishable with imprisonment for a term which may ,extend to two years, or with fine, or with both. The fact that penal consequences follow from non-compliance with an order made under sub- section (2) of section 19 also highlights the importance of specifying the information book or other document in the order. The order under the above provision of law is addressed to the person who is either in possession of requisite information book or other document or is, in the opinion of the authority ,concerned, able to obtain and furnish such information, book or ,other document. For compliance with such an Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 9 order, it is imperative that the person against whom the order is directed should be left in no doubt with regard to the precise information, book or other document which is required to be furnished by him. It, therefore, becomes essential that the requisite information, book ,or other document should be specified in the order. In the light of what has been stated above, let us examine the impugned order in the present case. The appellants have been directed by the impugned order to obtain and furnish the documents mentioned in the schedule attached to the order. The first six items in the schedule relate to 5 letters and one telegram while the 7th item mentions other books, papers and documents relating to the appellants in the possession of the Registrar of this Court under order dated 6th of May, 1966 passed by this Court. The list of those documents is on the file of this case and its perusal shows that hundreds of documents and files are in the custody of the Registrar relating to the appellants. Some of those documents have not even the remotest connection with the matters for which information, book or other docment may be obtained under section 19(2) of the Act. One of the documents is a Memorandum submitted by the appellant comPany to the Minister for Finance and Industry, Government of Andhra Pradesh. Some other documents contain agenda for the meetings of the Board of Directors. Still another document is described as "one confidential typed pamphlet of five papers heading 'The Empire of T.T.K. and Company' found in the personal brief case of the Managing Director." There are also files relating to the Memoranda submitted to the Minister for Heavy Engineering as also copies of letters addressed to the Chief Controller of Imports and Exports. Some sheets of papers contain chemical formulae relating to the preparation of certain barium compounds. A number of shares certificates of the appellant company in the name of the appellant, his wife and minor child are also in the custody of the Registrar. We are at a loss to understand as to how it was considered necessary for the purpose of the Act to obtain and examine any of the above mentioned documents. It cannot be gainsaid that there has to be- some nexus between the documents sought to be obtained and tic purpose of the Act. Where such a nexus is missing and the document has no relevance for the purpose of the Act, the condition precedent to the making of an order under section 19(2) must be held to be non-existent. The fact that an omnibus order was made in respect of all documents relating to the appellants, which were in the custody of the Registrar under the orders of this Court, including some of the documents which have not even the remotest bearing on the matters covered by the Act, goes to show that there was no due application of the mind by the authority concerned. As mentioned earlier, an essential condition precedent to the making of an order under section 19(2) is that the authority concerned should have considered it necessary to obtain-and examine for the purpose of the Act the specified information, book or other document. The element of due care and attention which is an essential ingredient of the phrase 'considers it necessary' is lacking in this case. As such, the impugned order should be held to be not in conformity with sub-section 19 of the Act. Mr. Chagla on behalf of the respondents has referred to the case of Seth Durgaprasad etc. v. H. R. Gomes where it was held that the power to search granted under section 105 of the Customs Act is a power of general search and it is not necessary for its exercise that the authority should specify the documents for which search is to be made. The above case, in our opinion, cannot be of much assistance to the respondents. The power to search contemplated by section 105 of the Customs Act (1) [1966] 2 S.C.R. 991. Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 10 is similar to that conferred under section 19D of the Foreign Exchange Regulation Act, which also relates to search for and seizure of useful and relevant documents secreted in any place. The authorisation for search contemplated by the above two provisions need not specify the documents for which search is to be made because in a vast majority of cases, the authority concerned might not be aware of the precise nature of the secreted documents. The same reasoning would not, however, hold good in case an order is made under section 19(2) for obtaining specified documents. Reference has also been made by Mr. Chagla to the cases of M. P. Sharma and others v. Satish Chandra, District Magistrate, Delhi and other(1) and Income-tax Officer, Special Investigation Circle-B, Meerut v. M s. Seth Brothers and Ors. The first of these cases deals with the question as to whether search warrant issued under section 96 of the Code of Criminal Procedure offends Article 19(1)(f) of the Constitution and whether compelled production of incriminating documents by a person against whom a first information report has been made is testimonial compulsion within the meaning of Art. 20(3) of the Constitution. None of these questions arises for consideration 'in the present case and as such the cited authority cannot be of much help to the respondents. The other case of Seth Brothers dealt with the power of search and seizure under section 132 of the Indian Income-tax Act. The question involved in that case was essentially different from that which arises for determination in the present case. As such, the said decision can also be of not much avail to the respondents. The impugned order for the reasons stated above is liable to bequashed. It would, however, be open to the authority concerned to make a fresh order in due compliance with the requirements of section 19(2) of the Act. We, therefore, allow appeal No. 1452 of 1971, set aside the judgment of the High Court and quash the impugned order. The appellants shall be entitled to the costs of this appeal as well as of the High Court. Appeal No. 1453 of 1971 in the circumstances has become infructuous and as such is dismissed with no order as to costs. The records in question, in the custody of the Registrar, will be returned to the appellants after a month unless an other order has been made under section 19(2) of the Act or other provision of law. K.B.N. C.A. No. 1452/71 allowed. C.A, No. 1453/71 dismissed. (1) [1954] S.C.R. 1077. (2) [1970] I S.C.R.601. L643SupCI/71-2,500-5#-73 -GIPF. Barium Chemicals Ltd. & Anr vs Sh. A. J. Rana & Ors on 7 December, 1971 11 | {
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J.K. Synthetics Ltd. And Ors. vs Central Board Of Direct Taxes And Anr. on 24 September, 1971 Equivalent citations: [1973]83ITR335(SC), (1972)4SCC689, 1972(4)UJ220(SC) Author: K.S. Hegde Bench: A.N. Grover, H.R. Khanna, K.S. Hegde JUDGMENT K.S. Hegde, J. 1. The Writ Petition Bled by the Appellants was summarily dismissed by a Division Bench of the Delhi High Court. While dismissing the Writ Petition the Learned Judges gave a speaking order. Against that decision this appeal has been brought by certificate. After some discussion the counsel for the appellant sought the permission of the court to withdraw the Writ Petition in the peculiar circumstances of the case. This Writ Petition is primarily directed against certain communications sent by the Central Board of Direct Taxes dated the 18th March, 1970, 25th July, 1970 respectively to the appellants. We were informed by the counsel for both the parties that the decisions conveyed in those communications were not made in exercise of any of the powers conferred on the Board by any law. They were merely replied to the communications sent by the appellants. They cannot be even considered as directions under Section 119 of the Income-tax Act, 1961. as they pertain to decisions to be taken by concerned taxing authorities. The Board is not competent to give directions regarding the exercise of the any judicial power by its subordinates. The opinions expressed in those communications pertain to the exercise of judicial powers by the taxing authorities, as it is for those authorities to determine as to the year in which the undertaking began to "manufacture or to produce articles" within the meaning of Section 80J of the Income tax Act, 1961. The communications sent by the Board and impugned in the Writ Petition are replies sent by the Board to the letters written by the appellant. They cannot bind the taxing authorities who have to decide the question in issue on its own merits, uninfluenced by extraneous considerations. The question in issue is a question of fact. 2. We are sure that the concerned authorities will not be influenced either by the opinion expressed by the Board as to when the undertaking began to "manufacture or to produce articles" or by the observations of the High Court while dismissing the Writ Petition in deciding the question of the liability to pay tax or the question of levying penalty either on the company or his shareholder. 3. The appellants-petitioners' prayer to withdraw the Writ Petition from which this appeal arose is allowed and the appeal is dismissed as being withdrawn, for the reasons mentioned earlier. No costs. J.K. Synthetics Ltd. And Ors. vs Central Board Of Direct Taxes And Anr. on 24 September, 1971 1 | {
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Commissioner Of Income-Tax Bombay vs Maharashtra Sugar Mills Ltd. Bombay on 16 August, 1971 Equivalent citations: 1971 AIR 2434, 1972 SCR (1) 202, AIR 1971 SUPREME COURT 2434, 1971 TAX. L. R. 1405 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: COMMISSIONER OF INCOME-TAX BOMBAY Vs. RESPONDENT: MAHARASHTRA SUGAR MILLS LTD. BOMBAY DATE OF JUDGMENT16/08/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 2434 1972 SCR (1) 202 ACT: Income-tax Act (11 of 1922), s. 10(2)(xv) and r. 23 of Rules --Part of assessee's income not exigible to tax-Commission to managing agent-Whether part of commission relating to such income not deductible from assessee's gross profits. HEADNOTE: The assessee was a limited company. it owned extensive lands in which sugar cane was grown and the cane was used by the assessee for the manufacture of sugar in its factory. The cultivation of sugar cane and the manufacture of sugar by the assessee constituted one single and indivisible business. In the assessment year 1957:58, the assessee claimed deduction of remuneration paid to its managing agents under s.10(2)(xv) of the Indian Income-tax Act, 1922, as an item of expenditure laid out or expended wholly or exclusively for the purpose of its business. The Income-tax Commissioner Of Income-Tax Bombay vs Maharashtra Sugar Mills Ltd. Bombay on 16 August, 1971 1 Officer and the Appellate Assistant Commissioner disallowed a part of the remuneration on the grounds that part of the assessee's business namely cultivation of sugar cane, being an agricultural operation, the income therefrom was not exigible to tax, and therefore, any expenditure incurred in respect of that activity was not deductible. The Tribunal and the High Court on reference, however, upheld the plea of the assessee that the entire sum was deductible. Dismissing the appeal to this Court, HELD: (1) The mandate of s. 10(2)(xv) is plain and unambiguous. To find out whether a deduction claimed is permissible under the Act or not, all that the Court has to do is to examine the relevant provisions of the Act. Equitable considerations are wholly out of the place in con- struing the provisions of the taxing statute. If the allowance claimed is permissible under the Act then it has to be deducted from the grow profits, and if it is not so permissible it has to be rejected. [232 H; 233 A-D] In the. present case, the allowance claimed was undoubtedly laid out or expended for the purpose of the business carried on by assessee. The fact that income arising from a part of that business was not exigible to tax under the Act was not a relevant circumstance. [233 D-E] C.I.T., Bombay v. Parakh and (India) Ltd., 29 I.T.R., 661, and C.L T. Madras v. Indian Bank Ltd., 56 I.T.R. 79, followed. S.A.S.S. Chellappa Chettiar v. C.I.T, Madras, 5 I.T.R., 97 and Salt & Industries Agencies Ltd. Bombay v. C.LT., Bombay City, 18 I.T.R. 58, referred to. (2) Rule 23 of the rules framed under the Income-tax Act says that in computing the taxable income of a business the agricultural income as defined in s. 2 of the Act should be deducted from the tota 231 income for arriving at the taxable income. The rule further says that No further deduction shall be made of any expenditure incurred by the assessee as cultivator or receiver of rent in kind'. If the rule is read with s. 2(1) it is clear that reference to the expenditure incurred by the assessee as a cultivator only applies to the process ordinarily employed by a cultivator in raising the crops and all other incidental and supple mentary activities up to the stage of sale of the produce, and has nothing to do with disbursements such as payment of managing agency commission. [238E-H; 24OA-B] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1658 of 1968. Commissioner Of Income-Tax Bombay vs Maharashtra Sugar Mills Ltd. Bombay on 16 August, 1971 2 Appeal by special leave from the judgment and order dated September 22, 1967 of the Bombay High Court in Income-tax Reference No. 83 of 1962. B. D. Sharma, and R. N. Sachthey, for the appellant V. Rajagopal, M. M. Vakil, B. Datta, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the respondent. The Judgment of the Court was delivered by Hegde, J. This is an appeal by special leave. It arises from the decision of the Bombay High Court in Income-tax Reference No. 83 of 1962 on its file. That Reference was made by the Income-tax Appellate Tribunal, Bench 'B', Bombay. The question of law which was referred for the. opinion of the High Court under s.66(1) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as the Act) is: "Whether on the facts and in the circumstances -of this case the Department could disallow a sum of Rs. 1,26,359/- a portion of the managing agency ,commission paid by the assessee company for the ,assessment year 1957-58 in computing the income from business of the assessee company." The assessee is M/s. Maharashtra Sugar Mills Ltd. The concerned assessment year is 1957-58, the corresponding account year ending on 30-9-1956. , The assessee is a Limited Company. it carries on business of manufacture of sugar from.sugar cane. It owns extensive lands in which sugar cane is grown. The sugar cane grown in these lands is used by the assessee for manufacture of sugar in its factory. The finding of the Tribunal is that 16-M 1245 Sup. Cl/71 the cultivation of sugar cane and the manufacture of sugar by the assessee constitute one single and indivisible business. The assessee company is managed by managing agents. The managing agents were paid remuneration in accordance with the agreement entered into between the assessee company and the managing agents; The managing agents's commission roughly worked out at 10 percent of the profits of the company. In the assessment year in question the managing agents were entitled to a commission of Rs. 4,86,228 /6 /-. In its assessment proceedings, the assessee claimed deduction of this sum under s.10(2)(15) as an item of expenditure laid out or expended wholly or exclusively for the purpose of its business. Out of that sum, the Income-tax Officer disallowed a sum of Rs. 1,26,359/- on the ground that the same relates to the commission of the managing agents for managing the sugar cane cultivation part of the business. In appeal, the Appellate Assistant Commissioner concurred with the view taken by the Income-tax Officer. The assessee took up the matter in second appeal to the Income-tax Appellate Tribunal. The Tribunal upheld the plea of the assessee that the entire sum is deductible under S. 10(2) (15). It also rejected the contention of the department that on the facts of the case rule 23 of the Rules framed under the Act is applicable. In the Reference -referred to earlier, the High Court agreeing with the view. taken by the Tribunal answered the question in favour of the assessee. Hence this appeal. The finding of the Tribunal that the cultivation of sugar cane as well as the manufacture of sugar constitutes one business is a finding of fact. That finding has not been challenged before us What. was urged on behalf of the department is that the assessee's business consisted of two parts namely (1) cultivation of sugar cane and the manufacture of sugar. The former part being agricultural Commissioner Of Income-Tax Bombay vs Maharashtra Sugar Mills Ltd. Bombay on 16 August, 1971 3 operation, the income therefrom is not exigible to tax and therefore any expenditure incurred in respect of that activity is not deductable. This contention proceeds on the basis that only expenditure incurred in respect of a business activity giving rise to income, profit or gains taxable under the Act can be given deduction to and not otherwise. We see no basis for this contention. To find out whether a deduction claimed is permissible under the Act or not, all that we have to do is to examine the relevant provisions of the Act. Equitable considerations are wholly out of place in construing the provisions of a taxing statute. We have to take the provisions of the statute as they stand. If the allowance claimed is permissible under the Act then the same has to be deducted from the gross profit. If it is not permissible under the Act, it has to be rejected. As men- tioned earlier, it is not disputed that the cultivation of sugar cane and the manufacture of sugar constituted one single and indivisible business. Section 10(2) says that profits under S. 10(1) in respect of a business should be computed after deducting the allowances mentioned therein. One of the allowances allowed is that mentioned in s.10(2) (xv) which says that any expenditure laid out or expended wholly and exclusively for the purpose of such business shall be deducted as an allowance. The mandate of s 10 (2)(15) is plain and unambiguous. Undoubtedly the allowance claimed in this case was laid out or expended for the purpose of the business carried on by the assessee. The fact that the income arising from a part of that business is not exigible to tax under the Act is not a relevant circum- stance. For the foregoing reasons we agree with the view taken by the High Court. Turning now to the decided cases, we shall first refer to the decision of the Madras High Court in S. A. S.S. Chellappa Chettiar v. Commissioner of Income-tax, Madras( 1) The facts of that case are, : The assessee was carrying on the business of money lending in Burma. For the purpose of that business he was borrowing money from others at a lower rate of interest and advancing loans to his- constituents at a higher rate. In the course of his business, he was obliged to receive agricultural lands in repayment of his debts from some of his constituents. In his assessment proceedings he claimed deduction of the interest David by him in respect of his borrowings. Part of the money borrowed by him had been advanced to constituents who, as mentioned earlier, had made over their agricultural lands to the assessee. The question arose whether the interest paid in respect of the money advanced to those constituents was deductable in computing the profits and gains of the assessee. The High Court held that he was entitled to the deduction claimed and further he was also entitled to deduction in (1) 5 I.T. P,. 97. respect of the establishment and other charges incurred by him for managing and cultivating such lands and the amount spent for obtaining conveyances of such lands. Sir H. O. C. Beasley C. J., speaking for the Court observed: "It seems to us that the governing section in order to decide this matter must be Sec. 10(2)(iii). Was the capital borrowed for the purpose of the assessee's business ? No difficulty arises about that, for it is ,conceded that it was so borrowed. It was also unquestionably used for the purpose of the business because it is again conceded that it was lent to the borrowers. Does it continue to be so used ? It is in that respect that it is important again to emphasise that this case has been argued, before us on the Commissioner Of Income-Tax Bombay vs Maharashtra Sugar Mills Ltd. Bombay on 16 August, 1971 4 basis that these lands came into and were retained in the possession of the assessee in payment of a moneylending debt and ex- necessitate." The test applied by the learned Chief Justice appears to us to be the correct one. We shall next take up the decision of the Bombay High Court in Salt and Industries Agencies Ltd., Bombay v. Commissioner of Income-tax, Bombay City (1). The assessee in that case was a company incorporated in Bombay. They were the managing agents of another company which was also incorporated in Bombay. The managed company had business both in British India as well as in the Indian States. The profits arising from the business activities of the managed company in the Indian States was not exigible to tax but yet the assessee claimed that a part of the commission earned by it being in respect of business carried on outside British India, the same could not be considered as an income earned in British India. That contention was rejected by the High Court. In the course of its judgment, the High Court observed: "It is perfectly true that as far as the parent company is concerned, the profits made at Kandla could be said to have arisen and accrued at Kandla, but as far as the managing agents are concerned, their commission has nothing whatever to do with those profits. (1) 18 L.T.R. 58. Their commission is only concerned with the ultimate determination of all the workings of the company and the finding out whether and what profits has been earned by the company. It cannot be said that as profits were earned by the parent company, the commission also was accruing or arising to the managing agents." - In Commissioner of Income-tax, Bombay v. C Parakh & Co. (India) Ltd. I. The ratio of that decision bears on the question of law that we are considering. The assessee company therein was resident and ordinarily resident in India. It had its head office in Bombay. It maintained a branch at Karachi for purchasing cotton for shipment to Bombay or to export direct to other places.' By an agree- ment, the managing agents of the assessee company were entitled to a remuneration of 20 percent of the annual net profits of the assessee company to ascertain which the result of the trade in all its branches had to be taken into account. The assessee apportioned the managing agency commission and debited the proportionate amount in the respective profit and loss account for the Bombay head office and the Karachi branch. In computing the Pakistan income of the assessee for the purpose of double taxation relief the Income-tax Officer deducted from the income of the Karachi branch the proportionate managing agency commission. The Appellate Assistant Commissioner confirmed that order but the Tribunal and the High Court on a reference held that the managing agency commission in its entirety should be debited to the Bombay branch. On appeal this Court held that the entire managing agency commission was liable to be debited against the Indian profits and further assessee company could not be estopped from claiming the benefit of such deduction by reason: of the fact that it erroneously allocated a part of it toward the profits earned in Karachi. In the course of; its judgment this Court observed: "Section 10(2)(xv) of the Indian Income-tax Act provides that in computing the profits of a business allowance is to be made for any expenditure laid out or expended wholly and exclusively for the purpose of such business.. Now the respondent is Commissioner Of Income-Tax Bombay vs Maharashtra Sugar Mills Ltd. Bombay on 16 August, 1971 5 carrying on (1) 29 I.T.R. 661. business in cotton both in India and in Karachi. When an assessee carries on the same business at a number of places there is for the purpose of section 10 ,only one business and the net profits of the business have to be ascertained by pooling together the profits ,earned in all the, branches and deducting therefrom all the expenses. The fact that some of the branches are in foreign territories will make no difference in the position if the assessee is as in the present case resident and ordinarily resident within the taxable territories. Therefore the profits earned in India and in Karachi have to be thrown together and the expenses including the commission payable to the managing agents deducted therefrom and it is the net profits thus struck that become chargeable under the Act. That is how the Income-tax Officer has worked out the figures. The respondent is therefore clearly entitled to a deduction of the whole of the commission of Rs. 3,12,699 paid to the managing agents including the sum of Rs. 1,23,719 against the Indian profits." Lastly we refer to the decision of this Court in Co mission of Income-tax Madras v. Indian Bank Ltd(1). Therein the respondent, a banking company, in the course of its business, invested a large sum in securities, including securities the interest on which was exempt from tax. Profits and losses on the purchase and sale of such securities were duly taken into account in computing the business income of the respondent. The% question for decision was whether the interest paid by the respondent on the amount invested in securities, whose interest was tax free, was deductable from its gross profits. This Court held that interest paid by the respondent on moneys borrowed from its various depositors had to be allowed in its entirety under S. 10(2) (iii) of the Act and there was no warrant for disallowing a proportionate part of the interest referable to money borrowed for the purchase of securities whose interest was tax-free. In the course of the Judgment Subba Rao, J. (as he then was) observed: "In our opinion,, in construing the Act, we must adhere closely to the language of the Act. If there is ambiguity in the terms of a provision, recourse must (1) 56 I.T.R. 79. naturally be had to well-established principles of construction but it is not permissible first to create an artificial ambiguity and then try to resolve the ambiguity by resort to some general principle. We are concerned with the interpretation of section, 10. Let us then look at the language employed. Sub-section (1) directs that an assessee be taxed in respect of the profits and gains of business carried on by him. What is the business of the assessee must first be looked at. Does he carry on one business or two businesses or along with the business carried on by him some activity which is/not a business ? If he is carrying on an activity which is not business, we must leave out of account the receipts of that activity. That is the first step. Secondly, we must look at section 10(2) and deduct all the allowances permission ale to him. In allowing a deduction which is permissible the question arises: Do we look behind the ,expenditure and see whether it has the quality of ,directly or indirectly producing taxable income ? 'The answer must be in the negative for two reasons: First, Parliament has not directed us to undertake this enquiry. There are no words in section 10(2) to that effect. On the other hand, indications are to the contrary. In Section 10(2)(xv), what Parliament requires to be ascertained is whether the expenditure has been laid out or expended wholly and Commissioner Of Income-Tax Bombay vs Maharashtra Sugar Mills Ltd. Bombay on 16 August, 1971 6 exclusively for the purpose of the business. The legislature stops short at directing that it be ascertained what was the purpose of the expenditure. If the answer is that ,it is for the purpose of the business, Parliament is not concerned to find out whether the expenditure has produced or will produce taxable income. Secondly, the reason may well- be that Parliament assumes that most types of expenditure which are laid out wholly and exclusively for the purpose of business would directly or indirectly produce taxable income, and it is not worth the administrative effort involved to go further and trace the expenditure to some taxable income." On behalf of the department reliance was sought to be placed on the decision of this Court in Badridas Doga v. Commissioner of Income-tax(1). The ratio of that decision does not bear on the issue arising for decision in this case. That decision is wholly irrelevant for our present purpose It was next urged on behalf of the department that in view of rule 23 of the Rules framed, it was permissible for the Income-tax Officer to split up the commission given to the managing agents. We see no merit in this contention. Rule 23 to the extent material for our present purpose reads: "23(1) In the case of Income which is partially agricultural income as defined in section 2 and partially income chargeable to income-tax under the head "business" in determining that part which is chargeable to income-tax the market value of any agricultural produce which has been raised by the assessee or received by him as rent in kind and which has been utilised as raw material in such business or the sale receipts of which are included in the accounts of the business shall be deducted, and no further deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver of rent in kind." Rule 23 lays down the method of computing the taxable income of a business which partly arises from the utilisation of agricultural produce as raw material in the business. It says that in computing the taxable income, agricultural income as defined in S. 2 of the Act should be deducted from the total income for arriving at the taxable income. For determining what the agricultural income is the Income-tax Officer must determine the market value of the agricultural produce used as raw material in the business. The rule further says that "no further deduction shall be made of any expenditure incurred by the assessee as a cultivator or receiver of rent in kind." (emphasis supplied). The managing agency commission given to the assesses is not an expenditure incurred by the assessee as a cultivator or as a receiver of the rent in kind. The last part of subrule (1) of Rule 23 merely stipulates that the expenditure incurred by the assessee for his agricultural operation or incurred by him as receiver of rent in kind is not to be deducted while arriving at the taxable income. Section (1) 34 I.T.R. 10. 2(1) of the Act defines agricultural income. That section reads: "agricultural income" means- Commissioner Of Income-Tax Bombay vs Maharashtra Sugar Mills Ltd. Bombay on 16 August, 1971 7 (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land-revenue in the taxable territories or subject to a local rate assessed and collected by officers of the Government as such; (b) any income derived from such land by- (i) agricultural or (ii) the performance by a cultivator or receiver of rent in kind of any process ordinarily employed by a. cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market, or (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in sub-clause (ii). (c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator, or the receiver of rent in kind, of any land with respect to , which, or the produce of which any operation mentioned in sub-clauses (ii) and (iii) of claus e (b) is carried on: Provided that the building is on' or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator or the receiver of the rent-in-kind by reason of his connection with the land, requires as a dwelling house, or as a storehouse, or other out-building," If rule 23 is read along with S. 2(1), it is clear that Preference to, expenditure incurred by the assessee as a -cultivator applies to the process ordinarily employed by,a cultivator in raising the crops and all other incidental and supplementary activities upto the stage of sale of the produce.' That rule has nothing to do with disbursements such as payment of managing agency commission. In the result this appeal fails and the same is dismissed with costs. V.P.S. Appeal dismissed. Commissioner Of Income-Tax Bombay vs Maharashtra Sugar Mills Ltd. Bombay on 16 August, 1971 8 | {
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Morvi Industries Ltd vs Commissioner Of Income Tax ... on 5 October, 1971 Equivalent citations: 1971 AIR 2396, 1972 SCR (1) 970, AIR 1971 SUPREME COURT 2396, 1972 4 SCC 451, 1971 TAX. L. R. 1558, 1974 SCC (TAX) 140, 82 ITR 835, 1972 (1) ITJ 567, 1972 2 SCJ 97, 1972 (1) SCR 970 Author: Hans Raj Khanna Bench: Hans Raj Khanna, K.S. Hegde, A.N. Grover PETITIONER: MORVI INDUSTRIES LTD. Vs. RESPONDENT: COMMISSIONER OF INCOME TAX (CENTRAL)CALCUTTA DATE OF JUDGMENT05/10/1971 BENCH: KHANNA, HANS RAJ BENCH: KHANNA, HANS RAJ HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 2396 1972 SCR (1) 970 1972 SCC (4) 451 ACT: Income-tax Act, 1922, ss. 4(1)(b)(i) and 10(2)(xv)-Income accrues' when it becomes due-Relinquishment of office allowance and commission by managing agent after they had become due on the ground that managed company had suffered losses-Relinquishment made after amounts had become due' under agreement but before they had become payable-Amounts rightly included in total income-Relinquished amounts not deductible as expenses under s. 10(2)(xv) when the relin- quishment is not for purpose of assessee's business or on ground of commercial expediency. HEADNOTE: The appellant, a limited company, was managing agent of Morvi Industries Ltd vs Commissioner Of Income Tax ... on 5 October, 1971 1 another company. Under the terms of the agreement the appellant company was entitled to receive a fixed monthly sum as office allowance and commission at fixed rates on net profits and purchases and sales of cotton and yarn. The managed company's accounting year closed on the 30th day of December every year and that of the appellant company on the 30th day of June every year. Under cl. 2(e) of the managing agency agreement the commission was due on the 31st day of December every year and it was payable immediately after the annual accounts of the managed company bad been passed in the General meeting. The Annual General meetings of the managed company were held to adopt the- accounts for the relevant accounting years on November 24, 1955 and July 21, 1956, The amounts of commission in terms of the cl. 2(e) were thus 'due' on 31st December 1954 and 31st December 1955 and were 'payable' immediately after 24th November 1955 and 21st July 1956 respectively. Since the managed company had suffered losses in the preceding years the appellant relinquished the commission as well as the office allowance by resolutions of the Board of Directors dated April 4, 1955 and June 19. 1956. On these dates the amounts of commission relinquished had become 'due' but not 'payable'. The Income-tax Officer in making the assessments for the 1955-56 and 1956-57 did not make any allowance for the amounts relinquished and included them in the total income of the appellant. According to the Income-tax Officer the office allowance- had been relinquished ex-gratia and the commission had been relinquished after it had accrued. The Appellate Assistant Commissioner and the Appellate Tribunal confirmed the order of the Income-tax Officer. In ,reference the High Court held : (i) that the accrual of income was complete within the accounting year of the managed company and as no relinquishment had been done before the amount became due, the case came within the ambit of s. 4(1)(b)(i) of the Income-tax Act, 1922, (ii) that the relinquishment had not been made for the purpose of facili- tating the legitimate commercial undertaking or by way of commercial expediency and the case was not then--fore covered by s. 10(2)(xv). In ;appeal to this Court, HELD : (i) According to s, 4(1) (b) (i) of the- Act, subject to the provisions of this Act the total income of any previous year of any person includes all income profits and gains from whatever source derived which if such a person is resident in the taxable territories during 971 such year accrue or arise of the deemed to accrue or arise to him in the taxable territories that year. The dictionary meaning of the word 'accrue' is to come as an accession, increment, or produce; to fall to one by way of advantage; to fall due.' The income can thus be said to accrue when it becomes due. The postponement of the date of payment has a bearing only in so far as the time of payment is concerned, but it does not affect the accrual of income. The moment Morvi Industries Ltd vs Commissioner Of Income Tax ... on 5 October, 1971 2 the income accrues, the assessee gets vested with the right to claim that amount, even though it may not be payable immediately. There also arises a corresponding liability of the other party from whom the income becomes due to pay that amount. The further facts that the amount of income is not subsequently received by the assessee would also not detract front or efface the accrual of the income, although the non- receipt may, in appropriate cases, be a valid ground for claiming deductions. The accrual of an income is not to be equated with the receipt of the income. That the two, accrual and receipt of income, have different connotations is also) clear from the language of s. 4 of the Act. Clause (a) of sub-s.'(1) of s. 4 of the Act deals with the receipts of income while the accrual of income is dealt with in cl. (b) of that sub-section.. [975 B-E] In the present case the accounts of the appellant company were maintained on a mercantile basis. Under this system the profits and gains are credited though not immediately realised, and the entries thus made really show nothing more than an accrual or arising of the said profits, at the material time. Further, the amounts of income for the two years in question were given up unilaterally after they had accrued to the-appellant company. As such the appellant could not escape the tax liability for those amounts. [975 G-H; 976 E] Indermani Jatia V. C.I.T., U.P., 35 I.T.R. 298 and C.I.T., Bombay City I v. M/s. Shoorji Vallabhdas & Co., 46 I.T.R. 144, applied. (ii) The appellant could claim deduction of the amounts under s. 10(2)(xv) of the Act if the amounts had represented an expenditure laid out or expended wholly and exclusively for the business of the, appellant. There was however nothing to show that the amounts were relinquished for the purpose of the appellant's business or on grounds of commercial expediency. The High Court therefore rightly rejected the claim under s. 10 (2) (xv)[976 F-G] JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2093 and 2084 of 1970. Appeals from the judgment and order dated January 28, 1964 of the Calcutta High Court in Income-tax Reference No. 104 of 1960. B. P. Maheshwari, for the appellant (in both the appeals). S.T. Desai, P. L. Juneja and R. N. Sachthey, for the respondent (in both the appeals). The Judgment of the Court was delivered by Khanna,J. This judgment would dispose of two Civil Appeal.s Nos. 2083 and 2084 of 1970 which have been filed on certificate granted by the Calcutta Morvi Industries Ltd vs Commissioner Of Income Tax ... on 5 October, 1971 3 High Court and are directed against the Judgment of that Court whereby it answered the questions referred to the Court under Section 66(1) of the, Indian Income-tax Act, 1922 (hereinafter referred to as the Act) for two assessment years against the assessee-appellant and in favour of the respondent. The assessee is a Limited Company and the matter relates to the assessment years 1956-57 and 1957-58, the corresponding accounting years for which ended on June 30, 1955 and June 30, 1956 respectively. The appellant Company was appointed as the Managing Agent of Shree Ramesh Cotton Mills Ltd., Morvi (hereinafter referred to as the managed company), as per agreement dated 30-12- 1946. The managed company was a 100% subsidiary of the appellant company. Under the terms of the agreement, the appellant company was entitled to receive a fixed office allowance of Rs. 1,000/- per mensem plus a commission at the rate of 121/2% of the net profits, an additional commission of 1 % on all purchases of cotton and an equal amount on all sales of cloth and yarn. In the relevant years, the managed company suffered losses and congruently the commission payable at 121/2% of the net profits was nil but the commission on purchase of cotton at the rate of 1 1/2% and on sales of cloth and yarn at the same rate, aggregated to Rs. 38,719/- for the assessment year 1956-57 and Rs. 1,963/- for the following year. Besides these amounts, the appellant was entitled to Rs. 12,000/- per annum for each of the two years as fixed office allowance. The total amounts which the appellant was entitled to receive from the managed company were Rs. 50,719/- and Rs. 13,963/- for the two years. The managed company's accounting year closed on the 30th day of December and that of the appellant company on the 30th day of June every year. Clause 2(e) of the Managing Agency Agreement dated 30th ember 1946 contained the following term as to when the commission would be due and payable " (e) The said commission shall be due to the Agents yearly on the thirty-first day of December or any other date on which the Company's yearly account close in each and every year during the continuance of this Agreement and shall be payable and be paid immediate after annual accounts of the said Company has been passed by the Board of Directors and Auditors of the Company and by the company in, General Meeting". According to the above clause, the commission was due on the 31st day of December every year and it was payable imme- diately after the annual accounts of the managed company had been passed in the General Meeting. The Annual General Meetings of the managed company were held to adopt the accounts on November, 24, 1955 and July 21, 1956 respectively with regard to the assessment years in question. The amounts of commission in terms of the above clause were "due" on 31st December, 1954 and 31st December, 1955 and were "payable " immediately after the 24th of November, 1955 and 21st of July, 1956 respectively. The appellant company relinquished the managing agency commission for the assessment year 1956-57 as per resolution dated 4th of April, 1955 of the Board of Directors and for the following year as per resolution dated 19th June, 1956. The amounts of the commission were thus relinquished after they had become "due" but before they were "payable" in terms of clause 2(e) of the agreement. On behalf of the appellant, it was stated that the managed company had been suffering heavy losses in the past years and, therefore, the appellant did not Morvi Industries Ltd vs Commissioner Of Income Tax ... on 5 October, 1971 4 consider it proper to charge any commission or the fixed office, allowance and had consequently relinquished the same. The Income-tax Officer included the sums of Rs. 50,719/- and Rs. 13,963/- in the total income of the appellant for the two assessment years in question. The Income-Tax Officer took the view that in so far as the fixed office allowance was concerned, it had been given to the appellant to enable it to recoupe the expenses incurred on behalf of the managed company and the relinquishment was, therefore made ex- gratia. As regards the commission, the Income-tax officer held that it had become due to the appellant at the end of the accounting year of the managed company, and if the commission had been foregone after it had become due, it was taxable on accrual basis. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal affirmed the order of the Income-tax Officer. According to the Tribunal, the commission became due to the appellant yearly on the last day of the accounting year of the managed company, though the actual payment was deferred to a later date. Postponement of the actual payment after the income had accrued was held to be inconsequential. Likewise, the relinquishment of the income after it had become due in the opinion of the Tribunal, was inconsequential. Claim was ten made by the appellant that the amount relinquished should be treated as a permissible expenditure under section 10(2) (xv) of the Act. The above claim was rejected and it was observed that the total loss carried over at the end of year 1955 of the managed company was Rs. 14,95,221/-. As a result of foregoing the amounts of the managing agency commission, according to the Tribunal, the financial position of the managed company did not become stronger while that of the appellant company became weaker. The relinquishment was consequently held to be not for the benefit of-the appellant. At the instance of the appellant, the Tribunal referred the following two questions to the High Court :- " (1) Whether on the facts and in the circumstances of the case, the sums of Rs. 50,719/- and Rs. 13,963/foregone by the assessee by its Directors' resolution dated 4- 4-1955 and 19-6-1956 respectively, were liable to be included in its total income for the accounting years ending 30-6-1955 and 30-6- 1956 ?" "(2) If the answer to question No. 1 be in the affirmative, whether the assessee is entitled to claim an allowance of an equivalent amount as expenditure under the provisions of Section 10 (2) (xv) of the Indian Income Tax Act ?" The High Court agreed with the view taken by the Tribunal. It was observed that the accrual of income was complete within the accounting year of the managed company and as no relinquishment had been done before the amount became due, the case strictly came within the ambit of section 4 (1) (b) (i) of the Act. 'no relinquishment, it was further observed, was a unilateral act of the appellant. As regards the second question, the High Court found that the relinquishment had not been made for Morvi Industries Ltd vs Commissioner Of Income Tax ... on 5 October, 1971 5 the purpose of facilitating the legitimate commercial undertaking or by way of commercial expediency. The appellant's case was thus held to be not covered by section 10(2) (xv) of the Act, Mr. Maheshwari has assailed the findings of the High Court. Regarding the first question, the learned counsel contends that as the amounts in question were never received by the appellant but were relinquished, there arose no tax liability for those amounts. As regards the second question, Mr. Maheshwari submits that the relinquishment of the amounts should be construed as permissible expenditure under section 10(2) (xv) of the Act. There is, in our opinion, no substance in any of the above contentions. So far as the first question is concerned, we find that according to clause 2(e) of the Managing Agency Agreement reproduced above, the commission for the two years in question became due to the appellant on the 31st day of December, 1954 and 31st day of December, 1955. The appellant also became entitled to receive fixed office allowance of Rs. 12,000/- for each of the two years. It, therefore, can be said that the income of Rs. 50,719/- had accrued to the appellant on 31st December, 1954 and of Rs. 13,973/- on 31st December, 1955. The fact that the pay- ment of the managing agency commission was deferred till after the accounts had been passed in the meetings of. the managed company did not affect the accrual of the income of those amounts on December 31, 1954 and December 31, 1955 respectively. According to Section 4 (1) (b) (i) of the Act, subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived which if such person is resident in the taxable territories during such year accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year. The dictionary meaning of the word "accrue" is "to come as an accession, increment, or produce : to fall to one by way of advantage : to fall due". The income can thus be said to accrue when it becomes due. The postponement of the date of payment has a bearing only in so far as the time of payment is concerned, but it does not affect the accrual of income. The moment the income accrues, the assessee gets vested with the right to claim that amount even though it may not be payable immediately. There also arises a corresponding liability of the other party from whom the income becomes due to pay that amount. The further fact that the amount of income is not subsequently received by the assessee would also not detract from or efface the accrual of the income, although the non- receipt may, in appropriate cases, be a valid ground for claiming deductions. The accrual of an income is not to be equated with the receipt of the income. That the two, accrual and receipt of income, have different connotations is also clear from the language of Section 4 of the Act. Clause (a) of sub-section (1) of Section 4 of the Act deals with the receipt of income while the, accrual of income is dealt with in clause (b) of that sub-section. The appellant-company admittedly was maintaining its account according to the mercantile system. It is well known that the mercantile system of accounting differs substantially from the cash system of book keeping. Under the cash system, it is only actual cash receipts and actual cash payments that are recorded as credits and debits; whereas under the mercantile system credit entries are made in respect of amounts due immediately they become legally due and before they are actually received; similarly, the expenditure items for which legal liability has been incurred are immediately debited even before the amounts in question are actually disbursed. Where accounts are kept on mercantile basis, the Morvi Industries Ltd vs Commissioner Of Income Tax ... on 5 October, 1971 6 profits or gains are credited though they are not actually realised, and the entries thus made really show nothing more than an accrual or arising of the said profits at the material time. The same is the position with regard to debits made. [See Indermani Jatia V. Commis- sioner of Income-Tax, U.P. (1)] In the case of Commissioner of Income-Tax, Bombay City I v. Messrs Shoorji Vallabhdas and Co.(2) Hidayatullah, J (as he then was) speaking for the Court observed,: "Income-tax is a levy on income. No doubt, the Income-tax takes into account two points of time at which the liability to tax is attracted viz. the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a "hypothetical income", which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though, an entry to that effect might, in certain circumstances, have been made in the books of account". The assessee firm, who was the managing agent of two shipping companies in that case, gave up 75% of the managing agency commission with a view to get the managing agency transferred to two private companies. It was held that this was not a case of a gift by the assessee to the managed companies of a portion of income which had already accrued, but an agreement to receive a lesser remuneration than what had been agreed upon. In the present case, the amounts of income for the two years in question were given up unilaterally after they had accrued to the appellant company. As such, the appellant could not escape the tax liability for those amounts. Coming to the second question we find that the appellant could claim deduction of the amounts under section 10(2) (xv) of' the Act if the amounts had represented an expenditure laid out or expended wholly and exclusively for the business of the appellant. There is, however, nothing to show that the amounts were relinquished for the purpose of the appellant's business. The present is not a case wherein the amounts due to the assessee were given up on grounds of commercial expediency or for advancing the business interest of the assessee. The conclusion of the learned Judges of the High Court in this respect, in our opinion, is well founded. The result is that the appeals fail and ire dismissed but, in the circumstances, without costs. Appeals dismissed. G. C. (1) 35 I.T.R. 298. (2) 46 I.T.R. 144. Morvi Industries Ltd vs Commissioner Of Income Tax ... on 5 October, 1971 7 | {
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The State Of Maharashtra vs Dadamiya Babumiya Sheikh, Etc. on 6 May, 1971 Equivalent citations: AIR1971SC1722, 1971CRILJ1274, (1972)3SCC85, 1971(III)UJ694(SC), AIR 1971 SUPREME COURT 1722, 1971 UJ (SC) 694, 1971 CRI APP R (SC) 60, 1971 SCD 816 Author: I.D. Dua Bench: S.M. Sikri, P. Jaganmohan Reddy, I.D. Dua JUDGMENT I.D. Dua, J. 1. These two appeals are by special leave from the judgment of the Bombay High Court dated 11 August, 1967 allowing the criminal revision applications of two sureties and setting aside the order of the Presidency Magistrate forfeiting their bonds. 2. On March 2, 1964 one Abdul Wahab Ibrahim, who was accused of having committing certain offences under the Customs Act was produced before the Court of the Chief Presidency Magistrate for the purpose of securing his remand. The Chief Presidency Magistrate released him on bail on his executing a bond for a sum of Rs. 2 lakhs with two sureties. The two respondents in this Court Laxman Bania and Dadamiya Babumiya Sheikh stood sureties the former in the sum of Rs. 50,000/-and the latter in the sum of Rs. 1,50,000/-. The bonds in both the cases were in identical terms. The sureties undertook that the accused would appear before the Court of the Chief Presidency Magistrate on March 12, 1964 or on such other dates as the Court may direct. On March 12, 1964 the accused appeared in the Court of the Chief Presidency Magistrate when the period of bail was extended to 16th April 1964. According to the directions of the Court the accused Abdul Wahab Ibrahim was to appear in the Court of the Chief Presidency Magistrate on April 16, 1964. He did not appear on that date in that Court and it appears that he was not traceable because he did not surrender to his bail bond anywhere. A circular letter seems to have been issued by the Chief Presidency Magistrate on March 12, 1964 according to which all applications for remands and extensions of bail periods under the Customs Act and also miscellaneous applications pertaining to such cases were to be placed in future before the Miscellaneous Court at the Esplanade center of Courts. According to this circular it appears that surety applications and also fresh cases under Customs Act were to be filed in the miscellaneous Court. It is common case before us that on April 16, 1964 the accused neither appeared in the Court of the Chief Presidency Magistrate nor in the Miscellaneous Court. The Miscellaneous Court issued notices to the sureties on April 17, 1964 requiring them to show cause why their bonds be not forfeited. These notices were ultimately The State Of Maharashtra vs Dadamiya Babumiya Sheikh, Etc. on 6 May, 1971 1 disposed of by the Additional Chief Presidency Magistrate. Third Court on May 27, 1964 and the surety bonds of both the sureties were ordered to be forfeited. Criminal Provision against order of forfeiture was presented to the High Court where it was contended that the bonds having been executed for the purpose of guaranteeing the attendance of the accused in the Court of the Chief Presidency Magistrate on the dates as directed by that Court the bonds could not be forfeited by the Additional Chief Presidency Magistrate The order of forfeiture was set aside by the High Court and it was observed that it would be open to the Chief Presidency Magistrate on proper proceedings to enforce the bonds if their conditions had not been fulfilled and if the Court considered it proper to enforce them. The Customs Authorities then approached the Chief Presidency Magistrate Under Section 514, Cr.P.C. and that Court issued fresh notices to the sureties calling upon them to show cause why the bonds executed by them be not forfeited. On March 17, 1966 the Chief Presidency Magistrate held that there was good and convincing evidence to show that accused Abdul Wahid Ibrahim was absent from that Court on April 16, 1964 when he was required to be present according to that Court's directions dated March 12, 1964. Both the bonds were accordingly forfeited. The Court also believed the evidence of the Customs Officers that the accused had neither appeared in the Court of the Chief Presidency Magistrate nor in the Miscellaneous Court. 3. On revision by the two sureties, the High Court took the view that the accused was not bound to appear in the Court of the Chief Presidency Magistrate on April, 1964, and therefore the bonds executed by the sureties were not liable to be forfeited. It had been contended before the Chief Presidency Magistrate and upheld by him that according to the practice and procedure of the Court the accused was bond to appear before that Court on April 16, 1964, in spite of the fact that case was considered to have been transferred to the Miscellaneous Court by virtue of the Circular Order because it was on the appearance of the accused in the Court of the Chief Presidency Magistrate that he was to be directed by judicial order of that Court to appear in the Miscellaneous Court for further proceedings The Customs Officer and the clerk of the Chief Presidency Magistrate's Court had deposed to this practice. 4. The High Court, however, on revision took a different view. It observed that the evidence given by the Clerk of the Chief Presidency Magistrate's Court had not deposed to such practice, though the Customs Officer had, According to the High Court the said clerk had stated that apart from the cases transferred under the Circular Order the procedure in other cases transferred by the Chief Presidency Magistrate was that on the case being called out in that Court, the accused would be directed to go to the transferee Court for obtaining further orders. The High Court further felt that there was no satisfactory evidence, apart from the bar assertion of the Customs Officer, Ahuja, that this case was actually called out in the Court of the Chief Presidency Magistrate on April 16, 1964, there being no nothing to that effect on the official records. This view was considered to be supported by the fact that the Miscellaneous Court actually issued notices to the sureties why their bonds should not be forfeited. 5. Before us the short question canvassed at the bar relates to the effect of the Circular Order dated March 12, 1964, According to Mr. Daphtary the learned Counsel for the respondents, this Order had the effect of modifying the terms of the bond and of absolving the accused and the surety from any obligation to appear in the Court of the Chief Presidency Magistrate on April 16. 1964. There being The State Of Maharashtra vs Dadamiya Babumiya Sheikh, Etc. on 6 May, 1971 2 no obligation to appear in any other Court on April 16, 1964, according to Mr. Daphtar's argument, the accused and the sureties were completely absolved of all obligations under the bond and the bond virtually become a dead letter. 6. Mr. H.K. Khanna on behalf of the appellant State on the other hand contended that the bonds executed by the sureties could not get legally exhausted merely because of the Circular Order, and that the High Court was wrong in taking that view. 7. A surety bond is a contract and it is a question as to how far its terms can be considered to have been varied by any unilateral act. Each bond, it may be pointed out, has to be construed on its own terms. But in construing the terms of a surety bond for the production of an accused person, the purpose and object of executing it must be kept in view. Such a bond is executed for the purpose of ensuring the presence of the accused concerned in Court in which he is standing his trial for a criminal offence at the hearing of the case. But for the execution of such a bond, the accused would have to remain in custody so that the trial may proceed smoothly. 8. Looked at from this point of view surety bonds in criminal cases must be held to be designed to an extent to serve a public purpose. In some cases it is of course said that surety bonds call for a strict construction But the construction must not be so unduly strained as to result in defeating its essential purpose. Each bond has of course to be construed on its own terms, subject to what has just been stated. 9. In the present case the surety bonds relate to the production of the accused in the Court in which he was being tried, The High Court entertained some doubt if after the Circular Order the accused was under any obligation to appear in the Court of the Chief Presidency Magistrate. But after giving expression to this doubt, the High Court felt that there was no satisfactory evidence, apart from bare assertion of the Customs Officer, Ahuja, that the present case was actually called out in the Court of the Chief Presidency Magistrate on April 16, l964.The High Court also pointed out that there was no official noting on the record that the case was called and the clerk of the Court was unable to state that case had actually been called out on that date. Now under the bonds in question the sureties understood to assure that the accused would attend the Court of the Chief Presidency Magistrate on March 12, 1964 to answer the charge for which he had been arrested and would continue so to attend until otherwise directed by that Court. As in the opinion of the High Court, the material on the record does not show that the accused was required on April 16, 1964, to attend the Court of the Chief Presidency Magistrate for answering the charge in respect of which he had been arrested, and as, in our opinion, this view is a possible view to take on the existing record, we do not find any cogent ground for interfering with the impugned order under Article 136 of the Constitution. This Court, as has repeatedly been pointed out, does not interfere under Article 136 of the Constitution with every order of the High Court which may be considered to be erroneous in law The High Court decided this case on its own peculiar facts and on the terms of the surety bond in question. No exceptional circumstances have been brought to our notice impelling us to exercise extra-ordinary power of this Court. Without expressing any considered opinion on the general question of the obligation of a surety in the event of the transfer of the case to some other Court to produce the accused in the transferor or the transferee Court, we dismiss the present appeals on the short The State Of Maharashtra vs Dadamiya Babumiya Sheikh, Etc. on 6 May, 1971 3 ground that no case for interference under Article 136 of the Constitution has been made out. The State Of Maharashtra vs Dadamiya Babumiya Sheikh, Etc. on 6 May, 1971 4 | {
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State Of Madhya Pradesh vs Mir Basit Ali Khan & Ors on 22 March, 1971 Equivalent citations: 1971 AIR 1620, 1971 SCR 125, AIR 1971 SUPREME COURT 1620, 1971 JABLJ 939, 1973 MADLW (CRI) 121, (1971) 2 SC CRI R 431, 1972 MAH LJ 256, 1972 MPLJ 331, 1971 CRI APP R (SC) 458, 1971 SCD 891 Author: S.M. Sikri Bench: S.M. Sikri, P. Jaganmohan Reddy, I.D. Dua PETITIONER: STATE OF MADHYA PRADESH Vs. RESPONDENT: MIR BASIT ALI KHAN & ORS. DATE OF JUDGMENT22/03/1971 BENCH: SIKRI, S.M. (CJ) BENCH: SIKRI, S.M. (CJ) REDDY, P. JAGANMOHAN DUA, I.D. CITATION: 1971 AIR 1620 1971 SCR 125 1971 SCC (2) 96 ACT: Indian Penal Code, s. 420--Money circulation schemes--No cheating without misrepresentation or dishonest concealment of facts. HEADNOTE: The respondents organised a money circulation scheme. For alleged cheating and misrepresentation in connection therewith they were convicted by the Sessions Judge, Bhopal under s. 120B and s. 420 Indian Penal Code. The High Court however acquitted them. The State of Madhya Pradesh by special leave appealed to this Court. In support of the appeal the following facts were stressed: (1) None of the State Of Madhya Pradesh vs Mir Basit Ali Khan & Ors on 22 March, 1971 1 200 odd persons who purchased the policy issued under the scheme received Rs. 2309.50, the assured amount in the policy. (2) The large amounts of Rs. 90,750 and Rs. 5,52,587.95 were detained by the respondents and showed the extent of wrongful gain by them. (3) The policy holders had no control over other policy holders which would assure continuance of the scheme. (4) Merely because some persons receive some amount it could not be inferred that the scheme was not fraudulent. (5) The evidence showed that the names entered in columns 3, 4, 5, 6 and 7 of the pamphlet, issued by the respondents were bogus and that 2696 money orders were sent back to the remitter, as the persons were not traceable because of wrong address on the form. HELD: As held by the Calcutta High Court in Radha Ballav Pal's case and Haridas Barat's case there was an element of speculation in money circulation schemes, but those who ran them could not be held guilty of cheating unless there was misrepresentation or dishonest concealment of facts. It could not be said in the present case that the respondents had deceived the public and thereby induced it to contribute money to the scheme. The appeal must accordingly fail. [131H-132F] Radha Ballav Pal v. Emperor, A.I.R. 1939 Cal. 327 and Hari Das Barat v. Emperor, 1939 11 I.L.R. Cal. 81, approved. Nadir Barga Zaidi v. State of U.P. A.I.R. 1960 All. 103 and In re M. K. Srinivasan, A.I.R. 1944 Mad. 410, referred to. It is for the legislature to intervene if it wants to protect people who participate in these schemes, knowing that sooner or later the schemes are bound to fail. [132F-G] JUDGMENT: CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 142 of 1968. Appeal by special leave from the judgment and order dated September 8, 1967 of the Madhya Pradesh High Court in Criminal Appeal No. 81 of 1966. I. N. Shroff, for the appellant U. P. Singh and Nur-ud-din Ahmed, for the respondent. The Judgment of the Court was delivered by Sikri, C.J.--This appeal by special leave by the State of Madhya Pradesh is against the judgment of the High Court allowing the appeal of the respondents, Mr Basi Ali Khan, Mir Shahniwaz Ali khan and Mir Sarfaraz Ali Khan, and setting aside the conviction and sentences passed on them by the learned First Additional Sessions Judge, Bhopal, who had convicted them under Section 120B and Section 420, 1. P. C. The respondents were, however, acquitted of the charge under Section 406, 1. P. C. We may mention that there were two committal orders made by the learned Magistrate, First Class, Bhopal, on April 5, 1965 and on October 12, 1965, respectively, which gave rise to two Sessions Trials, No. 90 of 1965 and No. 98 of 1965. The learned Sessions Judge disposed of both the trials by a single judgment as he was of the State Of Madhya Pradesh vs Mir Basit Ali Khan & Ors on 22 March, 1971 2 view that both the trials were in effect a single trial of a single conspiracy and of several incidents of cheating. The respondents also filed one appeal before the High Court and the High Court disposed of that appeal by one judgment. The facts are not very much in dispute. The prosecution case, in brief, was that Mir Basit Ali Khan, the father, and his two sons, Mir Shahniwaz Ali Khan and Mir Sarfaraz Ali Khan. entered into a partnership which was registered on September 21, 1959, under the Indian Partnership Act of 1932 in the State of Andhra Pradesh at Hyderabad. The registration number of the firm was 1468. Mir Basit Ali Khan started a money circulation scheme known as Multi- Purpose Constructive Circulation Scheme with its head office at Hyderabad, in the year 1960. He, alongwith others, was prosecuted in the City Magistrate's Court at Hyderabad, but they were acquitted and the acquittal was maintained in the High Court. The Magistrate had come to the conclusion that though the scheme appeared to be speculative yet it could not be said that the accused were running the said scheme with a dishonest intention to cheat the public. It is alleged that Mir Basit Ali Khan again organised the Multi-Purpose Constructive Circulation Scheme on September 20,'1961, at Bhopal with its principal office at Bungalow No. 59, Roshanara Naka, T. T. Nagar, Bhopal. The firm issued policies and printed pamphlets and handbills representing that it was a Government of India Registered firm No. 1468. We may reproduce the pamphlet, Ex.-P-9 / 1, which was one of the pamphlets issued by the firm : "1. Perform the marriage of marriageable girls by spending only 5.50 np. 2. Only after spending once Rs. 5.50 np. send your promising children to America or England for Education. 3. By spending Rs. 5. 50 nP. only once, you can meet your daily necessities. 4. By spending Rs. 5 50 nP. only once make provision for education, and books, stationery, etc., etc. 5. By spending Rs. 5.50 nP. get a big sum of Rs. 2,309 for the progress of your business. For obtaining all the above mentioned thing, you can get a big sum of Rs. 2,309 by spending only Rs. 5.50 nP. Please do come and meet on the address noted below so that you may know how to do it and how to utilise this golden opportunity. Otherwise please do not say that you did not get intimation." It is necessary to reproduce another pamphlet, Ex. P-12, because according to the State there were clear misrepresentations of fact which amounted to cheating "Phone : 1266. M. C. C. Bhopal M. P. Grams "Jansewak" Government of India's Registered X X Firm, 1468. State Of Madhya Pradesh vs Mir Basit Ali Khan & Ors on 22 March, 1971 3 The Government of India after establishing the social service Department are doing a great service for the public and to the nation as a whole by spending lacks of rupees. The public have also been exerting manual labour in addition to giving their valuable time. But this Public Service scheme of ours is so unique that without any difficulty every individual of the country receives direct benefit to the extent of Rs. 2,309-50 by sitting at home. That is, remit your admission fee once through the de T. T. (sic.) and the Government postman will knock down at your doors several times to pay you up the amount. The Founder of this unique formula has placed before you in such a way that a person with ordinary intelligence will be pleased to understand it. HOW THIS IS POSSIBLE: Collect Rs.5.50 from each of your three friends, and out of this keep Rs. 5.50 for yourself and this remaining Rs. 11.00 may be remitted according to the schedule. It is thus clear that you have received your original amount of Rs. 5.50 in full immediately after the sale of three Policies. From the procedure explained above, it is very clear that this is neither a Gambling lottery, Riddle nor Satta. There is not the least possibility of your losing the amount. of course, such persons will be losers who will not be in a position to sell their three policies. Therefore, those persons who do not have the capacity of selling their 3 Policies need not join this scheme. But in our opinion we are confident that there Is no such an unfortunate person who is not having even three well wishing friends, or relatives in this vast world. But the question of selling 3 policies by an individual is most important. How.-You should purchase one policy by paying Rs. 5.50 nP. from any person who has already enrolled in this scheme or write to the Firm for the policy, by sending M. 0. of Rs. 5. Now select three energetic and enthusiastic friends, collect Rs. 5.50 from each of them and remit the M. Os. to the members and the Firm as shown in the schedule. Write down the names of your selected 3 friends with their address in full in BLOCK LETTERS ONLY. Send the Policy along with the M. 0. receipts to the firm by EXPRESS DELIVERY ONLY. Never send M. Os. to persons in column nos. 2 they will not get any amount to the extent of THIS POLICY ONLY BUT as and when this Policy goes in circulation they will automatically change their places and enjoy with their expected amount. FIRM'S RESPONSIBILITY: The firm will send you 3 policies in which you will stand in column No. 2 and that of the new member in column No. 1. Hand over these policies immediately to your friends carefully. As soon as you finish this job, YOUR RESPONSIBILITY IS OVER. The chain of M. Os., will be continued in such a way that your neighbors will be fed up with postman's voice. Because the beauty of our scheme is that we allow 15 days period for the sale of the policy to each of our member after the expiry of- the period we cancel such slack members and the same cancelled policy in which you stand in No. 2 is sold to other new members through our authorised agents and field officers, who are spread all over India thereby we try our utmost to continue your chain. The cause of failure of other previous Schemes is only due to not having this wonderful arrangement of continuation of Chain to which we give much importance. For this reason only we are having a very good response & our to days membership number is more than a lack all over India. Under unavoidable circumstances, extension of one week can be given on payment of extension fee of 0.37 nP. State Of Madhya Pradesh vs Mir Basit Ali Khan & Ors on 22 March, 1971 4 SCHEDULE S. NO. No. of Policies Amount payable Column No. 1 1 5.50 2 3 Nil 3 9 9.00 4 27 27.00 5 81 81.50 6 243 364.50 7 729 1822.50 Total No. of Policies 1093 2309.50 MOST IMPORTANT : If your chain of M. O.s. are discontinued for two weeks Please inform us immediately so that they may be continued. MEER BASITH ALI KHAN Author of Dukhi Kisan approved by the Ministry of Agr. Govt. of India, Founder of full House Proprietor M. C. C. Govt. of India's Regd. Firm No. 1468 Bhopal. TIME IS MONEY : If you are inclined to become agent, contact us and enjoy with the commission of 3.50 np. per member. The Chief agent will get 75 P. M. salary as well as commission of Rs. 3.50 per member. The advertisement expenses will also be borne by the The learned Sessions Judge had come to the conclusion that the respondents by using the expression "Government of India Registered Firm No. 1468" in their policies and pamphlets misled the public into believing that the scheme was sponsored by the Government of India or it had its approval. He also came to the conclusion that there was a misrepresentation in the pamphlet that the scheme was neither a gambling, lottery, riddle or a satta, but was an ordinary financial scheme. The learned 9-1 S.C. India/71 Sessions Judge had further found that as the remitter of the money orders was always Mir Basit Ali Khan,respondent No'. I and the Proprietor of M. C. C., the, member of the policy was left only with a small piece of paper, Ex. P-69, the -scheme 'contained a misrepresentation and suppression of material facts which made the respondents liable for conspiracy to cheat and cheating. The High Court, however, held that it being not in dispute that the firm was registered and its number was 1468 there was no fraudulent or deceitful representation. The High Court further held that most of the witnesses had clearly stated that they had known the fact that it was a private firm and the Government had nothing to do with it. The High Court was of the view that the statement may be an exaggeration or a puffing. The High Court, after going through the evidence and the various. pamphlets came to the following conclusion: "There appears to be no misrepresentation or suppression of any material facts with a view to defraud or cheat. How-so-ever speculative and unworkable the scheme may be, unless it is shown that there is a false representation or suppression of the material facts which might render it to be fraudulent, it cannot be said that the offence of cheating has been committed. of course, to judge its effect, the policy and the pamphlet has to be read as a. whole." The High Court further observed, after referring to a number of cases which we will presently deal with "In this scheme as aforesaid, the purchaser also got his amount alright and one can expect to get even more provided the Chain continued. As the policy with its rules and pamph let make it quite clear, the, appellants cannot be held guilty unless it is positively shown that some, deception had been practiced on the public with the result that they were deceived and they had paid the money. The prosecution has not produced any witness to say that some money was due from the company and they have been in any way deceived and the amount has not been paid. It is only the. Jhua lot of witnesses who could not be, paid because of the police raid and the, Ms. being withheld by the State Of Madhya Pradesh vs Mir Basit Ali Khan & Ors on 22 March, 1971 5 Magistrate." The High Court further found that the name of. Mir Basit Ali Khan, Proprietor, M. C. C., was mentioned simply because it was a chain scheme and that it may go on, working continuously, otherwise there is every possibility that some policy holder might not send the full amount or may not be traceable for one reason or the other. The High Court observed that nothing was kept secret from the policy holders and it was known to them alright that they had joined the scheme with the conditions laid down in the policy and the pamphlet. The High Court did not think that the size, of the taken had anything to do with cheating. The High Court accordingly came to the concl usion that the respondents had committed no offence. Regarding the money which had been seized by the police the High Court said that the money belonged to the policy holders and the respondents and it was a case where the money in question had 'to go back to them and it could not be ordered to be confiscated. The High Court accordingly directed that the respondents would be entitled to get back their amount which had .been withheld as property in the Sessions Trials referred to above. It is common ground that the Scheme is highly speculative, and the question which arises is whether it amounts to cheating under Section 420, 1. P. C. The learned counsel for the State ,stresses the following facts (1)None of the 2000 odd persons who purchased the policy had received Rs. 2309.50, the assured amount in the policy. (2) The large amounts of Rs. 90,750 and Rs. 5,52,587-95 were obtained by the respondents showed the extent of wrongful gain by them. (3)The policy holders had no control over other Policy holders which would assure continuance of the .scheme. (4)Merely because some persons received some :amount it could not be inferred that the scheme was not fraudulent (5)The evidence showed that the names entered in columns 3, 4, 5, 6 and 7 were bogus and that 2696 money orders were sent back to the remitter, as the persons were not traceable because of wrong addresses on the form. The learned counsel for the respondents contends that since the year 1939 similar schemes have been held not to fall within Section 420, I. P. C. , and the legislature must be deemed to have accepted the law as laid down in the cases. The learned counsel has drawn our, attention to two decisions of the Calcutta High Court on similar schemes. The earliest case pointed out by the learned counsel is Radha Ballav Pal, v. Emperor In that case (1) A. I. R. 1939 Cal. 327. the society was described as Government Registered No. 5934. registered under Act 11 of 1932. The High Court held that it was not a misrepresentation as this society was actually registered under that Act. Regarding the scheme the High Court held on the facts of that case that the scheme was one of those snowball schemes which were speculative to the highest degree and unworkable but it was not dishonest or fraudulent in the sense that it either represented to the public something which was not true or, concealed from them something which should have been disclosed. The High Court thought that it was an appeal to the gambling instinct of humanity but this cannot per se amount to cheating. This case was followed by another Bench of the Calcutta High Court in Hari Das Barat v. Emperor (1). The headnote brings out the decision thus : State Of Madhya Pradesh vs Mir Basit Ali Khan & Ors on 22 March, 1971 6 "Promoters of a financial snowball scheme, which could run only so long as there would be a continuous uninterrupted and enormously progressive increase in subscribers, but which could not go on indefinitely, would not be guilty of cheating, in the absence of false representations and dishonest concealment of facts either in the prospectus issued or in the conduct of the promoters, calculated to deceive the public and thereby induce it to contribute money to the scheme." These cases were distinguished in Nadir Barga Zaidi v. The State of U. P. (1) as the High Court felt that on the facts of that case there were misrepresentations made to the depositors and certain facts had been dishonestly concealed from them. In re M. K. Srinivasan (3) the facts were slightly different and the case does not assist us. It seems to us that the Calcutta cases, referred to above, were correctly decided and the High Court came to the correct conclusion. This appeal must accordingly fail. It is for the legislature to intervene if it wants to protect people who participate in these schemes knowing that sooner or later the schemes are bound to fail. In the result the appeal fails and is dismissed. G. C. Appeal dismissal. (1) [1939] 11 I. L. R. Cal. 81. (2) A. 1. R. 1960 All. 103. (3) A.I.R.1944Mad-410. State Of Madhya Pradesh vs Mir Basit Ali Khan & Ors on 22 March, 1971 7 | {
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B. Narayana Murthy & Ors. Etc vs State Of Andhra Pradesh Etc on 6 May, 1971 Equivalent citations: 1971 AIR 1716, 1971 SCR 741, AIR 1971 SUPREME COURT 1716 Author: I.D. Dua Bench: I.D. Dua, S.M. Sikri, G.K. Mitter, C.A. Vaidyialingam PETITIONER: B. NARAYANA MURTHY & ORS. ETC. Vs. RESPONDENT: STATE OF ANDHRA PRADESH ETC. DATE OF JUDGMENT06/05/1971 BENCH: DUA, I.D. BENCH: DUA, I.D. BHARGAVA, VISHISHTHA SIKRI, S.M. (CJ) MITTER, G.K. VAIDYIALINGAM, C.A. CITATION: 1971 AIR 1716 1971 SCR 741 1971 SCC (2) 425 ACT: Educational Institutions-Raising age of retirement of teachers-Re-fixing it at lower age-validity-Whether violative of Arts. 14 and 16 of Constitution. HEADNOTE: The retirement age of teachers in the service of the Andhra Pradesh Government, Zilla Parishads, Panchayat Samitis and Municipalities was fixed at 55 years till 1964 when Government raised the age of superannuation to 58 years. In 1966 the age was raised to 60 years, but, on November 3, 1967, Government issued a G.O. cancelling with effect from November 30, 1967, the two earlier G.0s. extending the age B. Narayana Murthy & Ors. Etc vs State Of Andhra Pradesh Etc on 6 May, 1971 1 of retirement; and corresponding changes were made in the rules relating to teachers in the service of Zilla Parishads, Panchayat Samitis and Municipalities. Some teachers challenged the G.O. dated November 3, 1967 and the 'High Court, holding that the teachers whose term had already been extended had a vested right to continue, directed the State Government not to give effect to the G. O. and the consequential rules as against such teachers. In pursuance of the judgment of the High Court Government issued a memorandum dated November 8, 1968, giving effect to the directions of the High Court and also providing that teachers who had attained the age of 55 years after November 30, 1967, should be dealt with under the G.O. dated 3rd November, 1967, and should be retired on attaining the age of 55 years. The petitioners challenged the memorandum on the ground that by not extending the benefit of the judgment of the High Court to them, land by fixing November 30, 1967, as the date for determining who should retire, Government acted arbitrarily and violated the equality rule embodied in Arts. 14 and 16 of the Constitution. HELD:(1) It was open to the Government to reduce the age of retirement without exposing such reduction to any constitutional infirmity. Fixing November 30, 1967, as the date for the classification of teachers who should retire at the age of 55 years could not be considered irrational or unreasonable. The object of raising the retirement age was to solve the problem of the dearth of qualified teachers because of the opening of new schools and the need for maximum utilisation of trained intelligensia. As soon as the dearth of qualified teachers disappeared Government restored the retiring age to 55 years. [748F, 750C] (2)If the Government order dated November 3, 1967, was valid then ,the petitioners had to retire at the age of 55 years notwithstanding the fact that after their initial employment the retirement age was raised first to 58 years and then to 60 years, because, those intermediary orders had been cancelled by the G.O. dated November 3, 1967, before the earlier ,Government orders became operative by actually retaining in service the present petitioners after their superannuation tinder the earlier rule. The 742 other employees were given benefit pursuant to the order of the High Court which had since become final.; Merely because by some subsequent orders the extended date of retirement was accepted in respect of those employees it would not entitle, by itself, the present petitioners to claim similar extension of age of retirement The directions given by the High. Court provide a valid differentia and the petitioners could not claim to be equated with those employees who had been given such benefit. [748G749C] (3)It could not be said that the Government having accepted the judgment of the High Court, the earlier orders B. Narayana Murthy & Ors. Etc vs State Of Andhra Pradesh Etc on 6 May, 1971 2 increasing the age of compulsory retirement must automatically be held to be revived. The Government only gave the benefit of the decision of the High Court to those employees whose cases were covered by the principle laid down by the High, Court. [749H; 750B] (4)Fundamental rule 56(a) does not govern the teachers employed, by the Municipalities, Zilla Parishads and Panchayat Samitis. [751A] (5)The submission that the rules applicable to the teachers employed' by such bodies were intended to be in conformity with the fundamental rule is of no avail to the petitioners because those rules could not be considered to have been automatically modified as a result of an)( amendment in the fundamental rule 56(a), when there is no consequent modification of the rules governing teachers employed in such bodies. [751B] JUDGMENT: ORIGINAL JURISDICTION : Writ Petitions Nos. 144, 216, 217, 221, 223, 242, 247 to 249, 308 and 324 of 1970. Petition under Article 32 of the Constiution of India for the enforecement of fundamental rights. L.M. Singhvi, Kanta Rao and K. Rajendra Chaudhuri, for the petitioners (in W. P. No. 144/1970.). B.Kanta Rao and K. Rajendra Chaudhuri, for the petitioners, (in W. P. No. 21 of 1970). M.C. Chagla, S. S. Shukla and B. Kanta Rao, for the peti- tioners (in W. P. No. 249 of 1970). S.s. Shukla and B. Kanta Rao, for the petitioners (in W. P: Nos. 216, 248 and 324 of 1970). Sarjoo Prasad and A. Subba Rao, for the petitioners (in W. P. No. 217of 1970). A. Subbh Rao, for the petitioners (in W. P. No. 247/1970.) K, Jayaram, for the petitioners (in W. P. Nos. 223 and 242, of 1970). B. Kanta Rao and G. Narasimhulu, for the petitioner (in W. P. No. 308 of 1970). P. Ram Reddy and A . V. V. Nair, for respondents No. 1 W. P. Nos. 144, 216, 217, 221, 223, 242, 247, 248 and 249 of 1970, P.Rom Reddy and P. Parameswara Rao, for respondent Nos. 6 and 28 (in W. P. No. 217 of 1970), respondents Nos. 4 and 10 in W. P. No. 223/70), respondents Nos. 84, 38, 52, 83 and 120 (in W. P. No. 247/1970), respondent No. 2 (in W. P. .No. 248). The Judgment of the Court was delivered by Dua, This batch of writ petitions raise common questions of fact and law and have, therefore, been heard together and ,are being disposed of by a common judgment. As the salient features of all the writ petitions are similar in essential B. Narayana Murthy & Ors. Etc vs State Of Andhra Pradesh Etc on 6 May, 1971 3 particulars, we may, for understanding the nature of the controversy, only refer to the facts of writ Petition No. 217 of 1970 (B. V. Subhaiah & Ors v. State of Andhra Pradesh & Ors.), because Shri Sarjoo Prasad who led the arguments on behalf of the petitioners addressed us by reference to this writ petition as illustrative of the common controversy. Writ Petition No. 217 of 1970 has been presented in this Court by 387 teachers under Art. 32 of the Constitution praying for a writ in the nature of mandamus or order or direction restraining the respondents from giving effect to, (i) the orders, G. O. Ms. No. 2219 dated November 3, 1967, read with Government of Andhra Pradesh Memo No. 6573 dated November 8, 1968 and G. O. Ms. No. 1321 dated June 17, 1969, (ii) the substituted r. 14 of the Rules made under the Andhra Pradesh Municipalities Act, and (iii) the substituted r. 16 of the Rules made under the Panchayat Samitis and Zilla Parishads Act. A declaration is also claimed to the effect that order No. G. O. Ms. No. 2219 dated November 3, 1967 read with Government Memo No. 6573 dated November 8, 1968 and G. O. Ms. No. 1321 dated June 17, 1969, Note 2 of the Fundamental Rule 56(a) and the Rules made under the Andhra Municipalities Act and Andhra Pradesh Panchayat Samitis Zilla Parishads Act are illegal and unconstitutional and for a further declaration that the rules laid down in G. O. Ms. No. 3099 dated November 30, 1964 and No. 1596 dated June 26, 1966 are applicable to the petitioners subject to the conditions stipulated in those orders. These petitioners claim to be working as permanent teachers in the service of Zilla Parishads, Panchayat Samitis and Municipalities for the last 25 or 30 years. According to their averments, the retirement age for the teachers in the service of the Andhra Pradesh Government, Zilla Parishads, Panchayat Samitis and the Municipalities is fixed at 55 years. Under F. R. 56(a) and the Subsidiary Rules of the Andhra Pradesh Government 1962, a government servant may however be retained in service after completing 55 years with the sanction of the Government and in special circumstances he may even be retained in service after 60 years. Rule 14 of the Establishment Rules made under the Andhra Pradesh Municipalities Act, 1959, and r. 16 of the Rules made under the Andhra Pradesh Zilla Parishads and Panchayat Samitis Act, 1959, also fix the age of retirement at 55 years for the employees of these bodies. The Fundamental Rule providing for extension of the age of retirement with the sanction of the Government on public ground was also claimed in the petition to be applicable to the employees under the Municipalities, Zilla Parishads and Panchayat Samitis, though at the hearing no serious attempt was made to substantiate this averment, or to show it advances their case. On November 20, 1964, the Government of Andhra Pradesh issued G. O. Ms. No. 3099 raising the age of superannuation to 58 years subject to medical fitness-and satisfactory work and conduct in respect of the Head-Masters and teaching staff in Government service and also in the institutions under the Zilla Parishads and Panchayat Samitis and Municipalities. On June 28, 1966, the Education Department of Andhra Pradesh issued G. O. Ms. No. 1596 raising the age of retirement to 60 years subject to certain conditions. On August 26, 1966, a clarification was issued whereby extension of service upto 60 years was stated to be subject to only two conditions, namely, medical fitness and satis- factory work and conduct. On November 3, 1967 the Government of Andhra Pradesh issued G. O. Ms. No. 2219 cancelling with effect from November 30, 1967, the earlier B. Narayana Murthy & Ors. Etc vs State Of Andhra Pradesh Etc on 6 May, 1971 4 Government orders extending the age of retirement of teachers, first from 55 to 58 and then from 58 to 60 years. This order also contained a direction for making suitable rules under the Panchayat Samitis and Municipalities Act separately, by the Panchayat Raj and Health, Housing and Municipal Administration Departments so as to give effect to the Government's decision. It was however provided in this order that the teachers affected thereby would be continued in service till the end of the academic year 1967-68 in order to ensure continuity in the academic teaching. On November 16, 1967, new r. 16 was substituted for old r. 16 by means of which the age of superannuation of officers and servants of Panchayat Samits and Zilla Parishads was reduced to 55 years. On November 20, 1967, new r. 14 was substituted for the old r. 14, similarly reducing the retirement age to 55 years, in respect of the employees of the establishments under the Municipalities. On March 14, 1968, Fundamental Rules 56(a) was amended by the Governor under Art. 309 of the Constitution by adding to it Note 2, according to which a government servant retained in service after the date of compulsory retirement could be retired at any time without notice and without assigning any reason. It appears that some teachers, other than the present petitioners, feeling aggrieved by these orders approached the Andhra Pradesh High Court for relief under Art. 226 of the Constitution. On April 16, 1968, Chinnappa Reddy, J., allowed those writ petitions and directed the Andhra Pradesh Government not to give ,effect to G. O. Ms. No. 2219 dated November 3, 1967, and the amendment to the Fundamental Rule and the Rules under the Municipalities Act, Panchayat Samitis and Zilla Parishads Act, insofar as they affected the rights of the petitioners in those petitions. Another batch of teachers employed by the Zilla Parishads, Panchayat Samitis and the Municipalities, other than the present petitioners, along with a few teachers employed by private establishments also applied to that High Court under Art. 226 of the Constitution with similar grievance. Those writ petitions were disposed of by the same learned Judge on August 7, 1968. The State in those cases tried, without success, to get over the ;earlier judgment in the case of the teachers by relying on the decision of the Supreme Court in B. S. Vadera v. Union of 'India & Ors.(1) which upheld the validity of retrospective operation of Rules made under Art. 309 of the Constitution. On appeal from the earlier judgment of the learned Single Judge, a Division Bench of the Andhra Pradesh High Court on April 14, 1969, agreed with the single bench in holding that the ,cancellation of the extension of the service of the writ petitioners by the impugned orders was inoperative. In the meantime, in pursuance of the judgment of the learned Single Judge the Government had on November 8, 1968, issued a Government Memo providing as under "1. Teachers employed by Municipalities, Zilla Parishad and Panchayat Samithis. (a)Teachers whose services have been extended up to the age of 60 years by specific individual orders should be retained in service until they attain that age. (b)Teachers who attained the age of 55 years before 30-11-1967 and in whose favour there are specific individual orders extending their services up to 58 years ,should be retained in service until they attain the age of 58 years, and thereafter their cases for further extension up to the age of 60 years should be considered by the competent B. Narayana Murthy & Ors. Etc vs State Of Andhra Pradesh Etc on 6 May, 1971 5 authorities in accordance with the G. O. Ms. 3099 Edn. dated 20-11-1964 and G. O. Ms. No. 1596 Edn. dated 28-6-1966. (1) W.P.No. 96 of 1967 decided on March 27, 1958, since reported as [1968] 3 S.C.R. 575. (C)The cases of teachers who attained the age of 55 years before 30-11-1967 but in whose favour there are no specific individual, orders of extension of service. should be considered by the competent authorities in accordance with G. O. Ms. No. 3099 Edn. dated 20-11-64 and G. O. Ms. No. 1596 Edn. dated 28- 6-1966.. (d)Teachers who attained the age of 55 years after 30-11-1967 should be dealt with under G. O. Ms. No.. 2219, Education dt. 3-11- 1967 and they should be retired on attaining the age of 55 years. Any such person con- tinued in service after attaining 55 years as a result of the High Court's stay orders should be considered as on extension and their extension terminated immediately." On March 17, 1969, the Government issued a Memorandum (No. 5929/HI/68) directing all the Block Development Officers,. Secretaries of Zilla Parishads and Secretaries of Municipal Councils not to oust the teachers who had attained 55 years of age before November 30, 1967, merely because there were no extension orders in their favour. This Memorandum also desired that proposals for extension of service of teachers be promptly forwarded to the District Educational Officers concerned without. delay. On June 17, 1969, r. 16(2) of the Rules relating to the establishments under the Panchayat Samitis and Zilla Parishads was amended. so as to bring it in conformity with the decision arrived at pursuant to the judgment of the High Court. The petitioners before us are feeling aggrieved by cl. (d) of the Memorandum issued by the Government on November 8, 1968, and it is this clause which is the main target of challenge. on behalf of the petitioners. Mr. Sarjoo Prasad who led the attack on behalf of the peti- tioners and addressed us in support of Writ Petition No. 217 of 1970 categorized his challenge under three heads : (1)that the classification made by the Government order fixing November 30, 1967, as the date for determining as to who should retire at the age of 55 years and whose service should be extended is arbitrary and highly discriminatory; (2)that the Government order dated November 3. 1967 can only affect persons joining service after that date andnot those who were already in service because their service conditions could not be unilaterally changed B. Narayana Murthy & Ors. Etc vs State Of Andhra Pradesh Etc on 6 May, 1971 6 to their prejudice; and (3)that Government is estopped to vary the date of retirement of the petitioners because they had on the faith of the modified conditions of their service arranged their affairs on the basis of their retirement at the age of 60 years. By way of illustration it was pointed that their contributions to the provident fund and their life insurance policies had been so planned as to suitably fit in with their retirement at the completion of 60 years. We did not permit Mr. Sarjoo Prasad to raise points Nos. (2) & (3) because they did not pertain to any fundamental right of the petitioners. In so far as point No. (1) is concerned the learned counsel concentrated on the contention that the classification based on November 30, 1967 as the dividing tine for determining the age of retirement was arbitrary and highly discriminatory, and it denied to the petitioners on irrational grounds equal opportunity with those employed along with them. The Government Order No. 2219 dated November 3, 1967, which cancelled the earlier orders extending the age of retirement reads as under : "G. O. Ms. No. 2219 Edn. Dated 3rd Nov., 1967. Reading the following :- 1. G. O. Ms. No. 3099 Education dated 22-11-1964 2. G. O. Ms. No. 1596 Education dated 28-6- 1966. and 3.Memo No. 8553-H. 1/66-1-1 Education dated 26-8-1966 ORDER The Government hereby direct that the orders contained in the Government Orders first and second read above, as subse- quently amended, extending the age of retirement of teachers from 55 to 58 and from 58 to 60 years be cancelled with effect from 30th November 1967. Suitable rules under the Panchayat and Municipalities Act will be made separately by the Panchayat Raj and Health, Housing and Municipal Administration Departments to give effect to the above decision. (2)The teachers who are affected by the orders in para 1 above, will however be continued in service till the end of the academic year 1967-68 in order to ensure continuity in the academic teaching." On behalf of the respondents justification for first increasing the age of compulsory retirement to 58 and then to 60 years and later restoring it to 55 years is stated in the counter- affidavit in the following words ".....................the G. O. did not contemplate any classification for it fixed a uniform date for retirement of teachers, who have completed 55 years but who got extension of the period of service, even before they attained their 60th year. It is only in compliance with the order of the Hon'ble High Court of Andhra Pradesh dated 164-1968 in Writ Petitions Nos. 3105 of 1967, etc. holding that teachers whose term has already been extended up to their 60th year have got a vested right to continue till their 60th year that they were allowed to continue. It is also significant that the Writ Appeal preferred by this respondent against the judgment w as also dismissed. The writ petitions filed by the teachers who did not complete their 55th year before the G. O. reducing the age of retirement was passed were dismissed by the same High Court in Judgment dated 7-8-1968 in W. B. Narayana Murthy & Ors. Etc vs State Of Andhra Pradesh Etc on 6 May, 1971 7 P. Nos. 1741 of 1968 etc. As such even if there are some anomalies in the working out of the G. O. that will not be a ground for striking out the G. O. as it treats alike all in the same category. x x x the object for raising the retirement age was to solve the problem of dearth of qualified teachers because of the opening of new schools and the need for the maximum utilisation of trained intelligensia." It is further explained in the counter-affidavit that as soon as the dearth of qualified teachers disappeared, the retirement age was again restored to 55 years. In this counter-affidavit it is also pointed out that "if the G. O. is struck down, it will mean 'extension of services of thousands of teachers, when there is really no need for them." After a faint attempt to challenge the validity of the Government Order No. 2219 dated November 3, 1967, the learned counsel expressly confined his challenge only to the subsequent orders made by the Government. Now if G. O. No. 2219 dated November 3, 1967 is valid, then obviously the petitioners have to retire at the age of 55 years notwithstanding the fact that after their initial employment their retirement age was raised by Government orders, first from 55 to 58 years and then to 60 years because those intermediary orders had been cancelled by G. O. No. 2219 before they became operative by actually retaining in service the present petitioners after their superannuation under the earlier rules. Merely because by some subsequent orders the extended date of retirement was accepted in respect of those employees in whose favour either specific orders had been made extending their age of retirement from 55 to 58 or to 60 years, or who had,' after crossing the 55 years age limit, been actually retained in service pursuant to the modified directions, notwithstanding that those directions were later cancelled, would not by itself entitle the present petitioners to claim similar extension in their age of retirement on the basis of the equality rule embodied in Arts. 14 & 16 of the Constitution. The other employees were given benefit of the directions pursuant to the orders of the High Court which have since become final. This clearly provides a valid differentia and the present petitioners cannot claim to be equated with those employees who had been given such benefits. The learned counsel contended that the case of the present petitioners is identical with that of the teachers who had applied to the Andhra Pradesh High Court and had secured orders in their favour. The present petitioners, it was argued, having also acquired a vested right by virtue of the Government orders raising their retirement age to 60 years are entitled to claim from this Court similar orders as were made by the High Court in favour of the petitioners in the two writ petitions. We do not think there is any such fundamental right possessed by the present petitioners as would entitle them to claim similar relief from this Court in the present proceedings. The two categories of the tea- chers employed by the three local bodies are distinct and separate. We are not concerned with the question whether the High Court was right in granting relief to the petitioners in the two earlier cases, though the respondent has in the counter-affidavit questioned the correctness of those orders. They became final and are binding on the parties to those proceedings. The present petitioners did not secure similar orders and now their retirement age having been restored to the original limit of 55 years the petitioners cannot claim the higher age limit. No doubt during a short period the increased age limit for retirement remained in force. But, as is rightly conceded by all the counsel for the various petitioners, it is open to the Government in this case to reduce the age of retirement without exposing such reduction to any constitutional infirmity. B. Narayana Murthy & Ors. Etc vs State Of Andhra Pradesh Etc on 6 May, 1971 8 In this connection it may be pointed out that the Andhra Pradesh High Court also had by a subsequent order denied relief to some of the teachers similarly placed as the present petitioners, holding their case- to be distinguishable from that of the teachers who had successfully applied for relief in the earlier two writ petitions. The submission, that when the Government itself accepted the judgment of the Andhra Pradesh High Court striking down the Government order reducing the retirement age to 55 years, then the earlier order increasing the age of compulsory retirement must automatically be held to be revived, is unacceptable. The Government, it is noteworthy, made the impugned orders after the decision. of the Andhra Pradesh High Court with the object of giving the benefit of that decision to all the employees whose cases were covered by the principal laid down by the High Court. The case of the present petitioners is quite different and is not covered by the rule laid down by the High Court. The impugned Government order fixing November 30, 1967, as the date for founding the classification of teachers who should retire at the age of 55 years and those who should get the benefit of the interim orders extending the age of retirement to 58 or 60 years cannot be considered to be either irrational, or unreasonable or having no nexus with the object to be achieved .by reducing the age of retirement. The problem of unemployment in our country is undoubtedly a complex problem and opinions may differ how best to solve it. But that would not raise any question of fundamental right with which alone we are concerned in the present proceedings. The position as stated in the counter- affidavit in the case before us, however, furnishes a complete answer to the petitioner's contention. The classification made by the Government does not suffer from any infirmity as it is founded on rational nexus with the object to be achieved. Shri Chagla appearing in support of Writ Petition No. 249 of 1970 also made attempt to challenge the Government Order dated November 3, 1967. But nothing new was urged and the learned counsel had, with his usual candour, to concede that the Government could lawfully reduce the age of retirement without attracting constitutional infirmity. Dr. Singhvi appearing in support of Writ Petition No. 144 of 1970 drew our attention to Fundamental Rule 56(a) as amended by the Andhra Pradesh Government in 1965 and submitted that according to the amended sub-rule "the date of compulsory retirement of a Government servant, whether ministerial or nonministerial and in the last grade service is the date on which he attains to the age of 55 years and 60 years respectively". According to the learned counsel the petitioners are non-ministerial government servants in the last grade service and are, therefore, entitled to remain in service till they attain 60 years of age. This submission appears to us to be inconsistent with the petitioners' case as pleaded in the writ petitions. In the writ petitions it has been assumed that according to the F. R. 56(a) the teachers have ordinarily to retire at the age of 55 years. In any event, whether or not the amended F. R. 56(a) fixed the retirement age of nonministerial government servants at 60 years, and whether or not the petitioners are covered by this rule, seems to be immaterial because it has not been shown that the teachers employed by the Municipalities, Zilla Parishads and Panchayat Samitis are governed directly by this Fundamental Rule. The submission that ,.the rule applicable to the teachers employed by such bodies was .intended to be in conformity with the Fundamental Rule is of little avail to the petitioners because those Rules could not be considered to have been automatically modified as result of the .amendment in F. R. 56(a) in 1965. It is not disputed that there is no such B. Narayana Murthy & Ors. Etc vs State Of Andhra Pradesh Etc on 6 May, 1971 9 modification in the Rules which directly govern such teachers. The argument based on the amended F. R. 56(a) is, therefore, of no assistance to the petitioners. Dr. Singhvi's criticism that the position taken up in the counter-affidavit that the rule "last come, first go" applies to the petitioners is unfounded also cannot benefit the petitioners. The petitioners have to retire at the age of 55 years because the benefit under the intermediary directions, which have since been cancelled, ,cannot after cancellation be claimed by them under any provision of law. This contention is, therefore, also repelled. Dr. Singhvi referred us to Bishun Narain Mishra v. State of Uttar Pradesh and Others(1); State of Assam and others v. Premadhar Baruah and others(1); and to an unreported decision of this Court in The State of U. P. and Anr. v. Kishan Chand Dhaune). These decisions do not advance the petitioners' case. In Bishun Narain Mishra(1) this Court observed: "Now it cannot be urged that if Government decides to retain the services of some public servants after the age of retirement it must retain every public servant for the same length of time. The retention of public servants after the period of retirement depends upon their efficiency and the exigencies of public service, and in the present case the difference in the period of retention has arisen on account of exigencies of public service." In Premadhar Baruah(2) it was observed by this Court "As we have already indicated paragraph 4 of the memorandum flowed from F. R. 56(a). The Government could retain a Government servant beyond the age of superannuation. The Government has also the discretion to withdraw such retention in service because the retention does not confer any right on the Government servant." (1) [1965] 1 S.C.R. 693. (2) A.I.R. [1970] S.C. 1314. (3) C.A. No. 1832 of 1968 decided on Dec. 12, 1968. It is, not understood how those decisions are helpful to the counsel. The unreported decision had to deal with a different problem and nothing said in that judgment has been shown to assist the petitioners before us. In the other writ petitions the counsel merely adopted the arguments raised by Mr. Sarjoo Prasad and Mr. Chagla, and therefore they do not call for any comment. In the final result, all the writ petitions are dismissed, but in the circumstances with no order as to costs. V.P.S. Petitions dismissed. B. Narayana Murthy & Ors. Etc vs State Of Andhra Pradesh Etc on 6 May, 1971 10 | {
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Jonnala Narasimharao & Co. & Ors. Etc. ... vs State Of Andhra Pradesh & Ors on 5 April, 1971 Equivalent citations: 1971 AIR 1507, 1971 SCR 367, AIR 1971 SUPREME COURT 1507, 1971 TAX. L. R. 939 Author: P. Jaganmohan Reddy Bench: P. Jaganmohan Reddy, S.M. Sikri, G.K. Mitter, K.S. Hegde, A.N. Grover PETITIONER: JONNALA NARASIMHARAO & CO. & ORS. ETC. ETC. Vs. RESPONDENT: STATE OF ANDHRA PRADESH & ORS. DATE OF JUDGMENT05/04/1971 BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN SIKRI, S.M. (CJ) MITTER, G.K. HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 1507 1971 SCR 367 ACT: Andhra Pradesh General Sales Tax Act, 1957 as amended by Act 9 of 1970-Past assessments under invalid law validated- Agents selling jaggery on behalf of principals made liable under s. 11 as amended to pay the tax collected by them- Agents had no locus standi to challenge levy on the basis of discrimination between principals inter se-Validity of s. 9 of Amending Act-Classification between dealers who had collected tax and those who had not collected is reasonable. HEADNOTE: The appellants carried on the business of Commission Agents in Jaggery in Andhra Pradesh. They arranged for the sale of Jonnala Narasimharao & Co. & Ors. Etc. ... vs State Of Andhra Pradesh & Ors on 5 April, 1971 1 jaggery charging a small commission for their service and rendering an account to their Principals in respect of those sales. Every buyer was fully apprised of the fact that he was purchasing jaggery of specified agriculturist Principals and not that of the appellants. Till about 1963 under s. II of the Andhra Pradesh General Sales Tax Act, 1957, commission agents were required to obtain and were being issued licences and if they conformed to the conditions of those licences, they were not subjected to tax. In 1963 the principal Act was amended by Andhra Pradesh General Sales Tax Amendment Act 16of 1963. By the new s. I I introduced by the Amending Act the Agentsof resident Principals were made liable for assessment and collection of tax though- the liability of the Agent was made co-extensive with that of the principal. The High Court held that in assessing the Agent the turnover of those Principals whose turnover was below the taxable limit of Rs. 10,000 could not be taken into account. As a consequence of this decision the Andhra Pradesh General Sales Tax Amendment Act 5 of 1968 was enacted and a new s. I 1 substituted for the existing section. This s. II was given retrospective effect from 1st August 1963. The object of this amendment was to enable the taxing authorities to assess levy and collect tax or penalty under the Sales Tax Act from the Agent irrespective of the fact that the Principal was not liable to tax. This new section was also struck down by the High Court, on the ground that it was violative of Art. 14 of the Constitution. In view of this judgment which restored the legal position to that prevailing before the Amendment, large sums of money which bad been collected as tax from the Agents became refundable. To meet this situation the Andhra Pradesh Legislature enacted the Andhra Pradesh General gales Tax Amendment Act 9 of 1970, Section 8 of which validated the assessments already made. Under s. 9 Agents who had not collected the tax from their Principals were exempted from tax. Under s. I I Agents who had collected the tax were made liable to pay the same. In writ petitions under Art. 226 filed by Agents it was contended that s. II as amended and s. 9 of the Amending Act were violative of Art. 14. The High Court held that s. 1 1 was valid but s. 9 violated Art. 14. In appeal filed against the High Court's judgment by certificate, HELD:(i) The appeals filed by the agents were not maintainable. What was sought to be recovered from the appellants was in respect of a tax collected on past dealings and not with respect to the future transactions. The tax had already been collected, no doubt at first illegally, but 368 due to the Amendment Act, that collection had become legal and as dealers, the appellants were liable to pay that amount to the State. As there was nothing to show that what was sought to be recovered from the dealer was more than Jonnala Narasimharao & Co. & Ors. Etc. ... vs State Of Andhra Pradesh & Ors on 5 April, 1971 2 what he had collected he had not suffered any loss nor any disadvantage which would entitle him to seek a remedy under Art. 226 of the Constitution [373B-C] (ii) Section 9 had been wrongly struck down by the High Court as invalid. This section was enacted by the legislature with the object of removing shortcomings in the principal Act which were found wanting by judicial interpretation. The interregnum between the declaration by the High Court of certain provisions of the Act as being unconstitutional and the attempt of the legislature to remedy the defects and to give retrospective effect thereto created two distinct categories between the same class of dealers namely those who had collected the tax whether they were assessed or not and those who had not collected the tax. This classification was certainly reasonable and was related to the object which the Amendment Act sought to achieve. The dealers who had not collected the tax could not have collected it as the law stood and therefore the legislature thought it just or proper to collect the tax from those who were not liable. . Even this exemption was given to those who could establish that they had not in fact collected it, the burden of which was upon those who claimed the exemption. [374D-E], JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2116, 2217, 2218, 2126 to 2128 of 1970 , 33, 144 ,157, 159 to 163 and 164 to 166 of 1971. Appeals from the judgments and orders dated the September 5, 1970 of the Andhra Pradesh High Court in Writ Petitions Nos. 2720 of 1970 etc. S. V. Gupte and G. Narayana Rao for the appellants (in 2116 of 1970). C.A. No. M. Natesan and G. Narayana Rao for the appellants (in C.A. No. 2217 of 1970). G. Narayana Rao for the appellants (in C. As. Nos. 2218 of 1970, 144, 157, 159 to 163 and 164 to 166 of 1971). M. C. Setalvad and W. C. Chopra, for the appellants (in C.As. No. 2126, of 1970). Polesseti Ramachandra Rao and W. C. Chopra for the appel- lants (in C.As. Nos. 2127 and 2128 of 1970). S. T. Desai and K. Rajendra Chowdhary, for the appellants, (in C.A. No. 33 of 1971). P. Ram Reddy and P. Parameshwara Rao, for the respon- dents (in all the appeals). The Judgment of the Court was delivered by p. Jaganmohan Reddy, J.--This batch of Appeals is by Cer- tificate against a common Judgment of the Andhra Pradesh High Court dismissing the Writ Petitions filed by several dealers in jaggery who challenged the vires and constitutionality of Jonnala Narasimharao & Co. & Ors. Etc. ... vs State Of Andhra Pradesh & Ors on 5 April, 1971 3 Sections 2, 5, 8 and 9 of the Andhra Pradesh, General Sales Tax Amendment Act 9 of 1970 (hereinafter called the "Amendment Act"). The Appellants are Commission Agents carrying on trade in jaggery. Agriculturists who prepare jaggery out of surplus sugarcane which they are unable to sell to the Sugar factories employ the Appellants as their Commission Agents to sell that jaggery. We will take the facts in Civil Appeal No. 2116 of 1970 as typical of the common question arising in all these Appeals. The Appellants carry on business of Commission Agent in jaggery in Anakapalli, Visakhapatnam and at varies places in West Godavari. In the course of their business the Appellants arrange, for the sale of jaggery charging a small commission for their services and renders an account to the respective principals in respect of these sales. In the pattis issued to the Agriculture the name of the persons to whom jaggery is sold is specifically mentioned. The baskets of each principal are separately marked. The stock register also indicates the number of baskets of jaggery held in the name of the Commission Agents. Every buyer is fully ap- prised of the fact that he is purchasing the jaggery of specified agriculturist principals and not that of the Appellants. This procedure it is said has been in vogue for a long time. Till about 1963 under Section 11 of Madras General Sales Tax Act as well as under the Andhra Pradesh General Sales Tax Act 1957 (hereinafter called the "Principal Act") Commission Agents were required to obtain and were being issued licences and if they conformed to the conditions of those licences they were not subjected to tax. In 1963 the Principal Act was amended by Andhra Pradesh General Sales Tax Amendment Act 16 of 1963 which substituted a new Section II for that which was in force fill then. The new Section II changed the preexisting structure of assessment in that, the Agents of Resident Principals were made liable for assessment and collection of Tax through the liability of the Agent was made co-extensive with that of the Principal. The Sales Tax authorities however were making assessments of the turn-over of the Agents in respect of the purchase and sales of jaggery of several principals notwithstanding the fact that the turnover upto Rs. 10000/- of each was not exigible to tax. These assessments were challenged in a batch of writ petitions in Irri Raju & Ors. v. The Commercial Tax Officer, Tedeplalligudem & Anr.(1) in which the, High Court of Andhra Pradesh hold that the (1) Sales Tax Cases-Vol. XX (1967) p. 501. 24-1 SC India/71 provisions of the principal Act indicated that the Agent is a dealer in respect of each of the principals, that he is deemed to be as many dealers as there are principals and therefore the total turn-over of the Agent in respect of the several principals could not be computed for assessing him when in fact the turnover of each of the principals was below the limit i.e. Rs. 10.000/-. As a consequence of this. decision, the Andhra Pradesh General Sales Tax Amendment Act 5 of 1968 was enacted and a new Section 1 1 was substituted for the then existing Section. This Section II was given retrospective effect from the 1st August 1963. The object of this Amendment was to enable the 'Taxing authorities to assess, levy and collect tax or penalty under the Sales Tax Act from the Agent irrespective of the fact that such principal is not liable to pay the tax or penalty in respect of that transaction on account of the turn-over of the principal being less than the minimum turnover specified in sub-section of section 5. The proviso to the new Section II however authorised the Tax or penalty assessed or levied on or due from the Agent to, be, recovered by the Assessing authorities from the Principals instead of from the Agents, only if the principal is liable to pay tax or penalty. This new Section was also challenged on various grounds in a batch of writ petitions in Sri Jonnala Narasimharao & Co. & Ors. Etc. ... vs State Of Andhra Pradesh & Ors on 5 April, 1971 4 Konathala Venkata Ramana & Budha Apparao v. State of Andhra Pradesh & Anr.(1). The High Court held that even after the amendment the liability of the Agent continues to be based on the principal of representation and whether he is a dealer in respect of an the principals or only one principal, his liability is co-extensive with that of the principal. It also held that while there is no conflict between Section 5 and Section II of the Act, Section II which authorises the imposition of a tax independently of the liability of the principal or which takes away or limits the rights of the Agent to reimburse himself or withhold moneys due to the principal only where the principal is liable is discriminatory and is hit by Article 14. In view of this Judgment, which in fact restored the legal position to that prevailing prior to the Amendment, large sums of money in which assessments had been made and tax collected became refundable To meet this situation the Legislature enacted the Andhra Pradesh General Sales Tax Amendment Act 9 of 1970. The effect of the. Amendments made by Sec. 2. 5, 8 and 9 of the Amendment Act is that a proviso was added to Section 5(1), a new Section II was substituted for the old Section II with retrospective effect from 1-8-63. The, amended Section 11 it may be noticed (1) Sales Tax Cases-Vol. 24 (1969) P. 367. was identical with Section 1 1 as it stood on 1-8-1963. The first schedule to the principal Act was also amended by adding jaggery as item 77 which was made taxable at the point of first sale at 5 paise in the Rupee. It was further provided that as soon as this entry came into force on the date fixed by a Notification the proviso to Section 5 (A) added by Section 2 of the Amending Act would cease to have effect. Section 8 of the Amending Act purported to validate the assessments already made while Section 9 granted exemption from liability to pay tax in certain cases. We have already noticed that jaggery was being taxed at the point of the first purchase of its sale between 1-2-6o and 31-7-63 but by reason of the Amendment introduced by Act 16 of' 1963 a multiple point tax on safe subject to an exemption of a turn-over of Rs. 10000/- became leviable at 2 paise pet Rupee from 1-8-63 which rate was enhanced to 3 paise from 1-4-1966 by Amendment Act 7 of 1966. A single point taxation was however levied on items in Schedule 1 and 2 of the Act which became chargeable as such under Section 5(2). We are not concerned with schedule 3 which deals with declared goods but schedule 4 specified the goods which are exempt in terms of Section 8. All other sales which do not fall within the schedules are as earlier stated exigible to multiple point tax under Section 5(1) of the Act subject to the minimum of Rs. 10,000/-. The Appellants had before the High Court of Andhra Pradesh raised several contentions but the principal attack was confined to 3 aspects of the Amendment Act. Firstly that Section II read with the new proviso to Section 5 (1) makes an invidious distinction between dealers in jaggery on the one hand and dealers in other commodities on the other by perpetuating an unreasonable classification which is based on no intelligible differentia nor can any reasonable nexus be discerned with the object that the Amendment seeks to achieve. Secondly that Section 9 has to be read as part of Section 2 of the Amendment Act by which a new proviso is added to Section 5(1) of the Principal Act and is a part of Section 11 substituted by the Amendment Act. If so read the new proviso to Section 5(1) and the new Section II would be violative of Art. 14 inasmuch as the dealers in jaggery similarly situated have been invidiously discriminated by levying tax from those, dealers who have collected the tax and the dealers who have not collected the tax. Thirdly that the basis of the Jonnala Narasimharao & Co. & Ors. Etc. ... vs State Of Andhra Pradesh & Ors on 5 April, 1971 5 amendment is an imposition of a tax not on the transaction of sale or purchase of jaggery but on the, collection or non-collection of the tax by the dealers, as such it is also bit by Article 14 of the Constitution. The High Court rejected all these contentions except the one relating, to the validity of Section, 9. the State of Andhra Pradesh as well as the Appellants in Civil Appeal No. 33 of 1971 had contended that that provision which granted an, exemption from. payment of tax to, dealers who bad not, in fact collected the tax from their principal was, valid and did, not suffer from the vice of discrimination under Art. 14 because not only was the classification reasonable but that it was based on an intelligible differentia having a nexus with- the object of the impugned Act. We shall however deal with last mentioned aspect presently but before we do so on the threshold of the argument of them Appellants there is a valid objection to the maintainability of the Writ Petitions filed by the dealers who as Agents of the Principals had collected tax from the purchasers which as a consequence of the two decisions, of the High Court referred to earlier was illegal. After the, amendment Act the levy and collection by the dealers became prima facie legal. In so, far as jaggery is concerned there was also no question of any, exemption of the minimum turnover of the principal of Rs. 10,000, so That the hardship which a Corn-- mission Agent dealer had to undergo in trying to determine whether the, turn-over of each of his principals was below Rs. 10,000 before he could collect Sales Tax was no longer there. After the Amendment by removing the exemption of Rs 10,000 on sale of jaggery which was given retrospective -effect, the dealer agents could not now complain, which complaint had been held by the High Court to be justified, that while the principals were exempted from tax upto Rs. 10,000 the tax is being levied on the agents turn-over irrespective of that exemption. In any case whatever objections the principals may have to the constitutional validity of the provisions introduced by the amending Act under Article 14 the Agent dealers certainly have no locus standi to complain about discrimination between Principals inter-se. That apart the dealers are not expected to and in fact do not pay any money of their own towards the tax which is levied. The tax so levied and paid to the assessing authorities by the dealer agent is, under the provisions of the Act, not returnable nor can the principal under the provisions of the Act make any claim against such dealer Agents. Shiri Gupte on behalf of the Appellants was unable to tell us that there were among the Appellants any principals who had a direct interest in challenging the validity of the provisions on the ground of discrimination. Shri Motilal Setalvad on behalf of the Appellants in Civil Appeals Nos. 2126 to 2128 of 1970 strenuously contended that the Appellants have an interest and can maintain the Writ Petitions because they were dealers within the meaning of Section 2(e) and are persons who are aggrieved because of the assessment made or likely to be made and tax recovered from them. He has further contended that this Court has in several cases hold that even a notice issued to any person under the provisions of an impugned Act which is likely to cause prejudice will entitle him to challenge the Constitutional Validity of the law under which the notice is given. If so, where an assessment has been made the assessee has a right to challenge the provisions of the Amendment Act under which the levy and Collection of tax have been given retrospective validity. Apart from the question that 'this argument does not take into account the distinction between an at tack under Art. 14 and an attack under Art. 19 it overlooks the fact that what is sought to be recovered from the Appellant is in respect of a tax collected on the past dealings and not with respect to the future Jonnala Narasimharao & Co. & Ors. Etc. ... vs State Of Andhra Pradesh & Ors on 5 April, 1971 6 transactions. We had pointed' out that tax had already been collected no doubt at first illegally but due to the amendment Act that collection has become legal and has also dealer be is liable to pay that amount to the State la. respect of the Asses sments made. As there is nothing to show that what is sought to be recovered from the dealer is more than what he hits collected, he 'has not suffered any loss nor any disadvantage which would entitle him to seek a remedy under Art. 226 of the Constitution. Shri P. RamchandraTao in Civil Appeal No. 2127 of 1970 had nothing now to add to the arguments advanced by the learned Advocates for the Appellants. On this short ground alone we dismiss all the Appeals except Civil Appeal No. 33 of 1971 but in the circumstances without costs. Appeal in Civil Appeal No. 33 of 1971: In this Appeal Shri S. T. Desai contends that the High Court had erroneously struck down Sec. 9 of the Amendment Act. Sec. of the Amendment Act is as follows: "9(1) where any sale of jaggery has been effected during the period between the 1st August 1963 and the commencement of Section 5 of this Act in so far as it relates to item 77, and the dealer effecting such sale has not collected ally amount by way of tax under the principal Act ,on the ground that no such tax could have been levied or collected in respect of such sale, or any portion of the turnover relating to such sale, and where no such tax could also have been levied or collected if the amendments made in the principal Act by this Act had not been made, then, notwithstanding anything contained in Section 8 or the said amendments, the dealer shall not be liable to pay any tax under the principal Act, as amended by this Act, in respect of such sale or such part of the turnover relating to such sale. (2)For the purposes of sub-section (1), the burden of proving that no amount by way of tax was collected under the principal Act in respect of any sale referred to in sub-section (1) or in respect of any portion of the turnover relating to such sale, shall be on the dealer effecting such sale". This Section is enacted by the legislature with the object of removing short-comings in the principal Act which were found wanting by judicial interpretation. The interregnum between the declaration by the High Court of certain provision of the Act as being unconstitutional and the attempt of the legislature to remedy the defects and to give retrospective effect thereto created two distinct categories between the same class of dealers namely those who had collected the tax whether they were assessed or not and those who had not collected the tax. This classification is certainly reasonable and is related to the object which the Amendment Act seeks to achieve. The dealers who had not collected the tax could not have collected it as the law stood and therefore the legislature did not think it just or proper to collect tax from those who were not liable. Even this exemption as can be seen is given to only those persons who can establish that they have not in fact collected it, the burden of which is upon those who claim the exemption. It is unnecessary to deal with hypothetical cases. The mere fact that in many cases it was not collected because the assessment could not be completed cannot be a valid ground nor can it even now be made in regard to those assessments which are now pending (a matter upon which we do not pronounce) cannot be valid grounds to Jonnala Narasimharao & Co. & Ors. Etc. ... vs State Of Andhra Pradesh & Ors on 5 April, 1971 7 declare the classification as arbitrary or unreasonable, which reason seems to have weighed with the High Court. We think not only the classification reasonable but there is an intelligible differentia furnishing a nexus with the object the Amendment Act seeks to achieve. In this view we set aside the Judgment of the High Court declaring Section 9 as unconstitutional and allow the appeal, but in the circumstances without costs. G. C. Appeal allowed. Jonnala Narasimharao & Co. & Ors. Etc. ... vs State Of Andhra Pradesh & Ors on 5 April, 1971 8 | {
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Commissioner Of Income-Tax, West ... vs Brij Lal Lohia And Mahabir Prasad Khemka on 29 July, 1971 Equivalent citations: [1972]84ITR273(SC) Author: K.S. Hegde Bench: A.N. Grover, K.S. Hegde JUDGMENT K.S. Hegde, J. 1. These are appeals by special leave. The only question that arises for decision in these appeals is whether on the facts and in the circumstances of the case the finding of the Tribunal that the gifts alleged to have been made by the assessee to his brother Briaj Lal Lohia and his nephew Nand Kishore Lohia are genuine gifts. 2. In these appeals we are concerned with the assessment of the assessee for the years 1947-48, 1948-49, 1949-1950, 1950-1951 and 1951 1952. 3. The assessee is an individual. On July 12, 1943, it is said the assessee made a gift of 5, 11, 101 to his brother Brijlal Lohia and another sum of Rs. 2,50,000/-to Nandkishore Lohia his nephew. There after the assessee's brother and nephew are said to have started a new firm dealing in Jute. At about the same time the assessee stopped his business. The assessee was also dealing in Jute. The question for consideration is whether the gifts alleged to have been made by the assesser were genuine gifts. This question came up for consideration before the authorities under the Act while dealing with the assessment of the assessee for the years 1945-1946 and 1946-1947. Therein on the basis of the material before them the Tribunal held that the gifts in question are not genuine gifts. The High Court did not interfere with the finding of the Tribunal on the basis that it is the finding of facts. When the matter was brought in appeal to this Court in Kanhaiyalal Lohia (deceased by his legal representatives Mahabir Prasad Khemka and Ors. vs Commissioner of Income Tax. West Bengal 44 I.T.R. page 405, this Court also refused to interfere with the finding of the Tribunal observing that the question whether the gifts were real was a matter within the jurisdiction of the Appellate Tribunal as the final fact-finding authority. The question whether those very gifts were genuine or not again came up for consideration before the authorities under Act while dealing with the assessments with which we are concerned in this case. In those cases the assessee adduced considerable additional evidence and on the basis of that evidence the Tribunal after taking into consideration the decisions rendered by the Tribunal in the previous proceeding came to the conclusion that the gifts in question are genuine gifts. In arriving at that conclusion the Tribunal had taken into consideration various circumstances and those circumstances as set out by the Commissioner Of Income-Tax, West ... vs Brij Lal Lohia And Mahabir Prasad Khemka on 29 July, 1971 1 Tribunal are as follows : (a) On going through the capital account and the wealth statement of the assessee, the Tribunal found that before making this gift to the said persona the total amount standing to this credit were as follows: (i) A sum of Rs. 16,79,223/-and Rs. 61, 968/-as the balance left over to his credit in his Profit and Loss Account. (ii) A sum of Rs. 6,32,804/-being his credit balance in his capital account in the partnership business styled Kanailal Lohia (Jute Press). These items, namely, in (i) and (ii) taken together worked out to Rs. 23,73,995/-. (iii) House properties whose value had been estimated at Rs. 19,00,000/-. (iv) Besides, those the assessee had certain further assets which had remained undisclosed till the year 1951, valued at over Rs. 20,00,000/-. 4. The Tribunal accordingly held that the assessee's financial position was such that he was capable of making gifts to his brother and nephew of Rs. 7,61,101/-. Proceeding further the Tribunal observed : (b) The donees after having received the gifts had deposited the said amounts with the National City Bank of new York, which bank had certified that it was the account of a firm whose partners were Messrs Brijlal Lohia and Nand-Kishore. Lohia and it was those persons only who were authorised to sign for and on behalf of the said firm. There were other banks also with whom the said two partners of the said firm had opened up accounts and they had also certified to the same effect. (c) Affidavit dated the 8th September, 1964 sworn by the assessee, in which he had stated that he had given Rs. 5,11,101/-and Rs. 2,60,000/-to his brother, Brijlal Lohia and nephew Nandkishore Lohia respectively and that he had no concern, right, title or interest whatsover in the aforesaid gifted money or any business carried on by his said brother and nephew. (d) Letters from Jwalaprasad Bhartia and Kashiram Lohia, who were persons in the know of the factum of the making of the gifts and testified that in fact the assessee had gifted the aforesaid amounts to his brother and nephew. (e) The Tribunal also considered that the assessee had no issue and having enough to spare, he was making charities of substantial amounts to various institutions. Such of the institutions to whom the assessee had given donation, were (i) Lohia Charity Trust wherein a sum of Rs. 1,25,000/-was donated; (ii) K.L. Lohia Charity Trust to whom Rs. 2,00,000/-had been donated and (iii) Lohia College, which received Ra. Commissioner Of Income-Tax, West ... vs Brij Lal Lohia And Mahabir Prasad Khemka on 29 July, 1971 2 2,03,000/-as donation from the assessee. 5. The Tribunal took into consideration the following further circumstances : (a) Registration of the firm Messrs. Brijlal Nandkishore under Section 65 of the Indian Partnership Act with the Registrar of Firms on the 23rd December, 1948; (b) Sales Tax Registration certificates showing the two persons, namely, Brijlal Lohia and Nandkishore Lohia as partners of the firm known as Messrs. Brijlal Nandkishore. (c) Affidavit dated the 8th September, 1934 sworn by the assessee stating therein that he had given Rs. 5,11,101/-and Rs. 2,50,000/-to his brother, Bnijlal Lohia and nephew Nandkishore Lohia absolutely and that he had no concern, right, title or interest whatsoever in the aforesaid gifted money or in any business carried on by his said brother and nephew; (d) Copies of the personal accounts of Brijlal Lohia and Nandkishore Lohia in the books of the partnership to show that the gifted amount was introduced by them as their capital in their partnership business and the withdrawals made by them out of the business were so negligible that it carried no meaning in saying that the profits from their business was being indirectly diverted to the assessee under the guise of these withdrawals; (f) The assessee exercised no control at all either over the money gifted or the partnership business and had unequivocally given out on affidavit, adversely to his interest, that he had absolutely do interest to them. 6. Any of the circumstances taken into consideration by the Tribunal cannot be said to be an irrelevant circumstance. Those circumstances have material bearing on the point in issue. It is not said that the Tribunal had ignored any one of the relevant circumstances. All that is said on behalf of the Revenue is that the Tribunal has not taken into consideration the evidence of Mr. Majumdar given in the previous proceedings. Mr. Majumdar's evidence was not before the Tribunal when it dealt with the cases with which we are concerned in these appeals. Therefore, the Tribunal could not have considered the evidence of Mr. Majumdar. 7. On going through the Tribunal's order, we are satisfied that the finding of the Tribunal cannot be said to be a perverse finding The finding being finding of facts, it was not open to the High Court nor is open to this Court to interfere with that finding. 8. The fact that in the earlier proceedings the Tribunal took a different view of those deeds is not a conclusive circumstance. The decision of the Tribunal reached during those proceedings does not operate as resjudicata. As seen earlier there was great deal more evidence before Tribunal during the present proceedings relating to those gift deeds. 9. In the result these appeals fail and the same are dismissed with costs. One hearing fee. Commissioner Of Income-Tax, West ... vs Brij Lal Lohia And Mahabir Prasad Khemka on 29 July, 1971 3 | {
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Bishwanath Rai vs Sachhidanand Singh on 7 May, 1971 Equivalent citations: AIR1971SC1949, (1972)4SCC707, 1971(III)UJ726(SC), AIR 1971 SUPREME COURT 1949, 1972 4 SCC 707 1971 U J (SC) 726, 1971 U J (SC) 726 Author: J.M. Shelat Bench: J.M. Shelat JUDGMENT V. Bhargava, J. 1. This appeal Under Section 116A of the Representation of the People Act, 1961 (hereinafter referred to as "the Ace") has been filed by Bishwanath Rai whose election to the Legislative Assembly of Bihar from the Ramgarh Assembly Constituency No. 219 in the mid-term elections held in February, 1969, has been set aside on the ground of commission of corrupt practices. The Election Commission issued the notification calling for election on the 1-1-1969 The last date for filing nomination papers was 8-1-1969,the date of scrutiny was 9-1-1969 and the date of withdrawal of nomination papers was 11-1-1969. Polling took place on the 9th February, 1969 followed by the counting of the ballot papers and declaration of the result on 11th February, 1969. Nine candidates, including the appellant, and the respondent Sachhidanand Singh who filed the election petition, filed their nomination papers One candidate withdrew his candidature on the 11th January, 1969. On counting of ballot papers, the appellant was found to have received 21,143 votes, while the respondent election petitioner received 19,358 notes. The remaining candidates got very few votes ranging between 7 and 694. The election of the appellant was challenged by the respondent on various grounds, of which we need mention only two grounds which have been accepted by the High Court of Patna and on the basis of which the election of the appellant has been set aside. These grounds relate to commission of the corrupt practices of undue influence Under Section 123(2) and of making appeal on the ground of caste Under Section 123(3) of the Act. 2. The pleading in respect of the first ground of undue influence, which has been found against the appellant, relates to the incidents in two villages, Dumduma and Mukhraon. In the election petition, here was a general pleading that the appellant managed to use force in order to check the workers and innocent voters, who were supporting the candidature of the respondent, from going to the villages and the polling stations to canvass and cast their votes and he further managed to get bogus votes polled in his favour in place of those voters as well as other voters. It was further pleaded that the appellant, through his agents and workers, did not even allow the respondent and his voters and workers to move and meet other voters in several villages by using force, lathi, dhela and gherao. etc. and in this way, the appellant, his workers and agents, with the consent of the appellant, not Bishwanath Rai vs Sachhidanand Singh on 7 May, 1971 1 only terrorised the voters and workers of the respondent, but also restrained them from canvassing, working for the respondent, securing votes for him, or voting for him In the particulars forming part of Schedule 2, this corrupt practice Was alleged to have been committed in three villages, Kurchani, Dumdurna and Mukhraon However, no evidence was led during the trial in respect of village Kurhani. Evidence was led to the effect that the appellant and his workers with his consent res'rained the workers of the respondent from proceeding to do canvassing in village Dumduma on 30th January, 1969 and, for that purpose, surrounded them, threatened them with lathis, and threw brickbats at them. Evidence was further led that on 31st January, 1969, the workers of the appellant with his consent restrained and prevented the workers of the respondent from entering village Mukhraon for the purpose of canvassing in that village and threw brickbats on them. These are the two charges which have been held proved by the High Court against the appellant. These charges, according to the High Court, constitute the corrupt practice of undue influence committed by, or with the consent of, the appellant, so that the commission of this corrupt practice is one of the grounds on which the election of the appellant has been set aside. 3. The second ground of appeal on the ground of caste is based on the application that the appellant is Bhumihar Brahmin by caste and so is one Swami Bimlanand Saraswati alias Awadh Behari Suman. A large number of voters in this constituency also belong to the same caste and, even within the same caste, they belong particularly to the 'Bhawadhi' of Swamiji. Such Voters are spread out in 15 to 20 villages and they are all known as 'Sarkarwar' family of Bhumihar caste Swamiji commands the highest respect in this community in these villages, because he works for the welfare of the members of this caste and also tries to attain unity and supremacy for the caste in polities. He has also been encouraging social and political organisations in the caste during the last five years or so. The allegation is that Swamiji, accompanied by the appellant and one Bhola Rai of the same caste, went to a number of villages and appealed to individual voters there to vote for the appellant on the ground that he was a member of the caste, that he had, with great difficulty, obtained a ticket from the Central Board of the Congress Party, and that, if he was defeated on this occasion, the members of the caste would lose prestige and position in the various villages. He also wrote letters to some important members of the caste, including one Ram Chandra Sharma of village Harpur, who was working for the respondent. Ram Chandra Sharma was also Bhumihar by caste and was not on good terms with the appellant. Swamiji appealed to him, on the ground of caste, to give up the disputes and support the appellant. This is the appeal on the ground of caste which has been held established by the High Court and forms the second ground for setting aside the election of the appellant. The High Court, in dealing with this case, in its judgment first dealt with the second ground relating to the appeal on the ground of caste which constituted the corrupt practice Under Section 123(3) of the Act and, consequently, we also proceed to deal with it before coming to the other ground relating to undue influence. 4. The High Court has held that the appeal by Swamiji on the ground of caste, in the manner described above, has been proved in respect of village Harpur, Piprarh, Kanahari, Sujatpur, Chhitandihra and Kuchhila. This finding has been recorded by the High Court on the basis of the oral evidence of witnesses to whom or in whose presence the appeal was made by Swamiji in these various villages, Before dealing with this oral evidence, however, we consider it advisable to indicate our views in respect of letter Ext. I which purports to have been written by Swamiji to witness Ram Bishwanath Rai vs Sachhidanand Singh on 7 May, 1971 2 Chandra Sharma. This letter has been proved by Ram Chandra Sharma to be in the hand-writing of Swamiji and he also proves that it was received by him in the beginning of January, 1069. On behalf of the appellant, two alternative pleas were taken in the written statement in respect of this letter. It was first contended that such a letter could not possibly have been written by Swamiji. In the alternative, it was pleaded that, if this letter was written by Swamiji, it must have been manoeuvred in collusion between Ramchandra Sharma and Swamiji. The letter having been proved by Ramchandra Sharma: the burden lay on the appellant to prove circumstances which would induce the Court to hold that either the letter was noc written by Swamiji or that it was written in collusion between him and Ramchandra Sharma No evidence in order to establish these alternative pleas, has been produced on behalf of the appellant. Even the cross examination of Ramchandra Sharma does not cast any doubt in his evidence to the effect that this letter was written by Swamiji and that it was received by him in the beginning of January, 1969. 5. There are circumstances which clearly indicate that the two pleas taken on behalf of the appellant to challenge this letter cannot have any force at all. The first point is that the two pleas are themselves inconsistent. The plea that it was not written by Swamiji at all, and the alternative plea that, if it was written by him it was in collusion between him and Ram Chandra Sharma cannot both stand together. Obviously, the two pleas have been taken merely on guess work. The only evidence in proof of this letter was the statement of Ramchandra Sharma and two questions were put to him. One question was that the letter was a forgery which he denied. The second question was that he had obtained this letter from Swamiji and this was also denied by him. It is significant to note that this latter is written on a postal inland letter and bears the postal stamp of 2nd January, 1969 as the date on which this letter was posted at Varanasi. There is not even a suggestion that this postal stamp has in any way been procured by Ram Chandra Sharma or the respondent or any one else so as to manoeuvra a forgery of this letter. In view of this postal stamp, there can be no doubt that this letter must have been written some time on or before the 2nd January, 1969 at which time there was m question of an election petition being filed, because the election had not yet been held. In fact, the Election Commissioner called upon the constituency to elect the candidate by the notification dated 1st January, 1969 and even the date of nomination was a subsequent date, viz., 8th January, 1969. There can be no justification for assuming that as early as 2nd January, 1969, before even the election process had started and before any one knew who would be the successful candidate, a forgery of this letter would be committed by Ram Chandra Sharma with the object of using it subsequently against the appellant in case he was successful in the election. Similarly, the theory of collusion at that early stage is totally unbelievable A forged letter or a letter in collusion could possibly have been obtained for the purpose of challenging the election only after the appellant had already succeeded in the election He was declared successful on the 11th February, 1969. It cannot, therefore, be accepted that this letter was either forged or obtained by collusion before the 11th February, 1969. The genuineness of this letter cannot be doubled. 6. Of course, the manner in which the appellant could obviously challenge this letter was by examining Swamiji himself as a witness. Instead of examining Swamiji as a witness, the appellant adopted the procedure of making an application to the High Court to summon him and examine him as a Court witness. That request was first put forward at a very early stage before examination of witnesses of parties had commenced. The Court rightly held that it was too early a stage for the Bishwanath Rai vs Sachhidanand Singh on 7 May, 1971 3 Court to come to a finding whether the examination of Swamiji as a Court witness was necessary. Such an opinion could only be formed after evidence of parties was over The appellant was, therefore, directed to move the application at the appropriate stage. Thereafter evidence of both parties was recorded and the appellant did not examine Swamiji as his witness He renewed the request for his examination as a Court witness after closing his evidence. The Court, in our opinion, quite correctly took the view that it was open to the appellant as well as the respondent to examine Swamiji as his witness and, when both of them failed to produce him as a witness, there is no reason why the Court should summon him as its own witness. Learned Counsel appearing for the appellant argued before us that the appellant had sufficient justification for not examining Swamiji, because the appellant had made an allegation that he was in collusion with Ram Chandra Sharma and further because the request of the appellant to examine Swamiji as a Court witness was refused after the appellant had closed his evidence. Neither of the two reasons is adequate to explain the omission on the part of the appellant. A mere suggestion made as a guess work that there was collusion between Swamiji and Ram Chandra Sharma can provide no justification for not examining him when no evidence at all had been tendered to prove that Swamiji and Ram Chandra Sharma were in any way great friends or that Ram Chandra Sharma had some influence on Swamiji as a result of which he could induce him to collude and write this letter at that early stage in January, 1969 in advance of the election. In fact, whatever evidence there is on the record points to a closer association between the appellant and Swamiji then any association between Ram Chandra Sharma and Swamiji. So far as the second ground for non-examination is concerned, it was the appellant's own fault that he did not examine Swamiji at the earlier stage before closing his evidence. In any case, he had the alternative that, when the Court refused to examine Swamiji as a Court witness, he could have made a request to the Court to permit him to summon and examine Swamiji as his own witness; but no such request was made to the Court. In these circumstances, the fact that the appellant did not try to give the only possible evidence which he could to challenge the authenticity and genuineness of this letter justifies the conclusion that this letter was sent by Swamiji on 2nd January, 1969 to Ram Chandra Sharma as stated by the latter. 7. At one stage in its judgment, the High Court has stated that this letter was not relevant when Swamiji himself was not examined and that, if it had been relevant, the Court would have been inclined to entertain the request for examination of Swamiji as a Court witness. Great reliance was placed by learned Counsel on this view expressed by the High Court in its judgment. It appears to us that the High Court was quite wrong in holding that this letter was not relevant. The contents of this letter were proved by the evidence of Ram Chandra Sharma who stated that he knew the handwriting of Swamiji with whom he had in correspondence even earlier. His evidence, thus, was sufficient to prove that Swamiji wrote this letter to Ram Chandra Sharma, and that the statements contained in the letter were made by Swamiji himself. It is true that, in the absence of examination of Swamiji, the correctness of those statements cannot be held to be proved Thus, the evidence of Ram Chandra Shrama proves the contents of the letter, but not the correctness of those contents. The letter was, therefore, admissible to the extent to which the fact that Swamiji wrote such a letter to Ram Chandra Sharma with its contents has bearing on the issues involved in this case. To that extent, the letter was relevant and admissible. However, we are not inclined to agree with the High Court that, if this letter is relevant and admissible, the Court should have examined Swamiji as its own witness. The relevancy or admissibility was judged by the Court at the last stage of delivering Bishwanath Rai vs Sachhidanand Singh on 7 May, 1971 4 the judgment. There was no justification for the appellant to wait for the judgment and not examine Swamiji as his own witness as held by us above. In the circumstances, this letter has to be taken into account to the extent just indicated by us above. 8. This letter, by itself, does not constitute any corrupt practice, because it does not contain any appeal to any voter to vote on the ground of caste. The appeal is to Ram Chandra Sharma to support the candidature of the appellant on the ground of caste and to ignore personal differences with the appellant in the interests of the unity and success of the members of the caste. Such an appeal does not by itself constitute the corrupt practice Under Section 123(3) of the Act. However, this letter is of great value in assessing the evidence of witnesses who have been examined to prove the oral appeals on the ground of caste made by Swamiji in various villages. The oral appeals were made in villages Harpur, Piprarh and Kanahari on the 19th December, 1968, in villages Sujatpur and Chhitandihra on the 20th December, 1968 and in village Kuchhila on 22nd January, 1969 This letter was sent by Swamiji on 2nd January, 1969, subsequent to the appeals made in the various villages, mentioned above, except the appeal made in village Kuchhila. The letter is addressed to Ram Chandra Sharma of village Harpur; and the oral evidence that an appeal was made to Ram Chandra Sharma by Swamiji on the 19th December, 1968 finds some support from 'his letter, as Swamiji in this letter refers to an earlier oral appeal made by him to Ram Ghandra Sharma when Ram Chandra Sharma did not respond to that appeal. The fact that Swamiji referred to such earlier appeal gives great support to the evidence of the witnesses who have been examined to prove that such an appeal was made in their presence. In respect of village Harpur, the witnesses examined are Ram Chandra Sharma himself, Ramnath Singh Yadav, and Suraj Nath Rai. The criticism against Ram Chandra Sharma by learned Counsel was that there has been long standing political rivalry between him and the appellant and Ram Chandra Sharma resigned from the Congress on the very day on which the ticket was given by the Congress party to the appellant to stand as its candidate from this constituency. He was a worker of the respondent. No doubt, Ram Chandra Sharma is an interested witness; but, on that account, his evidence cannot be totally disregarded. As we have said above, there is some support to his evidence provided by letter Ext. I Ramnath Singh Yadav is a resident of a neighbouring village Ismailpur and is a Mukhiya of Harpur Gram Panchayat He says that he came to Ram Chandra Sharma to take his tractor on hire. There is nothing in the cross-examination of Ramnath Singh Yadav to show that he has any reason to be against the appellant or to favour the respondent. He is an independent witness The third witness Suraj Nath Rai is, no doubt, related to Ram Chandra Sharma, being a distant nephew. There is, however, nothing else in his evidence which would justify our holding that he is not a reliable witness. The evidence of these witnesses has been accepted by the High Court even without the support provided to the evidence by letter Ext. I. No sufficient reasons have been brought to our notice which would justify our holding that the High Court was incorrect in believing these witnesses. That Court had the benefit of watching their demeanor in the witnessbox. In these circumstances, we see no reason to disturb the finding recorded by the High Court that Swamiji did make an appeal on the ground of caste to Ram Chandra Sharma in village Harpur as stated by these witnesses. The petty contradictions that were pointed out to us by learned Counsel in the evidence of these witnesses cannot justify our setting aside the finding recorded by the High Court that these witnesses are reliable. The appellant's witnesses were not considered sufficient to disprove the case by the High Court and the reasons given appear to us to be correct, The appellant himself is a highly interested witness and the other witness Bhola Rai, Bishwanath Rai vs Sachhidanand Singh on 7 May, 1971 5 who supports him by denying that they had gone with Swamiji to Harpur to make the appeal to Ram Chandra Sharma, is also highly interested witness. Their were denials, without support from any other circumstance, could not be held to disprove the case which was supported by good evidence tendered on behalf of the respondent. Four other resident, of Harpur were examined to say that no such visit of Swamiji took place on 19th December, 1968 Their evidence was rightly considered insufficient by the High Court, because the visit could have taken place without the knowledge of those witnesses if those witnesses were not in the village on that day or, in the alternative, they did not see Swamiji, Bhola Rai and the appellant coming to the village, because they were in their houses, and these persons only went to the house of Ram Chandra Sharrna. In these circumstances, the finding of commission of corrupt practice of making an appeal on the ground of caste in respect of village Harpur recorded by the High Court has to be upheld 9. With regard to the appeals in the other villages Piprarh, Kanahari, Sujatpur and Chhitandihra, which were made on 19th or 20th Dec., 1968, the finding recorded by the High Court again is that the evidence given on behalf of the respondent to prove that such appeals were made by Swamiji is sufficiently reliable to be believed. For village Piprarh, the two witnesses relied upon are Jadunandan Rai and Sarabjeet Rai. Neither of them has any direct enmity or differences with the appellant. It is true that there was some litigation between these two witnesses and persons who are found to be workers of the appellant but that can be no reason for holding that these witnesses have come to give false evidence against the appellant. In their cases also, some contradictions were pointed out but none of them are so serious as would induce us to hold that the High Court was incorrect in relying on their evidence Similarly, the witnesses examined to prove the caste appeal made in village Kanahari are Bindhyachal Rai, Deonandan Singh and Manrakhan Rai. Bindhyachal Rai was no doubt a polling agent of the respondent but the other two persons Deonandan Singh and Manrakhan Rai are not shown to have any connection with the respondent or to be hostile to the appellant. The criticism against Manrakhan Rai's evidence was that his name was put forward as a witness on behalf of the respondent at a very late stage after the other two witnesses Bindhyachal Rai and Deonandan Singh had been examined. That, however, does not show that he is a witness subsequently procured by the respondent for the case. The explanation for his name being mentioned at a late stage is that the respondent came to know that he was present at the time of the appeal only when his name was mentioned by the other witnesses during their evidence in this case. He could not naturally summon him earlier The witness in respect of Sujatpur are Sarabjeet Singh and Kamla Rai. These two witnesses were both polling agents of the respondent; but no other significant discrepancy was found in their evidence, Kamala Rai in fact was asked by Swamiji himself to contact Sarabjit Singh as Swamiji wanted to meet the latter and it was in that connection that Kamla Rai came to Sarabjit Singh's house and then remained present until Swamiji came and made the appeal to Sarabjit Singh. Kamla Rai obliged Swamiji because he is a follower of the math which is now presided over by Swamiji. In respect of village Chhitandihra, the two witnesses examined are Raj Narain Rai and Nethuni Rai. Though Raj Narain Rai was a polling agent of the respondent and may, thus, be slightly interested in him, Nathuni Rai at least is an independent witness He is also one of the persons whose name came to the knowledge of the respondent only when Rajnarain Rai in his evidence mentioned his presence at the time of the caste appeal and, consequently, he had to be summoned at that late stage All these witness in respect of the caste appeal in various villages have been believed by the High Court. Nothing of importance has been Bishwanath Rai vs Sachhidanand Singh on 7 May, 1971 6 brought to our notice which would justify our holding that these witnesses are unreliable and differing from the assessment of their evidence made by the High Court. The appellant's evidence in respect of these caste appeals consists primarily of the statements of the appellant himself and Bholarai who are both highly interested and whose evidence did not impress the High Court. The other witnesses examined could not competently disprove the caste appeals, because there was no guarantee that they were present at the time when Swamiji actually made the caste appeals. Further, we have the fact that an appeal on the ground of caste in favour of the appellant was actually made by Swamiji in writing to Ramchandra Sharma, though for a slightly different purpose, viz., that of persuading Ramchandra Sharma not to oppose him, not to support his rival candidate, and to work in his favour. In the background of this letter of Swamiji, about the genuineness of which we are fully justified, we consider that the High Court was right in relying on the evidence of the witnesses and in holding against the appellant that caste appeals were made in these villages in the presence of the appellant by Swamiji in order to persuade members of Bhumidhar caste to vote for the appellant. 10. The appeal subsequent to the letter, in respect of which evidence has been given, relates to village Kuchhila. For the appeal in this village, six witnesses have been examined. The first witness Ramrupsingh merely proves the fact that Swamiji visited the house of Lal Bahadur Rai in the company of the appellant and Bhola Rai. He was not present when the appeal was made by Swamiji to Lalbahadur Rai and others to vote in favour of the appellant, because he was a Bhumidhar Brahmin. Another witness Abbas Mian, who is totally an independent witness, has also proved that he was asked to call some persons whom Swamiji wanted to meet and to whom, according to the evidence of other witnesses, the appeal on the ground of caste was made. The evidence of this witness is very important, because he has no reason to be antagonist to the appellant or to favour the respondent. He was a mason who belonged to a different village and was employed on construction work of Lalmani Rai. Lalmani Rai has himself been examined and has proved the actual appeal made by Swamiji His evidence is supported by three other witnesses, Radha Mohan Rai, Digeshwar Rai and Lalbahadur Rai. It is true that Lal Bahadur Rai was a strong supporter of tbe respondent and a worker for him and he had enmity with the appellant. Digeshwar Rai and Radha Mohan Rai were also parties to proceedings Under Section 107 of the CrPC in which the appellant was ranged on the opposite side. Lalmanirai, however, appears to be a fairly independent witness. The only thing that was urged against him was that he is a nephew of Lalbahadur Rai. He is a distant nephew and there is nothing to show that he has come to give evidence under the influence of Lalbahadur Rai. In any case, the High Court has relied on the evidence of all these witnesses which was justified, as we have stated earlier, by the circumstance that letter Ext I proves beyond doubt that Swamiji was a supporter of the appellant, wielded influence amongst the Bhumihar Brahmins and even made an appeal in writing to Ramchandra Sharma on that ground 10 support the appellant and give up his support to the respondent. Consequently, we hold that the finding of the High Court that Swami Bimlaland Saraswati made appeals to various persons in several villages to vote for the appellant on the ground of" being members of the Bhumihar Brahmin caste in the presence of the appellant is correct, so that the appellant is guilty of commission of the corrupt practice failing under the provisions of Section 123(3) of the Act and, on this ground at least, the election of the appellant has been rightly set aside. Bishwanath Rai vs Sachhidanand Singh on 7 May, 1971 7 11. So far as the ground of undue influence is concerned, learned Counsel appearing for the appellant challenged the decision of the High Court on two alternative grounds. One ground was that the finding recorded by the High Court was to the effect chat the workers of the respondent were prevented from going to do canvassing on behalf of the respondent and such interference with the workers does not amount to undue influence as defined in Section 123(2) of the Act read with the definition of 'electoral right' contained in Section 79(d) of the Act. The second argument was that, in judging the evidence of witnesses of the two parties on this issue, the High Court has applied different standards and, by so doing, has disbelieved the evidence of witnesses examined on behalf of the appellant on the basis of circumstances which have been ignored when believing the evidence of respondent's witnesses. It, however, appears to us that it is unnecessary to go into these aspects and to deal with the question whether any corrupt practice of undue influence was committed or not, because the finding we have recorded in regard to the Commission of corrupt practice on the ground of caste Under Section 123(3) of the Act is sufficient to dispose of this appeal which has to be dismissed. As a result, the appeal is dismissed with costs. Bishwanath Rai vs Sachhidanand Singh on 7 May, 1971 8 | {
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M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 Equivalent citations: AIR1972SC1279, (1972)4SCC1, 1972(4)UJ84(SC), AIR 1972 SUPREME COURT 1279, 1972 4 SCC 1 Bench: S.M. Sikri, D.G. Palekar, A.N. Ray JUDGMENT 1. These are appeals by the plaintiffs on a certificate granted by the High Court of Mysore which, in Regular Appeals Nos. 120 & 121 of 1956, modified the decree of the learned District Judge, Mysore in Original Suit No, 4 of 1954. The suit was originally filed by one Nagappa Setty in the Court of the District Judge, Bangalore, on 29th March, 1948. It was then numbered as Original Suit No. 61 of 1947-48 Nagappa Setty died on 20th February, 1949. His heirs and legal representatives were brought on record and they prosecuted the suit and the appeals. For administrative reasons, the suit was transferred to the file of the Distt. Judge. Mysore in 1954 & there it was re-numbered as O.S No. 4/1954. That Court only partially decreed the plaintiffs' claims. Aggrieved by that decree both sides went in appeal to the High Court of Mysore. These appeals were R.A. Nos. 120 and 121 of 1966. A Division Bench of the High Court heard these appeals together and, by a common judgment, modified the decree of the trial Court by its judgment and decree dated 9th July, 1962. The plaintiffs filed two applications for the grant of the certificate under Article 133 of the Constitution Since two certificates were granted, we have two appeals before us, but both of them are by the plaintiffs. 2. As already stated, the suit, out of which these appeals arose, had been filed by Nagappa Setty. His suit was for partition of the family properties. To start with, there were nine defendants to the suit, defendants 1.8 being Nagappa's younger brothers and defendant No. 9 being their mother. On an objection raised by the defendants that necessary parties were not on record, the other defendants, who were members of the defendants' family, were joined as parties. The Chief contest was between Nagappa Setty, on the one hand, and defendants 1-9, on the other. 3. The plaintiff Nagappa Setty based his claim principally on the will dated 1st January 1933(Ext. A A) made by his father Lachiah Setty. He claimed that the properties in suit were, in accordance with the will, the self-acquisitions of Lachiah Settey which he was entitled to dispose of at his sweet-will and pleasure, Under that will, the plaintiff alleged, his father had given him a four-anna share in the family properties and, hence, he was entitled to the same; in the alternative, a claim was made that, if the suit properties were found to be joint family properties, the aforesaid will should be regarded as embodying a family arrangement and must be given effect to as such. The defendants challenged the documents as being inoperative either as a valid will or a valid family arrangement. They claimed that the properties were ancestral joint family properties which Lachiah Settey was incapable of disposing of by will. There was no occasion also for a family arrangement and, hence, the will could not be regarded as a family arrangement. M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 1 4. Both the Courts held that the properties in suit were the ancestral joint family properties which could not be disposed of by Lachiah Settey by will. The Courts also held that there was no family arrangement, and, even if it were to be deemed to be a family arrangement, it was void, because, one of the sons, Dasratha Settey, who is supposed to have accepted that arrangement by signing below the will, was a minor at the time. The learned District Judge, who tried the suit, therefore held, that the plaintiff Nagappa Setty was entitled to only a 1/9th share in the family properties. The High Court disagree with the District Court on the question of Nagappa Setty's share. In its opinion, the severance of the joint status had taken place on 30th March, 1940 when the sons referred their disputes to the Arbitrators under an Arbitration Agreement. Under the Mysore Hindu Law Women's Rights Act (Misore Act No. X of 1933), the mother on a partition was entitled to 1/2 of the share of a son. Since Nagappa Setty had pre-deceased the mother, his heirs were not entitled to share along with their uncles, the present defendants 1-8, in the share of the mother, defendant No. 9, and hence, Nagappa's heirs could claim what Nagappa Setty could claim at the time of the suit, viz., only 2/19th share in the family properties. The High Court, therefore, held that the plaintiffs were entitled to have partition of 2/19th share and nor 1/9th share as held by the trial court. Some other minor modifications were also made in the decree of the trial Court. 5. Exhibit AA is the will of Lachiah Setty. The will does not specify the several movable and immovable properties of the testator; but it says that all the properties of the family standing in the name of either himself or his sons were his self-acquired properties which he was in a position to dispose of by a testamentary document. A mere look at the schedules to the plaint would go to show that the properties are numerous and extensive, indicating thereby that the family was one of the wealthiest families in Mysore State. Evidence has been led to show that Lachiah Setty belonged to a family which carried on extensive business in coffee and other commodities from about the year 1860. The family owned coffee estates After the death of Lachiah's father, Lingappa Setty, there was a partition of the family properties between Lachiah, his younger brother, Manjiah, and the two sons of a pre-deceased elder brother, Sidd-anna. The partition deed is Ext. VII dated 18th July, 1910. In this partition, Lachiah received a large amount of cash, considerable movable and immovable properties, including coffee estates, and also a running business in cloth at Chiekmangalure. Lachiah's eldest son, Nagappa Setty, had already come of age and had joined his father in the family business. The other sons were minors at the time; but there is no dispute that, when the sons came of age. they all joined the father in the family business which, after 1910, was carried on in the name of "Lachiah Setty & Sons". The family expanded its business. A Branch was opened at Mangalore in 1921 or 1922 for direct export of coffee and, altogether, the family became a very wealthy family having amassed wealth in trade and business. In the course of this business, several houses and immovable properties were acquired, including coffee estates. The family rose to high political & social status in the old Mysore State, and Nagappa Setty was given the title of Dharampravartha by the Maharaji of Mysore and was on friendly terms with the Dewan of the Mysore State, Sir Mirza Ismil. In short, at the time of the execution of the will on 1st January, 1923, Lachiah and his sons formed a joint Hindu family which, with the help of the ancestral nucleus, had been able to acquire large estates and properties during the course of joint family business. Both the Courts, therefore, were right in holding that the properties were joint faintly properties and not self acquired properties of Lachiah Setty as stated in the will. M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 2 6. Since the Plaintiff has claimed that effect should be given to the document Ext. AA either as a will or a family arrangement, we shall have to consider what Lachiah intended to do by executing this document. The draft of the document was prepared by P.W. Vasudeva Murthy, the family lawyer, who, later on, became a Judge of the old Mysore High Court. The document consists of 22 paragraphs. It begins with the following words: Will dated 1st Jnnuary, 1933, executed by Mysore Lachiah Setty, son of Mysore Lingappa Setty, resident of Chickmangalur is as follows: It ends with the words:- I got the above Will read and have affixed my signature, with my free-will. Om. Om. Om. At the end of the will, there is the signature of Lachiah Setty and the signature is attested by two witnesses, one of whom was the aforesaid lawyer, Mr. Vasudeva Munhy. Below this will, there is an endorsement by the ten sons of Lachiah Setty, including the plaintiff and defendants 1-8, The endorsement reads: We have read the above Will and have attested it whole-heartedly agreeing to act accordingly. Out of the ten sons, M.L. Vasudeva Muny, defendant No. 8, had just attained majority and the other son, M.L. Dasaratha Setly, was a minor of 16 years of age. 7. In the very first paragraph, Lachiah Setty says that he was eighty years old at the time and, on account of illness, he was growing weak. The reason given by him for making the will is that, owing to his old age and possible accidents of life, he was executing the Will, when, he was of sound mind and body, in order to express his desire regarding disposal of his vast properties and the manner in which the members of his family should conduct themselves after him This leaves no doubt that Lachiah Setty intended to make a testamentary disposition of his properties to take effect after his death. In para 2, he names the several numbers of his family and says that all of them, including their wives and sons were under his care and protection. He further says that all the sons had great regard and affection for him, for his eldest son Nagappa Setty, and their mother, Rukminiamma, defendant No. 9 and the relations between all of them were harmonious. Then, in para 3, he says that, in the family partition with the brother and brother's sons (referring to the partition of 1910), he had obtained only a few properties for his share. All the properties which he now possessed were his self acquired ptopeities, having been acquired by trade, money transactions and coffee cultivation. Then he says that it was possible for him to acquire such vast properties only after his eldest son, Nagappa Setty, on his attaining majority, took over the management of the entire business and "conducted the affairs of the family with the help of his intelligence, enterprise, skill, etc." Even so, he is particular to point out that, though some of the acquisitions stood in the name of Nagappa Setty or in the names of other sons, the acquisitions are his own and "he was fully entitled to dispose them of as he desired." He further observed that all his sons had unanimously consented M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 3 to such disposal by him and had attested the Will in token of their consent. Then, in para 4, he says: "All my sons have conducted themselves with great affection and harmony with me, my eldest son Nagappa Setty and amongst themselves. It has been my extreme desire that even in future, they should in the same way continue to live harmoniously, united and without any differences. All have agreed to do so." Then follow in paras 5 to 15 several bequests in favour of charities and near relations. By para. 16, he says that, after payment of the bequests as aforesaid, all the remaining properties, movable and immovable, shall be disposed of as detailed hereunder. The family house will go to his wife, Rukminiamma, for her life and the sons shall pay to her a monthly allowance of Rs. 50/-. In case there was a partition amongst the children, his wife would be entitled to a share as mentioned later in para 19. In para 17, he directs that a sum of Rs. 1000/-should be paid to each one of his present and future daughters-in-law. Then follow paragraphs 18, 19 and 20 which, being important, are reproduced below : 18. Even after my demise, my sons should remain joint and undivided as at present and manage and enjoy the properties, leading a virtuous and pious life. Further after my demise, my eldest son Nagappa Setty should remain the manager of the joint family, as at present and should look after all the management. And my other sons should continue to evince the same regard and devotion to him, in the same manner as they are showing towards me towards him and towards their mother. All my sons should conduct themselves in this manner. It is my firm conviction that there will be scope for our family to rise into a greater status and prosperity, even in furture, if they remain united and conduct themselves as such. But by providence, if by any reason it becomes unavoidably necessary to effect a partition amongst my sons, all my movable & immovable properties, assets and liabilities should be divided as hereunder. 19. Out of the entire movable and immovable properties that I own at present and the properties that might be acquired by the family in future, the liabilities that might be exist in respect of the entire properties at that time, should be deducted and the remaining properties, movable and immovable should be divided into 16 parts and out of which four anna share should be given to my eldest son Nagappa Setty or if he is not alive, to his sons. Two annas shares should be given to my second son Subbaraya Setty or if he is not alive, to his sons. Two annas share should be given to my Dha-ramapathni Sowbhagyavathi Rukminiyamma. The remaining eight annas share should be divided equally amongst the remaining eight sons. After the death of my wife, the share given to her and all her jewels, movable and immovable properties should be divided equally amongst all my sons. But the house given to my wife for her residence for her life-time should not be divided. She should be in enjoyment of it, during her life-time and after her death, my sons shall be entitled to share it, in proportion to their shares as aferesaid. But, the said house of our family shall only be enjoyed jointly by my sons and should not be division unavoidably in future, the entire house has to be given to my eldest son's share, for lawful consideration. 20. With a view that no differences all ill-feelings of any kind should arise as amongst themselves, even in future all my children having solicited to make suggestions when I am bodily fit, in respect M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 4 of the disposal of my vast properties and future conduct, in the m inner that I consider just and properties, and having promised to implicitly carry out the same, with the filial affection, as hither to, I have made this Will at the inspiration of God, for their own prosperity. Paragraph 21 shows that he had decided to give up all interest in wordly affairs and was devoting himself to the worship of God. In para 22, he appoints his two sons Nagappa Setty and Subbaraya Setty as executors of the Will. 8. On reading the document as a whole, there can be hardly any doubt that Lachiah was wanting to make a will. It was drafted by his family lawyer. The whole form of the document is of a will. It is attested by two witnesses. Executors are appointed and a number of bequests have been made which were to take effect after his death. In the beginning and at the end, Lachiah described the document as his Will which he was making in his old age, while in good mental state. The will shows his awareness that, if the family properties were regarded as joint family properties, he would not be in a position to make any disposition of the same by a will. So, although two of his elder sons had contributed largely to the family acquisitions, all those acquisitions, he insisted, were his self-acquired properties, over which, he claimed, he had absolute power of disposition, As a matter of fact, if the properties as claimed by him had been self-acquired, there is no doubt that the document would have absolutely operated as the last will and testament of Lachiah Setty. But unfortunately, Luchiah, though a father, could not, under the Hindu law, dispose of, by will, joint family property or any part thereof and as a will it was clearly inoperative on the various dispositions made by him (See Paryatibai vs Bhagwant, Vishwanath Patak 39 Bom. 593, and Subbarami Beddi v. Ramamma) 43 Mad. 824. This latter case has questioned the correctness of a previous decision of that Court in Appan Patra Chariar v. V.S. Snnivasa Chariar and Ors. 40 Mad. 1122. The decisions proceed on the principle which was well-settled in Vittla Bulten v. Yamenamma (1874) 8 M.H.C.R. 6, and Lakshman Dada Naik v. Ramachandra Dada Naik 5 Bom. 48 P.C. that a coparcener cannot devise joint family property by will, because, on the date of his death when the will takes effect, there is nothing (or the will to operate on, as, at the moment of his death, his interest passes by survivorship to the other coparceners. 9. It is true that, in some cases, the Privy Council had given effect to a "will" by a coparcener when the dispositions had been made with the consent of the other coparceners (See Brijraj Singh and Anr. v. Sheodan Singh and Ors. 40 I.A. 161, and Lakshmi Chand v. Anandi and Ors. 53 I.A. 123, But, in both these cases the will was given (fleet to not as a will but as a family arrangement which was acted upon. 10. The plaintiffs have, therefore, clutched at the above decisions and submitted that, since the sons had agreed to the dispositions made in the will, the will should be given effect to as a family arrangement. When a document which is unexceptionable as a will that is to say, a testamentary document, revocable by the testator at his sweet-will is supposed to embody a family arrangement, we are transported into a different realm where the intentions and objects of the maker or makers of the document are quite different. As pointed out in Halsbury's Laws of England, 3rd Edition, Vol. 17, at p. 215: M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 5 A family arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family either by compromising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour. This view of a family arrangement has been approved by this Court in Maturi Pullaiah and Anr. v. Maturi Narasimham and Ors. where it is pointed out that: though conflict of legal claims in present or in future is generally a condition for the validity of a family arrangement, it is not necessarily so. Even bona fide disputes, present or possible, which may not involve legal claims will suffice. Members of a join Hindu family may, to maintain peace or to bring about harmony in the family, enter into such a family arrangement. If such an arrangement is entered into bona fide and the terms thereof are fair in the circumstances of a particular arrangement than to avoid it. It will be, therefore, seen that, in the first place, there must be an agreement amongst the various members of the family intended to be generally and reasonably for the benefit of the family. Secondly, the agreement should be with the object either of compromising doubtful or disputed rights, or for preserving the family property, or the peace and security of the family by avoiding litigation or for saving its honour. Thirdly, being an agreement, there is consideration for the same, the consideration being the expectation that such an agreement or settlement will result in establishing or ensuring amity and good-will amongst the relations (See Ram Chaian Das vs Giris Nandini Devi and Ors. . The question, therefore, is whether the father and sons in this case had been really motivated by the above objects when the father purported to make the "Will" which would then be a misnomer for an agreement embodying a family arrangement. As to this, we are constrained to say there is very little either in the will or the pleadings or the evidence led in the case. In construing a document, whether in English or in vernacular, the fundamental rule is to ascertain the intention from the words used. The sum ending circumstances are to be considered. But that is only for the purpose of finding out the intended meaning of the words which have actually been employed (See Ram Gopal v. Nand Lal and Ors. 1950 S.C.U. 766. The Will here does not show that there was any occasion for making a family arrangement The Will itself discloses that all the sons were on amicable terms, there were no dissensions, no contrary claims and no reasonably anticipated disharmony. On the other hand, the father exhorts the sons to continue to remain joint and undivided for the greater glory of the family as one unit. It is true that in para 20 he states that all his children had solicited him to make suggestions with a view that no differences or ill-feelings should arise amongst themselves. But that is only a manner of speaking, because such forebodings of diff lenses and ill-feelings are in here not in every joint family. In the absence of any evidence of even a whisper of disharmony in the family, the statement that the children had solicited him to make suggestions is, to our m nds, only a flourish. But what is important to note is that the father does not M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 6 propose a partition or a severance of status. On the contrary, he exhorts the sons to live united as members of a joint family on the same cordial terms which prevailed till then, A father in a Mitakhshara joint family has the undoubted right to divide the family property at any moment during his life, whether his sons consent or do not consent to the division. The only limitation on his powers is that the division directed by him must be a fair one in which he gives his son an equal share with himself. The will does not show that he wanted to exercise any such power and, since a partition was very far from his mind, he merely made his own "suggestions" as to what he would regard as proper if, in some remote future, the members of the family thought about severance of status These suggestions, if acted upon, would have given plaintiff Nagappa a 4-anna share, defendant No. 1 a 2-anna share and his wife Rukminiamma a 2-anna share, while the other eight sons would have got only an anna share each. This would have been a very unequal partition. Two of the sons would have got much more than they were entitled to on a partition and the mother, who was not entitled under the Hindu Law as it prevailed in Mysore in 1933 to any share on partition in the family, would have got a 2-anna share If these suggestions had been acted upon voluntarily by the various parties perhaps there would have been some point in the contention raised on behalf of the plaintiff. The father Lachiah died in January, 1936 and the family continued to be joint till a submission was made to the Arbitrators in 1940. But as long as the suggestions were not acted upon, they remained more suggestion of the father and, in our opinion, paras. 18 and 19 of the Will can only be read as embodying the exhortations and recommendations of an affectionate father to his dutiful sons to act in a particular circumstances. The father, it is obvious, did not contemplate a severance of the joint family status in the foreseeable future. Deaths of sons were not unlikely to occur which would have completely upset the shares suggested by him in para. 19 Secondly, a situation, like the one we have in this case where only one of the members of the family wanted to separate from the others, was bound to create a difficult problem. A son, in disregard of his father's exhortation to remain joint, desires to separate, while the other sons, in obedience to the father's wishes, do not desire to separate. In such a case, the latter would be able to retort to the former. "Since you disregard the father's wishes that we should continue to be join, we are discharged from the necessity or obeying father's wishes with regard to shares in partition." A problem of this kind would inevitably create difficulties in the matter of sharing the family property as suggested by the father and, for that reason also, the contents of para, 19 are better construed as "suggestions" of the father as expressly stated by him in para, 20. In short, the contents of paras 18 and 19 are merely in the nature of exhortations or recommendations, not binding like a contract for want of mutuality or consideration, though the sons have endorsed under the Will that they had read the will and had attested it whole heartedly agreeing to act accordingly. 11. In the plaint also, Nagappa Setty has not stated what was the occasion for the father to make a family arrangement. In para. 6 of the plaint, he stated: M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 7 The father and the sons alike were desirous that the father, during the life-time, should make arrangements for the division of the properties among his sons so as to avoid all squabbles and misunderstandings between them after his life-time. And, then in para. 23, the plaintiff says: The plaintiff father submits that the "WILL" really embodied a family arrangement agreed to by all the parties after full consideration and with full understanding of the terms and dispositions as just and proper in all the antecedent circumstances referred to in the "WILL" itself. There are no antecedents circumstances referred to in the will, except those to which reference has been already made. Those circumstances, far from furnishing an occasion for a family arrangement, go to show just the contrary. Nagappa's son Arya Murthy, P.W. 12, whose was the principal evidence on behalf of the plaintiffs, tried to suggest that his father Nagappa was thinking of separating himself and beginning his trade separately before the Will, that his brothers were jealous of him as he was a greater favorite of Lachiah Setty than the other sons, and that there were misunderstandings in the family because Nagappa's and defendant No. 1's daughters had been married at great expense to the family. It is obvious that this evidence is of really no value, not only because nothing about it is stated in the plaint, but also because it is against the whole tenor of the father's will. Mr. Vasudeva Murthys who was examined as a witness on behalf of the plaintiffs, on the other hand, says that, on the event of making the Will, Lachiah had told him that his son Nagappa wanted to take whatever property Lachiah gave him and separate from the family and start his own business and, therefore, he was intending to make an arrangement to keep Nagappa in the family, for, otherwise, the family as a whole would suffer if Nagappa had decided to sever his connection with it. This evidence also has not been accepted by both the Courts and we think there is good reason to think that the story now given at the time of the hearing is an after-thought. In short, there is nothing in the Will, the pleadings, or the evidence which goes to show that there was any occasion for agreeing to a family arrangement, or that the motivation, which is necessary or a family arrangement, was ever present to the minds of Lachiah and his sons when the will was executed. 12. Technical objections were also raised to the alleged family arrangement embodying Ext. A A on the ground that one of the sons, M.L. Vasudeva Murthy, defendant No. 8, had just attained majority when he had signed the acceptance of the Will and the other son, Dasaratha Setty, who was then a minor, had also signed the Will. There is no evidence to show that Vasudtva Murthy who was a callowlad at the time, had independent advice when he had signed along with his brothers; and, so far as the minor Dasaratha Setty is concerned, his signature below the Will has absolutely no voluet Lachiah was the guardian of Dasartha Setty at the time and, as pointed out in Subbarami Rfddi v. Ramamma (supra), the arrangements made in the will could not have been supported as against Dasaratha Setty on the ground that his father Lachiah was also a party to it. And, when one of the M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 8 sons of the family shown to have not accepted or participated in the family arrangement, the family arrangement as a binding agreement between the several coparceners must fail (See Mohammed Amin v. Vakil Chand 1952 S.C.R. 1133). 13. Attempts were, however, made to show that Dasaratha Setty had accepted the arrangement. Reliance was placed on two documents Exts. BB and DD. Exhibit BB is said to be an agreement between the ten sons and their mother and is dated 30th March 1933. The High Court suspected the origin of this document but we do not think that there is anythings auspicious about it. It was not seriously contested before us that the ten sons and the mother executed this document at one time. This agreement amounts to nothing more than a reiteration that they were admitting the Will of the father and the correctness of its recitals and embodies an undertaking by them to act up to the wishes of the father. In this agreement, the minor Dasaratha Seity is represented by his mother as his guardian. In law, the mother was not his guardian at the time and she was incompetent also for the reason that her interests were in conflict with that of the minor. She, who had, under the law, no share in the property, was to get a 2-anna share in the property and Dasaratha Setty, whose share was much more than 1-anna, was to be content with a very much reduced share. The reduction was partly due to a share being given to Rukm-iniarnma. Therefore, this agreement also would be of no avail. 14. Reliance was then placed on a photographic copy of a document Ext. DDl dated 12th March, 1936. It is stated that the original document was signed by Dasaratha Setty and there by he had ratified the agreement referred to earlier. The original of this document, which would normally be in the possession of Nagappa Setty, has not been produced and both Courts have refused to regard the photographic copy Ext DDl as admissible in evidence and, in our opinion, rightly. The whole trouble arose, because Dasharatha Setty died afterwards in November, 1938 and the original document was neither produced nor its loss properly accounted for. The circumstances, under which the original of Ext. DDl was signed are also very suspicious. In short, there was no legal acceptance of the alleged arrangement by Dasaratha Setty and for that reason also the alleged family arrangement must fail. But even assuming that all the sons had accepted the arrangement the acceptance means no more than merely agreeing to abide by the suggestions made by their father in the will and since, as already pointed out, there was no consideration for such acceptance, the document must fail as a family arrangement. It was suggested in the course of arguments that the will was acted upon and reference was made to certain payments alleged to have been made in pursuance of the father's directions. Both the Courts have found that the Will was not acted upon and we see no good reason to take a different view. In our opinion, the High Court was right in holding that the document Ext. AA was inoperative as a Will and ineffective as a family arrangement. 15. The learned Trial Judge thought that the plaintiffs' share in the family property was 1/9th, but the High Court, for reasons which are not challenged before us in the arguments has come to the conclusion that the plaintiffs' correct share would be 2/19th. We agree with that finding. 16. One more point was touched upon the course of the arguments. It will be recalled that father Lachiah died in Jan., 1936, and the youngest son Dasartha Setty died in November, 1938. On 30th March, 1940, the mother and the remaining nine sons including Nagappa made a reference to three M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 9 arbitrators for a division of the family properties. It is common ground that the family no longer remained undivided as from that date. The three Arbitrators entered upon their work on 1st April, 1940; but the course of the arbitration proceedings was not at all smooth. Differences arose with regard to the management of the family properties and business, and Nagappa was disinclined to remain in the same family house along with the other brothers, At the instance of the Arbitrators, Nagappa was provided with a separate house belonging to the family and it appears that Nagappa with the members of his own family left the family house on 5th April, 1940 to live in the family bungalow names 'Sunder Vilas'. The other brothers and the mother lived together and were in possession of the coffee estates and other immovable properties of the joint family, On 11th July, 1940, the Arbitrate n made a special provision in agreement with the parties, with regard to the business. For that purpose, lists were prepared with a view to see how much stock-in trade and securities were in the custody of the brothers. Securities of the value of Rs. 1,49,833/-were found in the hands of Nagappa Setty and securities of the value of Rs. 1,45,616/21/-were found in the hands of his other brothers. The stock-in-trade was valued at Rs. 1. 32,495/-, Since it was impossible for the business being carried on jointly, a clear arrangement was made by the Arbitrators in writing to which the parties consented. There was no partition as such of the securities and stock-in-trade referred to above, but, on an ad hoc basis, the Arbitrators directed that Nagappa Setty should retain with him securities of the value of Rs. 55,397/-and hand over the rest the defendants. The defendants, on the other hand, who were in possession of the stock-in-trade, were directed to make over to Nagappa Setty stock-in-trade, worth Rs. 24, 840/-. The parties, however, failed to carry out these directions although, in the first instance, they had agreed to the arrangement. The course of arbitration was begged down by the quarrels between the sons. In the meantime, one of the Arbitrators died. The other co-Arbitrators were requested to continue with the arbitration, but they too could not make much progress Thereafter, allegations were made about partiality against one of the other of the Arbitrators and the matter went to Court and, since the arbitration was not completed by a certain date, all attempts at arbitration aborted. However, after 11th July, 1940, the plaintiff, on the one hand, and the defendants, on the other, continued to do business; and it is the plaintiffs case that the defendants had continued the family business with the help of family assets and, hence, that business with the help of family assets and, hence that business and the assets of that business must be all made available for partition. Both the Courts have held that the plaintiff was not entitled to get any share in the business, or in the properties acquired from the profits of that business. They have also held that on 11th July, 1940, the old family business in the name of Lachiah Setty & Sons and Giri Coffee Works had come to an end and that the plaintiff, on the one hand, and the defendants, on the other, had started their own new business and one had no concern with the other. It is true that although the defendants did new business, that new business continued to have the old names. The books of account were freshly opened for the same and we feel no difficulty in agreeing with the concurrent findings of both the Courts the business carried on by the defendants from 11-7-1940 in the name of Lachiah Setty & sons and Giri Coffee works was a new business having no connection with the old family business which had come to an end The directions given by the Arbitrators on 11-7-1940. to which the parties had agreed, were to the effect that, from 11-7-1940 onwards, the defendants shall be entitled to the profits made in the business and will be also liable for the losses in that business. In other words, the business was defendants' own after 11 7-1940 and the plaintiff would have no concern with it. The High Court has held that the Arbitrators had intended to close the family business and divide the stock-in-trade leaving to the M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 10 parties to carry on business, if they so chose, on their own exclusive responsibility. 17. That being the position, the question arises whether the defendants would, in law, be liable to account to the plaintiff for the profits earned by the defendants in their own business or for the acquisitions made by them in that business. We agree with the High Court that they were not so liable. On a partition by severance of the joint status, the members of the family become tenants in-common of the family property. If one of the members remains in possession of the entire properties of the family, there is no presumption that the property, which is acquired by him after severance of the status, must be regarded as acquired for the family, (see Gulabrao Fakirrao v. Baburao Fakirrao and Anr. A.I.R. 1960 Bom. 159 Where rents and profits are received by the member in possession, he would be liable to account for the rents and profits received by him, But the funde in the hands of that member do not become impressed with any trust in favour of the other member. (See John Kennedy v. Mery Annette De Trafford) and Ors. 1897 A.C. 180. Therefore, if such a member acquired some property with the funds in his possession, the other members could claim no share in that property. Hence we agree with the High Court that the business carried on by the defendants on and after 11-7-1940 should be considered as the exclusive business of the defendants, and the plaintiffs would have no right to claim any share in the profits or the acquisitions made out of that business. What is true about this business carried on by the defendants is also true of the business carried on by the plaintiff. The defendants have not claimed and cannot claim any share in the business run by the plaintiff after 11-7-1940 or in the profits and acquisitions made by him that business. This finding, however, is not to be understood to mean that the securities and stock-in-trade already referred to are not to be taken into account as family assets for the purpose of partition, nor can the parties declare the liability to account to each other for the income derived by the from the family assets in their possession. 18. We have dealt with all the points raised in the course of the arguments before us and, in our view, the findings of the High Court are quite unexceptionable. The appeals must, therefore, fail. It was however, brought to our notice that the wording of the decree as passed by the High Court is likely to be. mis-interpretated and misconstrued at the time of execution, and, hence the name should be properly clarified. We, therefore, propose to substitute a decree, as under, for the decree passed by the High Court: (1) It is declared that the original plaintiff Nagappa (now his heirs brought on record) was entitled to a 2/19th share in the joint family properties and liable for a similar share in the joint family liabilities. (2) The joint family properties, as mentioned in the suit, shall comprise all the movable and immovable properties including stocks, shares and valuable securities in the possession and control of the plaintiff and defendants 1 to 9 as on 11th July, 1940 The family liabilities as on that date shall be accertained with a view to determine the net assets. The plaintiff shall have 2/19th share in the same. (3) The parties are liable to account for the rents, income, profits and dividends received by them after 11-7-1940 till the date of final partition in respect of the joint M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 11 family properties in their respective possession on and after 11-7-1940. If, on taking accounts, the plaintiffs are found to have received less for their 2/19th share in such rents, income, profits and dividents. the deficiency shall be made good by the defendants. 19. It is however, clarified that the parties are not accountable for the profits or acquisitions made in the course of the separate business or business carried on by the parties after 11-7-1940. The business carried on by the defendants in the name of "Lachiah Setty and Sons" and "Gin Coffee Works" is to be regarded, after 11-7-1940, as the separate business of the defendants. (4) The plaintiffs shall be put in separate possession of the properties coming to their share on partition by metes and bounds. The partition shall be effected by a commissioner appointed by the Court in respect of all properties not required under the law to be partitioned by the Deputy Commissioner. In respect of properties, partition of which is required under the law to be effected by the Deputy Commissioner, the partition shall be effected by the Deputy Commissioner or his Subordinate Gazetted Officer. The present possession of the parties shall be respected as far as possible. (5) The order of costs made by the High Court is confirmed and the appellants shall pay the costs of the respondents in these appeals. M.N. Aryamurthy And Anr. vs M.D. Subbaraya Setty (Dead) Through L. ... on 20 September, 1971 12 | {
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Gyanendra Kumar vs The State Of U.P. on 25 November, 1971 Equivalent citations: AIR1972SC502, 1972CRILJ308, (1972)4SCC819, 1972(4)UJ343(SC), AIR 1972 SUPREME COURT 502, 1972 4 SCC 819, 1972 MADLJ(CRI) 371, (1972) 1 SCJ 601 Author: D.G. Palekar Bench: D.G. Palekar, P. Jaganmohan Reddy JUDGMENT D.G. Palekar, J. 1. In this appeal by special leave the appellant Gyanendra Kumar who is about 22 years old has been convicted by the Civil and Sessions Judge Etah for offences under Sections 302, 307, 224 IPC and Section 25 of the Indian Arms Act. On conviction he has been sentenced to imprisonment for life and to several other terms of imprisonment. All the sentences are made to run concurrently In appeal, the High Court at Allahabad confirmed the conviction and sentence and hence this appeal by special leave. 2. The person who lost his life was one Munshi Lal, the maternal uncle of the appellant. The incident took place in Ganjdunwara town on August 30, 1984. There is a School in that town known as the Hindi Muria School, which was run by the Dharmada Committee of the local grain-merchants. The appellant's father Raja Ram and Uncle Mehtab Rai are influential grain merchants of the town and were members of the Dharmada Committee. The deceased Munshi Lal was a teacher in that School. The President of the Dharmada Committee received a letter in which it was suggested that the School may either be closed or the salaries of the teachers be reduced. Hence a meeting of the Dharmada Committee was called on August 29, 1964. The meeting, however, was adjourned to 2. 30 P.M. on August 30, 1964. A large number of people attended the meeting of the Dharmada Committee. There were members of the Committee and also non-members. The appellant, a non-member, was also present at the meeting 3. As soon as the meeting commenced one Bankey Lal Kabra P.W. 9 pressed for the consideration of the letter which suggested that the School be either closed or the salaries of the teachers be reduced. The appellant's father Raja Ram and uncle Mehtab Rai took exception to Bankey Lal Kabra taking part in the proceedings on the ground that he had ceased to be a grain merchant and was not entitled to address the meeting as a member. This annoyed Bankey Lal Kabra who made some derogatory remarks against Raja Ram and Mehtab Rai. The appellant got very much excited on hearing what was said against his father and uncle and said that Binkey Lal Kabra was creating trouble and it was necessary to look to him. So he left the meeting, went to his house which was Gyanendra Kumar vs The State Of U.P. on 25 November, 1971 1 about a furlong away and returned with a loaded double barrelled gun. By that time the meeting had ended in disorder and the people were dispersing on the road in front of the house where the meeting was taking place. Banekcy Lal Kabra accompanied by some-others was moving away from the place when the appellant came with the gun and addressing those who were accompanying Bankey Lal Kabra said "Move away. I shall shoot this Sala Kabra with my gun." Saying this, he fired one shot in the direction of Bankey Lal Kabra. He missed his aim. Bankey Lal Kabra then started running to save himself towards the house of one Laxrai Narain. In the meantime the deceased Munshi Lal rushed towards his nephew, the appellant, in order prevent him from using the gun. The appellant, however, pushed him back and fired at Bankey Lal Kabra, Unfortunately Munshi Lal came between the gun and Bankey Lal Kabra and was shot in the back. Munshi Lal fell down. 4. The gun was a breach loader. The appellant attempted to reload the gun after the two spent cartridges were thrown out by the rejector and fell on the ground. As he put his hand in his pant pocket to take out fresh cartridges, the appellant was overpowered by the friends and associates of Bankey Lal Kabra namely Sita Ram. P.W. 1, Chandra Shekhar, P.W. 6 and others. Binkey lal Kabra also joined them they caught the appellant and were marching him to the Police Station when Mehtab Rai, Raja Ram and six of their associates came and rescued him from his captOrs. In the melee, Bankey Lal held the appellant fast by his shirt and a piece of shirt came in his hand as the appellant freed himself by force The appellant with his gun was taken away by his relations. It was past 3.00 P.M. by now. The captors picked up the two empty cartridges which had fallen on the ground and then wrote a complaint. With this complaint they proceeded to the Police Station and at 3.30 P.M. lodged the complaint. The two empty cartridges and the piece of shirt were handed over to the Officer in charge. A search was taken of the house for the shirt of the appellant and the same, Ext. 21, was attached under a Seizure Memo. On Comparison, the piece was found to be a part of the shirt attached. 5. In the evening the Superintendent of Police arrived in town and he called for the gun. The gun was produced by Mehtab Rai. On examination of the gun it was found that it had been freshly greased and the barrels had been cleaned. The gun and the two empty cartridges were sent to the Scientific Section of the U.P. Government where Inspector Rameshwar Prasad Rastogi, P.W. 3 found, after firing two live cartridges from the gun that the two empty cartridges which had been sent to him must have been fired from this gun. Munshi Lal died of the gun shot wound and on a post-mortem examination of his body it was found that he had a gun shot injury which was chest cavity deep with margins blackened A charge sheet was filed against the appellant and his rescuers. The learned Sessions Judge acquitted the rescuers but convicted the appellant as aforesaid, 6. The defence of the appellant was one of alibi. He said that he had gone away to Bareilly on the evening of August 29. 1964 and that he was not present all at at the time of the occurrence. He further stated that he had been falsely involved because his father and uncle were influential men and the prosecution witnesses were jealous of them. 7. Both the courts held that the prosecution case had been substantially proved. The eye-witnesses of the occurrence were Bankey Lal, P.W. 9, Sita Ram, P.W.I, Chandra Shekhar, P.W. 6 and Krishna Gopal P.W 7. Besides, there was the evidence of the two empty cartridges, which, in the opinion of Gyanendra Kumar vs The State Of U.P. on 25 November, 1971 2 the Expert Inspector Rastogi had been fired from the gun recovered from Mahtab Rai. There was also the piece of the shirt of the appellant. Objection was taken to the evidence of the eye witnesses on the ground that they were associates of each other and partial witnesses. After due consideration of this objection, both courts held that the appellant had fired two shots from the gun at Bankey Lal. The first missed its aim and the second hit the unfortunate Munshi Lal when it was really intended for Bankey Lal. These are findings of fact and this Court would not normally interfere with the High Court's findings of fact. We may say at once that no good grounds are made before us for reviewing the findings. 8. Mr. Kohli appearing for the appellant, however, submitted that on the basis of some of the findings of the High Court and the admitted circumstances of the case it was very probable that the deceased Munshi Lal might have been hit by a shot discharged accidentally in a scuffle. Admittedly Munshi Lal had rushed to the appellant to prevent him from firing the second shot. It is also in evidence that the appellant pushed Munshi Lal aside. It is submitted that at this stage there might have been a scuffle between the two and in the scuffle the gun was accidentally discharged and Menshi Lal fell to the shot. In this connection Mr. Kohli particularly invited our attention to the following observations of the High Court: It is not very clear how Munshi Lal came in between the barrel of the gun and Bankey Lal. In our opinion, there is no substance in this submission. The observations of the High Court must be read in their context. The High Court does not say that there was any scuffle, between Munshi Lal and the appellant. There is no evidence to show that Munshi Lal was trying to catch hold of the gun. The evidence, on the ether hand, was that Munshi Lal was pushed aside, and, according to the High Court, it was quite likely that when he was pushed aside, he steadied himself and assumed a standing position just when the appellant fired a second time at Banney Lal. The fact is that Munshi Lal received the wound in the chest, though from a very short range, which only goes to show that the appellant was firing at chest height. Moreover, there is absolutely no basis made in the evidence to show that there was a scuffle. The case of the appellant was that he was not present at the time of the occurrence. No suggestion also about the alleged scuffle or the gun accidentally discharging itself was made when the eye witnesses were cross-examined The point was not even raised before the learned Sessions Judge. A feeble attempt, however, seems to have been made before the High Court, but the submission was rejected by the High Court, and in our opinion, rightly. 9. It was next contended that the offence, if any, was one under Section 304, Part-I and not under Section 302 r/w Section 301-IPC. It was argued that the appellant was of an irritable temperament and that he must have Bred the shots under grave and sudden provocation. The learned Sessions Judge has rejected this contention. It may be the, the appellant had an irritable temper but there was no question of any grave provocation much less a sudden provocation. After all, during the course, of the meeting, all that Bankey Lal had said was that Mehtab Rai and Raja Ram were Gyanendra Kumar vs The State Of U.P. on 25 November, 1971 3 monoplising all seats of authority and they were dishonest. The appellant being a near relation may certainly resent such derogatory words addressed to his father and uncle. But they can hardly be said to be grave provocation having regard to the station in life. Mehtab Rai and Raja Ram occupied, on the one hand, and Binkey Lal, on the other. It is true that what is grave provocation in one set of society may not be grave provocation in another. But the words uttered by Bankey Lal to the effect that they were dishonest cannot be regarded as grave provocation under the circumstances. In any case the provocation was far from being sudden. The appellant goes to his house which is about a furlong away and latches the gun. There was sufficient time for him to cool down. His action was deliber. ate. He asked these who were near Bankey Lal to move away because he wanted to shoot Bankey Lal. One shot missed its aim, Munshi Lal came up to prevent him from filing another shot. The appellant pushed him and then fired the second shot. All this cannot be attributed to any grave and sudden provocation. The offence, therefore, it is on under Section 304, Part-I. In the remit the appeal fails and is dismissed. Gyanendra Kumar vs The State Of U.P. on 25 November, 1971 4 | {
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Commissioner Of Income Tax, Bombay vs West Coast Paper Mills Ltd on 17 September, 1971 Equivalent citations: 1971 AIR 2406, 1972 SCR (1) 780, AIR 1971 SUPREME COURT 2406, 1972 4 SCC 382, 1971 TAX. L. R. 1740, 1974 SCC (TAX) 72, 1972 (1) SCJ 463, 82 ITR 607, 1972 (1) ITJ 311, 1972 (1) SCR 780 Author: A.N. Grover Bench: A.N. Grover, K.S. Hegde PETITIONER: COMMISSIONER OF INCOME TAX, BOMBAY Vs. RESPONDENT: WEST COAST PAPER MILLS LTD. DATE OF JUDGMENT17/09/1971 BENCH: GROVER, A.N. BENCH: GROVER, A.N. HEGDE, K.S. CITATION: 1971 AIR 2406 1972 SCR (1) 780 ACT: Finance Act, 1959 as amended by Finance Act 1960-Section 19(4)-Scope and effect-Whether a company declaring dividends for previous years out of the profits of the accounting year in question, is exempt from deducting tax at source under the section. HEADNOTE: The assessee, a public limited company paid dividends for 3 earlier years to the preference share holders out of the profits made in the accounting year ended on June 30, 1960. The assessee did not deduct any tax at source from the dividends already declared as paid. The assessee contended that the dividends were declared in respect of previous years relevant to the assessment year 1959-60 and the earlier years and under s. 19(4) of 1959-Act, the company Commissioner Of Income Tax, Bombay vs West Coast Paper Mills Ltd on 17 September, 1971 1 was exempt from deducting tax at source for those years. The I.T.O. and the appellate authorities held against the assessee but on a reference to the High Court, the High Court held in favour of the assessee. In appeal to this Court, it was contended by the Revenue that under the provisions of the company law, dividend can be declared and paid only out of profits of a particular year, that since there was no profit during the three years in question it could not be said that the dividend declared in 1959-60 was in respect of the previous 3 years in question. In the eye of law, the dividend which were declared and paid in 1959-60 could only be dividend in respect of that year only, and could not be dividend in respect of earlier years in which the preference share holders were entitled to the same but were not paid. Dismissing the appeal, HELD : (1) The word 'dividend' as understood in company law is not applicable in the present case because, a good part of s. 19(4) would become otiose if the word 'dividend' is given its technical meaning in accordance with its signification in Company Law. [785 A-B] (ii)The language of s. 19(4) is quite clear and unambiguous. In plain language, the legislature had enacted that any dividend declared or payable before June 30, 1960 in respect of any previous year etc. would be exempt from the operation of the amendments contained in the sections by which the obligation was imposed on the company to deduct the tax at source. The language used in s. 19(4) applied to payments, the right to receive which had been acquired in the previous years on account of the dividend of the preference shares and the said expression is wide enough to include payments relating to the undischarged liabilities in respect of those previous years. [784 H, 785 B-C] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 13144 of 1971 and 139 of 1969. Appeals by special leave/certificate from the judgment and order dated October 7, 9, 1967 of the Bombay High Court in Income-tax Reference No. 105 of 1962. S.Mitra, K. S. Suri, R. N. Sachthey, and B. D. Sharma, for the appellant (in both the appeals). M.C. Chagla, R. Panjwani, J. B. Dadachanji, 0. C. Mathur and Ravinder Narain, for the respondent (in both the appeals). The Judgment of 'the Court was delivered by Grover, J. Civil appeal No. 1344 of 1971 is by Special Leave from a Judgment of the Bombay High Court in an incometax reference. The other appeal was Commissioner Of Income Tax, Bombay vs West Coast Paper Mills Ltd on 17 September, 1971 2 brought by certificate against the same Judgment. But the certificate being defective for wants of reasons, the same had to be revoked. The assessee is a public limited company which was incorpor- ated on March 25, 1955. Part of its paid up capital consisted of 60,,OOO six per cent (free of tax) cumulative preference shares of Rs. 100/- each. As the company did not make profits out of which it could distribute dividend no dividend was declared on the preference shares during the years of account ended on June 30, 1956, June 30, 1957 and June 30, 1958. During the account year ended on June 30, 1960, the company made profits. On February 9, 1960 the Board of Directors of the company passed the following resolution :- "That dividends on 60,000 Cumulative Preference shares of Rs. 100/ each in respect of the years ended 30th June, 1956, and 1957 remaining in arrears be paid at the rate of 6 % (free of tax) out of the profits of the current year ending, 30th June, 1960." The dividends were distributed in accordance with the resolution of April 25, 1960. On May 30, 1960. the Board of Directors passed a similar resolution for distributing the dividends on the preference shares in respect of the year ended on June 30, 1958. These dividends were actually paid from June 24, 1960 onwards. Adjustments with regard to these dividends were made in the balance-sheet prepared as at June 30, 1960. The Finance Act, 1959 (Act 12 of 1959) made certain changes in the scheme of taxation of a incorporated company and of its share-holders. The main changes were (i) reduction in the rate of tax levied on the company, (ii) taking away the credit given till then to the share-holder for income-tax paid by the company on the dividends declared and (iii) imposition of an obligation on the company to deduct tax at source on dividends declared by the company which was to be remitted to the Government. The duty to deduct tax was imposed by Section 18 (3D) and (3E) of the Income-tax Act, 1922 (hereinafter called the Act) which were introduced by Section 9 of Act 12 of 1959 which was brought into force with effect from April 1, 1959. However, an exemption was provided from the operation of the provisions of the amended sections under certain circumstances by Section 19(4) of Act 12 of 1959. That provision as amended retrospectively by the Finance Act, 1960 was in the following terms:- "Notwithstanding anything contained in sub- section (2) or sub-section (3), in relation to dividend declared or payable by a company on or before the 30th day of June, 1960, in respect of any previous year relevant to any assessment year prior to the assessment year 1960-61, the Income-tax Act shall have effect as if the amendments contained in section 5, section 7, section 9, section 14, section 15, section 16, and section 18 had not been made." The assessee did not deduct any tax from the dividends declared on February 9, 1960 and May 30, 1960 and paid from April 24, 1960 and June 24, 1960 onwards respectively. In the course of the assessment for 1960-61 made on the company the Incometax Officer called upon the assessee to show cause why it should not be treated as an assessee in default under section 18 ( 7 ) of the Act in respect of the taxes which according to him should have been deducted and paid but which were not paid. The assessee submitted that the dividends were declared in respect of previous years relevant Commissioner Of Income Tax, Bombay vs West Coast Paper Mills Ltd on 17 September, 1971 3 to the assessment year 1959-60 and the earlier years and that under section 19(4) of Act 12 of 1959 there was no obligation to deduct tax from dividends declared in respect of those years. This objection based on section 19(4) of Act 12 of 1959 was over-ruled by the Income-tax Officer. He held that the assessee was liable under section 18 (7) of the Act for payment of tax amounting to Rs. 2,32,748-70 P. The assessee appealed to the Appellate Assistant Commissioner but that appeal failed. There was a further appeal to the Appellate Tribunal. The Tribunal upheld the orders of the departmental authorities. There- upon the assessee moved the Tribunal for submitting, a Statement of the case and referring the following question of law to the High Court : "Whether in view of section 19 (4) of the Finance Act, 1959 (as amended by the Finance Act, 1960) there was any obligation to deduct tax under section 18 (3D) and (3E) from the dividends declared on February 9, 1960 and May 30, 1960 so as to justify the order under section 18(7) of the Income-tax Act, 1922, on failure to do so ?" the High Court answered the question in favour of the assessee and against the Revenue. The, whole controversy centres on the true interpretation of section 19(4) of Act 12 of 1959 as amended by the Finance Act of 1960. The assessee claimed that that section was enacted to give exemptions with regard to such dividends which were in respect of the earlier years and which were declared between the dates April 1, 1959 when the new obligation of deducting a tax at the source was imposed and June 30, 1960. According to the Tribunal,. the dividends declared on February 9, 1960 and May 30, 1960 were dividends in respect of the year 1959-60 and were in respect of the previous year relevant to the assessment year 1960-61. These dividends were not entitled to any exemption under section 19(4) of Act 12 of 1959. Section 19(4) lays down two conditions. The first is that the dividend must be declared or payable by a company on or before June 30, 1960. The second is that it should be in respect of any previous year relevant to any assessment year prior to the assessment year 1960-61. The only dispute is confined even with regard to the above two conditions to the meaning of the words "in respect of" in section 19(4). In other words the point for determination in the present case is whether the dividends declared by the company on February 9, 1960 and on May 30, 1960 and paid out by it from April 25, 1960 and June 24, 1960 onwards were dividends in respect of the previous years relevant to the assessment years which were prior to the assessment year 1960-61. As has been observed by the High Court the resolutions of the company, its annual report and accounts, the notice of the annual general meeting setting out the agenda, all showed that the dividends were referred to as the dividends paid on the preference shares for the accounting years ended on June 30, 1956, June 30, 1957 and June 30, 1958. The argument on behalf of the Revenue, however, has been that under the provisions of the company law, dividend can be declared and paid only out of profits of a particular year. As there were no profits during the three years in question it could not be said that the dividends declared by means of the resolutions passed on February 9, 1960 and May 30, 1960 and paid were in respect of the years which had ended on June 30, 1956, June 30, 1957 and June 30, 1958. In the eye of law, the dividends which were declared and paid in the year of account 1959-60 could only be dividends in respect of that year and they could not be dividends in respect of Commissioner Of Income Tax, Bombay vs West Coast Paper Mills Ltd on 17 September, 1971 4 any earlier years in which the preference share-holders were entitled to the same but were not paid. The argument on behalf of the Revenue, in other words has been that the so called dividends which were declared and paid for the three years in question were payments only of such amounts as were due to the preference share-holders as arrears. It is not disputed that a preference share-holder is entitled to the payment of the dividend whenever the company has profits even though it has not earned profits in any earlier year when the dividend became due. But it is contended when such a payment is made later it ceases to have the character of a dividend and is just a bare payment of what had become due to the preference shareholder. Our attention has been invited by the learned counsel for the Revenue to the statement in Buckley on the Company Acts, Thirteenth Edition(1), to the following effect ",In the absence of anything to the contrary in the regulations, members are entitled to profits in proportion to their shares in the undertaking. The company may, if it has or can acquire power so to do, issue preference shares. Where it is intended that a deficiency in a fixed preferential dividend in any one year shall be made good out of profits of a subsequent year, it is commonly and conveniently expressed as a cumulative preference dividend. But the words "preference dividend," without adding "cumulative", bear, in the absence of anything to the contrary, the same meaning. There is. no magic in a year; a preference dividend is a thing to be paid out of the proper fund, viz., the profits before the ordinary share comes into receipts "Arrears of dividend" and "back dividends" are inaccurate expressions". In Palmers' Company Law, 17th edition, it is stated that the ,term "cumulative preferential dividend" means a dividend payable out of the profits generally in priority to the subordinate class or classes of shares so that if the profits of one year are not sufficient to pay the dividend for that year, the deficiency accumulates as against subsequent profits and has to be paid before any dividend can be paid on the subordinate class or classes. There can be no manner of doubt that so far as company law is concerned the correct position is the one suggested on behalf of the Revenue and dividend would be payable only for the year in which profit is made. That expression may not be appropriate for the deficiency which accumulates on account of non payment of dividend in a particular year because no profits have been made by the company. But we are not concerned with the connotation of the expression "dividend" as it is understood in company law. The Act 12 of 1959 introduced the changes which have already been adverted to and an obligation was imposed upon the company to deduct tax on dividends. Section 19(4) contains an exemption and the language appears to be unambiguous. We apprehend that the exemption would be rendered meaningless and nugatory if the interpretation sought to be placed by the Revenue were to be accepted. In plain language the legislature has enacted that any dividend declared or payable before June 30, 1960 in respect of any previous year etc. would be exempt from the, operation of the amendments contained in the sections by which the obligation was imposed on the company to deduct the tax. A good part of section 19(4) would become otiose if "dividend" is given its technical meaning in accordance with its signification in the company law. We invited the learned counsel for the Revenue to give us any illustration of the actual operation of sub section 4 of section 19. He was unable to give us any satisfactory or cogent illustration. We entirely concur in the view of the High Court that the language used in section 19(4) applies to payments, the right to receive which had been acquired in the previous years on account of the dividend of the preference shares and that the said expression is wide enough to include payments relating to the " undischarged liabilities in respect of those prior years". The answer returned by the High Court is affirmed. Commissioner Of Income Tax, Bombay vs West Coast Paper Mills Ltd on 17 September, 1971 5 In the result, the appeal by special leave fails and it is dismissed with costs. As regards the appeal by certificate, the same is dismissed for the reasons already stated. There will be no order as to cost in that appeal. S.C. Appeals dismissed. -L3Sup.C.I./72 Commissioner Of Income Tax, Bombay vs West Coast Paper Mills Ltd on 17 September, 1971 6 | {
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Bharvad Bhikha Valu And Ors. vs The State Of Gujarat on 3 March, 1971 Equivalent citations: AIR1971SC1064, 1971CRILJ927, AIR 1971 SUPREME COURT 1064, (1971) 2 SC CRI R 330 Author: A.N. Ray Bench: C.A. Vaidialingam, A.N. Ray JUDGMENT A.N. Ray, J. 1. This is an appeal by special leave from the judgment dated 5 April, 1968 of the High Court of Gujarat setting aside the order of acquittal passed by the Sessions Judge, Ahmedabad on 21 September, 1965 on a charge for an offence under Section 302 read with Section 34 of the Indian Penal Code and convicting the appellants and sentencing each of them to imprisonment for life. 2. The three appellants Bhika Valu, Dhuna Magna and Valu Vela were the accused in this case. They belonged to the Barwad community of Gundi village of Dholka Taluka, Ahmedabad Rural District. In this village there were two factions one of the Koli Patels and the other of Bharvads. Five or six years prior to the date of occurrence, namely 20 February, 1965, 5 or 6 Bharvads of Gundi village were murdered. Amongst those murdered were Vajakaran Vaha, Ranchhod Valu, Ganda Kama, Deva Kama and Vela Kama. The appellant Bhika Valu is the nephew of Vajakaran Vaha and is brother of Ranchhod Valu both of whom were among the murdered Bharwads. The appellant Dhuna Magha is an agnate of the three murdered Bharvads Ganda Kama, Deva Kama and Vela Kama. The appellant Valu Vela is the son of murdered Bharvad Vela Kama. In respect of the said offences of murders of those Bharvads, a charge-sheet was brought against 23 Koli Patels of the village and out of them, four persons were convicted and sentenced to various terms of imprisonment. Palji Teja, the deceased in the present appeal and Pitambar Bhura and Rupsing Raja, two prosecution witnesses in this case were among the 23 Koli Patels implicated in those offences of murders. Since the murder of Bharvads relations between Koli Patels and Bharvads were not friendly. The present offence was alleged to have been committed in consequence of the strained relations between the Koli Patels and the Bharvads. 3. The prosecution case was this. On 20 February, 1965 Falji Teja and his son Khengar went to the Bhurkhi Railway Station which was about two furlongs from the place of the occurrence. Falji and Khengar went to meet the train, which would arrive at about 3 p. m. to engage agricultural labourers if they could be obtained. Falji and Khengar met the train but could not find any agricultural Bharvad Bhikha Valu And Ors. vs The State Of Gujarat on 3 March, 1971 1 labourer. Then they started on the return journey to Gundi Village. When they passed over a culvert near the Panchayat Office at Gundi accused No. 1 ran up from behind and gave a blow with an axe to Falji on the left leg from behind. Falji fell down. Accused Nos. 2 and 3 ran up to the spot. Accused No. 2 was armed with a spear and accused No. 3 with a Dharia. All the three accused started giving blows to Falji. As a result of the injuries Falji died on the spot. Three accused ran away. Falji Teja had a double barrelled gun with him and that gun fell from his hand when he was assaulted. Accused No. 1 carried away the gun which Falji Teja had carried with him. 4. Khengar who was a young boy of about 14 got frightened and ran away. He informed his mother Bai Samu about the assault on his father and told her who the assailants were. At the time of the assault Pitambar Bhura a Koli Patel was proceeding from his house in Gundi to Bhurkhi Railway Station and he saw the entire incident from a place. Another prosecution witness Rupsing Raja also a Koli Patel was behind Pitambar Bhura and was on his way to the field. He also saw the incident of assault on Falji After the assault Rupsing Raja went back to the village and informed Mera Mathur whose wife Bai Raju was working as an agricultural labourer with Falji. Thereafter Bai Samu went to the place of incident. Rupsing Raja and Mera Mathur also went to the spot by that time. At the place where the dead body of Falji Teja was lying, Pitambar Bhura and Rupsing Raja confirmed the information which Bai Samu had received from Khengar as to the three accused being the assailants of Falji. 5. One Kavabhai Mansing happened to go to a well near the scene of offence. Kavabhai Mansing saw Bai Samu and found her weeping. Kavabhai Mansing went up to Bai Samu and saw Falji lying dead with injuries. Rupsing Raja, Mera Mathur, Pitambar Bhura were also present when Kavabhai Mansing went up to the scene of offence. Bai Samu told Kavabhai Mansing about the incident and asked him to go and send a telegram to the Keth Police Station. Kava Mansing went to the Bhurkhi railway station and contacted the Station Master and asked him to send information to Koth Police Station. The Station Master, Bhurkhi got in touch with the Koth Railway Station and recorded the message. 6. The Police Sub-Inspector from Koth Police Station proceeded to Gundi village. He held inquest on the dead body. He made a panchnama. When the three accused ran away accused No. 2 left behind him at the scene of the offence his spear. The blade of the Dharia which was used by accused No. 3 was broken and the broken portion of the blade was left behind at the scene of the offence. The Police Officer took charge of the spear and the broken portion of the blade of Dharia. The dead body was sent to Dhandhuka for postmortem examination. The statements of Pitambar Bhura and Rupsing Raja were recorded on 20/21 February, 1965 in the night and the following day the statements of other witnesses were recorded. The three accused presented themselves before the Police Inspector on 21 February, 1965. The Police Sub-Inspector discovered in the presence of Panchas a gun which accused No. 1 had concealed at the house of a tailor. The Police Inspector further discovered a Dharia which accused No. 3 had concealed at the hedge of the Vada land of one Bharvad Vama Vaja. The piece of blade of Dharia which was found at the scene of the offence matched the broken edge of the Dharia discovered. An axe was also discovered by accused No. 1 who led the police party and the panchas to the Vada land of Vama Vaja and from there took out an axe. The reports of the Chemical Analyser and Serologists indicated that there were stains of human Bharvad Bhikha Valu And Ors. vs The State Of Gujarat on 3 March, 1971 2 blood on the gun and on the handle of the Dharia and the other portion of Dharia. There were blood stains on the axe but the blood had so integrated that the origin could not be determined. 7. After investigation a charge-sheet was submitted against the three accused. They were charged under Section 302 read with Section 34 of the Indian Penal Code and accused No. 1 was charged under Section 379 of the Indian Penal Code. All the accused denied having committed an offence. 8. The Sessions Judge examined the case under three broad heads. The first was evidence of motive. The second was evidence of eye-witnesses Pitambar Bhura and Khengar Falji and Rupsing Raja. The third was circumstantial evidence in the shape of discovery of blood stained articles, viz., stolen gun, farsi with stain of blood on them on information received from accused No. 1 and discovery of Dharia with stains of human blood on information received from accused No. 3. As to the prosecution witnesses the Sessions Judge found that since the incident of murder of some Bharvads six years prior to the date of occurrence Falji and others including witnesses Pitambar Bhura and Rupsing Raja who were also accused along with Falji in the trial of the Bharvad murder case belonged to the faction of Koli Patels who bore enmity against the Bharvads. The accused, in the present case, were Bharvads and the witnesses and the deceased Falji were Koli Patels. The Sessions Judge therefore held that the prosecution witnesses were partisan and they belonged to a rival faction. Khengar being the son of Falji and a young boy of 14 was found by the Sessions Judge to be a witness whose evidence had to be very carefully scrutinised along with the evidence of Pitambar Bhura and Rupsing Raja. The Sessions Judge considering the evidence found that it could not be said with reasonable certainty that the witnesses were persons whose presence at that place would be natural in ordinary course of events. The consideration which weighed with the Sessions Judge was that if Khengar was present the accused would not have spared Khengar to remain an eye-witness. The Sessions Judge also on analysis of medical evidence found discrepancies between the medical evidence and the evidence of the witnesses to be a serious infirmity. 9. According to the Sessions Judge, the most serious infirmity in the prosecution case was that the First Information Report did not mention the name of accused No. 3 Valu Vela as one of the assailants. Kavabhai stated that Bai Samu wife of Falji had given the names of accused No. 1 and accused No. 2 and thereupon Kava bhai carried the information to the Station Master. The Sessions Judge concluded that the truthfulness of the evidence of these three eye-witnesses as a whole was not free from doubt and their evidence could not be accept ed as sufficient for conviction in the absence of corroboration. 10. The Sessions Judge found that though the prosecution had established that there were strained relations between the accused and the deceased it could not be said that the incident of murder of Bharvads had not resulted in strained relations between Falji and any other Bharvad of the village but that possible motive for the murder could not be treated as corroboration of the evidence of the three eye-witnesses Pitambar, Khengar and Rupsing. 11. As to the discovery of blood stained articles, viz., stolen gun, farsi and Dharia and a piece of apparel called "Pachhedi" having a blood stain, the Sessions Judge held that considering that there were two factions it was highly desirable that persons other than Koli Patels were taken as Panchas Bharvad Bhikha Valu And Ors. vs The State Of Gujarat on 3 March, 1971 3 and examined as witnesses. The evidence of Panch witness Chaturbhai was found by the Sessions Judge tainted because the prosecution did not examine the other two Panchas one of whom was a Muslim and the other a Sindhi. 12. The High Court set aside the order of acquittal and convicted the appellants. The High Court accepted the evidence of Khengar son of Falji, Bai Samu widow of Falji and relied on the evidence of Khengar by reason of corroboration of various pieces of circumstantial evidence. 13. The High Court did not consider it safe to rely on the testimony of Pitambar because of the previous enmity between him and the Bharvads and on the additional ground that Pitambar was trying to improve upon his earlier version regarding the names of the assailants that were disclosed by Bai Samu. The High Court also found it not prudent to rely upon the testimony of Rupsing because he belonged to the rival faction which bore animosity against the Bharvads and at the time of the incident Rupsing was at a distance of more than 100 feet and therefore Rupsing might not have identified the three assailants of Falji. 14. As to Khengar's evidence the High Court said that he had seen his own father being seriously assaulted by use of dangerous weapons and his failure to appeal to Rupsing and Pitambar to come to the help of his father was not unnatural for a boy of his age at that critical time. The High Court therefore rightly said that Khengar who was a young boy of about 14 years of age must have been very much frightened and his action of rushing towards the village to his own house raising shouts all the time was quite natural in view of his age and his relationship with the victim and the nature of the assault. 15. The High Court rightly rejected the criticisms of Khengar's evidence, namely, that he said that no passenger had got down at Bhurki Railway Station whereas Rupsing Raja said that he saw some passengers coming from the opposite direction and the conflict between the medical evidence and Khengar's evidence that Falji had fallen down with his face downwards and the conflict between the medical evidence and Khengar's evidence as far as external injuries Nos. 1 and 2 were concerned. The doctor was not asked as to whether these two injuries Nos. 1 and 2 could not have been caused when Falji was lying with his face downward. 16. The other piece of evidence as to whether there was any passenger who had got down at Bhurki Railway Station was also found by the High Court not to be a ground for doubting Khengar's testimony because Rupsing was not asked any question as to whether the persons he met in the village coming from the opposite direction were passengers. 17. The High Court adopted the correct approach in finding that though there were no infirmities of Khengar's evidence as it stood but in view of the fact that he was a young boy it would be prudent to seek corroboration of Khengar's evidence. 18. The High Court correctly relied on the evidence of Bai Samu in corroboration of Khengar's testimony. Khengar told Bai Samu that his father was assaulted and on Bai Samu asking him who the assailants were Khengar told her that accused No. 2 Dhana Megha and accused No. 3 Valu Vela Bharvad Bhikha Valu And Ors. vs The State Of Gujarat on 3 March, 1971 4 and accused No. 1 Bhikha Valu had assaulted his father. Bai Samu in cross-examination maintained that Khengar had given her the names of the three accused as the assailants of her husband. Kavabhai was near the well which is situated at a short distance to the north of Panchayat Office and on the date of occurrence he saw Bai Samu on the road near the culvert. Kavabhai. saw Bai Samu weeping and went to her. Kavabhai saw Falji Teja lying dead on the ground with blood injuries. According to Kavabhai Bai Samu told him that Bhika Valu and Dhana Megha had killed her husband. Kavabhai went to the Station Master, Bhurki. The Station Master Chakravarti did not know Gujarati. Kavabhai spoke to him in Gujarati. The Station Master said that he understood from what Kavabhai told him that Bhikha Valu was murdered by Dhana Megha. The High Court rightly said the Station Master Chakravarti was not familiar with the Gujarati language and because of that there was misunderstanding of what Kavabhai said and wrong names were mentioned. Bai Samu was in great distress and agony of her life. Therefore it would be reasonable to find that though under the circumstances Bai Samu might have given out the names of three individuals Kavabhai understood her to mention the names of accused No. 1 and accused No. 2. 19. The High Court referred to the three Panchnamas Exhibits 20, 21 and 23 as pieces of circumstantial evidence. Exhibit 20 is the deposition of the Panch witness Nanubhai who spoke of injuries on the different portions of the dead body, a piece of Dharia blade to be found lying at a short distance from the dead body and a cap and a piece of cloth used as a head gear found lying there. The spear was also found lying at some distance from the dead body. The Panchnama Exhibit 21 was recorded in connection with the scene of offence. Panch witness Nanubhai spoke of the piece of apparel Pachhedi of the nature of a short dhoti worn by accused No. 3 and taken charge by the police on 21 February, 1965. Accused No. 3 put on the pachhedi. It appeared to have a blood-stain and the police took charge of it under Panchnama Exhibit 23. Exhibit 21 also spoke of the piece of blade of Dharia found lying at a distance of one pace to the south of the dead body and the spear was found lying at a distance of about 7 paces to the west of the dead body. The Panchnama Ex. 23 mentioned that there was one blood spot on the right side on the "thigh portion" of that Pachhedi and accused No. 3 was allowed to change the pachhedi by wearing another pachhedi which he had with him and the spot of blood which was noticed on the pachhedi of accused No. 3 was encircled under the signature of Panch witnesses. 20. The High Court referred to the evidence of Dr. Lala who performed the postmortem examination on the body of Falji Teja. Dr. Lala's evidence was that all the injuries could have been caused by sharp cutting instrument and the death of Falji Teja was due to shock and haemorrhage as a result of the fracture of the skull. Dr. Lala spoke of six injuries on Falji Teja. Injury No. 4 a cut on the back of left upper arm lower one third skin deep could have been caused by a spear. Injury No. 3 a semi-circular incised wound cutting through the bone and exposing the brain starting from the right frontal area 11/2 above lateral edge of right eyebrow and going backwards across the right parietal left occipetal and then forward over left temporal area and terminating at about 2 above left ear, could have been caused by a Dharia blow and it could not have been caused by an axe. Injuries Nos. 5 and 6 viz., an oblique incised wound on the back of left thigh and an incised wound on the back of middle half of the left leg could have been caused by an axe and not by a spear. Injury No. 1 an incised wound near the outer angle of left eye and injury No. 2 an oblique incised wound over left cheek in the area of left ear could have been caused by a Dharia and a farsi and not by a spear. That Bharvad Bhikha Valu And Ors. vs The State Of Gujarat on 3 March, 1971 5 was the evidence of Dr. Lala. 21. The High Court dealt with the arguments advanced on the medical evidence that injuries Nos. 1 and 2 on the outer angle of left eye and over the left ear were so located that they could not have been caused when he was lying with his face downward. No questions were put to Dr. Lala about this aspect of the case and the High Court rightly said that it was not possible to accept the submission on behalf of the accused that those two external injuries could not have been caused when the deceased was lying with his face towards the ground. 22. The High Court correctly found corroboration from the injuries on the dead body and the three different weapons, viz., the axe, the spear and the Dharia and the wearing apparel pachhedi. The medical evidence was that the different injuries could have been inflicted by Dharia, axe and spear. External injury No. 4 could have been inflicted by a spear or by an exe. Khengar's evidence was there was a spear injury but he had not specified the part of the body where the spear had landed. Khengar might have noticed only the action of accused No. 2 in thrusting the spear but did not notice how and in what manner the spear landed on the person of Falji. Therefore, there could not have been discrepancy between Khengar's and the medical evidence. A spear was found lying at the scene. A broken blade of a Dharia was also lying near the dead body. The Police Sub-Inspector recorded inquest and took charge of that broken piece of Dharia blade. Stains of human blood were found on the Dharia blade. The stains of blood on the spear had so integrated that its origin could not be determined. Therefore, looking at the place from which the spear was found and the circumstances under which the spear was taken charge of by the police, it is clear that the spear must have been stained with Falji's blood and must have been left behind by the person or persons who assaulted Falji. 23. The injuries on the dead body were consistent with the three different weapons and the three different types of weapons rendered it not unreasonable for the High Court to come to the conclusion that there were three assailants each of whom was having a different weapon and each of whom caused injuries to the deceased Falji. Khengar's testimony is corroborated by the testimony of Bai Samu that the three accused assaulted the deceased and caused injuries to the deceased by means of axe, spear and Dharia. The pachhedi which was taken charge from accused No. 3 immediately after he was arrested had stains of human blood. The High Court examined the pachhedi and found that there was only one cutting taken out from the pachhedi and that too was from the portion around which there was a circle in ink and the signature of panch witness Nanbhai was also there. No other cutting was taken out from the pachhedi. There was only one tear on the pachhedi. This cut mark was taken out from the portion encircled in ink when the Panchanama was made. The stain of human blood on the pachhedi worn by accused No. 3 was a strong reliable piece of evidence. 24. The discovery of a gun and an axe by accused No. 1 and a Dharia by accused No. 3 is of great importance for the purpose of corroboration. Panch witness Chaturbhai was a panch to three different Panchnamas in connection with the discovery of different weapons. Hasan Alibhai, and Dayaram Kamaldas were copanchas with him and accused No. 1 was in police custody at that time. Accused No. 1 said that he would show the place where he had kept the gun and accused No. 1 led Bharvad Bhikha Valu And Ors. vs The State Of Gujarat on 3 March, 1971 6 the police and the panchas to a place on the station road to the tailor's house which was under construction. Accused No. 1 showed the gun which was lying at that house. The gun was attached. Panchanama was made and the gun was taken charge of by the police. The gun was shown to be the gun belonging to Falji. The licence showed the number of the gun. The licence was given to Falji. The number and other description tallied. The number of the gun was noted in the panchanama. 25. Accused No. 3 led the police party and the panchas to a place near a small temple of a deity. Accused No. 3 took out a Dharia from the hedge of thorns. The Dharia was attached. A panchanama was made. The Dharia which was attached had. its blade broken. There were blood like stains on it. Article 13 was the Dharia produced in Court. The blade which was found from the scene of offence near the dead body and the dharia which was attached matched. The High Court saw the two pieces matched completely at the broken edge and there was no doubt in coming to the correct conclusion that the broken piece of blade was broken from this particular dharia and the remaining portion which was recovered according to the prosecution from the hedge was the other matching part of it. 26. The third panchanama made on 22 February, 1965 stated that accused No. 1 said that he would find out the farsi in a hedge. Accused No. 1 also stated that he had kept the farsi in a hedge and then the panchnama was recorded at the Panchayat Office. Chaturbhai also said in evidence that the distance between the spot from where the dharia was taken out and the place from where farsi was taken out by accused No. 1 might be about 10 feet. The hedge from which the broken dharia and the axe were recovered was about a distance of 20 feet from the station road and the house of the tailor from which the gun of Falji Teja was recovered was on the station road. The High Court rightly said that the criticism on behalf of the accused that Chaturbhai was a Koli Patel and therefore had interest of the community was no ground to hold that Chaturbhai's evidence should not be accepted. Panch witness Nanubhai Virsing was also a Koli Patel and no allegation was made against Nanubhai. The High Court found that nothing was shown to hold that Chaturbhai was an interested witness or to be a professional panch or amenable to the pressure of the police. Panch witness Hasanali was won over by the accused. That is why Hasanali who was cited as a witness was not examined along with Mera Mathur. Other witnesses were also dropped. Dayaram another panch witness was not examined. It was not obligatory to call Dayaram because it could not be said that Chaturbhai was an interested witness. 27. The High Court rightly said that there was no reason to disbelieve the three panchnamas and once that evidence was accepted it clearly followed that the prosecution established that a gun with stains of human blood on it and belonging to Falji Teja was recovered from a spot from where accused No. 1 had kept the gun and the broken blade of the Dharia with stains of human blood on it was recovered from the hedge of the Vada of Vama Vaja the place where accused No. 3 had kept it and the axe was found from another spot in the hedge of Vama Vaja. Discovery of the Dharia and the farsi and the gun corroborated the testimony of Khengar and the further fact that the names of the accused were disclosed by Bai Samu to Kava Mansing. Bai Samu had in her turn been told the names of the three accused as assailants by Khengar. This supports Khengar's version before the Court. Khengar's evidence received corroboration by the discovery of the gun, the axe and the spear. Bharvad Bhikha Valu And Ors. vs The State Of Gujarat on 3 March, 1971 7 28. The High Court rightly found that the prosecution case against the three accused had been established beyond reasonable doubt from the evidence of Khengar and from the corroboration which Khengar's evidence received. 29. For these reasons the appeal fails and is dismissed. Bharvad Bhikha Valu And Ors. vs The State Of Gujarat on 3 March, 1971 8 | {
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Lalta Prasad Khinni Lal vs Asstt. Commr. (Judl.) Sales Tax, Kanpur ... on 6 October, 1971 Equivalent citations: 1972 AIR 401, 1972 SCR (1)1010, AIR 1972 SUPREME COURT 401, 1972 4 SCC 505, 1972 TAX. L. R. 1740, 1972 (1) SCR 1010, 1974 SCC (TAX) 339, 29 STC 201 Author: A.N. Grover Bench: A.N. Grover, K.S. Hegde PETITIONER: LALTA PRASAD KHINNI LAL Vs. RESPONDENT: ASSTT. COMMR. (JUDL.) SALES TAX, KANPUR & ANR. DATE OF JUDGMENT06/10/1971 BENCH: GROVER, A.N. BENCH: GROVER, A.N. HEGDE, K.S. CITATION: 1972 AIR 401 1972 SCR (1)1010 ACT: U.P. Sales Tax Act, 1948, s. 9(6)and Limitation Act,1908 s. 5--Sales Tax Appeal filed within periodof limitation- Amount admitted to be due deposited in full after expiry of limitation-Resulting delay in filing appeal whether may be condoned. HEADNOTE: The appellant was a Hindu undivided family carrying on the business of manufacturing oils. For the assessment year 1963-64 the appellant tied its quarterly returns under the U.P. Sales Tax Act, 1948. The Sales Tax Officer made an assessment enhancing the turnover which resulted in increase of the amount of tax. The appellant filed an appeal on October 21, 1965 which was three days' before the period of limitation prescribed for filing the appeal was to expire. Lalta Prasad Khinni Lal vs Asstt. Commr. (Judl.) Sales Tax, Kanpur ... on 6 October, 1971 1 There was some difficulty about the encashment of a cheque which had been deposited along with the rest of the cash amount towards payment of the amount of tax the liability for which stood admitted. The total payment was not made if the entire amount until May 27, 1966 when the treasury challan was produced. The assessee filed an application praying for condonation of delay, if any, in filing the appeal under s. 5 of the Indian Limitation Act 1908 which was applicable by virtue of s. 9 (6) of the U.P. Sales Tax Act, 1948. The Assistant Commissioner (Judl.) Sales Tax rejected the memorandum of appeal as defective on the ground that the deposit of tile amount of tax admitted to be due had not been made within the period of limitation and that the delay in doing so could not be condoned under s. 5 of the Limitation Act. The appellant's petition under Art. 226 challenging the Assistant Commissioner's order was dismissed. In appeal by certificate-, HELD : It is true that an appeal filed under s. 9 of the Act cannot be entertained by the appellate authority unless satisfactory proof is adduced of the payment of tax admitted by the appellant to be due. but in a case where the amount of admitted tax is deposited after the period of limitation has expired all that will happen is that the appeal will be come entertainable only on the day on which satisfactory proof of payment of that amount is produced. In other words the appeal will be deemed to have been properly filed on the date on which the amount of admitted tax is paid. If that is beyond the period of 30 days the appeal will be barred by time. Section 9(6) will immediately become applicable to that appeal and it will be open to the appellant to apply for condonation of delay under that provision. It was not possible to accept the argument that the deposit of the amount of admitted tax must be made within 30 days even though the delay in filing the appeal can be condoned under sub-s. (6). The correct approach is to treat the appeal as having been preferred on the date on which proof of payment of the tax was furnished and then to see whether under sub- s. (6) of s. 9 there was sufficient cause for excusing the delay in preferring the appeal. [1013 E-1014 B] Gangadharan Pillai v. Sales Tax Officer (Reserve) Ernakulam, 16 S.T.C. 578 and Raja of Venkatagiri v. Commissioner of Income-tax, Madras, 28 I.T.R. 188, approved. 1011 Janta Cycle & Motor Mart v. Asstt. Commissioner (J.) III, Sales Tax Kanpur Range & Anr. 22 S.T.C. 94, disapproved. Lakshmiratan Engineering Works Ltd. v., Asstt. Commissioner (J), I Sales Tax, Kanpur, 21 S.T.C. 154, distinguished. In the present case when the assessee produced the necessary documents which showed that the deposit of the full amount had been made by May 27, 1966 the appeal became entertainable. It only suffered from the defect that it was barred by time, on that date. The assessee could, therefore, apply under s., 9(6) for extending the period of Lalta Prasad Khinni Lal vs Asstt. Commr. (Judl.) Sales Tax, Kanpur ... on 6 October, 1971 2 limitation in accordance with s. 5 of the Limitation Act. The appellate authority was, wrong in disposing of the appeal on the short ground that it had no, jurisdiction to extend the period of limitation. [1015 B-D] [Appeal allowed and case remitted to High Court for making appropriate directions for reconsideration and rehearing of the appeal by the appellate authority under the Act.] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2571 of 1969. Appeal from the judgment and order dated March 25, 1969 of the Allahabad High Court in Civil Misc. Writ No. 2200 of 1966. S. Markandeya, for the appellant. L. M. Singhvi and O. P. Rana, for the respondents. The Judgment of the Court was delivered by Grover, J. This is an appeal by certificate from a judgment of the Allahabad High Court in which the main point involved relates to the provisions of s. 9 of the U.P. Sales Tax Act, 1948, hereinafter called the 'Act'. The facts lie in a narrow compass. Lalta Prasad Khinni Lal a Hindu undivided family which is the assessee carried on business of manufacturing oils. For the assessment year 196364 it was assessed to sales tax under the Act by an order dated July 28, 1965. The assessee had been filing its quarterly returns and had deposited a sum of Rs. 3,153.01 which was the admitted amount of its tax liability. The Sales tax Officer, however, made an assessment enhancing the turnover which resulted in increase of the amount of tax. The assessee filed an a peal on October 21, 1965 which was three days before the period of limitation prescribed for filing the appeal was to expire. There was some difficulty about encashment of a cheque which had been deposited along with the rest of the cash amount towards payment of the amount of tax the liability for which stood admitted. The total payment was not made of the entire amount until May 27, 1966, when the treasury challan was produced. The assessee filed an application under s. 5 of the Indian Limitation Act praying for condonation of delay, if any, in filing the appeal. The Assistant Commissioner (Judicial) Sales Tax rejected, the memorandum of ,appeal as defective on the ground that the deposit of the amount of tax admitted to be due had not been made within the period of limitation and that the delay in doing so could not be condoned under s. 5 of the Limitation Act. The assessee filed a petition under Art. 226 of the Constitution in the High Court challenging the order of the Assistant Commissioner (Judicial) Sales Tax. That petition was dismissed on the ground that although the appeal was filed within time there was delay in making the necessary deposit of the admitted tax and that delay could not be condoned under s.5 of the Limitation Act. Section 9 of the Act deals with an appeal against an order of assessment. It provides that any dealer objecting to an order under the various sections mentioned in sub-s.(1) may within 30 days appeal to such Lalta Prasad Khinni Lal vs Asstt. Commr. (Judl.) Sales Tax, Kanpur ... on 6 October, 1971 3 authority as may be prescribed. The proviso to sub-s. (1) is material and is set out below "Provided that no appeal against an assessment shall be entertained unless it is accompanied by satisfactory proof of the payment of the amount-of tax admitted by the appellant to be due or of such instalments thereof as may have become payable: Provided, secondly, that the appellate, authority shall not exercise any powers or perform any other function except those conferred on or entrusted to him as such authority." Sub-s.(6) of s.9 provides that s.5 of the Indian Limitation Act 1908 shall apply to appeals under the Act. The relevant Rules may next be reproduced: Rule 66(2) "The memorandum of appeal shall be accompanied by adequate proof of payment of the fee payable and a certified copy of the order appealed against and the challan showing deposit in the treasury of the tax admitted by the appellant to be due, or of such instalments thereof as might have become pay- able". Rule 67(3) "If the memorandum of appeal is not in order it may be rejected or be returned, after the necessary endorsement on its back about its presentation and return, to the applicant for correction and representation within the time to be fixed by the Assistant Commissioner (Judicial) or be amended then and there". A full bench of the Allahabad High Court considered the question of the applicability of s.5 of the Limitation Act to a case the admitted amount of tax is not deposited by the appeal within the time prescribed for filing the appeal in Janta Cycle and Motor Mart v. The Asstt. Commissioner (J.) III, Sales Tax Kanpur Range & Anr.(1). The full 'bench relied on an observation of this Court in Lakshmiratan Engineering Works Ltd. v. Asstt. Commissioner (J.) I, Sales Tax, Kanpur & Another (2 ) with regard to the meaning of the word "entertain". According to that decision "entertain" meant the first occasion on which the court took up the matter for decision. It might be at the admission stage or if by the rules of the appellate Tribunal the appeals were automatically admitted it would be the time of the hearing of the appeal. The High Court considered that according to the aforesaid decision of this Court when the first proviso is read with the main provision of s.9(1) of the Act the deposit also had to be made within limitation. The High Court came to the conclusion that s.9(6) of the Act could not be applied and s.5 of the Limitation Act was not attracted when the question arose whether the delay in depositing the admitted tax should be condoned. We are wholly unable to comprehend and appreciate the above reasoning or the conclusion of the High Court on the point under consideration. It is true that an appeal filed under s.9 of the Act cannot be entertained by the appellate authority unless satisfactory proof is adduced of the payment of tax admitted by the appellant to be due but in a case where the amount of admitted tax is deposited after the period of limitation has expired all that will happen is that the appeal will become entertainable only on the day on which satisfactory proof of payment of that amount Lalta Prasad Khinni Lal vs Asstt. Commr. (Judl.) Sales Tax, Kanpur ... on 6 October, 1971 4 is produced. In other words the appeal will be deemed to have been properly filed on the date on which the amount of admitted tax is paid. If that is beyond the period of 30 days the appeal will be barred by time. Section 9(6) will, immediately become applicable to that appeal and it will be open to the appellant to apply for condonation of delay under that provision. We are wholly unable to follow the argument that the deposit of the amount of admitted tax must be made within 30 days even though the delay in filing the appeal can be condoned under subs.(6). A proper and correct reading of s.9 cannot justify such an approach. If a petition of appeal has been filed without proof of payment of tax accompanying it that appeal can be said to have been preferred only when proof of payment of tax is furnished. Such furnishing of the proof may take place within the period prescribed for preferring the appeal or after the lapse (1) 22 S.T.C. 94. (2) 21 S.T.C. 154. of that period. If the proof of payment of admitted tax is furnished within the period prescribed the appeal must be entertained. If the furnishing of that proof is done after the expiry of the period of limitation the question will arise whether the appeal should be entertained or not. In such cases s.9(6) will come into operation and the question will arise whether there has been sufficient cause for not preferring the appeal within the statutory period. The correct approach is to treat the appeal as having been preferred on the date on which proof of payment of the tax was furnished and' then to see whether under sub-s. (6) of s.9 there was sufficient cause for excusing the delay in preferring the appeal. The decision of the Kerala High Court in Gangadharan Pillai v. Sales Tax Officer (Reserve) Ernakulam(1) is to this effect and we entirely agree with the reasoning and the conclusion therein. In Raja of Vankatagiri v. Commissioner of Income tax, Madras(2) a division bench of the Andhra Pradesh High Court consisting of Subha Rao C. J. as he then was and Bhimasankaram J. had to consider the provisions of the Indian Income tax Act 1922 similar to s.9 of the Act. According to the proviso to s.30(1) of that Act no appeal lay against an order under sub-s.(1) of s.46 unless the tax had been paid. Sub-s.(2) ,of that section provided that the appeal was to be ordinarily ,presented Within 30 days but the Appellate Assistant Commissioner could admit the same after the expiration of the period if he was satisfied that the appellant had sufficient cause for not presenting it within that period. It was held that the payment of the tax was condition precedent to the maintainability of the appeal. If an appeal was filed, though after the prescribed period of time, the Assistant Commissioner had the jurisdiction to hear the appeal after the tax due was paid. The only possible objection that could have been raised was that the appeal was barred as having been filed beyond the period prescribed by s.30(2). But the appellate authority had the jurisdiction to excuse the delay. The ratio of this decision is that even though the payment of tax was a condition precedent to the maintainability of the appeal the delay could be condoned under s.30(2) thus treating the appeal as having been filed when the amount of tax was paid. The Allahabad High Court appears to have been greatly in- fluenced by the decision of this Court in Lakshmiratan Engineering Works Ltd. v. Asstt. Commissioner (J.) I Sales Tax, Kanpur(-') and by the meaning of the word "entertain" as explained there. We have found considerable difficulty in discovering how that decision could afford any assistance to the respondents in the present case. Indeed according to that decision the words (1) 16 S.T.C. 578. Lalta Prasad Khinni Lal vs Asstt. Commr. (Judl.) Sales Tax, Kanpur ... on 6 October, 1971 5 (3) 21 S.T.C. 154. (2) 28 I.T.R. 188. "no appeal shall be entertained" in the proviso to s.9 do not denote the filing of the memorandum of appeal but refer to the point of time when the appeal is being considered. Therefore, though the memorandum of appeal filed within time is not accompanied by the treasury challan showing payment of tax if before the appeal is being considered satisfactory proof of payment of tax is given then the proviso to s.9 is satisfied. In the present case when the assessee produced the necessary documents which showed that the deposit of the full amount had been made by May 27, 1966 the appeal became entertainable. It only suffered from the defect that it was barred by time on that date. The assessee could, therefore, apply under s.9(6) for extending the period of limitation in accordance with s.5 of the Limitation Act. It is entirely a different matter whether on the facts of the present case the appellate authority would have condoned the delay or not but to say that the appellate authority had no jurisdiction to extend the time simply because the amount of admitted tax had been deposited beyond the period of 30 days would be wholly erroneous and would not represent a true and correct ,view of the provisions of s.9. It may be pointed out that the case of Lakshmiratan Engineering Works(1) on which the High Court largely relied did not involve the question of the extension of the period of limitation under s.9(6). Indeed in our judgment the word "entertain" in s.9(1) has hardly any material bearing on the point under consideration. As the appellate authority disposed of the appeal on the short ground that it was barred by time and that it had no jurisdiction to extend the period of limitation this- matter will have to go back for reconsideration and redecision of that authority. In the result the appeal is allowed and the judgment of the High Court is set aside. The case is remitted to the High Court for making appropriate directions for reconsideration and rehearing of the appeal by the appellate authority under the Act. The assessee will be entitled to costs' in this Court. G.C. Appeal allowed. (1) 21 S.T.C. 154. Lalta Prasad Khinni Lal vs Asstt. Commr. (Judl.) Sales Tax, Kanpur ... on 6 October, 1971 6 | {
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Sardar Bahadur S. Indra Singh Trust vs Commissioner Of Income Tax, Bengal on 25 August, 1971 Equivalent citations: 1972 AIR 34, 1972 SCR (1) 392, AIR 1972 SUPREME COURT 34, 1972 TAX. L. R. 23 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: SARDAR BAHADUR S. INDRA SINGH TRUST Vs. RESPONDENT: COMMISSIONER OF INCOME TAX, BENGAL DATE OF JUDGMENT25/08/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1972 AIR 34 1972 SCR (1) 392 1971 SCC (3) 364 CITATOR INFO : R 1973 SC1252 (2) R 1981 SC 968 (2) ACT: Gift made to charitable trust-If valid. Income-tax Act, s. 4(3)(i)-If the income of charitable trust arising from a gift will augment the assessee trust. HEADNOTE: The assessee is a charitable trust created under two trusts deeds. One ,of the trustees, gifted certain fully paid up equity shares to the trust. On the said shares dividend accrued on which tax was deducted at source. The trustees claimed that the said income of the assessee was exempt from payment of income-tax in view of s. 4 (3) (i) of the Act and hence they claimed refund of the tax deducted at source. Sardar Bahadur S. Indra Singh Trust vs Commissioner Of Income Tax, Bengal on 25 August, 1971 1 The Income-tax Officer refused to grant the refund on the ground that the trust deed did not contain any provision for receipts of gifts from outsiders and so the gift in question was not a valid gift. The Appellate Assistant Commissioner and the Tribunal held the gift valid and decided against the revenue. On reference, High Court held that the gift was a valid gift, but it did not have the effect of augmenting the assessee trust and the assessee was not entitled to get the refund of -the tax. HELD : (i)That the gift was a valid gift. The trustees had accepted the gift. The trust deed does not prohibit the trustees from accepting a new gift. The trustees can accept gift from third parties for the purpose of furthering the objectives of the trust. So long as the trust deed did not prohibit from receiving such gifts and so long as the gift made did not in any manner impinge on the objects intended to be achieved by the Trust. In the present case, the shares gifted are vested in the appellant trust and therefore, the trust is entitled to the dividends received in respect of the gifted shares. Since the dividend is exempt from tax under s. 4(3) (i) the appellant is -entitled to the refund claimed. [397 A-D] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1885 of 1968 and 1084 of 1971. Appeals from the judgment and order dated November 7, 1967 of the Calcutta High Court in Income-tax Reference No. 21 of 1964. S.R. Banerjee, P. C. Bhartari, for the appellant (in both the appeals) V.S. Desai, P. L. Juneja, R. N. Sachthey and B. D. Sharma, for the respondent (in both the appeals). The Judgment of the Court was delivered by Hegde, J. Both these appeals arise from the decision of the ,Calcutta High Court in a Reference under s. 66(1) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as 'the Act. 3 93 The first of these two appeals was brought by the appellant Trust on the strength of a certificate granted by the High Court under s. 66(A) (2) of the Act. In that certificate all that we find is a bald statement by the High Court that the case is a fit one for appeal to this Court. This Court has ruled that such a certificate is an invalid one and an appeal brought on the strength of such a certificate is not maintainable. It is for that reason, the appellant filed the Special Leave application No. 2214 of 1971 seeking special leave from this Court to appeal against the very judgment which was the subject matter of the appeal in Civil Appeal No. 1885 of 1968. After hearing the parties, we came to the conclusion that the leave asked for -should be granted. That Petition is now numbered as Civil Appeal No. 1084 of 197 1. Sardar Bahadur S. Indra Singh Trust vs Commissioner Of Income Tax, Bengal on 25 August, 1971 2 The two questions referred to the High Court are "(1) Whether on facts and in the circumstances of the case, the Tribunal was right in holding that the gift made by Sardar Ajaib Singh was valid and complete in law ? (2)If the answer to the first question is in the affirmative then whether on the facts and in the circumstances of the case, the assessee was entitled to the refund of tax deducted at source on the dividends accruing on the shares gifted by Sardar Ajaib Singh ?" The High Court answered these questions as follows "1. The gift made by Sardar Ajaib Singh was a valid and complete gift but did not have the effect of augmenting the assessee trust, and 2.The assessee was not entitled to the refund of the tax deducted at source on dividends accrued on the shares gifted by Sardar Ajaib Singh ?" Now let us turn to the facts a set out in the Statement of case. The assessment years with which we are concerned in these appeals is 1960-61 for which the relevant previous year ended on March 31, 1960 The assessee is a charitable Trust constituted under a Trust Deed dated December 19, 1944. A-- supplementary Trust Deed was executed on January 10, 1951. In the first Trust Deed, the objects of the trust are mentioned as those that "Trustees may in their absolute discretion from time to time determine in and :towards the attainment assistance or support of such charitable purpose or purposes as the Trustees may in their unfettered judgment deem to be the most deserving of support." The objects mentioned in the first deed were further elaborated in the second Deed which requires the Trustees to spend the income " amongst others for the advancement of learning and education 3 94 and/or ameliorations of the sufferings of all citizens of the Indian Union, irrespective of caste, colour or creed for maintaining library or libraries for the free use of the public in general who are residents of the Indian Union for fostering encouraging and providing the means of healthy recreation including teaching or singing classes or choruses for the residents of the Indian Union and for the purpose of providing music and instruments for the town and in the premises hereinbefore mentioned for meeting the expenses wholly or in part of the Khalsa High School and A. V. Middle Schools to the extent and for and during such times as long as the trust continues and/or to apply such income in simi- lar such objects as the ,trustees may in their absolute discretion from time to time determine in and towards the attainment assistance and support of such charitable purpose or purposes as the Trustees may in their unfettered judgment deem to be the most deserving of support." Sardar Ajaib Singh one of the Trustees of the appellant Trust by his letter dated January 23, 1959 transferred 640 fully paid up enquity shares of the face value of Rs. 6,40,000/- to the assessee reserving to himself the right to revoke and recall the transfer or either the entire 640 shares or any portion thereto but not until the expiry of clear full seven years from the date of the delivery of the shares to the Trust. The Trustees by their letter dated February 1, 1959 accepted the offer and also the terms and conditions upon which the offer had been made and ratified the same by the resolutions of the Trustees dated February 5, 1959 and March 4. 1959. The shares were transferred and given delivery of to the Trustees. On the said shares dividend amounting to Rs. 1,28,000/- accrued on which tax was deducted at the source. The Trustees claimed that the said income of the assessee was exempt from payment of income-tax in view of s. 4(3) (i) of Sardar Bahadur S. Indra Singh Trust vs Commissioner Of Income Tax, Bengal on 25 August, 1971 3 the Act. Hence they claimed refund of the tax deducted at the source, The.Income-tax Officer refused to grant the refund asked for on the ground that the Trust Deed under which, the Trust was formed did not contain any provision for receipts of donations or gifts from outsiders and therefore the gift made by Sardar Ajaib Singh of the 640 shares was not a valid gift. He also observed that the transfer of the shares was revocable after seven years and accordingly was a conditional transfer; hence the assessee was precluded from claiming the refund of the tax deducted at the source. The assessee appealed against that order to, the Appellate Assistant Commissioner. That Officer upheld the assessee's right to the refund of tax on the ground that during the relevant year the shares did belong to the assessee and the dividend income accruing thereon was the income of the assessee and therefore refund of the tax deducted at the source was allowable. The Department went up in appeal to the Income-tax Appellate Tribunal as against that order. Before the Tribunal the Department contended that the Trust was not competent to receive gifts from outsiders. There being no clause in the Trust Deed empowering the receipt of such gifts. It was further contended that the gift being conditional and revocable was invalid in the eye of law. The Tribunal found that the assessee was a public charitable Trust and it was not limited in its scope of activities within the four corners of the crust Deed by which it was created. A public charitable Trust, the Tribunal held, was entitled as of right to receive gifts and donations from the public and as such the gift of the shares made by Sardar Ajaib Singh had been validly received by the assessee. The Tribunal accordingly dismissed the first contention raised on behalf of the Department. It is not necessary for us to refer to the facts relating to the second contention as that matter is not in issue before us, now the same having been held against the Department by the Tribunal. While dealing with the reference made by the Tribunal, as mentioned earlier, the High Court upheld the validity of the gift 'made by Ajaib Singh but strangely enough after holding that the gift in question was a valid one, it came to the conclusion that the, said gift did not have the effect of augmenting the assessee's Trust and therefore the assessee was not entitled to the refund of the tax deducted at the source on the dividend accrued on the shares gifted by Ajaib Singh. To us these findings appear to be somewhat mutually conflicting. If the gift in question was a valid one then the Trust became the owner of the shares gifted. That being so it also became the owner of the dividends received. Hence those dividends will have to be considered as the income of the Trust. The reason which persuaded the learned judges of the High Court for coming to the above conclusion are set out in their judgment at pp. 21 and 22 of the printed paper book. We shall quote that part of the High Court's judgment : "The question for our consideration, however, is whether the gift, as accepted by the trustee, had the effect of augmenting the assessee trust for taxation purposes, or whether the effect of it was that it remained a separate trust in the hands of the trustees of the assessee trust, with liberty to them to apply the income of the subsequent trust for the benefit of the assessee trust. Mr. Banerjee urged that it was not necessary expressly to empower the trust as of a public trust to accept gifts, donations or endowments. That, he submitted, was a power inherently vested in them. We have our doubts. Sardar Bahadur S. Indra Singh Trust vs Commissioner Of Income Tax, Bengal on 25 August, 1971 4 Trust is a confidence reposed in a person or persons, with respect to property of which he had or they have legal possession or over which he or they can exercise power, to the intent that he or they may hold the property or exercise the power for the benefit of some other person or object. Now, this confidence may not necessarily include in itself the liberty that the trustees would go on accepting donations and try to augment the trust to such dimensions that the purpose for which the original trust was created may be swamped or modified or qualified. If a settler wants to invest the trustees with such a power, it is but reasonable to expect that the power should be conferred by the deed which created trust. The trust that-,we have to consider does not appearto confer upon the trustees the further power to acceptdonations gifts or endowments. We therefore, do notthink that the trustees have the liberty or the right to accept further gifts in the absence of specific authorisation, augment the original trust and then claim the benefit of section 4(3) (i) of the Indian Income-tax Act." It is somewhat difficult to follow the reasoning adpoted by the learned judges of the High Court. Either the gift made by Ajaib Singh and accepted by the Trustees was a valid gift or it was not a valid gift. If it was a valid gift, the shares gifted became the property of the Trust. If it was not a valid gift, the shares still continued to be the property of Ajaib Singh. It is no body's case that there was a Trust within a Trust. No such Trust is put forward either by the Department or pleaded by the assessee. The existence of a Trust is a fact and not a fiction. We fail to see how the learned judges were able to come to the con- clusion that Ajaib Singh while gifting the shares created one more Trust without any writing and without any objective and appointed the Trustees of the assessee Trust to be the Trustees of the new Trust as well. These assumption have no basis either in fact or in law. At this stage we may mention that the very learned judges who decided this Reference had held in Wealth Tax Reference No. 444 of 1963 on the file of the High Court of Calcutta that the shares gifted by Ajaib Singh did not continue to be his property. If they are not Ajaib Sing's property, whose property are they ? The only answer is that they are the property of the appellant Trust. Those shares cannot float in the -mid air. They must be owned by someone.' As seen earlier, the appellant is a public Trust. Its objects are charitable objects Ajaib Singh made over the shares to that 3 97 Trust for effectuating the very objects of the Trust. He did not stipulate any other object to be attained. The Trustees had accepted the gift. The Trust Deed does not prohibit the Trustees from accepting a new gift. We fail to see what difficulty was there for the Trustees to accept gifts from third parties for the purpose of furthering the objectives of the Trust, so long as the Trust Deed did not prohibit them from receiving such gifts and so long as the gift made did not in any manner impinge on the objects intended to be achieved by the Trust. We fail to see why the Trustees could not accept that gift. In our opinion the assumption of the High Court that the Trustees were incompetent to receive the gift made by Ajaib Singh is an erroneous one. On the other hand we agree with the Tribunal that the gift made by Ajaib Singh was a valid gift, the shares gifted are vested in the Trust and therefore the Trust is entitled to the dividends received in respect of those shares. In view of s. 4(3) (i), that dividend is exempt from tax. Hence the appellant is entitled to the refund claimed. Sardar Bahadur S. Indra Singh Trust vs Commissioner Of Income Tax, Bengal on 25 August, 1971 5 In the result we allow Civil Appeal No. 1084 of 1971, dis- charge the answers given by the High Court and in their place, we answer the questions referred to the High Court in the affirmative and in favour of the assessee. The appellant is entitled to its costs in this appeal. We revoke the certificate produced in Civil Appeal No. 1885 of 1968. In view of our decision in Civil Appeal No. 1084 of 1971, there is no need to send that case back to the High Court for giving reasons in support of the certificate. That appeal is accordingly dismissed as being not maintainable-no costs. S.C. C.A. 1084 of 71 allowed. C.A. 1885 of 68 dismissed. 7-L1340SupCI/71 Sardar Bahadur S. Indra Singh Trust vs Commissioner Of Income Tax, Bengal on 25 August, 1971 6 | {
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Lachoo Mal vs Radhey Shyam on 10 February, 1971 Equivalent citations: 1971 AIR 2213, 1971 SCR (3) 693 Author: A.N. Grover Bench: A.N. Grover, K.S. Hegde PETITIONER: LACHOO MAL Vs. RESPONDENT: RADHEY SHYAM DATE OF JUDGMENT10/02/1971 BENCH: GROVER, A.N. BENCH: GROVER, A.N. HEGDE, K.S. CITATION: 1971 AIR 2213 1971 SCR (3) 693 ACT: U.P. Temporary Control of Rent and Eviction Act, 1947, ss. 1(A) and 3-Construction after 1951-Agreement that Act should apply-If binding upon landlord-Indian Contract Act (9 of 1872), s. 23-Scope of. HEADNOTE: The appellant was the tenant of the respondents shop. As the latter wanted to make some constructions they entered into ail agreement in 1962, according to which, the appellant was to vacate the shop but reoccupy it on the same rent as soon as the construction was completed. It was also agreed that all the sections of the U.P. (Temporary) Control of Rent and Eviction Act, 1947, shall be fully applicable to the new tenancy. After the construction was completed the appellant resumed possession and offered rent. The respondent refused the rent and filed a suit for ejectment. In appeal, the High Court held that the appellant was not entitled to the protection of the Act, because, the res- pondent was entitled to rely on s. IA according to which nothing in the Act shall apply to a building constructed on Lachoo Mal vs Radhey Shyam on 10 February, 1971 1 or after 1st January, 1951, and that the agreement was unlawful within the meaning of s. 23 of the Indian Contract Act, 1872. In appeal to this Court, HELD : The general principle is that every one has a right to waive the advantage of a law, made for his benefit in his private capacity, when a public right or public policy is not infringed thereby. Section 1A was meant for the benefit of owners of buildings constructed after January 1, 1951. But there is no prohibition in the section against a land- lord and his tenant entering into an agreement, that they would not be governed by that section. If a particular owner did not want to avail himself of the benefit of the section, there was no bar created by it to his waiving or giving up or abandoning the advantage and no question of policy, or public policy is involved. Therefore, the performance of the agreement in the present case would not entail the transgression of any law and the agreement was not void under s. 23 of the Indian Contract Act. [696 C; 69- 7 D-E; 698 A-C] Neminath Appayya Hanumannavar v.Jamboorao Sateppa Kochteri, A.I.R. (1966) Mys. 154, approved. Vita Food Products Incorporated v. Unus Co. Ltd. (in Liquidation), (1939) AC. 277 at 291, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 18 of 1968. Appeal by Special leave from the judgment and order dated April 14,,1967 of the Allahabad High Court in Second Appeal No. 307 of 1965. V.M. Tarkunde, Urmila Kapoor and R. K. Khanna, for the appellant. S. V. Gupte and M. V. Goswami, for the respondent. The Judgment of the Court was delivered by Grover, J This is an appeal by special leave from a judgment of the Allahabad High Court and involves the question whether the appellant, who was the tenant, was entitled to the benefit of s. 3 of U.P. (Temporary) Control of Rent and Eviction Act, 1947, hereinafter called the "Act". The facts are not in dispute. The appellant had been occupying a shop in Mathura belonging to the respondent from a very long time, at a monthly rental of Rs. 18.37. In 1962 the respondent wanted to construct rooms on the upper Storey of the shop for his own residence. This construction could possibly be made only if the appellant vacated the shop for some period. On June 4, 1962, the appellant and the respondent entered into an agreement . After reciting the above facts it was agreed that the shop would be. vacated by the appellant on the condition that as soon as the required construction had been completed he would resume possession of the shop. At this stage the following clauses of the agreement may be set out. Lachoo Mal vs Radhey Shyam on 10 February, 1971 2 "1. On this day the second party has withdrawn his possession from the shop bearing No. 1/2C, situate at Tilakdwar, and has given the same to the first party. 2. The first party shall get the shop constructed within thirty days and would then hand over the possession of the same to the second party. 3. At present a sum of Rs. 18-6-0 per mensem, which includes house tax and water tax, is being paid by the second Party to the first party as rent. After the construction of the shop, the first party shall be entitled to get the same, amount as rent from the second party. All the sections of the U.P. Rent Control and Eviction Act shall be fully applicable to this house. The first party shall in no case be entitled to derive benefits from it as the property built after 1-1-51." After the construction had been made and the appellant had resumed his possession of the shop the appellant offered rent to the respondent but the latter did not accept the same. Ultimately lie deposited the rent from April 1, 1962 to July 31, 1963 in court under s. 7 C of the Act. The respondent served a notice April 20, 1963 apparently under the provisions of the Transfer of Property Act purporting to terminate the tenancy of the appellant. This was followed by a suit which the respondent filed for ejectment of the appellant and for arrears of rent, damages etc. The Munsif dismissed the suit holding that the appellant was entitled to the protection conferred by s. 3 of the Act which was applicable. The District Judge, on appeal, took the contrary view and decreed the suit. The' High Court affirmed the judgment of the District Judge. It was held, inter-alia, that the, respondent was, entitled to rely on s. 1 A of the Act and the appellant could not be given the benefit of s. 3. Now there can be no manner of doubt that the tenancy between the appellant and the respondent was governed by the provisions of the Act prior to the reconstruction of the premises. It appears to have been accepted that when the respondent made the re-construction after the agreement mentioned above in 1962 the buildings came to be constructed within the terms of s. 1-A of the Act: That section says that nothing in the Act shall apply to any building or part of a building which was under erection or was constructed on or after January 1, 1951. It will have to be decided whether it was open to the respondent to give up the benefit of this provision or waive it by means of an agreement of the nature which was entered into between the appellant and the respondent in June 1962. According to the preamble on the cessation of the applicability of sub-rule 2 of rule 81 of the Defence of India Rules after September 30, 1946 it was considered expedient owing to the shortage of accommodation in the State of Uttar Pradesh to provide for the continuance during admitted period of powers to control the letting and "the rent of accommodation and to prevent the eviction of tenants therefrom. Section 3 imposed restrictions on eviction. No suit could be filed in any civil court against the tenant for his eviction from any accommodation except on one or more of the grounds mentioned in sub-s. (1) 'of that section without the permission of the District Magistrate or of the Commissioner to whom a revision lay against the order of the District Magistrate. Section 5 contained provisions relating to control of rent. The ether provisions of the Act need not be noticed. It has never been disputed that the Act was enacted for affording protection to the tenants against eviction except in the manner provided by the Act. It was also meant to regulate the letting of Lachoo Mal vs Radhey Shyam on 10 February, 1971 3 accommodation, fixing of rent etc., the provisions relating to which were all intended to confer benefits on the tenants against unreasonable and capricious demands of the landlords. At the same time' it appears that the legislature was conscious of the fact that the Act might retard and slacken the pace of construction of new buildings because the landlords would naturally be reluctant to invest money in properties the letting of which would be governed by the stringent provisions of the Act. It was for that purpose that the saving provision in s. 1-A seems to have been inserted. The essential question that has to be resolved is whether S. 1-A was merely in the nature of an exemption in favour of the landlords, with regard to the buildings constructed after January 1, 1951 and conferred a benefit on them which they could give up or waive by agreement or contractual arrangement and whether the consideration or object of such an agreement would not be lawful within the meaning of s. 23 of the Indian Contract Act. The general principle is that every one has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity which may be dispensed with without infringing any public right or public policy. Thus the maxim which sanction the nonobservance of the statutory provision is cuilibet licat renuntiare juri pro se introducto. (See Maxwell on Interpretation of Statutes, Eleventh Edition, pages 375 & 376.) If there is any express prohibition against contracting out of a statute in it then no question can arise of any one entering into a contract which is so prohibited but where there is no such prohibition it win have to be seen whether an Act is intended to have a more extensive operation 'as a matter of public policy. In Halsbury's Laws of England, Volume 8, Third Edition, it is stated in paragraph, 248 at page 143 : "As a general rule, any person can enter into a binding contract to waive the benefits conferred upon him by an Act of Parliament, or, as it is said, can contract himself out of the Act, unless it can be shown that such an agreement is in the circumstances of the particular case contrary to public policy. Statutory conditions may, however, be imposed in such terms that they cannot be waived by agreement, and, in certain circumstances, the legislature has expressly provided that any such agreement shall be void." In the footnote it is pointed out that there are many statutory provisions expressed to apply "notwithstanding any agreement to the contrary", and also a stipulation by which a lessee is deprived of his right to apply for relief against forfeiture for breach of covenant (Law of Property Act, 1925). Section 23 of the Indian Contract Act provides "The consideration or object of an agreement is lawful, unless- it is forbidden by law; or 69 7 is of such a nature that, if permitted, it would defeat the provisions of any law or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void." It has never been the case of the respondent that the consideration or object of the agreement which was entered, into in June 1963 Lachoo Mal vs Radhey Shyam on 10 February, 1971 4 was forbidden by law. Reliance has been placed mainly on the next part of the section, namely, that it is of such a nature that it would defeat the provision of any law and in the present case it would be s. 1-A of the Act. Now s. 1-A does not employ language containing a prohibition against or impose any restriction on a landlord and a tenant entering into an agreement that they would not be governed by that section. We concur with the view expressed in Neminath Appayya Hanumannavar v. Jamboorao Satappa Kocheri(1) that the words "if permitted it would defeat the provisions of any law" in s. 23 of the Contract Act defer to performance of an agreement which necessarily entails the transgression of the Provisions of any law. What makes an agreement, which is other-wise legal, void is that its performance is impossible except by disobedience of law. Clearly no question of illegality can arise unless the performance of the unlawful act was necessarily the effect of an agreement. The following observations of Lord Wright in Vita Food Products Incorporated v. Unus Company Ltd.(1) (in Liquidation) are noteworthy in this connection "Nor must it be forgotten that the rule by which contracts not expressly forbidden by statute or declared to be void are in proper cases nullified for disobedience to a statute is a rule of public policy only, and public policy understood in a wider sense may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds." We are unable to hold that the performance of the agreement which was entered into between the parties in the present case would involve an illegal or unlawful act. In our judgment s. 1-A. (1) A. I.R. [1966] Mysore 154. (2) [1939] A.C. 277, 293. was meant for the benefit of owners of buildings which were under erection or were constructed after January 1, 1951. If a particular owner did not wish to avail of the benefit of that section there was no bar created by it in the way of his waiving, or giving up or abandoning the advantage or the benefit contemplated by the section. No question of policy, much less public, policy, was involved and such a benefit or advantage could always be waived. That is what was done in the present case and we are unable to agree with the High Court that the consideration or object of the agreement entered into between the parties in June 1962 was unlawful in view of s. 23 of the Contract Act. In the result the appeal is allowed, the judgment of the High Court is set aside and that of the trial court restored. The appellant will be entitled to his costs in this, court. V.P.S. Appeal allowed. Lachoo Mal vs Radhey Shyam on 10 February, 1971 5 | {
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Khanjan Lal Sewak Ram vs Commissioner Of Income Tax, U.P on 31 August, 1971 Equivalent citations: 1972 AIR 61, 1972 SCR (1) 502, AIR 1972 SUPREME COURT 61, 1972 TAX. L. R. 26 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: KHANJAN LAL SEWAK RAM Vs. RESPONDENT: COMMISSIONER OF INCOME TAX, U.P. DATE OF JUDGMENT31/08/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1972 AIR 61 1972 SCR (1) 502 1971 SCC (3) 662 CITATOR INFO : F 1973 SC1445 (15) R 1973 SC2401 (4) ACT: Income Tax Act (11 of 1922), s. 26A and rr. 6(3) and 6A of the Rules-Application for renewal of registration-Book Profits distributed but black market profits not distributed-If firm entitled to renewal of registration. HEADNOTE: The assessee was a registered firm. The partners applied to the Income-tax Officer for renewal of registration. To that application they appended a certificate that the profits of the previous year were divided or credited as shown. While the application was pending, the partners fell out and the Income-tax Officer found, that the firm had earned Khanjan Lal Sewak Ram vs Commissioner Of Income Tax, U.P on 31 August, 1971 1 considerable black market profits which had not been credited in the account books and had not been distributed among the partners in accordance with the instrument of partnership. The Department, Tribunal and the High Court, on reference, held that the firm was not entitled to renewal. Dismissing the appeal to this Court, HELD : Under s. 26A of the Income-tax Act, 1922, one of the conditions for registration and renewal is that the application should contain such particulars as are prescribed in the Rules under the Act.. Rule 6(3) provides that the partners should append a certificate to the application for renewal that the profits (or loss if any) of the previous year or period up to the date of dissolution were divided or credited as shown. So long as the divisible profits had in fact been divided or had been credited to the accounts of the partners, the requirements of the provision must be held to have been complied with. But the certificate is not a mere formality because, a registered firm is not taxable, but only the partner and, if a portion of the profits earned by the firm was not actually divided amongst the partners or credited to their accounts, to that extent the assessee firm had evaded tax. In such a case the only course open to the Income-tax Officer is not to register the firm but to tax the partners of the firm as an association of persons. [506 B, G; 507 C-G] Since, in the present case, the application for renewal of registration did not comply with the prescribed conditions, under r. 6A, the Income-tax Officer was justified in refusing renewal of registration. [507 F-G] Agarwal & Co. v. C. 1. T., U. P., 77 I. T. R. 110 (S.C.), followed. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1947 of 1968. Appeal from the judgment and decree dated January 21, 1964 of the Allahabad High Court in Misc. Income-tax Reference No. 383 of 1958. T. A. Ramachandran and A. G. Ratnaparkhi, for the appellant. B. Sen, J. Ramamurthy, R. N. Sachthey and B. D. Sharma, for the respondent. The Judgment of the Court was delivered by Hegde, J. This is an appeal by certificate. It arises from. a decision of the Allahabad High Court. The appellant is the assessee and the concerned assessment year is 1948-49. The assessee is a firm constituted under an Instrument, of partnership dated April 30, 1947. The shares of the partners in, the profit and loss' of the firm as mentioned in that deed are Khanjan Lal Sewak Ram vs Commissioner Of Income Tax, U.P on 31 August, 1971 2 as follows : 1. L. Khanjan Lal--/4/- 2. L. Lalloo Ram- -/2/ 3. L. Dwarka Prasad- -/2/- 4. L. Ram Lal- -/2/- 5. L. Sewak Ram- -/4/- 6. Smt. Jagrani Devi- -/2/- Lallu Ram, Dwarka Prasad and Ram Lal are the children of- Khanjan Lad. Sewak Ram is the son of Jagrani Devi. The first group has -/ 10/- share in the profit and loss of the firm and the second group has -/6/- share. The assesesee firm was registered for the assessment year 1947-48. On July 12, 1949, the partners of the firm applied to the Income-tax Officer for renewal of the registration for the assessment year 1948-49. That application was signed by all the partners. To that application they appended a certificate to the. effect that "profits of the previous year were divided or credited as shown below. . . " On November 5, 1949, the partner-ship was dissolved under a deed of distribution dated November 9, 1949 One of the clauses in that deed provides : "But if an amount which was not entered in the books at the time of settlement is found then only that person will be accountable for it through whom the money was received or paid. None of the parties will have any objection to it." On October 5, 1950, the first four partners made a disclosure statement to the Income-tax Officer to the effect that the firm had' earned Rs. 15,000/- by way of profits outside the books. In that disclosure statement, they further stated that those profits had been divided between the partners. On December 9, 1950, Sewak Ram, one of the partners stated on oath before the Income-tax Officer that he and his mother Jagrani Devi were not given full' share of the profits of the business earned by the firm in Sam v. year 2005. He further stated that the entire profits earned in that business carried on in the previous year were not recorded in the books and the first four partners had given to him and his mother only their shares of those profits which were recorded in the books. Therein he sought to withdraw the application for registration because all the profits earned had not been divided according to the shares. According to Sewak Ram, the profits ,earned and not entered in the accounts amounted to Rs. 1,13,571/-. From the aforementioned statements, it s clear that the firm was trying to evade tax on a portion of the profits .earned by it by not bringing the same into their books. On March 31, 1951, Sewak Ram sued the first four partners for rendition of accounts. In that Khanjan Lal Sewak Ram vs Commissioner Of Income Tax, U.P on 31 August, 1971 3 suit he estimated his share of profits in the amount that had not been entered in the account books at Rs. 50,0001. Ultimately the suit was compromised and Sewak Ram withdrew his suit. In his application to withdraw the suit, he stated that he wanted to withdraw the suit "in view of the circumstances of the above case", an expression of utmost ambiguity. Therein he stated that he is not entitled to get any more amount from the defendants. On March 15, 1952, Sewak Ram and his mother Jagrani Devi gave an application to the Income-tax Officer stating that they are withdrawing their signatures on the application for renewal of registration as the profits of the previous year were not distributed according to the deed of partnership and the certificate of registration required under rule 4(1) of the Income-tax Rules, 1922 (to be hereinafter referred to as "the Rules") framed under the Indian Income-tax Act, 1922 (in brief 'the Act') had never been granted as required by law on the back of the partnership deed. Therein they further stated that as the certificate under rule 6 had not been granted by the assessee in accordance with law, the firm was not entitled for registration under rule 6 of the Rules. On the basis of the material before him, the Income-tax Officer came to the conclusion that the firm had earned considerable black market profits, and the same had not been distributed amongst the partners according to the partnership deed and therefore the firm was not entitled for renewal of the registration. He further opined that the application for registration had stood withdrawn. On the basis of those conclusions, he refused to renew the registration of the firm and taxed the firm in the status of association of persons. In appeal the Appellate Assistant Commissioner, upheld the decision of the Income-tax Officer. The assessee took the matter in appeal to the Income-tax Appellate Tribunal. The two members who heard the appeal ,concurred with the Income-tax Officer and the Appellate Assistant Commissioner that a substantial portion of the profits earned by the firm had not been entered in the books. They also held that those profits were not distributed amongst the partners according to the Instrument of partnership. On the basis of those findings the Judicial member held that the firm was not entitled to the renewal of registration asked for but the Accountant member opined that inasmuch as the profits that had been entered in the books had been distributed, there was compliance with the provisions of the "Act" as well as the, "Rules". In view of this difference of opinion between the two members, the matter was referred to the President of the Tribunal under s. 5A(7) of the Act. The President agreed with the Judicial Member that firm was not entitled to have the renewal of the registration asked for. There- after at the instance of the assessee, the Tribual submitted the following question to the High Court under s. 66(1) of the Act. "Whether the assessee firm which had distributed its book profits amongst the partners according to the Instrument of Partnership but which had not distributed the profits earned by it in the black market amongst the six partners in accordance with the Instrument of Partnership was entitled for renewal of registration for the assessment year 1948-49 ?" The High Court answered that question in favour of the Department. Hence this appeal by the assessee firm. Before examining the scope of the question submitted to the High Court under s. 66(1) of the Act, we may mention that the question whether the application for renewal of Khanjan Lal Sewak Ram vs Commissioner Of Income Tax, U.P on 31 August, 1971 4 registration stood withdrawn or not is not before us. On that question, the Judicial member of the Tribunal took the view that the said application stood withdrawn but the Accountant member did not agree with that view. The President of the Tribunal did not express any opinion on that point. Now turning to the question referred to the High Court, that question is based on two findings of fact which are no more open to question. Those findings are : (1) that the firm had distributed its book profits amongst the partners according to the Instrument of partnership, (2) but it had not distributed the profits earned by it in the black market amongst the six partners in accordance with the Instrument of partnership. Mr. Ramachandran, the learned Counsel for the assessee sought to assail the correctness of those findings on the ground that those findings are not supported by evidence, but we did not permit him to go into the same as that question is not before us. We are bound by those findings. Having said that much, we shall now turn to the relevant provisions in the Act and the Rules. Section 26 (A) of the Act reads : " 1. Application may be made to the Income-tax Officer on behalf of any firm, constituted under an ins- trument of partnership specifying the individual shares of the partners, for registration for the purposes of this Act and of any other enactment for the time being in force relating to income-,tax or super-tax. 2. The application shall be made by such person or persons and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed." This Court has ruled in Agarwal & Co. v. Commissioner of .Income-tax, U.P.(1) that the conditions of registration prescribed by s. 26-A and the relevant Rules are : 1. On behalf of the firm, an application should be made to the Income-tax Officer by such person and at such times and containing such particulars, being in such form and verified in such manner as are prescribed by the rules; 2. The firm should be constituted under an instrument of partnership; 3. The instrument must specify the individual shares of the partners and 4. The partnership must be valid and must actually exist in the terms specified in the instrument. Therein it was further laid down that if those conditions are fulfilled, the Income-tax Officer is bound to register the firm. The same rule will apply in the case of renewal of registration. In this Khanjan Lal Sewak Ram vs Commissioner Of Income Tax, U.P on 31 August, 1971 5 case we are primarily concerned with the question whether the application made by the firm is in accordance with the rules prescribed. The rules with which we are concerned in this appeal is paragraph 3 of rule 6 and rule 6-A. Paragraph 3 of rule 6 provides that the partners should append the following certificate to their application for renewal of registration. "We do hereby further certify that the profits (or loss, if any) of the previous year or period upto the date of dissolution were divided 'or credited as shown below........ Rule 6-A provides that " on receipt of an application under rule 6, the Income-tax Officer may if he is satisfied that the application is in order and that there is or was a firm in existence (1) 77 I.T.R,10. constituted as shown in the instrument of partnership, grant to the assessee a certificate signed and dated by him in the following form. . . . . It further provides : "If the Income-tax Officer is not satisfied he shall pass an order in writing refusing to renew the registration of the firm." Now the sole question for decision is whether the application made in this case complied with the requirements of paragraph 3 of rule 6. If it did not comply with the requirements of rule 6, the Income-tax Officer was within his powers in rejecting it. As seen earlier, the finding of the Tribunal is that though the profits of the firm entered in its account books had been distributed, the profits earned but not entered into the account books have not been divided or credit in the account books. From that it follows that the certificate given in the application for renewal of registration is not a true certificate and further that a substantial portion of the profits earned had not been divided. The reason behind rule 6 was that at the relevant time, the registered firm as such was not taxable. Only the partners of a firm could be taxed. That being so, if 'a portion of the profits earned by the firm was not divided amongst the partners or credited to their accounts, to that extent, the profits earned by the firm escaped assessment. Therefore the certificate contemplated by rule 6 is not a mere formality. It has a definite purpose. If a portion of the profits earned by the firm was not actually divided amongst the partners or credited to their accounts, then the only course open to the Income-tax Officer was not to register that firm and to tax the partners of the firm as an association of persons. By giving a false certificate that the profits earned by the firm had been divided or credited in the manner shown in the application, the assessee firm was trying to evade tax. Hence we must hold that the application for renewal of registration made by the assessee did not comply with conditions prescribed in paragraph 3 of rule 6. Hence the Income-tax Officer was justified to refuse to renew the registration. In resisting the above conclusion, Mr. Ramachandran Counsel for the assessee relied on certain decisions of the High Courts. The first decision relied on by him is that of the Bombay High Court in Commissioner of Income-Tax, M. P. Nagpur and Bhandaru v. D Costa Brothers(1). Therein the Court held that the Income-tax Officer was not entitled to reject the application for registration of the deed of partnership of the assessee firm on the ground that the house-hold expenses of the partners were debited to the profit and loss account of the firm. Therein there was no (1) 49, I.T.R. Khanjan Lal Sewak Ram vs Commissioner Of Income Tax, U.P on 31 August, 1971 6 181. contention that all the profits earned were not distributed. The only question was whether the household expenses could have been deducted before dividing the profits. In other words the question was whether the household expenses was a proper deduction to be made in the circumstances of that case before dividing the profits. Hence that decision has no bearing on the question under consideration. He next placed reliance on the decision of the Punjab High Court in Commissioner of Income-tax, Simla v. Sat Ram Gian Chand(1). Therein the partners first estimated the divisible profit and divided the same. The Court held that the division of profit was a matter relating to the internal affairs of the partnership and had no bearing on the genuineness of the firm and that no question of law arose from the order of the Appellate Tribunal. The ratio of that decision has no relevance for our present purpose. Counsel for the assessee next relied on the decision of the Madras High Court in N. S. S. Chokkalingam Chettiar- and Co. v. C.I.T. Madras ( 2 ). In that case though there was no provision in the deed of partnership for payment of salary to any of the partners, some of the partners were paid a salary in addition to the shares to which they were entitled under the terms of the partnership and the Income-tax Officer refused to register the firm on the ground that the profits were not divided in accordance with the partnership deed as some of the partners took an additional amount out of the profits in the shape of salary. The court held that, as the partnership was found to be a genuine one and the application for registration was also in due form, the mere fact that some partners took some portion of the profits as salary was not a ground for refusing registration. The question whether a partner should be paid salary for the services rendered by him is a matter to be decided by the partners of the firm : so long as their payment is bona fide one, the same has to be deducted before the divisible profits are computed. Hence the ratio of that decision also does not bear on the facts of the present case. Reliance was next placed on the decision of the Madhya Pradesh High Court in C.I.T., M.P. v. Mandanlal Chhagan Lal(3). In that case the partnership deed provided that each partner will be entitled to interest at 6 per cent per annum on his capita investment and that the profit and loss will be divided equally among the partners after deducting the interest payable on the capital advances made by the partners. When the partners made an application for registration under s. 26A of the Act, the Income-tax Officer refused to register it but the Court held that the application was a valid one and the provision for payment of inte- (1) 42, ITR, 543. (2) 60, ITR, 671. (3) 50, I.T.R. 477. rest did not in any manner conflict with the relevant provision. Here again there is no question of not dividing any portion of, profits earned. That being so, that decision is irrelevant for our present purpose. Lastly reliance was placed on the decision of the Kerala High Court in St. Joseph's Provisions Store v. C.I.T., Kerala(1). Therein the partners of the assessee firm resolved that the profits of the firm as disclosed in the profit and loss account need not be divided and credited in the profit and loss accounts of the partners, but should be credited to a reserve account but each of the partners to have an equal share in that amount. An application for registration of the firm was rejected on the ground that the firm had not complied with the requirements of rule 6 of the Rules. Khanjan Lal Sewak Ram vs Commissioner Of Income Tax, U.P on 31 August, 1971 7 The court held that the absence of entries in the separate accounts of each partner was not fatal; the requirement of rule 6 was met when the profit was taken into a reserve fund showing the partners' shares therein and indicating what was the contribution of each partner to the reserve fund. Therefore the application for registration was not liable to be rejected on the ground that rule 6 had not been complied with. Here again the profits earned had beep divided and they were credited to the accounts of the partners though the same were credited to a reserve fund. Hence the rule laid down in that case is inapplicable to the facts of the present case. As the above referred decisions do not bear on the point in issue we have not gone into the question whether all or any of them were correctly decided or not. The apprehension of Mr. Ramachandra that our decision might be taken advantage of by the Department for refusing registration of firms whose return of income or claim for some allowance has not been accepted by the Income-tax Officer for one reason or the other, appears to us to have no basis. Herein we are merely considering the scope of paragraph 3 of rule 6. So long as the divisible profits had been divided or had been credited to the accounts of the partners, the requirement of that provision was complied with. In the result this appeal fails and the same is dismissed with costs. V.P.S. Appeal dismissed. (1) 45, I.T.R. 380. --1340SupCI/71 Khanjan Lal Sewak Ram vs Commissioner Of Income Tax, U.P on 31 August, 1971 8 | {
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Shekhawati General Traders Ltd vs Income Tax Officer, Company Circle I, ... on 4 October, 1971 Equivalent citations: 1971 AIR 2389, 1972 SCR (1) 927, AIR 1971 SUPREME COURT 2389, 1971 TAX. L. R. 1551 Author: A.N. Grover Bench: A.N. Grover, K.S. Hegde PETITIONER: SHEKHAWATI GENERAL TRADERS LTD. Vs. RESPONDENT: INCOME TAX OFFICER, COMPANY CIRCLE I, JAIPUR DATE OF JUDGMENT04/10/1971 BENCH: GROVER, A.N. BENCH: GROVER, A.N. HEGDE, K.S. CITATION: 1971 AIR 2389 1972 SCR (1) 927 ACT: Income-tax Act, 1961-Sections 147 and 55 and its scope. HEADNOTE: In 1949, the assessee company had acquired some ordinary shares of a company of the face value of Rs. 10/- each. On this holding the assessee had received certain bonus shares. The assessee further acquired a certain number of right shares of the same company in 1961. During the assessment year 1962-63 it sold a certain number of shares which it held prior to January 1, 1954 and calculated the cost price of the shares sold, at the market rate prevailing on January 1, 1954. Similarly, the assessee acquired certain ordinary shares of another company before January 1, 1954 and received certain bonus shares after that date. During the assessment year 1962-63 it again sold some of these shares and calculated Shekhawati General Traders Ltd vs Income Tax Officer, Company Circle I, ... on 4 October, 1971 1 the cost of acquisition of the said shares at the market value prevailing on January 1, 1954. Thus, according to the assessee, by selling the shares of the two companies, it had suffered a capital loss and the Income-tax Officer allowed the loss to be carried for-ward by the assessee. After nearly 2 1/2 years, the Income-tax Officer notified the assessee that income chargeable to tax for the assessment year 1962-63 had escaped assessment within s. 147 of the Income Tax Act, 1961 and wrote that while working out the cost, the assessee wrongly claimed the prevalent market price as on January 1, 1954 ignoring the fact that the same shares were given as bonus shares in later years after January 1, 1954. According to the Income-tax Officer, the cost has to be worked at by averaging the cost of the original shares, amongst the original,shares and the bonus shares taken together. The assessee maintained that it had exercised its option under s.55(2) of the Act. Therefore, the cost of acquisition of the ordinary shares of the two companies which had been acquired long before January 1, 1954 was taken at the fair market value as on that date and the capital loss was computed accordingly. The assessee, thereafter filed a writ petition before the High Court challenging the validity of the notice issued under s. 147 of the Act. The High Court dismissed the writ petition on the ground that since the assessee had not shown the acquisition of bonus and right share-, in the Income-tax return, the Income-tax Officer had reason to believe that the income chargeable to tax had escaped assessment and therefore, the notice was valid. Allowing the appeal, HELD : (1) That the cost of acquisition under s. 55(2) of the Act, is the cost of the asset to the assessee or the fair market value of the asset on the 1st day of January, 1954 at the option of the assessee., Therefore, in the present case, the assessee rightly applied its option and the fair market value is duly determined. it is wrong to hold that while working out the capital gains, the cost had to be worked out by averaging the cost of the original shares among the original shares and the bonus 928 shares taken together, ignoring the statutory provisions of ss. 48 and 55(2) of the Act. For the ascertainment of the fair market value of the shares in question, on January 1, 1954, any event prior to or subsequent to that, date is wholly extraneous and irrelevant. [932 F] (2)The assessee is bound to disclose under cl. (a) of s. 147 only such material facts which are necessary for its assessment for the assessment year and not those facts which at)-, irrelevant and extraneous for the purpose of assessment. As regards cl. (b) of s. 147 from the infor- mation furnished by the assessee, there is no reason for the I.T.O. to believe that income chargeable to tax has escaped Shekhawati General Traders Ltd vs Income Tax Officer, Company Circle I, ... on 4 October, 1971 2 assessment for the assessment year in question. [933 B-C] Commissioner of Income-tax, Bihar v. Dalmia Investment Co., 52 I.T.R. 567, referred to and distinguished. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2039 and 2040 of 1968. Appeals from the judgment and order dated April 20, 1968 of the Rajasthan High Court in D. B. Civil Writ Nos. 104 and 1 05 of 1967. S. Mitra, O. P. Khaitan, N. R. Khaitan, B. P. Maheshwari and R. K. Maheshwari, for the appellant (in both the appeals). V.S. Desai, P. L. Juneja, R. N. Sachthey and B. D. Sharma, for the respondent (in both the appeals). The Judgment of the Court was delivered by Grover, J. These appeals by certificate from a judgment of the Rajasthan High Court involve a common question relating to the computation of capital gains in respect of sale of certain shares. It is necessary to refer to the facts in Civil Appeal No. 2039/ 6 8 only. The assessee is a company incorporated under the Indian Companies Act 1956 having its registered office at Jaipur. For the assessment year 1962-63 relevant to the previous year ending March 31, 1962 the assessee filed its return before the Income-,tax Officer, Company Circle No. 1, Jaipur. On March 29, 1949, the assessee had acquired 12,000 ordinary shares of the Orient Paper Mills of the face value of Rs. 10 each. On this holding it received 12,000 bonus shares on or about April 28, 1951. It again received 60,000 bonus shares on or about June 4, 1954 and further acquired 25,200 right shares on June 26, 1961. It sold 22,000 shares during the assessment year 1962-63. It is common ground that these shares which were sold were out of the 24,000 shares which it held prior to January 1, 1954. The price realized on account of the sale of 22,000 shares during the assessment year 1962-63 was Rs. 8,45,110/-. The assessee calculated the cost price of 22,000 shares sold by it at the market rate prevailing on January 1, 1954 which came to Rs. 8,63,500 /-. The assessee had also acquired 15,000 ordinary shares of Birla Jute Manufacturing Company before January 1, 1954. It got 41,250 bonus shares on original holding after January 1, 1954. It further got 22,500 right shares for the nominal value of Rs. 3,60,000. The assessee sold 15,000 shares during the assessment year 1962-63 and the sale price realized was Rs. 4,54,130/-. The assessee calculated the cost price of 15,000 shares sold by it at the market value prevailing on January 1, 1954 which came to Rs. 6,45,000//-. Thus according to the assessee the cost of acquisition of the said shares in the two companies came to Rs. 15,09,400 while they were sold for Rs. 12,09,240 and thereby the assessee suffered a capital loss of Rs. 2,10,160. The assessee filed a statement giving all these details. Fromthat statement it was clear that the 22,000 shares of the OrientPaper Mills and the 15,000 shares of the Birla Jute Mfg. Co. which were sold during the assessment year 1962-63 were those which it had acquired or received by way of bonus shares prior to January 1, 1954. Shekhawati General Traders Ltd vs Income Tax Officer, Company Circle I, ... on 4 October, 1971 3 The Income-tax Officer by his assessment order dated July 20. 1964 accepted the statement furnished by the assessee and held that it had suffered a capital loss of Rs. 2,10,160/- which was directed to be carried forward. By means of a notice dated January 4, 1967 the Income-tax Officer informed the assessee that he had reasons to believe that income chargeable to tax for the assessment year 1962- 63 had escaped assessment within the meaning of s. 147 of the Income-tax Act 1961, hereinafter called the "Act". This notice was accompanied by a letter in which it was stated "While working out the cost you claimed the prevalentmarket price as on 1-1-1954 in complete disregardof the fact that the same shares had been given bonus shares in the subsequent years after 1-1-54.The Supreme Court had laid down in the case of Dalmia Cement (1964) 52 ITR 567 that while working out the capital gains the cost has to be worked out by averaging cost of the original shares amongst the original shares. and bonus shares taken together. Your claim of the cost, therefore, was incorrect. By following erroneous method you claimed and were allowed loss of Rs. 2,10,160 in assessment year 1962- 63 and Rs. 45,176/- in assessment year 1964- 65. Against this the cost in assessment year 1962-63 would come much less and instead of capital losses a figure of capital gain will get computed". The assessee sent a letter dated February 9, 1967 to the Income-tax Officer saying that it had exercised its option under s. 55(2) of the Act and in accordance therewith the cost of acquisition of the ordinary shares of the two companies which have been acquired and held by the assessee long before January 1, 1954 was taken at the fair market value as on that date and the capital loss was computed accordingly. It was pointed out that the judgment of the Supreme Court referred to in the letter of the Income-tax Officer had no relevance in the present case and that the notice which had been issued under s. 147 of the Act was illegal and without jurisdiction. Subsequently the assessee filed a petition in the High Court under Art. 226 of the Constitution challenging the legality and validity of the notice issued under s. 147 of the Act. The High Court was of the view that since the acquisition of bonus and right shares acquired by the assessee on the original holding had not been shown in the income tax return it could be said that the Income-tax Officer had reason to believe that the income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. It was contended on behalf of the assessee before the High Court that it was altogether unnecessary for the assessee to have shown the acquisition of bonus shares in the return filed by it for the determination of the cost of acquisition of the shares held by it and therefore the notice issued by the Income-tax Officer was without jurisdiction. G. M. Mehta J., disposed of the matter by saying, "prima facie it cannot be said that the Income-tax Officer had no reason to believe that there was an escapement of assessment on account of omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for the assessment for the years 1962-63........ requiring notice under s. 148 of the Income tax Act." The other learned judge D. M. Bhandari J. wrote a separate judgment expressing the opinion that the case of the assessee was covered by s. 147 (a) and that it did not fall within s. 147 (b) of the Act. The writ petition was dismissed. Shekhawati General Traders Ltd vs Income Tax Officer, Company Circle I, ... on 4 October, 1971 4 It is somewhat unfortunate that the real points which arose for determination in the present case did not engage the attention of the learned judges of the High Court. Section 45 of the Act provides that any profits and gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in ss. 53 and 54 be chargeable to income tax under the head "Capital gains" and shall be deemed to be the income of the previous year in which the transfer took place. Section 48 deals with the mode of computation and deductions. It says that income chargeable under the head "capital gains shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset following amounts, namely, (i) expenditure incurred wholly and exclusively in connection with such transfer and (ii) the cost of acquisition of the capital asset and the cost of any improvement thereof. The meaning of the cost of acquisition is explained by s. 5 5 (2) and for our purpose that sub-section with clause (1) need be reproduced : 55(2) "For the purposes of sections 48 and 49, "cost of acquisition", in relation to a capital asset (i) where the capital asset became the property of the assessee before the 1st day of January 1954 means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of January, 1954, at the option of the assessee; The assessee had exercised the option of the fair market value of the assets. The shares which had been sold by it of both the companies had indisputably become its property before the first day of January 1954. Therefore all that had to be determined was the fair market value on the first day of January 1954 of those shares. This was duly determined and it was not disputed that that determination was made according to the rates prevailing in the market on the aforesaid date by the Income-tax Officer when he made his assessment order on July 20, 1964. Once the market value of the shares was ascertained or determined on the date given in cl. (1) of s., 5 5 (2) that would be the cost of acquisition in relation to capital assets. Up to this point there is no controversy between the Revenue and the assessee but on behalf of the Revenue an almost startling position has been advanced that while determining the fair market value on January 1, 1954 the issuance of bonus or right shares after that date on the basis of the holding of the assessee prior to January 1, 1954 should have been taken into account. In other words as was explained in the letter of the Income-tax Officer dated January 4, 1967 while working out the capital gains the cost had to be worked out by averaging the cost of the original shares amongst the original shares and the bonus shares taken together. Thus, according to the Revenue, after the issue of bonus shares the cost of the original holding had to be spread over all the shares inclusive of the bonus or the right shares acquired on the original holding. Support for this view appears to have been found in the decision of this; Court in Commissioner of Income tax, Bihar v. Dalmia Investment Co. Ltd.(1). (1)52 I.T.R. 567. The question which had to be decided in the above case was entirely, of a different nature. The assessee there held ordinary shares in Rohtas Industries Ltd. apart from holding shares by way of Shekhawati General Traders Ltd vs Income Tax Officer, Company Circle I, ... on 4 October, 1971 5 investment and also as stock-in-trade of its business as a share dealer. In 1944 the assessee acquired 31,909 of these shares and was holding them in January 1945. In that month the Rohtas Industries Ltd. distributed bonus shares at the rate of one ordinary share for each original share. So the assessee got 31,909 bonus shares. Between that time and December 31, 1947 the assessee sold 14,650 of the original shares. The assessee acquired some newly issued shares in the years 1945 and 1947. The total holding of the assessee on January 1, 1948 came to 1,10,747 shares which in its books had been valued at Rs. 15,57,902. In arriving at this figure the assessee had valued the bonus shares at the face value of Rs. 10 /'- each and the other shares at the actual cost. On January 29, 1948/ the assessee sold all these shares for the total sum of Rs. 15,50,458 and in its return for the year 1949-50 claimed a loss of Rs. 7,444 on the sale. It was held by the majority that the bonus shares had to be valued by spreading the cost of the old shares over the old shares and the bonus shares taken together if they ranked pari passi and if they did not the price might have to be adjusted either in proportion of the face value they bore or on equitable consideration based on the market price before and after issue. We have set out the facts of this case in detail in order to demonstrate that that decision was not at all apposite for the purpose of deciding the point which has arisen in the present case. No question arose there of the calculation of the capital gain or loss in accordance with the statutory provisions in Pari materia with ss. 48 and 55(2) of the Act. In the present case we are confined to the express provisions of s. 55(2) relating to the manner in which the cost of acquisition of a capital asset has to be determined for the purpose of s. 48. Where the capital asset became the property of the assessee before the first day of January 1954 the assessee has two options. It can decide whether it wishes to take the cost of the acquisition of the asset to it as the cost of acquisition for the purpose of s. 48 or the fair market value of the asset on the first day of January 1954. The word "Fair" appears to have been used to indicate that any artificially inflated value is not to be taken into account. In the present case it is common ground that when the original assessment order was made the fair market value of the shares in question had been duly determined and accepted as correct by the Income- tax Officer. Under no principle or authority can anything more be read into the provisions of s. 55 (2) (i) in the manner suggested by the Revenue based on the view expressed in the Dalmia Investment Co's case(3). The High Court corn- (1)[1952] I.T.R. 567. pletely overlooked the fact that for the ascertainment of the fair market value of the shares in question on January 1, 1954 any event prior or subsequent to the said date was wholly extraneous and irrelevant and could not be taken into consideration. If the contention of the Revenue were to be accepted the acquisition of bonus shares subsequent to January 1, 1954 will have to be taken into account which on the language of the statute it is not possible to do. On this view of the matter there was no question of the case of the assessee falling within clauses (a) or (b) of S. 147 of the Act. The assessee is bound to disclose under cl. (a) only such material facts which are necessary for its assessment for the assessment year and not those facts which are wholly irrelevant and extraneous for the purpose of assessment. As regards cl. (b) also the information must be such as should lead the Income-tax Officer to believe that income chargeable to tax has escaped assessment. The information, in the present case, relating to the acquisition of the bonus shares subsequent to January 1, 1954 could possibly furnish no reason to the Income-tax Officer to form the belief that income chargeable to tax had escaped assessment for the assessment year in question. For the reasons given above the appeals are allowed and the. judgment of the High Court is set aside. The impugned notice issued to the assessee in each case shall stand quashed. The assessee shall be Shekhawati General Traders Ltd vs Income Tax Officer, Company Circle I, ... on 4 October, 1971 6 entitled to its costs in this Court. Hearing fee one set. S.N. Appeals allowed., Shekhawati General Traders Ltd vs Income Tax Officer, Company Circle I, ... on 4 October, 1971 7 | {
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University Of Poona & Ors vs Shankar Narhar Ageshe & Ors on 30 April, 1971 Equivalent citations: 1971 AIR 1783, 1971 SCR 597, AIR 1971 SUPREME COURT 1783 Author: A.N. Ray Bench: A.N. Ray, J.M. Shelat PETITIONER: UNIVERSITY OF POONA & ORS. Vs. RESPONDENT: SHANKAR NARHAR AGESHE & ORS. DATE OF JUDGMENT30/04/1971 BENCH: RAY, A.N. BENCH: RAY, A.N. SHELAT, J.M. BHARGAVA, VISHISHTHA CITATION: 1971 AIR 1783 1971 SCR 597 ACT: Election-System of proportional representation by single transferable vote by ballot-Equality of votes in second count-Exclusion of candidate by reference to votes on first count-Propriety. Affiliation of Colleges to University-Delay in publication of notification-Effect on voting rights. HEADNOTE: Under s. 11 of the Poona University Act, 1948, the Vice Chancellor shall be elected by the Court of the University, from among three persons recommended by the Executive Council, and the election shall be made by the system of proportional representation by means of a single transferable vote by ballot. In the present case, the result of the ballot papers was that one candidate secured University Of Poona & Ors vs Shankar Narhar Ageshe & Ors on 30 April, 1971 1 58 first preference votes, the second secured 53 first preference votes, and the third candidate secured 37 first preference votes. The third candidate was eliminated on the first count on the basis of his securing the lowest number of first preference votes, and his second preference votes were distributed between the other two. This resulted in both of them securing an equal number of votes on the second count. and the candidate who had the majority in the first count was declared elected. The election was set aside by the High Court. On the questions: (1) Whether the tie should have been resolved by drawing of lots; and (2) Whether the principals of four colleges voted wrongly at the election because those colleges had not been duly affiliated at the date of election. HELD: (1) It is an established principle in the system of proportional representation by means of a single transferable vote by ballot, that where for one vacancy there are three candidates and one of them is excluded at the first count and the other two candidates continue and secure in the second count an equal number of votes, then the one who had the lower number of votes in the first count shall be excluded. Determination by lot in case of equality of votes is neither a principle of universal application nor is it a common law principle. It is only permissible when there is a specific statutory provision to that effect. In the absence of such a statutory provision the method of decision by lot is not resorted to when there is another rational method. The principle of decision by lot is de- pendent on chance and accident whereas the principle of exclusion with reference to difference of votes on the original count is based on reason and legislative principles. The principles of exclusion are not to be found in any statutory enactment in the present case. On the other hand there is the support of legislative measures embodying the principle of exclusion by reference to original count. [605D, H; 606A-C] (a) Rule 75(4) of the Conduct of Election Rules indicates that when two or more candidates have been credited with the same value and stand lowest on the poll the candidate for whom the lowest number of original 598 votes are recorded shall be excluded. The rule applies when there are two or more candidates and not only when there are more than two candidates. The words 'stand lowest on the poll' qualify 'two or more candidates who have been credited with the same value'. The High Court overlooked the rational of the principle embodied in this rule that in the case of two continuing candidates each having the same value of votes to fill in one vacancy the tie between the two would be resolved by having regard to their original votes in the first count. [604B, F] University Of Poona & Ors vs Shankar Narhar Ageshe & Ors on 30 April, 1971 2 (b) Rule 6 in the Schedule to the Presidential and Vice- Presidential Election Rules, 1952, and Statute No. 158 framed under the Poona University Act, though it does not in terms apply to the election of a Vice-Chancellor, also embody this principle. [603B] (c) The High Court's reliance on r. 81(13) of the Conduct of Election Rule, 1961, in support of the conclusion that the only system of exclusion in a case of the present type should be by lot is erroneous. The principle in r. 81(3), applies only where more than one seat is to be filled and only one vacancy remains unfilled with only two continuing candidates and each of them has the same value of votes at that count. [605C] (d) The defeated candidate himself made a petition to the Chancellor under s. 60 of the Act, which provides that if any question arises as to whether a person has been duly elected the matter may be referred to the Chancellor whose decision shall be final, not to confirm the election. The Court of the University has thus laid down its own procedure for correction. When there is discretion to choose between two principles of exclusion, this Court would not command the University to exercise the discretion in a specific way. [606E] (2) The four colleges were in fact affiliated before the date of election but there was delay in the publication of the notification. Such delay would not detract from the sanction previously granted. [607A] JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5 of 1971. Appeal from the judgment and order dated December 18, 21, 1970 of the Bombay High Court in Special Civil Application No. 1583 of 1970. S. J. Sorabeje, M. O. Chinoy, J. R. Gagrat, and B. R. Agarwala, for the appellants. V. S. Desai and S. B. Wad, for the respondents Nos. 1, 2, 4 and 7. The Judgment of the Court was delivered by Ray, J.-This is an appeal by certificate under Article 133(1) (c) of the Constitution from the judgment dated 18 and 21 December, 1970 of the Bombay High Court. The Bombay High Court issued a writ of quo warranto declar- ing that respondent No. 3 Dr. Balkrishna Pandurang Apte is not entitled to act as the Vice-Chancellor of the University of Poona is pursuance of the election held on 9 May, 1970 and further restraining him from acting as the Vice-Chancellor. H. V. Pataskar, the Vice-Chancellor of the University of Poona died on 21 February, 1970. The Governor of Bombay who is the Chancellor of the University then nominated Maha Mahopadhyaya Datto Vaman Potdar to act as the Vice- Chancellor until the date on which another Vice-Chancellor was elected under sub-section (1) of section 11 of the Poona University Act, University Of Poona & Ors vs Shankar Narhar Ageshe & Ors on 30 April, 1971 3 1948 (hereinafter referred to as the Act). Under section 12 of the Act the Vice-Chancellor is the prin- cipal executive and academic officer of the University. Under section 11 of the Act the Vice-Chancellor shall be elected by the Court from among three persons recommended by the Executive Council. Section 56 of the Act provides that every election to the office of the Vice-Chancellor and every recommendation for the nomination to the office of the Vice-Chancellor under the Act shall be made by the system of proportional representation by. means of a single transferable vote by ballot in such manner as may be prescribed by the Statutes. At the meeting of the Executive Council held on 28 February, 24 March and 18 April, 1970 the Executive Council recommend- ed a panel of three persons. They were Dr. Balkrishna Pandurang Apte, Principal Narayan Ramchandra Kulkarni and Principal Narhar Govind Suru for election to the office of the Vice-Chancellor. These were the three candidates from amongst whom the Court of the University had to elect one as the Vice-Chancellor. The said meeting of the Court of the University was convened under notice dated 22 April, 1970 for 9 May, 1970 for election of the Vice-Chancellor from amongst those three persons. At the election held on 9 May, 1970 the total number of votes tendered was 149. One of the votes was invalid. The valid votes were 148. The election was in accordance with section 56 of the Act by the system of proportional representation by means of a single transferable vote by ballot. The result of the ballot papers appeared to be that Dr. Apte secured 58, Principal Kulkarni 37 and Principal Suru 53 first preference votes. Principal Kulkarni was thus eliminated on the first count on the basis of the lowest number of first preference votes. 8 of the voters who had given first preference votes to Principal Kulkami had not exercised second preference in favour of either of the remaining two candidates Dr. Apte and Principal Suru. The remaining 29 voters gave 12 second preference votes to Dr. Apte and 17 second preference votes to Principal Suru. This resulted in both the continuing candidates Dr. Apte and Principal Suru each securing 70 votes on the second count. Dr. Apte was declared elected because in the first count, namely, the count previous to the one in which both obtained equal number of votes. Dr. Apte had a clear majority of 5 votes and therefore Principal Suru was excluded from the election. The election of Dr. Apte was challenged in the High Court on three principal grounds. First, it was contended that the tie between Dr. Apte and Principal Suru at the second count was to be resolved by drawing of lots, because it was the ordinary practice in elections held under the system of proportional representation by means of a single transferable vote by ballot for election to a single seat that the tie of the above kind must be resolved by drawing of lots. Secondly, it was said that the Principal of four Colleges, viz. N. D. M. V. P. Samaj's Arts and Commerce College, Sinnar; V. P. Mandal's Arts, Science and Commerce College, Thana; Narhar Balwant Thakur Law College, Nasik and G. E. Society's College for Education, Sangamner which had not been duly affiliated at the date of the election had acted and voted at the election as members of the Court, and, therefore, the votes given by the members of those four colleges were invalid. Thirdly, it was contended that the meeting for the election of the panel of respondents Dr. Apte, Principal Kulkarni and Principal Suru for election to the office of the Vice-Chancellor was an invalid meeting and therefore the election was void. University Of Poona & Ors vs Shankar Narhar Ageshe & Ors on 30 April, 1971 4 The High Court upheld the first contention and rejected the other two. The High Court held that when upon final count the continuing candidates Dr. Apte and Principal Suru secured equal majority of valid votes the system of proportional representation by means of a single transferable vote by ballot never aimed at excluding one of such continuing candidates by reference to any of the previous counts and/or of original vote. The High Court held that where only two continuing candidates remained to fill up only one vacancy and both of them had the same number of votes the tie of votes between the two continuing candidates was to be solved by the principle of decision by lot. Section 56 of the Act speaks both of election to the office of the Vice-Chancellor or any authority of the University by the system of proportional representation by means of a single transferable vote by ballot in such manner as may be prescribed by the Statutes. The authorities of the University are mentioned in section 15 of the Act. The Vice-Chancellor is not one of the authorities mentioned there. The Vice-Chancellor is one of the officers of the University. The officers of the University are mentioned in section 8 of the Act. Section 18 of the Act contemplated making of Statutes. Statutes No. 142 to 165 are the relevant Statutes for elections to authorities. These Statutes do not apply to election of Vice-Chancellor because he is not an authority. The system of election by proportional representation by means of a single transferable vote by ballot is the prescribed system of election to authorities. The relevant Statute for election to authorities on which counsel for the appellants relied is Statute No. 158 in support of the proposition that it embodied the rule of exclusion of one of the two continuing candidates both of whom secured equal number of votes in the second count by reference to the principle as to which of the two continuing candidates had the lowest number of votes at the first count. There is no doubt that Statute No. 158 does not in terms apply to the election of Vice-Chancellor but it is manifest that Statute No. 158 embodies a rule of exclusion of one of the candidates at the second count on the ground that that candidate bad the lowest number of votes at the first count. Election by proportional representation by means of a single transferable vote by ballot is often described as the Hare system of proportional representation named after the English political reformer Thomas Hare. This system of election is based on a quota determined by the following formula. The total votes cast is divided by the number of seats to be filled plus one, and one is added to the quotient. If 100.000 votes are cast and 4 seats are to be filled, divide by 5 to get a quotient of 20,000 then add I to get 20,001, which is the quota. A candidate receiving the quota of first-choice of votes is elected. Under this system electors ,express first, second. third or additional choices according to the number of candidates. An elector does not waste his vote. If the candidate for whom he has expressed his choice, does not need his vote, the surplus votes are distributed in accordance with the indicated second choices among candidates whose quotas have not been filled. If enough candidates are not elected by this process the candidate with the smallest number of choices is then excluded and his votes are distributed in the same way. This process of ,exclusion or elimination goes on until enough candidates have filled their quotas or until the successive eliminations have left no more than enough to fill the vacancies. In working out the method of election in the present case, it has to be noticed whether the manner in which Principal Suru has been excluded at the second count and Dr. Apte has been declared University Of Poona & Ors vs Shankar Narhar Ageshe & Ors on 30 April, 1971 5 elected at the second count is a principle of exclusion which has been recognised in the system of proportional representation by means of a single transferable vote by ballot. Counsel for the ..appellants contended that there was legislative recognition of this principle in three cases. The first is rule 75 of the Conduct of Elections Rules, 1961. The second is rule 6 in the Schedule to the Presidential and Vice-Presidential Elections Rules, 1952. The third is Statute No. 158 in the Statutes of the Poona University Act. Rule 75 of the Conduct of Elections Rules is applicable in the case of counting of votes where only one seat is to be filled. The two sub-rules of Rule 75 on which reliance was placed by, counsel for the appellants for the legislative recognition of the principle of exclusion are (3) and (4) which are as follows : - "(3). If, at the end of any count, no candidate can be declared elected, the returning officer shall- (a) exclude from the poll the candidate who up to that stage has been credited with the lowest value; (b) examine all the ballot papers in his parcel and sub-parcels, arrange the unexhausted papers in sub-parcels according to the next available preferences recorded thereon for the continuing candidates,, count the number of papers in each sub-parcel and credit it to the candidate for whom such preference is recorded, transfer the sub- parcel to that candidate. and make a separate sub-parcel of all the exhausted papers ; and (c) see whether any of the continuing candidates has, after such transfer and credit, secured the quota. (4) If, when a candidate has to be excluded under clause (a) of sub-rule (3), two or more candidates have been credited with the same value and stand lowest on the poll, the candidate for whom the lowest number of origi- nal votes are recorded shall be excluded, and if this number also is the same in the case of two or more candidates the returning officer shall decide by lot which of them shall be excluded". Sub-rule (4) indicates that if when a candidate has to be excluded two or more candidates have been credited with the same value, and stand lowest on the poll the candidate for whom the lowest number of original votes are recorded shall be excluded. In the present case at the first count Principal, Kulkarni was excluded because he received the lowest number of votes on the first count. At the second count Dr. Apte and Principal Sum were the two continuing candidates. Of these two one had to be excluded. Therefore the principle of exclusion is that the candidate for whom, the lowest number of original votes are recorded shall be excluded. The original first preference votes indicated that Dr. Apte. had 58 votes and Principal Suru had 53 votes. Therefore. Dr. Apte had larger first preference votes. The other part of sub-rule (4) of rule 75 is that if both at the first count and at the second count they University Of Poona & Ors vs Shankar Narhar Ageshe & Ors on 30 April, 1971 6 had equal number of votes then one of them was to be excluded on the principle of decision by lot. Rule 6 in the Schedule to the Presidential and Vice-Presi- dential Elections Rules, 1952 on which counsel for the appellants relied embodied the same principle which is as follows :- "If, when a candidate has to be excluded under clause (a) above, two or more candidates have been credited with the same number of votes and stand lowest on the poll, exclude that candidate who had secured the lowest number of first preference votes, and if that number also was the same in the case of two or more candidates, decide by lot which of them shall be excluded". Statute No. 158(3) on which counsel for the appellants relied is as follows : - "If, when a candidate has to be excluded, two or more candidates have each the same number of votes, and are lowest on the poll, the candidate with the lowest number of votes at the first count at which the candidates in question have an unequal number of votes shall be excluded and, when the number of votes credited to the candidates are equal at all counts, the Registrar shall determine by lot who shall be excluded". These provisions were referred to and relied on by counsel for the appellants only for the limited purpose of establishing that where two continuing candidates at the second count have equal number of votes in the second count and there is one vacancy to be filled up the candidate who had the lower number of votes at the first count shall be excluded. The High Court held that the words "two or more candidates" and the other words "stand lowest on the poll" in rule 75(4) of the Conduct of Elections Rules indicated that the principle embodied in that rule would apply only where the contest continued between three and more continuing candidates and the question could not arise when the contest was only between two candidates left over as continuing candidates. The other reason given by the High Court was that when there were two continuing candidates they could never stand lowest on the poll and the two candidates, according to the High Court, could stand lowest on the poll only if there were other remaining or continuing candidates with larger and better value of votes. The interpretation of rule 75(4) by the High Court is erroneous. The rule itself speaks of two or more candidates and does not speak of more than two candidates as the High Court construed it. The words "stand lowest on the poll" occur along with two or more candidates who have been credited with the same value. It is because they have the .same value that both of them stand lowest on the poll. There fore, rule 75(4) resolves that tie by adopting the principle of exclusion of one of the candidates with regard to the number of original votes at the first count. The High Court held that the principle in rule 75(4) would not apply in the present case with only two continuing candidates for filling in one vacancy because there University Of Poona & Ors vs Shankar Narhar Ageshe & Ors on 30 April, 1971 7 would be no possibility of transfer of the excluded candidate's votes in favour of the other candidate. The High Court therefore relied on rule 81(3) of the Conduct of Elections Rules, 1961 to support the conclusion that the only system of exclusion in a case of the present type would be decision by lot. Rule 81(3) is as follows:- "When at the end of any count only one vacancy remains unfilled and there are only two continuing candidates and each of them has the same value of votes and no surplus remains capable of transfer, the returning officer shall decide by lot which of them shall be excluded; and after excluding him in the manner aforesaid, declare the other candidate to be elected". The High Court overlooked the rational of the principle embodied in rule 75(4) that in the case of two continuing candidates each having the same value of votes to fill in one vacancy the tie between the two would be solved by having regard to their original votes in the first count. There would be no occasion for transfer of excluded candidate's votes in such a contingency. Where two or more candidates continued for one vacancy and each of the candidates would have the same value of votes at the end of a count the tie between the two or more candidates having equality of votes would be solved by excluding the one who had the lowest number of votes on the first count and thereafter the excluded candidate's second choice would be transferred to the continuing candidates until the vacancy would be filled up by the principle of exclusion embodied in rule 75(4). The principle in rule 81(3) is applicable where more than one seat is to be filled and only one vacancy remains unfilled with only two continuing candidates and each of them has the same value of votes at that count. In such a case the exclusion of one of the candidates is decision by lot. The reason for decision by lot in rule 81(3) is that the two continuing candidates by reason of the transferred votes at the last count have the same value of votes. The values of their votes in the previous counts have already been worked out by rule 80(7) of the Conduct of Elections Rules, 1961 which embodied the principle of exclusion of a candidate where two or more candidates have the same value of votes by having regard to the original votes of each candidate and excluding the candidate for whom fewest original votes are recorded. The principle of Rule 81(3) does not apply to the present case because that rule applies to counting of votes where More than one seat is to be filled. This is not the case here. Rule 81(3) resolves tie on count of votes between the last two contesting candidates at the last count on transfer of votes from the previous count. It is an established principle in the system of proportional representation by means of a single transferable vote by ballot that where for one vacancy there are three, candidates and one of them is excluded at the first count and the two candidates continued and in the second count both of them have equal number of votes then one of the two candidates who had the lower number of votes than the other continuing candidate in the first count shall be excluded. The present election was held on this principle. Section 56 of the Act only speaks of election by the system of proportional representation by means of a single transferable vote. It cannot be said in the present case that there is any statutory infringement of election by the system of proportional representation by means of a single transferable vote. The two rival contentions were that according to the University authorities Principal Suru was to be excluded at the second count because his votes on the original count were University Of Poona & Ors vs Shankar Narhar Ageshe & Ors on 30 April, 1971 8 lower than that of Dr. Apte whereas according to the persons who impeached the election the only method of exclusion was decision by lot. It appears that there is legislative sanction in support of the contention on behalf of the University authorities that resolving equality of votes by reference to first preference or original votes is a known recognised method in the system of proportional representation by means of a single transferable vote. Even if Statute No. 158 of the Poona University does not in terms apply, Statute No. 158 furnishes a valuable guide regarding the working of the system of proportional representation mentioned in section 56 of the Act and principles analogous to Statute No. 158 are applicable and have been applied by the authorities who conducted the election in the present case. Determination by lot in case of equality of votes in neither a principle of universal application nor is it a common law principle. It is only permissible when there is a specific statutory provision to that effect. In the absence of a statutory provision the method of decision by lot is not resorted to when there is other rational method. The principle of decision by lot is dependent on chance and accident whereas the principle of exclusion with reference to difference of votes on the original count is based on reason and legislative principles. In the present case the Statute imposed a duty of election by the system of proportional representation by means of a single transferable vote. The principles of exclusion are not to be found in any statutory enactment in the present case. On the one hand there is the support of legislative measures embodying the principle of exclusion by reference to original count. The principle of exclusion by lot on the other hand is adhered to only if the Statute has a compelling force to that effect. In the present case there is no such statutory compulsion of deciding by lot in the eventuality which happened. If there are two principles of exclusion and the authority has a discretion in the mode of performing the duty, the authority cannot be commanded to a duty in a specific way (See Halsbury's Laws of England, Third Edition, Vol. II, Para. 160, page 85). The election was held by the continuing Vice-Chancellor. The Court of the University was master of its own procedure. It adopted one of the principles of exclusion by reference to votes on the original count. In following that procedure it cannot be said that there is violation of statute. It is not out of place to mention here that Principal Suru himself made a petition to the Chancellor under section 60 of the Act asking him not to confirm the election. Under section 60 of the Act if any question arises as to whether a person has been duly elected or appointed the matter may be refer- red on a petition to the Chancellor who shall decide the question and his decision shall be final. We are not basing our decision on the finality of the decision of the Chancellor in the present case but this is a feature which is not to be lost sight of by reason of the fact that the candidate who lost at the election made representation for redress of his grievances to the Chancellor. Counsel on behalf of the respondents repeated the contention which had been advanced in the High Court that Principals of 4 unaffiliated Colleges attended the Court meeting and therefore the election was bad. The High Court rightly rejected that contention. There is evidence to show that in the month of June, 1969 the Government sanctioned the recommendation of the University for affiliation of these Colleges to the University. The affiliation was for three years from 1969. In these orders it was stated that the final Government notification would be issued after the University submitted a report to the Government of fulfilling the conditions. The respondents' contention was that the notification was published after the month of May, 1970. The High Court rightly held that the sanction was granted by the Government. Delayed publication of the notification would not detract from the sanction ,previously University Of Poona & Ors vs Shankar Narhar Ageshe & Ors on 30 April, 1971 9 granted. The third contention which had been urged in the High Court was not pressed here. For these reasons, we accept the appeal and set aside the judgment of the High Court. Each party will pay and bear its own costs in this Court. V. P. S. Appeal allowed. University Of Poona & Ors vs Shankar Narhar Ageshe & Ors on 30 April, 1971 10 | {
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S. M. Nandy & Ors vs State Of West Bengal & Ors on 19 February, 1971 Equivalent citations: 1971 AIR 961, 1971 SCR (3) 791, AIR 1971 SUPREME COURT 961 Author: S.M. Sikri Bench: S.M. Sikri, G.K. Mitter, K.S. Hegde, A.N. Grover, P. Jaganmohan Reddy PETITIONER: S. M. NANDY & ORS. Vs. RESPONDENT: STATE OF WEST BENGAL & ORS. DATE OF JUDGMENT19/02/1971 BENCH: SIKRI, S.M. (CJ) BENCH: SIKRI, S.M. (CJ) MITTER, G.K. HEGDE, K.S. GROVER, A.N. REDDY, P. JAGANMOHAN CITATION: 1971 AIR 961 1971 SCR (3) 791 1971 SCC (1) 688 CITATOR INFO : RF 1973 SC1461 (1041) ACT: West Bengal Land (Requisition and Acquisition) Act, 1948-If ultra vires Constitution under Art. 19(1) (f) and (5). HEADNOTE: On the question whether the West Bengal Land (Requisition and Acquisition) Act, 1948, was ultra vires the Constitution under Art. 19 (1) (f) read with 19(5). HELD : The State of West Bengal was faced with many emergent problems created by the partition of India and the impugned S. M. Nandy & Ors vs State Of West Bengal & Ors on 19 February, 1971 1 Act was enacted in order 'to provide for requisitioning and speedy acquisition of land under s. 3 for a number of public purposes mentioned therein. The necessity for requisitioning must necessarily be left to the State Government. Though there is no express provision to make a representation against an order of requisition under s. 3(2) there is no bar to such a representation being made and to its being considered by the State Government or appropriate Governmental Authorities. If. however, any order is made for any collateral purpose, or has been made for purposes not mentioned in s. 3 of the Act, or is mala fide., it can always be challenged in a civil court. Under ss. 7(3) and (4), 8 and 8A of the Act, fair compensation has been pro- vided for requisitioning which is determinable by a civil court, if there is a dispute regarding the amount, and ultimately by the High Court and this Court. Therefore, the restrictions imposed by the impugned Act are not ,unreasonable. [792 C, D; 794 D-F] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 500, of 1967. Appeal from the judgment and order dated January 13, 1965 of the Calcutta High Court in Appeal from Original Order No. 104 of 1963. Arun Kumar Datta and D. N. Mukherjee, for the appellants. Niren De,-Attorney-General and P. K. Chakravarti, for the respondent. The Judgment of the Court was delivered by Sikri, C.J. The following question has been referred to the Constitution Bench under the proviso to art. 145(3) of the' Constitution : "Whether the West Bengal Land (Requisition and Acquisition) Act 1948 is ultra vires the Constitution under art. 19(1)(f) read with art. 19(5)? The learned counsel for the appellant, Shri Arun Kumar Dutta, challenges the West Bengal Land (Requisition and Acquisition) Act, 1948-hereinafter referred to as the impugned action theground that it does not impose reasonable restrictions withinart. 19(5) of the, Constitution. He urges three ground in thisrespect. First, he says, that there is no provision for a noticeto the owner or the occupier of the property before an order of requisition is passed, secondly, there is no provision for an appeal against the order of requisition, and thirdly, a civil suit is barred under s. 1 1 of the impugned Act. In order to appreciate the points raised by the learned counsel it is necessary to set out the scheme of the Act. The impugned act was enacted in order to provide for requisitioning and speedy acquisition of land for a number of public purposes. These purposes are-: (1) maintaining supplies and services essential to the life of the S. M. Nandy & Ors vs State Of West Bengal & Ors on 19 February, 1971 2 community; (2) provide proper facilities for transport, communication, irrigation or drainage; and (3) creation of better living conditions in urban or rural areas by the construction or re-construction of dwelling places in such areas. The State of West Bengal,was faced with many emergent problems created. by the partition of India, and this Act was designed to meet these problems in a speedy manner. Section 3 enables the State Government to requisition land for the purposes mentioned above. A Collector of a district, an Additional District Magistrate or the First Land Acquisition Collector, Calcutta, when authorised by the State Government in this behalf, may exercise within his jurisdiction the powers of requisitioning conferred by sub-s. (1). Sub-s. (2) of s. 3 provides for service of this order in the prescribed manner on the owner of land and also on the occupier not being owner of land. Under sub-s. (3) of S. 3 the Collector, or any person authorised by him in writing in this behalf is entitled to execute the order in the manner mentioned therein, if the order passed under sub-s. (2) is not complied with by any person. There is nothing in the impugned Act which prevents a person on whom an order has been served under sub-s. (2) to make a representation to the Collector Or the State Government against the order of requisition Section 4 enables the State Government to use or deal with the land for the purposes aforesaid. We are not concerned with acquisition in this case but we may mention that the State Government may acquire 'any land requisitioned under the Act by publishing a notice in the official gazette that such land is required for a public purpose referred to in sub.s. (1 ) of, s . 3. Section 6 enables the St-ate Government to derequisition or release from requisition any land. The impugned Act provides for fair. compensations in respect, of the requisitioned land under 8. 7(3) and s. 7(4). Sub-s. (3) provides that where any land is requisitioned under S. 3, there. shall be paid to every person interested compensation in respect. Of- (a) the, requisition of such land; and (b) any damage done during the period of requisition to such land other than what may have been sustained by natural causes. Sub-s. (4) lays down the principles to be followed in determining the compensation. If the Collector and the person interested agree to the compensation the Collector is enabled to make an, award ordering payment of the agreed compensation. If there is disagreement, sub-s. (4) provides that the compensation pay-able shall, be the amount determined by the- Court on reference made by the Collector under cl. (b) of sub-s. (1) of s. 8. Under s. 8 the Collector is obliged to refer the matter to the decision of the Court if there is any disagreement with regard to compensation, and sub-s. (2) of s. 8 prescribes the same procedure as the Land Acquisition Act, 1894, in this regard, and the State Government is directed to apply the principles set out in sub-s, (1) of s. 23 of that Act, and in cl. (a) of sub-s. (2) of s. 7 of the, impugned Act, which provides "7(2)(a) When the compensation has been deter- mined under subsection (1) the Collector shall make an award in accordance with the principles set out in section 11 of the Land Acquisition Act, 1894, and no amount referred to in S. M. Nandy & Ors vs State Of West Bengal & Ors on 19 February, 1971 3 sub-section (2) of section 23 of, that Act, shall be included in the award : Provided that interest at the rate of six per centum per annum on the amount of compensation under the, award from the date of the publication of the- 'notice, under sub-section (1a) of section 4 until payment shall be included in the amount payable under the award." It seems to us that these provisions give fair compensation and' enable a Civil Court to determine the question in case of a dispute. An appeal lies under s. 8 A from the award made by a Court on- a reference under s. 8 as if such award was an Originals decree passed by the Court in exercise of its civil jurisdiction. Not only therefore fair compensation is provided but the determination of the amount of compensation rests with a Civil Court in case of a dispute. Although the learned counsel took objection to the court which has to make an award, we see nothing-- wrong with the definition of the word "Court" the word "Court" has been defined to mean: " "Court" means a principal Civil Court of original jurisdiction, and includes the Court of any Additional Judge, Subordinate Judge or Munsif whom the State Government may appoint, by name or by virtue of his office, to perform concurrently with any such principal Civil Court, all or any of the functions of the Court under this Act within any specified local limits and, in the case of a Munsif, up to the limits of the pecuniary jurisdiction with which he is vested under section 19 of the Bengal, Agra and Assam Civil Courts Act, 1887." Section 1 1 provides that "save as otherwise expressly pro- vided in this Act, no decision or order made in exercise of any power conferred by or under this Act shall be called in question in any Court." It seems to us that if any order is made for any collateral purpose or has been made for purposes not mentioned in s. 3 or is mala fide, it can always be challenged. We are, therefore, of the opinion that it is difficult to hold that restrictions imposed by the impugned Act are unreasonable. Fair compensation has been provided for requisitioning, which is determinable by a Civil Court and ultimately by the High Court ,or the Supreme Court. Regarding the necessity for requisitioning it must necessarily be left to the State Government. It is true that there is no express provision to make a.representation against an order of requisition but there is no bar to a representation being made after an order is served under s. 3 (2) of the Act. We have no doubt that if the representation raises a point which overrides the public purpose it would be favourably considered by the State Government or other Government authorities as the case may be. Accordingly the question referred to us is answered in the negative. The case will now go back to the Division Bench for disposal according to law. V.P.S. Act held intra vires. S. M. Nandy & Ors vs State Of West Bengal & Ors on 19 February, 1971 4 S. M. Nandy & Ors vs State Of West Bengal & Ors on 19 February, 1971 5 | {
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P.K. Nedungadi vs The Malayalee Bank Ltd. (In ... on 9 February, 1971 Equivalent citations: AIR1971SC829, [1972]42COMPCAS120(SC), (1971)3SCC598, AIR 1971 SUPREME COURT 829 Author: A.N. Grover Bench: A.N. Grover, K.S. Hegde JUDGMENT A.N. Grover, J. 1. This is an appeal by certificate from a judgment of the Madras High Court. 2. In October, 1950 the Malayalee Bank Ltd., hereinafter called the "Bank" was ordered to be wound up. On that date there were only two Directors i.e., respondent No. 3 and the appellant P. K. Nedungadi. The second respondent P. S. Mannadiar hereinafter called "M" was appointed as the Managing Director on March 4, 1945. He continued to work as such till December 25, 1948. After wards he was a Director till the date of his resignation on June 14, 1950. The third respondent T. Eronanunrd was Director from November 15, 1943 onwards. The fourth respondent V. K. Thirumalpad was a Director from 1940 till March 13, 1949. The appellant P. K. Nedungadi was a Director from October 8, 1948 till the date of the winding up order.The fifth respondent V. Venugopalan Thampan was a Director from June 22, 1946 till October 8, 1948. 3. In September, 1953 the Official Liquidator filed a petition under Sections 183(3) and 235 of the Indian Companies Act together with Rule 9 of the Companies Rules and Section 45, A, B and F of Act IX of 1950 and Rule 6 of the Banking Companies Rules for an order determining and fixing the liability of the respondents jointly and severally in respect of the acts of misfeasance, misapplication of monies, breach of trust etc., and to declare their liability to contribute Rs. 2,11,998.04 or such other sum as might be determined. In September, 1954 the High Court directed the Official Referee to record the evidence. Two charges were framed out of which so far as the appellant is concerned, the material portion of the following charge may be reproduced: In contravention of the resolution of the Board of Directors dated 27-10-1946. No. 1 (P. S. Mannadiar) amongst you took away and Nos. 2 to 5 (T. Eromanunni, V. K. Thirumalpad and V Venugopal Thampan) permitted No. 1 to take away a sum of Rs. 14,623-4-2 from the Bank under the guise of an overdraft. P.K. Nedungadi vs The Malayalee Bank Ltd. (In ... on 9 February, 1971 1 That No. 1 amongst you obtained and Nos. 2 to 5 amongst you sanctioned to No. 1 loan, aggregating to Rs. 34,863-6-0 (wherein the aforesaid sum of Rs. 14,623-4-2 was merged) on the supposed security of the Mannadiar Saw and Oil Mills Ltd., Palghat. That at the time the transaction was put through you knew or could with reasonable diligence have known that the security was wholly illusory and that was only a device to circumvent the provisions of Section 20 of the Indian Banking Companies Act That by this and other connected wrongful devices you caused loss to the aforesaid bank of a sum of Rs. 49,608-4-3. A learned Single Judge took the view that all the Directors left everything in the hands of respondent No. 2 and that was the reason why the transactions which had been brought about had taken place. According to the learned Judge any criminal prosecution in the circumstances disclosed would have failed and therefore he dismissed the application of the Official Liquidator. On appeal by him a Division Bench of the High Court held that the appellant and respondent No. 2 had been guilty of acts of misfeasance etc. ana directed that they should jointly and severally pay to the Official Liquidator a sum of Rs. 46,616 together with interest on a sum of Rs. 34,541.31 from 1953 to the date of realisation. It is unnecessary to refer to the liability of the other respondents which was determined. Respondent No. 2 has not filed any appeal and we are concerned with the appeal of Nedungadi. 4. Now what the High Court found from the evidence was as follows: Respondent No. 2 was carrying on business under the name of Mannadiar Saw & Oil Mills. He had three loan accounts with the Bank. The first was a current account and the second an overdraft account and the third an account in the name of the Mills. Large sums of money were drawn by him without security from the various accounts exceeding limits sanctioned to him by the Board of DirectOrs. The affairs of the Mills became very unsatisfactory and its business fell on evil days. M formed a public limited company and sold the Mills and its property at an inflated price to the said company. This company was incorporated by the name of Mannadiar Saw & Oil Mills Ltd. on January 31, 1948, hereinafter referred to as the "Mills." The appellant was one of the Directors of that Company. This company was ultimately wound up in 1950. The Bank had certain deposits to the extent of Rs. 50,000/-with the Palghat Branch of the Indo-Mercantile Bank. In the beginning of 1948 the Indo-Mercantile Bank got into difficulties and it closed its business from February 10, 1948. M had an overdraft account with Indo-Mercantile Bank at its Palghat Branch. The agent of that Branch was the appellant. M purporting to act on behalf of the Bank drew a cheque on the Indo-Mercantile Bank Ltd. on February 8, 1948 for a sum of Rs. 13,000/-and with the help of the appellant that amount was adjusted against his overdraft account. In the accounts of the Indo-Mercantile Bank this sum was debited against Rs. 50,000 standing to the credit of the Bank. M however did not debit himself with the sum of Rs. 13,000/-in any of his accounts with the Bank. The amount was shown only in the suspense account. On October 8, 1948 the appellant, who was formerly the agent of Palghat Branch of Indo-Mercantile Bank, was appointed a Director of the Bank. On taking charge be discovered that M had not brought to account the sum of Rs. 13,000/-which he had taken away from the Bank in the manner stated before, M thought of a scheme by which his obligations to the Indo-Mercantile Bank P.K. Nedungadi vs The Malayalee Bank Ltd. (In ... on 9 February, 1971 2 were to be consolidated with certain other sums and for the total indebtedness a mortgage was to be got executed by the Mills thereby discharging, completely his indebtedness to the Bank. A fourth mortgage of the property of that company was consequently executed for a sum of Rs. 34,541-5-0. This amount which was the consideration for the mortgage was in satisfaction of the claim which the Indo-Mercantile Bank had against M and certain other amounts. Now these other amounts were made up in this way. The Indo-Mercantile Bank had a claim against one Ravi Verma who was a Director of the Mills. He was perfectly solvent and that amount could have been realized from him but instead of doing that M was given a credit to the extent of Rs. 12,083/-with a direction to him to realize Ravi Verma's dues to the Bank himself. M was also indebted to Rukmini, the sister-in-law of the appellant. For wiping out this liability a fixed deposit account for Rs. 6,000/-was opened in the Bank in the name of Rukmini. Cash money was not deposited and the consideration for the deposit was an undertaking by M to pay to the Bank and that liability was included in the total liability covered by the mortgage executed by the Mills. Subsequently the fixed deposit amount of Rs. 6,000/-was withdrawn by Rukimini. Thus, the High Court found that the three items of consideration for the mortgage which had been created on a defunct company like the Mills were, (1) the wiping out of the liability of M to the Bank to the extent of Rs. 14,623-4-2 which consisted of a sum of Rs. 13,000/-and interest; (2) wiping out of liability of Ravi Verma a solvent debtor of the Indo-Mercantile Bank to the extent of Rs. 12,083/9/7 and (3) the creation of the fixed deposit for the benefit of the fourth respondent for a sum of Rs. 6,000/-. The appellant obviously got the benefit for bringing about this transaction because of his relationship with Rukimini. 5. The High Court found that the assets of the Mills were worth not even Rs. 10,000/-and to obtain a fourth mortgage of the property of that company could not be an error of judgment on the part of the Directors but it was designed and calculated arrangement made with a view to benefit, at the expense of the Bank, M, the appellant and Ravi Verma. It was not possible to believe that the Directors were not aware of the financial condition of the Mills. The security which was thus taken was merely illusory and when the transaction was approved at the meeting of the Directors held on July 22, 1949 the Directors present were M, the appellant and respondent No. 2 before the High Court. The Division Bench quite rightly did not agree with the learned Single Judge that all these transactions which were tell tale were the result of an error of judgment. On the contrary there was a clever plan and design behind the creation of the mortgage. As regards the appellant this is what was observed: The fourth respondent P. K Nedungadi, was undoubtedly the guiding spirit for the fraud perpetrated by the first respondent.He obtained a benefit on opening a fixed deposit in favour of his sister-in-law, and realising the same while he was in active management, as the Managing Director of the Bank. But scruples were not amongst his virtues is plain from the fact that he who engineered the mortgage transaction described the same within the few months thereof in his report to the DirectOrs. He should be made liable to the entire extent. But for his help, the first respondent could not have avoided his liability or been permitted to realise the unpaid purchase money from the Mannadiar Saw and Oil Mills Ltd., which he had no hopes of realising. He should be made liable to the entire amount decreed against the first respondent Under Section 235 of the Indian Companies Act, 1913 which was in force at the P.K. Nedungadi vs The Malayalee Bank Ltd. (In ... on 9 February, 1971 3 material time the Court has been given the power to assess damages against the delinquent Directors, etc. If the money or the property of the Company has been misapplied or there has been misfeasance or breach of trust in relation to the company by a Director, an officer or other persons mentioned in the section the Court, after examining the matter, can compel him to repay or restore the property with interest at such rate as the court may think fit or to contribute such sums to the assets of the Company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Court thinks fit. It has been expressly declared that the section shall apply notwithstanding that the offence is one for which the offender may be criminally responsible. In Halsbury's Laws of England, 3rd Edition, Volume 6, it has been stated at page 623 that misfeasance and breach of trust include a breach by a Promoter, Director etc. of a duty to the Company the direct consequence of which has been a misapplication or loss of its assets for which he could be made responsible in an action. Allegations or proof of fraud are not essential and it is immaterial that the offence is one for which the offender may be criminally liable. 6. In the present case the High Court has found and that finding has not been shown to be wrong or erroneous in any manner that it was the appellant who enabled M to perpetrate the fraud which apparently resulted in loss to the Company. The appellant himself also derived a certain benefit from the fraudulent acts of M. He would thus be clearly liable to repay or restore to the Bank the amount in respect of which there was misapplication, misfeasance and breach of trust resulting in loss to the Company. The appellant cannot escape liability for the entire amount for which an order has been made against him by the High Court. 7. In the result this appeal fails and it is dismissed with costs. P.K. Nedungadi vs The Malayalee Bank Ltd. (In ... on 9 February, 1971 4 | {
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N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 Equivalent citations: 1971 AIR 2039, 1971 SCR (3) 506, AIR 1971 SUPREME COURT 2039, 1971 3 SCR 506 1974 BOM LR 828, 1974 BOM LR 828 Author: C.A. Vaidyialingam Bench: C.A. Vaidyialingam, J.M. Shelat PETITIONER: N.B. SANJANA, ASSISTANT COLLECTOR OF CENTRAL EXCISE, BOMBAY Vs. RESPONDENT: ELPHINSTONE SPINNING & WEAVING MILLS CO. LTD. DATE OF JUDGMENT22/01/1971 BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. SHELAT, J.M. CITATION: 1971 AIR 2039 1971 SCR (3) 506 CITATOR INFO : R 1991 SC 456 (5) ACT: Central Excise Rules, 1944, rr. 9, 10 and 10A-Scope of. 'Levy', 'Short Levy' 'paid' in r. 10, meaning of. HEADNOTE: Under r. 8 of the Central Excise Rules, 1944, made under the Central Excise and Salt Act, 1944 the Central Government issued a notification exempting cotton fabrics from excise duty. The respondents owned a textile mill and factory. They manufactured grey cloth which- was removed from the mill and kept in a godown and later removed to the factory for being processed into leather cloth which was stored in another godown in the factory, from where it was taken Out as finished product. The removal at each stage was done after filling the prescribed forms and with the permission N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 1 of the Excise Inspector Incharge. In each of the forms filled by the respondents upto July 30, 1960. the Excise Inspector had made an assessment showing the rate of duty and the amount of total duty payable as 'nil'. Later, the excise authorities thought the goods were not of the description exempted under the notification and on November 3, 1961, two notices were issued calling upon the respon- dents to make certain payments, one under r. 10A and the other under r. 9 of the Rules. The respondents protested and filed a writ petition in the High Court. The High Court held that the proper rule applicable was r. 10 but that as the demand notices were not issued within 3 months .Is required by that rule, the notices were illegal and void. In appeal to this Court, HELD : (1) Rule 10A cannot apply when a short levy is made ,through error or misconstruction on the part of an officer as such a case is specifically provided for by r. 10, because, r. 10A deals with residuary powers and does not apply when specific provision for collection of duty is provided or by other rules. [516 H; 517 A: 521 D] (2) The proper provision under which action should have been taken, if at all, is r. 10. Under r. 10, when duties or charges have been shortlevied through inadvertence, error, collusion or Misconstruction on the part of an officer, the person chargeable with the duty or charge shall pay the deficiency on written demand being made within three month from the date on which the duty or charge was paid. Though the words used are 'short-levied' and paid, in order to attract r. 10 it is not necessary that some amount of duty Should have been assessed and that the said amount should also have been actually paid. It will apply even duty later on assessed must be considered to be the duty originally short-levied. 1519 F-G; 520 E-F; 521 D-E] (a) The expression 'levy' is not used in the Act or the Rules as meaning actual collection, because, s. 3(1) of' the Act use.,,, both the 'levied' and 'collected'. 1514 G-H] 507 (b) The expression 'paid' in r. 10 should not be read in a vacuum and it will not be right to construe it literally as 'actually paid'. The word will have to be understood and interpreted in the context in which it appears. If the literal construction is accepted, then in a case where an assessee, in collusion, manages to have a very petty amount of duty assessed, he can, if he paid the amount, effectively plead limitation of three months, but, when no duty has been levied there would, be no period of limitation, a result which would be anomalous. Therefore, the proper interpretation to be placed on the expression 'paid' is 'sought to have been paid.' (c) This interpretation will not cause any difficulty in calculating the period of three months. The Act and the Rules provide very elaborately the stage and the time when N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 2 the duty is to 'be paid and that must be considered to be the stage,or time when the duty 'ought to have been paid', and the period of three months will be counted from that time. [519 G-H] Gursahai Saigal v. C.I.T. Punjab, [1963] 3 S.C.R. 893 followed, Allen v. Thorn Electrical Industries Ltd. (1968) 1 Q.B. 487, referred to. (3) Rule 9 does not also apply to the facts of the case. Rule 9(1) provides for the time and manner of payment of duty. To attract r. 9(2) the goods should have been removed in contravention of sub-r. (1), that is, clandestinely and without assessment; but in this case there is no such clandestine removal without assessment. Moreover, sub-r. (2) is a penal provision applicable where there is evasion of payment of duty, since the party is also made liable to a penalty and confiscation. [520 G-H; 521 A-C] J. K. Steel v. Union. [1969] 2 S.C.R. 481, followed. Therefore, the demands having been made long after the expiry of the period of three months referred to in r. 10, the demands are not valid, JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1467 of 1967. Appeal from the judgment and order dated July 1, 2, 1965 of the Bombay High Court in Appeal No. 69 of 1963. V. A. Seyid Muhammad and S. P. Nayar, for the appellants. C. K. Daphtary, Anil B. Diwan, Suresh A. Shroff, Ravinder Narain and O. C. Mathur, for the respondent. S. J. Sorabjee and O. C. Mathur, for the intervener. The Judgment of the Court was delivered by Vaidialingam, J This appeal by certificate is directed against the judgment and order of the Division Bench of the Bombay High Court dated July 1/2, 1965 confirming the decision dated August 6/7, 1963 of the learned Single Judge in Miscellaneous petition No. 20 of 1962 quashing the two notices of demand dated November 3, 1961 issued by the second appellant as also the notice dated December 2, 1961 issued by the first appellant for payment of the amount covered by the said two notices. The circumstances leading up to the filing of the writ petition may be mentioned.', The respondents own a textile mill at Elphinstone Road, Parel, Bombay where they manufacture, inter alia, grey cloth. They also have a factory situated at Tulsi Pipe Lane Road, Bombay for processing grey cloth into various other .goods like leather cloth, book binding cloth and other coated fabrics. Under s. 3 of the Central Excise and Salt Act, 1944 (hereinafter to be referred as the Act) duty is Imposed on all ,excisable goods produced or manufactured in India at the rates set forth in the First Schedule to the Act. Item 19 of the First Schedule includes cotton fabrics. Section 3 of the Act provides that excise duty is to be collected in such manner as may be prescribed by rules made under the Act. On cotton fabrics additional excise duty called handloom cess is also imposed under the additional Duties of Excise (Goods of Special Importance) Act, 1957 and Khadi and other Handloom Industries Development (Additional Excise Duty on Cloth) Act, 1953, respectively. Under :S. 37 of the Act, the N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 3 Central Government has made rules called the Central Excise Rules, 1944 (hereinafter to be referred as the ,Rules). Rule 8 gives power to the Central Government to exempt by notification subject to such conditions as may be specified therein any excisable goods from whole or any part of duty leviable on such goods. Accordingly the Central Government issued a notification Ex. A dated January 5, 1957 exempting cotton fabrics mentioned therein wholly from excise duty. hem No. 2, related to 'leather cloth and inferior or imitation leather cloth ordinarily .Used in book binding'. The exemption granted in respect of this item and another item was withdrawn by the Central Government with effect from July 30, 1960 by notification Ex. D dated July 29, 1960. There does not appear to have been any controversy before the High Court that the two notices dated November 3, 1961 and the notice dated December 2, 1961 related only to goods falling under item No. 2. of the notification Ex. A. The respondents between July 4, 1958 and July 30, 1960 manufactured grey cloth in the textile mill and sent some of those items to their factory for being processed and manufactured into leather cloth and imitation leather cloth. During the material period the company used to manufacture grey, cloth and used to store them in a bonded godown. Periodically they used to send to the factory such quan- tities of grey cloth as were required after filling in the necessary forms prescribed by the rules and after obtaining the necessary permission in the manner prescribed by the rules from the Excise Inspector Incharge of the textile mill. The respondents had, however, not obtained the requisite licence and so they paid excise duty on grey-cloth manufactured in their mill during the period July 4, 1958 and July 30, 1960 manufactured grey cloth in the manufacturing leather cloth and imitation cloth. The respondents later on obtained the necessary licence with the result that they became entitled to remove the grey-cloth manufactured at their textile mill to their factory without paying excise duty on the grey-cloth at the time when the goods were removed. The grey-cloth so removed after September 30, 1959 and before July 30, 1960 used to be kept in the bonded godown. Those goods were removed to the factory after filling up the necessary forms and obtaining the permission of the Excise Inspector Incharge of the factory. The grey- cloth after it was processed and made into leather cloth or imitation leather cloth was again stored in another bonded godown in the factory and they were removed by the company as finished products after filling in form A.R.I. prescribed by the rules. There is again no dispute that in each of these A.R.I. forms the company had shown and made a declara- tion that the excise duty payable on the goods governed by the forms was 'nil'. Under the heading 'Assessment Memorandum.' in the said form the particulars regarding rate of duty and amount of total duty payable on the goods referred to in the form had to be filled up and signed by the Excise Inspector. There is no controversy that in each of the A.O.1. forms filed by the respondents during the period July 4, 1958 and July 30, 1960, the Excise Inspector Incharge, Leather Cloth Division has made an assessment in the appropriate portion of those forms showing the rate of duty and the amount of total duty payable as "nil' and has affixed his signature under such 'Assessment Memorandum'. Therefore, it will be seen that all the goods removed by the, respondents during the said period were shown by them as not liable to pay any excise duty and were also assessed by the Excise Inspector as not liable to pay any duty. Later on, the excise authorities appear to have entertained some doubt whether the goods covered by these A.R.I. forms were of the description exempted under item No. 2 of the notification Ex. A. Some correspondence took place between the department and the respondents. On November 3, 1961, the second appellant issued two notices marked Ex. G. The first notice- issued under rule 10A required the N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 4 respondents to pay a sum of Rs. 1,07,146,39. In the particulars of demand it was stated that the amount represented duty on leather cloth manufactured out of (i) non-duty paid cloth and (ii) duty paid cloth cleared without payment of duty from October 1, 1959 to March 31, 1960. The second notice of the same day issued under rule 9 called upon the respondents to pay a sum of Rs. 1,502,24 representing the extra processing duty on leather cloth manufactured out of duty paid cloth from July 4, 1958 to September 30, 1959. These two notices were followed by the first appellant by issuing a letter of demand dated December 2, 1961, Ex. H, calling upon the respondents to pay up the amount as per the notice issued by the second appellant. The respondents were advised that if they are aggrieved with the decision they may go up in appeal to the Collector of Central Excise, Bombay. The respondents sent a reply dated December 28, 1961 Ex. I, contesting validity of the notices dated November 3, 1961 and December 2, 1961. They objected to the demand on the ground that the notices were illegal and neither rule 9 nor rule 10A gave power to the authorities to issue such notices. They further contended that the demands were barred by time. The respondents also addressed a letter on the same lines to the Central Board of Revenue. As there was no favourable response from the appellants they, filed the writ petition, out of which these proceedings arise, in the High Court to quash Exhibits G and H. The respondents contended before the High Court that neither rule 9 nor rule 10A gave power to the appellants to issue the demand notices. Their stand was that if at all it was rule 10 that applied and as the demands have been made long after the period of three months prescribed in the said rule, the notices were illegal and void. On behalf of the appellants it was urged that rule 10 has no application as that rule will apply only when duties and charges have been 'short levied'. As initially no amount has been levied in this case, rule 10 has no application. According to the appellants the rule applicable was rule 10A. Alternatively it was contended that if rule I OA did not apply, the demands made by them were amply covered by rule 9(2). The learned Single Judge accepted the contention of the res- pondents and held that rule 10 applied and as the demand notices had been issued long after the expiry of three months, Ex. G and H, the notices, were illegal and void. In this view the learned Single Judge quashed the said notices. On appeal the Division Bench confirmed the order of the learned Single Judge. This is a convenient stage to refer to the relevant rules. They are rules 7, 9, 10, 10A, 52 and 52A(1). We have already referred to the fact that the rules have been made by the Central Government under S. 37 of the Act. Those rules, referred to above, are as follows : "(7) Recovery of Duty :-Every person who produces, cures, or manufactures any excisable goods, or who stores, such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such person as may be designated, in or under the authority of these Rules whether the payment of such duty or duties is secured by bond or otherwise. (9) Time and manner of payment of duty:- N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 5 (1) No excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export, or manufacture of any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Collector may require and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form; Provided that such goods may be deposited without payment of duty in a store-room or other place of storage approved by the Collector under rule 27 or rule 47 or in a warehouse appointed or licensed under rule 140 or may be exported under bond as provided in rule 13; Provided further that such 'goods may be removed on part- payment of duty leviable thereon if the Central Government, by notification in the Official Gazette, allow the goods to be so removed under rule 49; Provided also that the Collector may, if he fit instead of requiring payment of duty in respect of each separate consignment of goods removed from the place or premises specified in this behalf, or from a store-room or warehouse duly approved, appointed or licensed by him keep with any person dealing in such goods an account-current of the duties payable thereon and such account shall be settled at internal, not exceeding one month and the account-holder shall periodically make deposit therein sufficient in the opinion of the Collector to cover the duty due on the goods intended to be removed from the place of production, curing, manufacture or storage. (2) If any excisable goods are, in contravention of sub- rule (i) deposited in, or removed from, any place specified therein, the producer or manufacturer thereof shall pay the duty leviable on such goods upon written demand made by the proper officer, whether such demand is delivered personally to him, or is left at his dwelling house, and shall also be liable to a penalty which may extend to two thousand rupees, and such goods shall be liable to confiscation. (10) Recovery of duties or charges short-levied, or erroneously refunded- When duties or charges have been short-levied through inadvertence, error, collusion or mis-construction on the part of an officer, or through misstatement as to the quantity, description or value of such goods on the part of the owner, or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded, the person chargeable with the duty or charge, so short-levied, or to whom such refund has been erroneously made, shall pay the deficiency or pay the amount paid to him in excess, as the case may be, on written demand by the proper officer being made within three months from the date on which the duty or charge was paid or adjusted in the owners account-current, if any, or from the date of making the refund. (10-A) Residuary powers for recovery of sums due to Government- N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 6 Where these Rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short levied, or of any other sum of any kind payable to the Central Government under the Act or these Rules, such duty, deficiency in duty or sum shall, on a written demand made by the proper officer, be paid to such person and at such time and place, as the proper officer may specify. (52) Clearance on payment duty- When the manufacturer desires to remove goods on payment of duty, either from the place or a premise specified under rule 9 or from a store-room or other place of storage approved by the Collector under rule 47, he shall make application in triplicate (unless otherwise by rule or order required) to the proper officer in the proper Form and shall deliver it to the officer at least twelve hours (or such other period as may be elsewhere prescribed or as the Collector may in any particular case require or allow) before it is intended to remove the goods. The officer, shall, thereupon, assess the amount of duty due on the goods and on production of evidence that this sum has been paid into the Treasury or paid in the account of the Collector in the Reserve Bank of India or the State Bank of India, or has been despatched to the Treasury by money-order shall allow the goods to be cleared. 52A-(1) Goods to be delivered on a Gatepass- No excisable goods shall be delivered from a factory except under a gatepass in the proper Form or in such other form as the Collector may in any particular case or class of cases prescribe signed by the owner of the factory and countersigned by the proper officer.." Dr. Syed Mohammad, learned counsel for the appellants urged that going by a plain reading of rule 10, it is clear that the said rule will apply only to cases : (1) when an assessment has been made that same amount is due as duty and(2) when the said amount so assessed has been paid by the party concerned. In this case, he pointed out, there has been, no doubt, an order of assessment passed when the goods were cleared by the party, but that order of assessment was not one making the party liable to pay any duty, on the other hand, it was an order of 'nil assessment' under which the party was to pay no duty whatsoever. In consequence of such assessment, no duty having been paid, it cannot be stated that there has been a short levy for any of the reasons mentioned in rule 10. According to the learned counsel rule 10 will apply only when there has been an assessment making the party liable to pay some ,duty and that amount so assessed has also been actually paid or adjusted by the party, as the case may be. When later on it is found that the amount so levied and paid falls short of the correct amount that ought to have been levied and paid by the ,party, rule 10 will stand attracted. In this connection he placed very great reliance on the concluding part of rule 10 where a period of three months by way of limitation has been provided for calling upon the party to pay the deficiency and the period of three months is to be calculated "from the date on which the duty or charge was paid...... He stressed that the use of the expression "paid" clearly indicates that some duty must have been actually paid by a party on a particular date and if that were not so, it would be difficult to calculate the period of three months within which a party can be called upon to make good the deficiency. The counsel also urged that the word 'levy' in rule 1 0 means actual collection and that short levy, therefore, denotes that full duty has not been collected. He also urged that rule 10A covers all cases of short levy or non-levy for any reason whatsoever and the notices N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 7 issued by the appellants in this case are legal and valid. He finally urged that even if it is held that rule 10A does not apply , the notices could be sustained under rule 9(2) in as much the respondents have removed the goods without payment of duty in contravention of rule 9(1). The mere fact that one of the notices issued on November 3, 1961 refers to rule 10A is not ,on that ground invalid when the authorities have ample., power to issue, such notices under rule 9(2). Mr. Daphtary, learned Counsel for the respondents and Mr. Sorabjee, learned counsel for an intervener, have both contended that the notices issued by the appellants squarely come under rule 10 and as they have been issued beyond the period of three months, they have been rightly held to be invalid and illegal. 'Though the words used in rule 10 "duty or charge so paid", reading the rule as a whole it is clear that the rule does not contemplate that any amount should have been levied as a duty and that the said amount should have been paid. 'Me word "paid" has only been used to provide a starting point of limitation of three months. Though the ordinary meaning of the expression "paid" is that some amount should have been actually paid as such, both the counsel pointed out, that the said word should be construed in the context in which it appears. So read, it is pointed out that the proper interpretation to be placed on the word "paid" is that it has been used to denote the stage or time when the duty or ,charge ought to have been paid. Such a reading will not do any violence to the language of rule 10. It is further pointed out that the expression "short levied" in rule 10 will cover cases not only levy of smaller amount that what is due but also of making the party not liable to pay any duty. In one case the short-levy will 'be the difference of the amount actually levied and the correct amount due; and in the other case the short levy will be the entire amount of duty that is found to be actually due by a party. Ile counsel further pointed out that rule 10A will apply only to those ,cases where no specific provision for collection of duty or any deficiency in duty has been made by the rules and that will apply also to any other sum of. any other kind payable to the Central Government under the Act or the Rules. In this case, as the party admittedly has been assessed to 'nil duty' by the officers concerned and allowed to remove the goods, the specific provision for recovery of any short-levy is specifically provided for by rule 10, which will exclude rule 10A. On these grounds, both the ,counsel urged, that the High Court was right in holding that rule 10 applies and that the notices having been issued beyond the period of three months are illegal and invalid. We are not inclined to accept the contention of Dr. Syed Mohammad that the expression 'levy' in rule 10 means actual collection of some amount. The charging provision section 3(i) specifically says "There shall be levied and collected in such, a manner as may be prescribed 'the duty of excise...... It is to be noted that sub-section (i) uses both the expressions ,levied and collected" and that clearly show that the expression "levy" has not been used in the Act or the Rules as meaning actual collection. Dr. Syed.Mohammad is, no doubt, well founded in his contention that if the appellants have power to issue notice either under rule 10A or rule 9(2), the fact that the notice refers specifically to a particular rule, which may not be applicable, will not make the notice invalid on that ground as has be held by this Court in J. K. Steel Ltd. v. Union of India(1) : If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 8 exercise, of the power in question. This is a well settled proposition of law. In this connection reference may usefully be made to the decisions of this Court in B. Balakotaiah v. The Union of India and ors (2 ) and Afzal Ullah v. State of U.P.(3). In this case, the officer who issued the two notices is competent to make demands under both rules 9(2) and rule 10- A. But in order to sustain the validity of the demand either under rule 9(2) or rule 10-A, the appellants will have to go further and establish that the demands can be justified under either of the rules. Before we deal with the contentions of the learned counsel we may state that rule 10-A was incorporated because of the decision of the Nagpur High Court in Messrs Chhotabhai Jethabhai Patel v. Union of India(4). The assessees in that case were a firm of tobacco merchants and manufacturers of bidis holding licence under the Central Excise Rules. On the introduction in Parliament of Bill No. 13 of 1951 on February 28, 1951, the assessees paid the requisite duty on tobacco stored by them under the declared provision read with sections 3 and 4 of the Provincial Collection of Taxes Act, 1931. The assessees cleared tobacco from the warehouse between March 1, 1951 and April 28, 1951, after obtaining clearance certificates from the Range Officer, Central Excise. The rate of duty payable on un-manufactured tobacco was increased by the Finance Act of 1951. On June 4, 1951 a demand was made by the Range Officer, Central Excise at the increased rate and the assessees therein were asked to pay the said increase. The assessees challenged the demand before the High Court under Art. 226 of the Constitution on various grounds. The Nagpur High Court held that rule 10 did not apply and that the demand was invalid. (1) [1969] 2 S.C.R.481. (3) [1964] 4 S.C.R. 991. (2) [1958] S.C.R 1052. (4) I.L.R. [1952] Nag., 156. After the decision of the Nagpur High Court, the Central Government by a notification dated December 8, 1951 amended the Central Excise Rules, 1944 by the addition of a new rule 10-A. On the basis of this rule in respect of the same assessees a further and fresh demand was made for payment of duty as per' the Finance Act, 1951. The assessees challenged the validity of the demand on the same ground as before. The Full Bench of the Nagpur High Court rejected the assessees' contention and held that rule 10A covers a case for increased levy on the basis of a change of law. This decision was sought to be challenged before this Court but without any success. In fact this Court in Chhotabhai Jethabhai Patel and Co. v. The Union of India and another(1) specifically rejected the assessees' claim regarding non- applicability of rule 10A stating that it had been specifically designed "for the enforcement of a demand like the one arising in the circumstances of the case". The decision of this Court is an illustration of certain types of cases to which rule 10-A will N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 9 apply. This now takes us to the question of proper interpretation to be placed on the expression "short-levied" and "paid" in rule 10. Does the expression "short-levied" mean that some amount should have been levied as duty as contended by Dr. Syed Mohammad or will that expression cover even cases where the assessment is of 'nil duty', as contended by Mr. Daphtary. What is the meaning of the word "paid" in rule 10 ? It is contended on behalf of the appellants that it means "actually paid", whereas, according to the respondents', it means "ought to have been paid". Taken literally, the word "paid" does mean actually paid in cash. That means that a party or an assessee must have paid some amount of duty whatever may be the quantum. If this literal interpretation is placed on the expression "paid" in rule it is needless to state that it will support in a large measure the contention of Dr. Syed Mohmmad that rule 10 contemplates a short-levy in the sense ,that the amount which falls short of the correct amount has been assessed and actually paid. In our opinion, the expression "paid" should not be read in a vacuum and it will not be right to construe the said word literally, which means actually paid. That word will have to be understood and interpretted in the context in which it appears in order to discover its appropriate meaning. If this is appreciated and the context is considered it is apparent that there is an ambiguity in the meaning of the word "paid". It must be remembered that rule 10 deals with recovery of duties or charges short levied or erroneously refunded. The expression "paid" has been used to denote the starting point of limitation of three months for the issue of a written demand. The Act and the (1) [1962] Supp. [2] S.C.R. 1. Rules provide in great detail the stage at which and the time when the excise duty is to be paid by a party. If the literal construction that the amount should have been actually paid is accepted, then in case like the present one on hand when no duty has been levied, the Department will not be able to take any action under rule 10. Rule 10-A cannot apply when a short-levy is made. through error or misconstruction on the part of an officer, as such a case is specifically provided by rule 10, Therefore, in our opinion, the proper interpretation to be placed on the expression "'paid" is "ought to have been paid". Such an interpretation has been placed on the expression "paid" occuring in certain otherenactments as in Gursahai Saigal v. Commissioner of Income-tax, Punjab(") and in Allen v. Thorn Electrical Industries Ltd. (2 . In Gursahai Saigal v. The Commissioner of Income-tax, Punjab(1), the question arose as- follows : In certain assessment proceedings under the Indian Income-tax Act, 1922, an assessee was charged with interest under subsection (8) of s. 18A of that Act. Under that sub-section interest calculated in the manner laid down in sub-section (6) of s. 18A was to be added to the tax assessed. Sub-section 3 of s. 18A dealt with cases of a person who has not been assessed before and he was required to make his own estimate of the tax payable by him and pay accordingly. Sub-section (3) of s. 18A was applicable to the assessee in that case. However, he neither submitted any estimate nor did he pay any advance tax. Under sub- section' (6) of s. 18A it was provided : "Where in any year an assessee has paid tax under sub- section (2) or sub-section (3) on the basis of his own estimate, and the tax so paid is less than eighty Per cent of the tax determined on the basis of regular assessment simple interest at the rate of six per cent per annum from the 1st day of January in the financial year in' which the tax was paid up to the date of the said regular assessment shall be payable by the N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 10 assessee upon the amount by which the tax so paid falls short of the said eighty per cent." This sub-section is to apply to cases where tax has been paid' by an assessee according to his own estimate but that estimate was on regular assessment found to be deficient. Further, interest has to be calculated from 1st January of the Financial Year in which tax mentioned therein was paid and calculation has to be made on the short fall between the amount paid and eighty. per cent of' the tax which was found payable on regular assessment. Subsection (8) of s. 18A provided : (1) [1963] 3 S.C.R. 893. (2) 1968 1 .Q.B. 487. .lm15 "where, on making the regular assessment the Income-tax Officer finds that no payment of tax has been made in accordance with the foregoing provisions of this section, interest calculated in the manner laid down in sub-section (6) shall be added to the tax as determined on the basis of the regular assessment." The assessee in that case did not dispute that sub- section(3) ,of s. 18A applied to him and that he should have made an estimate and paid advance tax. He also admitted that he never made an estimate nor did he pay any advance tax whatsoever. While admitting that sub-section (8) of s. 18-A applied to him, the assessee contended before this Court that since he had not paid any tax at all, it is not possible to calculate interest in the manner laid down in sub-section (6). According to the assessee 'there was no 1st day of January of a financial year in which the tax was paid and there was no question of a short fall between eighty per cent of the tax payable on regular assessment and the ,amount paid because he. had paid nothing. While rejecting the said contention this Court held : "The proper way to deal with such a provision is to give it an interpretation which, to use the words of the Privy Council in Mahairam Kamjidas's (case) (1) makes the machinery workable utres valeat potius quam pereat". We, therefore, think that we should read sub-section (6) according to the provision of which interest has to be calculated as provided in subsection (8) in a manner which makes it workable and thereby prevent the clear intention of sub-section (8) being defeated. Now, how is that best done? As we have earlier said sub-section (6) deals with a case in which tax has been paid and therefore it says that interest would, be calculated "from the 1st day of January in the financial year in which the tax was paid". This obviously cannot literally be applied to a case where no tax has been paid. If however the portion of subsection (6) which we have quoted above is read as "from the 1 st day of January in the financial year in which the tax ought to have beep paid", the provision becomes workable. It would not be doing too much violence to the words used to read them in this way. The tax ought to have been paid on one or other of the dates earlier mentioned. The intention was that interest should be charged from January 1, of the financial year in which the tax ought to have been paid. Those, who paid the tax but a smaller amount and those who did not pay tax at all would then be put in the same position substantially which is obviously fair and was clearly intended." N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 11 Regarding the further contention that there was no short fall, as no tax has been paid it was observed : "With regard to the other question about there being no shortfall between eighty per cent of the amount of tax found payable on the regular assessment and the amount of tax paid in a case where no tax was paid, it seems to us the position is much simpler. If no tax is paid, the amount of such shortfall will naturally be the entire eighty per cent. We also think that the case before us is very near to Allen's case.(1)" The above decision establishes two propositions : (1) though the expression used was "paid" it is open to read it as "ought to have been paid" having regard to the context in which it appears and to make the provision of law in which that expression appears workable; and (2) the short fall will be the entire eighty per cent referred to subsection (6) of s. 18A. Applying the above principles to the case on hand, the expression "paid" in rule 10 can be reasonably read as "ought to have been paid". Similarly even in cases where there has been a nil assessment due to one or other of the circumstances mentioned in, rule 10 and if subsequently it is found that duty is payable, then the entire amount of duty should be considered to have been short-levied. The literal meaning of the expression "paid" as actually paid in cash has again not been adopted by the Court of Appeal in Allen v. Thorn Electrical Industries Ltd.(2). Having regard to the context in which the said expression appeared in the particular provision which came up for interpretation, the Court of Appeal construed the expression to mean "contracted to be paid". Therefore, the contention of Mr. Daphtary that the expression "Paid" should be construed as "ought to have been paid" and even when no duty has been assessed, the entire duty when subsequently assessed will be a short-levy, which is also supported by the decision of this Court in Gursahai Saigal v. Commissioner of Income-tax, Puniab(3) has to be accepted. It follows that in order to attract rule 10, it is not necessary that some amount of' duty should have been assessed and that the said amount should have also been actually paid. That provision will apply even to cases where there has been a nil assessment in which case the entire duty later on assessed must be considered to be the duty (1) 22 T.C. 15, 16, 17. (2) [1968] 1 Q.B. 487. (3) [1963] 3 S.C. R. 893. originally short-levied. There is also no difficulty in calculating the period of three months. As pointed out above, the Act and the Rules provide very elaborately the stage and the time when the duty is to be paid and if that is so that must be considered to be the stage or time when the duty ought to have been paid and if so the period of three months will run from the time when the duty ought to have been paid. Dr. Syed Mohammad referred us to certain decisions of the High Courts where a demand has been sustained under rule 10 or rule 10A. We have considered those decisions. In some of those decisions there has been a short-levy due to the reasons mentioned in rule 10 and the demand also has been N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 12 issued within the period of three months and hence the notice had been sustained under rule 10. In other cases, it was specifically held that the demand covered by the notice issued under rule 10A has not been specifically provided for by any other rule and the demand therefore, was valid. These decisions, in our opinion, do not in any manner advance the case of the appellants and we do not think it necessary to deal with them individually. We may point out that if the contention of Dr. Syed Moham- mad that in order to constitute short-Levy, some amount should have been assessed as payable by way of duty so as to make rule 10 applicable, is accented the result will be rather anamolous. For instance if due to collusion (which means collusion between a party and an officer of the Department) a sum of Rs. 2/- is managed to be assessed by way of duty when really more than thousand times that amount is payable anD if the smaller amount of duty so assessed has been paid, the Department will have to take action within three months for payment of the proper amount of duty. On the other hand, if due to collusion again an order of nil assessment is passed, in which case no duty would have been paid, according to the appellants rule 10A will apply. We do not see any reason to distinguish the above two cases one' 'from the other. Both are cases of collusion and if an assessee in collusion manages to have a petty amount of duty assessed and paid he can effectively plead limitation of three months under rule 10. Whereas in the same case of collusion where no duty has been levied there will be no period of limitation. In our opinion, that will not be a proper interpretation to be placed on rule 10A by us. By the interpretation placed by us on rule 10, the position will be that an assessee who has been assessed to a smaller amount as well as an assessee who has been assessed to nil duty will all be put on a par and that is what is intended by rule 10. The above reasoning leads to the conclusion that rule 10A ,does not apply to the case on hand. Then the question is whether the demands could be justified under rule 9(2). Even here we find considerable,- difficulty in sustaining the notice under this rule. Sub-rule (1) of rule 9 provides for the time and the manner of payment of duty. In this case there is no controversy that whenever goods were cleared by the respondents, necessary applications had been made to the officer concerned and the latter had passed orders of assessment to nil duty. To attract sub-rule 2 of rule 9, the goods should have been removed in contravention of sub- rule (1). It is not the case of the appellants that the respondents have not complied with the provisions of sub- rule 1. We are of the opinion that in order to attract sub- rule 2, the goods should have been removed clandestinely and without assessment. In this case there is no such clandestine removal without assessment. On the other hand, goods had been removed with the express permission of the Excise authorities and after order of assessment was made. No doubt the duty payable under the assessment order was nil. That, in our opinion, will not bring the case under sub-rule (2). That sub-rule (2) is a penal provision is shown from the fact that apart from the duty payable, the party is also made liable to a penalty and he also incurs the risk of the goods being confiscated. That rule 9(2) applies only to cases where there has been an evasion from payment of duty is clear from the decision of this Court in J. K. Steel Ltd. v. Union of India(1). Though on certain other aspects there was a difference of view amongst the learned Judges, on this aspect the decision is unanimous. There is absolutely no material placed before us by the appellants which would justify the issue, of the notice under rule 9(2). N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 13 To conclude rule 10A does not apply as the specific provision for collection of duty to cases like the one before us is specifically provided by rule 10 nor does rule 9(2) apply to the case on hand. The proper provision under which action should have been taken if at all is rule 10. The demands having admittedly been made long after the expiry of the period of three months, referred to in the said rule, it follows that the demands were not valid. The High Court was justified in striking down the notices dated November 3, 1961 Ex. G as well as the demand dated December 2, 1961 under Et. H. The appeal fails and is dismissed with costs. V.P.S. Appeal dismissed. (1) [1969] 2 S.C.R. 481. N.B. Sanjana, Assistant Collector Of ... vs Elphinstone Spinning & Weaving Mills ... on 22 January, 1971 14 | {
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Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 Equivalent citations: 1971 AIR 2100, 1971 SCR (3) 942, AIR 1971 SUPREME COURT 2100, 1971 TAX. L. R. 1360 Author: J.M. Shelat Bench: J.M. Shelat, C.A. Vaidyialingam PETITIONER: GULABCHAND BAPALAL MODI Vs. RESPONDENT: MUNICIPAL CORPORATION OF AHMEDABAD CITY DATE OF JUDGMENT04/03/1971 BENCH: SHELAT, J.M. BENCH: SHELAT, J.M. VAIDYIALINGAM, C.A. CITATION: 1971 AIR 2100 1971 SCR (3) 942 ACT: Bombay Provincial Municipal Corporation Act, 59 of 1949, s. 129 of Act whether bad for excessive delegation and absence of guidelines Rule 10 of Taxation Rules whether mandatory or directory-Maintenance of ward-wise assessment books whether- essential-Tax levied on basis of one assessment book for whole Municipal area whether invalid-Effect of rr. 13, 15 and 19 under the Act, on the interpretation of r. 10. HEADNOTE: The appellant was owner of immovable property situate within the limits of the municipal corporation, Ahmedabad City. Under the power reserved to it by s. 127 of the Act the Corporation served on the appellant as also on the other rate payers, bills and demand notices for payment ,of property tax in respect of the assessment year 1962-63. These were challenged by the appellant and also certain Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 1 other rate payers in writ petitions before the High Court. The High Court inter alia held (i) that s. 129 of the Act did not suffer from the vice of excessive delegation by reason ,of the fact that no maximum rate of tax was laid down; (ii) that it was permissible under r. 10 to maintain only one assessment book and the levy could not be held invalid on the ground that ward-wise assessment books as contemplated by rr. 13, 15 and 19 were not maintained. In appeal to this Court by certificate, HELD : The High Court rightly held that the charging sections of the Act were not without guidelines. The assessment and levy of the property taxes have to be in conformity with the Act and the rules. These rules contain inter alia Taxation Rules which are part of the Act. Section 454, no doubt, empowers the corporation to amend, alter and add to those rules but such power is made under s. 455 subject to sanction of the State Government. Under s. 456 the State Government can at any time require the Corporation to make rules under s. 454 in respect of any purpose or matter specified in s. 457 which includes item "Municipal Taxes-The assessment and recovery of Municipal Taxes." Although the Act did not during the relevant period prescribe the maximum rate at which the property taxes could be raised, the ultimate control for raising them was with the councillors responsible to the people, It was difficult therefore to sustain the plea that the power to levy the property tax was so unbridled as to make it possible for the Corporation to levy it in an arbitrary manner or extent. [951 G 852 B] The proposition that when a provision requiring sanction of the Government to the maximum rate fixed by the Corporation is absent, the rest of the factors which exist in the Act lose their efficacy and cease to be guidelines cannot be accepted. Further, if the Corporation has the flexibility of power given to it in fixing the rates, the State Legislature can at any moment withdraw that flexibility by fixing the maximum limit up to which the Corporation can tax. Indeed the State Legislature had done so by s. 4 of the Gujarat Act, 8 of 1968. In view of the decisions of this Court it is not possible to agree with the contention that the Act conferred on the Corporation such arbitrary and uncontrolled power as to render such conferment an excessive delegation. [954 F-G] 943 Corporation of Calcutta v. Liberty Cinema, [1965] 2 S.C.R. 477, Municipal Corporation of the City of Ahmedanwd v. Zaveri Keshavia, 6 Guj. L.R. 701, Western India Theatres Ltd. v. Municipal Corporation of the City Poona, [1959] Supp. 2 S.C.R. 71, Pandit Banarsi Das Bhanot v. Madhya Pradesh, [1959] S.C.R. 427 and Devi Das v. Punjab [1967] 3 S.C.R. 557. referred to. Municipal Corporation of Delhi v. Birla Mills, [1968] 3 S.C.R. 251 followed. Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 2 (2) The tax levied on the basis of one assessment book was not invalid, Rule 10 differs from s. 157 of the Bombay Municipal Corporation Act, 1888, in that, whereas, it gives an option to the Commissioner either to maintain one assessment book for the entire city or separate assessment books, Sec. 157 gave no such option and provided only for ward assessment-book which collectively constituted, as in r. 10(2), "the assessment book'. The legislature deliberately made a departure from s. 157 by leaving it to the discretion of the Commissioner either to maintain one book or several books ward-wise. Such a departure was presumably made because the Act was to apply not to one city only, as did the Bombay Act of 1888, but to an unknown number of cities where Municipal Corporations might in future be set up, each having different conditions from the other and not being certain whether one assessment book or separate ward assessment books would be suitable for each of them. [955 G; 956 A] The contention that r. 10 should be, construed as mandatory ignores (1) the permissive language of the rule and (2) the deliberate departure made by the legislature from s. 1-57 of the Bombay Corporation Act, 1888. If it intended that assessment-books for each ward shoud be kept, there was no necessity for it to depart from the language of s. 157 of that Act. The fact that it made such departure is a sure indication that it did not. Unless compelled by the context and content of the other rules, there would be no justification not to give to r. 10 the plain meaning of its language, particularly in view of the fact that the Act intended to apply not to one but to an indefinite number of cities, each differing in conditions from the other a factor which, as aforesaid, led the legislature to make a departure from the said s. 157. [958 H-959 B] Certain anomalies would arise from the High Court's interpretation that rr. 13, 15 and 19 would not apply in the case of one assessment book. Rule 19 was intended to enable the Corporation to proceed to makedemands so soon as entries were made as provided by cl. (e) of r. 9 and the Commissioner had given thereafter his authentication that there existed no valid objection to the ratable values entered under the said cl. (e). Since the object of r. 19 was to make the entry as to the amount of tax conclusive evidence so as to enable the Commissioner to issue the bills, the legislature could not have intended to apply the rule only when ward assessment-books were kept and not when, one assessment-book was maintained, especially when in r. 10 it had deliberately given discretion to the Commissioner to maintain either one assessment-book or several ward assessment books. Further if r. 19 were to be so construed, rr. 13, and 15 also would have on the same reasoning to be likewise construed. That would mean that the notice to enable the rate payers to take inspection under r. 13 and the notice under r. 15 fixing the date on or before which Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 3 complaints against 'ratable value can be made, would have to be given only where ward assessment books are kept and not where one L1100 SupCI/71 944 assessment book is kept. it goes without saying that the right to inspect provided under r. 13 and the right to file a complaint under r. 15 are vital matters. That being so it is hardly conceivable that the legislature intended these rules to apply only where the Commissioner kept ward assessment-books. Since r. 10 has to be construed as permissive and not mandatory, and the construction adopted by the High Court in regard to rr. 13, 15 and 19 is bound to create anomalies, the conclusion must be that it was through inadvertence that the old language used in ss. 157 to 168 of the Bombay Corporation Act was allowed to be retained without carrying out the change. of language necessitated as a result of r. 10 giving discretion to the Commissioner either to maintain one book or several books ward-wise. In the result the assessment book in question must be held to be valid and no objection as to the validity of the bills and demand notices can be raised on the ground that only one assessment book and not warding books were kept. [959 C-960 E] JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1090 of 1967. Appeal from the judgment and decree dated May 5, 1966 of the Gujarat High Court in S.C.A. No. 877 of 1962. B. R. L. lyengar, N. J. Modi, P. C. Bhartari and K. N., Desai for the appellant. 1. N. Shroff, for respondent No. 1. K. L. Hathiand S. P. Nayar, for respondent No. 2. The Judgment of the Court was delivered by Shelat, J. This appeal, by certificate, arises out of one of the seventy Special Civil applications filed in the High Court of Gujarat by several- rate payers challenging the Validity of the assessment of property tax made by the respondent-Corporation under the Bombay Provincial Municipal Corporations Act, LIX of 1949 (hereinafter referred to as the Act). The appellant is the owner of an immovable property situate within the limits of the Corporation. Until March 31, 1961, two kinds of taxes were being levied on buildings and lands situate within the Corporation's municipal limits : (1) the general tax levied by the Corporation under the Act, and (2) the urban immovable property tax levied under the Bombay Finance Act, 1932 by the State Government, but collected on its behalf by the Corporation. At the request of the Corporation made in 1960, an arrangement was arrived at between the Government and the Corporation where under Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 4 the Government agreed not to levy the U.I.P. tax provided the Corporation increased the rate at which it was till then levying the property tax. Accordingly, in January 1961 the Corporation passed a resolution in,creasing the rate of the property tax with effect from April 1, 1961 under the power reserved to it by S. 127 of the Act. In 94 5 pursuance of the said resolution and in accordance with the raised percentage of the general tax the Corporation served on the appellant, as also on the other rate payers, bills and demand notices. In this appeal we are concerned with the bills and ,notices in respecter the assessment year 1962-63. The appellant, as also certain other rate payers, challenged the said bills and notices in their said writ petitions mainly on the grounds (1) that the Corporation had no authority to amend the rates with the object of including the said U.I.P. tax in the general tax so far levied by the Government under a different statute and given up by it under the said arrangement; (2) that the said bills and notices were illegal as the assessment-book kept by the Cor- poration was not in accordance with the rules made under the Act and was not authenticated by the Commissioner as required thereunder; (3) that ss. 99, 123 and 129(c) of the Act were unconstitutional in that they suffered from Other vice of excessive, delegation in so far as they did not fix the maximum rate at which the Corporation could levy the property tax, and (4) that the said sections were also violative of Art. 19(1) (f) and Art. 31 as the tax was confiscatory in character. By its judgment dated May 5, 1966, the High Court first dis- posed of fifty two out of the said seventy writ petitions rejecting the contentions raised therein. There after the judgment under review separately disposed of the remaining 18 petitions, including that of the appellant, as, besides the points raised in the said 52 writ petitions, these 18 writ petitions raised some additional points. The High Court in this judgment did not deal afresh the points already disposed of by it in the larger group of writ petitions and based its judgment in respect of them on its earlier judgment dated May 5, 1966. In its judgment, dated the May 5, 1966, the High Court elaborately examined the scheme and the objects, of the Act and the rules and came to the following conclusions : (1) that the Corporation need not maintain separate assessment-book for each of the wards and could legally maintain one assessment-book covering all the wards; (2) that the authentication provided for by r. 19 of the said rules in Ch. VIII to Sch. A of the Act ,*as not mandatory; (3) that the liability to pay the tax arose when entry under r. 9(e) was made in the assessment-book; and 9 46 (4)that s. 129 (c) read with ss. 99 and 127 did not suffer from the vice of excessive delegation as the legislature had provided in the Act both its policy and principles guiding the Corporation in levying the said tax. The High Court also negatived the contention that s. 129(c) by giving power to tax without laying down the maximum rate was violative of Art. 19(1) (f) and/or Art. 31 or Art. 14. The High Court also Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 5 rejected the additional contentions raised in the petitions left over from the earlier batch of 52 petitions and dismissed all of them. The correctness of the views expressed by-the High Court in this judgment, as also in its earlier judgment by the combined effect of which altogether 70 writ petitions were negatived, is challenged in this appeal. We need not go into all the diverse contentions raised before the High Court as counsel for the appellant raised before us the following three questions only (1) that while making the, assessment the procedure contemplated by ss. 127, 129(c) of the Act and rr. 9 to 20 of the Taxation Rules was not cornplied with inasmuch as no ward assessment-books were maintained, and consequently, the entries therein were not authenticated as required by r. 19; (2) that S. 129 suffers from the vice of excessive delegation of legislative powering as-the Act fails to provide either the maximum rate leviable by the Corporation or the guidelines for levying the tax; (3) that in any view of the matter, in the circumstances in which the resolution raising the rate was passed, it did not impose the enhanced rate on the property of the appellant as the same was ,not, prior to April 1961' subjected to the U.I.P. tax. Later, Mr. lyengar gave up, the third contention. We are, there fore, left with his contentions (1) and (2) only for determination. Broadly stated, the facts regarding the assessment-book and its authentication are as follows : Each year the Commissioner either prepared or continued the assessment- book required to be maintained by him under the Taxation Rules. Each year he went through the procedure for authentication of the assessment-book purporting to do so under r. 19 of the Taxation Rules. After 9 4 7 the assessment-book was authenticated, as aforesaid, and a certificate was issued by him that no valid objection had been received in respect of the rateable values entered in the assessment-book as required by cl. (e) of r. 9 of the said rules, the Corporation issued bills and demand notices requiring the owners or occupiers of the properties to pay the said tax. The Act and the rules provide for objections to the rateable values entered in the assessment-book under Cl. (b) of r. 9, which objections would be heard and decided by the Commissioner. There are provisions in the Act, such as ss. 406, 4 1 0 and 41 1, for appeals to the Judge, Small Causes Court, both against the rateable value fixed under the Taxation Rules as also against the amount of tax demanded in the bills. As aforesaid, the High Court dismissed the contention as to the constitutionality of s. 129(c) basing its decision mainly on the authority of the Corporation of Calcutta v. Liberty Cinema,(1) wherein the validity of s. 548(2) of the Calcutta Municipal Act, authorising the Corporation to levy a fee (held by this Court to be a tax) for every licence and permission at such rate as may be fixed from time to time by the Corporation'. but which did not lay down the maximum rate, was challenged. The High Court in particular relied on the observations in that decision (1) that fixation of the rate was not an esserxtial legislative function and could be delegated, and (2) that the provisions in the Act, which limited the power to levy taxes to the extent of the statutory needs of the Corporation, furnished sufficient control and guidance. Reliance was also placed on the following observation relating to the absence of maximum rate "It is said that the delegation of power to fix rates of taxes authorised for Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 6 meeting the needs of the delegate to be valid, must provide the maximum rate that can be fixed, or lay down rules indicating that maximum. We are unable to see how the specification of the maximum rate supplies any guidance as to how the amount of the tax, which no doubt has to be below the maximum, is to be fixed. Provision for such maximum only sets out a limit of the rate to be imposed and a limit is only a limit and not a guidance." Besides deriving support from this judgment, the High Court examined various provisions of the Act and reached the conclusion that under the Act, as under the Calcutta Act, the tax, which the Corporation could collect, would have to be for the purposes of the Act only and that fact, together with certain other controls embodied in the Act, furnished sufficient guidance preventing the vice of arbitrariness or excessive delegation. (1) 1962 S.C.R. 477. Before the High Court, the contention also was that for each. of the relevant years there was no valid assessment- book on the basis of which the property tax could be levied. The argument was that the Taxation Rules required the Commissioner to prepare ward assessment-book for each of the wards and not one assessment-book for the whole of the municipal limits, that being so, the assessment made on the properties was not in accordance with the rules prescribed for that purpose and was therefore in breach of Art. 265 of the Constitution and s. 127(2) of the Act which lays down that the taxes shall be assessed and levied in accordance with the provisions of the Act and the rules. The High Court, on a reading of the rules, found : (1) that r. 10 gave discretion to the, Commissioner to prepare either one assessment book or ward assessment-books, and (2) that the rules used both the expressions, namely, 'assessment-book' and 'ward assessment books the latter expression being used only in rr. 13 (1), 15 f and 1 9 (1 ) and (2). According to the High Court, the contention as to the validity of the assessment-book and the construction of the rules suggested on behalf of the appellant were not correct. The object of r. 9, according to the High Court, was to provide for the preparation and maintenance of the assessment-book wherein would be entered the amount of property tax against each of the buildings and lands set out therein. The rule provided that the Commissioner shall first make entries under cls. (a) to (d) of the rule. An entryunder cl. (e), as its language plainly shows, is to be made after :(1) the rates of property tax are fixed, (2) the period fixed forreceipt of complaints against the rateable values has expired, and (3) after such complaints, if any, are disposed of by the Commissioner. An entry under cl. (e) having to be made only after the events in (1), (2) and (3) above stated have happened, r. 9 takes in, by using the expression "as herein- after provided", the public notice provided by rr. 13 and 15. According to the High Court, the liability to pay the property tax arises as soon as entry under cl. (e) of r. 9 is made in the assessment-book in the manner therein provided and is not dependent on authentication and certification provided in r. 19 in respect of ward assessment-books. Authentication and certification in such ward assessment-books provides a rule of evidence in the Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 7 sense that the entries therein become conclusive evidence as regards the amount of tax therein set out against each property and is not an event on the happening of which the liability to pay arises. Such liability arises as soon as entry under cl. (e) of r 9 is made. The High Court distinguished its earlier decision in the Municipal Corporation of the City of Ahmedabad v. Zaveri Keshavtal(1) by pointing out that that decision was under the Bombay (1) 6 Guj. L.R.701. Municipal Boroughs Acts, 1925 which had a scheme and pro- visions different from the present Act and the rules thereunder made. That decision had laid down that the liability of the rate payer would arise only after authentication of the assessmentbook. For distinguishing that decision the High Court, firstly, relied on r. 30 of the Taxation Rules which provides that property tax shall accrue clue on the 1st of April of each official year, and secondly, on the ground that the Boroughs Act and the rules thereunder did not have a rule corresponding to r. 9(e) which, when read with r. 30, shows that the liability to pay the amount of tax arises on entry under cl. (e) of that rule being made. According to the High Court, r. 19, )which provides for authentication applies only to ward assessment- books and not to a single asscssment-book, that such authentication has nothing to do with the accrual of liability and is a mere rule of evidence which is not available to the Corporation where the Commissioner does not prepare ward assessment-books and keeps only one assessment- book. The High Court in this connection observed "If a single assessment-book is prepared, then the amount of tax entered in the assessment-book will not be the conclusive evidence. In an appeal, it would be open to a rate payer to challenge the amount on any legal ground, possibly including the challenge to the rateable value of the property in respect of the fact that had not been done before by him." On this interpretation, the High Court dismissed the entire batch of the said 70 writ petitions including that of the appellant. Though the earlier judgment is not under review in this appeal, we have set out its conclusions as the judgment under review followed the earlier judgment,- delivered by the same learned Judges and rejected the conclusions raised by the appellant. In effect, therefore, both the judgments are under challenge to the extent that they decided questions raised in this appeal. Sec. 127(1) lays down that "for the purposes of this Act" the taxes which the Corporation has compulsorily to levy are property taxes and a tax on vehicles, boats and animals. The second subsection authorises the Corporation to levy the taxes set out therein in addition to the aforesaid two taxes. Sec. 129 deals with property taxes. Cl. (c) there of provides that property taxes shall comprise inter alia of a general tax of not less than 12% of the rateable value of buildings and lands. We may note that the Gujarat State Legislature, by Act 8 of 1968, has recently amended cl. (c) by inserting therein the maximum rate of 30%, so that the question as to the absence of maximum rate is relevant only for the assessment years prior to the amendment. The Legislature itself has framed elaborate rules contained in Sch. A to the Act of which the Taxation Rules in Ch. VIII thereof are part and which under s. 453 form part of the Act. Besides the said rules, ss. 454 and 455 authorise the Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 8 Corporation to add to, amend, alter ,or rescind those rules subject to their being not inconsistent with the provisions of the Act, sanction of the State Government and to the condition of their being made after previous publication. The other relevant provisions of the Act are ss. 63 to 66 which lay down the obligatory functions which the Corporation must perform and certain discretionary functions which it can perform. The argument was that thought s. 127 ( 1 ) lays down that property taxes can be levied by the Corporation only for the purposes ,of the Act, that is to say, for and in respect of the functions which the Corporation must and can carry out, the Act being silent as to the maximum rate upto which the Corporation can levy, it gives unbridled and arbitrary power to levy the property tax as much and to any extent it may desire. Mr. Iyengar pointed out that amongst the discretionary functions which the Corporation can undertake under s. 66 there are such things as swimming pools, public parks, gardens, recreation grounds, construction of dwellings, for municipal officers and servants, libraries, museums etc. for undertaking which the Corporation can spend huge, amounts and impose extravagant and burdensome rate of tax. According to the argument, there are no guidelines or controls in the Act which can place any limits to the spending by the Corporation on such discretionary objects, and therefore, the rate payers are exposed to being taxed in an arbitrary and uncontrolled fashion. The question. thus is whether the Act contains any policy or' guidelines or control over the taxing power of the Corporation without which the delegation of power to tax would be excessive, arbitrary and violative of Art. 14. The Act, as its preamble and the long title show, was passed for establishment of municipal corporations in the city of Ahemedabad and Poona and certain other cities for ensuring better municipal government. It was apparently modelled after the Bombay Municipal Corporation Act, 1888. The Act does not lay down any maximum rate in s. 127 probably because its operation was not confined to any particular city in which the municipal corporation would be set up. The Legislature, while passing it, could not envisage in which particular cities such corporations would be set up. Nor could it envisage what their financial needs would be; nor which of the discretionary functions, under S. 66, such ,corporations would feel they must undertake. Such needs being variable and incapable of uniform specification, the Legislature might have felt if inexpedient to restrict the fiscal powers of the corporations to be established in furture. The point for consideration is whether the absence of a pro- vision laying down the maximum rate is by itself sufficient to render the delegation of the power excessive. As already stated, s. 127(1) expressly provides that taxes can be levied only for the purposes of the Act. They cannot thus be raised for any function 'other than the one provided by the Act. Sec. 82 requires all monies received by the Corporation under the Act to be credited to the Municipal Fund held by the Corporation in trust for the purposes of the Act. By reason of s. 86, no payment can be made out of the Municipal Fund unless it is covered by the current budget grant. Furthermore, s. 88 lays down that the moneys credited in the Municipal Fund shall be applied in payment of sums, Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 9 charges and costs necessary for carrying the Act into effect, or payment directed or sanctioned by or under the Act. Sec. 89 restricts expenditure by the Corporation within the city except when provided by the Act or by a resolution by not less than. half the total number of councillors. Under s. 95, the Commissioner is required annually to lay before the Standing Committee estimates of income and expenditure, and under s. 96. the Standing Com- mittee has to prepare budget estimate 'A' "having regard to all the requirements of this Act." The budget estimate then has to be laid before and passed by the Corporation. Similar provisions are made in ss. 97 and 98 for budget estimate 'B' prepared by the Transport Manager. It is after all this has been, done that the Corporation under s. 99 determines, on or before the 20th of February of each year, the rates at which property taxes under s. 127(1), but sub ject to the limitations and conditions laid down in Ch. XI, are to be levied for the next ensuing official year, Under s. 100, the Corporation, either sends back the budget esti- mates 'A or 'B' for further consideration, or adopts them with such alterations as it deems expedient. The conditions and limitations subject to which the Corporation can fix, under s. 99, the rates at which the property taxes are to be levied are those provided in s. 127(3) and (4), i.e., they can be assessed and levied in accordance with the provisions of the Act and the rules. These provisions clearly show that the ultimate control, both for raising the taxes and incurring expenditure, lies with the councillors chosen by and responsible to the people. As aforesaid, the assessment and levy of the property taxes have to be in conformity with the Act and the rules. These rules contain inter alia Taxation Rules, which are part of the Act. Sec. 454, no doubt, empowers the Corporation to amend, alter and add to these rules, but such power is made under s. 455 subject to the sanction of the State Government. Under s. 4 56, the State Government can at any time require the Corporation to make rules under s. 454 in respect of any purpose of matter specified in s. 457, which includes-item "(7) Municipal Taxes.-(a) The assess- 95 2 ment and recovery of municipal taxes". Thus, although the Ac does not prescribe the maximum rate at which the property taxe can be raised, the ultimate control for raising them is with the councillors responsible to the people. It is difficult, therefore, to sustain the plea that the power to levy the property tax is so un bridled as to make it possible for the corporation to levy it in arbitrary manner or extent. In all statutes dealing with local administration municipa I authorities have inevitably to be delegated the power of taxation,. Such power is a necessary adjunct to a system of local self-govemment. Whether such delegation is excessive and amounts to abdication of an essential legislative function has to be considered from the scheme, the objects, and the provisions of the statute in question. In The Western India Theatres Ltd. v. Municipal Corporation of the City of Poona(1) this Court spelt out the policy in the expression "for the purposes of this Act", an expression also used in S. 127. In Pandit Banarsi Das Bhanot v. Madhya Pradesh(2), delegation of power to the executive to determine the details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be levied the rates at which it is to be Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 10 charged in respect of different classes of goods and the like, was held not to be unconstitutional on the principle that so long as the legislature retains or has the power of withdrawing or altering the power to tax delegated to a subordinate authority such delegation would be held neither an abdication nor excessive. In Liberty Cinema case ( 3 ) the majority view was that the power to fix the rate of a tax was not of the essence of the legislative power and that such a power could be delegated even to a non-legislative body. But the decision laid down that when such a power is delegated, the legislature must provide guidance for such fixation. The majority held that where rates have not been specified in the statute, the power to fix the rates as might be necessary to meet the needs of the delegate itself affords guidance. The minority view differed from the majority view, in that, according to it, the power to fix the rate of tax was an essential legislative function. But, even according to that view, such a power can be delegated provided the delegate is afforded guidance by the legislative laying down the policy and principles in the Act, It, however, disagreed with the majority view that the raising of tax 'co-extensive with the needs of the delegate in implementing the purposes of the Act can afford such guidance. The Liberty Cinema case(3) came for consideration in Devi Das v. Punjab (4) where Subba Rao, C.J., speaking for the Court, said : (1)[1959] Sup, 2 S.C.R.71. (2) [1959] S.C.R.427. (3) [1965]2 S.C.R. 477. (4 [1967] 3 S.C.R. 557. "If this decision [Liberty Cinema case(1) is an authority for the position that the Legislature can delegate its power to a statutory authority to levy taxes and fix rates in regard thereto, it is equally an authority for the position that the said statute to be valid must give a guidance to the said authority for fixing the said rates. . . " Though he did not agree as a general principle that guidance can always be spelt out from the limitation to fix the rate by the extent of needs of and the expenses required by the delegate to discharge its statutory functions, the Court did not disapprove Liberty Cinema case(1) but confined the principle laid down there to the provisions of the Calcutta Municipal Act in which the majority had found the requisite guidelines. No such guidance was available in the Sales Tax statute before the Bench deciding Devi Das's case(2). The position which emerged from the decisions so far, therefore, was that the power to fix rates can be delegated if the statute doing so contains a policy or principles furnishing gunance to the delegate in exercising such power. In the Municipal Corporation of Delhi v. Birla MilIS(3), the question as to the limits of delegation of taxing power once more arose. The Delhi Municipal Corporation Act, 1957, like the present Act, entrusted to the Delhi Corporation two kinds of functions, compulsory and optional. In relation to the former, the Act specified the maximum rate of tax the Corporation could raise, but not so in the case of tax relating to or for implementing the optional functions. The controversy was whether the Act contained provisions furnishing guidance to the Corporation in the exercise of the power to tax. Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 11 After an analysis of the provisions of the Act, Wanchoo, C.J., pointed out the following factors which furnished' sufficient guidance preventing the delegation becoming invalid : (1) that the delegation was to an elected body responsible to the people, including those who pay taxes and to whom the councillors have every four years to turn to for being elected; (2) that the limits of taxation were to be found in the. purposes of the Act for the implementation of which alone taxes could be raised and though this factor was not conclusive, it was nonetheless relevant and must be taken into account with other relevant factors; (3) that the impugned s. 1 150 itself contained a provision which required that the maximum rate fixed by the. Corporation should have the approval of the Government; (1) [196512 S.C.R. 477, (2) [1967] 3 S.C.R. 577. (3) 1968(3) S.C.R.251. (4) that the Act contained provisions which required adoption of budget estimates by the Corporation annually; and (5) that there was a check by the courts of law where the poower of taxation-is used unreasonably or in non compliance or breach of the provisions and objects of the Act. Referring to Devi Das case(1), he pointed out that (1) that did not disapprove Liberty Cinema case (2 ) was concerned case with a sales tax statute and not with a statute dealing with bodies with limited purposes, such as local self governing bodies. At page 268 of the reports he observed.: "There is in our opinion a clear distinction between delegation of fixing the rate of tax like sales tax to the State Government and delegation of fixing rates of certain taxes for purposes of local taxation. The needs of ,the State are unlimited. The result of making delegation of a tax like sales tax to the, State Government means a power to fix the tax without any limit even if the needs and purposes of the State are to be taken into account." Thus, the majority view in this decision, which is binding on us, shows that the mere fact that an Act delegating taxing power refrains from providing a maximum rate does not by itself render the delegation invalid. From the provisions of the present Act, cited earlier, it will be seen that though factor (3) of the factors relied on by Wanchoo, C.J., is absent in s. 127, the rest are present. It is impossible to say that when a provision requiring sanction of the Government to the maximum rate fixed by the Corporation is absent, the rest of the factors which exist in the Act loose their efficacy and cease to Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 12 be guidelines. Furthermore, if the Corporation were to misuse the flexibility of the power given to it in fixing the rates, the State legislature can at any moment withdraw that flexibility by fixing the maximum Emit up to which the Corporation can tax. Indeed, the State Legislature has now done so by S. 4 of Gujarat Act, 8 of 1968. In view of the decisions cited above it is not possible for us to agree with counsel's contention that the Act confers on the Corporation such arbitrary and uncontrolled power as to ren- der such conferment an excessive delegation. That brings us to the contention regarding the validity of the assessment-book maintained by the Commissioner for the assessment year in question. (1) [1967] 3 S.C.R. 577. (2) [1965] 2 S.C.R. 477. Rules 9 to 21 of the Taxation Rules are headed "Assessment- Book". A comparison of these rules with ss. 156 to 168 of the Bombay Municipal Corporation Act, 1888 at once shows that they are, with the exception of r. 10, taken almost verbatim from those sections. Rule 9 requires the Commissioner to keep a book to be called the "Assessment- Book" in which the following matters have to be entered, viz., (a) a list of buildings and lands, (b) the rateable value of each of them, (c) the names of persons primarily liable for the payment of the property taxes, if any, leviable on each such building or land, (d) the reasons for non-liability, if any of them is not liable to be assessed to the general tax, and (e) "when the rates of the property-taxes to be levid for the year have been duly fixed by the Corporation and the period fixed by public notice, as hereinafter provided, or the receipt of complaints against the amount of rateable value entered in any portion of the assessment-book has expired, and in the case of any such entry which is complained against, when such complaint has been disposed, of in' accordance with the provisions hereinafter contained, the amount at which each building or land entered in such portion of the assessrnent-book is assessed to each of the property taxes, if any, liable thereon." The rule contain other clauses, but we are not at present concerned with them. Rule 10(1) provides that the assessment-book may, if the Commissioner thinks fit, be made in separate books called "ward assessment-books", one for each of the wards into which the city is for the time being divided for purposes of the elections. Cl. (2) of the rule says that the ward assessment-books and the respective parts, if any, shall collectively constitute the assessment-,book. Rule 10 differs from s. 157 of the Bombay Municipal Corporation Act, in that, whereas it gives an option to the Commissioner either to maintain one assessment-book. for the entire city or separate Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 13 ward assessment-books, s. 157 gives no such option and provides only for ward assessment-books which collectively constitute, as in r. 10(2), "the assessment- book". The Legislature, thus, deliberately made a departure from s. 157 by leaving it to the discretion of the Commissioner either to maintain one book or several books wardwise. Such a departure was presumably made because the Act was to apply not to one city only, as did the 'Bombay Act of 1888, but to an unknown number of cities where municipal corporation might in future be set up, each having different conditions from the, other and not being certain whether one assessment-book or separate ward assessment books would be suitable for each of them. Rules 11 and 12 deal with treatment of properties let to two or m ore persons in separate occupancies and the procedure where the name of the person primarily liable for property taxes cannot be ascertained. Rule 12, it Will be noticed, mentions only the assessment-book and not ward- assessment- books. Rule 13 provides that when entries required by cls. (a), (b), (c) and (d) of rule 9 have been completed "in any ward assessment-book-, the. Commissioner shall give public notice thereof and of the place where the ward assessment- book, or a copy of it, may be inspected." Rule 14 provides for inspection and taking extracts by an owner or occupier of premises-entered' in "the assessment-book" from any portion of "tie said book" which relates to the said pre- mises. Rule 15 requires the Commissioner "at the time and in the manner prescribed in r. 13" to give notice of a day not being less than 15 days from the publication of such notice, on or before which complaints against the amount of any rateable value entered "in the ward assessment-book" will be received in his office. Cl. ,(2) of that rule requires the Commissioner to give a special written notice to the owner or occupier of premises which have for the first time been entered "in the assessment-book' as liable to property taxes or in which the rateable value of any premises has been increased. Rule 16 provides for the manner of filing complaints referred to in r. 1 5 against the rateable value "entered in the assessment-book", and r. 17 provides that complaints received under r. 16 shall be registered in a book kept for that purpose as also for notice to each complainant of the, time and place when and whereat his complaint would be investigated. , Rule 18 provides for the hearing of the complaint if and cl. (3) thereof lays down that when a complaint is disposed of, its result shall be noted in the said book of complaints and the necessary amendment shall be made in accordance with such result "in the assessment-book". Rule 19, which has been the subject matter of controversy both in the High Court and before us, provides that when "all such complaints, if any, have been disposed of and the entries required by cl. (e) of r. 9 have been completed in the ward assessment-book, the said book shall be authenticated by the Commissioner, who shall certify, under his signature, that except in the cases, if any, in which amendments have been made as shown therein, no valid objection has been made to the rateable values entered in the said book". Cl. (2) provides that "the said ward assessment-book sub- Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 14 95 7 ject to such alterations as may thereafter be made therein under the provisions of r. 20 shall be accepted as conclusive evidence of the amount of each property-tax leviable on each building and land in the ward in the official year to which the book-relates." Rule 20 empowers the Commissioner to amend the assessment-book even after it has been authenticated in certain cases and subject to the conditions set out therein. Lastly , r. 21 provides that it is not necessary to prepare a new assessment-book every official year and permits the Commissioner to adopt the entries in the last preceding year's book as the entries for each new year. This, he can do, for. four successive years. From the scheme of rules 9 to 21, it is clear that the Commissioner first enters in the assessment book prescribed by r. 9 the particulars set out in cls. (a) to (d) of at rule. Having done this, he proceeds to enter in the assessment-book the amount at which each building or land is assessed. He can do this under cl. (e) naturally after (i) the rates of property taxes are fixed by the Corporation, (ii) the period fixed by public notice under r. 13 and for the receipt of complaints under 15 against rateable values entered under cl. (b) has expired, and (iii) after such complaints, if any, have been disposed of. On a plain meaning of the language in r. 10 the Commissioner has the option to maintain either one assessment-book or ward assessment-books separately for each ward. But even if he were to do so, such ward assessment-books would collectively constitute "the assessment-book". As earlier stated, giving of such an option under r. 10 was a clear departure by the Legislature from s. 157 of the Bombay Act, 1888. Since these rules have been taken almost verbatim from that Act, the departure has to be regarded as deliberate. and for the reason that the Legislature could not foresee at the time of enacting the Act as to the cities in which municipal corporations would be set up and the conditions prevailing at such time in those cities. The difficulty, however, arises because rr. 13, 15 and 19, which provide for a notice for inspection, for filing complaints against rateable Values entered under el. (b) of r. 9 and for authentication and certification, use the expression "ward assessment book". It is from this fact that the contention was raised that, though r. IO is couched in permissive language, it must be construed as mandatory requiring the Commissioner to maintain ward assessment- books. Therefore, the Commissioner having maintained only one assessment-book for the whole city, it is not a valid book on the basis of which the levy of the property tax can be sustained. The argument was that the right of inspection, the right of taking extracts, the right to file complaints and the duty to give public. notice under rr. 13 and 15 and a special notice under cl. (2) of r. 15, as also the duty to authenticate and certify under r. 1 9, are all matters vital to both the rate payers, as also. the Corporation, and that it was in respect of these vital matters that rr. 13, 15 and 19 speak of ward assessment-books. Therefore, if the Legislature, which framed these rules, had contemplated one assessment-book instead of separate assessment-books for each of the wards, the language of these rules would not have been what it is. The Language of these rules, therefore, show that r. 10 must be construed to mean that the Commissioner has to maintain ward assessment-books and it is when such books are maintained that the Corporation can validly levy the tax on the basis of such books. Confronted with this difficulty, the High Court construed the rules to mean that r. 10 was discretionary and not mandatory but that rr. 13, 15 and 19 apply only when ward assessment-books are kept, and that when they are read together, they show that the scheme was that where ward assessment-books are prepared the Legislature intended to invest each of such books with a finality and did not intend that the question as to rateable value or the amount of tax should remain Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 15 hanging fire until all the ward assessment- books were prepared. As regards r. 19, the High Court held that "if a single assessment-book is prepared, then the amount of tax entered in the assessment-book will not be conclusive evidence". Such a conclusion means that r. 19, as also rr. 13 and 15 would apply only to ward assessment-books, and therefore, there would be no authentication and certification where one assessment book is kept and entries in such a single assessment-book would not be conclusive evidence as regards the quantum of tax entred in it under cl. (e) of r. 9. But once it is held that r. IO is discretionary and the Commissioner can maintain one assessment-book or several ward assessment-books, as the High Court has done, it is hardly possible that the legislature which gave such an option could have intended that r. 19 should apply only to ward assessment-books and not where one assessment-book is kept and deprive the Corporation of the benefit of entries in it being treated as conclusive evidence., It is true that a genuine difficulty arises in construing these rules as a result of the use of the expression "ward assessment-book" in rr. 13, 15 and 19, and the use of the expression "a ssessment-book in the rest of the rules. At the same time acceptance of the appellant's contention or the in terpretation by the High Court would create difficulties. The contention that r. 10 should be construed as mandatory ignores (1) the permissive language of the rule, and 9 59 (2)the deliberate departure made by the Legislature from s. 157 of the Bombay Corporation Act. If it intended that assessmentbooks for each ward should be kept, there was no necessity for it to depart from the language of s. 157 of that Act. The fact that it made such a departure is a sure indication that it did not. Unless compelled by the context and the content of the other rules, there would be no justification not to give to r. 10 the plain meaning of its language, particularly in view of the fact that the Act is intended to apply not to one but to an indefinite number of cities, each differing in conditions from the other, a factor which, as aforesaid, led the Legislature to make a departure from the said s. 157. But a far more serious difficulty would arise if the conclusion reached by the High Court were to be accepted. If r. 19 were to be interpreted as applying to ward assetsment books, and not where one assessment-book is kept, rr. 13 and 15 must also on the same reasoning be construed in the same way. The Legislature could not have intended that the entry under cl. (e) of r. 9, as regards the quantum of property tax leviable on each building and land, would become conclusive evidence only where ward assessmentbooks are kept and not where one assessment-book is kept. Cl. (e) of r. 9 requires the Commissioner to enter in the assessment-book the amount at which each building is assessed to each of the property taxes. The object of authen0cation under r. 19 is to make such entry conclusive evidence of the amount being leviable on each such building and land for the particular official year. It is the amount of tax entered under cl. (e) of r. 9 to which is given the attribute of conclusive evidence, so that the Corporation can thenceforth proceed to issue bills for those amounts and serve demand notices. The rate payers cannot object to such bills and notices on the ground that the amounts therein set out are not correct by reason of some error or such similar reason. Rule 19 confers conclusiveness only to that extent and not to the rateable value or the tax fixed or charged, as both are subject to an appeal under s.406. Rule 19, therefore, was intended to enable the Corporation to proceed to make demands so soon as entries are made as provided by cl. (e) of r. 9 and the Commission has given thereafter his authentication that there exists no valid objection to the rateable value entered under the said cl. (e) . Since the object of r. 19 is to make the Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 16 entry as to the amount of tax conclusive evidence so as to enable the Commissioner to issue the bills, the Legislature could not have intended to apply the rule only when ward assessment- books are kept and not when one assessmentbook is maintained especially when in r. 10 it has deliberately given discretion to the Commissioner to maintain either one assessment-book or several ward assessment-books. We are in agreement with the High Court that the liability to pay the tax arises under r. 30 and r. 9(e) and is not dependent on 17-LI10OSupCI/71 9 60 authentication, which, as aforesaid, is intended for a limited purpose. But that does not mean that the provision as to authentication applies only when ward assessment books are kept, or that r. 19 does not apply where one assessment- book is prepared. If r. 19 were to be so construed, rr. 13 and 15 also would have on the same reasoning to be likewise construed. That would mean that the notice to enable the rate pay to take inspection under r. 13 and the notice under r. 15 fixing the date on or before which complaints against rateable value can be made, would have to be given only where ward assessment-books are kept and not where one assessment-book is kept. It goes without saying that the right to inspect provided under r. 13 and the right to file a complaint under r. 15 are vital matters. That being so, it is hardly conceivable that the Legislature intended these rules to apply only where the Commissioner keeps ward assessment-books. Since, for the reasons given earlier, r. 10 has to be construed as permissive and not mandatory, and the construction adopted by the High Court in regard to rr. 1 3, 15 and 19 is bound to create anomalies pointed out above, the conclusion we must reach is that it was through inadvertence that the old language used in ss. 157 to 168 of the Bombay Corporation Act was allowed to be retained without carrying out the change of language necessitated as a result of r. 10 giving discretion to the Commissioner either to maintain one book or several books wardwise. The result, therefore, is that the assessment-book in question must be held to be valid and no objection as to the validity of the bills and demand notices can be raised on the ground that only one assessment-book and not wardwise books are kept. The appellant, thus, does not succeed on either of the two contentions raised on his behalf. The appeal fails 'and is dismissed with costs. G.C. Appeal dismissed. Gulabchand Bapalal Modi vs Municipal Corporation Of Ahmedabad ... on 4 March, 1971 17 | {
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} |
J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 Equivalent citations: 1972 AIR 1954, 1972 SCR (1) 651, AIR 1972 SUPREME COURT 1954, 1972 LAB. I. C. 689, 1971 2 LABLJ 552, 1972 (1) SCR 651, 23 FACLR 367, 41 FJR 186 Author: P. Jaganmohan Reddy Bench: P. Jaganmohan Reddy, C.A. Vaidyialingam PETITIONER: J. K. SYNTHETICS LTD. Vs. RESPONDENT: J. K. SYNTHETICS MAZDOOR UNION DATE OF JUDGMENT09/09/1971 BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN VAIDYIALINGAM, C.A. CITATION: 1972 AIR 1954 1972 SCR (1) 651 1971 SCC (3) 509 CITATOR INFO : RF 1976 SC 611 (15) D 1976 SC1207 (218) ACT: Bonus-When dividends on shares are extraneous income for the purpose of payment of Bonus Act, 1965 The principle for determining the share required for rehabilitation. HEADNOTE: A dispute for Bonus was raised by the workers of the Appellant company before the Tribunal for the Bonus year 1962-63, as the appellant company which made profit during the year, did not pay any bonus to the workers; but only a gratuity of one month was paid to them. According to revised returns filed by the workers, there was an available J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 1 surplus of Rs. 5.34 lakhs; but according to the management, there was a deficit. There were two main points of dispute : (1) the workers challenged the deduction of Rs. 4.1 lakh received as dividend by the company as extraneous income. According to the management however, as the company invested part of the paid up capital in hares which earned an income of Rs. 4.1 lakh, the company was entitled to claim this amount as an extraneous income because the workers had made no contribution in its earning and so this amount should be deducted from the gross profit. (2) The workers also disputed Rs. 75.89 lakhs shown by the management as the annual share required for rehabilitation. The management divided the plant and machinery of the company into two blocks. The original cost of the plant and machinery for firdt block was 133.00 lakhs and Rs. 15.0 lakhs for the second block. The appellant company claimed the `multiplier' (which is the probable increase in the price of assets at the time of rehabilation over the original cost) for each of the two blocks as 6 and the `deviser' (number of years after which the asset require s replacement) for the first block as 10 and for the second block as 11. The Tribunal decided the first point against the management because even though there was share capital available to the appellant, instead of utilising it as working capital, it had borrowed amounts to work the Nylon factory for which it bad to pay an interest of over Rs. 5 lakhs. In these circumstances, it disallowed the claim for deduction on the ground that it would be unfair to allow the management to treat the income from investments as extraneous income and still reduce the profits by raising loans and pay interests resulting in diminution of the surplus. On the second point the Tribunal admitted only a fraction of the total amount as annual share required for 'rehabilitation. It held the 'Multipliee as 4 for the first block and 2 for the second block and the 'deviser' as 13 and 14 respectively. After deducting the prior charges from the gross profits, the tribunal computed the available surplus to be Rs. 3.25 lakhs and of this, 60 per cent payable as bonus would come to Rs. 2,11,000/-. As the company bad already distributed Rs. 90,000 the tribunal directed payment of the balance of Rs. 1,21,000/- a# bonus. In appeal by special leave, a further point was agitated before the Court as to whether the Respondent can challenge a finding by the Tribunal in the absence of an appeal by it. Dismissing the appeal, HELD, : (i) Since the dividend in the present case is the return from investment-, of part of the paid up capital of the company which is invested for the purpose of earning an income, it cannot be construed as 652 ,extraneous income and the Tribunal is justified in disallowing tile dividend on shares as a valid deduction. The return on paid up capital is one of the prior charges admissible as a valid deduction and if any amount is .earned J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 2 from the employment of capital unconnected with the business of the company, the labour cannot claim the right to participate in its returns. Further if any reserve is utilised for working capital, whether this .reserve is depreciation reserve or any reserve, a return in respect of they are also allowed as prior charges, at a reduced rate. The company has the discretion to invest its capital in various activities; but it cannot deprive the workmen of the benefits of the returns derived therefrom unless the investments in such activity is extraneous to the activities of the company, in the earning of which the workers had not made any contribution. In the present case, the return from the investments is a return on a part ,of the paid up capital which is invested for the purpose of earning an income and therefore, it is not extraneous income as claimed by the management. [656 G-B] (ii) The elements which are important for the computation of annual rehabilitation is the price of the asset at original cost, the period for which these assets can be used before requiring rehabilitation due to rise in prices, devaluation etc. In other words, for computation of annual rehabilitation, the 'multiplier' and the 'deviser' is to he found out. In the present case, the management failed to place satisfactory evidence before the Tribunal to arrive at a proper 'multiplier' and 'deviser' and in absence of any proof as to how and on what basis the Tribunal had arrived at its own 'multiplier' and 'deviser' on a pure conjecture and guess work, the appeal cannot be sustained. Further, the Tribunal is not justified in including the trading investments to be available for the purpose of re- habilitation as these investments were made prior to 1960 when the company was an investment company and as such these investments were not connected with the activities of the present company, which was floated only in 1960. [666 G] (iii)In appeal, the respondents are entitled to challenge or support the judgmentin his favour given before the High Court even upon grounds which are negatived in the judgment. Workmen of M/s. Hindustan Motors Ltd. v. M/s. Hindustan Motors Ltd. & Anr. [1968] 2 S.C.R. 311, M/s. Gannon Dunkerley & Co. v. Their Workmen, [1971] 22 F.L.R. 158, Management of Northern Railway Cooperative Society Ltd. v. Industrial Tribunal, Rajasthan, [1967] 2 S.C.R. 476, Ramabhal Ashabhai Patel v. Dabhai Ajit Kumar Fulshingji [1965] 1 S.C.R. 712, Associated Cement Co. Ltd. v. Its Workmen, [1959] S.C.R. 925, Khandesh spinning & Wvg. Mills Co. Ltd. v. Rashtriya Gir Kamgar Samiti Jalgoan, [1960] 2 S.C.R. 841, Bengal Kagazkar Mazdoor Union v. Titaghar Paper Mills Co. Ltd., [1964] 3 S.C.R. 38, National Engineering Indnstries Ltd. v. Its Workmen, [1968] 1 S.C.R. 779 and Honorary Secretary, Coimbatore District Textile Workers Union [1962] Supp. 2 S.C.R. 926, referred to. J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 3 JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1675 of 1970. Appeal by special leave from the Award dated February 18, 1970 of the Industrial Tribunal, Rajasthan, Jaipur in Case No. 1.T. 12 of 1967. G. B. Pai, P. N. Tiwari and O. C. Mathur, for the appellant. M. K. Ramamurthi and Vineet Kumar, for the respondent, The Judgment of the Court was delivered by P. Jagamohan Reddy, J.-This Appeal is by Special'. Leave against the Award of the Industrial Tribunal, Rajasthan directing the payment of a bonus of Rs. 1,21,000/- apart from an amount of Rs. 90,000/- already disbursed to the workmen of the Appellant for the year 1962-63. The dispute for the bonus year beginning 1st July '62 and ending 30th June '63 was raised by the workmen because the Company which had admittedly made profits, did not pay them a bonus though a gratuity of one month was given to them. The following dispute was therefore referred to the Tribunal: "Whether workmen of M/s. J.K. Synthetic Ltd., Kota are entitled to any bonus for the year 1962-63 and whether payment of one month's wages as gratuity by the management can be regarded as payment towards bonus for the, year in question?". The Mazdoor Union (hereinafter called 'the Union') on behalf of the Workmen contended that on the basis of the calculation,; of available surplus they were entitled to a bonus of 60% in accordance with the bonus formula which will entitle them to a five months wages apart from the one month's wages already paid to them. The first statement of computation filed on behalf of the workers was obviously incorrect because it did not take-into account the various prior charges such as Income Tax, return on reserves, rehabilitation reserve etc. which are deductible under Full Bench formula as approved and accepted by this Court from% time to time. It therefore filed another revised return showing an available surplus of Rs. 5.34 lakhs. The management on the other hand challenged the validity of the claim as according to it there was no available surplus for distribution even though they had already paid one month's bonus wrongly styled as gratuity. The calculations given by it were also found to be equally wanting. As such it filed a revised calculation showing a net deficit of Rs. 72.35 lakhs. It may however, be mentioned that as pointed' out by the Tribunal, there was no dispute with regard to any of the eight items which comprised the computation of gross profits amounting to Rs. 62.16 lakhs. The Union also did not dispute the deduction of interest on debentures of Rs. 0.06 lakhs; share transfer fee of Rs. 0.05 lakhs; the notional normal depreciation of Rs. 30.57 lakhs; and the return on share capital of Rs. 7.50 lakhs. It had however challenged the deduction of Rs. 4.1 lakhs received as dividend on shares as extraneous income which was being claimed as a deduction by the management. It also disputed an amount of Rs. 1, 11,000/- shown as return on reserves employed in the business and Rs. 75.89 lakhs shown as the annual share required for rehabilitation. The method of calculation of income tax amounting to Rs. 15.23 lakhs was also objected to. The four" J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 4 items upon which the Tribunal was called on to adjudicate therefore were: ( 1 ) Deduction of Rs. 4. 10 lakhs received as dividend on shares from the gross profits as extraneous income; (2) Rs. 1, 11,000/- as return on reserves employed in business; (3) Rs. 75.89 lakhs as annual share required for rehabilitation, and (4) Rs. 15.23 lakhs towards Income tax. With respect to the first issue the Tribunal felt that even though there was share capital available to the Appellant, instead of utilising it as working capital it had borrowed amounts to work the Nylon factory for which they had to pay an interest of over Rs. 5 lakhs. In these circumstances it disallowed the claim for deduction on the ground that it would be unfair to allow the management to treat the income from Investments as extraneous income and still reduce the profits by raising loans and pay interests resulting in demunition of the surplus. On the second issue the objection of the Union for a deduction of Rs. 1,11 lakhs as return on reserves employed as working capital was disallowed-on the ground that the statement M.W. 2/1 produced by Talwar, established that the excess of liability over the assets was utilised as working capital during the course of the bonus. year. The claim of the management for deduction of Rs. 75.89 lakhs as share required for rehabilitation was however disallowed, as the oral and documentary evidence produced on behalf of the Management did not according to the Tribunal either establish that the life of the Plant and machinery was only 10 years for 1961- 62 Block (hereinafter called 'the first Block') and 11 years for 1962-63 Block (hereinafter called 'the second Block') nor was the deviser of six years for both the first and the second Block reasonable. It found that the more reasonable multiplier was 13 years for machinery purchased in respect of the first Block and 14 years for machinery purchased in respect of, the second Block and likewise a reasonable deviser for these two Blocks would be four years and two years respectively. In so far as rehabilitation requirements for buildings was concerned the Union did not raise any dispute to the claim of the management amounting to Rs. 0.90 lakhs. As there was also no dispute about the original cost of plant & machinery, the Tribunal by applying the multiplier and deviser as aforesaid computed the annual rehabilitation replacement for plant, machinery and buildings as follows : Rupees in lakhs Block Origi Mul- Repla- Break- Balan- Funds Net Life Annu-- of nal tip cement down ce avail Repla al re plant lier cost value able cement quire & Mach cost cost ment 61-62 133 -004 522 .006 -65 525 -35113 -28412 -07 1331 -70 62-63 15-00 2 -0 30 -00 0 .'75 29 -25 29 -25 14 2 -10 -------- J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 5 33.80 Rehabilitation replacement for machinery.......33.80 Rehabilitation replacement for building (as per Company calculation)................................0.90 Total 34.70 Accordingly the additional rehabilitation to be providedfor was calculated as under Funds available : Depreciation upto 31-3-62............Rs. 15 .68 lakhs General reserves ....... 12.00 Investments .....................85.60 113 -28 Annual rehabilitation replacement........34.70 Less : Depreciation provided during the year30 -57 _________________ Additional rehabilitation to be provided . .4.23 In so far as Income tax calculation of Rs. 15.18 lakhs was accepted being in accordance with the calculations under the Income Tax Act with respect to which it was said the Union did not find itself in a position to contest. The Tribunal after giving its finding on the matters in issue computed the available surplus as follows: 1. Gross profit............Rs. 62 -11 lakhs 2, Deduct prior charges: Rs. 1. Notional normal depreciation.........30.57 lakhs 2. Direct tax...........................15.18 3. Return on share capital..............7.50 4. Return on reserves...................1.11 5. Additional requirement for rehabilitation4 -23 --------- 58.59 Available suprlus ....... Rs. 3 .25 lakhs of the 60% payable as bonus would come to Rs. 2,1 1,000/-. As the Company had already disbursed Rs. 90,000/-, the Tribunal directed payment of the balance of Rs. 1,21,000/-. Before us only two items of controversy have been urged namely:(1) relating to extraneous income of Rs. 4.10 lakhs and(2) relating to rehabilitation requirement amounting to Rs. 75.89 lakhs, the first of which the Tribunal disallowed while in respect of the second it only admitted Rs. 4.23 lakhs. With respect to the first item, the disallowance of Rs. 4.10 lakhs, the management not only claimed this amount but also Rs. 7.5 lakhs as return on paid up capital of Rs. 125 lakhs @ 6% per annum. Obviously even on a cursory glance it would appear that the management was seeking to obtain double benefit in respect of investments made out of the paid up capital. The reasons which impelled the Tribunal to reject the claim of the management have, already been noticed and it would therefore be unnecessary to reiterate them. It however, appeared to the Tribunal that if the Company wanted to exclude income from investments it cannot also be allowed J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 6 6% return on that part of the share capital which is invested elsewhere and at the same time be allowed to treat the income of Rs. 4.10 lakhs earned therefrom as extraneous income, because apart from deducting income tax on this amount the Company also meets the expenses of administration and management in respect of the said investments. In this view it sustained the objection of the Union. The return on paid up capital is one of the prior charges admissible under the Full Bench formula as approved by this Court. It is based on the principle that while the claim of labour to a share in the profits by way of bonus is in furtherence of social justice, the claim of the capital for a fair return to the investor and also to keep the industry running efficiently which will in the long run enure for the benefit of labour is equally based upon that principle. If therefore any amount is earned from the employment of capital unconnected with the business of the Company, the labour cannot claim the right to participate in its returns. Apart from this if any reserves are utilised for working capital whether these reserves are depreciation reserves or any other, a return in respect of these also is allowed as a prior charge at a reduced rate because utilisation of such reserves would obviate the borrowing from outside sources for which a higher interest has to be paid and which in the long run will not be for the benefit of the- workers. These principles have been laid down by this Court as well accepted in Industrial adjudication. While it is true that the Company has the discretion to invest its capital in various activities it cannot on that account deprive the workmen of the benefits of the returns derived therefrom unless of course the investments in such activity is extraneous to the activities of the Company, in the earning of which they had not made any contribution. Whether in any particular case the return on investments amounts to an extraneous income will depend on the facts and circumstances of each case. So far as the case before us is concerned there can be no doubt that the return from the investments is a return on a part of the paid up capital of the Company which is invested for the purpose of earning an income. It cannot therefore be construed as extraneous income. In Workmen of M/s. Hindustan Motors Ltd. v. M/s. Hindustan Motorv Ltd. & Anr.,(1) to which one of us was a party (Vaidialingam, J.) no doubt where the income of the Company was from interest on (1) (1968) 2 S.C.R. 31 1. fixed deposits, it was treated as extraneous income because it was held that it accrued to the Company without any contribution by the workmen. At the same time the Company was not permitted on equitable ground to claim the interest paid by it on its borrowings as business expenditure. Further in that case even the income received by the Company from its foreign collaborators as commission on sales effected by the said collaborators of their own cars in India was treated as extraneous income to which the Company's workmen made no contribution and was therefore not to be taken into account in calculating the available surplus. In the recent case of MI? Gannon Dunkarley & Co. Ltd. v. Their Workmen(1), by a reference to the decision in the Hindustan Motor's this principle was again reiterated. In that case one of the question which this Court considered was whether dividends received from trade investments should be deducted from the gross profits- for calculating the surplus available for bonus. It was held that "these trade investments have to be treated as capital assets of the Company forming part of their trading activities. The income accruing from these dividends must therefore be re- lated to the business of the Company as a whole and hence the income from these dividends has to be included in the income for purposes of calculation of surplus available for bonus". In this view we think the Tribunal J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 7 was justified in disallowing the deduction of Rs. 4.10 lakhs and in fact on behalf of the Appellant it was frankly conceded before us that the claim in respect of the said item cannot be pressed on any tenable or valid grounds. This brings us to the only remaining controversy, the provi- sion for rehabilitation requirement. The claim for a prior charge on this account like any other prior charge has to be established by evidence but As this item results in a substantial deduction from the gross profits and reduces available surplus, materially, effecting the claim of the employees for bonus, each constituent element which is necessary for computing the amount to be provided for must be proved by satisfactory evidence and cannot be left to surmises and conjectures. It is idle to suggest that as the employees have not in any particular case given any evidence or have not produced any material to controvert the claim of the management that claim must be admitted, because it is the management that is in possession of all the relevant material and is accordingly required to satisfactorily substantiate that claim. The elements which are important for the computation of annual rehabilitation requirement, is, the price of the assets at the original cost, the period for which these assets can be used before requiring rehabilitation and the probable increase in the cost of rehabilitation, due to rise in prices, devaluation etc. The probable increase in the price of assets at the time of the rehabilitation over the original (1) (1971) 22 F.L.R. 148. L3SupCI/72 cost is the multiplier, as it is measured in terms of multiples of the original cost. The number of years after which the asset requires replacement, rehabilitation or modernisation is termed the deviser because the probable cost on a future date has to be provided annually and therefore has to be divided by the number of years at the end of which the amount would be required. There is in this case no dispute between the parties as to the original cost of the plant and machinery which is for the first block Rs. 133.00 lakhs and for the second block Rs. 15.00 lakhs. The only controversy is about the multiplier and the deviser which has been adopted by the Tribunal. The Appellant had in its written statement claimed the multiplier for each of the two blocks as six and the deviser for the first block as 10 and for the second block as 11 but as we have already noticed earlier the Tribunal has accepted the multiplier as 4 for the first block and 2 for the second block and the deviser as 13 and 14 respectively. Even in respect of these the learned Advocate for the Appellant admitted that he is not in a position to contest the reasonableness of what has been adopted by the Tribunal but the Respondent has challenged the very basis adopted by the Tribunal as being more dependent on guess work than on any evidence or material before it. On behalf of the management the right of the Union to chal- lenge the multiplier and deviser, in the absence of an Appeal by it is strenuously contested but in our view there is little force in this objection. The appeal by the employer is against the grant of bonus to the employees which implies that the method of computation of the gross profits, as well as of the available surplus and the rate at which the bonus is granted can be subjected to scrutiny. It is needless to recount the several priorities that have to be deducted and the items in respect of which amounts have to be added, before arriving at the available surplus. In an Appeal, the several steps which have to be taken for computation of the available surplus either in respect of the actual amounts or the method adopted, can be challenged. If so the Union, even where it has not appealed against the Award, can support it on a method of computation, which may not have been adopted by the Tribunal but nonetheless is J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 8 recognised by the Full Bench formula of this Court so long as in the final result the amount awarded is not exceeded. We are supported in this view by a decision of this Court in Management of Northern Railway Cooperative Society Ltd. v. Industrial Tribunal, Rajasthan, Jaipur & Anr.(1) where it was held that the Respondents were entitled to support the decision of the Tribunal even on grounds which were not accepted by the Tribunal or on other grounds which (1)[1967] 2 S.C.R. 476. may not have been taken notice of by the Tribunal while they were patent on the face of the record. A passage from the case of Ramanbhai Ashabhai Patel v. Dabhi Ajithkumr Fulsinji & Ors. (1), will give the reasons adopted by this Court for the aforesaid view. That no doubt was an election appeal but it was said that though the rules framed by this Court in exercise of its rule making powers do not contain any provisions analogous to Order XLI Rule 22 of the Civil Procedure Code, which permits a party to support the Judgment appealed against upon a ground which has been found against him in the Judgment, it was held that this Court has the jurisdiction to sustain the Judgment on grounds which have been found against the Respondent. Mudholkar, J. speaking for himself, Gajendragadkar, C.J., Wanchoo, Hidayatullah, and Raghubar Dayal, JJ.. after considering whether the provisions of Order XVIII, Rule 3 of the Rules of this Court which requires parties to file statement of the case could limit it only to those contentions which deal with the points found in favour of that party in the Judgment appealed from, observed at page 724: "Apart from that we think that while dealing with the appeal before it this Court has the power to decide all the points arising from the Judgment appealed against and even in the absence of an express provision like O.XLI, R. 22 of the Code of Civil Procedure it can devise the appropriate procedure to be adopted at the hearing. There could be no better way of supplying the deficiency than by drawing upon the provisions of a general law like the Code of Civil Procedure and adopting such of those provisions as are suitable. We cannot lose sight of the fact that normally a party in whose favour the Judgment appealed from has been given will not be granted special leave to appeal from it. Considerations of justice, therefore, require that this Court should in appropriate cases permit a party placed in such a position to support the judgment in his favour even upon grounds which were negatived in that Judgment". In the view we have taken, we will have to consider the plea on behalf of the Respondents that the rehabilitation requirement has not been properly established, but this need only be entertained if we come to the conclusion that the main contention that the rehabilitation requirement has not been properly computed and if so computed there will be no available surplus for awarding bonus to the employees. (1) [1965] 1 S.C.R. 712. The learned Advocate for the Appellant as we said earlier has not seriously insisted on the adoption of the multiplier and the deviser claimed by the Appellant but on the other hand contends that even if the multiplier and the deviser as adopted by the Tribunal is followed the trade investments amounting to Rs. 85.6 lakhs cannot be said to be available for computation of rehabilitation J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 9 requirement. On this assumption while not disputing the computation of the Tribunal in respect of the original cost which as we have earlier mentioned has not been disputed, even by accepting the multiplier, the break-down value and the deviser as adopted by the Tribunal the annual amount required would be Rs. 10.71 lakhs and not Rs. 4.23 lakhs as computed by the Tribunal. The only variation between the computation of the appellant and that of the Tribunal is in respect of the funds available which according to the Tribunal is Rs. 113.28 lakhs including the trade investment of Rs. 85.6 lakhs and according to the Appellant it is Rs. 27.8 lakhs comprising of only two items namely depreciation of Rs. 15.68 lakhs and general reserve of Rs. 12 lakhs. If this computation isaccepted then there will be a negative balance of Rs. 2.9 lakhs.This result is arrived at as follows : Gross profits .............................Rs. 62.11 lakhs 1. Notional normal depreciation..Rs. 30.57 lakhs 2. Direct tax ....................Rs. 15 .18 3. Return on share capital.........Rs. 7 .50 4. Return on reserves..............Rs. 1 .11 5. Additional requirement for rehabilitationRs. 10 .71 Rs.65. 07" Negative balance. (-) Rs. 2 .96 lakhs It will be observed that the prior charges comprised in items 1 to 4 are not really in dispute. It is only the additional requirement for rehabilitation that- is the bone of contention between the parties and this is challenged on two grounds; firstly that the trade investment of Rs. 85.6 lakhs are available funds for rehabilitation requirement as admitted by the Appellant to be so available in the statement which it furnished to the Tribunal; secondly that no claim for rehabilitation requirement has been substantiated. On the first ground it is contended that the question, what was the: available amount for the annual requirement was specifically before the Tribunal, and that it was the case of the management and not of the workmen that an amount of Rs. 1,23,90,000/- was available consisting of Rs. 26.30 lakhs towards depreciation, Rs. 12 lakhs towards general reserves and Rs. 85 6 lakhs towards investments. In these circumstances the Tribunal was not called upon to investigate the question as to what exactly was the nature of the investments or whether any of them were realisable or were not available for meeting the rehabilitation requirements. Further there was no grievance made in this behalf in the Special Leave Petition and therefore the management is, it is submitted stopped from challenging before his Court the validity of inclusion of this amount in the amount available for rehabilitation. It is further submitted that assuming that this question can be agitated, in the absence of any specific investigation as to the nature of the investments and more particularly when the management itself had shown this amount as being available, the Appellant J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 10 cannot be permitted to say that it is not available. The contention of the respondents proceeds on a basic error namely that the Appellant had held out that the trade investments were available for rehabilitation requirement. This is not so. In the amended written statement filed on 4-7-69 after obtaining the permission of the Tribunal on 3-7-69, the Appellant claimed the annual share required for rehabilitation as Rs. 93,56,207/-. Even in the statement filed earlier on 10-4-69 it showed two amounts as being available namely depreciation of Rs. 26.31 lakhs and general reserves of Rs. 12 lakhs. It is submitted by the Appellant that only when the arguments were completed on behalf of the Company on 9-12-69, having regard to the claim made by it for deduction of Rs. 4.1 lakhs as extraneous income derived from the trade investments, the corpus of Rs. 85.6 lakhs which earned that income was also shown as available and a statement to 'hat effect was filed on the same day to facilitate the Tribunal in arriving at an Award. In as much as we are not allowing the deduction of Rs. 4.1 lakhs as extraneous income, the question whether the corpus should be treated as being available also has to be considered in the light of the decisions of this Court. The Appellant in our view is fully justified in urging this contention before us, as it cannot be said that this was not raised before the Tribunal. The Tribunal had ample opportunity of considering this aspect since it did specifically consider the nature of the income therefrom. Assuming for the present that the adoption by the Tribunal of the multiplier and deviser can be justified, though the validity of the Tribunal's award in this behalf has been seriously challenged 'before us, the question to be determined is whether the investments of the Appellant amount to Rs. 85.6 lakhs is available for rehabilitation which in turn will depend upon whether these investments are made in the course of the business of the Company or are unconnected with its business and only invested with a view to earning extraneous income. The principles upon which rehabilitation grant is to be calculated as laid down by this Court is that the depreciation reserves, or in the case of other reserves only if they are available as liquid assets and cash and not earmarked for any specific purposes, are deemed to be available and can be taken into account in computing the annual requirement. The depreciation reserve, the object of which is to meet the requirement of replacement, rehabilitation and modernisation at a future date is considered to be always available whether it is in the form of a liquid asset or not. It is obvious that even this amount will not achieve the purpose of recouping the cost of replacement of the wasted assets and it is for that reason the claim of the industry for rehabilitation in addition to the admissible depreciation has been recognised. Then there are the general reserves, capital reserves and development reserves all of which will be considered to be available if they are in the form of liquid assets or cash. The question in some of these cases will be whether they are considered to be the capital assets of the Company kept in that form in the course of its business or kept as investments outside the business of the Company for the purposes of earning an extraneous income. If it is the former then they are available but if it is the latter they cannot be brought into account for calculating the rehabilitation requirement. As it happens in most cases the claim by the employer is that the reserves are either wholly or partly not available because they J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 11 have been used as working capital and consequently the, amount to be utilised should not be excluded from the amount claimed towards rehabilitation. The principles governing what deductions should be made from out of reserves before calculating the amount in respect of rehabilitation for the bonus year were set out in the Full Bench formula and have been restated in the Associated Cement Co. Ltd. v. Its Workmen(1). The two items according to that decision that are to be taken into consideration are the general reserves available to the employer and the reserves which have been reasonably earmarked for specific purposes of the industry. In explaining what was meant by availability of the reserves or the earmarking for specific purposes Subba Rao, J. as he then was in Khandesh Spinning & Wvg. Mills Co. Ltd. v. Th.? Rashtriya Girni Kamgar Sang Jalgaon(2), observed at page 845-846 :- "We do not think that by using the said words this Court meant to depart from the well recognized principle that if the general reserves have not been used as working capital, they cannot be deducted from the rehabilitation amount. The reserves may be of two kinds. Moneys may be set apart by a company to meet future. payments which the Company is under a contractual or statutory obligation to meet, such as gratuity etc. These amounts are set apart and tied down for a specific purpose and, therefore, they are not available to the employer for rehabilitation purposes. But the same thing cannot be said of the general reserves : they would be available to (1) [1959] S.C.R. 925 @ 970. (2) [1960] 2 S.C.R. 841. The use of the words "reasonably earmarked" is also deliberate and significant. The mere nominal allocation for binding purposes, such as gratuity etc. in the Company's books is not enough. It must be ascertained by the Industrial Court on the material placed before it whether the said amount is far in excess of the requirements of the particular purpose for which it is so earmarked and whether it is only a device to reduce the claim of the labour for bonus". What is meant by the above observations in the Khandesh Spinning & Wvg. Mills case was later explained by Wanchoo J, as he then was in Bengal Kagazkal Mazdoor Union & Anr. v. The Titaghur Paper Mills Co. Lid.(1). This was what was said at page 54 "All that that decision lays down is that that part of the reserves which go to make up the working capital which is in the shape of raw materials etc. or earmarked reserve will not be deducted from the I gross-rehabilitation amount; it does not lay down that all cash reserves in the shape of depreciation reserve, general reserve, renewal reserve and so on and also in the shape of investments and advances cannot be deducted from the gross rehabilitation amount as they may be used as working capital next year". Now the question of trade investments unconnected with the purposes of the industry fell for consideration in the National Engineering Industries Ltd. v. Its Workmen (2). In this case the Company had an investment of Rs. 18.22 in shares, which were treated by this Tribunal as liquid assets available for rehabilitation. But the Company contended that this investment can either -be J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 12 treated as a trading transaction carried out in the ordinary course of business or as a capital asset. If it was the former then it should have been allowed the loss of Rs. 1.72 lakhs as trading expenditure but instead the tribunal had added the profits therefrom to the gross profits, thereby treating the investment as capital asset. It could not therefore deduct Rs. 18.22 lakhs as a fund available for rehabilitation cost. Negativing this contention of the Company, Shelat J, observed at page 796-797 :- "We fail to see any contradiction on the part of the Tribunal. The balance sheet for the year 1957-58 contains two schedules; Schedule A shows fixed assets and schedule B shows trade investments of the value of (1) [1964] 3 S.C.R. 38. (2) [1968] 1 S.C.R. 779 Rs. 18,21,571/-. The Company not being an investment Company the investment of Rs. 18.22 acs in shares of other joint stock Companies prima facie represents extra capital not required as working capital for otherwise the Company could not have spared this amount for investment in the stocks of other Companies. The Tribunal was right in treating this investment as a capital asset and in refusing to treat the loss therefrom as trading expenditure. 'the Tribunal at the same time could deduct this amount from the rehabilitation cost because that amount was available to meet the rehabilitation cost. The investment in shares could easily, if the Company was so minded, be converted into cash and utilised for replacement of its worn out machinery". In Gannon Dunkerley's case also these principles were reiterated. It was held in that case that in calculating rehabilitation grant one of the principles which this Court has laid down is that the depreciation reserve must always be deducted irrespective of the fact whether it is available or not as a liquid asset. In addition other reserves like general reserve are also to be deducted if they are available as liquid reserves and are not ear-marked for any specific purpose. The capital reserve and the development reserve can also be deducted if there is material to show that they existed in the form of liquid assets or cash. The question would be whether they are capital assets of the Company kept in that form in the course of its business or whether they have been treated as investments outside the business for the purposes of earning extraneous income. If they are investments made in the course of its business they are to be treated as part of the capital but otherwise if they are extraneous to the business they do not form part of the reserves available for rehabilitaion. It may be observed that in the National Engineering Industries Ltd. v. lts Workmen(1), an exception had been made in the case of an investment Company the investment of which is to be treated as working capital employed in the business of the Company. The Companies Act placed restrictions on the purchase of shares by one Company, of shares of any other body corporate except to the extent and except in accordance with the restrictions and conditions specified in Sec. 372 of that Act as amended by Act 65 of 1960. By. Sec. 373 it is enjoined on Companies investing after 1st April 1952 in shares of any other body corporate in exercise of the limit specified in sub-section (2) and the second proviso to the said-sub-section of Sec. 372 to obtain the authority of 'he Central Government within six months from the commencement of the Act and if such authority and approval is not so obtained the Board of Directors must dispose of the investments in excess of the limits specified in the aforesaid provision within two years from the commencement of the Act. It is also provided by J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 13 Sec. 372(10) that after the commencement of the Companies Amendment Act a statement should be annexed to the balance-sheet giving the details of, the investments acquired; the bodies corporate in the same group, of which the shares have been acquired, whether the investments are existing or not, and the nature of the said investments. An exception however has been made by the proviso to the said sub-section in the case of investment Companies (which are those whose principal business is the acquisition of shares etc.) that it shall be sufficient if the investments, existing on the date as at which the balance-sheet to which the statement is annexed has been made out From these provisions it is contended that the balance-sheet in this case shows only those details which are required to be given by an investment Company which is also consistent with the plea,, ,that the investments of the Appellant were made prior to 1952 when it was an investment Trust Company and these investments, which are the same exceeded the limits prescribed by the Companies Amendment Act without having to conform to the conditions of having either to obtain approval of the Central Government or to dispose of the excess within two years i.e. by 31st March 1962. On behalf of the Respondents however it is submitted that there has been no finding by the Tribunal that the Company is an Investment Company or that the investments were made prior to, 1952 as an Investment Company which would entitle it to treat those investments as not available for the purposes of rehabilitation within the exception indicated in the National Engineering Industries case. In our view this submission has no force. There is ample justification in the contention of the Appellant's Advocate that the Tribunal did advert to the fact that the Company invested initially a capital of Rs. 75 lakhs as an investment Trust Company and from its inception these investments have been made and that it is only after the amendment in 1960 when it was not possible for it to invest further amounts that it changed its name, increased its capital and started the present industry. On this, aspect of the matter the Tribunal stated thus : "Originally the Company was floated as J. K. Investments Trust Ltd. It had a share capital of Rs. 75 lakhs. They invested this amount and some loans in debentures and loans. Due to amendments in Company law they had to stop further investment from 1960 onwards and changed the name of the Company to J. K. Synthetics Limited, raised additional Rs. 50.00 lacs share capital and started this Nylon factory. Thus to date the share capital of the Company is Rs. 125.00 lacs including the old share capital of Rs. 75.00 lacs of J. K. investments Trust Ltd. Now instead of utilising the old share capital and loans invested in debentures the Company took separate loans to work the Nylon factory for which according to the balance sheet they had to pay over Rs. 5 lacs as interest on loans". It is also apparent from Schedule 'E' statement forming part of the balance-sheet as at 30th June, 1963 that a list of trade investments held by the Appellant have been given. There are two notes attached thereto. Note (1) states- Investments in the Companies marked with asterisks exceed ten per cent of their respective subscribed capital. These investments were acquired before the commencement of the Companies (Amendment) Act, 1960, while Note (2) states-The Total investments of the Company exceed thirty per cent of its subscribed capital. These investments were acquired before the commencement of the Companies (Amendment) Act, 1960. J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 14 Having regard to these undisputed facts it appears to us clear that the trading investments were made prior to 1960 when the Company Was an Investment Company, as such these investments are not connected with the activities of the Company, are extraneous to its business and do not form part of the reserves available ,for rehabilitation. In the circumstances the Tribunal is not justified in including this amount in the amounts available for rehabilitation purposes. While this is so and the result of the non-exclusion of Rs. 85.60 lakhs would result in a negative balance, the respondents as we have already held are entitled to- challenge the claim for rehabilitation on the ground that the essential requisites have not been established by any cogent or sufficient evidence. In computing the requirements for rehabilitation as has been stated often, regard must be had, to two imponderables out of the three main elements because one of them namely the original cost of the asset is specifically ascertainable while the other two have to be established as near as possible which might to some extent involve an estimate based on evidence deducible therefrom. These two imponderables are the multiplier and the deviser. Unless all these elements are determined the amount required for rehabilitation cannot be ascertained. of course the scrap value of the old assets has also to be ascertained but this does not involve any difficulty because normally it is taken as 5% of the value of the assets at cost. Even so the determination of the amount for rehabilitation no doubt poses problems but it is suggested that a reasonable method would be to divide them into blocks, accord- ing to the nature of the asset and the year in which the assets have been acquired. The cost of the separate blocks has then to be ascertained and their probable future life has to be estimated. Once this estimate is made it becomes possible to anticipate approximately the year when the plant and machinery would need replacement and the probable price of such requirement at a future date when the asset requires replacement. In determining this difficult question the Tribunal as already observed must have before it all available evidence from which a reasonable and probable adjudication can be made in respect of these essential requisites. The Respondent's Advocate submits that the Tribunal while quite properly rejecting the evidence produced on behalf of the Appellants indulged in guess work when it adopted arbitrarily the multiplier and the deviser. It is his case that the determination of the life of machinery depends on various factors such as for instance nature of the machinery, its quality, the nature of the industry, the efficiency of workmen etc. In the Hindustan Motor's case, Bhargava, J, after examining the several cases relating to this aspect of the matter observed at page 319 : "The life of machinery of one particular factory need not necessarily be the same as that of another factory. Various factors come in that affect the useful life of a machinery. There is, first the consideration of the quality of machinery installed. If the machinery is purchased from a country producing higher quality of machines, it will naturally have longer life than the machinery purchased from another country where the quality of production is lower. Again, the articles on which the machinery operates may very markedly vary the life of a machine. If, for example, a machine is utilised for grinding of cement the strain on machine will necessarily not be the same as on a machine which operates on steel or iron". J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 15 In the Honorary Secretary South India Millowners' Association & Ors. v. The Secretary, Coimbatore District Textile Workers' Union(1), to which a reference had been made in the above case, after accepting, on the facts of that case, that the life of the textile machinery was adopted as 25 years, this Court laid down the following principle at p. 933. "We are not prepared to accept either argument because, in our opinion, the life of the machinery in every case has to be determined in the light of evidence adduced by the parties". (1) [1962] 2 Supp. S.C.R. 926. The Advocate on behalf of the Appellant on the other hand says that the Full Bench Formula for determining rehabilitation as accepted in Associated Cement Companies(1) case laid down an elastic measure for determining the probable cost which was to be estimated "as near actualities or realities as possible". At pages 967-968 Gajendragadkar J, as he then was observed : "The estimate about the probable life of the plant and machinery'is itself to some extent a matter of guess work and any anticipation, however, intelligently made, about the probable trend of prices during the interven- ing period would be nothing but a guess. That is how, in determination of this problem, several imponderables face the tribunals. One of the points which raises a controversy in this connection is : What level of prices should the tribunal consider in making its calculations about the probable cost of replacement..... It seems to us that in order to enable the Tribunal to make an estimate in this matter as near actual ties of realises as possible it is necessary that the Tritunal should be given full discretion to admit all relevant evidence about the trend in price levels .... The problem of determining the probable cost of replacement itself is very difficult; but the difficulty is immediately increaser when it is remembered that the claim for rehabilitation covers not only cases of replacement pure and simple but of rehabilitation and modernisation. In the context rehabilitation is distinguished from ordinary repairs which go into the working expenses of the industry. It is also dis- tinguished from replacement .... That is why we think it is necessary that the tribunals should exercise their discretion in admitting all relevant evidence which would enable them to determine this vexed question satisfactorily". Keeping these observations in view what we must see is whether the Tribunal was justified on the evidence in adopting the particular multiplier and the deviser. The stand taken by the management is that it had produced sufficient evidence in support of its own multiplier and deviser and in any case the learned Advocate says the Tribunal is right in arriving at its own conclusion. In fact it is submitted, the management had made an application for appointment of an assessor to assist the Tribunal as an expert for determining the several questions appertaining to the computation of rehabilitation requirements, but that was rejected as the Tribunal did not feel any necessity for it and there is nothing more which the management could do in the circumstances. J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 16 (1)[1959] S.C.R. 925 @970. It is pointed out that the Nylon industry was a new industry at the time when it was started and the evidence of the General Manager, who had been with the Company from the initial stages and throughout the negotiation for purchase of the machinery, says that according to the manufacturers the life of the machinery could only be six years. That apart the management also produced sample invoices for each year and adduced the evidence of the Manager to prove what would be the cost of rehabilitation. In fact it is said that the Appellant was fortunate in having actual invoices of machinery purchased because the Company had only then expanded its undertaking. The Tribunal rejected the oral evidence on the ground that the witnesses produced by the management were no experts and they did not throw any material light on the matters to be adjudicated by it. It also rejected the documentary evidence on the ground that the machinery which was said to have been purchased was not the same as was sought to be replaced and in any case there was not sufficient evidence for it to accept the multiplier and deviser as claimed by the management. Whether this criticism is valid or not will depend largely on what in fact weighed with the Tribunal in arriving at the multiplier and the deviser. No doubt the employer did make an appli- cation to the Tribunal as noticed earlier and the same was rejected on 5-8-69 as it did not find it necessary to appoint an assessor. The application itself was for requesting the Tribunal to appoint an assessor if it thinks necessary. The management cannot without discharging its duty of placing all the necessary material before the Tribunal ask it to appoint an assessor who would be useless without that material. We do not think in the circumstances the Tribunal was wrong in rejecting the application. The Tribunal considered the evidence of S/Shri Jain, Aggarwal and that there had been hundred per cent increase in prices also machinery worth about Rs. 10 lakhs had already been replaced and that there had been hundred percent increase in prices also due to devaluation. The witness was however, not able to give any details as to when the replacement of the parts and machinery took place even though the management kept the record of the replacement of the machinery. He could not also explain what exactly was the impact of the devaluation of Rupee on prices. He did not see the quotations of the machinery. It was therefore concluded that his statement both with regard to the life of the machinery and the replacement cost was quite us--less and was based on hearsay. Shri Aggarwal's evidence was also considered unsatisfactory, both with respect to the estimate of the replacement cost and the life of the machinery. His calculations were based on a comparison of the original cost of machinery in invoices Ex. M. 1, M. 2 and M. 3 and their cost in 1967, as given in the corresponding invoices Ex. M. 4, M. 5 and M. 6 and the devalua- tion of the Rupee. The Tribunal then considered the discrepancy between the machines mentioned in various exhibits. No doubt there is some justification in the comment of the learned Advocate by the Tribunal merely because the machines mentioned therein for the Appellant that some of these invoices were not relied upon were different in size and weight to those which were installed in the factory. Undoubtedly there would be a variation because the ingenuity of the inventor and technician is not static and as time goes on there are improvements, renovations and changes that make the machine more sophisticated and efficient. While this is so the question is whether satisfactory evidence has been produced to prove the total cost of rehabilitation and also the life of the machinery. The evidence of Talwar was equally found to be defective. He was greatly relying on the Handbook of Chemical Engineers by John Parry, for establishing the life of the machinery. He J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 17 said that in that Book the life of a Chemical plant working in three shifts is shown to be 11 years. He also admitted that the Author gives only the guideline for Income tax purposes only. An extract of the Parry's Handbook was also given by the Tribunal, which stated its conclusions as under : "In view of the above said infirmities it is evident that the management's claim for rehabilitation is very much inflated. The selection of the average multiplier is rather arbitrary or at least quite generous to the management and their estimate about the life of the machinery is slightly conservative. From the available evidence on record he then proceeds to make his own estimates which as far as the life of the machinery is concerned was placed between that adopted for textile machinery of 25 years and the life given in he Chemical Engineers Handbook of 11 years. It said after referring to the statement in the Chemical Engineer's Handbook that the life of a Chemical machinery must be more than II years in America where they work efficiently to the maximum capacity of the machinery. It was observed here the working conditions being different the machinery is likely to last longer and certainly due to poor economic conditions in the country the management also cannot afford to discard such valuable machines in eleven years only. The life of the plant therefore must be more than 11 years. On the other hand the ordinary life of textile machinery is taken to be 25 years or more. In this view of the matter if we take the life of the machinery as 14 years it would still be on the side of the conservative estimate". Regarding the multiplier the Tribunal said that : "The 1961-62 Block of the machinery would require replacement according to our estimate in 1975-76. The Company's claim of six times the original cost based on a comparative study of invoices Ex. M. 1 to M. 3 on the one hand and Ex. M. 4 to M. 6 on the other is very much inflated .... The Company has not produced the current price list also of the machinery or any price indices indicating the trend of prices of machines. The prices of machines are more stabilised than prices of consumer goods. The production of the machines has also gone up in the country and it is not impossible that by 1975 we might manufacture our own machines for Nylon factory also. Even otherwise the prices of imported machines are not likely to be more than four times. Therefore, in our opinion the multiplier should only be four for the block of 1961-62. In awards also relied upon by Shri Talwar even though they considered only prewar block of machines, in no case they allowed a multiplier of six. For the block of machines installed in the accounting year, ordinarily the unit is taken as the multiplier but as there has been in the meantime deva- luation of the rupee we think it would on the whole be fair to adopt two as a suitable multiplier for the block installed in the accounting year". It appears to us that this is an unsatisfactory way of determining the two most important factors required for computing the rehabilitation requirement. The evidence produced before the Tribunal consisted only of a few invoices which were to serve as samples of the price of machines to show that they have gone up. We are not impressed with the submission of the learned Advocate for the J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 18 Appellant that a complete set of invoices in respect of all the Departments of the industry which required rehabilitation had been placed before the Tribunal. Indeed the very application for appointment of Assessor demonstrably contradicts this assumption. In this application the management stated that it did ,'examine S/Shri S. S. Aggarwal, A. C. Talwar as its expert witnesses and have filed some invoices by way of example to show the trend in rising cost in plant and machinery. With regard to useful life of the plant the Respondent places reliance on Chemical Engineer's Handbook IVth Edition by John Parry" (emphasis ours). It is apparent from this application that the management was relying only on a few sample invoices which they said they had produced while depending heavily only on Parrv's Handbook for ascertaining the life of the machinery and the probable cost. We have also gone through the evidence of the three witnesses and the invoices referred to and we think that the Tribunal rightly rejected this evidence as not being of much assistance. It is quite probable that the price of the indigenous industry as appearing from the bulletin of the Reserve Bank of India has gone up but that does not furnish a basis for arriving at any specific multiplier or deviser for the Appellant's plant. All that the invoices produced before the Tribunal establish is only the probable cost of machinery of 2 1/2 lakhs, in an attempt to prove the cost of replacement of plant and machinery worth Rs. 825 lakhs. The Tribunal was therefore, amply justified in saying that the only evidence given is of the few invoices the value of which is only 2 1/2 % of the requirement of the replacement cost which in our view is not sufficient to establish, how many machines in each Department of the industry are required, what is the nature of those machines and what is the probable cost of each of those machines. We are far from satisfied that the management has placed before the Tribunal any satisfactory evidence much less sufficient evidence to arrive at a multiplier and deviser nor has the Tribunal any bases for arriving at its own multiplier and deviser except it be on a pure conjecture and guess work. The result is that though the appellant is able to succeed in one of the main points of his Appeal, the Appeal will have to be dismissed as the Respondents are able to sustain the Award on other grounds. The circumstances of the case justify a direction for each party to bear its own costs. S.C. Appeal dismissed. J. K. Synthetics Ltd vs J. K. Synthetics Mazdoor Union on 9 September, 1971 19 | {
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Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 Equivalent citations: 1971 AIR 1613, 1971 SCR 209, AIR 1971 SUPREME COURT 1613 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: VEERAMACHINENI GANGADHARA RAO Vs. RESPONDENT: ANDHRA BANK LTD. ORS. DATE OF JUDGMENT25/03/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 1613 1971 SCR 209 ACT: Indian Registration Act, 1908, s. 17-Mortgage by deposit of title deeds-Document evidencing mortgage when must be registered-Document which itself does not create contract but is only memorandum of contract already entered into need not be registered-Further evidence to prove terms of agreement not barred by ss. 91 & 92 Evidence Act, 1872. HEADNOTE: The respondent Bank gave a loan to Godavari Sugars Refiners Ltd., of which defendants 1 to 3, as partners, were managing agents. Subsequently the bank filed a suit for the recovery of the loan. The appellant, a brother of defendant No. 1, was impleaded as defendant No. 4 and Godavari Sugars as defendant No. 5. The suit was decreed and the decree was upheld by the High Court. Only Defendant No.4 appealed tothis Court. The decree against the appellant was passed Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 1 on the basis of Exh. 1-6, a document which was signed by Defendants 1 & 4 and in which it was recorded that the title deeds Exhs. A-7 and Exh. A-8 had been deposited with the respondent bank as security for money due. According to the appellant the said title deeds had been deposited by him as security for a loan given to him by the bank in his individual capacity, and that the signature of defendant no. I had been appended to Exh. A-6 only because he bad an interest in one of the properties covered by Exhs. A-7 and A-8. HELD.- If the parties intend to reduce their bargain: regarding the deposit of title deeds to the form of a document the document requires registration. If on the other hand its proper construction and the surrounding circumstances lead to the. conclusion that the parties did not intend to do so, then, there being no express. bargain the contract to create a mortgage arises by implication of the law from the deposit itself with the requisite intention, and the document being merely evidential does not require registration. [220 H-221A] Rachpal Maharaj v. Bhagwandas Daruka & Ors., [1950] S.C.R, 548 Pranjivandas Mehta v. Chan Ma Phee, L.R. 43 I.A. 123, Shaw v. Foster: (1872) L.R. 5 H. L. 321,341 and Subramonian JUDGMENT: The language of Ex. A-6 was undoubtedly wide and if it governed the agreement between the parties then there could be no doubt that the suit debts were also secured by the deposit of title deeds A-7 and A-8. But Ex. A-6 could not be considered a contract governing the rights of the parties because: (a) it was incomplete inasmuch as certain unnecessary words which were meant to be struck out were not actually struck out; (b) while according to the plaintiff the appellant agreed to secure the debt due from the first defendant to the Bank in consideration of the Bank not pro- ceeding against defendants 1 to 3, no such term was found in Ex. A-6; (c) from the recitals of Ex A-6 it was seen that the memorandum in question was intended to 'Put on record' the terms already agreed upon. If the parties intended that the document should embody the contract between them it would have been necessary to register the same under s. 17 of the Registration Act, 1908. [22OA-D] 14-1 S. C. India/71 Exhibit A-6 was not registered. If that document was considered as a contract of mortgage between the Bank and the depositors, the same not having been registered it was inadmissible in evidence. If on the other hand that document was considered as a' mere memorandum evidencing the deposit of title deeds in pursuance of an earlier contract then the correctness of the recitals therein could be gone into without being inhibited by ss. 91 and 92 of the Evidence Act. Whichever view was taken the plaintiff's case must fail. On an overall consideration of the evidence and probabilities of the case it was established that Exbs. A-7 and A-8 were not deposited with the Bank to secure the debts due from defendant No. 1 to the Bank. [222C-E] The appeal must accordingly be allowed. & CIVIL APPELLATE JURISDICTION: Civil Appeal No. 786 of 1966. Appeal by special leave from the judgment and order dated June 9, 1964 of the Andhra Pradesh High Court in Appeal No. 96 of 1969. Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 2 K. R. Chaudhuri, for the appellant. B. V. Subramanyam, A. Subba Rao for A. V. Rangam, for respondent No. 1. The Judgment of the Court was delivered by Hegde, J The 4th defendant in Original Suit No. 200 of 1954 in the court of Subordinate Judge, Vijayawada is the appellant in this appeal by special leave. That was a suit instituted by the Andhra Bank Ltd., the contesting respondent in this appeal. The suit was to recover the loans advanced to the Godavari Sugars Refiners Ltd., defendant No. 5 in the suit. The suit was decreed against all the defendants and that decree was affirmed by the High Court in appeal. The decree against the other defendants has become final. The only question that arises for decision in this appeal is whether the decree against the appellant is sustainable. The High Court rested the decree against the appellant only on the basis of Ex. A-6 a letter given by defendants 1, 4 and another to the Masulipatam branch of the plaintiff bank while, depositing Exhs. A-7 and A-8. In order to decide the correctness of the decree, it is necessary to refer to the material facts as found by the trial court and the High Court and which are no more in dispute. Defendants I to 3 were the partners of a company known as Aid Co. Ltd. (defendant No. 6). That company was the managing agents of defendant No. 5, the Godavari Sugars Re- finers Ltd. which will hereinafter be referred as Godavari Sugars. The first defendant was the Managing Director of the Aid Co. Ltd. On January 29, 1952, the first defendant made an appli- cation 'on behalf of Godavari Sugars to the Andra Bank Ltd. (which will hereinafter be referred to as the Bank) for a loan of three to four lakhs ofrupees under the keyloan and cash credit account and on the guarantee and co-obligation of defendants 1 to 3 in their personal capacity also. The Managing Director and the General ,Manager recommended 'that applicalion to the Board of Directors upto a limit of Rs. 1,25,000. Before the sanction of the Board of Directors was obtained, the first defendant requested the Managing Director to sanction Rs. 50,000 tentatively as there was urgent need. The Managing Director sanctioned a sum of Rs. 50,000 in anticipation of the loan to be granted in pursuance of the application (EN, A3) made by the first defendant on January 29, 1952. The Managing Director authorised the agent of Bhimavaram branch to obtain the necessary documents signed by defendants 1 to 3 in their personal capacity as well as the first defendant as the Managing Director of the managing agents and on behalf of Godavari Sugars. A pronote and the cash credit agreement relating to that loan were handed over to the agent of Bhimavaram branch on April 24, 1952 after the same were executed by defendants 1 to 3. Thereafter defendant I drew from the Bhimavaram branch Rs. 20,100 on April 25, 1952 and Rs. 9,000 on April 25, 1952. But he deposited a sum of Rs. 8,100 on April 25, 1952. Thus a sum of Rs. 21,000 was due to the bank under the loan in question on April 26, 1952. On that date the Board of Directors sanctioned the loan asked for under Ex. A-3 upto a limit of Rs. 1,25,000. Sometime thereafter the authorities of the Bank learnt that on a creditor's winding up petition a provisional liquidator for the Godavari Sugars had been appointed by the High Court of Madras without objection from defendants 1 to 3 on April 18, 1952. That fact had not been brought to the notice of the Bank authorities by defendants 1 to 3 when the advances were made on the 25th and 26th of April 1952. After coming to know of that fact, the Manager and the Managing Director of the Bank pressed defendants 1 to 3 to repay the amount drawn. But they were advised by Satyanarain Chowdary, the father-in-law of the first defendant Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 3 (2nd defendant is the wife of the first defendant and the third defendant his mother-in-law) lo plead before the High Court that the Bank was a pledgee of the articles pledged for the keyloan and as such had a lien over the pledged goods in respect of the advances made. The Bank accordingly moved the High Court claiming a lien over the goods pledged but that claim was rejected by the High Court. In connection with the proceedings before the High Court the Bank incurred an expenditure of Rs. 1548-10-6. The claim against defendants 1 to 3 is based on the above facts. That claim has been decreed as mentioned earlier. The decree to that extent has become final. Now coming to the claim against the appellant which is the only claim material for our present purpose, the facts disclosing the cause of action against him as set out in the plaint paragraph 9 are as follows : "The defendants 1 and 4 requested the plaintiffbank to refrain from taking legal action at that time (after the bank's claim was rejected by the High Court) and give them time. For all sums due till then and owing thereafter on any account by the defendants 1 and 4 either individually or jointly with others, two titles deeds (Exhs. A-7 and A-8) were deposited with the bank on 15-1-1953 at Masulipatam thereby creating Equitable Mortgage over the properties comprised therein and situated within the jurisdiction of this Honourable Court.. In consideration of the above deposit,, the plaintiff-bank refrained taking legal proceedings against the defendants 1 to 3 for the amount due and loss occurred to the plaintiff-bank and an overdraft account was also sanctioned to the defendants 1 and 4. Thus the plaintiffbank has got security over the properties shown in the schedule covered by 'the two title, deeds deposited with the plaintiff-bank on 15-1-1953 at Masulipatam for the suit debt, the particular of which are "detailed hereunder". According to the plaint a mortgage by deposit of title deeds was created in pursuance of the contract set out above. In this appeal we are only concerned with the truth of that contract. The appellant denied the allegations contained in para 9 of the plaint. According to him he had nothing to do with the suit transactions and that he never requested the Bank to refrain from taking legal action against defendants 1 to 3. He went further and averred in his written statement that he did not know anything about the suit transactions till the Bank refused to return to him Exhs. A-7 and A-8. Dealing with the deposit of Exhs. A-7 and A-8, he averred that those documents were deposited to create an Equitable Mortgage to secure an overdraft loan of Rs. 25,000 borrowed by him and that deposit has nothing to do with the suit transactions. The only question for decision is whether Exhs. A-7 and A-8 were deposited to secure the suit debts. In order to decide that question it is necessary to set out a few more facts. Defendants 1 and the appellant are divided brothers. The first defendant was having his business in Madras. The appellant was having his business at Masulipatam. Madras and Masulipatam are quite far off from one another. Both the appellant and defendant No. 1 appear to have had separate dealings with the Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 4 Bank even prior to the suit transactions. We have earlier referred to the loan application Exh. A-3 made by the first defendant and the advances made. From the pronote as well as the cash credit agreement referred to earlier, it appears that the loan was made on the security of the goods belonging to Godavari Sugars as well as on the personal security of defendants 1 to 3. That is also the basis on which the Board of Directors of the Bank sanctioned the loan-see Exh. A-71. Neither in Exh. A-3 nor in Exh. A-71 nor in any of the correspondence that passed between the Bank and defendant No. 1 there is any reference to the fact of appellant's either standing as a surety for the loans advanced to the Godavari Sugars or his having given his property as security for that loan. It is also admitted that in the books of account kept by the Bank, the Equitable Mortgage created by the deposit of Exhs. A-7 and A-8 is not shown as a security for the advances mentioned in the plaint. There is neither documentary evidence nor reliable oral evidence to support the averments in para 9 of the plaint. In none of the correspondence that passed between the Bank and defendant No. 1 or that passed between the Bank ,and the appellant, there is any mention of the fact that at the instance of the appellant, the Bank had refrained from taking action against defendants 1 to 3. Nor is there any mention in them that because of the deposit of A-7 and A-8 along with the memorandum Ex. A-6 the Bank refrained from taking action against defendants 1 to 3. Neither the Manager nor the Managing Director of the Bank who have been examined in support of the Bank's claim spoke to the fact that they- refrained from taking action against defendants 1 to 3 at the instance of the appellant or that they refrained from taking action against them because of the equitable mortgage referred to earlier. Three witnesses namely P. Ws. 1 to 3 were examined in support of "the plaintiff's case. Neither P.W. 1 nor P.W. 2 speaks to the circumstances under which Ex. A-6 came to be executed. P.W. 3, the Managing Director- of the Bank deposed in his Chief Examination as follows: "D-4 applied for a loan as per Ex. A-67. He met me in that connection. D-1 also met me in that connection. D-4 represented that D-1 had commitments in regard to Godavari Sugars, that the and D-1 wanted monies and requested me to get Ex. A.67 be sanctioned representing that they would deposit-title deeds that Would be additional security to safeguard the interest of the "bank. I told him that the loan of Rs. 50,000 could' be" 'Sanctioned if he agreed to pay outright the amount due from D-1. D-4 represented that might prejudice our claim before the High Court as pledgee and that there would be deposit of title deeds he. made a request ultimately to sanction at least Rs. 25,000. D-1 also represented that title deeds would dedeposited and requested that the loan might be granted. Under Ex. A-67 loan of Rs. 25,000 was granted. D-1 and D-2 gave title deeds as security for it. We did not take criminal action on the assurances given by them. This evidence is not consistent with the averments in plaint paragraph 9 to which reference has been made earlier. It makes out a new case. Further from that evidence, it is clear that the deposit of title deeds Ex. A-7 and Ex. A-8 were made to secure only the loan of Rs. 25,000 given to the appellant. The uncontroverted evidence in this case clearly establishes that the said loan was borrowed by the appellant for his own Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 5 business. Further in his cross-examination P.W. 3 deposed that "the deposit of title deeds was made in terms of Board's Resolution and as agreed to between the parties". The Board's Resolution granting loan to the Godavari Sugars on the application of defendant No. 1 does not either directly or indirectly refer to any mortgage by deposit of title deeds or even to any security of immovable property for the loan in question. The question of depositing title deeds was not before the Board when the loan was sanctioned to Godavari Sugars. But the loan granted to the appellant as we shall presently see was on the basis of a mortgage by deposit of title deeds. Before considering the scope and effect of Ex. A-6, it is necessary to refer to the circumstances leading to the execution of Ex. A-6. On October 15, 1952 under Ex. A-67, the appellant applied for a loan of Rs. 50,000. Column four in that application refers to the purpose for which the loan was asked. The answer given was "For business". Under column "Other additional guarantee or security", answer given was "On the security of title deed i.e. sites possessed by me at Vijayawada Krishna District which costs about one Lakh at present-Market value" In the covering letter the appellant stated . "sir, As desired above, I request for sanction of loan of Rs. 50,000 on secured overdrafts Being bound by your previous Bank Rules and also bound by any changes in them, we will clear the loan according to your current Bank rate. Otherwise if we fail to clear the loan in time, we will not only pay, as and when necessary, the penal interest, but also agree, to be bound by all the actions taken against us. Further changes in the particulars of the property given in the list have been affected. We have not made any sort of alienations whatsoever on this property. Until your loan is cleared, we are not going to make any sort of alienations. If becomes necessary to do so, we will do the same after obtaining your consent, Be pleased to consider Sd/-- Veeramachaneni Gangadhara Rao (In Telugu)". This application was placed before the Board of Directors on January 11, 1953. The relevant agenda for the Board's con- sideration reads as follows: "Loans.and Overdrafts: 3.To consider the application of Mr. Veerama chaneniGangadhararao. Masulipatam, for a secured overdraft limit of Rs. 50,000 for one year at 7% p.a. on the co-obligation of Messrs. Kolli Surya Prakasa Rao and Adusumilli; Venkata Krishna Rao and on the mortgage by deposit of title deeds relating to the applicant's sites of the extent of about 2,662 sq. yds. at Vijayawada of the approximate value of about Rs. One Lakh. Resolution: Sanctioned Rs. 25,000." Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 6 From the above facts it is clear that the loan of Rs. 25,000 granted to the appellant was a secured loan-secured by a mortgage by deposit of title deeds in respect of his sites at Vijaywada. It may be noted that neither the appellant nor his co-obligants are shown to have had anything to do with Godavari Sugars. It appears from the records of the Bank that some of documents deposited were not originals. Therefore the Bank found it necessary to have legal advice in the matter. According to the appellant one of the items covered by Exh. A-7 was of the joint ownership of himself and his brother defendant No. 1, hence the officers of the Bank wanted defendant No. 1 also to join in making the deposit of title deeds; but defendant No. 1 was a that time in Madras; therefore a printed form was given to for getting the signatures of defendant No. 1; the place at defendant No. 1 was to sign in that form was marked in pencil that form was sent to Madras with his clerk accompanied by a bank official; defendant No. 1's signatures were obtained; there after the same was signed by him in the presence of the Bank's agent at Masulipatam and given to the Bank's agent without scoring out any of the words in the printed form. The appellant does not appear to be familiar with English language. As could be seen in Ex. A-67. he has signed that same id Telugu. Ex. A-6, as mentioned earlier, is in a printed form, That was a ready made form which could, be used for various purposes. It was an all comprehensive form relating to the deposit of title deeds. It is clear from the terms in that form that the parties were required to strike out the unnecessary terms and conditions in that form. Admittedly no term in Exh. A-7 was struck out. According to P.W. 1, the agent of the Bank, the appellant brought that form at about 5 p.m. just when the Bank was about to close. Therefore he did not strike out the unnecessary words in that document. In this background, we have to see whether Exh. A-6 ,is only a memorandum in support of the deposit of Exhs. A-7 and A-8 to secure the loan advanced to the appellant under Exh. A-67 or whether the deposit of title deeds in question were intended to secure that loan as well as all amounts due from defendant No. 1 to the Bank. The loan advanced to the appellant under Ex. A-67 has been admittedly discharged and the pronote executed by him in that connection had been returned to him. The loans granted to Godavari Sugars were disbursed at the Bhimavaram Branch of the Bank as could be gathered from plaint paragraph 5. The loan sanctioned to the appellant was disbursed at the Masulipatam branch. Exb. A-6, A-7 and A-8 were produced in the Masulipatam Branch. The Masulipatam Branch does not appear to have had anything to do with the loans advanced to Godavari Sugars. We have earlier mentioned that in the accounts relating to the loan given to Godavari Sugars, ,ther e is no mention as to the deposit of title deeds. All the correspondence relating to the loans granted to Godavari Sugars proceed on the basis that they were granted on, the perso nal responsibility of the defendants 1 to 3 and on the pledge of the goods belonging to that company-see Ex.A-3, loan application Ex. A-2, agreement for cash credit on the security of pledged goods, Ex. A-13, letter written, to the agent, Bhimavaram Branch by the General Manager of the Bank on April 15, 1952, Exh. A-14 letter, written by the General Manager to the Agent, Bhimavaram Branch on April 16, 1952, Ex. A-17, letter written by the first defendant to the Bank on, October 29, 1952, But the correspondence that passed between the appellant and the Bank shows that the Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 7 deposit of title., deeds. was made to secure the loan advance to him under Ex. A-67. Under Ex. A,20 the appellant wrote, to the, Bank on October, 15, 1952 as follows: "Dear Sir, I have, two sites at Bezwada worth about; Rs. 1,00,000 and 1. propose to deposit Tide Deeds of the same and require a secured over-draft of Rs. 50,000 against the same. My property statement is with you. I shall therefore be glad if you sanction the same at an early date........... " To the same effect is the loan application made-,by him on the same date. But an' overdraft of Rs. 25,000 only was sanctioned. On February 6, 1954, the appellant wrote to the Bank that he had cleared the overdraft account of Rs. 25,000 but he wanted a renewal of over-draft arrangement (Ex. A-22). He sent a reminder in that connection on April 1, 1954 (Ex. A-23). As the Bank delayed in making available the over-draft facility asked for, he wrote to the Bank on Septr. 20, 1954 under Ex. A-25 as follows "Masulipatam Dated 20-9-54. V. Gangadhara Rao Chowdary Managing Director, Indian Industrial & Scientific Co. Ltd. To The General Manager, The Andhra Bank Ltd., Masulipatam. Sir, Sub: Over Draft Facility granted to me. With reference to the over draft renewed by your Board of Directors in the month of May 1954, for Rs. 25,000 and which was not' allowed to be drawn by me, I specially request you to kindly facilitate for my drawing an amount up to Rs. 15,000 from the over draft account, is due to the stoppage of this facility, which I am enjoying since 4 years, my business is suffering a lot and immediate investment is necessary to meet urgent demands in my business of Scientific Apparatus etc. In this connection I confirm the discussion I had with your Managing Director at my residence, requesting me to mediate for the amicable, settlement of the affair of my brother,' Sri V. Butchiyya Chowdary with your bank regarding the keyloan account granted to Godavary Sugars 'and Refiners Ltd. I shall be obliged for immediately allowing 'me to draw the amount. Thanking you. Yours faithfully, Sd/- Illegible." From this letter it is clear that the Bank was putting pressure on the appellant to persuade his brother defendant No. 1 to amicably settle the suit loans; That is also the' evidence of the appellant. The allegation in this letter that 'the Managing Director was requesting the appellant: to mediate for the amicablesettlement of the affairs of defendant 1 with the Bank regarding suit loans does not appear to, have been repudiated in any of' the letter,% written by the Managing Director to the appellant. Though the Board of Directors of the Bank sanctioned on February 14, 1954, the renewal of. the over-draft facility asked' for by the appellant the appellant was not permitted to utilise that Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 8 facility. The appellant's case is that the Managing Director of the Bank was using that opportunity to put pressure on him to see that defendant 1 discharged the suit loans. Being fed' up with the delaying tactics of the Bank, the appellant withdrew his loan application and asked the Bank to return his title deeds. It is only at that stage that the Bank took up the position that the title deeds deposited were also intended to secure the amounts due from defendant 1 to the Bank. The appellant repudiated' that claim. Then the Bank issued the lawyers' notice Ex. A-18 to all the defendants on April 5, 1954. Therein it was stated' for the first time that the Bank refrained from proceeding against defendants 1 to 3 in respect of the suit transactions at the instance of Satyanarayan Chowdary and the appellant and those two persons had agreed to indemnify the Bank any loss that may be, caused due to those transactions. Further suggestion in that notice is that in pursuance of that agreement Ex. A-7 and A-8 were deposited under Ex. A-6. These allegations were repudiated' by the appellant in his registered reply notice Ex. A-19 date& April 21, 1954. From the above discussion it is clear that apart from Ex. A-6, there is absolutely no evidence to show that the deposit of Exhs. A-7 and A-8 was intended to secure not merely the loan advanced' to the appellant under Ex. A-67 but also to secure the suit loans. or other debts due from defendant to the Bank. The oral evidence of P.W. 3, the Managing Director is of no assistance as seen earlier. It does not connect the deposit of title deeds, Exhs. A-7 and A-8 with any of the debts due from defendant 1. This leaves us with Ex. A-6, the printed form containing the terms and conditions under which Exhs. A-7 and A-8 were deposited. The material portion of that document reads as follows: "To The Agent, The Andhra Bank Ltd., Masulipatam. Dear Sir, I/We write to put on record that as already agreed, upon I/We have on 15-1-53 delivered by way of deposit at Masulipatam the. following documents of title to immovable property with intent to secure the repayment to, the Bank of moneys that are now due or shall from time to time or at any time be due from me/ us either solely or jointly with any other person or persons to the Bank whether on balance of account or by discount or otherwise in respect of Bills of Exchange, Promissory Notes, Cheques and other negotiable instruments or in any manner whatsoever and including interest. commission and other banking charges and any law costs- incurred in connection thereto. LIST OF DOCUMENTS ------------------------------------------------------------ S. Nature of Title Description Estimated No. deed and date property and value exact situation ------------------------------------------------------------ 1. Sale Deed D/ 4-2-49. Two plots of house site bearing assessment No. 21612 N. T. S. 663 Block No. 13 (sic) Ward No. 9 measuring 0.28 (sic) and the other O.27(sic) Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 9 2. Registration Extract House site measuring 1140Sq.Yds. of Sale Deed D/ 30-12-36. bearing Town S. No. 599 in new Ward No. 19 in Bezwada Town. 3.Encumbrance certificate Ec. 574152. 4.Encumbrance certificate No. Ec. 555152. ----------------------------------------------------------- Name and Address: Yours faithfully Sd./-1. Veeramanchaneni Gangadhara Rao 2. V. Butchaigh Chowdary 3. Sri Krishna Prasad being minor by father Veeramachaneni Gangadhara Rao 5. Plan of (sic) in N. T. S. No. 663 Block No. 13 of Ward No. 9, Vijayawada Town. ----------------------------------------------------------- As mentioned,earlier this is a printed form. No part of that form had been struck out though the expressions "I" "Me" found in that document are inconsistent with the other portions of that document. We have earlier referred to the evidence of the agent of the Masulipatam branch of the Bank (P. W. 1) that he did not strike out the unnecessary words in Ex. A-6 as it was presented before him late in the evening. The language of Ex. A-6 is undoubtedly wide and if it governs the agreement between the parties then there can be no doubt that the suit debts are also secured by the deposit of title deeds A-7 and A-8. In the first place Ex. A-6, for the reasons already mentioned must be held to be an incomplete document. Therefore it can not be considered as a contract between the parties. According to the plaintiff, the appellant agreed to secure the debt due from the first defendant to the Bank in consideration of the Bank not proceeding against defendants 1 to 3. No such term is found in Exh. A-6. From the recitals of Exh. A-6, it is seen that that memorandum in question was intended to "put on record" the terms already agreed upon. That being the case, the document cannot be considered as a contract entered into between the parties. If the parties intended that it should embody the contract between them, it would have been necessary to register the same under s. 17 of the Registration Act, 1908. As observed by this Court in Rachpal Maharaj v. Bhagwandas Daruka and ors.(1) that "when a debtor deposits with the creditor title deeds of his property with intent to create a security, the law implies a contract between the parties to create a mortgage Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 10 and no registered instrument is required under s. 59 as in other forms of mortgage. But if the parties choose to reduce the contract to writing, the implication is excluded by their express bargain, and the document will be the sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are essential ingredients in the creation of the mortgage. As the deposit alone is not intended to create the charge and the document, which constitutes the bargain regarding the security, is also necessary and operates to create the charge in conjunction with the deposit, it requires registration under s. 17 of the Indian Registration Act-, I 1908, as a non-testamentary instrument, creating an interest in immovable property, where the value of such property is one hundred rupees and upwards." Therefore the crucial question is : Did the parties intend to reduce their bargain regarding the deposit of the title deeds to the form of a document? If so, the document requires registration. If on (1) [1950] S.C.R. 548. the other hand. its proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, then, there being no express bargain, the contract to create the mortgage arises by implication of the law from the deposit itself with the requisite intention. and the document being merely evidential does not require registration. The law relating to the nature of a memorandum filed along with the deposit of title deeds or one filed thereafter has come up for consideration by courts in this country as well as in England. The decisions on the subject are numerous. We have already referred to the decision of this Court in Rachpal Maharaj's case (1). We shall now refer to two of the decisions , of the Judicial Committee. In Pranjivandas Mehta v. Chan Ma Phee(2) dealing with the law on the subject Lord Shaw of Dunfermline observed "The law upon this subject is beyond an doubt (1)Where titles of property are handed over, with nothing said except that they are to be security, the law supposes that the scope of the security is the scope of the title. (2) Where however, titles' are handed over accompanied by a bargain, that bargain must rule. (3) Lastly, when the bargain is a written bargain, it, and it alone, must determine what is the scope and the extent of the security. In the words of Lord Cairns in the leading case of: Shaw v. Foster (3), "Although it is a wellestablished rule of equity that a deposit of a document of title, without more, without writing, or without word of mouth will create in equity a charge upon the property referred to, I apprehend that that general rule will not apply where you have a deposit accompanied by an actual written charge. In that case you must refer to the terms of the written document, and any implication that might be raised, supposing there were no document, is put out of the case and reduced to silence by the document by which alone you must be governed." In Subrmonian and anr. v. Lutchman and ors.(4) Lord Carson speaking for the Judicial Committee stated the law thus: "The law upon the subject admits of no doubt. In the case of Kedarnath Dutt v. Shamloll Khettry (5) Couch C. J. said: "The rule with regard to writings (1) [1950] S.C.R.548. (2) L.R.43 I.A.123. (3) [1872] L.R. 5 H.L.321, 341. (4) Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 11 51),I.A.77. (5) It Ben. L.R.(O.C.J.)405. is that oral proof cannot. be substitute for, the written evidence ;of any contract which the parties have put into writing, And. the reason is that the writing is tacitly considered by the parties themselves as the only repository and the appropriate evidence of,, their agreement. If this memorandum was of such a nature that it could be treated as the contract for the mortgage and what the parties considered to be the only repository and ,appropriate evidence of their agreement it would he the instrument by which the equitable mortgage was created, and would come within section 17 of the Registration Act:" Exhibit A-6 is not registered. If that document is considered as a contract of mortgage between the Bank and the depositors, the same having not been registered, it is inadmissible in evidence. If on the other band that document is considered as a mere memorandum evidencing the deposit of tide deeds in pursuance of an earlier contract then the correctness of the recitals therein can be gone into without being inhibited by ss. 91 and 92 of the Evidence Act. Whichever view is taken the plaintiffs case must fail. On an overall consideration of the evidence and the probabilities of the case, we are satisfied that Exhs. A-7 and A-8 were not deposited with the Bank to secure the debts due from defendant No. I to the Bank In the result this appeal is allowed, the decree and judgment against the appellant is set aside and the suit against him is .dismissed with costs throughout. G.C Appeal allowed. Veeramachineni Gangadhara Rao vs Andhra Bank Ltd. Ors on 25 March, 1971 12 | {
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Rukumanand Bairoliya vs The State Of Bihar on 5 January, 1971 Equivalent citations: AIR1971SC746, (1971)3SCC167, 1971(III)UJ143(SC), AIR 1971 SUPREME COURT 746 Author: A.N. Grover Bench: J.C. Shah, A.N. Grover, K.S. Hegde JUDGMENT A.N. Grover, J. 1. This is an appeal by certificate from a judgment of the Patna High Court by which a petition under Articles 226 and 227 of the Constitution filed by the appellant was dismissed. 2. The disputed land belonged originally to one Anwar Ali Khan. His heirs gifted it to Mustaque Ali Khan. It was recorded as Ghairmazrua orchard. Mustaque Ali Khan settled this land and some other land with Mohini Devi, the mother of the appellant by a registered patta dated June 19, 1946 on annual rental of Rs. 236/8/6 for the construction of houses thereon which could be rented out. The estate of Mustaque Ali Khan vested in the State of Bihar under the Bihar Land Reforms Act, 1950, hereinafter called the "Act". Mohini Devi created a trust in the name of her deceased husband of which the appellant was the Secretary. The disputed land continued to remain in his possession in that capacity. In 1956-57 proceedings were started for the acquisition of the disputed land for extension of the Darbhanga Medical College. An amount of Rs. 12, 689/2/-was assessed as compensation for the property which had been acquired and an award was made in the joint names of the appellant and the State of Bihar. Because the appellant objected to the inclusion of the State in the award he sought a reference Under Section 30 of the Land Acquisition Act. That reference was pending in the Court of the District Judge, Darbhanga when on April 16, 1960 proceedings Under Section 4(b) of the Act were started in respect of the disputed land. On April 25, 1961 the Land Reforms Deputy Collector made an order that the settlement of the disputed land with Mohini Devi in 1946 by Mustaque Ali Khan was invalid and that it should be annulled. This order was confirmed by the Collector of Darbhanga on May 25, 1962. The appellant moved the Commissioner for setting aside of the aforesaid orders but without any success. He then filed a petition under Articles 226 and 227 of the Constitution challenging those orders. The High Court referred to the following part of the order of the Commissioner : The circumstances of the settlement and certain features of the settlement itself may disclose the intention of the party The land has been settled at a very low rate of Rs. 3/-per katha. But the amount of compensation has been calculated at Rs. Rukumanand Bairoliya vs The State Of Bihar on 5 January, 1971 1 12,689/2/-It is, therefore, obvious that the rate mentioned in the Patta did not disclose the real value of a plot of land situated in an important part of the city close to the Darbhanga Medical College Hospital. By acquiring such a valuable piece of land on a low rate, the intention of Smt. Mohini Devi was obviously to appropriate the profits which would have accrued to the State on vesting of the Zamindari. Had there been any intention of using this land for the construction of a house, the construction would have been taken in hand after obtaining the settlement. This was not done. The expansion of the Darbhanga Medical College "Hospital was a well known, and the possibility of obtaining advantage out of that expansion obviously attracted the purchaser. It was contended on behalf of the appellant before the High Court that the revenue authorities had not referred to any specific evidence in respect of their conclusion on the question of loss to the State being the object of settlement. The High Court, however, was of the view that this contention was not well founded. This is what the High Court said : Here the finding is based on circumstantial evidence as the order of the Commissioner, which I have extracted above, clearly shows. The revenue authorities were fully entitled to take into consideration the circumstances and features of the settlement for the purpose of determining the object with which it had been made. Besides, they also took into account the potential and the present value of the land which had been settled at a rate which, in the circumstances, was a very low rate, having regard to the situation of the land, I am, therefore, unable to accept the contention of the learned Counsel that there was no material before the revenue authorities to come to the conclusion at which they have reached The High Court, however, agreed that if the finding of the revenue authorities was based on no material whatsoever the position would be different. 3. Section 4 of the Act relates to the consequences of the vesting of an estate or tenure in the State. Under Clause (b) of that section the Collector has been empowered to make inquiries in respect of any transfer including the settlement or lease of any land comprised in such estate or tenure or the transfer of any kind of interest in any building etc. and if he is satisfied that such transfer was made at any time after the first of January 1946 with the object of defeating any provisions of the Act or causing loss to the State or obtaining higher compensation thereunder, the Collector may, after giving reasonable notice, annul such transfer and dispossess the person claiming under it. The order of the Deputy Collector as well as the Commissioner says that both the authorities were considerably influenced by the rental of Rs. 3/-per katha at which the settlement had been taken. The High Court also was of the view that this fact weighed with the authorities among other considerations in coming to the conclusion that the settlement had been made with a view to causing considerable loss to the State Government. In our opinion neither the revenue authorities nor the High Court took into consideration the absence of any proof having been adduced with regard to the actual rate of settlement prevailing at the time when the settlement of the disputed land was made. We are altogether unable to understand how the rate of Rs. 3/-per katha was considered to be very low Rukumanand Bairoliya vs The State Of Bihar on 5 January, 1971 2 when no material had been produced to show what the current rate of rental prevailing at the relevant time was of land similar to the disputed land. Therefore one of the principal matters which weighed with the authorities and the High Court was based on pure assumptions and conjectures and on no evidence whatsoever. On this ground alone the impugned orders should have been quashed. 4. The appeal is allowed and the impugned orders are hereby set aside. The appellant shall be entitled to his costs in this Court. Rukumanand Bairoliya vs The State Of Bihar on 5 January, 1971 3 | {
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Narinder Chand Hem Raj & Ors vs Lt. Governor, Administrator, Union ... on 5 October, 1971 Equivalent citations: 1971 AIR 2399, 1972 SCR (1) 940, AIR 1971 SUPREME COURT 2399, 1971 TAX. L. R. 1734 Author: K.S. Hegde Bench: K.S. Hegde, A.N. Grover PETITIONER: NARINDER CHAND HEM RAJ & ORS. Vs. RESPONDENT: LT. GOVERNOR, ADMINISTRATOR, UNION TERRITORY,HIMACHAL PRADES DATE OF JUDGMENT05/10/1971 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. CITATION: 1971 AIR 2399 1972 SCR (1) 940 ACT: Sales Tax-Deputy Commissioner giving impression to bidders at auction for licence for sale of liquor that Indian made foreign liquor would be exempt from sales-tax-Higher bids given as a result of such impression-Exemption not actually given-Court cannot issue writ to State Government to make change in law and to grant exemption-Executive cannot be asked not to enforce a provision of law. HEADNOTE: Under the Punjab General Sales Tax Act, 1948, no sales tax was payable on goods specified in the first column of Schedule B to the Act subject to certain conditions and exceptions. Up to August 31, 1966 Indian made foreign liquor was in Schedule B. But on that date the Government of Punjab in exercise of its powers conferred under proviso to S. 5 deleted Indian made foreign liquor from Schedule B and Narinder Chand Hem Raj & Ors vs Lt. Governor, Administrator, Union ... on 5 October, 1971 1 included the same in Schedule A which made it exigible to sales tax. Simla was part of Punjab tiff, reorganisation of Punjab in 1966. Simla and two other districts of the former State of Punjab were added on to the Union Territory of Himachal Pradesh under the Punjab Reorganisation Act, 1966. Under the provisions of that Act the laws in force, immediately before the appointed day namely October 1, 1966 in those districts were to continue in operation till the appropriate legislature or competent authority altered the same. Accordingly in Simla and other areas thus transferred to Himachal Pradesh Indian made foreign liquor was liable to sales tax. In the auction for sale of Indian made foreign liquor and beer held on March 31, 1967 the appellant, a firm of wine merchants, was the highest bidder for dealing in liquor under L-2 licence as provided in the Punjab Liquor Licence Rules as applicable to certain parts of the then Union Territory of Himachal Pradesh. When the State of Himachal Pradesh took steps against the firm for realising sales-tax on liquor and beer sold by it the appellant firm filed a writ petition in the High Court. It was alleged in the petition that the Deputy Commissioner Simla, who was also Collector of Excise and Taxation, announced at the time of auction that no sales tax would be liable to be paid on the sale of Indian made foreign liquor and beer. Accordingly the appellant prayed that because of the equities of the case the court should issue a writ, direction or order restraining the respondents from enforcing the levy of sales tax on the sales of Indian made foreign liquor at Simla. In the firm's appeal to this Court against the judgment of the High Court, HELD : (i) The averments in the petition did not show that the Deputy Commissioner gave an assurance to the bidders that the Himachal Pradesh Government had decided to abolish sales tax on the sale of Indian made foreign liquor. If the statement in the writ petition was correct the Deputy Commissioner merely gave a wrong interpretation of law. On behalf of the respondent it had been denied that the Deputy Commissioner had made such a representation. According to them all that the Deputy Commissioner stated was that "the Government was considering to abolish the tax on the line of the Haryana Government". it further appeared from the correspondence between the State Government and the Central Government that the Government of Himachal Pradesh 941 wanted to bring their sales tax law relating to the sale of Indian made foreign liquor in line with the law in force in Haryana State. Obviously, the Government of Himachal Pradesh was of the opinion that it could not alter the law without the concurrence of the Central Government. That being so it was difficult to accept the contention of the appellant hat the Deputy Commissioner had represented that the Himachal Pradesh Government had decided to remove sales- tax on the sale of Indian made foreign liquor. The only Narinder Chand Hem Raj & Ors vs Lt. Governor, Administrator, Union ... on 5 October, 1971 2 thing which the Deputy Commissioner could have announced was that the Himachal Pradesh Government was considering to abolish the tax in question. Such a representation cannot be considered as a condition of the auction assuming that such a condition could be imposed orally by the Deputy Commissioner., [943 B-H] (ii)The power to impose tax is undoubtedly a legislative power. That power can be exercised by the legislature directly or subject to certain conditions, the legislature may delegate that power to some other authority. But the exercise of that power whether by the legislature or by its delegate is an exercise of a legislative power. The fact that the power was delegated to the executive does not convert that power into an executive or administrative power. No court can issue a mandate to a legislature to enact a particular law. Similarly no court can direct a subordinate legislative body to enact or not to enact a law which it may be competent to enact. [945 F-G] Article 265 of the Constitution lays down that no tax can be levied and collected except by authority of law. Hence the levy of a tax can only be done by the authority of law and not by any executive order. Unless the executive is specifically empowered by law to give any exemption, it cannot say that it will not enforce the law as against a particular person. No Court can give a direction to a Government to refrain from enforcing a provision of law. Under these circumstances, it must be held that the relief asked for by the appellant cannot be granted. [945 H-946 B] Collector of Bombay v. Municipal Corporation of the City of Bombay and Ors., [1952] S.C.R. 443, Union of India and Ors. v. M/s. Indo Afghan Agencies Ltd [1968] 2 S.C.R. 366, distinguished. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1313 of 1970. Appeal from the judgment and order dated January 13, 1970 of the Delhi High Court Himachal Bench in Letters Patent Appeal No. 10 of 1969. H. L. Sibal, Advocate-General, Punjab, N. N. Goswami and S. N. Mukherjee, for the appellants. V. C. Mahajan and R. N. Sachthey, for the respondents. The Judgment of the Court was delivered by Hegde, J. The appellant-firm are wine merchants, carrying on business at the Mall in Simla. In the auction for sale of the Indian made foreign liquor and beer held on March 31, 1967, the appellant was the highest bidder for dealing in liquor under a L-2 licence as provided in the Punjab Liquor Licence Rules as applicable to certain parts of the then Union Territory of Himachal Pradesh. The case for the appellant is that at the time of the auction, Deputy Commissioner, Simla who is also the Narinder Chand Hem Raj & Ors vs Lt. Governor, Administrator, Union ... on 5 October, 1971 3 Collector of Excise and Taxation, announced that no sales tax will be liable to be paid on the sale of the Indian made foreign liquor and beer but despite this assurance the Government has levied and collected from the appellant firm a sum of Rs. 26,798/26 P. and further it is taking steps against the firm for realising sales tax on the liquor and beer sold by it. Hence it filed a writ petition in the Delhi High Court (Himachal Pradesh Bench at Simla) seeking various reliefs. Several contentions were taken in the writ petition but at the time of the hearing only one of the reliefs prayed for in the writ petition was pressed. Many of the contentions taken in the writ petition were given up. Hence it is not necessary for us to refer to the facts relating to the other reliefs prayed for in the writ petition. The appellant pleaded that in view of the representation made by the Deputy Commissioner, it was induced to increase its bid as a result of which the Govern- ment had substantially benefited. The case for the appellant is that because of the equities of the case, the Court should issue a writ, direction or order restraining the respondents from enforcing the levy of sales tax on the sales of Indian made foreign liquor and beer at Simla. In the counter-affidavit filed on behalf of the respondents, it was denied that the Deputy Commissioner had represented to the bidders before the auction commenced that no sales tax was liable to be paid on the sale of Indian made foreign liquor or beer. The case of the respondents is that all that the Deputy Commissioner told the bidders was that the Government was considering tile question of removing sales tax on the sale of Indian made foreign liquor. In fact, the Himachal Pradesh Government took a decision to remove sales tax on sale of Indian foreign liquor but they could not enforce that decision without approval of the Union Government; the Union Government did not accord the approval asked for hence the Government was not able to remove the sales tax in respect of the sale of Indian foreign liquor. It was urged oil behalf of the respondent that sales tax "as imposed by law. The Government cannot refuse to implement the mandate of the law. Any chance in the provisions of tile Punjab General Sales Tax Act could be affected only according to the provisions of the law in force. No Court can issue a mandate to a legislature or to a subordinate legislative body to make or change any law; further the Himachal Pradesh Government is incompetent to change the law without the approval of the Union Government which is not a party to tile writ petition. The first question that we have to decide is as to what was the representation made by the Deputy Commissioner it the time of the auction. As seen earlier the parties are not agreed on this point. The relevant allegation in the writ petition is found in paragraph 3 thereof. It reads : .......... it was also announced that no sales tax would be liable to be paid on the sales of Indian made foreign liquor and beer...... This statement does not show that the Deputy Commissioner gave an assurance to the bidders that the Himachal Pradesh Government had decided to abolish sales tax on the sale of Indian made foreign liquor or beer. If the statement in the writ petition is correct, the Deputy Commissioner merely gave a wrong interpretation of the law. Apart from that, as mentioned earlier, it was denied on behalf of the respondents that the Deputy Commissioner had made such a representation. According to them all that the Deputy Commissioner stated at that time was that "the Government was considering to abolish the tax on the line of Haryana Government". Barring asserting that the Deputy Commissioner had made a representation that "no sales tax would be liable" on the sales of Indian made foreign liquor and beer, the appellant has produced no material in support of that assertion. It appears from the letter written by the Secretary, Excise to Government of Himachal Narinder Chand Hem Raj & Ors vs Lt. Governor, Administrator, Union ... on 5 October, 1971 4 Pradesh to the Deputy Secretary, Government of India, Ministry of Home Affairs on June 24, 1967 and from the letter written by the Chief Secretary to the Himachal Pradesh Government to the Additional Secretary (U.T.) to the Government of India, Ministry of Home Affairs on January 16, 1968 that the Government of Himachal Pradesh wanted to bring their sales tax law,: relating to the sale of Indian made foreign liquor in line, with the law in force in Haryana State. But it is clear from those letters that, the Himachal Pradesh Government was of the opinion that it could not do so without the concurrence of the Central Government. Whether the Himachal Pradesh Government was competent to alter the Sales Tax law as desired by it without the concurrence of the Central Government, as contended on behalf of the appellant or whether it could do so only with the concurrence of the Central Government as contended on behalf of the respondents, the fact remains that the Government of Himachal Pradesh was of the opinion that it could not alter the law without the concurrence of the Central Government. That being so, it is difficult to accept the contention of the appellant that the Deputy Commissioner had represented that the Himachal Pradesh Government had decided to remove sales tax on the sale of Indian made foreign liquor. The only thing which the Deputy Commissioner could have announced was that the Himachal Pradesh Government was considering the abolition of the tax in question. The learned single judge who hear the writ petition came to conclusion that "there is no positive evidence on record to support the contention that this announcement (that the Government of Himachal Pradesh had decided to remove sales tax on sale of Indian made foreign liquor) was actually made by the Collector conducting the auction as a condition of the auction". Before coming to this conclusion, the learned single judge had considered all the relevant material bearing on the, point. But the Division Bench while hearing the appeal of the appellant did not analyse the evidence bearing on the point nor did it consider the effect of the material before it. It held "it is clear from the admission contained in paragraph 2 of the letter dated the 16th of January 1968, that there was some announcement on the 31st of March, 1967, when the auction was held and it was not an ambiguous announcement. It was presumably specific to the effect that either the Government of Himachal Pradesh had decided to abolish the sales tax or that they were going to achieve its abolition in respect of the merged areas." This is at best a speculative conclusion. Our attention has not been invited to any material on record on the basis of which that conclusion could have been arrived at by the Division Bench. The two letters referred to earlier do not support that conclusion. The averment in the writ petition, as seen earlier does not accord with the case taken at the time of the arguments. The Government has denied that the Deputy Commissioner had either been authorised or he had made the representation at the time of the auction that the Government had decided to abolish the sales tax on sale of Indian made foreign liquor. According to the respondents, all that, the Deputy Commissioner had represented to the bidders was that the Government was con- sidering the abolition of the sales-tax on sale of Indian made foreign liquor; such a representation cannot be considered as a condition of the auction, assuming that such a condition can be imposed orally by the Deputy Commissioner. Hence in our opinion the Division Bench erred in its conclusion about the alleged representation by the Deputy Commissioner. This finding alone is sufficient to dismiss the appeal but as Mr. Sibbal, learned Counsel for the appellant has elaborately argued the question of law to which we shall presently refer, we shall examine the same. Simla was a part of Punjab till reorganization of Punjab in 1966. Simla and two Narinder Chand Hem Raj & Ors vs Lt. Governor, Administrator, Union ... on 5 October, 1971 5 other Districts of the former State of Punjab were added on to the Union Territory of Himachal Pradesh under the Punjab Reorganization Act, 1966. Under the Provisions of that Act, the laws in force, immediately before the appointed day namely October 1, 1966, in those districts were to continue in operation till the appropriate legislature or competent authority altered the same. One of the laws that was in force in those areas is the Punjab General Sales Tax Act, 1948. Section 6(1) of that Act provides : "No tax shall be payable on the sale of goods specified in the first column of Schedule B subject to the conditions and exceptions, if any, set out in the corresponding entry in the second column thereof and no dealer shall charge sales tax on the sale of goods which. are declared tax free under this section." Till August 31, 1966, Indian made foreign liquor was ill Schedule B. But on that date the Government of Punjab in exercise of its powers conferred under proviso to s. 5 deleted Indian made foreign liquor from Schedule B and included the same in Schedule A to that Act. Thus the sale of the said liquor became exigible to sales tax. This was the law in force in Punjab when re-organization took place. Hence Simla and other areas which were formerly parts of the State of undivided Punjab continued to be governed by that law even after reorganization. Our attention has not been drawn to any provision in that Act empowering the Government to exempt any assessee from payment of tax' Therefore it is clear that appellant was liable to pay the tax imposed under the law. What the appellant really wants is I mandate from the court to the competent authority to delete the concerned entry from Schedule A and include the same, in Schedule B. We shall not go into the question whether "he Government of Himachal Pradesh on its own authority was competent to make the alteration in question or not. We shall assume for our present purpose that it had such a power. The power to impose a tax is undoubtedly a legislative power. That power can be exercised by the legislature directly or subject to certain conditions, the legislature may delegate that power to some other authority. But the exercise of that power, whether by the legislature or by its delegate is an exercise of a legislative power. The fact that the power was delegated to the executive does not convert that power into an executive or administrative power. No court can issue a mandate to a legislature to enact a particular law. Similarly no court can direct a subordinate legislative body to enact or not to enact a law which it may be competent to enact. The relief as framed by the appellant in his writ petition does not bring out the real issue calling for determination. In reality he wants this Court to direct the Government to delete the entry in question from Schedule A and include the same in Schedule B. Art. 265- of the Constitution lays down that no tax can be levied and collected except by authority of law. Hence the levy of a tax can only be done by the authority of law and not by any executive order unless the executive is specifically empowered by law to give any exemption, it cannot say that it will not enforce the law as against a particular person. No court can give a direction to a Government to refrain from enforcing a provision of law. Under these circumstances, we must hold that the relief asked for by the appellant cannot be granted. In support of its contention, the appellant relied on two decisions of this Court. The first is Collector of Bombay v. Municipal Corporation of the City of Bombay and ors.(1) The facts of that case are as follows In 1865, the Government of Bombay called upon the predeces- sor in title of the Corporation of Bombay to remove some markets from a certain site and vacate it. On the application of the then Narinder Chand Hem Raj & Ors vs Lt. Governor, Administrator, Union ... on 5 October, 1971 6 Municipal Commissioner, the Government passed a resolution approving and authorising the grant of another site to the Municipality for the purpose if running a market. The resolution passed by the Government stated further that "the Government do not consider that any rent should be charged to the Municipality as the markets will be like other public buildings, for the benefit of the whole community." The Corporation gave up the sites on which the old markets were situated and spent a sum of over 17 lacs in erecting and maintaining markets on new site. It continued to be in possession of the site in question without paying any rent, openly and to the knowledge of Government for a period of seventy years. In 1940 the Collector of Bombay, overruling the objection of the Corporation, assessed the new site under s. 8 of the Bombay City Land Revenue Act to land revenue rising from Rs. 7,500 to Rs. 30,000 in 50 years. The Corporation sued for a declaration that the of assessment was ultra vires and that it was entitled to the land for ever without payment of any land-reservenue. The High Court of Bombay held that the Government has lost its right to levy land revenue on the land in question 'by of the equity arising, in favour of the Corporation. By a majority his Court affirmed the decision of the Bombay High Court. Therein this Court was not called upon to issue a mandate to alter any law. Section 8 of the Bombay City Land Revenue Act provide,, .lm15 "it shall be the duty of the Collector, subject to the orders of the Provincial Government, to fix and to levy the, assessment for land revenue. Where there is no right on the part of the superior holder in limitation of the right of the Provincial Government to assess, the assessment shall be fixed at the discretion of the Collector subject to the control of the Provincial Government. (1) [1952] S.C.R. 443. 94 7 When there is a right on the part of the superior holder in limitation of the right of the Provincial Government, in consequence of a specific limit to assessment having been established and preserved, the assessment shall not exceed such specific limit." Section 8 did not impose any land revenue. It only imposed a duty on the Collector to fix and to levy the assessment. Power to levy land revenue was the prerogative of the Government. 'Me Court held that in view of the seventy years possession of the land by the Corporation openly and in assertion of a right to hold that land free of rent, it had acquired an adverse title to the property though the right acquired was a limited one. This is what the court observed (p. 52 of the report) : "Such possession being not referable to any legal title it was prima facie adverse to the legal title of the Government as owner of the land from the very moment the predecessor in title of the respondent Corporation took possession of the, land under an invalid grant. This possession was continued, openly as of right, uninterruptedly for over 70 years and the respondent Corporation had acquired the limited title in it and its predecessor in title had been prescribing during all this period, that is to say, the right to hold the land in perpetuity free from rent but only for the purpose of a market in terms of the Government resolution of 1865. The, immunity from the Narinder Chand Hem Raj & Ors vs Lt. Governor, Administrator, Union ... on 5 October, 1971 7 liability to pay rent is just a,, much an integral part of an in severable incident of the title so acquired, is the obligation to hold the land for the purposes of market and for no other purpose." From these observations, it is clear that in that case the court was only considering tile relationship between a landlord and a tenant. It was,sought to be argued in that case that even if the Government be precluded from enhancement- the "rent" in view of the terms of the Government Resolution, it cannot be held to have disentitled itself from the prerogative right to assess revenue". The Court refused to entertain that plea as it was non raised in the written statement, nor made the subject matter of an issue on which the parties went to trial. Hence the ratio of that decision has no relevance for our present purpose. The other decision relied upon by the appellant is Union of India and Ors. v. M/s. Indo Afghan Agencies Ltd.(1) Therein in exercise of the powers conferred on the Government under s. 3 of the Imports and Exports (Control) Act, 1947, the Central Government issued the Imports (Control) Order, 1955 and other orders setting out the policy governing the grant of import and export licences. The Central Government also evolved an Import Trade Policy to facilitate the mechanism of the Act and the orders issued thereunder. The scheme was modified from time to time by issuing fresh schemes in respect of new commodities. In 1962, the Central Government promulgated the Export Promotion Scheme providing incentives to exporters of woollen-textiles and goods. It provided for the grant to an exporter, certificates to, import raw materials of a total amount equal to 100% of the F.O.B. value of his exports. Clause 10 of the Scheme provided that the Textile Commissioner could grant an import certificate for a lesser amount if he is satisfied, after holding an enquiry, that the declared value of the goods exported was higher than the real value of the goods. The Scheme was extended to exports of woollen textiles and goods to Afghanistan. The Textile Commissioner without holding an enquiry is required by cl. 10 of the scheme, arbitrarily reduced the import quota of some of the exporters on the basis of some private enquiry. One such exporter moved the High Court for the issuance, of a writ-to the Government to abide by the terms of the scheme. On behalf of the Government, it was urged that the scheme contained only administrative instructions and the Government was competent to change the scheme depending upon the exigencies of situation. On facts this Court came to the conclusion that the scheme, was not changed because of any ,exigencies of situation and the import quota of some of the exporters was reduced on the basis of some private enquiry. Under those circumstances this Court held that the Government was bound by the representation that it made regarding the quota to which the exporters were entitled under the scheme. The ratio of that decision again cannot have any bearing on the point under consideration. So long as that scheme was in force, the Government was bound to implement the same. This Court did not hold that the Government was not competent to change the scheme. If the scheme, had statutory force, it bound the Government as much as it bound the exporters. In that event the Court was competent to compel, the Government to act ,according to the scheme. If on the other hand the scheme contained merely administrative instructions then the Government having made the representation referred to earlier, on the basis of which the exporters bad exported certain goods, the Government was estopped from going back on the representation made by it. In this case, again, there was no question of issuing any direction to make a law or abrogate an existing law. Narinder Chand Hem Raj & Ors vs Lt. Governor, Administrator, Union ... on 5 October, 1971 8 For the reasons mentioned above this appeal fails. But in the circumstances of the case. we think this is eminently a fit case where the parties should be asked to bear their own costs both before the-High Court as well as in this Court. There is no doubt that the Deputy Commissioner did give an impression to the bidders that the Government was considering the abolition of sales-tax on the sale of Indian made foreign liquor. Relying on that information the bidders must have given very high bids. The Government of Himachal Pradesh tried its best to persuade the Central Government to agree to change the law but it failed. In the process, the appellant must have suffered financially. That being so, we order this appeal to be dismissed but at the same time direct the parties to bear their own costs both in this Court as well as in the High Court. G.C. Appeal dismissed. Narinder Chand Hem Raj & Ors vs Lt. Governor, Administrator, Union ... on 5 October, 1971 9 | {
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T. C. M. Pillai vs Indian Institute Of Technology, ... on 29 April, 1971 Equivalent citations: 1971 AIR 1811, 1971 SCR 555, AIR 1971 SUPREME COURT 1811, 1971 (1) LABLJ 530, 1971 SERVLR 679, 1971 SCD 763 Author: A.N. Grover Bench: A.N. Grover, K.S. Hegde PETITIONER: T. C. M. PILLAI Vs. RESPONDENT: INDIAN INSTITUTE OF TECHNOLOGY, GUINDY, MADRAS DATE OF JUDGMENT29/04/1971 BENCH: GROVER, A.N. BENCH: GROVER, A.N. HEGDE, K.S. CITATION: 1971 AIR 1811 1971 SCR 555 1971 SCC (2) 251 ACT: Institutes of Technology Act, 1961-Statute 13, cl. (9) framed under s. 27-Probationer-Termination of Service- Attitude or tendency displayed by employee valid consideration-Termination based on such considerations not punishment. HEADNOTE: The appellant, a scientist, was appointed to the staff of the respondent institute on probation. He had executed a bond to serve the Kerala University but this fact was never disclosed by him. He adopted an attitude questioning the Rules and Regulations of the Institute as well as every order made by the superior authorities, he even threatened legal proceedings at every stage. He had barely been in the service of the Institute for a short time when he wanted to T. C. M. Pillai vs Indian Institute Of Technology, ... on 29 April, 1971 1 take up service elsewhere. When the question of his confirmation came up before the Board of Governors it was recorded that the Board had come to know for the first time that while the appellant had executed a bond to serve the Kerala University he did not disclose that fact when he applied to the Institute. 'Ibis, in the opinion of the Board was "serious transgression of well known convention and etiquette". The Board, after considering all the aspects and perusing the confidential reports came to the conclusion that it would not be desirable in the interest of the Institute to retain the services of the appellant. It was therefore resolved that his services be terminated with a month's notice in terms of the order of appointment. The appellant filed a petition under Art. 226 of the Constitution challenging the order of termination. He relied on cl. 9 of Statute 13 framed under s. 27 of the Institutes of Technology Act, 1961 which provided that no order imposing any penalty shall be passed without giving a reasonable opportunity of showing cause against the action proposed to be taken ill regard to a member of the staff. The High Court held that although the Board of Governors took note of the fact that the appellant had committed a breach of a Covenant with the Kerala Government and that he had insisted on certain benefits which he was not entitled to it could not be said that his services had been terminated by way of punishment. Dismissing the appeal to this Court, HELD: A probationer or a temporary servant can be discharged if it is found that he is not suitable for the post which he is holding. Suitability does not depend merely on the excellence or proficiency in work. A particular attitude or tendency displayed by an employee can well influence the decision of the confirming authority while judging his suitability or fitness for confirmation. In the present case, if the Institute thought that a person of the appellant's type would not be suitable for being confirmed as a member of the staff of the Institute the order dispensing with his services could not be regarded as penal action taken with the object of inflicting punishment. [559H-560B] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2263 of 1968. Appeal from the judgment and order dated August 4, 1964 of the Madras High Court in Writ Appeal No. 337 of 1963. M. C. Chagla and R. Gopalakrishnan, for the appellant. S. T. Desai, C. N. S. Chengalverayan and A. V. Rangam, for the respondent. T. C. M. Pillai vs Indian Institute Of Technology, ... on 29 April, 1971 2 The Judgment of the Court was delivered by Grover, J.--This is an appeal by certificate from a judge- ment of a division bench of the Madras High Court affirming the decision of a learned single judge rejecting the petition filed by the appellant under Art. 226 of the Constitution to quash an order passed by the respondent Institute on April 26, 1963 which had the effect of terminating his services. The appellant had a distinguished academic career. After passing the Master's degree in Organic Chemistry from the Lucknow University he obtained a Doctorate from the Royal School of Mining of the University of London. He got a Post Graduate Diploma from the Imperial College of Science and Technology, London. He worked for sometime and was employed successively in some of the Universities in the United States of America. Since the year 1960 the appellant had been making efforts to get employment in the respondent Institute. This Institute is one of the four Institutes of Science and Technology which have been declared to be institutions of national importance. It has a Board of Governors, the Chairman and Members of which are distinguished educationists, scientists and teachers. By a letter dated January 8, 1962 the appellant was offered the post of the Assistant Professor of Extracting Metallurgy at the Institute. Condition No. 2 was as follows: "The post is permanent. Your appointment how- ever is made on probation for a period of one year. Subject to satisfactory completion of probation, you will be confirmed in the post. During the period of probation your services may be terminated by one month's notice on either side." This offer was accepted by the appellant. By a resolution of the Board of Governors dated March 1, 1962 the action of the Chairman in according approval to the appointment of the appellant was confirmed. The appellant joined the staff of the Institute on May 23, 1962. It is somewhat unfortunate that a distinguished scientist of the caliber of the appellant did not commence his career in a happy manner. It appears that he had executed a bond to serve the Kerala University. According to the Institute this fact was never disclosed by him. It has been noticed in the judgment of the High Court that according to the statement of the Director of the Institute in his affidavit to which no exception was taken by the appellant in his reply the latter adopted an attitude questioning the Rules and Regulations of the Institute as well as every order made by the superior authorities; he even threatened legal proceedings at every stage. In spite of that, on January 31, 1963 the Director gave an assurance to the appellant that he did not want members of the staff to quit the Institute on differences of opinion on matters which were completely non-academic. On March 21, 1963 a report on the work done by the appellant was called for with a view to placing it before the Board of Governors. That report was submitted by the appellant. A meeting of the Board of Governors was held on April 15, 1963. Item 27 of the agenda of that meeting related to the consideration of certain representations made by the appellant. The Board rejected the appeal against the decision of the Director in the matter of allotment of a C type quarter. It also confirmed the Director's decision that the application submitted by the appellant for a post in the Benaras Hindu University be withheld. The Board made a note of the fact that there was no provision in the Institute Medical Attendance Rules for charges of X-ray done in a private Radiological Institute and reimbursement of charges relating to taxi hire incurred by the appellant in taking his wife to and T. C. M. Pillai vs Indian Institute Of Technology, ... on 29 April, 1971 3 from the hospital in the absence of a certificate from the authorised medical attendant. Item 28 related to the question of the satis- factory completion of probation of Assistant Professors and their confirmation. It was recorded that the Board had come to know for the first time that while the appellant had executed a bond to serve the Kerala University he did not disclose that fact when he applied to the Institute. This, in the opinion of the Board, was " serious transgression of well known convention and official etiquette". The Board, after considering all the aspects and pursuing the confidential reports by the Head of the Department in respect of the work of the appellant, came to the conclusion that it would not be desirable in the interest of the Institute to retain the services of the appellant. It was, therefore, resolved that his services be terminated with a month's notice. The Secretary of the Board of Governors thereafter sent a letter to the appellant dated April 23, 1963 informing him that the Board had decided to terminate his services and a month's notice was being given to him in view of clause 2 of the order of appointment. The appellant filed a petition under Art. 226 of the Consti- tution. His main plea was that no reasonable opportunity had been afforded to him to show cause against the order terminating his services and therefore the same was illegal and invalid. The allegations made by the appellant were controverted on behalf of the Institute. The learned single judge, who heard the writ petition con- sidered the question of the applicability of Art. 311 of the Constitution to the case of the appellant. It was held by him that the appellant was not in the civil service of the Union and could not claim the benefit of the aforesaid Article. Even otherwise the learned judge was not inclined to agree that the circumstances in which the services of the appellant were terminated warranted the conclusion that he had been discharged by way of punishment. The appellant filed an appeal under clause 15 of the Letters Patent of the High Court. Before the division bench the correctness of the decision of the learned single judge with regard to the applicability of Art. 311 was not contested. Reliance was sought to be placed on the provisions of Statute 13 framed under S. 27 of the Institutes of Technology Act, 1961 under which the respondent Institute had been incorporated as a body corporate. Clause 5 of that Statute conferred power on the appointing authority to terminate the services of any member of the staff without notice and without any cause being assigned during the period of probation. Clause 9 gave the penalties which could be imposed on a member of the staff. Removal and dismissal from service were included among those penalties. It was provided that no order imposing any penalty shall be passed without giving ?a reasonable opportunity of showing cause against the action proposed to be taken in regard to a member of the staff. The division bench was satisfied that Statute 13 prescribed the terms and conditions of permanent employees of the Institute. Statute 14 related to the conditions of service of temporary employees. Although probationers could not be termed as permanent employees the conditions of their tenure were also governed by Statute 13. If the services of a probationer were, therefore, terminated by way of punishment without following the procedure prescribed by clause 9 of Statute 13 it would be competent for the High Court to issue an appropriate writ. The division bench proceeded to examine the circumstances which led to the resolution of the Board by which his services were terminated. The conclusion which was arrived at was that although the Board of Governors took note of the fact that the appellant had committed a breach of a covenant with the Kerala Government and that he had insisted on certain benefits to which he was not entitled it could not be said that his services had been terminated by way of punishment. It was possible that the dissatisfaction of the Board with the conduct of, the appellant formed the motive for the ultimate order passed-by it but that was quite different from terminating his services as a measure of T. C. M. Pillai vs Indian Institute Of Technology, ... on 29 April, 1971 4 punishment. Mr, M. C. Chagla for the appellant has forcefully emphasised the background and the circumstances which prompted the making of the order terminating the services of the appellant. According to him the appellant was a distinguished and promising scientist whose services would have been of immense advantage to the Institute and merely because he insisted on certain benefits which he conceived to be his just dues and wanted to advance and further his prospects in the Benaras Hindu University by getting an assignment there, his services were dispensed with without his being told what the charges against him were and without his having any opportunity of giving an explanation or satisfying the Board that whatever he had done was fully justified and did not merit any action being taken against him. Mr. Chagla pointed out that it is such treatment meted out to our scientists and technologists that there was so much brain drain from this country. Indeed the appellant has now taken up a highly remunerative and important assignment in the United States. It is true that every one who has good of the country at heart should endeavor to retain the services of scientists and technologists of high repute so that the institutions in this country could take advantage of their scholarship and research. At the same time the scientists or scholars who have distinguished themselves in foreign countries should also consider it a part of their duty and obligation to contribute to the imparting of education and advancement of research in their own country even though it be at a sacrifice of monetary and other benefits which foreign countries can offer but which it is not possible to obtain here. The present case is a typical one of a scientist who started making complaints about reimbursement charges of x-ray and taxi fare and other small matters as soon as he joined the Institute and even though he had entered into a bond with the Kerala Government to serve the Kerala University he did not apparently take the permission of the Kerala Government or University for working elsewhere. He had barely been in the service of the Institute for a short time when he wanted to take up service with the Banaras Hindu University when a vacancy arose there. No one can blame the appellant for his natural desire to improve his prospects but if the Institute thought that a gentleman of his type would not be suitable for being confirmed as a member of the staff of the Institute the letter dispensing with his services could not be regarded as a penal action taken with the object of inflicting punishment on him. It is well settled that a probationer or a temporary servant can be discharged if it is found that he is not suitable for the post which he is holding. This can be done without complying with the provisions of Art. 311(2) unless the services are terminated by way of punishment. Suitability does not depend merely on the excellence or proficiency in work. There are many factors which enter into consideration for confirming a person who is on probation. A particular attitude or tendency displayed by an employee can well influence the decision of the confirming authority while judging his suitability or fitness for confirmation. In the present case the Board of Governors consisted of a number of distinguished and well known academicians and teachers. Although there is a mention in the resolution about the confidential reports by the head of the department and the Director but they have not been placed on the record. Even assuming that those reports were favourable so far as the academic work of the appellant was concerned the Board was entitled to take into consideration the other matters which have already been mentioned for the purpose of deciding whether he should be confirmed or whether he should T. C. M. Pillai vs Indian Institute Of Technology, ... on 29 April, 1971 5 be given a notice of one month as per the terms of the letter of appointment. The Board decided to adopt the latter course. By no stretch of reasoning can it be said that the appellant had been punished and that his services had been dispensed with as a penal measure. It has been pointed out to us by Mr. Chagla that subsequ- ently also wherever an inquiry has been made from the Institute about the work and conduct of the appellant the certificate which has been sent is in such terms that the appellant cannot expect to get any gainful employment in this country. This, it is submitted, shows what the approach of the Institute was. We are not directly concerned with this matter in the present appeal but we have no doubt that the Institute will not adopt any such attitude which may stand in the way of the appellant getting any other employment in this country or in any other country. The appeal fails and it is dismissed. There win, however, be no order as to costs throughout. K.B.N. Appeal dismissed.- T. C. M. Pillai vs Indian Institute Of Technology, ... on 29 April, 1971 6 | {
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Mohini Thapar (Dead) By L. Rs vs C.I.T. (Central) Calcutta & Ors on 23 September, 1971 Equivalent citations: 1972 TAX. L. R. 444, (1972) 1 S C R 883, 83 I T R 208, (1972) 2 S C J 221 PETITIONER: MOHINI THAPAR (DEAD) BY L. RS. Vs. RESPONDENT: C.I.T. (CENTRAL) CALCUTTA & ORS. DATE OF JUDGMENT23/09/1971 BENCH: ACT: Income-tax Act, 1922, s. 16(3)(a)(iii)-Scope of. HEADNOTE: The assessee made certain gifts to his wife out of those gifts she purchased shares and made investments. On the question whether the dividends earned and the interests realised were income "from assets transfer-red directly or indirectly" by the assessee to his wife within the meaning of s. 16(3) (a) (iii) of the Income-tax Act, 1922, HELD : Section 16(3) (a) (iii) includes not merely the income that :arises directly from the assets transferred but also the income that arises indirectly 'from. those assets. In the present case the income has a nexus with the assets transferred and they are income indirectly received in respect of the transfer of cash directly made. Therefore the department is entitled to include the dividends and interest in question in computing the taxable income of the assessee. [885 C-D] C.I.T. West Bengal III v. Prem Bhai Parakh & Ors., [1970] 77 I.T.R. 27, held inapplicable. JUDGMENT: CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 1374 and 2146 to 2149 of 1970. Mohini Thapar (Dead) By L. Rs vs C.I.T. (Central) Calcutta & Ors on 23 September, 1971 1 Appeals from the judgments and order dated July 30, 1963 and February 11, 1965 of the Calcutta High Court in Income-tax Reference No. 48 of 1959, and 69 of 1961 respectively. D.Pal, T. A. Ramachandran and D. N. Gupta, for the appel- lants and respondents Nos. 2 to 4 (in all the appeals). S.C. Manchanda, P. L. Juneja, R. N. Sachthey and B. D. Sharma, for respondent No. 1 (in all the appeals). The Judgment of the Court was delivered by Hegde, J. All these appeals by certificate are filed by the legal representatives of Late Karam Chand Thapar who was the assessee in this case. He died after the assessments were made. The assessment years with which we are concerned in these appeals are 1949-50, 1950-51, 1951-52, 1952-53 and 1953-54. The facts of the case lie within a narrow compass. Late Karam Chand Thapar made certain cash gifts to his wife Smt. Mohini Thapar. From out of those gifts, she purchased certain shares and the balance amount she invested. The shares earned dividends and the investments yielded interest. The interest realised and the dividends earned were included in the income of Karam Chand Thapar for the purpose of assessment in the assessment years mentioned earlier. The assessee objected to the inclusion of that amount in his income. The question is whether the department was entitled to include the dividends and interest in question in computing the taxable income. of the assessee. The Income-tax Officer held that they were liable to be included in the income of the assessee. That decision was upheld by- the Appellate Assistant Commissioner. On a further appeal, taken by the assessee to the Tribunal the Tribunal upheld the order of the Assistant Commissioner. Thereafter at the instance of the assessee, the question set out below was submitted to the High Court under section 66(1) of the Indian Income-tax Act, 1922, in respect of the assessment year 1949-50 : "(1) 'Whether on the facts and on the circums- tances of the case, the income of Rs. 21,225 derived from deposits and shares held by the assessee's wife, Smt. Mohini Devi Thapar was income from assets directly or indirectly transferred by the assessee to his wife within the meaning of Section 16(3) of the Income-tax Act." Similar questions were referred in respect of other assessment year. The High Court answered these questions in favour of the revenue. Hence these appeals. Section 16(3)(a)(iii) of the Act-the provision relevant for the purpose of these appeals reads thus: (2) "In computing the total income of any individual for the purpose of assessment, there shall be included- (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly- (i)................. (ii)................. (iii)from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart;" Mohini Thapar (Dead) By L. Rs vs C.I.T. (Central) Calcutta & Ors on 23 September, 1971 2 The assets transferred in this case is the gift of cash amounts made by the assessee to his wife. The transfers in question are direct transfers. But those assets, as mentioned earlier, were invested either in shares or otherwise. Hence it was urged on behalf of the revenue that the incomes realised either as dividends from shares or as interest from deposits are income indirectly received in respect of the transfer of cash directly made. This contention of the revenue appears to be sound. That position clearly emerges from the plain language of the section. It was urged by Dr. Pal, learned counsel for the assessee that there is no nexus between the income earned and the transfer of the assets. According to him before an income can come within section 16(3) (a) (iii) it must be an income directly arising from the assets transferred. In other words, he urged that only such income which can be said to have directly sprung from the assets transferred "Can come within the scope of section 16 (3) (a) (iii). We are unable to accept this contention as sound. Otherwise the expression 'as arises directly or indirectly' in section 16(3)(a) would become redundant. The net cast by section 16(3)(a) (iii) includes not merely the income that arises directly from the assets transferred but also that arises indirectly from the assets transferred. We are in agreement with the contention of Dr. Pal that the income that can be brought to tax under section 16 (3) (a) (iii) must have a nexus with the assets transferred directly or indirectly. But in this case the income with which we are concerned has a nexus with the assets transferred. In support of his contention Dr. Pal relied on the decision of this Court in Commissioner of Income-Tax, West Bengal III v. Prem Bhai Parakh and others(1). The facts of that case are as follows : The assessee, who was a partner in a firm having 7 annas share therein, retired from the firm on July 1, 1954. Thereafter, he gifted Rs. 75,000 to each of his four sons, three of whom were minors. There was a reconstitution of the firm with effect from July 2, 1954, whereby the major son became a partner and the minor sons were admitted to the benefits of partnership in the firm. The question was whether the income arising to the minors by virtue of their admission to the benefits of partnership in the firm could be included in the total income of the assessee under section 16 (3) (a) (iv) a provision similar to section 1 6 (3) (a) (iii) The Tribunal found that the capital invested by the minors in the firm came from the- gift made in their favour by their father, the assessee. This Court overruling the contention of the revenue came to the conclusion that the connection between the gifts made by the assessee and the income of the minors from the firm was a remote one and it could not be said that income arose directly or indirectly from the asses transferred. Hence I income arising to the three minor sons of the assessee by virtue of their admission to the benefits of partnership in the firm could not (1) [1970] 77 I.T.R. p. 27. be included in the total income of the assessee. The ratio of the decision is found at page 30 of the report. This is what the Court observed in that case : Mohini Thapar (Dead) By L. Rs vs C.I.T. (Central) Calcutta & Ors on 23 September, 1971 3 "The connection between the gifts mentioned earlier and the income in question is a remote one. The income of the minors arose as a result of their admission to the benefits of the partnership. It is true that they were admitted to the benefits of the partnership because of the contribution made by them. But there is no nexus between the transfer of the assets and the income in question. It cannot be said that that income,' arose directly or indirectly from the transfer of the assets referred to earlier. Section 16(3) of the Act created an artificial income. That section must receive strict construction as observed by this court in Commissioner of Income-tax v. Keshavlal Lallubhai Patel-(1965) 55 I.T.R. p. 637. In our judgment before an income can be held to come within the ambit of section 16(3), it must be proved to have arisen- directly or indirectly from a transfer of assets made by the assessee in favour of his wife or minor children. The connection between the transfer of assets and the income must be proximate. The income in question must arise as a result of the transfer and not in some manner connected with it." The ratio of that decision is inapplicable to the facts of the present case. Here we are dealing with an income which has proximate con- nection with the transfer of the assets made by the assessee. In the result, these appeals fail and they are dismissed with costs. Costs one set. K.B.N. Appeals dismissed. Mohini Thapar (Dead) By L. Rs vs C.I.T. (Central) Calcutta & Ors on 23 September, 1971 4 | {
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B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 Equivalent citations: 1971 AIR 2004, 1971 SCR 477 Author: I.D. Dua Bench: I.D. Dua, J.M. Shelat PETITIONER: B. C. DAS ETC. Vs. RESPONDENT: STATE OF ASSAM & ORS. DATE OF JUDGMENT23/04/1971 BENCH: DUA, I.D. BENCH: DUA, I.D. SHELAT, J.M. BHARGAVA, VISHISHTHA CITATION: 1971 AIR 2004 1971 SCR 477 1971 SCC (2) 168 ACT: Constitution of India, Arts. 311(2) (c) and 320 (3) (2)- Governor passing order of dismissal-Order reciting Governor's satisfaction that it was not expedient to give opportunity to show cause against action proposed Recital must be held to imply that Governor was also satisfied that it was not expedient to hold inquiry-Article 311(2) as amended in 1963 only clarifies what was judicially held to be implied in original article-Consultation with Public Service Commission by Governor before passing order of dismissal not necessary-Chief Secretary's authentication of Governor's order does not show that Governor was influenced by Chief Secretary Mala fides not established. HEADNOTE: The appellants were dismissed from the service of the Government of Assam by two separate orders passed by the Governor on April 1, 1965. The orders recited that the appellants were unfit to be retained in the public service, B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 1 that they ought to be dismissed from service and that the Governor was satisfied in terms of Art. 311(2) (c) of the Constitution that it was not expedient to give them opportunity to show cause against the action proposed to be taken in regard to them as stated above. The appellants challenged the orders of dismissal in writ petitions under Art. 226 of the Constitution which were dismissed by the High Court. In appeals by certificate the contentions of the appellants were: (i) that the impugned orders were not in compliance with the terms of Art. 311(2) as amended by the Constitution Fifteenth Amendment Act which had come into force on October 6, 1963; (ii) that the orders were bad because they were passed without consulting the Public Service Commission ; (iii) that the orders were passed mala fide at the instance of the Chief Secretary and the Finance Minister who were annoyed with the appellants. HELD: (i) Per Shelat and Dua, JJ. According to the decisions of this Court the expression "reasonable opportunity of showing cause against the action proposed to be taken" in the unamended Art. 311(2) included an opportunity to show cause against the guilt of the government servant concerned. This opportunity to show cause against the guilt seems to correspond to the reasonable opportunity of being heard in respect of the charges in the course of the inquiry contemplated by the amended sub-article. The amendment in 1963 was made principally to put in clearer language the result of the judicial decisions construing s. 240(3) of the Government of India Act, 1935 and unamended Art. 311(2) of the Con- stitution. It could not be doubted that the Governor in the present case was fully alive to the interest of the security of the State when he expressed his satisfaction about the inexpediency of giving an opportunity to the appellants to show cause against their guilt as contemplated by cl. (2) of Art. 311 and intended that this clause shall not apply to their cases. Merely because the form of the order was expressed in the language used in the unamended Art. 311(2) it did not detract from its effectiveness as operating to exclude the applicability of the amended cl. (2) of Art. 311 as a whole. The use of the words in conformity with the unamended article served to convey the same intention as was contemplated by the 478 amended article and the difference in the language which seemed to be inconsequential did not have the effect of nullifying the impugned orders. The words 'as stated above' in the orders did not have the effect of restricting the ambit of the show cause notice to the question of penalty which may be imposed after the inquiry into the unfitness of the appellants to be retained in the public service. [482C- H; 483E-G] Khem Chand v. Union of India & Ors. [1958] S.C.R. I Secretary of State for India v. I.M. Lal, [1945] F.C.R. 10 B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 2 and High Commissioner for India v. I.M. Lall, L.R. (1948) 75 I.A. 225, referred to. Per Bhargava, J. (dissenting) The "action proposed as stated above" in the impugned orders clearly was the order imposing the penalty of dismissal from service. In the order itself preceding the recording of the satisfaction there was no other action proposed, except the action of dismissal from service. The satisfaction recorded by the Governor, therefore, related to the third step to be taken under cl. (2) of Art. 311 of the Constitution. The Governor confirmed his satisfaction to the inexpediency of giving opportunity to the appellants to show cause against the penalty proposed. No satisfaction was recorded that it was inexpedient to hold the inquiry required by cl. (2) of Art. 311 as amended. Under sub-cl. (c) of the proviso, what was needed was a satisfaction that it was inexpedient to hold the inquiry. No such satisfaction having been recorded it was necessary that the provisions of the principal cl. (2) of Art. 311 should have been complied with before passing an order of dismissal. The order of dismissal was therefore void and liable to be struck down. [489C-E] Case-law referred to. (ii) Consultation with the Public Service Commission is not compulsory under r. 10 of the Assam Services Discipline and Appeal Rules, 1964 and regulation 6 of the Assam Public Service Commission (Limitation of Functions) Regulations 1951. The consultation with the Commission is not prescribed either by the Rules or by the Regulations. The consultation is only under Art. 320 (3) (c) of the Constitution. So far as that consultation is concerned this Court has held that it is not mandatory. Nonconsultation with the Public Service Commission could not therefore be held to vitiate the orders impugned. [492C-493D] State of U.P. v. Manbodhan Lal Srivastava, [1958] S.C.R. 533 and State of Bombay v. D. A. Korgaonkar, C.A. No. 289/1968 dt. 6-5-1960, relied on. (iii) There was no charge that the Governor had any extraneous reasons for Passing the orders of dismissal. There was nothing on record to show that either the Chief Secretary or the Finance Minister took any Part in the proceedings which led to the orders of dismissal, or that they advised the Governor. The orders were no doubt authenticated by the Chief Secretary in the name of the Governor, but that did not mean that the Governor was in any way influenced by any advice tendered to him by the Chief Secretary. In the circumstances, the plea of mala fide must be rejected. [493E-F] The appeals. had accordingly to be dismissed: JUDGMENT: B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 3 CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1644 and 1645 of 1967. Appeals from the judgment and order dated July 26, 1967 of the Assam and Nagaland High Court in Civil Rule Nos. 192 and 208 of 1966. Debabrata Mukherjee, D. N. Mukherjee and S. K. Nandy, for the appellants (in both the appeals). M. C. Chagla and Naunit Lal, for the respondents (in both the appeals. The Judgment of J. M. SHELAT and I. D. DUA, J.J. was de- livered by DUA, J. V. BHARGAVA, J., gave a dissenting Opinion. Dua, J.-We have read the judgment prepared by our learned brother Bhargava, We are in complete agreement with him so far. as decision on points Nos. (2) & (3) is concerned, but with respect we are unable to agree with him on point No. (1). It is unnecessary to. repeat the relevant facts which have been set out by our learned brother in his judgment. The impugned order dated April 1, 1965, in the case of appellant P. K. Hore may however, be again reproduced : "The Governor is satisfied that Shri P. K. Hore, Superintendent, P.W.D.F.C. & I Wing against whom more charges have been received is unfit to be retained in the public service and that he ought to be dismissed from service. The Governor is further satisfied under sub- clause (c) of the. proviso to clause (2) of Article 311 of the Constitution that in the interest of the security of the State, it is not expedient to give the said Shri P. K. Hore an opportunity to show cause against the action proposed to be taken in regard to him as stated above. Accordingly, the Governor hereby dismisses the said P. K. Hore, from service with immediate effect." On the same day an identical order was made with respect to the dismissal of the appellant B. C. Das except that in the order against him there is no mention of more charges having been received against him. It appears that when the Governor made these two orders his attention was not invited to the amended Art. 311(2) which was in force on that date. The impugned orders were accordingly made in terms of Art. 311(2) as it existed before its amendment by the Fifteenth Amendment Act, 1963, which had come into force on October 6, 1963. The amended Art. 311(2) has been reproduced in the judgment of my learned brother, it is, However, desirable to reproduce both the amended and unamended article 311(2) so as to understand if any substantial or material change in the legal position was intended by the amendment: B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 4 Unamended Prior to 6-10-63 (2) No such person as aforesaid shall be dismissed or removed or reduced in rank until he has been given a reasonable opportunity of 'showing cause against the action proposed to be taken in regard to him Provided that this clause shall not apply- (a) Where a person is dismissed or removed or reduced in rank on the ground of conduct which has led to his conviction on a criminal charge; or (b) where an authority empowered to dismiss or remove a person or to reduce him in rank is satisfied that for some reason, to be recorded by that authority in writing, it is not reasonably practicable to give to that person an opportunity of showing cause; or (c) where the President or Governor, as the case may be, is satisfied that in the interest of the security of the State it is not expedient to give that person such an opportunity. Amended After 6-10-63 (2) No such person as aforesaid shall be dismissed or removed or reduced in rank except after an inquiry in which he has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges and where it is proposed, after such inquiry, to impose on him any such penalty, until he has been given a responsible opportunity of making representation on the penalty proposed, but only on the basis of the evidence adduced during such inquiry. Provided that this clause shall not apply- (a) where a person is dismissed or removed or reduced in rank on the ground of conduct which has led to his conviction on a criminal charge; or (b) where the authority empowered to dismiss or remove a person or to reduce him in rank is satisfied that for some reason, to be recorded by that authority in writing, it is not reasonably practicable to hold such inquiry : or (c) where the President or Governor, as the case may be, is satisfied that in the interest of the security of the State it is not expedient to hold such inquiry. The unamended sub-article except the proviso was a reproduction of s. 240(3) of the Government of India Act, 1935. The proviso to s. 240(3) had only two clauses corresponding to cls. (a) & (b) of the unamended Art. 311(2). A bench of five Judges of this Court in Khem Chand v. The Union of India and Others (1) [1958] S.C.R. 1080. speaking through Das, C.. J., after referring to the divergent views expressed by Spans, C. J. of the Federal Court for himself and Zafarulla Khan, J., on the one hand, and by Varadachariar, J., on the other in Secretary of State for India v. I. M. Lall(1) and to the decision of the Privy Council on appeal in High Commissioner for India v. I. M. Lall(2) explained the Privy Council decision and clarified the meaning scope and ambit of the unamended Art. 311(2) in these words: B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 5 "In our judgment neither of the two views can be accepted as a completely correct exposition of the intendment of the provisions of s. 240(3) of the Government of India Act, 1935, now embodied in Art. 311(2) of the Constitution. Indeed the learned Solicitor- General does not contend that this provision is confined to guaranteeing to the government servant an opportunity to be given to him only at the later stage of showing cause against the punishment proposed to be imposed on him. We think that the learned Solicitor-General is entirely right in not pressing for such a limited construction of the provisions under consideration. It is true that the provision does not, in terms, refer to different stages at which opportunity is to be given to the officer concerned. All that it says is that the government servant must be given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. He must not only be given an opportunity but such opportunity must be a reasonable one. In order that the opportunity to show cause against the proposed action may be regarded as a resonable one, it is quite obviously necessary that the government servant should have the opportunity, to say, if that be his case, that he has not been guilty of any misconduct to merit any punishment at all and also that the particular punishment proposed to be given is much more drastic and severe than he deserves. Both these pleas have a direct bearing on the question of punishment and may well be put forward in showing cause against the proposed punishment." According to this decision the expression "reasonable opportunity of showing cause against the action proposed to be taken" included an opportunity to show cause against the guilt of the government servant concerned. This opportunity to show cause against the guilt seems to correspond to the reasonable opportunity of being heard in respect of the charges in the course of the (1) [1945] F.C.R. 103. (2) L.R. [1948 75 I.A. 225. inquiry contemplated by the amended sub-article. The question, therefore, arises if in the present case the Governor when expressing his satisfaction under sub-clause (c) of the proviso to cl. (2) of Art. 311 of the Constitution in the impugned order, by using the words "it is not expedient to give the said Shri P. K. Hore an opportunity to show cause against the action proposed to be taken in regard to him as stated above", intended to convey his satisfaction that in the interest of the security of the State it was not expedient to give an opportunity to P. K. Hore to show cause only against the penalty proposed to be imposed, and that the Governor's satisfaction did not extend to the inexpediency of giving P. K. Hore an opportunity of showing cause against his unfitness to be retained in service as well. In our opinion the impugned order cannot reasonably be construed to be restricted to the narrow meaning suggested on behalf of the appellant. The words "as stated above" on which great reliance was placed by the learned counsel do not have the effect of restricting the ambit of the show cause notice to the question of penalty which may be imposed after the inquiry into P. K. Hore's unfitness to be retained in the public service. The show cause notice about the inexpediency of which the Governor was satisfied seems to us to extend also to the question of such unfitness of P. K. Hore. To accept the suggestion made by the appellant's learned counsel would impute to the Governor an intention to make what seems to be a meaningless order. B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 6 It may be recalled that the amended Art. 311(2) does not speak of any show cause notice. The language of this sub-article refers to an inquiry in which the delinquent government servant is to be informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges and where after such inquiry it is proposed to impose on him a penalty he is again to be given a reasonable opportunity of making representation on the penalty proposed. The second stage does not speak of notice to show cause against the action proposed to be taken. The amendment in 1963 was made principally to put in clearer language the result of the judicial decision construing s. 240(3) of the Government of India Act, 1935, and unamended Art. 311(2) of the Constitution. As already noticed, under s. 240(3) of the Act of 1935 and the unamended Art. 311(2) provision was made of giving a reasonable opportunity to the government servant concerned of showing cause against the action proposed to be taken in regard to him. This expression was construed in terms to refer to the stage when, after such inquiry as may be necessary, and after the punishing authority, being satisfied of the guilt of the delinquent government servant, provisionally proposed the action to be taken against him. But in answer to this show cause notice the government servant was held entitled also to show cause against his guilt on the merits. Even though in the earlier inquiry, if any, the government servant had been given an opportunity of showing cause against his guilt, the second opportunity provided by the statute was held to be mandatory. The Privy Council in I. M. Lall's case(1) saw "no difficulty in the statutory opportunity being reasonably afforded at more than one stage". The Privy Council, however, dealt with s. 240(3) of the Act of 1935 and the earlier statutory rule on the subject. This Court in Khem Chand's case(2) after quoting a passage from the judgment of the Privy Council said: "Therefore, in a case where there is no rule like 55 the necessity of an enquiry was implicit in s. 240(3) and is so in Art. 311(2) itself. Further their Lordships say that an enquiry under r. 55 "would not exhaust his statutory right and he would still be entitled to make a representation against the punishment proposed as the result of the findings of the enquiry". This clearly pro- ceeds on the basis that the right to defend himself in the ,enquiry and the right to make representation against the proposed punishment are all parts of his "statutory right" and are implicit in the reasonable opportunity provided by the statute itself for the protection of the government servant." It cannot be doubted that the Governor in the present case was fully alive to the interest of the security of the State when he expressed his satisfaction about the inexpediency of giving an opportunity to P. K. Hore in the one case, and to B. C. Das in the other, to show cause against their guilt as contemplated by cl. (2) of Art. 311 and intended that this clause shall not apply to their cases. Merely because the form of the order was ,expressed in the language used in the unamended Art. 311(2), it does not in our view detract from its effectiveness as operating to exclude the applicability of the amended cl. (2) of Art. 311 as a whole. The use of the words in conformity with the unamended article serves to convey the same intention as is contemplated by the amended article and the difference in the language which seems to be inconsequential does not have the effect of nullifying the impugned order. B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 7 No doubt Art. 311(2) is intended to afford a sense of security to government servants covered by sub-art. (1) and the safeguards provided by sub-art. (2) are mandatory. But cl. (c) of the proviso to this sub-article which is designed to safeguard the larger interest of the security of the State cannot be ignored or (1) L.R. [1948] 75 I.A. 225. (2) [1958] S.C.R. 1080. considered less important,' when construing sub-art. (2). The interest of the security of the State should not be allowed to suffer by invalidating the Governor's order on unsubstantial or hyper-technical grounds which do not have the effect of defeating the essential purpose of the constitutional safeguard of individual government servant. It is nobody's case before us that inquiry into the charges against the two appellants as contemplated by the amended Art. 311(2) had already been held and the question of imposition of penalty alone remained to be finally settled when the impugned order was made. No inquiry of any kind as contemplated by Art. 311(2) was, according to the common case of the parties, held against the appellants when the Governor made the impugned orders under proviso (c) to this sub-article. In these circumstances the impugned orders when they speak of the "action proposed to be taken" must be construed as intended to refer to the action including inquiry into the truth of the charges against them and the proposed penalty to be imposed after such inquiry. The fact that cl. (c) of the proviso to the amended sub-article only speaks of the inquiry and not of imposition of penalty is understandable because in the absence of inquiry the question of penalty cannot arise. It also serves to indicate that the Governor could not have intended by the impugned order to exclude only representation against imposition of penalty, leaving untouched the inquiry land the right of the government servant to the opportunity of hearing with respect to the charges. Once it is borne in mind that the Governor's attention was, for some reason or the other, drawn only to the unamended Art. 311 and not to the amended article, and it is further kept in view that the amendment of Art. 311 in 1963, as already explained, was only designed to clarify and give effect to the judicial decisions interpreting the unamended article, the reason for the form and the language used in the impugned orders becomes clear and there can be no difficulty in understanding their true meaning. Reading the impugned orders in the light of what has just been stated, they quite clearly exclude the applicability of sub-art. (2) of Art. 311 in both cases. These appeals accordingly fail and are dismissed, but in the circumstances without costs. Bhargava, J.-These two appeals by certificate are directed against a common judgment of the High Court of Assam and Nagaland dismissing two writ petitions filed by the two appellants. For purposes of dealing with the case, it is enough to give facts in respect of one of the appellants, as the facts in the case of the other appellant are very similar, and the points arising are common. In Civil Appeal No. 1645 of 1967, the appellant is P. K. Hore who joined service in the Secretariat of the. Assam Government on 1st November, 1946 in the post of a Lower Division Assistant. On 9th December, 1950, he was confirmed in that post. On 1st July, 1957, he was confirmed as an Upper Division Assistant, and on further promotion, on 9th December, 1963, he was confirmed as a Superintendent in the Secretariat with the approval of the State public Service Commission. In the year 1964-65, he was elected as Vice- President of the Assam Secretariat Services' Association. This was at a time when, in the year 1964, the report of the Pay Committee appointed by the Government was published. The employees of the Secretariat were dissatisfied with the recommendations of the Pay Committee and there was an agitation against it in respect of the service conditions. As a result, B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 8 the Association took a decision for a pen-down strike. There was also some agitation alleging that the Pay Committee had shown undue favour to the brother of the Finance Minister of the State Government, viz., Fakhruddin Ali Ahmed. Consequently, between 16th and 19th November, 1964, there was a debate in the Legislative Assembly regarding the report where the Finance Minister had to give an explanation on this charge. There was the further allegation that the appellant P. K. Hore had taken special interest in ensuring that undesirable persons did not enter Assam from Pakistan which was resented by the then Chief Secretary of the Government. As a result of the agitation by the Association, of which P. K. Hore was the Vice- President, he was suspended on 12th March, 1965. The other appellant, B. C. Das, was suspended a few days later. In fact, including the latter, 32 other employees were placed under suspension. On 18th March, 1965, inquiry proceedings were drawn up against P. K. Hore and some others to show cause why disciplinary action should not be taken against them for insubordination. P. K. Hore was asked to submit his explanation within five days from the date of receipt of the communication. On 26th March, 1965, he applied for extension of time which request was accepted and time was extended up to 2nd April, 1965. Before he could submit his explanation, however, on 31st March, 1965, P. K. Hore, B. C. Das and three others were placed under detention by the District Magistrate under Rule 30(1) of the Defence of India Rules. Thereafter, in the case of P. K. Hore, the following order was passed on 1st April, 1965 :- "The Governor is satisfied that Shri P. K. Hore, Superintendent, P.W.D.F.C. & 1. Wing against whom more charges have been received is unfit to be retained in the public service and that he ought to be dismissed from service. The Governor is further satisfied under sub- clause (C) of the proviso to clause (2) of Article 311 of the Constitution that in the interest of the security of the State. it is not expedient to give the said Shri P. K. Hore an opportunity to show cause against the action proposed to be taken in regard to him as stated above. Accordingly. the Governor hereby dismisses the said P. K. Hore from service with immediate effect." On these facts, this order, as well as the similar order passed in the case of B. C. Das, were challenged in the High Court of, Assam and Nagaland in petitions under Art. 226 of the Constitution on the following three grounds which have also been urged in these appeals (1) The order of dismissal from service has been passed in violation of Art. 311(2) of the Constitution, as the order of the Governor did--not satisfy the requirements of sub- clause (c) of the proviso to clause (2) of Art. 31 1; (2) The order has been passed without consultation with the State Public Service Commission which was compulsory under rule 10 of the Assam Services Discipline and Appeal Rules, 1964 (hereinafter referred to as "the Rules"), and regulation 6 of the Assam Public Service Commission (Limitation of Functions) Regulations, 1951 (hereinafter referred to as "the Regulations"), (3) The order of dismissal has been passed mala fide. The High Court rejected all these grounds and dismissed both the writ petitions and, consequently, the appellants have come up to this Court in these appeals. Clause (2) of Art. 311 of the Constitution, as it stands after amendment by the Constitution (Fifteenth Amendment) Act, 1963 reads as follows :- B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 9 "311. (2) No such person as aforesaid shall be dismissed or removed or reduced in rank except after an inquiry in which he has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges and where it is proposed, after such inquiry, to impose on him any such penalty, until he has been given a reasonable opportunity of making representation on the penalty proposed, but only on the basis of the evidence adduced during such inquiry : Provided that this clause shall not apply- (a) where a person is dismissed or removed or reduced in rank on the ground of conduct which has led to his conviction on a criminal charge; or (b) Where the authority empowered to dismiss or remove a person or to reduce him in rank is satisfied that for some reason, to be recorded by that authority in writing, it is not reasonably practicable to hold such inquiry; or (c) where the President or the Governor, as the case may be, is satisfied that in the interest of the security of the State it is not expedient to hold such inquiry." Under this provision, if an order of dismissal or removal or reduction in rank is to be passed in respect of any Government servant, three steps have to be taken. The first step is to direct that an inquiry be held against him; the second is that, in that inquiry he has to be informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges; and, finally, after such inquiry, the third step to be taken is that, if it is proposed to impose on him any penalty of dismissal, removal or reduction in rank, he has to be given a reasonable opportunity of making a representation on the penalty proposed, but only on the basis of the evidence adduced during such inquiry. Under the three sub-clauses of the proviso, this principal clause ceases to apply altogether in case the conditions laid down in those sub-clauses are satisfied. Sub-clause (c), which is relevant in this case, lays down that, where the President or the Governor, as the case may be, is satisfied that, in the interest of the security of the State, it is not expedient to hold the inquiry under the principal clause, that clause shall not apply. In order, therefore, to enable the Governor to pass an order of dismissal without holding an inquiry, without informing the government servant of the charges against him and without giving him an opportunity of being heard in respect of those charges, and without giving him a reasonable opportunity of making a representation against the penalty proposed, the Governor must be satisfied that, in the interest of the security of the State, the holding of such an inquiry is not expedient. In the present case, in the impugned order dated 1st April, 1965, the satisfaction of the Governor was recorded in the following words :- "It is not expedient to give the said Shri P. K. Hore an opportunity to show cause against the action proposed to be taken in regard to him as stated above." There was no mention of any inquiry and the Governor did not record any satisfaction that it was not expedient to hold the inquiry envisaged by the principal clause (2) of Art. B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 10 311. It is specially to be noted that, in the first paragraph of the order, the Governor's satisfaction is recorded on two points. One is that the Governor is satisfied that P. K. Hore, against whom more charges had been received, is unfit to be retained in the public service, and the second is that he ought to be dismissed from service. Obviously, this paragraph envisaged that the Governor had already formed an opinion that the penalty of dismissal from service should be awarded to P. K. Hore. Having arrived at that opinion, it was expressed in so many words in the first paragraph of the order and, then, in the second paragraph, the Governor's satisfaction is recorded to the effect that it is not expedient to give P. K. Hore an opportunity to show cause against the action proposed as stated above. The "action proposed as stated above" in the order clearly is the order imposing the penalty of dismissal from service. In the order itself preceding the recording of this satisfaction, there is no other action proposed, except the action of dismissal from service. The satisfaction recorded by the Governor, therefore, related to the third step to be taken under clause (2) of Art. 311 as enumerated above. The Governor confined his satisfaction to the inexpediency of giving an opportunity to P. K. Hore to show cause against the penalty proposed. No satisfaction is recorded that it is inexpedient to hold the inquiry required by clause (2) of Art. 31 1. Under sub-clause (c) of the proviso, what was needed was a satisfaction that it was inexpedient to hold the inquiry. No such satisfaction having been recorded, it was necessary that the provisions of the principal clause (2) of Art. 311 should have been complied with before passing an order of dismissal. Mr. Chagla appearing on behalf of the respondent, however, relied on the fact that the satisfaction of the Governor was recorded in the language in which the provision in Art. 311(2) stood prior to its amendment by the Constitution (Fifteenth Amendment) Act, 1963, and which was as follows "311. (2) No such person as aforesaid shall be dismissed of removed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him Provided that this clause shall not apply- (a) where a person is dismissed or removed or reduced in rank on the ground of conduct which has led to his conviction on a criminal charge; (b) where an authority empowered to dismiss or remove a person or to reduce him in rank is satisfied that for some reason, to be recorded by that authority in writing, it is not reasonably practicable to give to that person an opportunity of showing cause; or (c) where the President or the Governor, as the case may be, is satisfied that in the interest of the security of the State it is not expedient to give to that person such an opportunity." Under the unamended clause (2) of Art. 311, what was required to be done was that a reasonable opportunity of showing cause against the action proposed to be taken in regard to him had to be given to the government servant, and, under the proviso, the Governor's satisfaction required was that in the interest of the security of the State it was not expedient to give that person such an opportunity. The satisfaction under the unamended provision, therefore, that the Governor had to arrive at was that it was not expedient to give the government servant an opportunity of showing cause against the action proposed to be taken in regard to him. This is the language used in the order impugned. The words used in the Article, before the amendment, were interpreted by this B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 11 Court in Khem Chand v. The Union of India and Others.(3) Summarising the position, the Court held :- "The reasonable opportunity envisaged by the provision under consideration includes- (a) An opportunity to deny his guilt and establish his innocence, which he can only do if he is told what the charges levelled against him are and the allegations on which such charges are based-. (b) an opportunity to defend himself by cross-examining the witnesses produced against him and by examining himself or any other witnesses in support of his defence; and finally (c) an opportunity to make his representation as to why the proposed punishment should not be inflicted on him, which he can only do if the competent authority, after the enquiry is over and after applying his mind to the gravity or otherwise of the charges proved against the government servant tentatively proposes to inflict one of the three punishments and communicates the same to the government servant." This interpretation was reiterated by the Court in Hukum Chand Malhotra v. Union of India.(1) It was urged by Mr. Chagla that, in interpreting the order of the Governor dated 1st April, 1965, it should be held that, in stating that it is not expedient [1958] S. C. R. 1080. (2) [1959] Suppl. S. C. R. 892. to give P. K. Hore an opportunity to show cause against the action proposed to be taken in regard to him, he must have used these words in the sense in which they were used in the Constitution prior to its amendment and in the light of the interpretation placed on those words by this Court in the two decisions cited above. For two reasons, this submission made by Mr. Chagla appears to be unacceptable. The first reason is that it is too much to hold that the Governor, while passing an order under the amended Art. 311(2), would be consciously thinking of and basing his order on the language which was used earlier in the unamended Article and on the interpretation placed on that unamended article by this Court. In fact, in the counter-affidavit filed on behalf of the State, the assertion made by the Chief Secretary again is "that the Governor of Assam was satisfied on the basis of materials before him that in the interest of security of the State, it was not expedient to give the petitioner to show cause against the order of dismissal." He, thus, reiterates that the Governor's satisfaction was confined to the inexpediency of permitting the petitioner to show cause against the proposed order of dismissal which was the proposed penalty. This statement in the affidavit gains importance when reference is made to a subsequent paragraph in it in which the Chief Secretary puts forward his submissions. It is in the submissions that the Chief Secretary says that the Governor was satisfied that it was not expedient to hold the inquiry. If, in fact, the Governor was so satisfied, there is no reason why the Chief Secretary should not have stated it on oath in the earlier paragraph, instead of merely making a submission of his in a subsequent paragraph. The second reason is that in the order, when recording his satisfaction, the Governor has stated that it is not expedient to give P. K. Hore an opportunity to show cause against the action proposed to be B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 12 taken in regard to him as stated above. The last three words "as stated above" have great significance. As has been mentioned earlier, the only action proposed to be taken, which was stated earlier in that order, was the action of dismissal from service. Obviously, therefore, the language used can bear no other interpretation except that the Governor, in recording the satisfaction, confined it to the inexpediency of giving an opportunity to P. K. Hore to show cause against dismissal from service which would be an opportunity to show cause against the penalty proposed only. No satisfaction was recorded with regard to the inexpediency of holding an inquiry. It was argued that this interpretation, which is being placed on the order of the Governor, is too strict and technical, and it should be held that, in fact, the Governor intended to record his satisfaction on the question of inexpediency of holding the inquiry as required by the amended Art. 311(2). It has to be remembered that the satisfaction of the Governor under sub- clause (c) of the proviso has the effect of depriving a government servant of a very valuable right of ;having an opportunity to prove his innocence as well as opportunity to make a representation against the penalty proposed to be inflicted on him. The effect of such satisfaction is that the government servant is dismissed without even being told of the charges against him. When such serious consequences follow, it is necessary that the precondition laid down by sub-clause (c) of the proviso to Art. 311 (2) is strictly satisfied so as to justify deprivation of the valuable right of the government servant mentioned above. I do not think, therefore, that it would be enough merely to infer the intention of the Governor and, thereupon, take away the right. There having been no proper compliance with the requirements of subclause (c) of the proviso to Art. 311(2), the order of dismissal passed against P. K. Hore is void and must be struck down. It may be mentioned that the same High Court in a later case of Zatia v. The State of Assam and Others(1) has arrived at the same decision, though on a different reasoning which does not appear to be sound. This decision applies equally to the case of B. C. Das, as, in his case also, the order passed by the Governor for his dismissal is exactly similar and was made in exactly similar circumstances as in the case of P. K. Hore. In view of the decision on the first point raised in these appeals, it is not necessary to deal with the other two points. However, since they were argued in detail by both parties, I may indicate that, in my opinion, there is no force in either of them. So far as non-compliance with rule 10 of the Rules and regulation 6 of the Regulations is concerned, I am unable to accept the submission put forward by counsel for the appellants that the rule or the regulation lays down any requirement that the Public Service Commission must be consulted before a government servant is dismissed. Rule 10 is as follows :- "Special procedure in certain cases.-Notwith- standing anything contained in Rule 9- (i) where a penalty is imposed on a Government servant on the ground of conduct which has led to his conviction on a criminal charge; or (ii) were the Disciplinary Authority is satisfied for reasons to be recorded in writing that it is not reasonably practicable to follow the procedure prescribed in the said B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 13 rule; or (1) [1969] Vol. I Pt. VI Assam Law Reports 192. (iii) where the Governor is satisfied that in the interest of the security of the State, it is not expedient to follow such procedure,- the Disciplinary Authority may consider the circumstances of the case and pass such orders thereon as it deems fit : Provided that the Commission shall be consulted before passing such orders in any case in which such consultation is necessary." The main part of this rule only enumerates cases where orders can be passed without consulting the Public Service Commission. It is only the proviso that mentions consultation; but it does not make it compulsory for the Commission to be consulted. All it says is that the Commission shall be consulted in any case in which such consultation is necessary. This clearly envisages that the necessity for consultation must be found in some other provision. This rule itself does not lay down that in all cases, other than those mentioned in the principal clause or in rule 9, consultation with the Public Service Commission is made mandatory. Similarly, regulation 6 only enumerates cases where it is not necessary to consult the Commission. It is true that consultation with the Commission, in cases where the Governor himself passes an original order imposing the penalty of dismissal on a, government servant, is not dispensed with. This regulation has obviously been made by the Governor in exercise of his power under the proviso to Art. 320(3) of the Constitution. It is the principal clause of Art. 320(3) which lays down when the Public Service Commission shall be consulted. Sub-clause (c) of clause (3) of Art. 320 is the relevant provision under which consultation with the Public Service Commission is required on all disciplinary matters affecting a person serving under the Government of a State. The regulations, as indicated above, do not dispense with this requirement of Art. 320(3)(c) in cases where the Governor is himself the original dismissing authority. The argument of learned counsel that regulation 6 itself lays down by implication that there must be consultation with the Public Service Commission in such cases cannot, therefore, be accepted. Regulation 6 not having exempted consultation with the Public Service Commission in such cases, all that can be held is that the consultation required by Art. 320(3)(c) continues to be in force and applicable. Counsel also drew attention to illustration (4) in regulation 6 which is as follows :- "It is proposed to dismiss a State Service Officer or to reduce his pension. The Commission must be consulted before an order is passed by the Governor." This illustration again merely indicates the correct legal position that the Commission must be consulted as required by Art. 320(3)(c). The illustration by itself cannot be read as a statutory rule laying down that there must be consultation with the Commission. The illustration is to the main B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 14 provisions of regulation 6 which only lay down cases in which consultation with the Commission is dispensed with and this illustration has been put down as one of the examples where the consultation has not been dispensed with. The consultation, therefore, with the Commission is not prescribed either by the Rules or by the Regulations. The consultation is only under Art. 320(3)(c) of the Constitution. So far as that consultation is concerned, this Court has already held that it is not mandatory and that this Article does not confer any rights on a public servant, so that the absence of consultation or any irregularity in consultation does not afford him a cause of action in a court of law, vide State of U. P. v. Manbodhan Lal Srivastava.(1) That decision was further affirmed in the State of Bombay v. D. A. Korgaonkar.(2) Non-consultation with the Public Service Commission cannot, therefore, be held to vitiate the orders impugned. The third ground of mala fides has, on the face of it, no force at all, because it is based on allegations that the Chief Secretary and the Finance Minister were annoyed with the appellants. But there was no charge that the Governor bad any extraneous reasons for passing the orders of dismissal. There is nothing on the record also to show that either the Chief Secretary or the Finance Minister took any part in the proceedings which led to the orders of dismissal, or that they advised the Governor. The orders are, no doubt, authenticated by the Chief Secretary in the name of the Governor; but that does not mean that the Governor was in any way influenced by any advice tendered to him by the Chief Secretary. In the circumstances, the plea of mala fide must also be rejected. As a result, the appeals are allowed with cost and the orders of dismissal in both the cases are quashed as having been passed in violation of Art. 311(2) of the Constitution. ORDER In accordance with the majority judgment, the appeals fail and are dismissed but in the circumstances of the case without costs. G.C. (1) [1958] S. C. R. 533. (2) Civil Appeal No. 289 of 1958 decided on 6th May, 1960. B. C. Das Etc vs State Of Assam & Ors on 23 April, 1971 15 | {
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Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 Equivalent citations: 1972 AIR 975, 1972 SCR (2) 765, AIR 1972 SUPREME COURT 975, 1972 2 SCR 765, 1972 CURLJ 654, 1972 SCD 128, ILR 1974 2 DELHI (SC) 73, 1973 MADLW (CRI) 161, 1972 (1) SCJ 691 Author: P. Jaganmohan Reddy Bench: P. Jaganmohan Reddy, D.G. Palekar PETITIONER: HIMACHAL PRADESH ADMINISTRATION Vs. RESPONDENT: SHRI OM PRAKASH DATE OF JUDGMENT07/12/1971 BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN PALEKAR, D.G. CITATION: 1972 AIR 975 1972 SCR (2) 765 1972 SCC (1) 247 CITATOR INFO : R 1973 SC 863 (15,27) R 1979 SC 400 (8) F 1979 SC1284 (4) R 1986 SC1769 (5) RF 1989 SC1205 (17) RF 1991 SC1108 (10) RF 1991 SC1853 (9) RF 1992 SC 49 (9) ACT: Constitution of India, 1950, Art. 136--Criminal appeal against acquittal--Scope of interference by Supreme Court. Criminal trial--Circumstantial evidence--Approach by Court. Evidence Act (1 of 1872), s. 27--Weight of evidence re : recovery--Panch witnesses--If should be different for each recovery. Criminal Procedure Code (Act 5 of 1898), s. Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 1 510--Admissibility and weight of report of finger print expert. HEADNOTE: The accused was charged with murder by stabbing, and the evidence against him was circumstantial. It consisted of : (a) evidence of ill-will against the deceased furnishing a motive (b) evidence that he was last seen in the company of the deceased, (c) evidence furnished by finger prints, that he was present in the room of the deceased at or about the time of the murder, (d) evidence that he was subsequently found in Possession of articles which had incriminating blood strains, and (e) evidence that he had bidden a dagger with bloodstains thereon, and certain other articles. which were discovered on information furnished by him. The trial court convicted him but the High Court set aside the conviction on the ground that the witnesses were not independent or impartial. Allowing the appeal to this Court, HELD : (1) In an appeal against acquittal by special leave under Art. 136, this Court has power to interfere with the findings of fact, no distinction being made between judgments of acquittal and conviction though in the case of acquittals, it will not ordinarily interfere with the appreciation of evidence or findings of fact unless the High Court acted perversely or otherwise improperly. [772 B-D] State of Madras v. Vaidyanatha Iyer, [1958] S.C.R. 580, 587, referred to. (2) In the case of circumstantial evidence if the links in the chain are complete leading to the undoubted conclusion that the accused alone could have committed the offence then it can be accepted. In appreciating -such evidence the prime duty of a court is to ensure that the evidence is legally admissible, that the witnesses are credible and that they have no interest or motive in implicating the accused, Since it is difficult to expect a scientific or mathematical exactitude while dealing with such evidence corroboration is sought wherever possible. If there is any reasonable doubt the accused is given the benefit of such doubt. The doubt should be reasonable and not a remote possibility in favour of the accused. That is, the greatest possible care should be taken by the court in convicting an accused,, who is presumed to be innocent till the contrary is clearly established, and the burden of so establishing is always on the prosecution. [772 C-E, G; 773 E-H; 774 C] (3)(a) While considering the evidence relating to the recovery under S. 27 of the Evidence Act the court will have to exercise that caution and care which is necessary to lend assurance that the information furnished by the accused lead in to the discovery of a fact is credible. [776 D] 766 Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 2 In the present case, the various panchnamas of seizure prepared by the Investigating Officer could not be assailed on the ground that the witnesses who witnessed the recoveries were connected with the deceased or with his business, and that therefore, they were not independent or impartial witnesses. [775 H; 776 G] (b) The evidence relating to recoveries is not similar to that contemplated under s. 103, Cr. P.C. It cannot be laid down as a matter of law or practice that where recoveries had to be effected from different places on the information furnished by an accused different sets of persons should be called to witness them. [777 B-C] On the contrary, in the present case, the witnesses who worked with the deceased were proper persons to witness the recoveries as they could identify the things which were missing. [777 C-D] (4) The report of the Director of the Finger Print Bureau regarding the finger prints can be used as evidence under s. 510 Cr. P.C., without examining the person making the report, because identification of finger prints has developed into an exact science. As long as the report shows that the opinion was based on relevant observations that opinion can be accepted. [783 A-E] In the present case, the report set out many points of similarity between the finger prints found in the room of the deceased and those of the accused. [783 H] (5) The information given by the accused that he purchased a dagger from one of the prosecution witnesses followed his leading the police to that witness and pointing him out is inadmissible under s. 27 of the Evidence Act. The concealment of a fact which is not known to the police is what is discovered by the information given by an accused and lends assurance that the information was true. What makes the information leading to the discovery of a witness admissible is the discovery from him of the thing sold to him or hidden or kept with him which the police did not know until information was furnished by the accused. But a witness cannot be said to have been discovered if nothing was found with or recovered from him. as a consequence of the information furnished by the accused. [778 F- 779 H; 780 A-C] Emperor v. Ramanuya Ayangar, A.I.R. 1935 Mad. 528, over- ruled. Pulukiuri Kotayya & Ors. v. King Emperor, 74 I.A. 65, Ramkrishan Mithaplal Sharma v. State of Bombay, [1955] I S.C.R. 9'03, Sukhan v. Crown, I.L.R. X Lah. 283, Public Protector v. India China Lingiah & Ors., A.I.R. 1954 Mad. 435 and Re : Vellingiri, A.I.R. 1950 Mad. 613. referred to. (6) But that the accused had taken some of the prosecution witnesses to the witness from whom he bought the dagger and pointed him out, would be admissible under s. 8 of the Evidence Act as conduct of the accused. [780 C-D] Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 3 (7) Even after excluding some recoveries on the ground that the evidence regarding them was not satisfactory, the evidence against the accused consisted of evidence of motive, recovery of a button in the room of the deceased which matched with the button on the cuff of the coat recovered from the accused, the finger prints in the room, recovery of a blood stained coat and other articles of dress, a blanket, and the dagger, and the 767 fact that the accused and deceased were last seen together. The evidences cogent and conclusive and should not have been rejected by the High Court. [781 C-E; 786 C-D] JUDGMENT: CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 67 of 1969. Appeal by special leave from the judgment and order dated August 12, 1969 of the Delhi High Court in Criminal Appeal No. 68 of 1967 and Murder Reference No. 1 of 1967. H. R. Khanna and R. N. Sachthey, for the appellant. Har Pershad and O. N. Mohindroo, for the respondent. The Judgment of the Court was delivered by P. Jaganmohan Reddy, J. This Appeal is by Special leave against the Judgment of the Himachal Bench of The High Court of Delhi acquitting the accused who had been sentenced to death for an offence of murder under Section 302 of the Indian Penal Code. The accused Respondent was a Manager at the Kotkhai Branch of the Himachal Pradesh State Cooperative Bank of which Sunder Lal Chaturvedi the deceased was the General Manager. It appears that during the period the accused was working in that Bank there was a fire in the Kotkhai Branch in which the records of the Bank were burnt and a sum of Rs. 10,000/,A was found missing. The deceased had suspended the accused from the service and subsequently he was dismissed. In or about 1964, the deceased retired from the Bank and in 1965 started a Private Limited Company under the name of Himprasth Financiers with the Head Office at Nagina Singh Building which was situated in the Mall at Shimla of which he was the Managing Director. He used to also live in the same building in one of the rooms of the office and have his meals in the Mansarovar Hotel. The other Directors of this Company were Gurucharan Singh, Puran Chand Sood and Kailasli Devi wife of I. C. Gupta, P.W. 2, who was at one time also Manager in the Himachal Pradesh State Cooperative Bank. After the accused was dismissed from the Bank he had applied to the deceased for a job and was appointed as an Accountant in the Finance Company but later when his request for increase in his pay was not sanctioned, he sent in his resignation by a letter dated 31- 12-66 Exh. P. 8 and it was accepted on 3-1-67 by a resolution of the Board of Directors Exh. P. 43. On the night of 30th January 1967 the deceased had his dinner at the Hotel and when lie came out after taking his food it was alleged that he was met by the accused. This was witnessed by Romesh Chand P.W. 7 the Proprietor of the Hotel who saw them both going towards the Mall. Thereafter at the betel shop which is near Nagina Singh Building, Lal Chand P.W. 9 who was purchasing cigarettes at that shop saw them together and going towards the Nagina Singh Building. It was the last time he was seen alive. On the 31st January 67 at about 9.30 a.m. I. C. Gupta P.W. 2, came to visit the deceased and .found that the main door was bolted from inside. He then peeped through the glass of the window panes through Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 4 the adjoining room and saw that the deceased was lying in a pool of blood. He immediately telephoned to the Police. In response to this call the Station House Officer of the Saddar Police Station, Inder Raj Malik, P.W. 28 came to the building, broke open the room through the kitchen door and saw that the back door of the bath room was open. At that time there were present P.W. 2. Amar chand P.W. 8, Raidev Krishan P.W. 13 and others. The deceased had on him four incised wounds one on the neck and 3 on the hands. On inspection of the room he found on the nearby table a key Ex. 4 stained with blood and under the table there was a biscuit colour Coat button Ex. 1. Inside the shelf of an Almirah there was a water flask which appeared to have on its neck 3 finger impressions. On the glass pane of the door leading to the kitchen were also found two finger marks. The curtain near the kitchen door showed that someone had wiped his blood stained hands on it. The key and the button were seized and a panchnama was made. There were also found two bunches of the keys underneath the pillow of the deceased. Des Raj, P.W. 6, the Police Photograph took photographs not only of the various objects in the room but also of the finer marks on the flask and the window panes after the same were dusted with some prey powder. Thereafter the Investigating, Officer P.W. 28 requested P.W. 2, P.W. 8 and P.W. 13 to ascertain if any of the things belonging to the deceased were missing. These three persons informed him after inspection list two loan registers, one general ledger, one cash book and vouchers from April '66 to December '66 were missing. They further informed him that one blanket of the deceased, one tea-poy cove,' and one canvas bag was missing. An inquest on the dead body was held and the blood found was also seized. Thereafter- p.W. 28 went to Mansarover Hotel and recorded the statement of P.W. 7. On 1-2-6-/ at about 11.30 a.m. P.W. 28 accompanied by the Assistant Sub-Inspector and Constables met P.W. 2, P.W. 8 and boarded the jeep of P.W. 2 driven by Roshan Lal and went towards the house of Om Prakash. On the way PW. 2 saw Kala Ram, P.W. 5, who was waiting for a bus and asked him to get into the jeep. Thereafter they went to the house of the accused situated at Anandale and there P.W. 28 went inside the house and saw the accused in one of his rooms and brought him outside. After interrogating him he arrested him and pursuant to a statement made by him seized from him one sweater, one coat, one blanket which was hidden inside the nivar of his cot lying inside his room. The sweater and the coat were stated by the accused to be his. The accused also gave them the pair of boots and socks which he was wearing and informed them that he had concealed one blood stained dagger under a stone slab below the Maidan of Burnt Market and over the bakeries which was by the side of a pipe and offered to have it recovered. He further stated that he had kept the five registers in a canvas bag which lie had hidden below a stone at Krishna Nagar on the bank of Ganda Nala and that he had thrown 8 or 9 bundles of the vouchers tied in a tea-poy cloth and his blood stained pants in the Ganda Nala and would get them recovered. The, Investigating Officer reduced the statements to writing in the presence of the Panchas and took their signatures. This Panchnama is Ex. P. 6. The coat and sweater and the blanket inside he nivar of his cot were handed over by the accused to the police. These were found to contain blood and were seized through a Panchnama. The accused then took them to the market and on the way were met by Bhag Singh P.W. 12 and in the presence of all these persons he. removed a piece of stone which was near a pipe and brought out a blood stained dagger from under it and gave it to P.W. 28. He then took them to the Tekri of one Ganga Singh P. W. II, in the Lower Bazar who sells daggers and there P.W. 28 recorded his statement that on the day of the incident the accused had purchased the dagger recovered from under the stone which was identified by P.W. 11, as the one sold to him. On the next day namely 2-2-67 P.W. 28, got a plan of the rooms and the office where the deceased was working and living Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 5 prepared and from there accompanied by P.W. 2, P.W. 13 went to Krishna Nagar taking with them on the way Manohar Lal P.W. 14, from Krishna Nagar to Ganda Nala which was flowing in the khud. From near there the accused pointed out a stone slab from where a canvas bag which contained five registers said to be missing from the residence of the deceased were recovered and then the accused went into the Ganda Nala brought out a tea-poy cloth which contained vouchers and also recovered a blood stained pant which was lying under the water. The button and the coat were sent to the forensic laboratory at Chandigarh for examination. The flash and, the glass panes were sent to the Finger Print Examiner at Phillor and the button to the Forensic Laboratory which gavel a report that it was similar to the button on the coat from which it was missing. The Chemical Examiner and Serologist found human blood on the key. the dagger, blanket, coat, sweater and pant, the shoes and socks. The blood grouping could only be found on the pajama and shirt of the deceased which is of 'O' group while no blood grouping was possible in respect of the other articles referred to. Vide Ex. P. 60 and Ex. P. 48. The finger print expert found on the flask and the glass pane reported as per Ex. P. 59 that they are the same as those of the accused and have more than 12 points of similarity i.e. matching ridge characteristic details. The High Court grouped the circumstances relied against the accused Under 4 broad heads namely (i) that there was a motive for committing the murder; (ii) that the deceased Chaturvedi was seen last in the Company of the accused; (iii) that in pursuance of the statement said to have been made by the accused as per Ex. P. 6 a recovery of blood stained sweater, coat, blanket. shoes and socks and blood stained dagger were made ,as per Ex. P. 6/A on 1-2-67 (the date given in the Judgment as 2-2-67 is not correct), and that on 2-2-67 five registers contained in a bag and 12 bundles of vouchers were recovered; and (iv) that the finger marks of the accused were found on the flask as well as on the glass panes at the place where the murder took place. If the circumstantial evidence as relied upon by the prosecution is credible and acceptable the offence with which the accused is charged can be held to be established beyond reasonable doubt. The High Court however did not accept these circumstances as having been established by any independent and reliable evidence. In so far as motive suggested byu the prosecution is concerned it was of the view that while no doubt the accused was suspended by an order of the deceased on 21-6-63 that suspension must have been as a consequence of the action taken by the authorities of the Bank with the approval of the Board of Directors and this does not indicater that he could have any grievance against him; that the accused had no grievance against the deceased is also shown by the fact that the deceas ed had given him employment in the Finance Company. The second circumstance against the accused, that lie was last seen in the Company of the deceased on 30-1-67 at 9.30 p.m. was also held not to incriminate him for the reason that even if Lal Chand P.W. 9's statement was true, it only goes to show that the accused was seen going with the deceased towards the Nagina Singh Building but that does not mean that they had gone into that Building together, but on the other hand there was a possibility of the accused taking leave of the deceased and going Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 6 away to his house without entering into the Nagina Singh Building. With respect to the third circumstance relating to the seizure and recovery of articles and their admissibility under Sec. 27 of the Evidence Act, it was observed that the evidence adduced by the prosecution for establishing these circumstances reveals a number of irregularities and is suspicious firstly because the prosecuting officer took with him all the witnesses who were neither independent nor impartial and even the witness P.W. 5 Kala Ram cannot be considered to be independent or impartial as he was not a stranger but was known to the Enquiry Officer. A reading of Kala Ram's ,evidence gives the impression that he is a person willing to be an ;agent of the police. It also appeared to the High Court that the action of P.W. 28 in bringing the accused out of the room when he and the other witnesses went to his house gives rise to the suspicion that it might have been done deliberately to clear the way for planting the articles in the cot which was in the room and fourthly the statement Ex. 6 said to have been made by the accused amounted to a confession by the accused and it as the enquiry officer P.W. 28 claimed that the statement was voluntary instead of recording it himself he could have produced the accused before a Magistrate for recording the same. In view of this the High Court was not satisfied that the statements were freely and voluntarily made by the accused and accordingly neither the portions of those statements which related to the discovery of incriminating facts nor the admissibility under Sec. 27 of these Memos Ex. P6 & P. 6A and P. 7 which were signed by P.W. 2, P.W. 5, P.W. 8 and P.W. 28 both on 1-2-67 as well as on 2-2-67 could be relied upon. Even the handing over of the shoes and socks it was observed cannot be treated as having been discovered because the accused was wearing them at the time when he handed them over to the police, and also that it was difficult to believe that the accused will have the coat, sweater and blanket which are said to have blood stains on them recovered because he could have discarded them in the same way as he is said to have done with his pants. Moreover the coat and the sweater were not shown to belong to the accused by independent and reliable evidence. For these reasons the alleged discoveries or the recoveries of the coat, the sweater, the blanket, shoes and socks were rejected. Even with respect to the discovery of the dagger the High Court thought that Amar Chand P.W. 8 was not an independent witness, that Bhag Singh P.W. 12 who was just a worker at the bakery claimed to be present casually did not inspire confidence, nor in the absence of independent witnesses who could have been easily procured could the other evidence be relied upon. The identification of the dagger by Ganga Singh P.W. 11 before the Magistrate was also not accepted because there was nothing to show that the dagger was the one which was purchased by the accused nor is it possible to distinguish the dagger in question from the other 3 daggers with which it was mixed up. Similarly the evidence relating to the recovery of the account books and vouchers was disbelieved. The thumb impressions on the flask and the glass panes was rejected on the ground that no particulars were set out by the Director of the Finger Prints Bureau except the stereotyped statement that there was a similarity of more than 12 points. On this aspect the High Court observed as follows "If the accused also had handled the flask, as suggested by the prosecution, his finger impressions also would be on the flask, and there would be quite a good number of finger impressions on the flask. But curiously only three finger impressions, and that too of the accused, are said to be present on the flask. This in our Opinion, is a very suspicious feature. Further, the existence of the finger-marks is said to have been noticed even at the earliest stage of the inquest, and that too not by any expert but by the any vestigating Officer, I.C. Gupta, Amar Chand and Baldev Krishan as though they anticipated the presence of the finger-marks. There is Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 7 thus no clear proof that the finger-marks alleged to have been found on the flask and the glass pane were those of the accused, and we hold accordingly". In possession of articles which bear incriminating blood stains and Court has undoubted power to interfere with the findings of fact, no distinction being made between judgments of acquittal and conviction, though in the case of acquittals it will not ordinarily interfere with the appreciation cf evidence or on findings of fact unless the High Court "acts perversely or otherwise improperly" (See State of Madras v. Vaidyanatha lyer) (1). The case against the accused as already stated depends entirely on circumstantial evidence the credibility of which is very much in issue. It is well established that circumstantial evidence consists in various links in a chain, which if complete, leads to the undoubted conclusion that the accused and accused alone could have committed the offence with which he is charged. It is said that this evidence is much more dependable than direct evidence provided that no link in the chain is missing. While it is possible that each of these links may not by itself incriminate the accused or be conclusive against him the linking of all of them may forge the chain in arriving at that conclusion The evidence that accused had ill will against the deceased furnishing a motive, that he was last seen in the company of the deceased, that he was present in the room of the deceased at or about the time he was murdered, that he was subsequently found in possession of articles which bear incriminating 'blood stains and that he had hidden the dagger with blood stains thereon and certain other articles which were discovered on the information furnished by him, all of which if believed leads to the conclusion that he was the murderer. In appreciating the evidence against the ac- cused the prime duty of a court is firstly to ensure that the evidence is legally admissible, that the witnesses who speak to it are credible and have no interest in implicating him or have ulterior motive. At the very outset an attempt was made on behalf of the de- fence to suggest that it was P.W. 2 who was the murderer and not the accused. This suggestion was made to him in the committal court as also in Sessions Court but it was denied. It was submitted that P.W. 2 had a motive to do away with the deceased because he (1) [1958] S.C.R. 580, 587. wanted to appropriate to himself the money and property of the deceased. To this end he was cross-examined with the object of establishing that he and the deceased had purchased jointly a land near Chhail and that the deceased was in possession of large sums of money and that P.W. 2 used to receive all the amounts from the loans. advanced by the Finance Company and to avoid any liability for these amounts the murder was committed with the object of taking away the accounts and destroying the evidence relating there to. It was further suggested that because of this motive he and P W, 8 who admitted that he considered P.W. 2 as his superior and P.W. 13 Bhag Singh who is the brother-in-law of P.W. 2 being the wife's brother, were interested in shifting the offence to the accused by taking a prominent part during the investigation and became the main witnesses for proving the several incriminating circumstances against him. While it is not the function cf this Court to determine who other than the person who has been charged with the murder had committed it, the line which the defence adopted was to establish that the witnesses referred to above had an interest in implicating the accused or at any rote to create uncertainty and doubt sufficient to give the benefit to the accused. It is not beyond the ken of Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 8 experienced able and astute lawyers to raise doubts and uncertainties in respect of the prosecution evidence either during trial by cross- examination or by the marshalling of that evidence in the manner in which the emphasis is placed thereon. 'But what has to be borne in mind is that the penumbra of uncertainty in the evidence before a Court is generally due to the nature and quality of that evidence. It may be the witnesses are lying or where they are honest And truthful, they are not certain. It is therefore difficult to expect a scientific or mathematical exactitude while dealing with such evidence or arriving at a true conclusion. Because of these difficulties corroboration is sought wherever possible and the maxim that the accused should be given the benefit of doubt becomes pivoital in the prosecution of offendsers which in other words means that the prosecution must prove its case against an accused beyond reasonable doubt by a sufficiency of credible evidence. The benefit of doubt to which the accused is entitled is reasonable doubt-the doubt which rational thinking men will reasonably, honesty and conscientiously entertain and not the doubt of a timid mind which fightshy-though unwittingly it may be-or is afraid of the logical consequence if that benefit was not given. Or as one great Judge said it is "not the doubt of a vacillating mind that has not the moral courage to decide but shelters itself in a vain and idle scepticism". It does not mean that the evidence must be so strong as to exclude even a remote possibility that the accused could not have committed the offence. If that were so the law would fail to protect society as in no case can such a possibility be excluded. It- will give room for fanciful conjectures or untenable doubts and will result in deflecting the course of justice if pot thwarting it altogether. It is for this reason the phrase has been criticised. Lord Goddard C.J. in Rex v. Kritz(1) said that when in explaining to the juries what the prosecution has to ,establish "a Judge begins to use the words "'reasonable doubt" and to try to explain what is a reasonable doubt and what is not, be is much more likely to confuse the jury than if he tells them in plain language "It is the duty of the prosecution to satisfy- you ,of the prisoner's guilt" ". What in effect this approach amounts to is that the greatest possible care should be taken by the Court in convicting an accused who is presumed to be innocent til the contrary is clearly established which burden is always in the accusatory system, on the prosecution. The mere fact that there is only a remote possibility in favour of the accused is itself sufficient to establish the case beyond 'reasonable doubt. This then is approach. The High Court thought, there was force in the suggestion of the learned Advocate for, the accused that P.W. 2 had a clear motive to take away the registers and vouchers of the Company to make such use of them as would suit him and also to murder the deceased. On the contrary the I evidence of P.W.; 2 shows that he was a friend of the deceased., He had been a Manager in the Himachal: Pradesh State Cooperative Bank when the de-, was the General Manager. There is nothing to show that during that period the deceased and, he were.,on inimical terms or there was any disagreement between them of Such a nature as .would imply that he bore ill will towards the deceased. On the ,other hand both of them had jointly purchased a land, and when the deceased started the Himprasth Finance Company P.W. 2's wife was made a Director in that Company blecause P.W. 2 being an employee in a State Cooperative Bank could not take interest therein. At the time of the incidept it' appear.-, that P.W. 2 was living in Simla and according to him he had ,regard for the deceased and as he was his General Manager he ,used to go to him almost daily in the morning and in the evening. He further says he must have visited him hundred times inside the house, and on the evening of the 30th January, 67, the deceased and he went for an evening stroll as usual and at 9.30 p.m. that day he left him near the Nagina Singh Building, after which the deceased went away to Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 9 take his food towards the Lower Bazar side and he went away to his house. P.W. 2 knew of the financial position of the deceased which was according to the loan ledger entries of the Himprasth Finance Company Rs. 1157.71 np. as on 31-12-66, that there was a credit amount of Rs. 14,000 as on 29-11-66 Which was not withdrawn till then; that certain amounts were also borrowed for the marriage of his daughter from Rawal Chand of Sanjouli whom he knew welt and that from the accounts it appeared that there was only Rs. 6.10 np. as cash in hand of the Company which may be in the hands of P.W. 13. He further states that he used to. be present in every meeting of the Himprasth Financiers and he used to write: the Minutes Book. There is no suggestion that these Account Books were manipulated or that the entries therein were, not made con- temporaneously with the transactions which they evidenced. There is therefore no justification for holding that either P.W. 2, or P.W. 8 or P.W. 13 notwithstanding their close connection with the deceased and the Himprasth ;Finance Company were inimically disposed towards the deceased or towards the accused. No adverse inference can be drawn as contended by the learned Advocate for the accused, against P.W. 2 that the circumstance point out to him- as being concerned with the murder or against the other two witnesses that they were supporting P.W. 2 with the object of exculpating him from any charge that may be levelled again st him. The' suggestion that P.W. 2 Wanted to appropriate the property of the deceased or do away with the cash from the loans which were, being paid to him directly had no rationale. to support it, because firstly the deceased had one married daughter another unmarried, and secondly that he had nephews who,in the absence, of the daughters would have inherited his property. A suspicion was sought to be aroused because P.W. 2 did.not scene for the daughters jut sent for the nephews which was with the object of dividing the properties of the deceased in league with them. P.W. 2 said that he did not know the address of the daughters of deceased and therefore he sent for the nephews, as such no sinister motive can be attributed to him. P;W. 28 the Investigating Officer had known that P.W. 2, P.W. 8 and P.W. 13 were the only persons closely connected he found some finger prints on the flask and the window panes, he out of abundant caution took their finger prints also on that very day long before the accused was suspected as being involved in the murder. It was only after the investigating Officer examined-P.W. 7 the Proprietor of Mansarover Hotel at about 8.30 p.m. on the day the murder was discovered that he came to know that the accused had met the deceased outside the Hotel after he had taken his meals that night. The various Panchnamas of seizures that the Investigating Officer prepared in the- presence of P.W. 2, P.W. 8 and P.W. 13 cannot be assailed merely on the ground that they were connected with the deceased or with Himprasth Finance Company. The fact that a key and a button was recovered or that the flask or the window panes had finger prints were found in the room where the deceased was murdered are, unassailable nor has any doubt been raised to discredit these recoveries. All that is said by the learned Advocate is that P.W.. 28, being an experienced Investigator had created evidence and the Account Books, vouchers, tea- poy cloth, a canvas bag, blanket of the deceased were shown as missing in order to plant them subs equently on the accused. But at the time when these seizures were made the part played by the accused if any was not known, and if at all P.W. 2, P.W. 8 and P.W. 13 who were Witness to the panchnama had not been cleared from suspicion. We are not unaware that Section 27 of the Evidence Act which makes the information given by the accused while in custody leading, to the discovery of a fact and the fact admissible, is liable to be abused and for that reason great caution has to be exercised in resisting any attempt to circumvent, by manipulation or ingenuity of the Investigating Officer, the protection afforded by Sec. 25 and Sec. 26 of the Evidence Act. While considering the evidence relating to the Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 10 recovery we shall have to exercise that caution and care which is necessary to lend assurance that the information furnished and, the fact discovered is credible. As already stated, on 1st February 1967 the coat, sweater, shoes and socks of the accused and a blanket of the deceased ware recovered in the presence of P.W. 2, P.W. 5, P,W. 8 and P.W. 28. After this they proceeded to: the place indicated by the accused and recovered the blood stained dagger from under a stone, which was witnessed by them.. P.W. 2 did not accompany the party as according to him he had to Jo to make arrangements for the funeral of: the deceased On 'the way to the place from where the dagger was to be recovered, the party met one Bhag Singh P.W. 12 who also accompanied then to the place of recovery and in the presence of Roshan Lal who I was 'not examined) Amar Chand, P.W. 8, Bhag Singh, P.W. 12, and P.W. 28, the dagger was recovered and a Memo Ex. P. 28 was prepared and. attested by the 'aforesaid witnesses,. The High Court rejected the evidence of 'these recoveries under Ex. P. 6/A and P. 28 because P.W. 2, P.W. 8, P.W. 13 and Roshan Lal the driver of P.W. 2, were all connected-with the deceased and are not therefore independent or impartial witnesses, It thought that the Investigating Officer should have called independent and impartial witnesses preferably, and if possible, from the locality, as it could not be said that they were not available or if,,: available would not be willing to be witnessed and that in any base calling of, the same persons to witness several searches or recoveries, is objectionable, and would render the search or the recovery doubtful and suspect, if not invalid. Further having held this it nonetheless said that there was no injunction against the same get of witnesses being present at the successive enquiries if nothing could be urged against them. In our view the evidence relating to recoveries is not similar to that contemplated under Sec. 103 of the Criminal Procedure Code where searches are required to be made in the presence of two or more inhabitants of the locality in which the place to be searched is situate. In an investigation under Sec. 157 the recoveries could be proved even by the solitary evidence of the Investigating Officer if his evidence could otherwise be believed. We cannot as a matter of law or practice lay down that where recoveries have to be effected from different places on the information furnished by the accused different sets of persons should be called in to witness them. In this case P.W. 2 and P.W. 8 who worked With the deceased were the proper persons to witness the recoveries as they could identify some of the things that were missing and also they could both speak to the information and the recovery made in consequence thereof as a continuous process. At any rate P.W. 2 who is alleged to be the most interested was not present at the time of the recovery of the dagger. P.W. 5,s evidence was not considered to be independent, be- cause the High Court thought that he was known- to P.W. 28 from before. This by itself in our view will not justify the rejection of his evidence. That apart there is nothing in his evidence to show that P.W. 28 knew him before he came to Simla while he was living in Kaithal. The witness stated that the S.H.O. was never posted at Kaithal but knew the Daroga (SHO) from 2/3 months before that date. He had not met P.W. 28 before be arrived at Simla. It was suggested to him that Daroga had come and sat in his shop at the Mandi but that was denied. He however stated that the Daroga used to ask his 'hal chal' sometime and used to wish him and that was all. Witness also denied having seen P.W. 2 and P.W. 8 before that day and came to know their names only when he went to Anandale. The brothers of P.W. 5 were at Kaithal doing business' but here again there was nothing to connect the brothers with P.W. 28 and though P.W. 28 admits that his own brothers Roshan Lal and Malik Harbans Lal reside in Kaithal and one of them has some lands there, he was not. on good terms with them and denies that they bad any connection Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 11 with P.W. 5. From this evidence it is clear that apart from the fact that P.W. 28 had known P.W. 5 after he had come to. Simla which is not unusual for a Police Officer, there is nothing to indicated that P.W. 5 could be subservient to P.W. 2,8. It is not unknown that in some instances where persons are made to witness Panchnamas they have resiled from them while giving evidence in Court, probably either due to the pressure exerted by the police at that time or they have been won over by the defence. Nothing of that nature is appar ent in this case and the comment of the High Court that a reading of the evidence of P.W. 5 gives the impression that he is a person willing to be pliable agent of the police and cannot be regarded as an independent or impartial witness has in our view no justification. It is said that P.W. 12 Bhag Singh was just a worker at the bakery and while he pretends to be present there casually at the spot from where the dagger was taken out, the Investigating Officer said he had summoned him on the suggestion of the Head Constable; as such his evidence 'does not inspire confidence-.'We do not think that this is a sufficient reason for discarding the evidence of P.W. 5 because when P.W. 28 says he summoned Bhag Singh through the constable it does not negative the statement of Bhag Singh that he was casually present and could have been called 'by him through the Head Constable. In our view there is no reason to hold that the evidence of these persons P.W. 2, P.W. 5, P.W. 8 and P.W. 12 can be said to suffer from any infirmity or that they had not witnessed the information given by the accused as per Exhibits P. 6, P. 6/A or P. 28 or the recoveries made by him as a consequence of that information. Thereafter on the information furnished by the accused that he had purchased the weapon from Ganga Singh P.W. 11 and that be would take them to him, they went to the, thari of P.W. 11 where the accused pointed him out to them. It is contended that the information given by the accused that he purchased the dagger from P.W. 11 followed by his leading the police to his thari and pointing him out is inadmissible under Sec. 27 of the Evidence Act. In our view there is force in this contention. A fact discovered within the meaning of Sec. 27 must refer to a material fact to which the information directly relates. In order to render the information admissible the fact discovered must be relevant and must have been such that it constitutes the information through which the discovery was made. What is the fact discovered in this case? Not the dagger but the dagger hid under the stone which is not known to the police. (See Pulukuri Kotayya & Ors. v. King-Emperor) (1). But thereafter can it be said that the information furnished by the accused that he purchased the dagger from P.W. 11 led to a fact discovered when the accused took the police to the thari of P.W. 11 and pointed him out ? A single Bench of the Madras High Court in Public (1) 74 India Appeals p. 65. Prosecutor v. India China Lingiah & Ors. (1), and in re Vellingiri (2), seems to have taken the view that the information by an accused leading to the disco-very of a witness to whom he had given stolen articles is a discovery of a fact within the meaning of Sec. 27. In Emperor v. Ramanuja Ayyangar(3), a Full Bench of three Judges by a majority held that the statement of the accused "I purchased the mattress from this shop and it was this woman (another witness) that carried the mattress" as proved by the witness who visited him with the police was admissible because the word 'fact' is not restricted to something which can be exhibited as a material object. This judgment was before Pulukuri Kotayya's case (4) when as far as the Presidency of Madras was concerned the law laid down by the Full Bench of that Court, in Re Athappa Goundan prevailed. It held that where the accused's statement connects the fact discovered with the offence and makes it relevant, even though the statement amounts to a confession of the offence, it must be admitted because it is that Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 12 has led directly to the discovery. This view was over-ruled by the Privy Council in Pulukuri Kotayya's case(5) and this Court had approved the Privy Council case in Ramkishan Mithanlal Sharma v. The State of Bombay(6). In the Full Bench judgment of seven Judges in Sukhan v. The Crown (7 ) , which was approved by the Privy Council in Pulukuri Kotayya's case(8), Shadi Lal, C.J., as he then was speaking for the majority pointed out that the expression 'fact' as defined by Sec. 3 of the Evidence Act includes not only the physical fact which can be perceived by the senses but also the psychological fact or mental condition of which any person is conscious and that it is in the former sense that the word used by the Legislature refers to a material and not to a mental fact. It is clear therefore that what should be discovered is the material fact and the information that is admissible is that which has caused that discovery so as to connect the information and the fact with each other as the 'cause and effect'. That information which does not distinctly connect with the fact discovered or that portion of the information which merely explains the material thing discovered is not admissible under Sec. 27 and cannot be proved. As explained by this Court as well as by the Privy Council, normally Sec. 27 is brought into operation where a person in police custody produces from some place of concealment some object said to be connected with the, crime of which the informant is the accused. The concealment of the fact which is not known to the police is what is discovered by the information and lends assurance that (1) AIR 1954 Mad. 333. (2) AIR 1950 Mad 613. (3)AIR 1935 Mad. 528. (4) 74 1. A. 64. (5) ILR 1937 Mad 695. (6) [1955] (1) SCR 903., (7) ILR Vol. X Lahore 283. the information was true. No witness with whom some material fact, such as the weapon of murder, stolen' 'property or other in eliminating article is not hidden sold or kept and which is unknown to the Police can be said to be discovered as a consequence of the information furnished by the accused. These examples however are only by way of illustration and are not exhaustive. What 'Makes the information leading to the discovery of the witness admissible is the discovery from him of the thing sold to him or hidden or kept with him which the police did not know until the. information was furnished to them by the accused. A wittiness cannot be said to be discovered if nothing is to be found or recovered from him as a consequence of the information furnished by the accused and the- information which disclosed the identity of the witness will not be admissible. But even apart from- the admissibility of the information under Sec. 27, the evidence of the Investigating Officer and the panchas that the accused had taken them to P.W. 11 and pointed him out and as corroborated by P.W. 11 himself would be admissible under Sec. 8 '.of the Evidence Act as conduct of the accused. We then come to the recovery on the second February, of Pant, the Account Books and the vouchers. These however, cannot in our view be relied upon because P.W. 28 had information relating to them which had been furnished by the accused more than 24 hours before and the description given by him was that they could have been discovered. At any rate the long delay does not lend assurance to the discovery. It appears from the application made on the 2nd February to the Magistrate that the accused was arrested on 1-2-67 and at his instance and from his possession one sweater. one coat and one blanket blood stained, have been recovered and in addition one blood stained warm pant, one duster, one bag containing 5 registers are still t0 be 'recovered on the Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 13 pointing out of the accused but the remand of the, accused is due to expire at 1 p.m. and accordingly it was requested that a further remand for 7 days be given and the a caused made over to the police and orders be passed. The accused is alleged to have given the information that he had hid them under the stone slab near Krishna Nagar Ganda Nala Which he had thrown away in the sewage and which he said will point out and get them recovered. The recovery itself is under E P.7, to which P.W. 2, P.W. 13 and Manohar Lal P.W. 14 who was picked up on the 'rasta when he was summoned by the constables are witnesses. According to P.W. 14 the Thandar was going ahead and went down to the Nala, when the constable summoned him and he went there. He further says that the Thanedar sent a constable down. The accused bad a talk with Thanedar. The constable took out from below a stone slab five registers in a bag, the accused was standing on a stone. At ibis stage the prosecutor sought permission to cross-examine the witness and it 'Was given. In the cross-examination he denied in signed the Memo at the spot and said that he had signed' it at the Thana. He also said it was incorrect to suggest that the Memo was read over to him and he signed it. Whether the articles recovered were planted at the place from where, they were alleged to be recovered or not as suggested by the learned Advocate for the accused, the evidence referred to certainly goes against the prosecution version that the Account Books, vouchers and the pant were recovered at the instance of the accused. The Police appears to have known the place from where these articles were alleged to have been recovered and therefore it cannot be said 'that they were discovered as a consequence of the information furnished by the accused. After excluding the recoveries made tinder Ex. 7 namely the Account Books etc. the evidence against the accused which remains to be considered is, the motive, the recovery of the button, the finger prints on the flask and the window panes, blood stained coat, sweater, shoes and socks alleged to be of the accused, blanket, the dagger and the deceased being last seen alive in his Company. As we have already noticed the High Court had rejected the evidence of motive but in our view it failed to consider one aspect which is important namely that the accused wanted to be reemployed with the Himprasth Finance Company and though the other Directors were willing, the deceased was not. It is true that the initial illwill which he may have had against the deceased when he suspended him in 1964 may have been forgotten because the deceased subsequently extended his sympathy and employed him in his Finance Company. The accused was not satisfied with the conditions of his service and wanted an increase in the pay which the Company was not prepared to give causing him to resign. This itself may have given him cause to nurse a grievance against the deceased because he was the person who was as incharge of the affairs of that Company in which he had a dominant voice but when he wanted to be reappointed the deceased definitely put his foot down and refused to entertain him which would certainly create ill will in him against the be occasion but if he does not continue to do so or positively obstructs or is against his being given any benefit even on one such occasion it may give rise to a sense of grievance against him. The springs of human action and conduct are unfathomable because what motivates them is difficult to postulate. At any rate where personal interest is involved, it is too much to expect objectivity in a person s relationship with others who are unobliging or considered to be hostile to him. There 'are many with greater cause who may not venture to do away with those that give occasion for it but experience has shown that even with lesser motive persons have committed more dastardly crimes; that is why in view of these imponderable, motive by itself is not sufficient to determine culpability. It has to be judged with positive evidence relating to incriminating facts and circumstances proved in a case against an Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 14 accused. It is contended strenuously that there is no evidence to establish that the accused was with the deceased at the time when he was murdered. This contention seems to have found favour with the High Court which has held that though the deceased was last seen alive in the Company of the accused it is not sufficient to indicate that he had gone with the deceased into the Nagina Singh Building and was with him at the time when the murder was committed. The evidence of P.W. '7 is positive that he had seen the accused in the company of the deceased after the deceased had his meals at about 9.30 or so. This witness was the first to give information to P.W. 28 which was at about 8.300 p.m. on 31st January. The High Court does not disbelieve this evidence. In so far as P.W. 9 is concerned it is said that he is a mere casual or chance witness. Even if the reasons given by the High Court for disbelieving his evidence is accepted it cannot negative the fact of the accused being seen in the company of the deceased at about 9.30 or 9.45 p.m. on 30th January when he was the last one to have seen him alive. That the accused was in the room with. the deceased is established by the fact that his finger prints were en the flask and the window panes and that a coat button of his Was found in the room. It was however contended on behalf of the accused that these finger prints were not blood stained nor do they indicate that the accused was present at the time when the offence was committed because the evidence shows that be was seeking to get reemployment and the possibility of his. having, visited the deceased earlier in the day or a few days before the offence when the finger prints could have been found on the flask and the window panes cannot be ruled out. Secondly it was urged that the report of the finger print expert as the High Court has held does not furnish the reasons for the opinion that they belonged to the accused. On the first of these contentions it may be observed that there is no evidence that he bad been to see the deceased earlier that day or had seen him before that day as would probably these finger prints being still present on the 31st January. The evidence merely points out to the fact that the accused was seeking reemployment in the Company and the deceased was unwilling to give him employment. It is a long way from this circumstance to infer that he had been in the room earlier. The second contention is in our view equally untenable. The report regarding the Finger Print is that of the Director of the Finger Print Bureau which under Sec. 510 Criminal Procedure Code can be used as evidence in any enquiry or trial without examining the person who gave the report just in the same way as the report of the Chemical Examiners or of the Chief Inspector of Explosives is evidence. Under sub. sec. (2), however the Court may, if it t hinks fit, and shall, on the application of the prosecution or the accused, summon and examine any such person as to the subject matter of his report. The addition of the report of the Director of Finger Prints Bureau and of the Chief Inspector of Explosives in Sec. 510 was made by Sec. 99 of Act 26 of 1955 and unless the Court or the Public Prosecutor or the accused require the summoning and examining of any person as to the subject matter of his report that report can be. acted upon. It is however submitted that while the report may be admissible the opinion will have to be justified. Neither the decision of a Single Judge of Andhra Pradesh High Court in re. Godaverthy Bheshyakaravcharvulu(1)., nor that of the Madras High Court case in re. Marudai, support this contention. The reason why the reports of the Director of the Finger Print Bureau is treated as evidence 'Without examining the persons giving the report is that the comparison and identification of Finger Prints has now developed into a science and the results derived therefrom have reached a stage of exactitude. As long as the report shows that the opinion was based on observations which lead to a conclusion that opinion can be accepted, but should there be any doubt it can always be decided by the calling of the person making the report; when once the report is proved; neither the prosecution nor the accused nor yet the Court thought it Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 15 necessary to require the person making the report to be examined. In this case, however, the photographs of the finger prints were taken on the very day when the flask and the glass pane were seized. After these material objects were sent to the Finger Print Bureau they were again photographed and compared with the finger prints taken of P.W. 2, P.W. 13 and P.W. 8 and the accused. In so far as. the Finger Prints of the accused are concerned though some- what smudged they were said to be readably clear and in each of the finger impressions found on the flask and the window pane there Were more than 12 points of similarity i.e. matching ridge characteristic details in their identical sequence, without any discordances in their comparable portion and the corresponding portion of the left thumb impression, middle finger impression, left index finger, right middle finger of Om Prakash the accused. It was also stated that so many points of similarity cannot be found to occur in the impressions of different thumbs and fingers and they are therefore of one and the same person. In respect (1) AIR 1960 A.P. 164. (2) AIR 1960 Madras 370. of a thumb impression compared with the right thumb impression of Om Prakash the expert had found not less than 10 points of similarity and even with respect to this his opinion was that SO many points of similarity cannot be found to occur in the impressions of different thumbs and fingers and are therefore identical or are, of one and the same person. There appears to be no difficulty in coming to the conclusion from the report that 'the points of similarity are those which can be accepted as a positive finding. The absence of these Finger Prints being blood stained is not indicative of the accused not being there before the murder We have it in evidence that the curtain near the door showed that blood stained hands severe wiped thereon. That apart the button which was recovered gives a direct clue to the presence of the accused at the time when the offence was committed. 'it. is seen from Ex. P. 6/A that the upper button of the 3 small buttons on the cuff of the coat recovered from the accused was missing and the button recovered from the room where the deceased was murdered matches the button and supplies the missing one. The report of the Forensic expert is that on a comparison of that button with the button of the accused's coat esta- blishes that it is the similar one. For this reason the accused had denied that the coat and the sweater belonged to him and the learned Advocate on his behalf has urged in support of that-plea that these were not recovered from the accused and the recovery memos were all fake and were written subsequently. Accused in the statement under Sec. 342 in answer to question 19, that he had signed the recovery Memos dealing with the sweater, coat and blanket said that it was incorrect. He further said that he was made to sign three- blank papers in the Thana and that he Was filing a copy of the application in this connection made by while he was in the judicial lock up. Again in answer to question 35 whether he has anything else to say he stated categorically that on the 1st February '67 he was taken to the Thana at 5 p.M. on the 2nd February he was produced before the Court where a remand was taken and that on 7-2-67 the S.H.O. 'obtained his signatures on three blank papers in respect of Which 'he had sent an application after he was taken to the judicial lock up. This statement goes counter to the facts stated ill the application of remand made to the Magistrate on 2-2-67-which was earlier extracted. A perusal of that remand application would show that these recoveries had already been made on the 1st and so there could be no question of his signatures been taken on the blank papers on the 7th for purposes of cooking up the recovery Memos which according to the accused Were-not recovered on the 1st. The coat. and the sweater were recovered from his room while the Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 16 shoes and socks from his person as the was wearing- them, There can be no doubt of the ownership being that of the accused. respect to which similar contentions were raised. Where a person who is not a hardened criminal is burdened with the guilt of a gruesome crime, is confronted with as-' tell tale finding the possibility of his making a clean breast of what is weighing heavily on him cannot be ruled out. It is difficult to generalise as to what a man may or may not do after committing a ghastly murder nor can there be an infallible test to determine the course of human reaction, conduct or behaviour in a given situation which might manifest itself in various ways. In case when the accused was confronted with the button of his coat he gave information leading to the incriminating discoveries. Whether the knife could have been properly identified by P. W. 11 in the identification held before the Magistrate there can be little doubt, if we believe his evidence, the accused hid purchased a knife that day, which is similar in nature to the one he was selling. There is no reason why P.W. II should not be, believed on this aspect. He says that it was purchased by the accused at the noon time on the day when Mahatma Gandhi had died on the 30th for Re. 1/- and that the police had; brought the accused to his shop on the 3rd day after the dagger was purchased. He further says that the accused used to go to him previously for the mending of his knife and scissors though the witness admits that he had not purchased any dagger from him previously. In cross- examination he admitted frankly that he was having his thari without permission of the municipality and that he was challenged and fined almost every month though from the last 8 months the police have not challaned but the Municipal Committee have challaned him. He also admitted that once about 23/24 years ago he was convicted in a theft case and was sentenced to rigorous imprisonment and his history sheet was closed 21 or 22 years ago. At the time of giving evidence he is about 35 years and even making an approximation of the age he must have been 13 or 14 years when the offence for which he was convicted was committed. This admission seemed to have weighed with the High Court that his antecedents were such as to justify their not relying upon his evidence. They also found it difficult to believe that when he had not put any special mark on the dagger he could identify it from amongst three similar ones. In this connection it may be remembered that P.W. It was making the knives which be was selling and it is not unknown that persons who make knives or other implements can recognise them with some amount of certainty even though special identification marks may not be present. Be that as it may, even if the identification is discarded there is nothing to doubt his statement that he knew the accused before the 30th January 1967 and that about noon on that day he had purchased a dagger from him.- It is not unreasonable to infer that the dagger which he purchased is the dagger which was recovered on the information furnished by the accused himself on the second day after his purchase and that dagger 'Contained human blood. One other important circumstance against the accused is the blanket that was found in his house which had. human blood stains thereon. The murder of the deceased was in January in the coldest months in Simla and the possibility of the accused having taken a blanket to cover himself also 'fits in with the other evidence adduced by the prosecution. There is in our view no justification for the High Court in jettisoning this cogent evidence of a conclusive nature on mere conjectures and. on the omnibus ground that the witnesses were not independent or impartial which as we have shown is without justification. In our view the evidence in this case is.- sufficient to justify the conviction of the accused for an offence of murder. We, accordingly set aside the judgment of acquittal of the High Court, convict the accused under Sec. 302 and sentence him to life Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 17 imprisonment. V.P.S. Appeal allowed. Himachal Pradesh Administration vs Shri Om Prakash on 7 December, 1971 18 | {
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Lakshmiji Sugar Mills Co vs Commissioner Of Income Tax, New Delhi on 27 August, 1971 Equivalent citations: 1972 AIR 159, AIR 1972 SUPREME COURT 159, 1972 TAX. L. R. 51 Author: A.N. Grover Bench: A.N. Grover, K.S. Hegde PETITIONER: LAKSHMIJI SUGAR MILLS CO. Vs. RESPONDENT: COMMISSIONER OF INCOME TAX, NEW DELHI DATE OF JUDGMENT27/08/1971 BENCH: GROVER, A.N. BENCH: GROVER, A.N. HEGDE, K.S. HEGDE, K.S. CITATION: 1972 AIR 159 CITATOR INFO : D 1977 SC 991 (3,4) R 1981 SC 395 (5,6) ACT: Income Tax Act-Capital or Revenue Expenditure-Test HEADNOTE: The appellant assessee is a private Ltd. Company carrying on the business of manufacture and sale of sugar. During the accounting period relating to the assessment year 1956- 57, sums of Rs. 75,000/- and Rs. 37,000/- were paid by the assessee to the Cane Development Council of the Sugarcane Department of U.P. (under U.P. Sugarcane Regulation and Sugar and Purchase Act, 1953) by way of contribution for road development between various sugar cane producing centers and the sugar factories of the assessee. The roads Lakshmiji Sugar Mills Co vs Commissioner Of Income Tax, New Delhi on 27 August, 1971 1 were originally the property of the Government and remained so after improvements had been made. The improved roads facilitated the transportation of cane to the factories of the assessee and the expenditure was incurred for commercial expediency and for benefit of the day to day business of the assessee. The Revenue Authorities, the Appellate Tribunal and the High Court found that these contributions constituted capital expenditure and could not be allowed as an admissible deduction in computing the total income of the Assessee. Allowing the appeal, HELD : In the facts and circumstances of the case the expenditure was incurred by the assessee for reasons of commercial expediency apart from statutory compulsion. The development of the roads was necessarily meant for facilitating the carrying on of the assessee's business with a view to produce profits. In the absence of any finding by the Tribunal that the roads were to be altogether newly made and that the assesses would get an enduring benefit, the expenditure was allowable as an admissible deduction. [468 H] Assam Bengal Cement Co. Ltd. v. C.I.T. West Bengal, 27 I.T.R. 34, 45; C. I. T. West Bengal v. Hindusthan Motors Ltd., 68 1. T. R. 301 and C.I.T. West Bengal v. Royal Calcutta Turf Club, 41 I.T.R. 414, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1928 of 1968. Appeal by special leave from the judgment and order dated February 17, 1967 of the Delhi High Court in Income-tax Re- ference No. 18 of 1963. D. K. Bajaj and K. B. Rohatgi, for the appellant. S. T. Desai, P. L. Juneja, R. N. Sachthey and B. D. Sharma, for the respondent. The Judgment of the Court was delivered by Grover, J. This is an appeal by special leave from a judgment of the Delhi High Court in an Income tax Reference. The assessee, which is the appellant, is a private limited company carrying on the business of manufacture and sale of sugar. it has two sugar mills one at Maholi (Sitapur) and the other at Raja-ka-Sahaspur (Moradabad). The head office of the assessee is at New Delhi. During the accounting period relating to the assessment year 1956-57 sums of Rs. 75,000/- and Rs. 37,500/- were paid by the assessee to the Cane Development Council of the Sugarcane Department of the Government of Uttar Pradesh by way of contribution for road development between the various sugarcane producing centers and the sugar factories of the assessee. The revenue authorities found that these contributions were intended to be applied for the construction and development of roads between the sugarcane producing centres and the sugar mills and held that these amounts constituted capital expenditure and could not be allowed as an admissible deduction while computing the total income of the assessee. The Appellate Tribunal Lakshmiji Sugar Mills Co vs Commissioner Of Income Tax, New Delhi on 27 August, 1971 2 upheld the order of the departmental authorities. On an application being moved the Tribunal referred two questions of law to the High Court. We are concerned only, in the present case, with the second question which is as follows: "Whether the sums of Rs. 75,000 and Rs. 37,500 paid to the Road Development Fund set up by the Government of U.P. were rightly disallowed as items of capital expenditure ?" The High Court held that the aforesaid expenditure could not be regarded as revenue expenditure and the answer was returned against the assessee. According to the assesses certain facts are fully esta- blished. These are (1) the expenditure incurred was for the development of roads and the assessee was under an obligation to make the aforesaid contributions under the provisions of the U. P. Sugarcane Regulation of Supply & Purchase Act, 1953; (2) the roads were originally the property of the government and remained so after the improvement had been made. (3) the sole reason for which the assessee had made the contribution was that the improved roads would facilitate the transportation of cane from the cane producing centres to the premises of the mills and also the flow of supply to and from the factories of the assessee; and (4) the expenditure was incurred for reasons of commercial expediency and for the benefit of the day to day business of the assessee. According to the High Court it was admitted on behalf of the assessee that if expenditure had been incurred by it for building roads of its own it would be capital expenditure. The High Court could see no difference if expenditure was incurred under compulsion or even without compulsion if the roads were built for facilitating transportation and improving the business and the flow of supply to and from the factories of the assessee. We are unable to agree with the reasoning or the conclusion of the High Court. The general principles governing the determination of the question whether an expenditure is in the nature of capital or revenue expenditure are well known. Where expenditure is incurred while the business is being carried on and not for its extension or for the substantial replacement of its equipment the position would be as follows :- "If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure." (Vide Assam Bengal Cement Ltd. v. Commissioner of Income tax, West Bengal(1) The argument on behalf of the revenue is that the expenditure which was incurred by the assessee in the present case was intended for bringing into existence an advantage for the enduring benefit of the business. On the other hand it has been maintained on behalf of the assessee that the expenditure was properly attributable to running the business or working it with a view to produce the profits. The Calcutta High Court Lakshmiji Sugar Mills Co vs Commissioner Of Income Tax, New Delhi on 27 August, 1971 3 had occasion to consider an identical question in Commissioner of Income tax, West Bengal v. Hindustan Motors Ltd.(). There the location of a factory of motor car manufacturing company was a little distance away from the main road. The approach road belonged to the government. It fell into disrepair and began to cause transportation difficulties to the assessee. The Government was not prepared to meet the expenses for the repair of the road. The assessee offered to contribute a certain amount for the improvement. The High Court had no difficulty in coming to the conclusion that the money was spent not so much to bring about any asset or advantage of enduring benefit to itself but it was incurred for its efficient and convenient running and therefore it was of revenue nature. This case has been sought to be distinguished on behalf of the Revenue on the ground that the expenditure was incurred only to meet the expense of the repair and no asset or advantage of an enduring benefit accrued or resulted to the assessee. This distinction does not appear to be sound because in the diverse nature of business operations it is difficult to lay down a test which would apply to all situations. The criteria has to be applied from the business point of view and on a fair appreciation of the whole situation. In the present case apart from the element of compulsion the (1) 27 I. T.R. 34,45. (2) 68 I.T.R. 301. roads which were constructed and developed were not the, property of the assessee nor is it the case of the Revenue that the entire cost of development of those roads was defrayed by the assessee. It only made certain contribution for road development between the various cane producing centres and the mills. The apparent object and purpose was to facilitate the running of its motor vehicles or other means employed for transportation of sugarcane to the factory. From the business point of view and on a fair appreciation of the whole situation the assessee considered that the development of the road in question could greatly facilitate the transportation of sugarcane. This was essential for the benefit of its business which was of manufacturing sugar in which the main raw material admittedly consisted of sugarcane. These facts would bring it within the second part of the principle mentioned before, namely, that the expenditure was incurred for running the business or working it with a view to produce the profits without the assessee getting any advantage of an enduring benefit to itself. In our judgment the ratio of the decision in Commissioner of Income tax, West Bengal, v. Royal Calcutta Turf Club(1) would be applicable to the present case. There the question was whether the expenditure on running a school for training of jockeys by the Royal Calcutta Turf Club could be claimed as a deduction under s. 10 (2) (xv) of the Indian Income tax Act 1922. It ,,,as pointed out that the business of the club was to run race meetings on a commercial scale for which it was necessary to have races of a high order. For the popularity of races and to make its business profitable it was necessary for the club to have jockeys of requisite skill and experience in sufficient numbers. It was for that purpose that the school had been started for training Indian jockeys. If there had not been sufficient number of Indian jockeys the interest of the club would have suffered. Therefore the expenditure incurred on running the school must be regarded as having been wholly and exclusively laid out for the purpose of the business of the club. Emphasis was laid on the principle that in order to justify a deduction it must be for reasons of commercial expediency and it must be incurred for the assessee's business. We are satisfied that in the present case the expenditure was incurred by the assessee for reasons of commercial expediency apart from statutory Lakshmiji Sugar Mills Co vs Commissioner Of Income Tax, New Delhi on 27 August, 1971 4 compulsion to which reference has been made before. The development of the roads was necessarily meant for facilitating the carrying on of the assessee's business. Furthermore the Tribunal did not give any finding that the roads were to be altogether newly made and that the assessee (1) 41 I.T.R. 414. would get an enduring benefit from these roads. The expenditure in question should have, therefore, been allowed as an admissible deduction. For the reasons given above the appeal is allowed and the answer given by the High Court to the question referred is discharged. We would return the answer in the negative and' in favour of the assessee. The assessee will be entitled to its costs in this Court. S.C. Appeal allowed. Lakshmiji Sugar Mills Co vs Commissioner Of Income Tax, New Delhi on 27 August, 1971 5 | {
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Shamrao Vithal Co-Operative Bank Ltd vs Kasargod Pandhuranga Mallya on 21 October, 1971 Equivalent citations: 1972 AIR 1248, 1972 SCR (2) 162, AIR 1972 SUPREME COURT 1248, 1972 4 SCC 600, 1973 (1) SCJ 145, 1972 2 SCR 162 Author: Hans Raj Khanna Bench: Hans Raj Khanna, K.S. Hegde PETITIONER: SHAMRAO VITHAL CO-OPERATIVE BANK LTD. Vs. RESPONDENT: KASARGOD PANDHURANGA MALLYA DATE OF JUDGMENT21/10/1971 BENCH: KHANNA, HANS RAJ BENCH: KHANNA, HANS RAJ HEGDE, K.S. CITATION: 1972 AIR 1248 1972 SCR (2) 162 ACT: Multi--Unit Co-operative Societies Act, 1942--Word 'Control' in s 2(1) of Act--Whether passing of award under s. 54 of Bombay Co-operative Societies Act, 1925 is comprehended within word 'control'. HEADNOTE: The appellant was a co-operative society registered in Bombay under the Bombay Co-operative Societies Act, 1925. The head office of the appellant was in Bombay and it had a branch in Mangalore. As the objects of the appellant were not confined to one State it was governed by MultiUnit Cooperative Societies Act, 1942 a Central Act. The appellant made a claim under s. 54 of the Bombay Act in respect of a transaction which took place in Mangalore against the respondent who was a resident of Kesaragod and was a member of the appellant society. Both Mangalore and Shamrao Vithal Co-Operative Bank Ltd vs Kasargod Pandhuranga Mallya on 21 October, 1971 1 Kesaragod were at the relevant time in Madras Presidency. The Deputy Registrar of Co-operative Societies Bombay gave an award regarding that claim. The award was sought to be executed as a decree in the Court of Subordinate Judge, Kesaragod. The respondent took an objection to the execution on the ground that the Deputy Registrar of Bombay bad no jurisdiction to pass the award and the same could not be executed as a decree in the courts in Kerala. Upholding the objection the Subordinate Judge dismissed the execution application. The High Court affirmed the decision. In appeal by special leave before this Court the appellant contended that since it was registered in Bombay State it was the Bombay Act which would govern the appellant society for purposes of registration, control and dissolution as laid down in s. 2(1) of the Central Act. The word 'control it was urged comprehends within itself the adjudication of a claim made by the society against its members, and in the circumstances the award under, s. 54 of the Bombay Act made by the Deputy Registrar Co-operative Societies Bombay did not suffer from any legal infirmity. HELD, : As the objects of the appellant society were extended to the Presidency of Madras it should in view of sub s. (1) of s. 2 of the Central Act be deemed to have been registered under the law in force in the Presidency of Madras relating to co-operative societies. The law which was then in force was the Madras Co-operative Societies Act, 1932. Under s. 51 of that Act a dispute between the appellant and the respondent in respect of its dealings relating to its Mangalore branch would normally have to be adjudicated upon by the Registrar appointed under the Madras Act. The fact that for the purpose of control the appellant society was governed by the Bombay Act would not justify a departure from the above normal rule. [166 B-E] The word 'control' is synonymous with superintendence, management, or authority, to direct restrict or regulate. Control is exercised by a superior authority in exercise of its supervisory power. Adjudication of disputes in a judicial or quasi-judicial function and it would be unduly straining the meaning of the word 'control' to hold that it also covers the adjudication of disputes between a co- operative society and its members. There is a clear distinction between jurisdiction to decide a dispute which is a judicial power, and the exercise of control which is an administrative power, and it would be wrong to treat the two as identical or equate one with the other. [166 F-G] 163 Panchshila Industrial Co-operative Societies (Multi-unit) v. Gurgaon Central Co-operative Bank Ltd., Gurgaon, [1971] 2 S.C.C. 500, distinguished. Since, as held above, the dispute between the parties could only be adjudicated upon in accordance with the provisions of the Madras Act the Registrar under the Bombay Act lacked inherent jurisdiction to decide the dispute and it was not a Shamrao Vithal Co-Operative Bank Ltd vs Kasargod Pandhuranga Mallya on 21 October, 1971 2 case of lack of territorial jurisdiction only [167 D-E] JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1312 of 1967. Appeal by special leave from the judgment and decree dated' October 22, 1962 of the Kerala High Court in Appeal Suit No.804 of 1969. B. R. Naik and K. Rajendra Chowdhary, for the appellant. The respondent did not appear. The Judgment of the Court was delivered by Khanna, J. This is an appeal by special leave against the judgment of Kerala High Court affirming an appeal, the order of the Lower Court whereby the appellant Bank's application for execution of an award made under the Bombay Co-operative Societies Act, 1925 (hereinafter referred to as the Bombay Act) was dismissed. The appellant is a Co-operative Society registered in Bombay under the Bombay Act. The Head Office of the appellant is in Bombay and it has a branch in Mangalore. As the objects of the appellant were not confined to one State, it was governed by Multi-Unit Co-operative Societies Act of 1942 (herinafter referred to as the Central Act). The appellant made a claim under section 54 of the Bombay Act in respect of a transaction which took place in Mangalore against the respondent who is a resident of Kasaragod, and was a member of the appellant society. Both Mangalore and Kasaragod were at the relevant time in Madras Presidency. The Deputy Registrar of Co-operative Societies, Bombay gave an award regarding that claim. The award was sought to be executed as a decree in the Court of Subordinate Judge, Kasaragod. An objection to the execution of the decree was raised by the respondent on the ground that the Deputy Registrar of Co-operative Societies, Bombay had no jurisdiction to pass the award and the same could not be executed as a decree in the Courts in Kerala. This objection was upheld by the Subordinate Judge and he dismissed the execution application. On appeal, the decision of the learned Subordinate Judge was affirmed by the High Court. It was not disputed before the High Court that the appellant was governed by the provisions of the Central Act.- The contention raised on behalf of the appellant was that the passing of an award came within the expression 'control' occurring in .sub-section (1) of section 2 of the Central Act. This contention ,did not find favour with the High Court and in the result, the appeal was dismissed. We have heard Mr. Naik on behalf of the appellant. No one has appeared on behalf of the respondent. Before dealing with the argument advanced on behalf of the appellant, it would be apposite to reproduce section 2 of the Central Act. The same reads as under :- "2. (1) A co-operative society to which this Act applies which has been registered in any State under the law relating to co-operative societies in force in that State shall be deemed in any other State to which its objects extend to be duly registered in that other State under the law there in force relating to co-operative societies, but shall, save as provided in sub-sections (2) and (3), be subject for all the purposes of Shamrao Vithal Co-Operative Bank Ltd vs Kasargod Pandhuranga Mallya on 21 October, 1971 3 registration, control and dissolution to the law relating to co-operative societies in force for the time being in the, State in which it is ac- tually registered. (2) Where any such co-operative society has established before the commencement of this Act or establishes after the commencement of this Act a branch or place of business in a State other than in which it is actually registered, it shall, within six months from the commencement of this Act or the date of establishment of the branch or place of business, as the case may be, furnish to the Registrar of Co-operative Societies of the State in which such branch or place of business is situated a copy of its registered by-laws, and shall at any time it is required to do so by the said Registrar submit any returns and supply any in-formation which the said Registrar might require to be submitted or supplied to him by a co-operative society actually registered in that State. (3) The Registrar of Co-operative Societies of the State in which a branch or place of business such as is referred to in sub-section (2) is situated may exercise in respect of that branch or place of business any powers of audit and of inspection which he might exercise in respect of a co-operative society actually registered in the State". According to sub-section (3) of section 1, the Central Act "applies to all co-operative societies with objects not confined to one State incorporated before the commencement of this Act under the Co-operative Societies Act, 1912, or under any Act relating to co-operative societies in force in any State, and to all co-operative societies with objects not confined to one State to be incorporated after the commencement of this Act." As the objects of the appellant society were not confined to one State, it was not disputed before the High Court that it is governed by the previsions of the Central Act. Plain perusal of sub-section (1) of section 2 reproduced above makes it manifest that if the objects of a co-operative society registered in State 'A' extend to State 'B', the Society shall be deemed to be registered in State 'B' under the law in force in State 'B' relating to co-operative societies. Despite this deemed registration in State 'B' for, three purposes, namely, registration, control and dissolution,, the society shall be subject to the law relating to co-operative, societies in force in State 'A'. Sub-section (2) makes it obligatory on a co-operative society which establishes a branch or place of business in a State other than that in which it is actually registered to furnish within the prescribed time to the Registrar of the cooperative societies of the State in which such branch or place of business is situated, a copy of its by-laws and to submit such return and supply such information as the Registrar might require in respect of a co-operative society actually registered in that State. Sub-section (3) gives a limited control to the Registrar of Co-operative Societies of the State in which a branch or place of business of a co- operative society is established by authorising him to exercise in respect of that branch or place of business any powers of audit and of inspection which he might exercise in respect of a co-operative society actually registered in that State. The contention which has been advanced on behalf of the, appllant society by its learned counsel, Mr. Naik, is that as the appellant was registered in Bombay, it is the Bombay Act which govern the Shamrao Vithal Co-Operative Bank Ltd vs Kasargod Pandhuranga Mallya on 21 October, 1971 4 appellant society for purposes of registration, control and dissolution. It is not disputed that the adjudication of a claim by the appellant against its members does not fall, under the head 'registration' or "dissolution". What is, however, urged is that the word 'control' comprehends within itself the adjudication of a claim made by the society against its members. Such a, claim having been made by the appellant against the respondent, the same could, according to the learned counsel, have been adjudicated upon under section 54 of the Bombay Act. The award made by the Deputy Registrar of Co- operative Societies, Bombay in the circumstances, the counsel submits, did not suffer from any legal infirmity. There is, in our opinion, no force in the above contention because we do not agree with the underlying- assumption of the above argument that the word 'control' comprehends within itself .the adjudication of a claim made by a co- operative society against its members. The appellant society, as would appear from the resume of facts given above, established a branch in Mangalore ,and had dealings there with the respondent who was a resident of Kasaragod. As the objects of the appellant society were extended to the Presidency of Madras, it should, in view of subsection (1) of section 2 of the Central Act, be deemed to have .been registered under the law in force in the Presidency of Madras relating to co-operative societies. The law which was then in force, according to Mr. Naik, was the Madras Co- operative Societies Act, 1932 (hereinafter referred to as the Madras Act). Clause, (f) of section 2 of that Act defines a registered society to mean a society registered or deemed to be registered under that Act. Section 51 of the Madras Act provides inter alia that if .,any dispute touching the business of a registered society between a member and the society arises, such dispute shall be referred to the Registrar for decision. Registrar has been defined in clause (g) of section 2 of the Madras Act to mean "a person appointed to perform the duties of a Registrar of Co-operative Societies under this Act and includes a person on whom all or any of the powers of a Registrar under the Act have been conferred". It would, therefore, follow that a dispute between the appellant and the respondent in respect of its dealings relating to its Mangalore branch would normally have to be adjudicated upon by the Registrar appointed under the Madras Act. The fact that for the purpose of control, the appellant society was .governed by the Bombay Act would not, in our opinion, justify a departure from the above normal rule. The word 'control' is ,synonymous with superintendence, management or authority to direct, restrict or regulate (See p. 442 of Words and Phrases (Vol 9) Permanent Edition). Control is exercised by a superior authority in exercise of its supervisory power. Adjudication of disputes is a judicial or quasi-judicial function and it would, in our opinion, by unduly straining the meaning of the word 'control' to hold that it also covers the adjudication of disputes between a co-operative society and its members. There is a clear distinction between jurisdiction to decide a dispute which is a judicial power and the exercise of control which is an administrative power and it would be wrong to treat the two as identical or equate one with the other. Reference has been made on behalf of the appellant to the case of Panchshila Industrial Co-operative Societies (Mult Unit) v. The Gurgaon Central Co-operative Bank Ltd., Gurgaon(1). In that case, Deputy Registrar of Co-operative Societies, Rohtak had given an award in favour of the respondent bank which was a co-operative society governed by the provisions of Punjab Cooperative Societies Act. The appellant filed an appeal against that award before the Central Registrar. The Central Registrar dismissed the appeal on the ground that he was not the appropriate appellate Shamrao Vithal Co-Operative Bank Ltd vs Kasargod Pandhuranga Mallya on 21 October, 1971 5 authority in respect of the said award. On appeal to this Court, the decision of the Central Registrar was affirmed. It was held that the dispute between the parties fell within section 55 of the Punjab Co-operative Societies Act and those provisions were not affected by the Central Act. It would appear from the above that the question involved in that case was entirely different and the appellant can derive no assistance from it. Argument has also been advanced that there was no inherent lack of jurisdiction in the Deputy Registrar appointed under the Bombay Act for adjudicating upon the dispute between the parties and that it was at the best a case of lack of territorial jurisdiction. We find ourselves unable to accede to this contention because we are of the opinion that there was inherent lack of jurisdiction in the Registrar appointed under the Bombay Act for dealing with the dispute arising out of the dealings of the Mangalore branch of the appellant society with the respondent. The dispute between the parties as would appear from what has been discussed above, could only be adjudicated upon in accordance with the provisions of the Madras Act. The appeal consequently fails and is dismissed. As no one has appeared on behalf of the respondent, we make no order as to costs. G.C. Appeal dismissed. (1) [1971] (2) 2.S.C.C. 500. Shamrao Vithal Co-Operative Bank Ltd vs Kasargod Pandhuranga Mallya on 21 October, 1971 6 | {
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Associated Stone Industries (Kotah) ... vs Commissioner Of Income-Tax, New Delhi on 25 August, 1971 Equivalent citations: [1971]82ITR896(SC), 1971(III)UJ854(SC) Author: K.S. Hegde Bench: A.N. Grover, K.S. Hegde JUDGMENT K.S. Hegde. J. 1. These appeals by certificate arise from the decision of the High Court of Delhi in a reference Under Section 66(1) of the Indian Income Tax Act, 1922 which will be hereinafter referred to as 'the Act'. 2. The controversy in these appeals relate to the assessment of the assessee appellant for the assessment years 1948-49 and 1949-50. The assesses was taxed as a non-resident. The assessee is a company incorporated on January 17, 1945 as a Public Company with its Head Office at Ramganjmandi in the State of Kotah an Indian State at that time The Maharaja of Kotah granted to the assessee company a monopoly for excavating kacha stone slabs in the Nizamat, Chechat and-Ramganjmandi in the State on May 2, 1945. Clauses '8 and 19 of the agreement entered between the Maharaja and the assessee are relevant for the present purposes. Clause 18 says: (i) In consideration of concessions and privileges granted by the grantor and in lieu of income-tax, super-tax and excess Profit Tax, the grantee covenant to pay to the grantor royalty on the stone excavated at the rate of rupee one per 100 sq. ft. subject to the minimum amount of Rs. 1,50,000/-per financial year. Provided that the aforesaid rate of Rs. 1/-per 100 sq. It will be operative so long as the selling rate of unpolished slabs does not exceed Rs. 10/-per 100 sq. ft. In the event of the selling rate going above this figure the royalty per 100 sq. ft shall be increased by 26% of the excess over ten rupees. (ii) The minimum royalty will be payable in four equal instalments in advance every quarter. Provided that if in any quarter the royalty payable calculated at the rate mentioned in sub-para (1) exceeds in instalments of minimum royalty paid in advance for that quarter, the balance shall be made up within the next quarter. 19. In addition to the Royalty mentioned in clause 18 the grantee have expressly covenanted to pay royalty on polished stone at the rate of Rs. 1/-per 100 sq. ft. payable every quarter. Associated Stone Industries (Kotah) ... vs Commissioner Of Income-Tax, New Delhi on 25 August, 1971 1 3. So far as the minimum royalty is concerned both the Appellate Assistant Commissioner as well as the Tribunal have come to the conclusion that the same is deductible allowance Under Section 10(2)(xv) of the Act. But as regards the excess royalty, they held that the same cannot be given deduction to in view of Section 10(4) of the Act on the ground that it was given in lieu of Income tax, Super-tax and Excess profit tax. 4. At the instance of the assessee the Tribunal submitted the following question to the High Court of Delhi Under Section 66(1) of the Act. Whether the payments of royalty in excess of the aforesaid minimum is deductible under lection 10 5. This question has to be understood in the light of the controversy between the parties before the Income Tax Officer, the Appellate Assistant Commissioner and the Tribunal. That controversy, as mentioned earlier, was whether the excess royalty paid could not given deduction to in view of Section 10(4) though they opined that but for that section it would have come Under Section 10(2)(xv). The High Court answered this question against the assessee proceeding on the basis that the expenditure incurred is a capital expenditure and that being so, the same was not a permissible allowance. This approach of the High Court was impermissible in view of the stand taken by the parties before the Income Tax Officer, the Appellate Assistant Commissioner as well as the Tribunal. All that the High Court had to decide was whether the deductions claimed was impermissible in view of Section 10(4) of the Act. 6. It is conceded at the Bar that there was no law imposing income tax or super-tax or excess profits in the State of Kotah during the relevant years. That being so, there was no question of the excess royalty being made to pay in lieu of income-tax or super-tax, or excess profit tax. If that is so then the excess royalty paid cannot be in lieu of income-tax, super-tax or excess profits tax. It was merely payable under the terms of a contract, though the reason given for that payment in the agreement is an erroneous one Hence Section 10(4) of the Act cannot be attracted to that payment That being so the said payment is a permissible allowance Under Section 10(2)(xv). Further we see no basis to hold that payment as a capital expenditure. The nature of that payment is no different from the minimum royalty paid. That payment was not made for getting some additional capital asset or even any enduring benefit. It was paid on the basis of commercial expediency. 7. For the reasons mentioned above, we allow these appeals, discharge the answer given by the High Court and answer in favour of the assessee. The assessee is entitled to its cost in this appeal in this Court. One hearing fee. Associated Stone Industries (Kotah) ... vs Commissioner Of Income-Tax, New Delhi on 25 August, 1971 2 | {
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Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 Equivalent citations: 1971 AIR 1389, 1971 SCR 447, AIR 1971 SUPREME COURT 1389, 1971 3 SCC 399, 1973 MADLW (CRI) 95, 1971 UJ (SC) 605, 1971 SCD 822 Author: C.A. Vaidyialingam Bench: C.A. Vaidyialingam, A.N. Ray PETITIONER: BALRAJ KHANNA & ORS. Vs. RESPONDENT: MOTI RAM DATE OF JUDGMENT22/04/1971 BENCH: VAIDYIALINGAM, C.A. BENCH: VAIDYIALINGAM, C.A. RAY, A.N. CITATION: 1971 AIR 1389 1971 SCR 447 1971 SCC (3) 399 ACT: Indian Penal Code (Act 45 of 1860), s. 499--Necessity of complainant stating actual words used by accused-When arises. Code of Criminal Procedure (Act 5 of 1898), ss. 202 and 203- Jurisdiction of magistrate holding preliminary enquiry-Scope of. Practice and Procedure-Applicability of exceptions to s. 499 to a case--If may be considered at the preliminary stage. HEADNOTE: The respondent filed a complaint against the appellants under s. 500 I.P.C. alleging that they made certain defamatory allegations against him. According to him the appellants passed a resolution suspending him from municipal service, that in the course of the discussion relating to the passing of the resolution, all the appellants made wild Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 1 and baseless allegations involving moral turpitude against the respondent, and after passing the resolution the appellants with the ulterior motive of maligning the respon- dent, gave publicity to the resolution in the local newspapers with large circulation. A report containing the allegations which was sent by the Secretary of the Corporation to the Commissioner was given in evidence.' The Magistrate dismissed the complaint under s. 203, Cr. P.C. on two grounds, namely, (1) there was no evidence on record as to which of the appellants made which allegations against the respondents and in the absence of such an important ingredient no prima facie case against any of the appellants could be said to have been made out, and (2) the resolution passed by the Standing Committee and the discussion preceding it were covered by the exceptions to s. 499, I.P.C. The sessions Judge dismissed the revision of the complainant summarily. The High Court set aside the order of the Magistrate and directed further inquiry on the grounds that: (1) it could not be said that there was no evidence as to which member of the Standing Committee made allegations against the respondent, as the evidence implicated all the members of the Standing Committee including the appellants in the charge of making the defamatory allegations contained in the report and (2) the appellants were not protected by the Exceptions to s. 499. In appeal to this Court, HELD: (1) While it is desirable that the actual words stated to have 'been used by the accused which are alleged to be defamatory should be reproduced by the complainant, in cases where the words spoken are too many or the statements are too long, it will be the height of technicality to insist that the actual words and the entire statements should-be reproduced verbatim. The object of having the actual words before the court is to enable it to consider whether the words are defamatory. That purpose will be served if the complainant is able to reproduce in his complaint or evidence, in a substantial measure, the words of imputation alleged to have been uttered. From the point of view of the accused also it is 448 necessary that the matters alleged to be defamatory in the complaint must be so stated as to enable them to know the nature of the allegations they have to meet. But a complaint cannot be thrown out on the mere ground that the actual words spoken had not been stated in the complaint. It is only if the case of a complainant is that each of the accused made different statements that it would be necessary for the complainant to specify them actual words spoken by each of the accused. (457B-F] In the present case, on the averments made in the complaint which refers to various matters referred to in the report, the complainant had furnished in a substantial measure the Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 2 words of imputation, which, according to him were defamatory. When the case of the complainant was that all the appellants made the statements referred to in the report, an& he was prepared to go to trial on that footing, the question of the complainant stating the words alleged to have been used by the individual accused did not arise. [457G-H; 458B] English decisions dealing with libel, held not applicable on all fours.[457A-B] Sarat Chandra Das & Anr. v. State, A.I.R. 1952 Orissa 351, Krishnarao v. Firm Radhakisan Ramsahai & Anr., [1956] I.L.R. Nag. 236, Emperor v. Col. Bholanath, 51 I.L.R. 1929 All. 313, K. S. Namjundaiah v. Setti Chikka Thippanna, (1952] Cr. L. J. Mysore 1633 and Dhruba Charan Khandal v. Dinabandhu Patri, A.I.R. 1966 Orissa 15, referred to. (2) Under ss. 202 and 203 Cr. P.C. the Magistrate has to see whether a prima facie case is made out against the accused on the materials and' evidence placed before him by the complainant and not whether the evidence is sufficient to warrant a conviction. [452G-H; 453A-B] In the present case, the approach of the Magistrate was fallacious in the face of the allegations by the respondent that all the appellants made the statements referred to in the report. [458F] Chandra Deo Singh v. Prokash Chandra Bose, [1964] 1 S.C.R. 639, followed. (3) It was also unnecessary for the High Court to consider the applicability of the Exceptions to s. 499 I.P.C., at this stage. All the defence that may be available to the appellants will have to be gone into during, the trial of the complaint. [459B-C] JUDGMENT: CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 14 of 1971. Appeal by special leave from the judgment and order dated, August 26, 1970 of the Delhi High Court in Criminal Revision, No. 138 of 1968. C. K. Daphtary and B. P. Moheshwari, for the appellants. The respondent appeared in person. The Judgment of the Court was delivered by Vaidialingam J--This appeal, by special leave, is directed against the judgment and order dated August 26, 1970 of the Delhi High Court in Criminal Revision No. 138 of 1968 dismissing under- Section 203 Cr. P. C. the complaint filed by the respondent under Section 500 I. P. C. The respondent Moti Ram filed a complaint in the court of the Sub-Divisional Magistrate, Delhi against the seven appellants under section 500 I. P. C. alleging that they made certain allegations against Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 3 him which were defamatory in character and had also passed a resolution placing the respondent under suspension. The complaint filed by the respondent is a fairly lengthy one and refers to various matters. But the relevant facts which could be gathered from the same appear to be as follows : The respondent during December, 1964 was serving as a Liaison Officer, Municipal Corporation, Delhi. The appellants were among the members of the Standing Committee of the Corporation at that time. The first appellant Balraj Khanna was bitterly inimical towards the respondent and was bent upon causing harm to him. He wielded considerable influence over the members of the Standing Committee. At his instance a requisition was given by the members of the Standing Committee to its Chairman to summon a meeting of the Committee to enable them to move a resolution for the immediate suspension of the respondent from his office. Accordingly a meeting of the Standing Committee was held on December 10, 1964. The said meeting was attended, not only by the Commissioner and other officers of the Corporation, but also by the press reporters. In that meeting the appel- lants made very serious allegations of a defamatory nature against the respondent and passed unanimously a resolution placing him under immediate suspension. The allegations made against the respondent and the fact of his suspension from office were given wide publicity, with the result that it brought down the respondent in the estimation of his friends causing harm to his reputation. P. W. 3, who was the Secretary of the Corporation, and who attended the meeting of the Standing Committee on December 10, 1964 sent a report the next day Ex. P. W. 3 / B to the Commissioner regarding the allegations stated to have been made against the respondent by the appellants. The allegations referred to in P. W. 3 1 B are as follows : "1. Since its inception in 1958 the Corporation has executed a very heavy programme of works for improving the sanitation of the Corporation and provide other civic amenities, but no publicity was given to these activities and the public has remained more or less in the dark. On the other hand the Corporation is adversely criticised even for minor omissions and commissions. The L.O. has, thus not performed the duties which are required of the post he has been holding and has been deficient in the performance of his duties. 29-1 S.C. India 171 450. 2. The L O. is not working in harmony with the representatives of the Press who attend the Corporation office to cover the meetings of the Corporation and its Committee, so much so that these representatives have desired that he be not required to come to their rooms in the Corporation office. Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 4 3. Instead of applying himself seriously to his official work he indulges in estranging one member from the other, one officer for the other and one political party for the other. He has even been trying to sow seeds of estrangement between the Mysore and the Commissioners. 4. In the days when he was Chief Reporter to the Hindustan Times. he resorted to undesirable means to achieve, his desired ends. 5. His association with some of the non Official Presidents of the erstwhile Delhi Municipal Committee has brought nothing but slur to their good names. 6. He is known for indulging in acts of moral turpitude and for seducing unsuspecting girls and women." In the complaint it is further stated that in October, 1964, all the seven appellants entered into a conspiracy to defame the respondent and remove him from the municipal service and passed a resolution on December 10, 1964 placing him under suspension. It is further stated that apart from the 'seven appellants, three other members of the Standing Committee were also parties to this resolution In particular, it is alleged in the complaint that in the course of discussion relating to the passing of the resolution-, all the seven appellants made wild and baseless allegations involving moral turpitude against the respondent. After passing the resolution the appellants with the ulterior motive of maligning the respondent and lowering him in the estimation of the public gave publicity to the resolution in the local newspapers with large circulation. The allegations stated to have been made by the appellants are those referred to in Ex. P. W. 3/B. The respondent alleged that the appellants knowingly and maliciously made false and defamatory allegations against him and prayed for taking action against them. Before the Magistrate the respondent and five other Witnesses were examine under section 202,Cr.P.C. and after consideration of the evidence the Magistrate dismissed the complaint under section 203.Cr.P.C.The dismissal of the complaint by the Magistrate is rested on two ground,namely,(1)there is no evidence on record as to which of the appellants made which allegation against the respondent and in the absence of such an important ingredient, no prima facie case against any of the appellants can be said to have been made out, and (2) the resolution passed by the Standing Committee and the discussion preceding it are covered by the Exceptions to Section 499 1. P. C. and hence the appellants were well within their rights in passing a resolution recommending suspension of the respondent. The Additional Sessions Judge, Delhi, dismissed the revision of the respondent summarily stating that the material on record was not sufficient to justify any direction being given to the trial Magistrate, to make further inquiry into the complaint. The Sessions Judge has further stated that the evidence produced by the respondent is too general to make out a case to summon any one of the appellants. The High Court, after a reference to the material evidence on record, as well as the allegations stated to have been made by the appellants, has held that the approach made by the Magistrate for dismissing the complaint was erroneous. In the view of the High Court the evidence on record goes to show that the case of the respondent is that all the members of the Standing Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 5 Committee including the appellants had made the allegations against the respondent, which had been reproduced by the Municipal Secretary in Ex. P. W. 3/B. On this reasoning the High Court held that it cannot be said that there is no evidence as to which member of the Standing Committee made the allegation against the respondent. According to the High Court the evidence as it stands implicates all the members of the Standing Committee including the appellants herein in the charge of making the defamatory allegations against the respondent. The High Court has further held that if at a later stage when witnesses are examined, it is found that only some of the appellants made the allegations and also what those allegations are, it will be open to the trial Magistrate to discharge such of the accused against whom there is no evid- ence of having made any defamatory allegation. The High Court is also of the view that the reasoning of the Magistrate that the appellants are protected by the Exceptions to Section 499 1. P. C. is also not correct. Ultimately, the High Court set aside the order of the Magistrate dismissing the complaint under Section 203 Cr. P. C. and directed further inquiry to be made into the complaint by the Chief Judicial Magistrate, Delhi or by any Magistrate subordinate to him, and to dispose of the same in accordance with law. Mr. C. K. Daphtary, learned counsel for the appellants, con- tended that in cases of defermation it is essential that the actual words used should be set out in the complaint and a reproduction of the gist or substance of the words used is not enough. He further contended that a general allegation that the appellants and other members of the Standing Committee made defamatory statements referred to in Ex. P. W. 3 / B is not a sufficient compliance with the requirement of law to enable the Magistrate to take further action. On the other hand, according to the learned counsel.. the complainant must specifically aver which particular allegation was made by which of the accused, in which case alone the individual accused will have an opportunity of effectively meeting the imputations alleged to have been made by him. In this connection Mr. Daphtary referred us to certain English decisions governing the law of Libel and he also invited our attention to certain decisions of the High Courts. On the other hand, the respondent, who appeared in person, has urged that at this stage the Court is concerned only with the question whether he has prima facie made out a case for his complaint being inquired into by the Magistrate and not whether he will be able to obtain a conviction of all or any of the appellants. That stage, he pointed out, will arise only during the course of the trial. He urged that in his complaint he has made a categorical statement that all the appellants have made the statements referred to in Ex. P. W. 3 /B. As to whether the statements have been properly recorded by the Municipal Secretary, is again a matter which will arise only during the course of the trial. According to him the allegation made by him in the complaint regarding the statements said to have been made by the appellants is sufficient for further action being taken by the Crimmnal Court. He further contended that the statements alleged to have been made by the appellants have been substantially reproduced in Ex. P. W. 3 / B and it has been placed before the Court in the complaint and that is a sufficient compliance with the requirement of law. He pleaded that the principles laid down by the English Courts regarding the law of Libel are not applicable when considering a case of defamation under the Indian Penal Code. He- has also referred us to certain decisions in support of his contentions. Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 6 Before we refer to the decisions cited by Mr. Daphtary and the respondent on merits, it is necessary to clear the ground by appreciating the nature of the jurisdiction exercised by the Magistrate under Sections 202 and 203 Cr. P. C. In Chandra Deo Singh v. Prokash Chandra Bose and another (1), it has been held by this Court that the object of the provisions of Section 202 Cr. P. C. is to enable the, Magistrate to form an opnion as to whether process should be issued or not. At that stage what the Magistrate has to see is whether there is evidence in support of the- allegations made in the complaint and not whether the evidence is sufficient to warrant a conviction. It been further pointed out that the, function of the Magistrate holdiug the preliminary inquiry is only to be satisfied that a prima facie case is made out against (1) [1964] 1 S.C.R, 639 the accused on the materials placed before him by the complainant. Where a prima facie case has been made out, even though much can be said on both sides, the committing Magistrate is bound to commit the accused for trial and the accused does not come into the picture at all till the process is issued. The question arises whether in an action for defamation under Section 500 I. P. C., it is necessary that the actual statements containing the words alleged to have been used by the accused must be before the court or whether it is enough that the statements alleged to have been made are substantially reproduced in the complaint. The further question is whether the complaint in this case is defective in the sense that the actual statements alleged to have been made by the individual accused have not been stated in the complaint. We will now refer to the decisions cited by Mr. Daphtary. He has referred us, in the first instance, to the passage in Halsbury's Laws of England, Third Edition, Volume 24, page 90 para 161 that for the statement complained of as being a libel or slander to be construed or interpreted, it is essential that the actual words and not merely their substance should be set forth verbatim in the statement of claim or indictment. Again he has referred us to another passage in the same volume as follows : "As it is necessary in actions for libel or slander to set forth the actual words complained of in the statement of claim with proper innuendoes, so also it is necessary to do so in an indictment where words are of the essence of the offence." (Page 135 para. 249). In Charles Bhedlaugh and Annie Besant v. The Queer (1) the Court of Appeal was dealing with an indictment for publishing an obscene book. Bramwell, I,. J., observes as follows : "In some instances, words are the subject- matter of an indictment; and it follows from this principle, which I have mentioned that wherever the offence consists of words written or spoken, those words must be stated in the indictment; if they are not, it will be defective upon demurrer, in arrest of judgment or upon writ of error. In like manner, there can be no doubt that in an indictment for defamatory libel it was necessary to set out the words complained of, so that the Court might judge whether they were or could amount to a libel it is manifest that where words constitute the offence, they must be stated in- the, indictment. (1) 3 Q.B.D. 607 In The Capital and Counties Bank Limited v. Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 7 George Henty and sons (1) Lord Blackburn in dealing with an action for libel states as follows : "The words themselves must have been set out in the declaration or indictment, in order that the Court might be able to judge whether they_-were a libel or not. And this still remains the law." In Collins v. Jones (2), Lord Denning quoted with approval the observations of Lord Coleridge. C. J. in Harris v. Waree as follows : "In libel and slander everything may turn on the form of words, and in olden days plaintiffs constantly failed from small and even unimportant variance between the words of the libel or slander set out in the declara- tion and the proof of them....... In libel and slander the very words complained of are the facts on which the action is grounded. It is not the fact of the defendant having used defamatory expressions, but the fact of his having used those defamatory expressions alleged, which is the fact on which the case depends." It is clear by a reference to the above English Law that is an action for libel it is essential that the words themselves must be set out in the indictment and that requirement is insisted to enable the Court to judge whether those words published in writing amount to libel or not. Mr. Daphtary referred us to certain decisions dealing with the nature of proof required in a prosecution for sedition under Section 124A I. P. C. But we do, not think it necessary to refer to those decisions as we are not at this stage concerned with the proof of the statements attributed to the appellants and which, according to the respondent, are defamatory. Mr. Daphtary also referred us to the decisions in Sarat Chandra Das and another v. The State(1) and Krishnarao v. Firm Radhakisan Ramshai and another In the Orissa High Court decision two accused were being tried for an offence under Section 500 I.P.C. It is no doubt stated in the said decision that in a trial for defamation it is essential that the words alleged (1)7 Appeal Cases 741 (2) [1955].2 All England Reports 145 (3) [1879] 4 C.P.D. 125 (4) A.I.R. 1952 Orissa 351 (5) 1956 I.L.R. Nagpur 236 to be defamatory in character should be precisely set out and the accused should be individually given notice of what he is charged with, as thewords so set out will constitute the foundation for defamation. It is further laid down that it is also essential that the words in question should be proved. A perusal of this decision will show that two accused were being prosecuted for defamation. In the complaint in that case it was stated that both the accused were alleged to have made certain statements. How ever, in the swornstatement the complainant had given a slightly different version. In his evidence before the court the complainant attributedto the different accused different statements. It was, under those circumstances, that the court laid down the proposition referred to earlier. Understood in that context, it is clear that according to the High Court when different statements are attributed to different accused, the statements alleged to have been made by each of the accused must be set out as the individual accused must have noticed as to what is specifically alleged against him. Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 8 In the second case, the Nagpur High Court dealing with a claim for damages for defamation observed as follows "We may point out that in a suit for damages for defamation the law requires that the plaint ought to allege the publication of the dafamtory statement, set out the actual words used and also state that they were published or spoken to some named individuals and specify the time and place when and where they were published." On the other hand, the respondent has invited our attention to the decisions reported in Emperor v. Col. Bholanath (1), K. S. Namjundaiah v. Setti Chikka Tippanna (2) and Dhruba Charan Khandal v. Dinabandhu Patri (3). In the first decision of the Allahabad High Court, Mukherji, J. observed : "While I am not prepared to lay down, as a universal proposition, that in no case where the actual words used have not been proved a conviction for defamation by word of mouth cannot be maintained, it must be conceded that in the majority of cases it should be so. Defamation is defined as follows:---"Whoever by words...... makes or publishes any imputation concerning any person intended to harm, or knowing or having reason to (1) 51 I.L.R. 1929. All. 313 (2) 1952 Criminal Law Journal Mysore 1633 (3) A.I.R. 1966 Orissa 15. 456. believe that such imputation will harm, the reputation..... is said......... to defame that person". When the question arises as to whether the words used were intended to harm or had the effect of harming the reputation, the court must be put in possession not only of the words used, but also of the context in which they were used..." King J., the other learned Judge of the bench observes : "I may here remark that in my opinion it is unnecessary to prove the exact words used by the accused, for the purpose of supporting a conviction for oral defamation. It is sufficient to prove the purport or substance of the defamatory imputations. No honest witness would profess to remember the exact words used by a person who has been speaking for even 15 minutes. At the most he may remember some striking phrase or expression. But a witnesse's failure to recall the exact words used or the exact context in which they were spoken is immaterial, provided that he can give a sufficiently clear account of the purport of the defamatory remarks. Although the learned counsel for the appellant argued that no conviction could be sustained unless the exact words were proved, he was unable to quote any authority for his proposition, and I am not prepared to accept it. English rulings on the English Law of libel seem beside the point when the task before us is to apply the provisions of section 499 of the Indian Penal Code to a case of alleged defamation by spoken words." In the second case the Mysore High Court has laid down that it is sufficient for the purpose of Sections 499 and 500 I. P. C. that if witnesses are agreed in a substantial measure on the words of imputation uttered as it is hardly possible or necessary to reproduce every word or expression used. In the last decision, the Orissa High Court has laid down that for the purpose of an offence under Section 500 I.P.C. it is enough if the witnesses are agreed in a substantial measure on the words of imputation uttered, for it is not possible even for a most honest witness to reproduce every such Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 9 word or expression. This decision has also distinguished the earlier decision in Sarat Chandra Das and another v. The State (1) on the ground that the observations contained in that judgment that the precise words uttered against the complainant should find a place in the charge were made in the context of the court dealing with two accused, each of whom was alleged to have made different statements. (1) A. I. R. 1952 Orissa 351 457. After a consideration of the various decisions referred to above, we are of the opinion that the propositions laid down in English decisions dealing with libel that the actual words alleged to be used must be stated in the indictment cannot be applied on all fours when dealing with the cases of defamation by spoken words under Section 499 I. P. C. it will be highly desirable no doubt if the actual words stated to have been used by an accused and which are alleged to be defamatory are reproduced by the complainant. The actual words used or the statements made may be reproduced verbatim by the complainant if the words are few and the statement is very brief. But in cases where the words spoken are too many or the statements made are too long, in our opinion, it will be the height of technicality to insist that the actual words and the entire statements should be reproduced verbatim. The object of having, if possible, the actual words or the statements before the court is to enable it to consider whether those words or the statements are defamatory in nature. That purpose or object will be served if the complainant is able to reproduce in his complaint or evidence in a substantial measure the words of imputation alleged to have been uttered. If the statements or the words placed before the court by the complainant are held to be not defamatory, it will mean that the complainant will have to lose. Therefore it is to his interest to get a proper adjudication from, the court that as far as possible the words spoken or the statements actually made and which he alleges to be defamatory are before the court. But a complaint cannot be thrown out on the mere ground that the actual words spoken or the statements made have not been stated in the complaint. From the point of view of accused also it is necessary that the matters alleged to be defamatory in the complaint must be so stated as to enable them to know the nature of the allegations that they have to meet. In this case we have already referred to Ex. P. W. 3 /B. which, according to the complainant, contains the statements made by the appellants during the discussion of the resolution leading to his suspension on December 11, 1964. The High Court, in this connection, has averted to the evidence of P. Ws. 1, 3 and 4 on this aspect. As to how far the evidence of those witnesses is to be accepted, is a matter which will arise only during the trial of the complaint. From the averments made in the complaint, which refers to various matters referred to in Ex. P.W., 3 / B, we are of the opinion, that the complainant has. furnished in a substantial measure the words of imputation, which, according to him, are defamatory. Therefore, the contention of Mr. Daphtary that the complaint is defective inasmuch as it does not contain the actual words alleged to have been spoken by the appellants has to be rejected. The further question is whether the complaint is defective for the reason that the actual statements alleged to have been made by the individual accused have not been stated therein. So far as this aspect is concerned, if the case of the complainant is that, each of the appellants made different Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 10 statements or spoke different words, which are defamatory, then it is absolutely necessary that the complaint must specify the words spoken or the statements made by each of the appellants. But that is not the allegation in the complaint. We have already referred to the fact that it is specifically stated in the complaint that during the course of the discussion of the resolution, all the seven appellants made a wild and baseless allegation against the complainant involving moral turpitude. According to him those statements are contained in Ex. P. W. 3/B. The evidentiary value of Ex. P.- W. 3 / B does not arise for consideration at this stage. The further question. whether the complainant will be able to prove his allegation that all the seven appellants made all or any of the statements contained in Ex. P. W. 3 / B, is again a matter which does not arise for consideration at this stage. We are only concerned to find out what are the allegations made by the respondent in his complaint against the appellants. When the case of the complainant is that the seven appellants made the statements referred to in Ex. P. W. 3 / B and he is prepared to go to trial on that footing, the question of the complainant being made to state the statements alleged to have been made by the individual accused does not at all arise. Such a situation will arise only when the case of the complainant is that different statements were made by different accused, who are before the court. The Magistrate dismissed the complaint on the ground that there is no evidence on record as to which of the appellant made which allegation against the respondent and in the absence of such an important ingredient, no prima facie case against any of the appellants can be said to have been made out. This, in our opinion, is a fallacious approach made by the Magistrate in the face of the allegation made by the respondent that all the seven appellants made the statements referred to in Ex. P. W. 3/B. In our opinion, the High Court has made a correct approach when it held that the evidence, as it stands implicates all the members of the Standing Committee, including the appellants in the charge of making the statements alleged to be defamatory and contained in Ex. PI W. 3 / B. We are in, entire agreement with the reasoning of the High Court on this aspect. Before concluding, the discussion, it is, to be stated that the trial Magistrate has given an additional reason for dismissing the complaint That, reason is that the resolution passed by the Standing Committee an December 11. 1964 and the discussion preceding it by the members of the Standing Committee including the,- appellants is covered by the Exceptions to Section 499 I. P. C. Unfortunately, the High Court also has touched upon this aspect and made certain observations. In our opinion, the question of, the application of the Exceptions to Section 499 I. P. C. does not arise at this stage. Rejection of the complaint by the Magistrate on the second ground mentioned above cannot be sustained. It was also unnecessary for the High Court to have considered this aspect and differed from the trial Magistrate. It is needless to state that the question of applicability of the Exceptions to Section 499 I. P. C. as well as all other defences that may be available to the appellants will have to be gone into during the trial of the complaint. To conclude we are satisfied that the High Court's order setting aside the order of the Magistrate dismissing the complaint under Section 203 Cr. P. C. and directing further inquiry to be made in the complaint of the respondent is correct. The appeal fails and is dismissed. Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 11 V.P.S. Appeal dismissed. Balraj Khanna & Ors vs Moti Ram on 22 April, 1971 12 | {
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Latafat Ali Khan And Ors vs The State Of U. P on 6 May, 1971 Equivalent citations: 1973 AIR 2070, 1971 SCC (2) 355, AIR 1973 SUPREME COURT 2070, 1973 2 SCC 355 1973 ALL. L. J. 407, 1973 ALL. L. J. 407, 1973 ALL. L. J. 407 1973 2 SCC 355, 1973 2 SCC 355 Author: S.M. Sikri Bench: S.M. Sikri, G.K. Mitter, C.A. Vaidyialingam, A.N. Ray, P. Jaganmohan Reddy PETITIONER: LATAFAT ALI KHAN AND ORS. Vs. RESPONDENT: THE STATE OF U. P. DATE OF JUDGMENT06/05/1971 BENCH: SIKRI, S.M. (CJ) BENCH: SIKRI, S.M. (CJ) MITTER, G.K. VAIDYIALINGAM, C.A. RAY, A.N. REDDY, P. JAGANMOHAN CITATION: 1973 AIR 2070 1971 SCC (2) 355 CITATOR INFO : D 1978 SC1296 (19,46,47) RF 1992 SC1033 (60) ACT: U.P. Imposition of Ceiling on Land Holdings Act (U.P. 1 of 1961), s. 6(xvii) and r. 4(4) of the Rules made thereunder- If protected by Arts. 31A and 31B. HEADNOTE: Section 6(xvii) of the U.P. Imposition of Ceiling on Land Holdings Act, 1960, and rule 4(4) of the rules made thereunder are protected by Arts. 31A and 31B of the Constitution. [720C-D] Latafat Ali Khan And Ors vs The State Of U. P on 6 May, 1971 1 (a)They are part of a scheme of land reform in U.P. and would therefore be protected from attack under Art. 31A. [720D] (b)The rule does not go beyond the powers conferred by the section read with s. 44 of the Act, and the Act is included to the Ninth Schedule to the Constitution. If a statutory rule is within the power conferred by a section of a statute protected by Art. 31B the rule cannot further be scrutinised under Arts. 14, 19 and 31. [720C] JUDGMENT: ORIGINAL JURISDICTION : Writ Petition No. 261 of 1968. Petition under Article 32 of the Constitution of India for the enforcement of fundamental rights. S. C. Agarwala and D. P. Singh, for the petitioner. S. C. Manchanda and O. P. Rana, for the respondent The Judgment of the Court was delivered by Sikri, C. J.--This petition under Art. 32 has been filed by the three appellants in Civil Appeals No. 2018-2020 of 1968, in which we have just delivered judgment. In this petition the vires of s. 6, cl. (xvii), of the U.P. Imposition of Ceiling on Land Holdings Act, 1960 (U. P. Act 1 of 1961)- hereinafter referred to as the Act-and rule 4(4) of the U. P. Imposition of Ceilings and Land Holdings Rules, 1961, have been challenged. It is urged that these provisions violate Art. 14, 19(1)(f) and (g) and 31(1) of the Constitution. The learned counsel for the State contended that the impugned provisions are protected by Art. 31B of the Constitution, as the Uttar Pradesh Imposition of Ceiling on Land Holdings Act, 1960 is included in the Ninth Schedule as item 58. The learned counsel for the petitioners, in reply, urged (1) that the impugned provisions have nothing to do with land reform, and (2) that rules made under the Act do not enjoy the protection of Art. 318. It is admitted that the land in dispute is a 'holding' within S. 3(d) of the Act. The definition reads : "Holding" means the land or lands held by a person as a bhumidhar, sirdar, asami of Gaon Samaj or ant asami mentioned in Section 11 of the Uttar Pradesh, Zamindari Abolition and Land Reforms Act, 1950, or as a tenant under the U.P. Tenancy Act, 1939, other than a sub- tenant, or as a Government lessee, or as a sublessee of a Government lessee, where the period of the sub-lease is co-extensive with the period of the lease." It seems to us that if a statutory rule is within the powers conferred by a section of a statute protected by Art. 31B, it is difficult to say that the rule must further be scrutinised under-Arts. 14, 19, etc. Rule 4(4) seems to us to be a rule which does not go beyond the powers conferred under s. 6(xvii), read with S. 44 of the Act. At any rate, S. 6(xvii) and rule 4(4) are part of a scheme of land reform in U.P. and would be protected from attack under Art. 31A of the Constitution. In the result we hold that s. 6(xvii) and rule 4(4) are valid The petition accordingly fails. In the circumstances there will be no order as to costs. Latafat Ali Khan And Ors vs The State Of U. P on 6 May, 1971 2 V. P. S. Petition dismissed.. Latafat Ali Khan And Ors vs The State Of U. P on 6 May, 1971 3 | {
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