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Appeal No. 90 of 1953.
Appeal under Article 132(1) of the Constitution of India from the Judgment and Order dated the 29th August, 1952, of the High Court of TravancoreCochin at Ernakulam in Original Petition No. 51 of 1952.
K.Thomas and M. R. Krishna Pillai, for the appellant.
Mathew P. Muricken, Advocate General for the State of Travancore Cochin (T. R. Balakrishna Ayyaiand Sardar Bahadur, with him), for the respondent.
November 25.
The Judgment of the Court was delivered by MEHR CHAND MAHAJAN C. J.
This appeal by leave of the High Court of Judicature of TravancoreCochin at Ernakulam is directed against an order of a Full Bench of that court dismissing an application for the issue of a writ of certiorari quashing the order of the Government of the united State of TravancoreCochin removing the appellant from service of the State and permanently debarring him from reappointment in service.
The facts giving rise to the petition and the appeal are these: The petitioner entered the service of the erstwhile Travancore State in the year 1928.
By promotion he became the Executive Engineer, Electricity Department in August 1937 and subsequently Electrical Engineer to Government in October 1944.
He was the Electrical Engineer to Government on the 1st July 1949 when the States of Travancore and Co chin were integrated by a Covenant entered into between the rulers of the two States.
By an order of the Government of the united State of Travancore Cochin dated the 11th August 1949, he was appointed as the officiating Chief Engineer (Electricity) in the State.
In or about September 1949 the Government of the 1014 united State received serious complaints about the conduct and dealings of some of their senior officers and allegations of corruption, communalism, etc. were made against them.
In December 1949 the Council of Ministers decided to take action against the appellant on a number of charges indicated in the resolution.
On the 22nd December 1949, immediately after this resolution was passed, the petitioner was informed that he was suspended from service pending enquiry and he was requested to hand over charge to Sri K. P. Sridharan Nair forthwith.
The petitioner complied with this order and handed over charge as directed.
On the 21st March 1950 the following notification was issued: "Whereas Government are of opinion that there are sufficient grounds for making a formal and public inquiry into the truth of the imputation of misconduct of the officers mentioned below: Government, under section 3 of the Travancore Public Servants (Inquiries) Act, XI of 1122, hereby commit the said inquiry to Sri K. Sankaran, Judge, High Court, appointed Commissioner for the purpose.
Government are further pleased under section 4 of the said Act to nominate Sri T. R. Balakrishna Ayyar, Government Pleader, High Court, to prosecute the inquiries on their behalf.
The inquiries shall be conducted as early as possible.
The officers referred to in para.
1 supra are: I. . . . . . . 2.
Sri P. Joseph John".
The petitioner was informed by notice of the 24th April 1950 about this inquiry.
The notification was signed by Shri K. G. Menon, Chief Secretary to Government.
Mr. Justice Sankaran took charge as Enquiry Commissioner and on the 11th May 1950 forwarded the articles of charges against the petitioner, the list of witnesses and the list of documents placed before him together with the notice regarding the commencement of the enquiry to Shri K. section Raghavan, Secre 1015 tary to Government, for service on the petitioner.
A few days before the date fixed for the commencement of the enquiry the petitioner made an application to the Enquiry Commissioner for a direction to the Prosecutor to produce the files and papers relating to the various charges in the office of the Commissioner and for permission to him and his counsel to inspect the same.
This application was allowed and he and his advocate were allowed to inspect the relevant files in the presence of the prosecutor or his deputy.
On the 20th May 1950 when the enquiry commenced, the petitioner pleaded not guilty to the charges by a written statement.
He was defended during the enquiry by Shri K. P. Abraham, a leading member of the Bar.
A preliminary objection was taken to the Tribunal 's jurisdiction on the basis of Article 20 of the Covenant entered into between the rulers of Tra vancore and Cochin and it was contended that the proceedings before the Commissioner were criminal in nature and could not be commenced without the sanction of the Rajpramukh and that its absence was fatal to the enquiry.
This objection was not immediately decided by the Commissioner but was ultimately overruled.
On the 22nd November 1950 the peti tioner submitted detailed answers in writing to the various charges.
The enquiry concluded on the 27th December 1950 and the Commissioner submitted his report to Government on the 17th February 1951.
Some of the charges were held proved, while others were held not established.
On the 5th July 1951 the following communication was sent to the petitioner by the Chief Secretary to Government: "I am to enclose here with a copy of the above report and to point out that the Government agree with the findings of the Inquiring Commissioner on the several charges against you.
Government also agree with the Commissioner that the objections raised by you challenging the validity of the en quiry itself are not tenable.
As against the 26 charges framed 1016 against you, the nine charges noted in the margin have not been established and they are accordingly dropped.
As regards Charge No. IX in view of the extenuating circumstances, the irregularity is condoned.
It is evident from the remaining charges, which have been established, that you have misused your official position as Electrical Engineer to Government and shown undue favouritism at the expense of State revenues, to private firms and issued materials from Government stores to private companies and individuals in violation of all rules (vide List A).
It is also evident that departmental stores and departmental lorries have been diverted for your personal use in a number of cases.
(Vide List B).
You are also found guilty of having shown defiance and insubordination towards the authority of the Government by your refusal, in connection with the supply of power to the Nagercoil Electric Supply Corporation, to supply certain particulars which were called for and which it was your duty to furnish and by your refusal to withdraw the objectionable statement in your reply to the Government in spite of the Government order directing you to withdraw the same.
The Government therefore propose to remove you from service from the date on which you were placed under suspension with permanent bar against future reappointment in service.
You are requested to show cause within 15 days of the date of receipt of this notice with enclosures why action should not be taken against you as proposed in paragraph 4 above".
The petitioner on receipt of this notice applied for time till the 10th September 1951 for showing cause.
Time as prayed for was allowed.
On the 10th September 1951 when the time granted at his own request 1017 was due to expire, he again applied for further time till the 10th November 1951.
He was allowed further time till the 24th September 1951.
On that date he again asked for further time till the 31 st October 1951 but this request was not granted.
In spite of the fact that the petitioner was granted the time which he originally asked for and this was further extended by a fortnight, he furnished no explanation and did not show any cause against the notice issued to him.
The petitioner having failed to avail himself of the opportunity to show cause against the action proposed against him, a draft of the proceedings relating to the enquiry was submitted to H. H. the Rajpramukh oil the 30th September 1951 and thereupon an order was issued for his removal from service from the date of suspension and debarring him from reappointment to service.
The order was in proper form as having been made by H. H. the Rajpramukh and was authenticated by the Chief Secretary to Government.
This order is dated the 1st October 1951.
It may be mentioned that before the papers were submitted to H. H. the Rajpramukh, the report of the Commissioner was submitted to the Public Services Commission for their consideration.
The Public Services Commission supported the action which the Government proposed to take against the petitioner.
On the 9th October 1951 the petitioner was removed from service with effect from the 26th December 1949.
Two months after the order of his removal, the petitioner submitted an ap plication for a reconsideration of the order removing him from service.
This was rejected by an order dated the 25th January 1952.
On these facts and in these circumstances an application was made before the High Court of Travancore Cocliin at Ernakulam on the 2nd June 1952 praying that the court may be pleased to issue a writ in the nature of certiorari or any other writ, directions or orders calling for the records relating to the orders dated the 9th October 1951 and the 25th January 1952 and to quash the same and direct the respondent to restore the petitioner to the office which he was lawfully to hold.
It was contended in the application 1018 that the applicant had no reasonable opportunity of showing cause against his removal and that he was entitled to show cause twice, once after he was found guilty and next after the punishment had been decided and that the denial of this right rendered the order of dismissal illegal and void and that it offended against the principles of natural justice.
It was further contended that the consultation with the Public Services Commission was not held in terms of the provisions of procedure for disciplinary action against Government servants and prescribed in Article 320, sub section 3(c) of the Constitution of India.
A number of other grounds were also taken against the order of dismissal.
The High Court negatived all the contentions of the petitioner and dismissed the petition.
It however certified that the case involved substantial questions of law as to the interpretation of the Constitution and was a fit one for appeal to this Court.
Mr. Thomas who argued the appeal on behalf of the appellant raised a number of points against the validity of the order removing the appellant from service and contended that the enquiry conducted into the charges made against him was wholly illegal and void.
In our judgment, none of the points urged by the learned counsel was of a substantial character and all of them concerned matters of mere form and no valid reasons have been shown for disturbing the decision of the High Court.
The question of the validity of an order of removal of a person employed in a civil capacity under the Union or a State falls to be determined on the provisions of Article 311 of the Constitution of India.
This Article is in these terms: " (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 until he has been given a reasonable opportunity of showing cause 1019 against the action proposed to be taken in regard to him. . . . . . . . .
It is not said that the petitioner was removed by an authority subordinate to that by which he was appointed.
There was no occasion to raise this issue because the order of removal had been made by the Rajpramukh and was expressed according to the provisions of Article 166 of the Constitution.
The requirement therefore of sub clause (1) of Article 311 was fully satisfied.
As regards the question whether the petitioner was given reasonable opportunity of showing cause against the action proposed to be taken in regard to him, the legal position in that respect and the nature of opportunity to be granted was stated by the Privy Council in the case of High Commissioner for India vs I. M. Lall(1) and it was held that when a stage is reached when definite conclusions have been come to as to the charges, and the actual punishment to follow is provisionally determined on, that the statute gives the civil servant an opportunity for which subsection (3) of section 240 of the Government of India Act, 1935 (which corresponds to Article 311) makes provision, and that at that stage a reasonable opportunity has to be afforded to the civil servant concerned.
It was also held that there was no anomaly in the view that the statute contemplates a reasonable opportunity at more than one stage.
In our opinion, in the present case the petitioner had reasonable opportunity at both stages to enter upon his defence.
He fully availed himself of the first opportunity and though a reasonable opportunity was also given to him at the second stage, he failed to avail himself of it and it is not open to him now to say that the requirements of clause (2) of Article 311 have not been satisfied.
It was not denied that the petitioner was given by the Enquiry Commissioner all facilities for entering on his defence.
Before filing his written statement before the Enquiry Commissioner the petitioner and his counsel were afforded facility to inspect the (1) 131 1020 various files concerning the charges which he had to meet.
After inspecting those files he filed a full written statement explaining those charges.
He was defended in the enquiry by a leading lawyer and was afforded fullest opportunity to examine and cross examine the witnesses examined by the Commissioner.
He was able to satisfy the Enquiry Comniissioner that out of the charges levelled against him a number of them were not established; but he failed to satisfy the Commissioner as regards the rest and the Enquiry Commissioner held them proved.
After the enquiry was concluded the petitioner was furnished with a copy of the report of the Commissioner and was asked to show cause against the action proposed to be taken against him.
He applied for two months ' time to show cause.
This was granted.
He made a further application for further time.
This was also partially granted.
He again asked for further time which was refused.
It is difficult to say that the time allowed to him was not reasonable in view of the fact that be bad taken part in the enquiry before the Commis sioner and all the evidence had been taken in his presence and he had full opportunity to defend himself.
All the material on which the Commissioner had reported against him on the charges found proved, was given in the report of the Commissioner and that was supplied to him with a show cause notice.
The time allowed, in our opinion, was more than sufficient for him to enter on his defence and having failed to do so, he cannot be heard to say that he was not given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him.
Mr. Thomas argued that the show cause notice was not in accordance with the provisions of Article 166 of the Constitution inasmuch as it was not expressed to have been made in the name of the Rajpramukh.
As above mentioned, this notice was issued on behalf of the Government and was signed by the Chief Secretary of the united State of Travan core Cochin who had under the rules of business framed by the Rajpramukh the charge of the portfolio of "service and appointments" at the Secretariat level 1021 in this State.
This was in our opinion substantial compliance with the directory provisions of Article 166 of the Constitution.
It was held by this court in Dattatreya Moreshwar Pangarkar vs The State of Bombay(1) that clauses (1) and (2) of Article 166 are directory only and non compliance with them does not result in the order being invalid, and that in order to determine whether there is compliance with these provisions all that is necessary to be seen is whether there has been substantial compliance with those requirements.
In the present case there can be no manner of doubt that the notice signed by the Chief Secretary of the State and expressed to be on behalf of the Government and giving opportunity to the petitioner to show cause against the action proposed to be taken against him was in substantial compliance with the provisions of the article.
The petitioner accepted this notice and in pursuance of it applied for further time to put in his defence.
He was twice granted this time.
In these circumstances, the contention of Mr. Thomas that as the notice was not expressed as required under Article 166 it was invalid and therefore the requirements of Article 311 were not satisfied in this case must be held to be devoid of force.
We are satisfied that all the requirements of Article 311 have been fully complied with in this case.
It may also be mentioned that the High Court held that H. H. the Rajpramukh had intimation of the decision of the Council of Ministers and the action proposed to be taken against the petitioner and that in fact His Highness approved of the proposed action.
Mr. Thomas further contended that the enquiry at the first stage also was invalid and irregular.
He argued that the order appointing the Enquiry Commissioner was not expressed in proper form and that the Commissioner did not conduct the enquiry in accordance with the provisions of the Act. 'The notification ordering an enquiry set out above was issued after the Council of Ministers had passed a resolution to that effect.
It must be presumed that in (1) ; 1022 the normal course.
of business that resolution was communicated to the Rajpramukh.
The order thus substantially complies with the requirements of law and in any case the effect of its not being expressed as directed by Article 166 does not vitiate the notification.
The appellant, as already stated, took part in the enquiry, defended himself and fought every inch of the ground.
That being so, it is not possible to hold that he was not given reasonable opportunity at the first stage to defend himself.
It was contended that under the Travancore Public Servants (Inquiries) Act, 1122) it was only the Maharaja who could make an order under the provisions of that Act, and that the Ministers could not take any action.
Emphasis was lai on the expression "Our Government" in the different provisions of the Act.
We are unable to see any force in this contention.
The expression "Our Government" means the Maharaja 's Government, in other words, the Government of the State of Travancore.
After the integration of the two States of Travancore and Cochin and the formation of the United State of Travancore Cochin the expression "Our Government" has to be construed according to the new set up of Government and when the Council of Ministers had come into being, it is obvious that the expression "our Govern ment" as adapted to fit in with the new Constitution means "The Council of Ministers".
It is an elementary principle of democratic Government prevailing in England and adopted in our Constitution that the Rajpramukh or the Governor as head of the State is in such matters merely a constitutional head and he is bound to accept the advice of his Ministers.
In this situation it cannot be held that the order of the Government appointing the Enquiry Commissioner *as ultra vires and without jurisdiction.
Another point taken by Mr. Thomas was that without the sanction of the Rajpramukh the proceedings could not be started against the petitioner and reliance for this contention was placed on Article 20 of the Covenant of the united State of Travancore and Cochin.
This article is in these terms: "Except with the previous sanction of the Raj 1023 pramukh, no proceedings, civil or criminal, shall be instituted against any person in respect of any act done or purporting to be done in the execution of his duty as a servant of either Covenanting State before the appointed day".
The High Court negatived this contention with the following observations: "Article 20 refers to the institution of civil and criminal proceedings, two well known expressions which are terms of art and clearly relate to civil and criminal proceedings before civil and criminal courts.
The said two kinds of proceedings do not exhaust the totality of matters which can be called proceedings.
is only in respect of civil and criminal proceeding that the sanction of the Rajpramukh is required under Article 20 of the Covenant.
It is not contended on behalf of the petitioner that the proceedings before the Commissioner are criminal proceedings.
The only contention is that they partake of the nature of criminal proceedings.
In our judgment, Article 20 of the Covenant does not apply to proceedings which are not criminal but merely partake of that character".
In these observations we fully concur.
In our view departmental proceedings do not come within the ambit of the Article.
Lastly it was urged that there was non compliance with the provisions of Article 320, clause 3(c) of the Constitution which provides that on all disciplinary matters affecting a person serving under the Government of India or the Government of a State in a civil capacity, including memorials or petitions relating to such matters, the Union Public Service Commission.
or the State Public Service Commission, as the case may be, shall be consulted.
In this case the Public Service Commission was in fact consulted in the matter of the action proposed against the petitioner by removing him.
The Public Service Commission agreed to the proposed action.
This consultation and the agreement was before the petitioner was asked to show cause why he should not be removed from service.
The complaint of the petitioner is that the 1024 consultation with the Public Service Commission sould have been after he was asked to show cause but the petitioner did not show cause and that being so, no question arose of consulting the Public Service Commission over again.
It was contended that the Public Service Commission should have been consulted on the review petition.
To accede to this argument will mean that the State will have to consult the Public Service Commission as many times as he may choose to file review petitions.
In our opinion the consultation envisaged by Article 320 does not extend so, far.
In this case the report of the Commissioner was placed before the Public Service Commission and the latter approved of the action proposed to be taken.
The appellant was given another opportunity to show cause but he did not avail himself of that opportunity or submit any explanation or show any cause on which the Public Service Commission could be consulted.
The order of dismissal having been made there was in the circumstances no further necessity to consult the Public Service Commission.
in our opinion therefore there is no force in this contention as well.
After having examined all the arguments of Mr. Thomas, we are of the opinion that all the rules of natural justice were fully observed during the enquiry in this case, and the petitioner had the fullest opportunity to put in his defence both before the Enquiry Commissioner and against the action proposed to be taken against him.
It was by reason of his own default that he failed to avail himself of the second opportunity.
He put in a belated review but such a review is not provided for under the rules and in our opinion, it was not necessary to consult the Public Service Commission at that stage.
Such petitions are not within the contemplation of the Constitution.
For the reasons given above this appeal fails and is dismissed.
In the circumstances of the case we make no order as to costs.
Appeal dismissed.
| IN-Abs | An enquiry under the provisions of the Travancore Public Servants (Inquiries) Act, (Act XI of 1132) was held against the petitioner in pursuance of a resolution passed by the Council of Ministers.
The petitioner took part in the proceedings, denied the charges and raised legal objection to the competence of the Enquiry Commission to hold the enquiry.
Some of the charges were held proved.
The petitioner was asked by the Chief Secretary to show cause why be should not be removed from service.
The petitioner 's request for extension of time to show cause was granted twice but refused a third time.
On his failure to avail himself of the opportunity to show cause against the action proposed to be taken against him, the report of the Enquiry Commissioner was submitted to the Public Services Commission and the latter approved of the action proposed to be taken against the petitioner.
The proceedings relating to the enquiry were submitted to the Rajpramukh and thereupon an order in proper form for the removal of the petitioner from service was made by the Rajpramukh and authenticated by the Chief Secretary to Government.
Held, (i) that under the provisions of article 311 of the Constitution a civil servant is entitled to have a reasonable opportunity to defend himself and show cause, both at the time of enquiry into the charges brought against him and at the stage when definite conclusions have been come to on the charges and the actual punishment to follow is provisionally determined upon.
The position cannot be characterised as anomalous if the statute contemplates a reasonable opportunity at more than one stage.
In the present case the petitioner had reasonable opportunity to enter upon his defence at both the stages.
He fully availed himself of the first opportunity, but refused to avail himself of the second opportunity which was offered to him.
All the rules of natural justice were observed in the case.
(ii) The provisions of article 166(1) and (2) are directory, not mandatory; and, in order to determine whether there has been compliance with the said provisions, all that is necessary to see is that the requirements of the sub sections are met in substance.
(iii) After the integration of the two States of Travancore and Cochin, the expression " Our Government" means "The Council of Ministers" under the new set up of democratic Government in the United State.
The Rajpramukh as the head of the State is merely at constitutional head and is bound to accept the advice of his Ministers.
(iv) The consultation envisaged by article 320(3) does not extend to review petitions which the petitioner may choose to file as many times as he likes.
(v) The sanction of the Rajpramukli under article 20 of the Covenant of the United State of Travancore Cochin is necessary only before the institution of civil or criminal proceedings.
Departmental proceedings do not fall within the ambit of the said Article.
1013 Dattatreya Moreshwar Pangarkar vs The State of Bombay ([1952] S.C.R. 612), referred to.
|
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.
section V. Gupte and J., P. Gopal, for the appellants.
A. K. Sen, Rameshwar Nath and Swaranjit Sodhi, for the respondent.
575 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.
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 576 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.
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 577 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, exhibit 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.
vs section V. V. section 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.
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) 578 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 vs 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 exhibit 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 section 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.
579 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 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 580 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 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 581 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 (exhibit 7) the appellant in their reply dated 5/6 May, 1953 (exhibit 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 vs Dinkar(1) Ram Motigaur vs Naranji ( 2 ) and Subbaih Chetty & Ors.
vs 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.
| IN-Abs | 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 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 article 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.
vs section V. V. section Veerappa Chettiar, and Nawab Major Sir Mohammad Akbar Khan vs 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 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 vs Dinkar Ram, A.I.R. 1921 Cal.
644, Motigauri vs Naranji, A.I.R. 1927 Bom.
362 and Subbaih Chetty & Ors.
The appeal must accordingly be dismissed.
|
Appeal No. 2241 of 1970.
Appeal by special leave from the judgment and order dated April 15, 1969 of the Mysore High Court in Writ Petition No. 2071 of 1967.
M. C. Setalvad and R. V. Pillai; for the appellant.
B. R. L. Iyengar and A. G. Ratnaparkhi, for respondent No. The Judgment of the Court was delivered by Mitter, J.
In this appeal by special leave the appellant challenges the decision of the Mysore High Court quashing his ,appointment as a University Grants Professor in Sanskrit by the Board of Appointments on the sole ground of non compliance with Rule 5 of the Supplementary Rules promulgated under the Mysore University Act, 1956.
That rule provides : "The Board of Appointments shall give, in writing the reasons for the selection of any candidate and also the basis on which the selection has been made and always give in writing the reasons for overlooking the claims of those who are seniors (i.e. total service as teacher) and/or have higher qualifications.
" The facts are as follows.
The appellant and the main con testing respondent have the same academic qualifications.
The ,a appellant joined the University as a lecturer in 1945 and he was appointed a temporary Reader in Sanskrit under the University Grants Commission Scheme which was distinct from other University appointments.
He was appointed a permanent Reader in the University under the said Scheme in April 1960.
The first respondent had joined the University as a lecturer in 1938 i.e. seven years before the appellant.
He was appointed a Reader ,under the University Grants Scheme in January 1961 i.e. several months after the appellant.
In December 1965 the appellant was placed as the Head of the Department of Sanskrit.
It appears that in 1967 an appointment had to be made as Professor in the University Grants Scheme, the top position in the department.
The ,claims of the appellant, the first respondent and two other persons were considered by the Board of Appointments.
They were also interviewed by the Board and on June 9,1967 the appellant was given the said appointment.
This was later approved of by the ,Chancellor of the University on June 29, 1967.
The first respondent filed a Writ Petition in the High Court challenging the appointment of the appellant under article 226 of 623 the Constitution on various grounds but the infraction of, rule 5 set forth above was not one of them.
The High Court, however on an application made for the purpose allowed the ground to be raised but the learned single Judge dismissed the writ petition.
The: first respondent filed an appeal which was heard by a Division Bench of the High Court.
The High Court turned down all but the contention based on rule 5 above and took the view that the said rule was a mandatory provision and it was incumbent on the Board of Appointments to state in writing why the first respondent although he had longer teaching experience was passed over in favour of the appellant before us.
According to the Division Bench the appointment of the appellant became invalid for this non compliance of rule 5 by the Board of Appointments.
The order of appointment was quashed by the High Court with a direction that the University should make an appointment in accordance with law.
This judgment was rendered on April 15, 1969.
The appellant 's application for a certificate being turned down by the High Court, he filed an application for special leave before this Court on 9th September 1969 along with a petition for stay of the order of the High Court.
On the application being moved on September 22, 1969 the respondents were directed to show cause why special leave should not be granted but an interim stay was granted to the effect that the matter of a fresh appointment as a result of the quashing of the order of the appellant 's appointment was not to be placed before the Chancellor for his approval under section 26(4) of the Mysore University Act.
This was occasioned by the fact that the University had taken steps to make another appointment necessitated by the order of the Division Bench of the High Court and had asked the appellant to appear at an interview for the purpose fixed on September 21, 1969.
On affidavits being filed this Court after hearing the parties passed an order on November 14, 1969 modifying the earlier order of stay to the effect that the order of the High Court was to remain suspended till the disposal of the special leave petition and as soon as the Chancellor had decided the case, the parties were to be at liberty to mention the matter to this Court and in the meanwhile the appellant was to continue as Professor.
On a clarification of the Court 's order being sought for, an order was passed on August 26. 1970 to the effect that the Chancellor was free to deal with the matter notwithstanding that the application for special leave was pending in this Court.
It appears that the Board of Appointments re constituted after the decision of the High Court had advised the appointment of the first respondent as Professor and the Chancellor, in the circumstances of the case felt that he should not come to any decision during the pendency of the matter before this Court.
The Chancellor 's order was made on November 11, 1970.
On December 11, 1970 this Court granted special leave to the appel 624 lant and directed the stay to continue till the disposal of the appeal.
Although we have set out what transpired after the presentation of the special leave petition to this Court in September 1969 to give a complete picture of the events concerning the appointment of a Professor under the University Grants Scheme, we do not propose to take any notice of what the Second Board of Appointments did.
In our view, if the action of the Board of Appointments taken on June 9, 1967 and approved of by the Chancellor on June 26, 1967 was valid, the Board would have no jurisdiction to consider the matter for a second time.
The position in law appears to be as follows.
The Mysore University Act, 1956 came into force on October 3, 1956.
section 13 ,of the Act sets out the authorities of the University which include inter alia the Senate, the Syndicate, the Academic Council and the Board of Appointments.
Different sections following the above prescribe the powers and functions of the Senate, the Syndicate and their authorities.
Section 26 concerns the Board of Appointments.
Sub section
(1) of this section provides : "Appointments to the staff of the University shall be made in accordance with the rules made by the Chancellor in consultation with the Syndicate." Sub section
(2) shows how the Board of Appointments is to be constituted for the purpose of making appointments of Professors, Readers and Lecturers.
The Board is to consist of (1) the Vice Chancellor who was to be the ex officio Chairman, (2) the Head ,of the University Department in the subject concerned, except where the appointment to be made was the post of the Head of the concerned Department, (3) one member who was to be an expert in the subject concerned selected from outside the University by the Syndicate and (4) another person who was to be an expert in the subject concerned selected from outside the University by the Chancelor.
Under sub section
(4) "The decisions of the Board and in such cases as may be prescribed by the Chancellor, the decision of the Vice Chancellor shall not have effect unless approved by the Chancellor; thereafter, every such decision shall be final and shall not be called in question in any manner.
" The Mysore University Staff (Appointment) Rules came into froce on October 24, 1964.
Some supplementary Rules of re. cruitment governing the appointment of University teachers were approved by the Governor under section 26 of the Act on 8th April 1967 and these were published on May 25, 1967.
Rule 5 men 625 tioned above is one of these rules.
Rule 3 of the Supplementary Rules shows that the Board of Appointment was to be provided at the meeting with all relevant information about every candidate regarding his qualification, seniority, teaching experience and research work and under, rule 4 the Dean and the Head of the Department who were to be associated with the Board were to prepare a note regarding qualification, work etc.
of the candidate who had served in the department under them and give their opinion in writing to the Board of Appointment.
This rule further prescribed that the claims of the "senior (most)" teachers with approved service who acted in that vacancy for ' a long time shall be given due consideration.
After interviewing the candidates the Board of Appointments made its written recommendation as follows "The Board took into consideration the academic qualifications, research and teaching experience and the performance during the interview of the four candidates who appeared for the interview.
The Board in consultation with the Dean of the Faculty of Arts, unanimously resolved that Dr. G. Narulasiddiah be appointed Professor of Sanskrit on a starting salary of Rs. 1,000/ P.M. in the scale of Rs. 1000 50 1500 subject to the usual period probation nor two years.
If rule 5 is to be observed in its latter and not according to its true intent it must be said that the Board of Appointments failed to give in writing expressing the reasons for overlooking the claims of the first respondent whose total service as a teacher undeniably exceeded that of the appellant.
According to the High Court: " .
the clear intendment of rule 5 is that a superior claim to an appointment flows out of the seniority to which it refers and that that claim should not be overlooked except for reasons to be stated in writing and since the resolution of the Board of Appointments with which we are concerned does not state any reason for the supersession of such claim with which the petitioner became clothes under the rule, we are inclined to the view that the appointment becomes invalid for that reason.
" We find ourselves unable to accept the above dictum of the High Court.
In our view the rule was not intended to load the dice in favour of someone merely because of longer experience as a teacher.
The Proper construction of that rule is to regard the length of teaching experience as one of the important factors to be taken into consideration by the Board of Appointments.
However much may be the importance of the length of teaching experience the 6 2 6 rule did not provide that as the determining factor.
The rule did not lay down all the factors which were to be considered by the Board in making their selection.
Of necessity they had to consider: the academic qualifications of the respective candidates including that of the quality of their teaching and of the research work if any to their credit, their past experience and the impression which they created in the minds of the persons constituting the Board '.
Rule 5 laid particular stress to the total length of teaching experience of the candidates but it was not meant to outweigh other consideration.
In this case it appears that the academic qualifications of the appellant and the first respondent were, of the same standard.
In mere length of service the first respondent certainly was superior to the appellant.
But that by itself would not tip the scale in his favour.
The recommendation of the Board clearly shows that one of the factors which they had taken into consideration was "teaching experience" and in 1967 when the appointment was made the appellant had to his credit a period of 22 years of teaching experience while the first respondent had 29 years of service to his credit.
It is not as if the appellant was a man very much junior in age to the first respondent with a career in teaching far shorter than or negligible compared to that of the first respondent.
It must also be noted that when there was a question of appointing a temporary Reader under the University Grants Scheme in 1958 it was the appellant who was given preference to the first respondent and even as a permanent Reader he secured the appointment some months ahead of the first respondent.
The preference given to him in the past was certainly one of the factors to be taken into consideration.
In our view it would be giving preference to the letter of the rule than to its spirit if we were to hold that the recommendation of the Board of Appointments was to be treated as invalid merely because they had failed to state, in clear words, that the appellant was preferred to the first respondent although the latter had a longer period of service as a teacher.
Mr. Setalvad appearing for the appellant drew our attention to Seniority Rules which were framed with the approval of the Chancellor and came into force on 30th March 1969 during the pendency of the matter before the Division Bench of the Mysore High Court.
Rule 7 of these rules provides that : "Teachers appointed to a class of post in the University Grants Commission scale shall be deemed senior to teachers holding the same class of posts in the University scale.
" Reference was made to this rule for the purpose of showing that the appellant who had been a Reader under the University Grants 627 Scheme nearly three years before the &St respondent would be senior to him in terms of the rule if it had been in force And even otherwise counsel contended that the mere fact that the appellant had preceded the first respondent in appointment tinder the Said scheme showed that his preference over the first respondent was, not undeserved.
We do not think that we can take into account rule 7 for the purpose of our decision in this case.
Mr. Setalvad 's second contention was that it was apparent from the recommendation of the Board that rule 5 was substantially complied with and as such the High Court should not have set aside the appointment of the appellant.
He also placed reliance on sub section
(4) of section 26 as giving a finality to the approval of the Chancellor to the appointment made by the Board.
Mr. Ayyangar appearing for the first respondent contended, first, that rule 5 was divided into two parts and that the provision for a statement in writing giving reasons for ignoring a person 's total length of service as a teacher had to be complied with by the Board and any disregard of this rule rendered the appointment invalid.
Counsel argued that the rules had statutory force and the mere approval of the Chancellor under, sub section (4) of section 26 of ' the Act did not put a seal on the case so as to prevent from scrutiny the disregard of any mandatory provision of the rules framed under section 26(1) and approval of the Chancellor would not cure such illegality.
In our view, rule 5 was substantially corn plied with by the Board and the failure to record expressly the reason for disregarding the greater length of service of the first respondent did pot vitiate the appointment per se.
At best it was an irregularity which was cured by the approval of the Chancellor.
Mr. Setalvad 's last contention was that the High Court had gone wrong in quashing the appointment but should have rele gated the matter back to the Board of Appointments to comply with the requirements of r. 5 and for this he relied on two English decisions in Iveagh (Earl) vs Minister of Housing etc.(1) and Brayhead Ltd. vs Berkshire County Council(2).
In the view we have taken it is unnecessary to consider the last point raised by counsel or the effect of these two decisions.
The Board of Appointment was constituted of four persons who were eminently fitted to assess the relative merits of the candidates before them at the interview and their recommendation shows that although they had not expressly recorded any reason in terms of the rule, they had taken the teaching experience of the candidates into consideration.
Our conclusion might have been otherwise if it were shown that the Board had not considered the length of teach (1) (2) 628 ing experience of the candidates as one of the, factors for coming their decision.
In the result we allow the appeal and set aside the order of the High Court holding that the appellant was validly appointed as a Professor under the University Grants Scheme.
In the circumstances of the case, we leave the parties to bear their own costs.
Before parting with this case we cannot but express our dis approval in noting that the canker of litigiousness has spread even to a sphere of life where discipline should check ambition concerning personal preferment.
A teacher is justified in taking legal action when he feels that a stigma or punishment is undeserved but he is expected to bear with fortitude and reconcile himself to his lot suppressing disappointment when he finds a co worker raised to a position which he himself aspired after.
K.B.N. Appeal allowed.
| IN-Abs | Rule 5 of the Supplementary Rules promulgated under the Mysore University Act, 1956, provides that "the Board of Appointments shall give in writing the reasons for the selection of any candidate and also the basis on which the 'selection has been made and always give in writing the reasons for overlooking the claims of those who are seniors (i.e., total service as a teacher) and/or have higher qualifications.
" The first respondent whose total service as teacher exceeded that of the appellant was considered along with the appellant and two others by the Board of Appoint ments for the post of a professor.
The Board made its written recommendation that it took into consideration the academic qualification, research, teaching experience and the performance during the interview of the four candidates who appeared at the interview and resolved to appoint the appellant in the post.
The appointment was later approved by the Chancellor of the University.
The 'first respondent filed a writ petition in the High Court challenging the appointment of the appellant as being in violation of r. 5.
The High Court quashed the appointment.
It took the view that the rule was a mandatory provision and it was incumbent on the Board of Appointments to state in writing why the first respondent, although he had longer teaching experience, was passed over in favour of the appellant.
Allowing the appeal, HELD : The proper construction of r. 5 is to regard the length of teaching experience as one of the important factors to be taken into consideration by the Board of 1 Appointments.
However much may be the importance of the length of teaching experience the rule did not provide that as the determining factor.
The rule did not lay down all the factors which are to be considered by the Board in making the selection.
[625 H] In the present case the academic qualifications of the appellant and the first respondent were of the same standard.
In mere length of service the first respondent certainly was superior to the appellant.
But that by itself would not tip the scale in his favour.
The recommendation of the Board clearly showed that one of the factors which the Board had taken into, consideration was teaching experience.
it would be giving preference to, the letter of the rule than to its spirit if it were to be held that the recommendation of the Board was to be treated as invalid merely because they had failed to state in clear words that the appellant was preferred to the first respondent although the latter had a longer period of service as a. teacher.
Rule 5 was substantially complied with by the Board and the failure to record expressly the reasons for disregarding the greater length of service of the first respondent did not vitiate the appointment per se.
At best it was an irregularity which was cured by the approval of the Chancellor.
[626 C] 622
|
l Appeals Nos.
2537 of 1966.
591 Appeals by special leave from the judgment and decree dated September 22, 1966 of the Andhra Pradesh High Court in Second Appeals Nos. 875 of 1961, 488 and 516 of 1962.
A. K. Sen, A. V. Rangam and T. Raman, for the appellant (in all the appeals): B. V. Subramanyam and B. Parthasarathy, for respondents 1 and 2 (in all the appeals).
The Judgment of the Court was delivered by Mitter, J.
The main question in these three appeals is, whe ther reception of secondary evidence of a written agreement to rant a lease is barred by the provisions of sections 35 and 36 of the Indian Stamp Act.
The relevant facts are as follows.
There is a rice mill in Bhimiavaram, West Godavari District, which was formerly owned by the appellant along with respondents 3, 4 and 5.
The mill was built on a site with an area of Ac.
1 75 by one K. N. Raju who had obtained a lease thereof from the guardian of respondents 1 and 2.
It was executed on 21st December 1941 and was to expire on 17th July 1956.
The appellant and respondents 3, 4 and 5 were successors in interest of the said leasehold rights.
Respondents I and 2 served notice of ejectment on the lessees to quit the site and deliver possession on the expiry of the said lease.
According to the lessees there were negotiations for a new lease.
Respondents I and 2 demanded enhanced rent and an agreement was ultimately arrived at on January 6, 1957 between the appellant and respondent No. 5 for themselves and on behalf of respondents 3 and 4 on the one hand and respondents I and 2 on the other for grant of a new lease for a period of thirty years commencing on January 1, 1957.
The rent was fixed at Rs. 5401 per annum payable every two months.
There was an option given to the lessors to purchase the rice mill It a price to be fixed by the President of the Rice Mills ' Association but in case the said option was not exercised, the lessees were entitled to remove the structures of the mill.
The lessees were to continue in possession and a deed of lease was to be executed and registered within a short time.
The agreement was written on two stamp papers of Rs. 0 12 0 each and signed by the appellant and the 5th respondent on the one hand and respondent No. I on his own behalf and on behalf of respondent No. 2.
The document was delivered to the respondent No. I after execution.
The appellant 's further case is that thereafter he effected considerable improvements to the mill costing about Rs. 30,000,/ 592 and purchased the shares of respondents 3 and 4 in the said mill but respondent No. 5 who had originally joined the appellant in the suit for specific performance of the said agreement sold his share in or about September 1965 to respondent No. 6 herein.
On March 12, 1957 respondents I and 2 instituted a suit O.S. No. 81 of 1957 in the court of the District Munsif of Bhima varam against the appellant and respondents 3, 4 and 5 besides certain other persons who were in occupation of the site, for recovery of possession after removing the rice mill and structures standing thereon on the basis that on the expiry of the old lease they had become entitled to possession.
Respondents I and 2 instituted another suit O.S. No. 100 of 1957 on 4th April, 1957 in the same court claiming damages from the appellant and respondent No. 5 for failure to deliver the site from 1st January, 1957 till date of delivery of possession.
In paragraph 6 of the plaint in this suit they expressly stated that they would file a separate suit to recover the future mesne profits.
The total claim in this suit was computed at Rs. 4,700/ being the amount due for 94 days from 1st January, 1957 to 4th April, 1957 at the rate of Rs. 501per day.
On April 5, 1958 the, appellant and respondent No. 5 instituted O.S. No. 92 of 1958 against respondents 1 to 4 praying for specific performance of the agreement to lease mentioned above with a direction that the respondents 1 and 2 should execute the lease deed.
By their written statement filed in O.S. No. 92 of 1958 respondents I and 2 denied the execution of the agreement to, lease while in the two suits for recovery of possession and damages for illegal occupation the appellant and respondent No. 5 pleaded the aforesaid agreement for lease in defence and submitted that they were entitled to remain in possession without any liability as to damages.
The three suits were tried together.
As respondents I and 2 did not produce the original agreement which according to the appellant had remained with them, oral evidence was called by the appellant to prove the execution of the said document.
In his judgment the learned Munsif held: "The plaintiffs have no right to lead any oral evidence in respect of the suit agreement to lease dated 6 1 1057.
However, in order to appreciate the case put forward by the plaintiffs in the absence of the agreement to lease oral evidence has been recorded to determine whether the plaintiffs are entitled to specific performance as the full facts must be before the court.
" Examining the evidence the learned Munsif recorded his finding that : 593 "The plaintiffs on whom the burden lies have not proved by evidence of P.Ws., I to 5 and 7 which is interested and developed that the agreement to lease dated 6 1 1957 is true and valid." O.S. No. 92 of 1958 was therefore dismissed.
O.S. No. 81 of 1957 was decreed against the appellant and others and they were directed to deliver vacant and peaceful possession after removing the constructions and the mill thereon on or before 9th July 1960.
Suit No. 100 of 1957 was decreed against the appellant and respondent No. 5 for Rs. 117 2 10.
The Subordinate Judge, Narsapur who heard the appeals from the judgment and decrees of the learned Munsif set them aside.
The suit for specific performance of the contract of agreement to lease was decreed and defendants 1 and 2 in that suit were directed to execute and register a lease deed from 1st January, 1957.
Ile accepted the oral evidence tendered on behalf of the plaintiffs in that suit and recorded that the objection regarding the admissibility of the oral evidence was raised only at the time of the argu ments on the ground that the agreement was written On a stamp paper of Rs. 1 8 0 when it should have been written on a paper with a stamp of Rs. 60/ .
According to the learned Subordinate Judge the defendants had suppressed the agreement to lease whereby the plaintiffs were deprived of the opportunity of making good the deficiency of the stamp.
The learned appellate Judge held further that the conditions mentioned in section 27 A of the Specific Relief Act had been fulfilled.
He also found that the parties were contemplating the execution of a deed of lease subsequent to the agreement and the mere fact that plaintiffs continued their possession after the expiry of the period of the previous lease did not take the case out of the purview of section 27 A of the Specific Relief Act.
The High Court in Second Appeal went elaborately into the question of the admissibility of the oral evidence regarding the agreement to lease and held that. "although the objection was raised by defendants I and. 2 in the trial court at the time of the final arguments and not before the oral evidence was received in regard to the admissibility of oral evidence, even then since section 36 is not attracted to such an objection, the oral evidence cannot be acted upon.
It is inadmissible in evidence and it cannot be received for any purpose.
" The appellant before us challenges this finding of the High Court.
Learned counsel for the appellant Mr. Sen argued that the admissibility of secondary evidence, be it oral or in writing, must 594 be primarily decided in terms of the Indian Evidence Act.
Inasmuch as the original document which was insufficiently stamped was suppressed by the defendants in the suit for specific performance, secondary evidence of the contents of the document could be led in terms of section 65(a) of the Evidence Act.
The Evidence Act imposed no bar to the reception of oral evidence by way of secondary evidence to prove the terms of the agreement to lease which was in writing and duly executed.
According to counsel the Stamp Act did not create a bar with respect to the reception of secondary evidence to prove a document which was unstamped or insufficiently stamped in any case where the party seeking to rely upon the execution of the document and the terms thereof offered to pay the penalty in terms of section 35 of the Stamp Act.
According to Mr. Sen section 35 raised a bar only in cases which were expressly excluded by proviso, (a) to section 35 and in others where the party seeking to rely on the document was not agreeable to pay the deficiency in the stamp together with the penalty in terms of the said proviso.
Mr. Sen further argued that the whole object of section 35 of the Stamp Act was that the Government revenue due by way of stamp should be protected.
But even then section 36 carved out an exception thereto and allowed the reception of an insufficiently stamped instrument in evidence when it had been admitted without objection at the initial stage.
It was not reasonable, according to counsel to limit the operation of section 36 only to cases where the original instrument was admitted in evidence without objection and logically oral evidence to prove the contents of a document which was insufficiently stamped should be subject to the same but no further infirmity and once such oral evidence was recorded without objection of the party against whom it was tendered, particularly where such party was responsible for the suppression or non production of the document, it should be acted upon by courts of law if the party tendering oral evidence was agreeable to make up the deficiency in the stamp and pay the penalty in terms of section 3 5.
We find ourselves unable to accept the submissions made on behalf of the appellant.
The Indian Evidence Act which was enacted in 1872 consolidates, defines and amends the law of evidence.
By various Chapters it deals with matters as to how facts are to be proved and which facts need not be proved.
section 59 of the Act lays down that, all facts except the contents of documents may be proved by oral evidence.
Documentary evidence is dealt with in Chapter V and section 61 provides that the contents of the document may be proved either by primary evidence or secondary evidence.
Under s.62 primary evidence means the document itself produced for inspection of the court.
section 63 shows the different kinds of secondary evidence admissible with regard to documents.
It includes several kinds of copies as specified in sub cls.
595 (1)to (3) of the section, counterparts of documents as against the parties who did not execute them in terms of cl.
(4) and oral accounts of the contents of a document given by some person who has himself seen it in terms of cl.
Under section 64 documents must be proved by primary evidence except in cases mentioned thereafter.
Section 65 allows secondary evidence to be given of the existence, condition or contents of a document in circumstances specified in cls.
(a) to (g) thereof.
Under section 91 when the relevant portion of a contract or of a grant or of any other disposition of property has been reduced to the form of a document, no evidence shall be given in proof of the terms except the document itself or secondary evidence of its contents in cases in which secondary evidence is admissible under the provisions hereinbefore contained.
As the first court of appeal recorded the finding that it was the defendants who were responsible for suppression of the original agreement to lease, a finding which was accepted by the High Court, it must be held that no objection to the reception of secondary evidence by way of oral evidence can be raised under the provisions of the Indian Evidence Act.
The Indian Evidence Act however does not purport to deal with the admissibility of documents in evidence which require to be stamped under the provisions of the Indian Stamp Act.
The Stamp Act which is now in force is an Act of 1899 but it had a fore runner in a statute of 1 879.
Chapter IV of the Stamp Act deals with instruments not duly stamped.
Section 33(1) of this Act provides that : "Every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, except and officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same.
" The relevant portion of section 35 is as below: "No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped Provided that (a) any such instrument not being an instrument chargeable with a duty not exceeding ten paise only, or 596 a bill of exchange or promissory note, shall, subject to all just exceptions, be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument, insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion.
Section 36 lays down that: "Where an instrument has been admitted in evidence, such admission shall not, except as provided in section 61, be called in question at any stage of the same suit or proceeding on the around that the instrument has not been duly stamped.
" The first limb of section 35 clearly shuts out from evidence any instrument chargeable with duty unless it is duly stamped.
The second limb of it which relates to acting upon the instrument will obviously shut out any secondary evidence of such instrument, for allowing such evidence to be let in when the original admittedly chargeable with duty was not stamped or insufficiently stamped.
would be tantamount to the document being acted upon by the person having by law or authority to receive evidence.
Proviso (a) is only applicable when the original instrument is actually before the court of law and the deficiency in stamp with penalty is paid by the party seeking to rely upon the document.
Clearly secondary evidence either by way of oral evidence of the contents of the unstamped document or the copy of it covered by section 63 of the Indian Evidence Act would not fulfil the requirements of the proviso which enjoins upon the authority to receive nothing in evidence except the instrument itself.
section 35 is not concerned with any copy of an instrument and a party can only be allowed to rely on a document which is.
an instrument for the purpose of section 35. 'Instrument ' is defined in section 2(14) as including every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded.
There is no scope for inclusion of a copy of a document as an instrument for the purpose of the Stamp Act.
If section 35 only deals with original instruments and not copies section 36 cannot be so interpreted as to allow secondary evidence of an instrument to have its benefit.
The words "an instrument" in section 36 must have the same meaning as that in section 35.
The legislature only relented from the strict provisions of section 35 597 in cases where the original instrument was admitted in evidence without objection at the initial stage of a suit or proceeding.
In other words, although the objection is based on the insufficiency of the stamp affixed to the document, a party who has a right to object to the reception of it must do so when the document is first tendered.
Once the time for raising objection to the admission of the, documentary evidence is passed, no objection based on the same ground can be raised at a later stage.
But this in no way extends the applicability of section 36 to secondary evidence adduced or sought to be adduced in proof of the contents of a document which is unstamped or insufficiently stamped.
The above is our view on the, question of admissibility of secondary evidence of a document which is unstamped or insufficiently stamped, as if the matter were res Integra.
It may be noted however that the course of decisions in India in the Indian High Courts, barring one or two exceptions, have consistently taken the same view.
One of the earliest decisions is the judgment of the Judicial Committee of the Privy Council in Raja of Bobbili vs Imuganti China Sitaramaswami Garu(1).
In this case, a suit was brought by the Raja of Bobbili to obtain the proprietary possession of an estate once belonging to the family.
The original defendant was the widow of a son of the sister of the plaintiff 's paternal grandfather, a former Raja of Bobbili, by whom the estate, the subject of dispute was granted by a deed of April 5, 1848 to a cousin who had then married the then Raja 's sister.
The donee died in 1872, and his widow thereupon restored the estate to the Raja on the footing that the grant had been only for her husband 's life.
The Raja then granted the estate to another cousin who died in the same year.
This was the husband of the original defendant.
It was necessary for the Raja to show that the grant of 1848 was absolute and unconditional.
The deed of grant was however not forthcoming having been lost.
The question was whether the draft or a copy, of the instrument tendered as secondary evidence of its contents when the original instrument was shown to have been insufficiently stamped, could be, subjected to the penalty prescribed by section 34 of the Indian Stamp Act, 1879 as a preliminary to its being admissible in evidence.
The respondent denied that such a deed was ever executed and averred that the gift consisted in transferring the estate to the donee 's name in the register, upon the footing that the estate was to revert to the donor, in the event of the donee leaving no heir male of his body.
At the trial the plaintiff offered in evidence what purported to be an unauthenticated copy and the defendant objected to the admission of the (1) 23 Madras 49. 598 same on the ground that it was the copy of a document which was insufficiently stamped.
The District Judge refused to receive the document or allow it to be proved and dismissed the suit.
The appeal to the High Court of Madras was also unsuccessful, the learned Judges of the High Court holding that: "The copy should not be admitted on payment of a penalty, for the provision of the Stamp Act regarding penalty (section 39 of Act I of 1879) prescribes that such payment shall be endorsed on the document and presupposes that the document is forthcoming." Before the Judicial Committee counsel for the appellant admitted that he was not in a position to dispute that the original deed of gift dated 1848 had not been sufficiently stamped in terms of the Madras Regulation XIII of 1816 and that he would be unable to maintain his claim for the estate unless he was permitted to prove the copy of the deed and use it as secondary evidence either on due payment of a penalty in court, or upon its endorsement by the Collector.
He based his right to that remedy on the provisions of the Stamp Act of 1879.
The Judicial Committee held on the construction of the said Act that the judgment appealed from was correct observing : "These clauses throughout deal with, and exclusively refer to, the admission as evidence of original documents which, at the time of their execution, were not stamped at all, or were insufficiently stamped.
It is only upon production of the original writ, that the Collector has the power given him or the duty imposed upon him, of assessing and charging tie penalty, a duty which he must, in that case, perform by writing an indorsement upon the writ submitted to him, which then, and not till then, becomes probative in law.
" Reference was made to, section 33 of the Act of 1879 which is in pari materia with section 33 of the Act of 1899.
section 34 of the Act of 1879 was on the same lines as the present section 35.
The Board further held that the effect of granting the remedy which the appellant maintained he was entitled to would be to add to the Act of 1879, a provision which it did not contain, and which the Legislature ,of India, if the matter had been brought under their notice, might ,possibly have declined to enact.
More than sixty years after the above decision this Court observed that the law laid down there was well settled and that a copy of an instrument could not be validated : The State of Bihar vs Karam Chand Thapar & Bros Ltd. (1).
It is not necessary to (1) ; 599 examine the facts of that case except to note that the contention put forward was whether an instrument i.e. an award received in court which had been prepared in triplicate, the other two having been sent to the parties, was an original instrument which could be used by the payment of stamp duty under section 35 of the Stamp Act and validated.
This Court held that although the document sent to the court was marked as a certified copy, it was in reality an original instrument for the purpose of the Stamp Act.
The above judgment shows that if the document tendered in court was not an original instrument but a copy the decision would have been otherwise.
However we may point out that the passage which occurs at page 835 of the report (reproduced hereinafter in part) as being quoted from the decision of the Judicial Committee is not to be found in their Lordships ' judgment.
The latter portion of the passage occurs in the judgment of the Madras High Court in Thaji Beebi vs Tirumalappa Pillai(1), but this does not in any way detract from the weight of the opinion expressed by a Bench of five Judges of this Court.
In Thaji Beebi 's case (supra) the plaintiff sued upon a "cadjan" mortgage which was said to be, in possession of the first defendant whose ancestors were alleged to have created the mortgage in favour of the plaintiffs ' ancestors.
The first defendant denied tile existence of any such deed.
The plaintiff examined two witnesses to prove the mortgage one of whom stated that he had attested the document which was unstamped.
Plaintiffs led oral evidence to prove the mortgage and also put in a petition by the first defendant 's ancestor in which the mortga e was admitted.
No objection was taken by the defendants to the reception of the secondary evidence.
The trial court found the mortgage proved but dismissed the suit on the defendants ' plea that the plaintiffs ' ancestors had sold away the lands.
On appeal the District Judge upheld the decision on the ground that the trial court ought not to have received secondary evidence of the mortgage.
The High Court dismissed the Second Appeal on the same ground.
The question as to whether it was open to.
the plaintiff to rely on the oral evidence of the alleged execution of the instrument and the alleged passing of possession of the property under that instrument in order to show that that possession operated to create by prescription only the title of a mortgage in the defendants, was answered in the negative by observing : "To hold otherwise would be to give some effect to the unstamped instrument inasmuch as it would necessary connect the possession with the contents of the document relating thereto; and that would be contrary to the express provisions of section 35 of the Stamp Act which (1) 30 Madras 336 at 337.
600 lays down that an instrument chargeable with duty shall not only not be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, but also that it shall not be "acted upon" by any such person unless duly stamped.
" The decisions of different High Courts make it quite clear that the cause of the non production of the original instrument is immaterial i.e. whether it was lost or whether it was destroyed or even if it was the allegation of the party seeking to prove its contents by alleging that the document was suppressed by his opponent.
In Chidambaram vs Meyyappan(1) the plaintiffs produced an unstamped document as the basis of their claim.
Before the trial commenced a mob invaded the court and set fire to it with the result that records of many cases including the record of the above case were destroyed.
When the trial commenced the plaintiff sought to put in a copy of the document and it was objected to on the ground that the copy could not be stamped even on payment of penalty.
The Subordinate Judge without admitting the document but leaving the question, of its admissibility open until he had heard the arguments of counsel, marked it as an exhibit.
In rejecting the plaintiffs appeal the learned Judges of the Madras High Court referred to the decision of the Privy Council in Raja of Bobbili 's case ( 2 ) and observed that the destruction by the mob 's action put the plaintiffs in no better position.
Numerous decisions on the point had been referred to by the learned Judge hearing the Second Appeal in the High Court but we do not think it necessary to take note of them in any detail.
Mr. Sen relied strongly on certain observations in a judgment of the Rangoon High Court in Maung Po Htoo and three vs Ma Ma Gyi and one( 3 ) .
This arose out of a suit for administration of the estate of one Daw Thet San and for a declaration that a deed of gift executed by him was void.
The District Court found that the deed of gift was void as being a testamentary disposition and (,ranted a declaration to that effect.
In appeal to the High Court the decision that the deed of gift was void was not contested and the only question for decision was whether the adoptions mentioned therein were proved.
The appellants wished to use a certain part of the deed as evidence to prove that the plaintiff and one Tun Sein were not adopted while the respondents claimed that it could not be admitted in evidence for any purpose.
The deed itself was not produced which admittedly had been in possession of Po Htoo who put in a certified copy alleging that he had lost the original.
On a consideration of the entire evidence the District Judge found (1) A.I.R. 1946 Madras 298 (2) 23 Madras Rangoon 363.
601 that the original deed of gift was insufficiently stamped.
This decision was not questioned before the High Court but the appellant claimed that it could not be admissible in evidence and was riot to 'be considered for any purpose.
Referring to the decision of the Judicial Committee and the passage which we have quoted already the Judges of the Rangoon High Court remarked that their Lordships observation (quoted by us earlier) that "Those clauses throughout deal with, and exclusively refer to, the admission as evidence of original documents, which , at the time of their execution, were not stamped at all, or were insufficiently stamped." did not intend to go as far as their words suggested.
According to the Rangoon Judges: ".
section 35 of the present Act, read with the provisions of the Evidence Act, excludes both the original instrument itself and secondary evidence of its contents.
Similarly, under section 36, when either the original instrument itself or secondary evidence of its contents has in fact been admitted, that admission may not be called in question in the same suit, on the ground that the instrument was not duly stamped.
In this view, they held that the terms of the deed of gift could be considered.
With all respect to the learned Judges it appears to us that both the premises of the last sentence of the above quotation and the conclusion based on the same are incorrect.
Neither under the decision of the Judicial Committee nor the express words of section 34 of the Stamp Act of 1879 mentioned in that judgment (present section 36) allow the leading of secondary evidence of the contents of an insufficiently stamped document.
As we have expressed our view already section 35 imposed a bar on the reception of any but the original instrument and forbade the reception of secondary evidence.
Section 36 only,lifted that bar in the case of an original unstamped or insufficiently stamped document to which no exception as to admissibility was taken at the first stage.
It did not create any exemption in the case of secondary evidence which a copy would undoubtedly be.
In the case before the Judicial Committee the copy was one other than ,the final draft of the original document which had been lost through no fault on the part of the person intending to prove it and yet it was held that the Stamp Act ruled out its admissibility in evidence.
For the same reason we must hold that the dictum in Satyavati vs Pallayya(1) that (1) A.I.R. 1937 Madras 431 at 432.
602 "section 35 will also apply when secondary evidence of an instrument not duly stamped had been wrongly admitted.
" is not good.
Learned counsel for the appellant also relied on the decision in Ponnuswami vs Kailasam(1).
In this case a suit as filed for recovery of the loans which were evidenced as two documents described as hand letters which were admittedly unstamped.
Before the trial stamp duty and penalty was levied by the court on the tooting that they were bonds.
The defendant admitted the execution of the two documents but pleaded that in substitution of his liability under them he had executed a promissory note and had made payments towards the same, leaving a balance of Rs. 40/only payable on the loan.
Neither party let in any evidence.
The defendant raised the only contention that the suit was not sustainable on the two documents because they are inadmissible in evidence for any purpose.
The learned Judge in revision took the view that it was not necessary for him to decide as to the exact nature of the two documents to determine whether they were admissible in evidence but he went on to add : "Assuming that these two documents should not have legally admitted in evidence, nevertheless it is contended for the petitioner. . that as the defendant had admitted the execution of the documents and had only pleaded a substitution of liability by the execution of another promissory note and a partial discharge towards it there was no necessity for the plaintiff to adduce proof of his claim by seeking to get the two documents admitted in evidence.
In other words the plaintiff will be entitled to a decree on the failure of the defendant to make out the Plea set up by him in defence.
" We do.
not think this judgment helps the appellant.
If a suit is based on a document which is admittedly unstamped the insufficiency of the stamp is cured by the payment of penalty.
The learned Judge never mean to lay down, as is contended for by Mr. Sen, that the defect of insufficiency of stamp is cured by the admission of execution of the document.
The learned Judge of the Madras High Court relied on an earlier decision of that court in Alimana Sahiba vs Subbarayudu (2)wherein a suit had been filed on a promissory note which bore a stamp paper but the same was not cancelled.
The defendant admitted the execution of the promissory note sued on but pleaded discharge.
Subsequently at the stage of the argument the defendant raised a legal objection (1) A.T.R. 1947 Madras 422.
(2) A.I.R. 1932 Madras 693.
603 to the maintainability of the suit on the ground that the stamp affixed to the promissory note had not been cancelled as required by section 12 of the Stamp Act and contended that the promissory note should accordingly be.
treated as unstamped for any purpose.
In Alimana Sahiba 's case (supra) the learned Judge stated in clear terms that "Under the provisions of section 12 (of the Stamp Act) therefore it must be taken that this promissory note was not duly stamped and accordingly if any question arose as to its admissibility in evidence the same may have to be held to be inadmissible." The learned Judge however took the view that as facts admitted need not be proved the circumstance that the promissory note was not admissible in evidence is immaterial for the purpose of this case.
No doubt the learned Judge added (see at p. 696) "Now when once this document has been admitted in evidence and marked as an exhibit ' then having regard to the provisions of section 36, Stamp Act, its admissibility could not be re opened on the ground of the document not having been duly stamped.
That position being clear under the provisions of section 36, Stamp Act, the whole discussion would thus seem to be entirely unnecessary and for no purpose, so far as the facts of this case are concerned.
" It was wholly unnecessary, as was pointed out by the learned Judge himself, to consider the question of admissibility under section 36 of the Act.
His decision really rested on the conclusion that a fact which is admitted did not require proof.
The case is not an authority for the proposition that secondary evidence of a document is to be treated on the same footing as an unstamped or insufficiently stamped original document.
In the result the appeal is dismissed with costs.
The respondents moved an application C.M.P. No. 87 of 1971 under Order 47 Rule 3of the Rules of this Court for a direction that a relief for future mesne profits from the date of the suit be added to the decree.
On the fact of this case we cannot allow the application.
The respondents in their own plaint had stated that they would file a suit for future mesne profits and it was because of this that the courts below did not grant any such relief.
R.K.P.S. Appeal dismissed.
| IN-Abs | On the question whether reception of secondary evidence of a written agreement to grant a lease, insufficiently stamped, is barred by the provisions of sections 35 and 36 of the Stamp Act, HELD :The first limb of Section 35 clearly shuts out from evidence any instrument chargeable with duty unless it is duly stamped.
The second liml of the section which relates to acting upon the instrument will obviously shut out any secondary evidence of such instrument, for, allowing such evidence to be let in when the original admittedly chargeable with duty was not stamped or insufficiently stamped, would have the effect of the document being "acted upon" by the person having by law or authority to receive evidence.
Proviso (a) is applicable only when the original instrument is actually before the court of law and the deficiency in stamp with penalty is paid by the party seeking to rely upon the document.
Clearly, secondary evidence either by way of oral evidence of the contents of the unstamped document or the copy of it covered by section 63 of the Indian Evidence Act would not fulfil the requirements of the proviso which enjoins upon the authority to receive nothing in evidence except the instrument itself.
There is no scope for inclusion of a copy of a document as an instrument for the purpose of the Stamp Act.
[596 D] If Section 35 only deals with original instruments and not copies, section 36 cannot he so interpreted so as to allow secondary evidence of an instrument to have its benefit.
The words "an instrument" in Section 36 must have the same meaning as in Section 35.
The legislature only relented from the strict provisions of Section 35 in cases where the original instrument was admitted in evidence without objection at the initial stage of a suit or proceeding.
[596 H] State of Bihar vs Karam Chand Thapar & Bros. Ltd. ; Raja of Bohbili vs Inuganti China Sitaramaswami Garu, 23 Madras 49.
, Thai] i Beehi vs Tirumalappa Pillai, 30 Madras 336 at 337 and Chidambaram vs Mayyappan, A.I.R. 1946 Madras 298, referred to.
Observations in Maung Po Htoo and three vs Ma Ma Gyi and one, I.L.R. 4 Rangoon 363 and Satyavati vs Pallayya, A.I.R. 1937 Madras 431 at 432, disapproved.
Ponnuswami vs Kailasam, A.T.R. 1947 Madras 422, and Alimana Sahiba vs Subbarayudu, A.T.R. 1932 Madras 693, explained.
|
iminal Appeals Nos.
151 to 158 of 1966.
Appeals from the judgment and order dated December 30.
1964 of the Punjab High Court, Circuit Bench at Delhi in Criminal Revisions Nos.
81 D to 83 D, 107 D and 129 D to 132 D of 1964.
Bishan Narain, B. P. Maheshwari and N. K. Jain, for the appellant (in all the appeals).
C. K. Daphtary, N. N. Goswami, K. L. Mehta and section K. Mehta, the respondent (in Cr. A. No. 151/1966).
K. L. Gossain, N. N. Goswami, K. L. Mehta and section K. Mehta, the respondent (in Cr.
152 to 158 of 1966).
section K. Mehta for the intervener.
The Judgment of the Court was delivered by Dua, J.
These eight appeals with certificate (Crl.
Al) peals Nos. 151 to 158 of 1966) raise a common question of law and would, therefore, be disposed of by a common judgment.
In deed, all the appeals in the Punjab High Court were also disposed of by a learned single Judge of that Court sitting on circuit at Delhi by a common judgment and another learned single Judge of the same Court similarly certified the cases to be fit for ,appeal to this Court by a common order.
The only question canvassed at the bar requiring determina tion by us is whether the respondent is liable to be prosecuted under the Prevention of Food Adulteration Act, 37 of 1954 (hereafter called the Adulteration Act) for selling adulterated vinegar when the vinegar is being sold under a licence granted under the Fruit Products Order, 1955 (hereafter called the Fruit Order) made by the Central Government under section 3 of the Essen 609 tial Commodities Act.
The High Court has relying on an un reported Bench decision of the Punjab High Court in State vs RaJ Kumar (Crl. A. 996 f 1961 decided on October 29, 1962) held that they cannot be prosecuted.
It was argued in the High Court that the rules made under the Adulteration Act had come into force after the enforcement of the Fruit Order and vinegar being mentioned as an article of food in those rules, prosecution under both the provisions of law was permissible.
Reliance in support of this argument was also placed on section 26 of the General Clauses Act.
This argument was not accepted and it was observed that the special provisions of the Fruit Order had overriding effect and, therefore, a manufacturer of Fruit Products could only be prosecuted under the provisions of the Fruit Order.
Prayer for reference to a larger Bench for reconsideration of Raj Kumar 's case (supra) did not find favour with the learned single Judge.
In this Court the view taken in Raj Kumar 's case (supra) was sought to be supported by the learned counsel for the, respondent.
The provisions of the Fruit Order and of the Adulteration Act, it was contended, could not harmoniously co exist on the statute book, as compliance with one would, in certain contingencies, result in violation of the other some respects.
With respect to the particular charges tried in the cases in appeal, however, no attempt was made on behalf of the respondents to show that there was any fatal conflict or inconsistency between the two provisions.
The question before us accordingly lies within a very narrow compass.
The appellant urged that there is no implied repeal of the Adulteration Act by the Fruit Order in so far as the sale of vinegar is concerned, whereas the case of the respondent is that there is an implied repeal and the respondents are not liable to be prosecuted under the Adulteration Act for violating its provisions.
Shri Bishan Narain sought support for his submission from Om Prakash Gupta vs State of U.P. (1) and T. section Baliah vs T. section Rangachari (2).
In the former case section 5 (1 ) (c) of the Prevention of Corruption Act was held not to repeal section 409 I.P.C. The decision of the Punjab High Court (Khosla and Falshaw, JJ.) in State vs Gurcharan Singh(3) holding to the contrary was overruled.
In the latter case section 52 of the Income tax Act, 1922 was held not to repeal section 177, T.P.C.
It is unnecessary to refer in detail to the facts of all the eight cases separately as no such reference was made by either side at the bar.
Shri Bishan Narain for the appellant, by way of illustra (1) ; (2) ; (3) A.I.R. 1952 Punjab 89.
610 tion made a passing reference to the facts of Crl.
Appeal No. 155 of 1966.
From the record of that appeal we find that samples of (i) sugar cane juice vinegar, (ii) vine (pure) vinegar and (iii) pure jaman vinegar, were takes by a Food Inspector from the shop of the respondent on October 17, 1960 and on the 'same having been found highly adulterated and unfit for human consumption because of the presence of sulphuric acid which is prohibited, complaints under sections 7/16 of the Adulteration Act were instituted by the Municipal Prosecutor in December, 1960.
After the prosecution evidence was recorded, the respondent Shiv Shan ker applied to the trial magistrate in October, 1963 praying that the prosecution be dropped.
In this application it was admitted that the prosecution had arisen out of a raid dated October 17, 1960 at the promises of the accused "when allegedly samples of vinegar were taken which are stated to be adulterated because of the presence of sulphuric acid".
It was pleaded that the petitioning accused had secured in 1960 a licence under the Fruit Order and vinegar whether brewed or synthetic being a food product and standard specification for such vinegar being tabulated in Part XIV attached to the Second Schedule of the Fruit Order, prosecution without the, previous sanction of the Licensing Officer as required by cl. 15 of the said Order was unauthorised.
Prosecution under the Adulteration Act was on this ground pleaded to be incompetent.
In the application reliance in support of this plea was placed on the unreported Bench decision of the Punjab High Court in Raj Kumar 's case in which according to the accused it had been held that a licensee under the Fruit Order could not be prosecuted for any contravention of that Order or of the Adulteration Act without the previous sanction of the Licensing Authority appointed under the Fruit Order.
The trial magistrate basing himself on an unreported single Bench decision of the Punjab High Court and on section 26 of the General Clauses Act rejected this application.
On revision, the Additional Sessions Judge relying on the decision in Raj Kumar 's, case (supra) made a reference to the High Court recommending that the proceedings be quashed.
J. section Bedi, J., relying on Raj Kumar 's case (supra) quashed the pro ceedings.
section K. Kapur J., who certified the case to be fit for appeal after quoting a passage from Raj Kumar 's case (supra) considered the question raised to be important enough for appeal to this Court.
The general principles governing implied repeal appear to us to have long since been settled.
The difficulty is normally experienced in their application to a given case.
From the passage quoted by Kapur J., from the unreported Bench decision in Raj ' Kumar 's case (supra) upholding the implied repeal of the Adulteration Act by the Fruit Order it seems to us that the Division Bench did not correctly and fully grasp them.
We accordingly, 611 consider it proper to broadly restate the general rule.
It was laid in Paine vs Stater(1) that when two Acts are inconsistent or repugnant the later will be read as having impliedly repealed the earlier.
As the legislature must be presumed in deference to the rule of law to intend to enact consistent and harmonious body of laws, a subsequent legislation may not be too readily presumed to effectuate a repeal of existing statutory laws in the absence of express or at least clear and unambiguous indication to that effect.
This is essential in the interest of certainty and consistency in the laws which the citizens are enjoined and expected to.
The legislature, which may generally be presumed to know the existing law, is not expected to intend to create confusion by its omission to express its intent to repeal in.
clear terms.
The courts, therefore, as a rule, lean against implying a repeal unless the two provisions are so plainly repugnant to each other that they cannot stand together and it is not possible on any reasonable hypothesis to give effect to both at the same time.
The repeal must, if not express, flow from necessary implication as the only intendment.
The provisions must be wholly incompatible with each other so that the two provisions operating together would lead to absurd consequences, which intention could not reasonably be imputed to the legislature.
It is only when a consistent body of law cannot be maintained without abrogation of the previous law that the plea of implied repeal should be sustained.
To determine if a later statutory provision repeals by implication an earlier one it is accordingly necessary to closely scrutinise and consider the true meaning and effect both of the earlier and the later statute.
Until this is done it cannot be satisfactorily ascertained if any fatal inconsistency exists between them.
The meaning, scope and effect of the two statutes, as discovered on scrutiny, determines the legislative intent as to whether the earlier law shall cease or shall only be supplemented.
If the objects of the two statutory provisions are different and the language of each statute is restricted to its own objects or subject, then they are generally intended to run in parallel lines without meeting and there would be no real conflict though apparently it may appear to be so on the surface.
Statutes in pari materia although in apparent conflict should also so far ,is reasonably possible, be construed to be in harmony with each other and it is only when there is an irreconcilable conflict between the new provision and the prior statute relating to the same subject matter, that the former, being the later expression of the legislature, may be held to prevail, the prior law yielding to the extent of the conflict.
The same rule of irreconcilable repugnancy controls implied repeal of 'a general by a special statute.
The subsequent provision treating a phase of the same genera subject matter in a more minute way may be intended to imply repeal pro tanto of the (1) 612 Repugnant general provision with which it cannot reasonably co,exist.
When there is no inconsistency between the general and the special statute the latter may well be construed as supplementary.
In the light of these broad guidelines we may now examine the two statutes as they stood in 1960 because the cases with which we are concerned relate to that year.
The history and the scheme of the two statutory provisions would be helpful in discovering the legislative intent on the question of implied repeal.
Turning first to the Adulteration Act, it was enacted by the Parliament to make provision for the prevention of adulteration of food and it came into force on June 1, 1955.
Previously corresponding laws on adulteration of foodstuffs were in force in different States, having been enacted by their respective legislatures.
All those laws were repealed by section 25 of the Adulteration Act.
It may be pointed ,out that under the Government of India Act, 1935 "adulteration of foodstuffs and other goods" was a provincial subject whereas under the Constitution it is included in the Concurrent List.
Section 2(i) of this Act which defines the word "adulterated" con sists of several sub clauses.
One of these sub clauses is (1) according to which "an article of food shall be deemed to be adulterated if the quality or purity of the article falls below the prescribed standard or its constituents are present in quantities Which are in excess of the prescribed limits of variability".
Clause (v) of section 2 defines "food" to mean "any article used as food or drink for human consumption other than drugs and water and includes : (a) any article which ordinarily enters into or is used in the composition or preparation of human food, and (b) any flavouring matter or condiments.
According to cl.
(ix) an article of food shall be deemed to be "misbranded" if it falls within an) one of the sub clauses (a) to (k).
It is not necessary to reproduce all these sub clauses.
"Pack age" has ' been defined in cl.
(X) to mean "a box, bottle, casket, tin, barrel, case, receptacle, sack, bag, wrapper or other thing in which an article of food is placed or packed".
We have referred to the definitions of "misbranded" and " package" because one of the cases before us (Crl. A. 154 of 1966) is a case of alleged misbranding, the remaining seven cases being ,of alleged adulteration.
Section 5 prohibits import of, inter alia, adulterated and misbranded food and all articles of food in contravention of any provision of the Act or of any rules made thereunder.
Section 7 prohibits manufacture for sale or store and also sale and distribution of, inter alia, adulterated and misbranded food land of articles of food, in contravention of the Adulteration Act and the Rules made thereunder.
Section 8 provides for appointment of Public Analysts and section 9 for the appointment of Food Inspectors.
The powers of Food Inspectors are contained in section 10.
He possesses very wide powers for the purpose of effectively achiev 613 ing the statutory object of preventing the manufacture, sale and distribution etc., of adulterated articles of food.
The procedure for taking samples of food by the Food Inspector for analysis is prescribed in section 11 and the report of the Public Analyst is made admissible by section 13.
The proviso to sub section
(5) of section 15 makes the certificate signed by the Director of Central Food Laboratory final and conclusive proof of the facts stated therein.
The Central Food Laboratory is established by the Central Government under section 4 for the purpose of carrying on functions entrusted to it by the Adulteration Act or by the Rules made thereunder.
Section 16 provides for penalties for offences under the Adulteration Act and cl.
(a) of sub section
(1) makes it an offence for any person, whether by himself or by any person on his behalf to import into India or manufacture for sale or to store, sell or distribute any article of food in contravention of any of the provisions of the Act or of any rules made thereunder.
In the prosecution for an offence pertaining to the sale of an adulterated or misbranded article of food section 19 makes impermissible the defence that the vendor was ignorant of the nature, substance or quality of the food sold by him or that the purchaser having purchased an article for analysis was not prejudiced by the sale.
Section 20 prohibits cognizance and trial of offences under the Act except when prosecution is instituted by or with the written consent of the State Government or a local authority or a person authorized in this behalf by such Government or authority.
Under the proviso to this section a purchaser referred to in section 12, is, however, empowered to institute a prosecution if he produces in court a copy of the report of the Public Analyst along with the complaint.
Section 21 overrides section 32, Cr.
P.C. in the matter of sentence to be passed under this Act by the Presidency Magistrates or Magistrates of 1 Class, trying offences under the Act.
Section 23 confers on the Central Government wide powers to make rules under the Act after consulting the Central Committee for Food Standards appointed by the Central Government under section 3.
Section 24 empowers the State Government, (after consultation with the Central Committee for Food Standards and with previous publication) to make rules for giving effect to the provisions of the Act in matters not covered by section 23.
Various States have actually framed rules under this section.
We may now briefly refer to the Prevention of Food Adultera tion Rules, 1955 (hereafter called the Adulteration.
Rules).
These rules were made by the Central Government under section 4(2) and section 23(1) of the Adulteration Act and were published in the Official Gazette as per notification dated September 12, 1955.
The rules other than those contained in Part III Appendix B Item A.12 Margarine, Part VI and Part VII came into force on the date of 614 their publication in the Official Gazette : the rules contained in Part III, Appendix B, Item A.12 Margarine came into force on June 1, 1956 and the rules contained in Part VI and Part VII came into force on December 1, 1956 : vide r. 1(3).
Under section 23(2) (prior to its amendment in 1964) all rules made under sub section
(1) had to be laid as soon as possible before both Houses of Parliament.
By Act 49 of 1964 sub section
(2) was amended so as to provide for every rule made under sub section
(1) to be laid before each House of Parliament while in session, for a total period of 30 days in order to afford an opportunity to the two Houses to study and to modify or annul it for, future if both Houses so agree.
We have referred to this amendment as some of the rules were amended thereafter.
The effect of the subsequent amendment of some of the rules will be noticed later.
The Adul teration Rules clearly bring out the anxiety of their authors to see that wholesome food is sold to the citizens.
The duties and powers of Food Inspectors as contained, inter alia, in rr. 9 and 1 3, broadly illustrate this anxiety.
These rules also indicate that the framers of the Rules were not unaware of the different provisions of the Fruit Order.
By way of illustration reference may be made to r. 50 which prescribes conditions of licence to manufacture, sell, stock, distribute or exhibit certain articles of food.
In cl.
(1) of sub r.
(1) of this rule the fruit products covered under the Fruit Order and some other articles have been excluded from the operation of this rule.
This clause was amended twice, once in November, 1956 and again in April, 1960.
Had the Adulteration Act been intended to be impliedly repealed by the Fruit Order (which would also mean implied repeal of the rules) it would have been unnecessary to expressly exclude such fruit products from the operation of this rule.
Rule 5 and Appendix B of these Rules came into force on December 1, 1956 after the promulgation of the Fruit Order.
According to r. 5 the standard of quality of the various articles of food specified in Appendix B are as specified therein.
In Appendix B item at sl.
No. A.16 deals with "fruit products".
But the articles of fruit products dealt with in A. 16.01 to A. 16.12 clearly show that vinegar is not included in the expression "fruit products".
Vinegar is dealt with in A.20 and synthetic vinegar in A.20.01.
Both these items were added in April, 1960.
We may now turn to the Essential Commodities Act, 10 of 1955 and the Fruit Order.
The Essential Commodities Act was enacted in 1955 with the object of providing, in the interests of the general public, for the control of the production, supply and distribution of, and trade and commerce in, certain commodities.
It came into force on April 1, 1956 repealing the Essential Commodities Ordi 615 nance No. 1 of 1955 which had been promulgated with the same object and enforced on January 26,1955, the date of the expiry of the Essential Supplies (Temporary) Powers Act 26 of 1946.
The last named Act had replaced the Essential Supplies (Temporary Powers) Ordinance No. XVIII of 1946 which had come into force on October 1, 1946.
That Ordinance was promulgated with the object of continuing, during a limited period, powers to control the production, supply and distribution of, and trade and commerce in, foodstuffs and certain other commodities.
To empower the Indian Legislature to enact law on this subject matter the British Parliament had passed India (Central Government and Legislation) Act, 1946(9 and 10 Geo.
Vl, c.39).
The lndian Legislature not being in session the Ordinance was promulgated to meet the emergency and this was replaced by Act 26 of 1946.
Reference has been made by us to this past history for the purpose of indicating the different objects and purposes intended to be achieved by the two legislative measures.
Section 2 of the Essential Commodities Act which is the definition section defines in cl.
(a) "essential commodity to mean any of the classes of commodities stated in sub cls.
(i) to (xi).
Sub clause (v) refers to "foodstuffs, including edible oil seeds and oils" and cl.
(xi) confers power on the Central Government to declare by a notified order any other class of commodity to be an essential commodity for the purposes of the Act, being a commodity with respect to which Parliament has power to make laws by virtue of Entry 33 in List III in the 7th Schedule to the Constitution.
Section 3 of the Act confers on the Central Government power to control production, supply, distribution etc., of essential commodities by providing, by an order, for regulating or prohibiting the production, supply and distribution of those commodities and trade and commerce therein.
Every order made under this section has to be laid before both Houses of Parliament as soon as may be after it is made.
By virtue of section 6 Orders made under section 3 have effect notwithstanding anything inconsistent there ,with contained in any enactment other than the Essential Commodities Act.
Section 7 provides for penalties for contravention of orders made under section 3.
Under section 11 courts are prohibited from taking cognizance of offences punishable under this Act except on a report in writing of the facts constituting such an offence made by a person who is a public servant as defined in section 21, I.P.C. Section 12 of this Act vests in the Presidency Magistrates and Magistrates of 1 Class power to pass sentences of fines exceeding Rs. 1,000/ on convicted persons notwithstanding the restriction in this respect imposed on their powers by section 32, Cr.
P.C. As already noticed earlier, an ordinance called the, Essential Corn modifies Ordinance, 1 of 1955 had been promulgated on the expiry of the Essential Commodities (Temporary Powers) Act and the present Act was passed to replace that Ordinance.
6 16 It may appropriately be pointed out at this stage that it was not the respondent 's case that the Essential Commodities Act had the effect of impliedly repealing the Adulteration Act for the purposes of these cases.
The only argument urged was that the Fruit Order had that effect and its overriding effect by virtue of section 3 of the Act was strongly emphasised.
We may now turn to the Fruit Order (S.R.O. 1052 dated 3rd May, 1955 published in the Gazette of India dated 14th May, 1955) which was made by the Central Government in exercise of the powers, conferred on it by section 3 of the Essential Commodities Act.
Clause (2) of this Order, which is the definition clause, defines the expression "fruit product" in sub cl.
(d) and "vinegar, another brewed or synthetic" is included in this expression as per item (ii) of this sub clause. "Licensing Officer" as defined in sub cl.
(g) means the Agricultural Marketing Adviser to the Government of India and it includes any other Officer empowered in this behalf by him with the approval of the Central Government.
"Manufacturer" as defined in sub cl.
(h) means a licensee engaged in the business of manufacturing in fruit products for sale and includes a person purchasing such fruit products in bulk and repacking them for sale either by himself or through someone else.
Clause 4 prohibits all persons from carrying on business of manufacture except and in accordance with the terms of an effective licence granted to him under this Order in Form "B".
Clause 5 prescribes procedure for applications for the grant of a licence under cl. 4.
Clause 7 enjoins the manufacturers to manufacture fruit products in conformity with the sanitary requirements and the appropriate standard of quality and composition specified in the Second Schedule to the Order and cl. 8 lays down the requirements to be complied with by the manufacturers in regard to the packing, marketing and labelling of containers, of fruit products.
Clause 10 prohibits sale, exposure for sale, despatch or delivery to any agent or broker for the purpose of sale, any fruit products which do not conform to the standard of quality and composition specified in the Second Schedule or which are not ,packed, marked and labelled in the manner laid down in the Order: ,the proviso to this clause contains directions for fruit products imported into India.
Clause 12 contains a mandate for every manufacturer to comply with the directions and orders issued to him and failure to do so is to be deemed to be a contravention of the provisions of the Order.
According to cl. 15 no prosecution for contravention of any of the provisions of this Order is to be instituted without the previous sanction of the Licensing Officer.
The object and purpose of the Adulteration Apt is to eliminate the danger to human life and health from the sale of unwholesome articles of food.
It is covered by Entry 18, List III of the 7th Schedule to the Constitution.
The Essential Commodi 617 ties Act on the other hand has for its object the, control of the production, supply and distribution of, and trade and commerce in,.
essential commodities and is covered by Entry 33 of List III.
In spite of this difference in their main objects, control of production and distribution of essential commodities may, to an extent from a. broader point of view include control of the quality of the essential articles of food and, thus considered, it may reasonably be urged that to some extent it covers the same field as is covered by the provisions of the Adulteration Act.
The two provisions may, therefore, have within these narrow limits co terminus fields of operation.
On this premise we have to see if the two provisions can stand together having cumulative effect and in case they cannot, which provision has the overriding or controlling effect.
It is needless to point out that they can stand together if the powers are intended to be exercised for different purposes without fatal inconsistency or repugnancy.
At the bar Shri Daphtary in his usual persuasive manner argued that there is an irreconcilable conflict between the two statutory provisions and the Fruit Order being, not only of a date later than the Adulteration Act but also having, by virtue of section 3(6) of the Essential Commodities Act, overriding effect over all other laws, it must prevail over the Adulteration Act and Rules.
He pointed out that under the Fruit Order the prosecution can be instituted only with the previous sanction of the Licensing Officer whereas under the Adulteration Act even a purchaser may, without any such sanction, institute a prosecution merely by producing along with his complaint a certificate from the Public Analyst.
He also drew our attention to section 20 A of the Adulteration Act according to which, unlike the Fruit Order, the Court trying an offence under that Act is empowered to implead the manufacturer, distributor or dealer of any article of food, it is satisfied that he is also concerned with, that offence, and proceed against him as though the prosecution had been instituted against him under section 20.
We do not think this section in any way reflects the legislative intention of implied repeal of the Adulteration Act by the Fruit Order.
The two statutory provisions can operate within their respective spheres without giving rise to any absurdity or such grave inconvenience as would impel the court to sustain the plea of implied repeal.
, Incidentally it may also be pointed out that this section was added by Act 49 of 1964 which came into force on March 1, 1965 long after 1960 when the present cases were started.
Shri Daphtary developed his argument by adding that if the respondents have manufactured for sale and have sold vinegar in accordance with the terms of the licence granted to them under the Fruit Order then imposition of further restrictions under the Adulteration Act and Rules with a threat of severe penal consequences for violation of those provisions would 618 be in direct conflict with the mandate or directions under the Fruit Order.
The counsel contended that at least the freedom to manufacture and sell vinegar as permitted by the Fruit Order is curtailed or further circumscribed by the Adulteration Act and Rules and this must necessarily cut across the provisions of the Fruit Order.
He illustrated his point by submitting that under the Fruit Order use of colouring matter is more liberal than under the Adulteration Act and Rules.
In view of these conflicting provisions the Adulteration Act and Rules, according to Shri Daphtary must be held to have been impliedly repealed by the Fruit Order.
We are unable to agree with this submission.
The two statutory provisions, for the purpose of effectuating their respective objects, have imposed ,different restrictions on the respondents when they manufacture and sell vinegar whether brewed or synthetic.
We are, however, '.Informed at the bar that in the present case the disputed vinegar is synthetic.
In the interest of public health the respondents have to comply with the provisions of Adulteration Act and Rules and in the interests of equitable distribution of essential commodities including the articles of food covered by Essential Commodities Act and the Fruit Order they have to comply with the provisions of the Fruit Order.
The provisions of the Adulteration Act and of the Fruit Order to which our attention was drawn seem to be supplementary and cumulative in their operation and no provision of the Fruit Order is shown to be destructive of or fatal to any ,provision of the Adulteration Act or the Rules made thereunder So as to compel the court to hold that they cannot stand together.
If the Adulteration Act or Rules impose some restrictions on.
the manufacturer, dealer and seller of vinegar then they have to comply with them irrespective of the fact that the Fruit Order imposes lesser number of restrictions in respect of these matters.
The former do not render compliance with.
the latter impossible, nor does compliance with the former necessarily and automatically involve violation of the latter.
Indeed, our attention was not drawn to any provision of the Adulteration Act and Rules, compliance with which would result in breach of any mandate, whether affirmative or negative, of the Fruit Order.
We are, therefore, unable to find any cogent or convincing reason for holding that the Parliament intended by enacting the Essential Commodities Act or the Fruit Order to implidely repeal the provisions of the adulteration Act and the Rules in respect the statutes can function with full the provisions of the Adultera of the vinegar in dispute.
Both vigour side by side in their own parallel channels.
Even if they happen to some extent to overlap.
section 26 of the General Clauses Act fully protects the guilty parties against double jeopardy or double penalty.
This section lays down that where an Act or omission constitutes an, ' offence under two or more enactments then the offender shall be liable to be prosecuted and punished under either or any of those enactments but shall not 619 be liable to be punished twice for the same offence.
If, therefore, the provisions of the Adulteration Act and those of Fruit Order happen to constitute offences covering the same acts or omissions then it would be, open to the prosecuting authorities to punish the offender under either of them subject to the only condition that a guilty person should not be punished twice over.
There is also another aspect which has to be kept in view.
Both the Adulteration Act and the Essential Commodities Act have been amended from time to time after their enactment.
Being governed by Entries in List III of the 7th Schedule even the States have power to amend these enactments and indeed they have been so amended in some States.
The subsequent amendments of the Adulteration Act and of the Essential Commodities Act by the Parliament and the amendment of the Adulteration Rules would also tend to negative any legislative intendment of implied repeal of the Adulteration Act by the Essential Commodities Act or the Fruit Order.
It may be recalled that cl.
(1) of sub r.
(1) of r. 50 of the Adulteration Rules was amended in 1956 and again in 1960 and the amended clause is indicative of the rule making authority being conscious of both the statutory provisions being operative in their respective fields at the same time, thereby negativing implied repeal.
A.20 dealing with "vinegar" was also added in Appendix B of the Adulteration Rules in 1956 and A. 20.01 dealing with " synthetic vinegar" was added in April, 1960.
A passing reference may also be made to some of the relevant amendments in some rules made subsequent to the enforcement of the amended section 23 (2).
In r. 55 in items at sl.
19 and 20, dealing with pickles and chutnies made from fruit or vegetables and with tomato and other sauces, respectively, the preservatives mentioned in cl. 2 were amended.
Similarly in r. 51(2) the table containing articles like fruit and vegetable juices including tomato juice was amended.
Both the above amendments were made in December, 1965.
It may here be pointed out that pickles, chutnies, tomato products, kutchups, sauces and also other unspecified items relating to fruits or vegetables are included in the definition of "fruit product" under the Fruit Products Order.
These amendments, though made after 1960, do seem to further negative the intendment of implied repeal as argued on behalf of the respondent.
In view of the foregoing discussion it seems to us that the two statutory provisions can harmoniously operate without causing confusion or resulting in absurd consequences ' and the scheme of the Adulteration Act and Rules can without difficulty fit into the scheme of the Fruit Order under the Essential Commodities Act.
The challenge on the ground of implied repeal must, therefore, be rejected.
Incidentally we may note that the view taken by the learned single Judge in this case was later overruled by a Full Bench of the 918 Sup.
C.I./71 620 Delhi High Court in Municipal corporation vs Harnarain (Crl. A. No. 163 of 1967 decided in May, 1969).
Shri Daphtary, as a last resort, tried to press into service article 14 in his challenge to the prosecution of the respondent.
According to him the prosecuting authorities have an unguided licence to prosecute his clients under one or the other statute and since the penalty under the Adulteration Act is more severe than that under the Fruit Order the principle of equality before the law is violated As this point was not taken in any of the courts below we did not permit him to raise it in this Court.
It would, however, be open to the respondent, if so advised, to raise this point in accordance with law in the court below, because the cases have not yet been finally disposed of.
The competence of the prosecution having been challenged at an intermediate stage, the cases will have to go back to the trial court.
As these cases have been pending since 1962 the trial court should dispose them of with due dispatch and without any further avoidable delay.
The appeals are accordingly allowed and the cases remitted to the trial court for further proceedings according.
to law in the light of the observations made above.
R.K.P.S. Appeals allowed.
| IN-Abs | The respondent, who was selling Vinegar under a license granted under the Fruit Products Order, 1955, made by the Central Government under section 3 of the Essential Commodities Act, was prosecuted under the , for selling adulterated vinegar.
He pleaded that vinegar, whether brewed or synthetic, being a food product and standard specification for such vinegar being tabulated in attached to the Second Schedule of the Fruit Order, persecution without the previous sanction of the licensing Officer as required by clause 15 of the said order was incompetent.
The trial judge rejected the contention.
But the High Court quashed the proceedings.
It was observed that the special provisions of the Fruit Order had overriding effect and therefore a manufacturer of fruit products could only be prosecuted under the provisions of the Fruit Order.
In the appeal to this Court it was contended for the respondent that there was an irreconcilable conflict between the two statutory provisions, and the Fruit Order being, not only of a date later than the Adulteration.
Act but also having, by virtue of section 3(6) of the Essential Commodities Act overriding effect over all other laws, it must prevail over the Adulteration Act and the rules.
On the question whether the Fruit Order impliedly repeals the Adulteration Act, HELD : The plea of implied repeal must fail and the appeals must be allowed.
To determine if a later statutory provision repeals by implication an earlier one it is necessary to scrutinise and consider the true meaning and effect both of the earlier and the later statute.
If the objects of the two statutory provisions are different and the language of each statute is restricted to its own object or subject, then they are generally intended to run in parallel lines without meeting and there would be no real conflict though apparently it may appear to be so on surface.
[611 D G] The provisions of the Adulteration Act and the Fruit Order, for effectuating their respective objects, have imposed, different restrictions in the manufacture and sale of vinegar whether brewed or synthetic.
in the interest of public health the respondent has to comply with the provisions of the Adulteration Act and Rules and in the interests of equitable distribution of essential commodities including the articles of food covered by the Essential Commodities Act and the Fruit Order they have to comply with the provisions of the fruit Order.
Both the provisions are supple 608 mentary and cumulative in their operation and no provision of the Fruit Order is shown to be destructive of or fatal to any provision of the Adulteration Act or the Rules made thereunder so as to compel the court to hold that they cannot stand together.
If the Adulteration Act or Rules impose some restrictions on the manufacturer, dealer and seller of vinegar, then they have to comply with them irrespective of the fact that the Fruit ,Order imposes lesser number of restrictions in respect of these matters.
The former do not render compliance with the latter impossible, nor does compliance with the former necessarily and automatically involve violation ,of the latter.
Even if both 'statutes to some extent overlap, section 26 of the General Clauses Act fully protects the guilty parties against double jeopardy or double penalty.
[618 C H] Om Prakash Gupta V., State of U.P.; , , T. section Baliali vs T. section Rengachari, ; , State vs Gurcharan Singh, A.I.R. 1952 Punjab 89, and Paine vs Stater, ,referred to.
|
ivil Appeal No. 2588 of 1966.
Appeal from the judgment and decree dated January 14, 1964 of the Patna High Court in First Appeal No. 572 of 1958.
D. Goburdhun and R. Goburdhun, for the appellants.
A. N. Sinha and P. K. Mukherjee, for respondent No. 1.
640 The Judgment of the Court was delivered by Mitter, J.
The only question involved in this appeal is, whether the direction of the High Court that the partition suit launched in 1943 should be allowed to proceed in view of the provisions of section 6 of the Bihar Land Reforms Act, 1950 which came into force on 25th September, 1950, is correct.
The suit had a chequered career.
It was instituted against a number of persons the main relief asked for being partition of four annas Milkiat interest in Touzi No. 702, Tappa Haveli, Pargana Maheshi, District Champaran, Bihar.
The Subordinate Judge of Motihari made a preliminary decree for partition declaring the first respondent 's share in the property as claimed by him.
The High Court in appeal modified the decree reducing the plaintiff 's share to Rs. 0 1 4 interest only.
In further appeal to these Court the trial court 's preliminary decree was upheld on 5th ,October 1953.
In the meanwhile the Bihar Land Reforms Act of 1950 effecting far reaching changes in the incidents of land tenure and land holdings had been passed.
The first appellant made an application to the trial court in June 1958 prayina that the proceedings for final decree be treated as having abated in view of the vesting of all estates in land in the State of Bihar.
This was accepted by the Subordinate Judge by an order dated July 12, 1958.
The High Court allowed the appeal with the direction above mentioned which the appellants now seek to have set.
aside.
The bone of contention between the parties is the extensive "bakasht ' lands in the aforesaid Mouza.
The appellants contend that under section 6 (1) of the Act all these lands vested in the State and came to be held by the persons in "khas possession" thereof as raiyats under the State.
To appreciate the plea it is necessary to make a brief reference to some of the provisions of the Act.
As is well known the object of the Act was to cause transference to the State of the interest of proprietors and tenure holders in land as also of the mortgagees and lessees of such interests including interests in trees, forests, fisheries, jalkars, ferries, hats, bazars, mines and minerals and to provide for certain consequences following there from and connected therewith.
section 3 of the Act ,enabled the State Government to declare by notification that the estates or tenures of a proprietor or tenure holder specified therein 'would pass to and become vested in the State.
The consequences ,of such vesting are set forth in section 4.
Under cl.
(a) : "Such estate or tenure including the interests of the proprietor or tenure holder in any building or part of a building comprised in such estate or tenure and used 641 primarily as office or cutchery for the collection of rent of such estate or tenure, and his interest in trees, forests, fisheries, jalkars, sairati interest as also his interest in all sub soil including any rights in mines and minerals whether discovered or undiscovered, or whether being worked or not, inclusive of such rights of a lessee of mines and minerals, comprised in such estate or tenure (other than the interests of raiyats or under raiyats) shall, with effect from the date of vesting, vest absolutely in the State free from all encumbrances and such proprietor or tenure holder shall cease to have any interest in such estate or tenure, other than the interests expressly saved by or under the provisions of the Act.
" section 6 of the Act provides for such saving and the relevant portion thereof runs as follows "(1) On and from the date of vesting all lands used for agricultural or horticultural purposes, which were in khas possession of an intermediary on the date of such vesting, including (a) (i) proprietor 's private lands let out under a lease for a term of years or under a lease from year to year. . . (ii) landlords privileged lands let out under a registered lease for a term exceeding one year or under ,a lease, written or oral, for, a period of one year or less, referred to in section 43 of the Chota Nagpur Tenancy Act, 1908, (b) lands used for agricultural or horticultural purposes and held in the direct possession of a temporary lessee of an estate or tenure and cultivated by himself with his own stock or by his own servants or by hired labour or with hired stock, and (c) lands used for agricultural or horticultural purposes forming ' the subject matter of a subsisting mortgage on the redemption of which the intermediary is entitled to recover khas possession thereof; shall. . . be deemed to be settled by the State with such intermediary and he shall be entitled to retain possession thereof and hold them as a raiyat under the State having occupying rights in respect of such lands subject to the payment of such fair and equit able rent as may be determined by the Collector in the prescribed manner.
642 The broad proposition which was advanced before the High Court and rejected by it and reiterated before us is that the consequence of section 6, was to put an end to the character of the possession of the bakasht lands to the malik by causing them to vest in the State and simultaneously creating a tenancy in favour of the person in khas possession thereof.
There is no dispute that bakasht lands fall under categories (b) and (c).
We are not here concerned with category (c) and have quoted it to appreciate some decisions relied on where there are references to that category.
This question has engaged the attention of the Patna High Court more than once and it would appear that the views expressed in different cases have not been uniform.
So far as the said High Court is concerned the point was settled by a decision of the Full Bench in Mahanth Sukhdeo Das.
vs Kashi Prasad Tewari and Shrideo Misra vs Ramsewak Singh(1).
The main questions before the Full Bench were whether on the vesting of an estate which was mortgaged at the material time the bakash lands therein which are deemed to be settled with the ex proprietor in khas possession would form substituted security for the purpose of the mortgage, and whether a co sharer proprietor not in actual possession of such lands had Any claim thereto on the basis of his constructive possession.
The High Court answered both the above in the affirmative.
One of the earliest cases in which this Court had to interpret section 6 of the Act was that of Surajnath Ahir vs Prithinath Singh (2 ) .
There the question which engaged the attention of this Court was whether the appellants who had originally gone into possession on the strength of a mortgage lost their right to continue in possession even if they claimed to be trespassers after the redemption of their mortgage by reason of the estate vesting in the State on the passing of the Act.
Although the case is not directly in point, it bears upon the identical provisions of law which have to be applied to the facts of the case before us.
The facts in that case were that the appellants had entered into possession of kasht lands of the mortgagors on the strength of a mortgage deed.
The mortgagors thereafter executed another mortgage with respect to their milkiat (proprietary) interest in favour of certain persons.
The plaintiff respondents bought the milkiat rights together with "kasht" lands from the mortgagors and entered into possession of the milkiat property and subsequently redeemed the mortgage deeds in 1943.
The appellants however did not make over possessions of the lands in dispute even after the redemption of the mortgage.
It was held by this Court that the respondents could not take advantage of section 6 (1) (c) of the Act as no mortgage subsisted on the date of vesting and the mere fact that the proprietor had a subsisting (1) I.L.R. 37 Patna 918.
(2) [1963] 3 S.C.R. 290 643 title to possession over certain land on the date of vesting could, ' not amount to that land being treated as under his "khas possession" for the purposes of the Act.
Referring to the definition of "Khas possession" in section 2(k) of the Act as meaning "the possession of such proprietor or tenure holder by cultivating such land or carrying on horticultural operations thereon himself with his own stock or by his own servants or by hired labour or with hired stock".
it was held that in order that the respondents could take advantage of the provision of section 6 (1 ) (c) of the Act they had to, establish a subsisting mortgage on the date of vesting which was inclusive, of the land subject to their right of redemption.
On the question of possession of the lands it was observed "On the date of vesting, the appellants were not in possession as mortgagees.
The mortgages had been redeemed in 1943.
Thereafter, the possession of the appellants was not as mortgagees.
It may be as trespassers or in any other capacity.
The land in suit, therefore, did not come within cl.(c) of section 6 of the Act.
" Rejecting the construction put on the expression 'khas possession by the High Court in Brijnandan Singh vs Jamuna Prasad(1) it was said : " The mere fact that a proprietor has a subsisting title to possession over certain land on the date of vesting would not make that land under his 'khas possession '.
" The Full Bench decision of the Patna High Court, came up for consideration by this Court in Ram Ran Bijai Singh vs Behari Singh alias Bagandha Singh(2).
There the appellants before this, Court were the plaintiffs who had filed a suit for a declaration that a certain plot of land was their zeraiti land and that the persons impleaded as the defendants 1st and 2nd parties had no right or title thereto and for recovery of possession of the said land by dispossessing them therefrom.
It was argued that in view of the concurrent findings of the courts below that the lands were the zeraiti lands of the plaintiffs they would not vest in the State because of the saving in section 6 of the Act and the appellant should be deemed to have been in khas possession of the land under section 6 (1) (c).
The respondents contended that it was not a case of a mortgagee remaining in possession after payment of the debt without anything more but of tenants who claimed to remain in possession by asserting a title which was as much against the mortgagors as against the mortgagees.
Reference was made in the (1) A.I.P. 1958 Patna 580.
(2) (3) I.L.R.37Pat.
644 course of arguments to the Full Bench decision in Sukhdeo Das 's case(3) and it was submitted that a mortgagee continuing in possession of the mortgaged property after payment of the :mortgage amount must hold the same on behalf of the mortgagor and in trust for him.
Counsel further relied on certain observations in the judgment of the Full Bench in aid of his proposition and submitted on the basis thereof that even the possession of a trespasser who had not perfected his title by adverse possession for the requisite period of time under the Limitation Act should be considered as in khas possession of the true owner.
Turning down this submission it was observed by this Court (p. 378) : "We consider that this equation of the right to possession with 'khas possession ' is not justified by principle or authority.
Besides this is also inconsistent with the reasoning of the Full Bench by which constructive pos session is treated as within the concept of khas possession.
" The Court went on to add that "The possession of the contesting defendants in the present case was in their own right and adverse to the plaintiffs, even on the case with which the appellants themselves came to court." Noting the statement of the plaintiffs in their plaint that the mortgagees had fulfilled their obligations and the obstruction to possession was put forward only 'by persons who claimed occupancy rights this Court concluded that, in the circumstances of the case, it was not possible for the appellants to contend that these tenants (defendants 1st and 2nd parties) were in possession of the property on behalf of the mortgagor or by virtue of any right through the mortgagor.
The case is not therefore an authority for the proposition that a co sharer 's constructive possession is to be ignored under section 6 (1) (c) of the Act.
Counsel for the appellants also referred us to a recent decision of this Court in section P. Shah vs B. N. Singh(1) in aid of his contention that the true effect of section 6 of the Act was to create a new right ,of tenancy in favour of the person in khas possession and consequently even if the plaintiff in the partition suit had a right to ask for demarcation of his Rs. 0 4 0 share of the bakasht lands before the passing of the Land Reforms Act, he could not pursue his claim by a prayer that he be considered a tenant along with those who were in actual khas possession.
In our view the above decision is no authority for this broad proposition.
In that case the appellants who were mortgagees of an estate including bakasht lands and other lands filed a suit on (1) ; 64 5 their mortgage and tried to follow up the preliminary decree which was obtained before the Act came into force by a petition for passing a final decree.
One of the questions before this Court was whether the mortgage decree had become unexecutable in view of the provisions of the Act.
It was held that the net effect of sections 3, 4 and 6 was that although on the vesting of the, lands in the State a settlement was deemed to be effected with the person in khas possession in law, there were two different transactions and the deemed settlement was in effect a separate transaction creating new rights.
The Court came to the conclusion that the only remedy open to the decree holders wag that provided in Chapter IV of the Act i.e. a claim under section 14 before the Claims Officer for determining the amount of debt legally and justly payable to each creditor in respect of his claim.
The Court was there dealing with the rights of the mortgage creditors after the Act had come into force.
Chapter IV of the Act made special provisions for dealing with the rights of secured creditors and section 4 (1) (d) expressly provided for the abatement of all suits and proceedings for the recovery of any money through proceedings which might be pending on the date of vesting arising out of securities created by mortgage or a charge on an estate or tenure.
Here however we are not dealing with the claims of mortgagees under Chapter IV.
In this case we have to consider whether the appellants had laid a claim which a co sharer could not put forward except by pleading ouster or any other independent ground.
Even if they were in actual khas possession within the meaning of section 2 (k) of the Act it must be held that the plaintiff who was a co sharer was in constructive possession through the appellants as "under the law possession of one co sharer is possession of all the co sharers".
We see no reason to hold that the observations of this Court to the above effect in P. L. Reddy vs L. L. Reddy(1) are not applicable to the case before us.
The appellants do not claim to be trespassers on the property neither did they claim any title to the lands adversely to the plaintiff respondent.
The deeming provision of section 6 must therefore enure for the benefit of all who in the eye of law would be regarded as in actual possession.
It follows that the plaintiff had not lost his share in the bakasht lands and had a right to them though not as tenure holder or proprietor but certainly as a raiyat under the provisions of the Land Reforms Act. ' The appeal must therefore be dismissed with costs.
V.P.S. Appeal dismissed.
(1) ; , 202.
| IN-Abs | In a suit for partition of bakash land a preliminary decree was passed.
The defendants appellants, claiming to be in actual possession of the bakasht land, filed a petition contending that the consequence of section 6.
of the Bihar Land Reforms Act, 1950 (which came into force in the meanwhile) was to put an end to the proprietor 's possession of the bakasht land by causing them to vest in the State and simultaneously creating a tenancy in favour of the person in khas possession thereof, and therefore, no final decree could be passed.
The trial court accepted the contention and dismissed the plaintiff 's application for passing final decree.
In appeal, the High Court set aside the order.
In appeal to this Court, HELD : Even if the appellants were in actual khas possession within the meaning of section 2(k) of the Act, it must be held that the plaintiff respondent, who was a co sharer, was in constructive possession through the appellants, as, under the law, possession of one co sharer is possession of all co shares.
The appellants did not claim to be trespassers on the property neither did they claim any title to the lands adversely to the respondent.
The deeming provision of section 6 must, therefore, enure for the benefit of all, who in the eye of land) would be regarded as in actual possession.
Therefore, the respondent had not lost his share in the bakasht lands and had a right to his share in them, though not as tenure holder or proprietor, but as a raiyat under the provisions of the Act.
[645 E G] P. L. Reddy vs L. L. Reddy, ; , 202, followed.
Surajnath Ahir vs Prithitnath Singh, , Ram Ran Baijal Singh vs Behari Singh alias Bagandha Singh, , section P. Shah vs, B. N. Singh; , and Mahant Sukhdeo Das vs Kashi Prasad, Tewari referred to.
|
minal Appeal Nos.
139 to 141 of 1968.
Appeals by special leave from the judgments and orders dated January 31, 1968 of the Punjab and Haryana High Court in Criminal Appeals Nos. 653, 655 and 654 of 1967 respectively.
R. L. Kohli, for the appellants (in all the appeals).
Harbans Singh, for the resondent (in all the appeals).
The Judgment of the Court was delivered by Grover, J.
Hazara Singh, his brothers Bachan Singh and Jamail Singh and three others Bhajan Singh, Baj Singh and Balwant Singh were tried under section 148 of the Indian Penal Code for being members of an unlawful assembly and in prosecution of the common object of that assembly which was to attempt to murder the police party, while these persons were armed with deadly weapons Eke pistol and rifle, having committed the offence on the midnight intervening 21st and 22nd July 1964.
Hazara Singh and Bhajan Singh were also charged under section 307, Indian Penal Code, while the other four were charged under section 307 read with section 149 of the Code for Hazara Singh and Bhajan Singh having fired pistol shots at the police party with such intention and under such circumstances that if they had there by caused the death of any member of the police party they would have been guilty of murder.
Hazara Singh and Bhajan Singh were further tried on a charge under section 25 of the Indian Arms Act.
The learned Sessions Judge found that all the six persons were proceeding towards Pakistan in order to smuggle six bags containing 40 Kg.
cardamom each.
Hazara Singh and Bhajan Singh were armed with a rifle and a pistol respectively and when challenged by the police party they fired shots from their weapons at the police party in their attempt to murder them in pursuance of the common object of them all and as such they were guilty of an offence under section 148 of the Indian Penal Code.
They were con 676 victed and sentenced to one year 's rigorous imprisonment on that count.
Hazara Singh and Bhajan Singh were found guilty of the offence under section 307 of the Indian Penal Code while their co accused were found guilty of the offence under sections 307 and 149, Indian Penal Code, and each one of them was sentenced to rigorous imprisonment for a period of five years and payment of a fine of Rs. 5001.
The sentences were to run concurrently.
Bhajan Singh and Hazara Singh were further found guilty of the illegal possession of firearms under section 25 of the Arms Act and were sentenced to rigorous imprisonment for one year each.
On appeals to the High Court the conviction of the aforesaid persons was upheld but the sentences of Bachan Singh, Jarnail Singh, Baj Singh and Balwant Singh were reduced to three years ' rigorous imprisonment.
All the convicted persons have filed appeals to this Court (Cr.
139 141/68) by special leave.
These shall stand disposed of by this judgment.
The prosecution story was that Inderjit Singh P.W. I who was posted as Deputy Superintendent of Police P.A.P. Border, Khem Karan, had received information on 31st July 1964 that a party of smugglers would be smuggling some goods to Pakistan during the night.
He organised a raiding party consisting of Sub Inspector Ajit Singh P.W. 1,5, Agya Ram P.W. 12, A.S.1s.
Darshan Singh, Nand Singh and Mulakh Raj, Head Constables Surjit Singh P.W. 3, and Ajai Singh P.W. 13.
The entire raiding party was divided into four groups.
Each group was headed by one of the officers including Inderjit Singh D.S.P.
At about midnight the police party noticed some persons coining from the side of village Lakhna by the katcha path with some mares.
The path led to Pakistan.
It was a moonlit night but was cloudy at that time.
It is unnecessary to go into the details which will be presently noticed of how the firing of the shots took place by the accused persons and how they were identified and arrested.
Four of them were taken into custody at the spot but Hazara Singh and Bhajan Singh escaped on their mares ' They were arrested later and on their disclosure a rifle and 'a revolver were recovered.
No one was injured and although some empty cartridges were found but no attempt was made to find the bullets which are alleged to have been fired by the party of the appellants.
The evidence of the police officers was consistent and we may only refer to the deposition of Inderjit Singh D.S.P. who appeared as P.W. 1 According to him when the culprits were at a distance of 25 to 30 karams (One karam is equal to 5 67 7 feet) he alerted members of the police party to be on their guard and directed Sub Inspector Ajit Singh to challenge the culprits and inform them that the police party was holding its positions and they should stop proceeding further.
Ajit Singh accordingly challenged the culprits.
Thereupon the, leader of the party fired a shot at the police party.
Inderjit Singh then ordered Sub Inspector Agya Ram to fire a light pistol so that there might be light and it might be possible to identify the culprits.
Agya Ram fired a shot and in the light that emerged the leader of the party was identified as Hazara Singh appellant who was riding a mare and who had a rifle in his hand.
He was followed by Bhajan Singh or Harbhajan Singh who also was riding a mare and had a loaded, bag and was armed with pistol.
He was followed by the other four on foot.
These persons then shouted to their companions Hazara Singh and Bhajan Singh that they should open fire on the police party.
Thereupon Hazara Singh and ' Bhajan Singh started firing shots from their respective weapons.
Sub Inspector Ajit Singh ordered the police party to open fire in defence.
Four Head Constables fired two shots each from their rifles at the culprits.
At this stage Agya Ram fired another light pistol shot.
Hazara Singh and Bhajan Singh ran away on their mares throwing away the bags.
The other four persons were found lying down on the ground.
There can be no manner of doubt that if Hazara Singh and Bhajan Singh fired shots at the police party and even though no one was injured the appellants would be guilty of the offences with which they were charged.
The real question is whether it had been proved beyond doubt that the shots were fired at the police party.
There could be two possibilities in such a situation, one could be of the shots being fined in the direction of the police party or taking aim at them and the other could be of the shots being fired in the air or in some other direction and not in the direction of the police party merely to create confusion for the purpose of running away.
On the evidence of Inderjit Singh P.W. 1 himself it was a moonlit night but owing to the weather being cloudy it was dark and light pistol shots bad to be fired by Sub Inspector Agya Ram on two occasions in order to provide sufficient light for seeing and identifying them.
The light provided by these pistol shots admittedly lasted only for 2 or 2 1/2 seconds.
If the shots which are alleged to have been fired by Hazara Singh and Bhajan Singh had been fired,at the time when there was light as a result of the firing of the light pistol shots by Sub Inspector Agya Ram then it could be said to have been established that the Deputy Superintendent of Police and the other witnesses could have seen in which direction the fire arms were fired by Hazara Singh and 678 Bhajan Singh and their statement could have been accepted that ,the shots had been fired at them.
But from the evidence of Inderjit Singh as also of Sub Inspector Agya Ram who actually fired the light pistol shots which provided the light on two occasions it is quite clear that the shots which were fired by Hazara Singh and Bhajan Singh were not fired during the few seconds there was light as a result of the light pistol shots of Agya Ram.
In other words the shots which are stated to have been fired by the aforesaid two appellants were fired in complete darkness when it was not possible for any member of the police party to see the direction in which they were fired or the aim which was taken by Hazara Singh and Bhajan Singh.
It is not possible to say from this evidence that Hazara Singh and Bhajan Singh fired the shoots in the direction of the police party or at them, and the possibility that the shots were fired in the air cannot be excluded.
Thus the conviction under section 307 of Hazara Singh and Bhajan Singh and of the other appellants under section 307 read with section 149, Indian Penal Code cannot be maintained and they must ' be acquitted of that charge.
It is unfortunate that the judgment of the High Court ' is very sketchy and there is hardly any discussion or examination of all the above material facts.
As regards, the conviction of the appellants under section 148 of the Indian Penal Code we find it difficult to uphold the same.
According to that section whoever is guilty of rioting being armed with deadly weapons or with anything which used as a weapon of offence, is likely to cause death, shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.
Rioting is defined by section 146 which provides that whenever force or violence is used by an unlawful assembly or any member thereof in prosecution of the common object of such assembly every member of such assembly is guilty of the offence of rioting.
Section 349 gives the meaning of the word "force".
The learned counsel for the State has not been able to show how any force or violence is proved to have been used by the appellants in prosecution of the common object of the unlawful assembly of which they were members.
With the exception of the firing of the shots in a direction which cannot be determined no attempt was made by any of the appellants to use any force or violence on any member of the police party.
Consequently the conviction of the appellants under section 148 must also be set aside.
As regards the conviction of Hazara Singh and Bhajan Singh under section 25 of the Indian Arms Act it is most unfortunate that the witnesses who were produced with regard to the disclosure statements made by them and the recoveries effected at their 6 7 9 instance are of such a type that their evidence could never have been believed by any court.
Lal Singh P.W. and Karnail Singh P.W. admitted that they had been joining in the police raids and had been appearing as witnesses for the police for the last 15 years.
Apart from that the statements made by them were so similar particularly with regard 'to the manner in which they happened to join the investigation that their whole evidence looks tutored and unconvincing.
P.W.11 Hakam Singh admitted that Pooran Singh was the son of his cousin Geja Singh and that he had been convicted in a case of murder and sentenced to life imprisonment.
Charan Singh, uncle of the two appellants had appeared as a witness against Pooran Singh in that case.
He was obviously an inimical witness.
It is again surprising that the High Court in its very sketchy judgment had made no mention of these salient facts and has contended itself by saying that there was nothing on the record to indicate that the appel lants had been falsely implicated.
The conviction of Hazara Singh and Bhajan Singh, therefore, cannot be maintained under section 25 of the Arms Act.
In the, result the appeals are allowed and the convictions and sentences of all the appellants are here by set aside.
The bail bonds of the appellants who were ordered to be released on bail by this Court on July 15, 1968 shall stand discharged.
| IN-Abs | The six appellants were challenged by a police party when they were proceeding towards Pakistan territory with contraband goods.
Two of them, H and B, had fire arms with which they fired shots.
No member of the police party was injured.
There was darkness except for a temporary illumination created by the firing of two shots from a light pistol.
The police claimed to have recognised H and B, in this light even though they fled away from the scene.
The remaining four persons were arrested ,on the spot.
H and B, were arrested later and on their pointing out, two unlicensed arms were recovered.
The Sessions Judge held H and B, to be guilty under section 307 of the Indian Penal Code as well as section 25 of the Arms Act.
The remaining four appellants were convicted under section 307 read with section 149 I.P.C.
All the appellants were convicted under section 148.
The High Court maintained the convictions of the appellants though in the ,case of those without fire arms it reduced the sentences.
, With special leave the appellants filed appeals in this Court, HELD : (1) From the evidence it was quite clear that the shots which were fired by H and B, were not fired during the few seconds there was light as a result of the light pistol shots.
In other words the shots were fired in complete darkness when it was not possible for any member of police party to see the direction in which they were fired or the aim which was taken by H and B. It was not possible to say from this evidence that H and B fired the shots in the direction of the police party or at them and the possibility that the shots were fired in the air could not be excluded.
Thus the conviction under section '307 of H and B and of the other appellants under section 307 read with section 149 could not be maintained.[678 B D] (2)Rioting is defined by section 146 which provides that whenever force or violence is used by an unlawful assembly or any member thereof in prosecution of the common object of such assembly every member of such assembly is guilty of the offence of rioting.
Section 349 gives the meaning ,of the word 'force '.
In the present incident no force or violence was proved to have been used by the appellants in prosecution of the common ,object of the unlawful assembly of which they were members.
With the exception of the firing of the shots in a direction which could not be deter mined, no attempt was made by any of the appellants to use any force or 675 violence on any member of the police party.
Accordingly, the conviction of the appellants under section 148 must also be set aside.
[678 F G] (3)The discloure statements made by H and B in respect of fire arms recovered at their instance could not be acted upon because the two witnesses produced in this connection gave statement which by their similarity appeared to be tutored and unconvincing.
These witnesses were associated with the police raids over a long period.
The other witness was proved to be inimical to H and B.
The High Court erred in ignoring these facts.
The conviction of H and B under section 25 of the Arms Act could not be sustained.
[679 B D]
|
Appeal No. 2394 of 1966.
Appeal by special leave from the judgment and decree dated June 26, 1964 of the Calcutta High Court in Appeal from Appellate Decree No. 1011 of 1962.
section V. Gupte and D. N. Mukherjee, for the appellants. 667 Bishan Narain and P. K. Ghosh, for respondents Nos. 1, 2(c), 2 (d), 2 (f ) and 2 (g).
The Judgment of the Court was delivered by Mitter, J.
The main question in this appeal is, whether the defendants appellants perfected their title to the property in respect of which partition was claimed by the plaintiffs by adverse, possession for the prescriptive period of twelve years or more.
The relevant facts are as follows.
The parties are all descendants of one Durgadas Mukherjee who died many years back, leaving six sons and inter alia the property which is the subject matter of this litigation, recorded as Dag No. 444 Khatian No. 72 in Mauja Barasat, District 24 Parganas during the last Cadastral survey.
Of the two plaintiffs the first Saradindu is a great grandson of the said Durgadas Mukherjee of the branch of the youngest son, his co plaintiff being a grandson in another branch.
The defendants belong to other branches of the said family.
The first plaintiff based his title on several conveyances from other members of the family as also purchase at an execution sale of a fractional interest of the members of the branch of Bama Charan, the second son of Durgadas.
The second plaintiff claims by inheritance.
The property consists of 34 acres together with two structures thereon which are quite separate from each other.
One portion of the structures i.e. that to the east, popularly known as Bamacharan Babu 's ' Bati is a fairly commodious building with a separate municipal number.
The other structure in the western portion known as Baitakhana Bati was and is admittedly the joint property of the descendants of Durgadas with a municipal number of its own.
The plaintiffs claim that the land and the two buildings are joint property while the whom are appellants before this the said eastern building with the case of the appellants was that the contesting defendants, some of Court, claim exclusive title to land on which it stands.
The eastern structure was constructed, by Bama Charan with his own money and that.
the co sharers of Bama Charan, by ekramamas, gave up their interest in the land on which the same stood.
The High Court agreeing with the finding of the first appellate court found that there was no, evidence on record to show that Bama Charan had put up the said building with his own money or that he was the exclusive owner of the said two storeyed building or that the other co sharers gave up their ownership of the subjacent soil and rejected the exclusive title sought to be set up with regard thereto.
This is a conclusion of fact which does not require further scrutiny.
The High Court also agreed with the lower appellate court in rejecting the story of permissive possession of the defendants over the said building set up by the plaintiffs and came to the conclu 13 918 Sup.
C.I./71 668 sion that "at all material times the heirs in the line of Bama Charan including the appellants were in separate possession of the eastern two storeyed building.
" The point for consideration before the High Court was and before us is, whether by such exclusive possession the heirs in the line of Bama Charan including the appellants acquired title by adverse possession to the eastern portion i.e. Bama charan Babu 's Bati.
With regard to the Baitakhana Bati there is no dispute about its jointness.
No question can be raised about the 'first plaintiff 's having become a co sharer with the heirs in the line of Bama Charan.in the year 1941 by private treaties and the auction purchase of the shares of three of his sons in execution of an award under a Co operative Societies Act.
By the kobalas the first plaintiff acquired fractional interest in the shares of some of the descendants of Bama Charan as also of the descend ants of his brother Shyama Charan.
In the sale certificate following the ;auction purchase there is a reference to "Dalan 3 Privy 2" but there is no express reference to these in the koabalas (exhibit 6 series).
In the courts below the defendants appellants contended that the eastern two storeyed building was neither intended to be nor was conveyed under Ex.6 series kobalas and exhibit 9 a), the sale certificate.
Both the trial court and the first a ale court :held that the kobalas and sale certificate were sufficiently comprehensive so as to include all or any structures which stood on the aforesaid plot of land at the material time and that there was, nothing express or implied in the kobalas to show that the two storeyed building on the eastern side was intended to be excluded from their operation.
The High Court also found that so far as the sale certificate was concerned the first plaintiff had acquired the interest of three sons of Baba Charan.
The point as to adverse possession canvassed by the appel lants arises in the following manner.
Their contention is that although the sale certificate was obtained in 1941 inasmuch as the suit for partition was filed in 1955 the requisite period of 12 years under article 144 of the Limitation Act of 1908 had elapsed in the meanwhile resulting in the perfection of their title by exclusive separate possession of the property.
To this the plaintiffs ' rejoinder was that the two storeyed building in the eastern wing had indisputably been in the occupation of the military authorities by requisition under the Defence of India Act and the Rules, 1939 for four years from 1942 to 1946.
It was argued that there was thus a break in the claim to the prescriptive title set up and adverse possession, if any, was limited to the period between 1946 and 1955.
This was sought to be repelled by the plea that the military authorities had taken possession of the property from the defendants and had restored possession W them in 1946 and 669 that their possession was really under or on behalf of the defendants without causing a break in the continuity of their possession.
An attempt was made to substantiate this by reference to several documents which form part of the record.
The order of requisition dated May 28, 1942 made under rule 75 A of the Defence of India Rules issued by the Collector of the District of 24 Parganas ' shows that the building together with fixtures, fittings etc.
was to be placed at the disposal and under the control of Brigadier Commander 36 Indian Infantry Brigade, Barrackpore on and from 8 2 1942 until six months after the termination of the war unless relinquished earlier.
A copy of the notice was served on Prakash Chandra Mukherjee of Barasat described as "the owner/occupier" of the said property. ' The notice of an award under section 19 of the Defence of India Act 1939 addressed to Prokash Chandra Mukherjee, another descendant of Bama Charan shows that compensation had been adjudged and awarded in respect of the property at Rs. 125.
A third notice dated June 24, 1946 sent out from the office of the Land Acquisition Collector addressed to Pankaj Kumar Mukherjee and others shows that possession of Cadastral survey plot No. 444 Mouza Barasat requisitioned under rule 75 A would be restored to, the addressee on July 2, 1946.
exhibit D, a memo forwarding a cheque for Rs. 2,100 was addressed to Prokash Chandra Mukherjee.
and others by way of rent for terminal compensation in respect of the premises which had been requisitioned.
In our view possession by Government or the military autho rities of immovable property under rule 75 A of the Defence of India Rules 1939 cannot be said to be in the character of an agent or by virtue of any implied permission from the true owner or occupier.
section 2 of the Act of 1939 under which rules were made and in particular cl.
(xxiv) of sub section
(2) of that section empowered the authorities mentioned to make orders providing for the requisitioning of any property, movable or immovable, including the taking possession thereof 'and the issue of any orders in respect thereof.
section 19 (1) of the Act only enjoined upon the Government to pay compensation in every case of such requisition and under section 19 B(1) Government was under an obligation, whenever any property requisitioned under any rule was to be released therefrom, to make such enquiry, if any, as was considered necessary and specify by order in writing the person to whom possession was to be given.
Sub section
(2) of this section clearly shows that delivery of possession of the property to the person specified in an order under sub section
(1) was to operate as full discharge to the Government from all liabilities in respect of the property, but was not to prejudice any rights in respect thereof which any other person might be entitled by due process of law to enforce against the person to whom possession of the pro 670 perty was given.
Rule 75 A enabled the Central Government of the Provincial Government to requisition any property, movable.
or immovable, subject to certain exceptions mentioned therein.
The net result of the Act and the Rules and the effect of orders of requisition and relinquishment of possession and or payment ' of Compensation must be taken to be that possession was taken by virtue of the powers under the Act and the rules irrespective of any consideration as to the rights of the true, owner or the occupier who could only make a claim to compensation.
It is further clear that even if possession was taken from A but was made over to B after relinquishment, A could have no cause of action against Government if relinquishment was in terms of cl.
(2) of section 19 B(1).
In other words possession of Government was neither by permission nor in the character of, an agent.
If possession under the requisition had been taken from a trespasser but had been restored to the lawful owner after the end of the period of requisition, the trespasser could not contend that he was wrongfully deprived of possession or that the, period of Government 's occupation should be added to the period of his preceding trespass to enable him to claim a prescriptive right by adverse possession.
The High Court relied on the decision of the Judicial Com mittee of the Privy Council in Karan Singh vs Bakar Ali Khan(1) in coming to the conclusion that such requisition put an end to the claim for adverse possession, if any, which might have started from an anterior date.
The Judicial Committee held that possession of the defendants since 1863 when the Collector had relinquished possession was not, 12 years ' possession but it was contended on behalf of the defendant that he was justified in tacking to his possession the possession of the Collector from 1861.
The Board found that pending a dispute between the parties the Collector, in order to secure the Government revenue had attached and taken possession of the property and retained possession of it from 1861 until October 1863 when in consequence of the decree of the civil court he delivered possession to the defendant and paid over to him the surplus profits of the estate after deducting the Government revenue and expenses.
As the suit was brought in the year 1874 the period of 12 years had to commence some time in 1862.
The Board observed that it must be assumed that "the Collector properly took possession for the purpose of protecting the Government revenue.
It was the duty of the Collector whi1st in possession under the attachment, to collect the rents from the ryots, and having paid the Government revenue and the expenses of collection to pay over the surplus to the real owner.
If the defendant was the real owner the surplus belonged (1) 9 I.A. 99. 671 to him; but if, on the other hand, the infants were the right owners, then the surplus belonged to them.
The Collector, by paying over the money to Karan Singh, did not give Karan Singh a title.
" Accordingly it was held that the suit was not barred by limitation.
Mr. Gupte on behalf of the appellants relied on Halsbury 's Laws of England (Third Edition, Vol.
24) article 484 at P.253 in support of his contention that the exclusive possession of s client was not disturbed by the requisition.
The article relied on reads "The mere fact that land is taken under the Lands Clauses Consolidation Act, 1845, for the purposes of a public undertaking, and is not superfluous land, does not prevent a person, who has exclusive possession of such land for the statutory period, from acquiring title under the statute;" The decision relied on by Mr. Gupte is that of Bobett vs The South Eastern Railway Co. (1).
In our view neither the above passage nor this judgment helps the appellants in any way.
One of the points raised in Bobett 's case was, whether the plaintiff in an action of trespass and to recover possession of land could be allowed to set up a plea that inasmuch as he had been let into possession by the defendants or that he had been in possession to the exclusion of the defendants without any tenancy at all during the time required by the Statute of Limitation for the acquisition of a prescriptive title, he was absolutely entitled to the land when ousted by the defendants.
It was argued on behalf of the defendants that even if the plaintiff was a tenant at will for the requisite period and in exclusive possession of the land the Statute of Limitation did not apply to the case, for the land in question was inalienable by the company under section 127 of the Lands Clauses Act and therefore could, by the mere aches of its officers have vested in the plaintiff contrary to the intention of the Legislature which only allowed the company to take possession of the land for the purposes of the undertaking and subject to the provisions of its Acts and not give it up to others.
There on a consideration of section 7 of 3 and 4 wm. 4, c. 27 and other statutory provisions Denman, J. arrived at the conclusion: ". .that the mere fact that the property in question was land taken for the purposes of the undertaking and not superfluous land, would not prevent the plaintiff if he had exclusive possession since 1863, either as a (1) 672 wrongdoer or as tenant at will in the first instance from being entitled to the land by virtue of the Statute of Limitations.
" Put simply the dictum only meant that the Statute of Limitation would be applicable to possession of a trespasser notwithstanding the provisions of the Lands Clauses Act, 1845.
The question before us is altogether of a different character.
If the defendants appellants could have established that an order under r. 75 A of the Defence of India Rules merely enabled the military authorities to take possession of the land for the period of their need by their permission or in the character of agents, they would have probably been on firm ground.
But, as already observed by us, the nature of the order of requisition under r. 75 A is altogether different and such possession cannot enure for the benefit of the person who was in possession before for the purpose of acquisition of a prescriptive, title.
The only other decision to which our attention was drawn is that of Dagdu vs Kalu(1).
In this case it was found that the plaintiff had been admittedly out of possession of the lands since 1881 and the defendant had been in adverse possession of them from that time until the date of suit October 2, 1895, with the exception of a period of three years during which period he had been dispossessed by one Barsu who wrongly alleged that he was a donee of the plaintiffs.
On that allegation the donee obtained possession of the land under the decree of the court of first instance but it was reversed by the High Court and the land was as a reversal restored by the court to the defendant on 9th April 1895.
It was observed by the High Court that (p. 736) : "The erroneous action of the Court of first instance cannot, we think, prejudice the defendant, or put him in a worse position that he would have occupied, had the erroneous decree not been made.
" This decision too, in our opinion, does not help the appellants.
The possession of the defendants was disturbed by a wrong order of the court which was ultimately put right and the court no doubt acted on the maxim that a litigant is not to be prejudiced by any wrong order of the court.
A faint attempt was made to re agitate the question that the auction sale of 1941 did not include the eastern portion.
This in our opinion is concluded by the finding of the High Court already noted.
(1) 22 Bombay 733.
673 The last, point put forward was that the plaintiffs had not asked for possession in their plaint.
This can be rejected summarily.
The prayers in the plaint not only include one, for preliminary decree for partition but for the appointment of a commissioner for effecting partition of the property by separating the shares of the plaintiffs from those of the defendants in the suit property.
Clearly the plaintiffs were asking for demarcation of ' the portion of the property which should be theirs as a result of the partition.
Imbedded in this prayer is a claim for possession.
In the result the appeal fails and is dismissed with costs.
V.P.S. Appeal dismissed.
| IN-Abs | The plaintiff became a co sharer with the defendant in the suit property in the year 1941 as a result of some conveyances by members of the defendants ' family.
The property was in the occupation of military authorities by requisition under the Defence of India Act, 1939, and the Rules made thereunder, for four years from 1942 to 1946.
The defendants were in exclusive possession thereafter from 1946 to 1955 when the plaintiff filed a suit for partition and possession of his share.
On the question whether the suit was barred by limitation under article 144 of Limitation Act, 1908, on the plea that as the military authorities had taken possession of the property from the defendants and had restored the possession to them in 1946 the possession of the said authorities was really under or on behalf of the defendants without causing any break in the continuity of their possession, HELD : The possession of the Government was neither by permission of the defendants nor in the character of an agent of the defendants.
The orders of requisition, relinquishment of possession and payment, of compensation under the Defence of India Act read with Act and the Rules how that the possession was taken by Virtue of the powers under the Act and the Rules irrespective of any consideration as to the rights of the true owner or the occupier who could make a claim to compensation.
Therefore, possession of Government by requisition under rule 75 A can not enure for the benefit of the person who was in possession before, for the purpose of enabling such person to acquire a prescriptive title.
[669 E F; 670 B D] Karan Singh vs Bakar Ali Khan, 9 I.A. 99, applied.
Bobett vs South Eastern Railway Co. and Dagdu vs Kalu, 22 Bombay 733, explained.
|
Appeal No. 1125 of 1970.
Appeal under section 116 A of the, Representation of the People Act, 1951 from the Judgment and order dated March 1970 of the Assam and Nagaland High Court in Election Petition No. 2 of 1969.
section V. Gupte, section K. Ghose, Advocate General, Nagaland, Naunit Lal, A. R. Barthakar, R. C. Chowdhury and B. K. Dass, for the appellant.
660 D.P. Singh, A. K. Gupta, V. J. Francis and section P. Singh, for A the respondent.
The Judgment of the Court was delivered by Ray, J.
This is an appeal from the judgment dated 26 March 1970 of the Assam and Nagaland High Court declaring the election of the appellant void under section 1 00 ( 1 ) (b) of the Representation of the People Act (hereinafter referred to as the Act) and further declaring the appellant to have committed a corrupt practice within the meaning of section 123(6) of the Act for incurring or authorising expenditure in contravention of section 77 of the Act.
The gist of the finding of the High Court is that the appellant showed in his return a sum of Rs. 900/ as election expenses after claiming a refund of Rs. 100/ but the appellant is found to have ' incurred or authorised expenditure of a further amount of Rs. 154.15 which the appellant did not include in his return and thereby the appellant exceeded the permissible limit of Rs. 1000/by Rs. 54.15.
The finding of the High Court is, that the appellant incurred or authorised the expenditure of Rs. 90/ for what is described as pink identity cards and secondly incurred or authorised the expenditure of Rs. 22.65 in respect of purchase of forms and election handbooks and,thirdly incurred or authorised the expenditure of Rs. 42.50 on 18 trunk calls between 15 January, 1969 and 11 February, 1969 aggregating Rs. 154.15 which sum was not included in the return of election expenses.
The appellant was at the time of the election Chief Minister of the State of Nagaland.
The appellant and the respondent were two candidates at the General Election in the year 1969 to the Nagaland Legislative Assembly from No. 6 Western Angami Constituency.
The polling took place on 6, 8 and 10 February, 1969 and counting of votes took place on 12 February, 1969.
The appellant polled 1933 votes.
The respondent polled 935 votes.
On 12 February, 1969 the result of the election was declared and the appellant having secured the majority of valid votes was declared to be elected.
The respondent in the election petition alleged that the appellant included in his return as election expenses the sum of Rs. 75/paid by him to Kohima Printing Press on 17 January, 1969 for printing blue identity cards but the appellant did not include in the said return a sum of Rs. 90/ by him to Kohima Printing Press on 29 January, 1969 for printing a set of pink identity cards issued by him.
The appellant in his written.
statement denied that lie spent IZs.
90/ for the purpose of printing identity cards that were 661 used by him in any way in his election.
The appellant stated that he spent Rs. 75/ only for printing the identity cards which were used in the election and the same has been properly accounted for in his statement for his election expenses.
Under section 123(6) of the Representation of the People Act the incurring or authorising of expenditure in contravention of section 77 is a corrupt practice for the purpose of the Act.
Section 77 deals with account of election expenses and maximum thereof.
The first sub section states that every candidate at an election shall, either by himself or by his election agent, keep a separate and correct account of all expenditure in connection with the election incurred or authorised by him or by his election agent between the date of publication of the notification calling the election and ,the date of declaration of the result thereof both dates inclusive.
The second sub section states that the account shall contain such particulars ' as may ' be prescribed.
The third subjection states that the total amount shall not exceed such amount as may be prescribed.
The prescribed maximum for election expenses is the sum of Rs. 1,000 as will be found in Rule 90(2) of the Conduct of Election Rules.
That is the sum prescribed for the State of Nagaland for State Assembly Election.
For other States different amounts are prescribed as the maximum of election expenses for the State Assemblies.
The relevant issue with regard to the alleged expenditure of Rs. 90 raises the question as to whether the appellant incurred or authorised the expenditure of the, said amount.
On behalf of the appellant the owner of the printing press Vipikejeye gave evidence.
He said that the appellant placed an order (exhibit 10) for 5000 identity cards for election and he also said that Exhibit 1 1 the blue identity cards were printed in his press.
The owner of the press further said that the appellant did not personally come to place the order but his party men came and placed the order ' The blue identity card was not found suitable and the owner of the printing press printed the pink identity card.
The owner was paid Rs. 75 for printing 5000 blue identity cards.
As for the pinkcards the evidence of the owner of the printing press was that the order for the pink cards was placed on 29 January, 1969 "by the young man" of the appellant.
The owner of the press supplied the pink cards numbering 6000 and be received the sum of Rs. 90 on 1 February, 1969 and one Pralie Peseyie paid that sum and took away the pink identity cards.
Pralie Peseyie was said to be a man of the appellant.
There was no written order for the printing job.
The owner of the press specifically said that he did not receive Rs. 90 from the appellant, 662 The appellant in his oral evidence said that the blue identity card was ordered by him to be printed and he entrusted one of his worker to do it.
On his return the appellant found that there was something wrong in the blue identity cards which contained the words 'Vote for T. N. Angami '.
The appellant said that he became annoyed and asked.
the, person entrusted with the printing of the identity cards to, go immediately to the printing press and get the cards "reprinted correctly".
After that "the man" brought the pink identity card but he did not tell anything about the payment of such printing work and that is how the appellant did not account for them.
The appellant accounted for Rs. 75 as the cost of printing identity cards.
In cross examination the appellant was asked whether he asked Pralie Peseyie to pay the cost of the blue identity card because of the appellant 's annoyance.
His answer was that he did not say anything specifically but Pralie Peseyie did something wrong and the latter felt shy and did not ask any money from the appellant.
The appellant 's evidence was that the press submitted the bill for the printing of the blue identity card and the payment was made by, the appellant but he did not personally go and pay.
In cross examination the appellant was specifically asked whether the pink identity cards were produced before him with the bill.
The appellant, answered in the negative.
The appellant was then asked whether before filing the return the appellant had asked from the press as to what the cost of the printing of the pink identity cards was.
The, appellant 's answer was "I bad not paid personally and the bill was not produced before me I did not enquire".
The appellant was again asked whether the amount for printing pink identity cards was paid.
, His answer was that the amount was paid by Pralie Peseyie.
Pralie Peseyie gave evidence on behalf of the appellant and said that the appellant was "much annoyed" because Pralie Peseyie without the appellant 's knowledge put the words "Please vote for T. N. Angami" on the blue identity cards and the appellant asked Pralie Peseyie to get the identity cards reprinted.
Pralie Peseyie therefore placed order to get 6000 identity cards printed again.
He said that he paid Rs. 90 from his own pocket as he felt that it was his responsibility to get the cards printed correctly.
He also said that he never asked the appellant to reimburse him for that amount of Rs. 90.
In cross examination he was asked whether he told the appellant that he paid Rs. 90.
His answer was in ,the negative.
Pralie Peseyie further said that the words "Please vote for T. N. Angami" were not on the sample that the appellant gave but the witness added those words without the knowledge of the appellant.
The witness was asked a direct question as to what amount the witness spent for the appellant in the election and his 663 answer was "I paid Rs. 90 for the printing of the pink identity cards and no more".
The High Court held that the amount of Rs. 90 must have been paid to the press by Pralie Peseyie on behalf of the appellant and therefore the expenditure was incurred by the appellant as well as authorised by him in connection with his election.
The respondent in the election petition alleged that the appellant paid Rs. 90.
The Representation of the People Act uses the words incuffing and authorising the expenditure.
The appellant denied that he paid Rs. 90.
It was never suggested to the appellant that he had authorised the expenditure of Rs. 90.
On the contrary, the positive evidence of the appellant is that he was annoyed with Pralie Peseyie for introducing the words 'Vote for 'F. N. Angami ' on the blue identity cards and therefore the appellant wanted Pralie Peseyie to get the cards reprinted correctly.
It is also the evidence of Pralie Peseyie that he did something wrong and he had to have it corrected.
He therefore paid Rs. 90 out of his own pocket.
The most significant feature in ',he evidence is, that the bill for Rs. 90 was never produced or sent to the appellant whereas the 'bill for the blue identity cards was sent to the appellant.
The manner in which the appellant reprimanded Pralie Peseyie for adding the words "Vote for T. N. Angami" would not necessarily involve an obligation to pay and authorise an expenditure for getting the cards reprinted correctly.
If it were the fault of the press, the press would have to rectify the same.
On the other hand, if the blame fell on Pralie Peseyie he would have to bear the brunt.
The fact that the bill was not sent to the appellant shows that the fault was of the witness Pralie Peseyie The oral evidence also points to that inescapable conclusion.
The High Court was in error in holding on the evidence that the expenditure for Rs. 90 was incurred or authorised by the appellant.
This finding is not supported by the evidence and on the contrary it is repelled by the evidence.
We cannot help observing that both the appellant and Pralie Peseyie gave evidence in a very straightforward and truthful Manner.
They narrated the correct course of events.
We accept their evidence and hold that the appellant neither incurred nor authorised the expenditure of Rs. 90 for the pink identity cards.
It would, therefore, not be necessary for us to go into the question whether, the sum of Rs. 41.50 for trunk calls and the sum of Rs. 22.65 for purchase of forms and hand books were incurred or authorised by the appellant.
Even if those two sums of money were added, the return would not be in violation of the maximum amount of Rs. 1000/ .
664 Counsel for the respondent contended that the findings of the High Court on allegations contained in paragraph 1(a), (f) and (j) of particulars of corrupt practice mentioned in paragraph 6 of the petition were incorrect and the High Court should have held that the appellant was guilty of corrupt practice.
Paragraph 1 (a) relates to a charge against the appellant of having paid Rs. 200 in cash to Dolhoutha Gaonbura of Zubra and one bag of sugar for entertainment of electors attending a function at Zubra on 25 January, 1969.
Paragraph 1 (f) alleges that on 27 Janu ary, 1969 a women 's meeting was held at Daklane when it was announced that a procession would be taken out on 1 February, 1969.
About 200 people mostly women formed a procession shouted slogans to vote for the appellant and the appellant asked them to vote for him and after the meeting a feast was held at the appellant 's house at which drinks were served to the people.
Paragraph 1 (j) alleges that on 27 January, 1969 the appellant and his wife and some other persons came to the village Pedugei in connection with the election and held a meeting where the appellant and his wife promised 8 bundles of corrugated iron sheets for the women of Kiruphema with the object of inducing them to vote for the appellant and corrugated iron sheets were later on brought from Dimapur by a truck belonging to Mizielhouto and divided amongst three groups of people.
The appellant in the written statement denied the charges.
The respondent did not have personal knowledge of the feast alleged in paragraph I (a) of the particulars but three witnesses were examined on behalf of the respondent.
On behalf of 'the appellant there was the evidence of Dolhoutha and Shitovi Hesso.
The High Court held that the three witnesses on behalf of the respondent were interested in the success of the respondent and the three witnesses attributed statements about feast and distribution of sugar to Dolhoutha who denied the same and said that the people of the village organised the feast with their money.
The High Court correctly found that the quality of evidence on behalf of the respondent was such that no reliance could be placed upon it.
As to allegations of corrupt practice in paragraph 1 (f) about the women 's meeting the High Court held that there was no evidence to indicate that the.
respondent or any person induced the persons present to vote or offered them food and fruit.
On the contrary, the High Court found that evidence of both sides indicated that it was customary practice in Nagaland to offer hospitality to the people who visit their house.
It will not be correct to equate ordinary hospitality or courtesy with corrupt practice.
With regard to allegations mentioned in paragraph I (j) and the distribution of bundles of corrugated iron sheets the High Court 665 held that the women 's society asked for corrugated sheets for a public cause.
The 'appellant was the Chief Minister at the time of the election.
It would not be unnatural for people to make requests to the Chief Minister for a public cause.
It would also be reasonable to expect that the Chief Minister would try to redress grievances of the people.
There is no proof of corrupt motive.
We agree with the High Court that there is no proof of corrupt practice alleged in paragraphs 1 (a), (f) and (j) of the particulars dealt with above.
For these reasons we accept the appeal and hold that the appellant is not guilty of any violation of section 123 (6) and section 77 of the Representation of the People Act.
The judgment of the High Court is set aside.
The charge, of corrupt practice under section 123(6) is set aside.
The order setting aside the election of, the appellant and the declaration avoiding the election under section 100(1)(b) of the Act are both set aside.
The election petition of the respondent is dismissed.
The appellant will be entitled to costs.
K.B.N. Appeal allowed.
| IN-Abs | The appellant was elected to the Nagaland legislative assembly.
He was at the time of his election Chief Minister of the State.
The, respondent challenged the election of the appellant on the grounds : (i) the appellant incurred or authorised the incurring of expenditure beyond the prescribed limit in contravention of section 77 of the Act and thereby committed corrupt practice within the meaning of section 123(6) of the Act, (ii) he offered inducements to the electors by giving feasts and entertaining them and (iii) he distributed bundles of Corrugated iron Sheets to a Women 's Society, with the object of inducing the members thereof to vote for him.
The High Court held that the appellant committed corrupt practice within the meaning of section 123(6) and set aside his election.
The other corrupt practices were held not proved.
Allowing the appeal and dismissing the election petition, HELD:(i) The High Court was in error in holding on the evidence that expenditure beyond the prescribed limit was incurred or authorised by the appellant [663 F] (ii)There was no evidence to indicate that the appellant or any person with his consent or knowledge induced any of the voters to vote for him by offering them food.
On the contrary the evidence on both sides indicated that it was customary practice in Nagaland to offer hospitality to the people who visit their house.
It would not be correct to equate ordinary hospitability or courtesy with corrupt practice.
(iii)There was no corrupt motive in the distribution of bundles of iron sheets.
The Society asked for corrugated iron sheets for a public cause.
The appellant was the Chief Minister at the time of the election and it would not be unnatural for people to make request to the Chief Minister for a public cause.
It would also be reasonable to expect that the Chief Minister would try to redress the grievances of the people.
[665 D]
|
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.
694 V.M. Tarkunde, Urmila Kapoor and R. K. Khanna, for the appellant.
section V. Gupte and M. V. Goswami, for the respondent.
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.
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.
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.
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 section 7 C of the Act.
The respondent served a notice April 20, 1963 apparently under the provisions of the 695 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 section 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 section 1 A of the Act and the appellant could not be given the benefit of section 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 section 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 section
(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 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 696 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 section 1 A seems to have been inserted.
The essential question that has to be resolved is whether section 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 section 23 of the .
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 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 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 section 1 A of the Act.
Now section 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 vs Jamboorao Satappa Kocheri(1) that the words "if permitted it would defeat the provisions of any law" in section 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 vs 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 section 1 A. (1) A. I.R. (2) , 293.
698 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 section 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.
| IN-Abs | 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 section IA according to which nothing in the Act shall apply to a building constructed on or after 1st January, 1951, and that the agreement was unlawful within the meaning of section 23 of the .
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 section 23 of the .
[696 C; 69 7 D E; 698 A C] Neminath Appayya Hanumannavar vs
Jamboorao Sateppa Kochteri, A.I.R. (1966) Mys.
154, approved.
Vita Food Products Incorporated vs Unus Co. Ltd. (in Liquidation), at 291, referred to.
|
Appeal No. 1728 of 1967.
Appeal by special leave from the judgment and order dated February 23, 1967 of the Bombay High Court, Nagpur Bench in Civil Revision No. 32 of 1965.
W. section Barlingay and A. G. Ratnaparkhi, for the appellants.
M. C. Bhandare and section P. Nayar, for the respondent.
The Judgment of the Court was delivered by Grover, J.
This is an appeal by special leave from a judg ment of the Bombay High Court (Nagpur Bench).
The appel lants had filed a suit for claiming proprietary rights in a property which was known as "Navegaon tank" and which consisted of several khasras with a total acreage of 3104 odd.
These villages were Malguzari villages.
By virtue of the provisions of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands), Act, 1950 the malguzari of this tank were deprived of their rights and the Government took over possession.
The compensation was paid by the Government after holding enquiry provided by the Act.
The appellants, however, claimed a declaration that they still continued to be owners as before and wanted a permanent injunction restraining the Government from interfering with their rights.
Alternatively it was prayed that if the Government was found to be in possession then a decree for possession be granted in their favour.
605 The Court Fee which was paid by the appellants was cal culated on the following basis.
It was alleged that compensation of Rs. 1126/ only had been paid, to the proprietors and therefore the tank had to be valued on the basis of that figure for the purpose of court fee and jurisdiction.
In addition owing to the injunction claimed an additional court fee of Rs. 501 was paid.
On behalf of the State an objection was raised in the trial court that the value of the tank would not be less than Rs. 10,00,000/ and court fee on that amount should have been paid.
The trial court came to the conclusion that the suit was for possession of land on the evidence which was produced it was held that the value of the land was Rs. 25,00,000/ .
The appellants were directed to pay court fee on that amount and make appropriate amendments in the plaint.
The appellants approached the High Court on the revisional side and challenged the decision of the trial court on the question of court fee.
The High Court referred to section 6(i) (v) of the Bombay Court Fees Act, 1959, which was in force at the material time.
This provision may be reproduced "In suits for the possession of land, houses and gardens according to the value of the subject matter; and such value, shall be deemed to be, where the subject matter is a house or garden according to the market value of the house or garden and where the subject matter is land." (a). . (b) (c). .
According to the High Court the court fee was payable according to the value of the subject matter of the suit.
So far as the houses and gardens were concerned it was the market value on which the court fee had to be paid.
As regards the land subclauses (a), (b) and (c) contained a qualification with regard to those lands which were liable to pay land revenue to the State.
Since tank was land covered under water it had to be valued as on the date of the suit without taking into consideration the improvements which might have been made.
The value was of the subject matter and it would be that value which would be relevant for the purpose of court fee and jurisdiction.
The matter was remanded to the trial court for further enquiry in the matter.
It appears that according to the view of the High Court the court fee is payable under section 6 (i) (v) even with regard to land 606 on its value which according to the counsel for the State would be the market value.
In our judgment section 6 (i) (v) does not admit of any such method of calculating the court fee where the subject matter is land.
There is no doubt that where the subject matter is a house or a garden, in a suit for possession the court fee has to be paid according to the market value of the house or garden but where the subject matter is land the court fee has to be calculated according to what has been provided in the subclauses (a), (b) and (c) with regard to different categories of land.
It may be that in clause (v) the land which has not been assessed to land revenue is not covered by, clauses (a), (b) and (c) but then the court fee will have to be calculated under some ,other provision of the Act but not on the basis of the value of the land.
If there is any lacuna in the Bombay Act that will not justify the court in straining the language of clause (v) and reading it in such a way that if the land does not fall within sub clauses ,(a), (b) and (c) mentioned therein it must be valued in the same way as a house or a garden and court fee should be paid on that value.
If, however, it is found that the land underneath the tank is assessed to land revenue then there is no difficulty and the court fee has to be calculated in accordance with the provisions of section 6(i) (v).
But if the court fee cannot be determined under that provision it will be for the trial court to decide, under which provision court fee is payable and the appellant shall be required to pay that amount of court fee which is payable under the appropriate provision.
The appeal is consequently allowed and the order of the High Court is set aside.
The case is remanded to the trial court for disposal in accordance with law.
Costs shall abide the event.
K.B.N. Appeal allowed.
| IN-Abs | In a suit for possession of land court fee was held to be payable, under section 6(1) (v) of the Bombay Court Fees Act, 1959, on the value of the land.
On appeal, HELD : Under section 6(i)(v) in a suit for possession of land the court fee has to be calculated according to what has been provided in subclauses (a) (b) and (c) with regard to different categories of land.
It may be that in cl.
(v) the land which has not been assessed to land revenue is not covered by clause (a), (b) and (c) but then the court fee will have to be calculated under some other provision of the Act but not on the basis of the value of the land.
[606 A]
|
Appeal No. 81 of 1953.
Appeal under article 132(1) of the Constitution of India from the Judgment and Order, dated the 18th April, 1951, of the High Court of Judicature for the State of Orissa at Cuttack in Judicial Case No. 60 of 1951.
H. J. Umrigar, Sri Narain Andlay and Rajinder Narain for the appellant.
Porus A. Mehta and P. g. Gokhale for the respondent.
November 25.
The Judgment of the Court was delivered by BHAGWATI J.
The appellant who is a legal practitioner residing within the limits of the Kendrapara Municipality and practising as a mukhtar in the criminal and the revenue Courts there filed his nomination paper for election as a Councillor of the Municipality on the 15th March, 1951.
That nomination paper was rejected by the Election Officer on the 25th March, 1951, on the ground that he was employed as a legal practitioner against the Municipality in a case U/S 198 of the Bihar and Orissa Municipal Act which was pending in the Sub Divisional Magistrate Court.
The appellant then filed on the 4th April, 1951, a petition before the High Court of Orissa under article 226 of the Constitution praying that a writ or order of prohibition be issued to the State Government and the Election Officer restraining them from holding the election to the Kendrapara Municipality under the Orissa Municipal Act, 1950 or the Municipal Election Rules, 1950.
This petition was rejected by the High Court but the High Court granted the appellant a certificate under article 132(1) of the Constitution for leave to appeal to this Court.
The Orissa Municipal Act, 1950 (Orissa Act 23 of 1950) was passed by the local Legislature and received the assent of the Governor on the 7th November, 1950, and was published in the official gazette on the 11th November, 1950.
Section I of the Act runs as under 1006 (1) This Act may be called the Orissa Municipal Act, 1950.
(2) It shall extend to the whole of the State of Orissa.
(3) It shall come into force in such area or areas on such date or dates as the State Government may appoint from time to time (5) Any notification, order or rule and any appointment to an office, may be made or election held under this Act, after it shall have received the assent of the Governor and shall take effect on this Act coming into force.
Section 16 of the Act prescribes the disqualifications of candidates for election and provides (1) No person shall be qualified for election to a seat in a Municipality, if such person (ix ) is employed as a paid legal practitioner on behalf of the Municipality or as legal practitioner against the Municipality On the 11th November, 1950, the Secretary to the Government, Local Self Government Department addressed to all District Magistrates of the State letter No. 1336/L.S.G. intimating that the Government had decided that general elections should be held on the basis of adult suffrage as provided in the Act in 12 Municipalities including the Kendrapara Municipality.
Notification No. 2015 L.S.G. was issued on the 13th December, 1950, under section 13 read with section 1 (5) of the Act fixing the 1st day of March, 1950, as the relevant date for voters in the election as regards their residential qualification in the Municipality.
Notification No. 65 L.S.G. issued on the 4th January, 1951, published rules made in exercise of the powers conferred by clauses (1) and (2) of sub section (2) of section 387 of the Act called the "Municipal Election Rules, 1950.
" Redistribution of wards was effected by Notification No. 167 L.S.G. dated the 10th January, 1951, and two Notifications Nos. 519 and 521 L.S.G. were issued on the 24th January, 1951, fixing 1007 the numbers of Councillors and of the reserved seats for each Municipality.
The 15th March, 1951, was fixed as the date for filing the nominations and the 25th March, 1951, for scrutiny of nomination papers.
The 20th April, 1951, was the date fixed for the holding of the election.
All these steps were taken by the Government in anticipation acting under the powers reserved under section 1 (5) of the Act and it was only on the 15th April, 1951, that the Act was extended to the Kendrapara Municipality by a notification under section 1 (3) of the Act.
The appellant contended (1) that the Act had not come into operation in the Kendrapara Municipality till the 15th April, 1951, that the disqualification prescribed by section 16(1) (ix) could not consequently have been incurred by him on the 15th March, 1951, when he filed his nomination paper, that the rejection of his nomination paper therefore on that ground by the Election Officer on the 25th March, 1951, was illegal and no election could be held on the 20th April, 1951, as was sought to be done under the provisions of the Orissa Municipal Act, 1950, or the Municipal Election Rules, 1950, and (2) that in any event the disqualification prescribed under section 16(1) (ix) of the Act violated his fundamentals rights guaranteed under article 14 and article 19(1) (g) of the Constitution.
Both these contentions were in our opinion rightly negatived by the High Court.
Section 1 (5) of the Act in express terms provides that after the Act has received the assent of the Governor elections could be held under the Act but were only to take effect on the Act coming into force, which means the coming into force of the Act in such area or areas on such date or dates which the State Government might appoint from ' time to time under section 1 (3) of the Act.
There is thus contemplated under the very provisions of sec tion 1 (5) the holding of elections under the Act in spite of the fact that the Act had not come into force in a particular area.
Ordinarily the statute enacted by a State Legislature comes into force as soon as it receives 1008 the assent of the Governor.
Section 1 (3) of the Act however postpones the commencement of the Act which means that section 1 (3) came into operation immediately the Governor gave his assent to the Act.
Section 1 (5) is nothing but a proviso to section 1 (3) and must be regarded also to have come into operation simultaneously with section 1 (3).
Section 1 (5) having thus come into force at once on the Act having received the assent of the Governor on the 7th November, 1950, if elections were to be held under the Act before the rest of the Act came into force in any particular area. ' all incidental steps for the holding of such elections were certainly contemplated to be taken and those steps which would be thus taken in anticipation of the Act coming into force in a particular area were certainly authorised by the terms of section 1(5) by necessary implication, because no elections could be held unless all the preliminary steps for holding the same were taken.
It would be necessary for holding elections to prescribe the residential qualification, to distribute the wards, to fix the numbers of Councillors and of reserved seats, to frame election rules with reference to the filing of nominations, the scrutiny of the nomination papers and also the holding of elections.
All these preliminary steps would have to be taken if the elections were to be held and section 1(5) clearly contemplated the taking of these steps in authorising elections to be held under the Act.
No doubt the Act was not to be in force in a particular area until the relevant notification was issued by the State Government and until the Act came into force the disqualifications prescribed in section 16(1) of the Act would not normally attach to candidates for election.
The election rules also would be framed in exercise of the power reserved under the Act and if the Act had not come into force much less could the election rules come into operation and bind the candidates.
This argument could have availed the appellant if the State Legislature had not enacted section 1(5) of the Act and the defect could not have been cured by the provisions of section 23 of the Orissa General Clauses Act (Orissa Act I of 1937) which was relied upon by 1009 the respondent.
That section only enables the making of rules or bye laws or the issue of the preliminary orders in anticipation of the Act coming into force, which rules, bye laws or orders however would not come into effect till the commencement of the Act.
The clear provisions of section 1(5) of the Act however expressly empowered the State Government to hold elections and thereby validated all the preliminary steps taken for the purpose of holding such election, the only reservation made being that even though the election under the Act be held such election was not to take effect till the Act came into force in the particular area.
This contention of the appellant therefore fails.
The contention that the disqualification prescribed in section 16(1)(ix) violates the fundamental rights of the appellant under article 14 and article 19(1)(g) is equally untenable.
Article 14 forbids class legislation but does not forbid reasonable classification for the purposes of legislation.
That classification however cannot be arbitrary but must rest upon some real and substantial distinction bearing a reasonable and just relation to the things in respect of which the classification is made.
In other words the classification must have a reasonable relation to the object or the purpose sought to be achieved by the impugned legislation.
The classification here is of the legal practitioners who are employed on payment on behalf of the Municipality or act against the Municipality and those legal practitioners are disqualified from standing as candidates for election.
The object or purpose to be achieved is the purity of public life, which object would certainly be thwarted if there arose a situation where there was a conflict between interest and duty.
The possibility of such a conflict can be easily visualised, because if a Municipal Councillor is employed as a paid legal practi tioner on behalf of the Municipality there is a likelihood of his misusing his position for the purposes of obtaining Municipal briefs for himself and persuading the Municipality to sanction unreasonable fees.
Similarly, if he was acting as a legal practitioner against the Municipality he might in the interests of his client misuse any knowledge which he might have obtained 129 1010 as a Councillor through his access to the Municipal records or he might sacrifice the interests of the Municipality for those of his clients.
No doubt having regard to the best traditions of the profession very few legal practitioners would stoop to such tactics, but the Legislature in its wisdom thought it desirable to eliminate any possibility of a conflict between interest and duty and aimed at achieving this object or purpose by prescribing the requisite disqualification.
The classification thus would certainly have a reasonable relation to the object or purpose sought to be achieved.
It was however urged that besides this category there are also other categories where there would be a possibility of conflict between interest and duty and that in so far as they were not covered by the disqualifications prescribed by section 16(1) of the Act the provision disqualifying the category to which the appellant belonged was discriminatory.
It was particularly pointed out that a client who had a litigation against the Municipality was not prevented from standing as a candidate for election whereas the legal practitioner who held a brief against the Municipality was disqualified, though the ban against both these categories could be justified on ground of avoidance of conflict between interest and duty.
The simple answer to this contention is that legislation enacted for the achievement of a particular object or purpose need not be all embracing.
It is for the Legislature to determine what categories it would embrace within the scope of legislation and merely because certain categories which would stand on the same footing as those which are covered by the legislation are left out would not render legislation which has been enacted in any manner discriminatory and violative of the fundamental right guaranteed by article 14 of the Constitution.
The right of the appellant to practise the profession of law guaranteed by article 19(1) (g) cannot be said to have been violated, because in laying down the disqualification in section 16(1) (ix) of the Act the Legislature does not prevent him from practising his profession of law but it only lays down that if he wants 1011 to stand as a candidate for election he shall not either be employed as a paid legal practitioner on behalf of the municipality or act as a legal practitioner against the Municipality.
There is no fundamental right in any person to stand as a candidate for election to the Municipality.
The only fundamental right which is guaranteed is that of practising any profession or carrying on any occupation, trade or business.
There is no violation of the latter right in prescribing the disqualification of the type enacted in section 16(1) (ix) of the Act.
If he wants to stand as a candidate for election it is but proper that he should divest himself of his paid brief on behalf of the Municipality or the brief against the Municipality in which event there will be certainly no bar to his candidature.
Even if it be taken as a restriction on his right to practice his profession of law, such restriction would be a reasonable one and well within the ambit of article 19 clause 5.
Such restriction would be a reasonable one to impose in the interests of the general public for the preservation of purity in public life.
We therefore see no substance in this contention of the appellant also.
The appeal accordingly fails and stands dismissed with costs.
Appeal dismissed.
| IN-Abs | The provisions of section 16(1)(x) of the Orissa Municipal Act, 1950, by which a paid legal practitioner on behalf of or against the Municipality is disqualified for election to a seat in such Municipality do not violate the fundamental rights guaranteed to such legal practitioner under article 14 or under article 19(1)(g) of the Constitution of India.
The Orissa Municipal Act, 1950, having received the Gover nor 's assent on November 7, 1950, all preliminary steps specified in section 1(5) of the Act which were taken for the purpose of a Municipal election after such assent are valid even though the Act itself had not then come into force in terms of section 1(3).
Accordingly a nomination filed on March 15, 1951, was validly subjected to the test of disqualification contained in section 16(1) (x) of the Act and the rejection of such nomination on March 25, 1951, was not defective though the Act came into force on April 15, 1951, in the area to which the rejected nomination relates.
Section 23 of the Orissa General Clauses Act, 1937, does not authorise the making of rules or bye laws, which are to come into (1) ; 1005 operation before the commencement of the Act, but they will be valid under the express provision of section 1(5).
|
iminal Appeals Nos. 205 and 206 of 1968.
Appeal from the judgment and order dated February 21 1968 of the Kerala High Court in Criminal Revision Petitions Nos. 415 and 416 of 1967.
D.P. Singh and M. R. K. Pillai, for the appellants (in both the appeals).
712 G.B. Pai, P. N. Tiwari, O. C. Mathur and Bhajar Ram Rakhiani, for the respondent (in both the appeals).
The Judgment of the Court was delivered by Sikri, C.J.
These appeals are on certificates granted by the High Court of Kerala.
The only question in these appeals is whether the workmen doing work in the premises of the res pondent are workers within the meaning of Sec.
2(1) of the .
Section 2(1) of the reads as follows "Worker ' means a person employed, directly or through any agency, whether for wages or not, in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or connected with, the manufacturing process, or the subject of the manufacturing process;" The respondent was convicted under Sec.
92 of the for using a building as a factory without obtaining the previous permission in writing of the Chief Inspector of Factories, for failing to apply for registration and grant of licence for the factory and for failing to maintain a muster roll of the workers employed in the factory in one case, and for failing to give attendance cards to every person employed in the factory in the, other case.
The respondent was sentenced to pay a fine of Rs. 20/ in each case.
He was also directed under Sec.102 of the to rectify the defects within a specified period.
The respondent filed a Revision Petition in the High Court.
The High Court held that the work that was being carried out in the premises of the respondent amounted to manufacturing Process.
This question has not been debated before us.
The High Court further held that the workmen working in the premises of the respondent were not 'workers ' within the meaning of Sec. 2 (1) of the .
It is this part of the decision that has been ' challenged in appeal by the State of Kerala.
The nature of the work done was described in a letter pro duced by the prosecution.
This letter is not printed on the record but the High Court summaries the document as follows "This document shows that as and when catches of prawns are made, a consignment of prawns is brought to the premises in a lorry at any time of the day or the night, that the women and girls of the locality, who form a "casual, heterogeneous, miscellaneous and irre gular group" come at their convenience and do the peeling, washing etc., at piece rates; and that there are no specified hours of work, nor is there any control by the Petitioner over the irregularity and attendance or of the nature, manner or quantum of their work.
The same workers after finishing the work in the premises of the petitioner, go to other similar premises in the locality where other lorry loads of prawns are taken.
In other words, if more prawns are caught at a particular time, they are brought and distributed among several premises are brought and distributed among several premises like the Petitioner 's and the local women and girls collect at the several premises and do the work at piece rates.
The same workers do not go to the same premises on different occasions, and the owners of the several.
premises do not have any control over the manner or quantum of work these women and girls do ' The rates of remuneration naturally depend upon the quantity of prawns available, the number of women and girls that come to do the work , the hour of the day or the night when the catches arrive, etc.
Sometimes, for days no work is done in the premises.
" The High Court after referring to the decisions of this Court in Dharangadhara Chemical Works Ltd. V. State of Saurashtra(1), a decision under the Industrial Disputes Act, Chintaman Rao & Another V. The State of Madhya Pradesh(1) and.
State of Kerala vs V. M. Patel(1).
decisions under the , held "It will be apparent that the women and girls who assemble and do the work when a catch of prawns is brought to the premises of the petitioner are not 'workers ' coming within the definition of the .
The Petitioner does not insist a,% to who should do the job or how it should be done; he only wants the work to be done for the agreed remuneration without spoiling the prawns i.e. within a short time.
(A quantity of prawns is taken for peeling, cleaning, washing etc.
by a particular individual for a fixed remuneration, and that individual, with the assistance of others whom she employs, finishes the job as quickly as possible. " The learned Counsel for the appellant contended that it was erroneous on the part of the High Court to have applied the (1) ; (2) ; (3) [1960] K.L.J. 1524 714 decision of this Court in Dharangadhara Chemical Works Ltd. Disputes Act, to the definition of 'worker ' in the .
He fairly pointed out that another Division Bench applied the same test in a dispute arising under the .
(see Birdhkhand Sharma vs First Civil Judge Nagpur) (2) .
But, nevertheless, he urged that we should refer the case to a larger Bench.
We see nothing wrong in the decision of this Court in Chintaman Rao & Another vs The State of Madhya Pradesh(3).
On the contrary, we are of the opinion that the case has been rightly decided.
The scheme of the clearly shows that the test adopted by this Court is the correct one.
It would be impossible to apply many provisions of the to the 'workers ' of the type we are concerned with here if we were to hold that they were workers ' within the definition of the .
We are really surprised that the High Court certified this case to be a fit case for appeal to this Court.
After this Court had laid down a test to be applied for determining who were 'workers ' within the meaning of the , the High Court should have treated the question of principle as no longer open.
The High Court had certified the case to be fit for appeal as it felt that the question involved is of general importance in the State.
If the question of principle has been settled by this Court, the application of the principle to the facts of a particular case does not make the question a fit one for the Supreme Court within Article 134(1)(c) of the Constitution.
In the result the appeals fail and are dismissed.
R K. P. section Appeals dismissed.
| IN-Abs | After catches of prawns made from time to time were brought to the respondent 's premises, a casual and irregular group of women and girls of the locality came at their convenience to do the peeling, washing, etc.
at piece rates.
There were no.specified hours of work and after finishing their work, the workers would go on to do similar work at other premises in the locality.
The respondent 's conviction under section 92 of the FactoriesAct for, inter alia, using his premises as a factory without obtainingregistration, etc.
was set aside in revision by the High Court on the viewthat the workers in question were not "workers" within the meaning of the .
On appeal to this Court, HELD:The High Court had rightly decided that the workers in the present case were not "workers" covered by section 2(1) of the .
[714 C] Dharangadhara Chemical Works Ltd. vs State of Saurashtra, A.I.R. , Chintaman Rao & Another vs The State of Madhya Pradesh, ; ; State of Kerala vs V. M. Patel, [1960] K. L. J. 1524 and Birdhichand Sharma vs First Civil Judge, Nagpur; , ; applied.
Obiter : After this Court had laid down a test to be applied for determining who were "workers" within the meaning of the , the High Court should have treated the question of principle as no longer open.
The High Court had certified the case to be fit for appeal as it felt that the question involved is of general importance in the State.
If the question of principle has been settled by this Court, the application of the principle to the facts of a particular case does not make the question a fit one for the Supreme Court within Article 134(1) (c) of the Constitution.
[714 D]
|
Appeal No. 2128 of 1969.
Appeal by special leave from the Award dated July 19, 1969 of the Ninth Industrial Tribunal, West Bengal, Calcutta in case No. VIII 396 of 1968.
C. K. Daphtarv.
Santosh Chatterjee and D. N. Mukherjee, for the appellant.
section C. Gupta, Manju Gupta and section C. Agarwala, for the respondents.
The Judgment of the Court was delivered by Bhargava, J.
The appellant, Messrs Alloy Steel Project, is an undertaking owned, controlled and managed by a Government Company, viz., Messrs Hindustan Steel Ltd. Alloy Steel Project was started in the year 1961 and it went into production in the year 1964 65.
No profit was earned at least right up to the year '1967 68.
The workmen, however, claimed bonus at the minimum rate prescribed under the Payment of Bonus Act No. 21 of 1965 (hereinafter referred to as "the Act") in respect of the year 1965 631 1966 on ' the plea that this Alloy Steel Project was a / part of the Hindustan Steel Ltd. and could not be treated as a new establishment for purposes of section 16 of the Act.
Hindustan Steel Ltd. was itself an establishment which had been in existence for a long period and had been even earning profits, so that exemption could not be granted to this Company in respect of payment of bonus under section 16 of the Act.
This claim of the workmen was resisted, by the Company on the plea that Alloy Steel Project was a separate establishment in respect of which separate balance sheets and profit and loss accounts were maintained, so that no bonus was payable until either this Project itself earned profits, or from the sixth accounting year following the year 1964 65 when this Project went into production.
The dispute between the work men and the Company.
could not be resolved amicably and, consequently, a reference was made under the which came up before the Ninth Industrial Tribunal, West Bengal.
The Tribunal held that Alloy Steel Project could not be treated as a separate establishment because, under the Act, a Company is itself an establishment, so that all units of a Company like Hindustan Steel Ltd. will constitute one establishment.
Since this Project had not been earning any profits the Tribunal directed payment of bonus at the minimum rate of 4 per cent of wages prescribed by the Act.
Aggrieved by this award of the Tribunal, the Company has come up in this appeal to this Court by special leave, though the name of the appellant is shown as Alloy Steel Project, because it was under this name that the reference was dealt with by the Tribunal.
The main basis of the decision of the Tribunal is that 'the word establishment ' has been used in this Act to indicate a "Company" as called in common parlance.
" It was on this view that the Tribunal further Proceeded to consider whether this Alloy Steel Project could be held to be an establishment separate from Hindustan Steel Ltd., or it had to be treated as a part of the parent establishment, viz., Hindustan Steel Ltd. In this approach, it is clear that the Tribunal committed an obvious error, as it ignored the indications which are manifest from the language used in the Act.
In section 2, sub section (15) and (16), establishments have been divided into two classes and their meaning has been defined.
In clause (16), "establishment in public sector ' is defined as meaning an establishment owned, controlled or managed by (a) a Government company as defined in section 617 of the ; (b) a corporation in which not less than forty per cent of its capital is held (whether singly or taken together) by 632 (i) the Government; or (ii) the Reserve Bank of India; or (iii) a corporation owned by the Government or ' the Reserve Bank of India.
In clause (15) of section 2, "establishment in private sector" is defined to mean any establishment other than an establishment in public sector.
Thus, between these two clauses, all establishments are covered.
If an establishment is in public sector, it is covered by the definition in clause (16).
If the establishment is not in public sector, it will be covered by the definition of "establishment in private sector" in clause (15).
The significant words are those contained in clause (16) which show that an establishment in a public sector hag to be owned, controlled or managed by a Government company, or by a corporation of the nature described in that clause.
Obviously, therefore, an establishment in a private sector would be one which is owned, controlled or managed by a person or body other than a Government company or a corpora tion of the nature described in clause (16).
In this view, an establishment cannot be identified with a company.
It would be absurd to say that a company is owned, controlled or managed by a Government company or a corporation.
Obviously, the word "establishment" is intended to indicate something different from a company as defined in the .
This is further clarify by the provisions of sub section
(3) of section I which lays down the applicability of the Act.
The Act has been made applicable to every factory and every other establishment in which twenty or more persons are employed on any day during an accounting year.
Supposing a company has a factory in one premises and has another workshop entirely distinct and separate from that factory, in which the number of persons employed is less than 20.
The Act itself will apply to the factory, but will not apply to the other establishment in which the number of employees is less than 20.
This applicability of the Act will be independent of the other provisions of the Act.
Learned counsel for the respondent workmen relied on section 3 of the Act to urge that even the establishment employing less than 20 persons will be a part of the parent establishment consisting of the factory.
Section 3 is as follows : "3.
Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of computation of bonus under this Act 633.
Provided that where for any accounting year a separate balance sheet and profit and loss account are prepared and maintained in respect of any such department or undertaking or branch, then, such department or undertaking or branch shall be treated as a separate establishment for the purpose of computation of bonus under this Act for that year, unless such department or undertaking or branch was, immediately before the commencement of that accounting year treated as part of the establishment for the purpose of computation of bonus.
" It is to be noted that the principal part of section 3 lays down that different departments or undertakings or branches of an establishment are to be treated as part of the same establishment only for the purpose of computation of bonus under the Act.
They cannot be treated as part of one establishment for purposes of subsection (3) of section 1 of the Act.
In fact, section 3 cannot be, resorted to at all when the Act itself is inapplicable in view of the provision contained in section 1, sub section
It is, thus, quite clear that the Tribunal went entirely wrong in holding that simply because Alloy Steel Project is owned, controlled and managed by Hindustan Steel Ltd., it has to be treated as a part of Hindustan Steel Ltd. which is itself an establishment.
Hindustan Steel Ltd. cannot be described as an establishment.
The facts appearing on the record show that Hindustan Steel Ltd. has a number of. establishments.
These include Alloy Steel Project besides the Head Office, Rourkela Steel Plant, Bhilai Steel Plant, Durgapur Steel Plant, Coal Washeries Project and Bokaro Steel Project.
The Company, Hindustan Steel Ltd., cannot be equated with any one of these units.
They are all separate undertakings, departments or branches owned, controlled and managed by one single Company and, consequently,.
the point raised has to be decided on the basis whether, under the proviso to section 3 the Alloy Steel Project is to be treated as a separate establishment, or is to be treated as part of the main establishment owned by Hindustan Steel Ltd. Learned counsel for the respondent workmen, however, advanced a new argument which was not put forward before the Tribunal.
His submission was that, if an establishment of a Company consists of a number of departments, undertakings or branches, the principal part of section 3 will apply and all such departments, undertakings or branches must be treated as parts of one single establishment for purposes of computation of bonus under the Act, but the proviso to section 3 will not apply in such a case.
According to him, the proviso to section 3 will apply to establishments consisting of different departments, undertakings or branches which are owned, controlled or managed by persons other 634 than companies.
This argument was based on the reasoning that, in order to calculate available surplus for distribution of bonus in the case of a company the Act lays down in section, 6 (d) read with the Third Schedule that the deductions to be made from net _profits will also include dividends payable on , preference share ,capital, and 8.5 per cent of its paid up equity share, capital as at the commencement of the accounting year.
This provision cannot be given effect to in respect of separate units of a Company, .because the paid up capital or the preference share capital is not ,allocated between different units.
In the case of the present Company, viz., Hindustan Steel Ltd., the entire paid up capital is shown in the accounts of the Head Office.
The money needed for working of the various units, including the Alloy Steel Project, is shown as remittance received from the Head Office and not as.
paid up capital of the Alloy Steel Project etc.
The result is that, if Alloy :Steel Project or other units of the Hindustan Steel Ltd. are treated as separate establishments and available surplus is calculated separately for each unit, there will be no deduction @ 8.5 per cent ,of the paid up equity share capital as envisaged by section, 6(d) ,and the Third Schedule of the Act.
We do not think that there is any force in this argument.
First, it would be a strange method of construction of language to hold that the establishment referred to in the main part of section 3 will include all different departments, undertakings and "branches of a company, while it will not do so in the proviso to 'the same section.
Such different meanings in the same section in respect of the same words or expression cannot be accepted.
Secondly, it seems to us that no difficulty of the nature pointed out by learned counsel can arise in calculating available surplus. 'Wherever the Act lays down that certain deductions are to be made, it is obvious that those deductions will only be effective if, in fact, circumstances do exist justifying such deductions.
In the 'Third Schedule itself, the first ' deduction envisaged is dividend payable on preference share capital.
A number of companies do not have preference share capital.
In such cases, clearly, no ,occasion would arise for making such a deduction.
Very similar is the position with regard to certain other deductions which are permissible under the Second Schedule which principally lays down the method of calculation of available surplus.
There is, therefore, no reason for interpreting the proviso to section 3 in the manner urged by learned counsel simply because, in the case of separate departments, undertakings or branches of the establishment of a company, it may not be possible to make a deduction @ 8.5 per cent of the paid up equity share capital.
In the present case, there is very clear evidence that, though the Company, Hindustan Steel Ltd., has a number of undertakings, 635 Separate accounts are kept for each separate undertaking.
The annual reports for three years were produced before the Tribunal.
They clearly indicate that separate balance sheet was prepared for each unit and separate profit and loss account was worked out for each unit, except that, for the Head Office, though a separate balance sheet was prepared, the profit and loss was worked out on the basis of the consolidated accounts.
The Tribunal, in support of its view that Alloy Steel Project is a part of the establishment constituted by the Company, Hindustan Steel Ltd., relied on the circumstance that a consolidated balance sheet is prepared for the Company in respect of all its units and after such consolidation, profit and loss is also worked out for all the establishments together so as to find out the actual profit and loss earned or incurred by the Company itself.
From this, the tribunal sought to infer that there were no separate accounts in respect of each unit as are required to be maintained before they can be treated as separate establishments under the proviso to section 3.
The Tribunal has obviously gone wrong in ignoring the fact that separate balance sheets and profit and loss accounts are in fact maintained for each separate unit and the consolidated accounts are prepared only for the purpose of complying with the requirements of the companies Act.
The does lay down the requirement that a consolidated balance sheet and profit and loss account for all the units of the Company must be prepared and, for, that purpose, quarterly statements of accounts have to be sent by each unit to the Head Office.
There is, however, no provision even in the containing a prohibition to maintenance of separate balance sheets and separate profit and loss statements for each unit for purposes of the Act.
That accounts are separately maintained for each unit is not only established from the various annual reports filed before the Tribunal and the evidence of, the Company 's witness Umapada Chakraborty, but is also admitted by Suprakash Kanjilal, the only witness examined on behalf of the workmen.
The latter also admitted that separate bonus calculation is made in respect of each unit and bonus was declared separately in each unit.
No bonus was, however, declared in respect of the Alloy Steel Project.
That declaration was not made because of the claim that Alloy Steel Project was exempt from payment of bonus under section 16 of the Act.
Section 16 runs as follows: "16.
(1) Where an establishment is newly set up, whether before or after the commencement of this Act, ,the employees of such establishment shall be entitled to be paid bonus under this Act only (a) from the accounting year in which the employer derives profit from such establishment; or 918Sup CI/71 636 (b) from the sixth accounting year following the accounting year in which the employer sells the goods produced or manufactured by him or renders services, as the case may be, from such establishment, whichever is earlier Provided that in the case of any such establishment the employees thereof shall not, save as otherwise provided in section 33, be entitled to be paid bonus under this Act in respect of any accounting year prior to the accounting year commencing on any day in the year 1964.
Explanation I. For the purpose of this section, an establishment shall not be deemed to be newly set up merely by reason of a change in its location, management, name or ownership.
Explanation II.
For the purpose of clause (a), an employer shall not be deemed to have derived profit in any accounting year unless (a) he has made provision for that year 's depreciation to which he is entitled under the Income tax Act or, as the case may be, under the agricultural income tax law; and (b) the arrears of such depreciation and losses incurred by him in respect of the establishment for the previous accounting years have been fully set off against his profits.
Explanation III.
For the purpose of clause (b), sale of the goods produced or manufactured during the course of the trial run of any factory or of the prospecting stage of any mine or an oil field shall not be taken into consideration and where any question arises with regard to such production or manufacture, the decision of the appropriate Government, made after giving the parties a reasonable opportunity of representing the case, shall be final and shall not be called in question by any court or other authority.
(2) The provisions of sub section (1) shall, so far as may be, apply to new departments or undertakings or branches set up by existing establishments 6 3 7 Provided that if an employer in relation to an existing establishment consisting of different departments or undertakings or branches (whether or not in the same industry) set up, at different periods has, before the 29th May, 1965, been paying bonus_to the employees of all such departments or undertakings or branches irrespective of the date on which such departments or undertakings or branches were set up, on the basis of the consolidated profits computed in respect of all such departments or undertakings or branches, then, such employer shall be liable to pay bonus in accordance with the provisions of this Act to the employees of all such departments or undertakings or branches (whether set up before or after that date) on the basis of consolidated profits computed as aforesaid.
" Sub section (1) of section 16 grants exemption from payment of bonus to establishments newly set up for a period of six years, following the accounting year in which the goods produced or manufactured are sold for the first time and, in the alternative, up, to the year when the new establishment results in profit, whichever is earlier.
If the Alloy Steel Project is treated as an establishment newly set up for purposes of section 16(1), the exemption claimed would be fully justified.
Section 16(2) of the Act makes it clear that the provisions of sub section (1) are to apply even to new departments, undertakings or branches set up by existing establishments.
Consequently, even if Alloy Steel Project is treated as a new undertaking set up by the existing establishments of Hindustan Steel Ltd., the exemption under section 16(1) would be avail able to it.
The proviso to sub section
(2) of section 16 also does not stand in the way of this claim, because there is no evidence at all that in any year, after Alloy Steel Project was set up bonus was paid to the employees of all the units on the basis of consolidated profits of all such units.
The only exception has been in the case, of workmen of the Head Office where no separate profit and loss was worked out and the bonus was paid on the basis of the consolidated Profits of all the units belonging to Hindustan Steel Ltd. That, of course, was fully justified, because the Head Office was working for all the units, though as a separate unit.
It was in the accounts of the Head Office that the entire paid up capital was credited and advances were made by the Head Office to the various units out of this capital or out of loans taken by the Head Office.
In the case of the Head Office, therefore, the calculation of bonus on the basis of consolidated accounts was Justified; but that does not affect the principle to be applied to the separate units for which separate accounts, separate balance sheets and separate profit and loss statements are maintained.
The proviso to sub 638 section (2) of section 16 only comes in the way it bonus is paid in any year to the employees of all the units on the basis of consolidated accounts.
That has never been done in the case of the Hindustan Steel Ltd. Consequently, the Alloy Steel Project should have been treated as a separate establishment newly set up in the year 1961.
It went into production in 1964 65 and did not, earn any profits at all till 1967 68.
Therefore, no bonus was payable, to, the workmen of this undertaking for the year 1965 66 in view ,of the provisions of section 16(1) of the Act.
The appeal is allowed, the order of the Tribunal is set aside, and the reference of the dispute is answered accordingly.
In the circumstances of this case, we direct parties to bear their own ,costs of the appeal.
G.C. Appeal allowed.
| IN-Abs | The Alloy Steel Project was an undertaking controlled and managed by a government company, namely, the Hindustan Steel Ltd. Alloy Steel was started in 1961 and went into production in 1964 65.
No profit was earned up to 1967 68.
The workmen claimed bonus at the minimum rate prescribed under the Payment of Bonus Act, 21 of 1965 in respect of the year 1965 66.
On behalf of the Alloy Steel Project exemption from payment of bonus was claimed under section 16(1) of the Act on the ground that it was a new establishment and had not made profits.
The Industrial Tribunal to which reference was made held that Alloy Steel could not be treated as a separate establishment because under the Act a company is itself an establishment so that all units of a company like Hindustan Steel Ltd. will constitute one establishment.
However, since Alloy Steel had not been earning profits the Tribunal directed payment of bonus at the minimum rate of 4% of wages as prescribed by the Act.
Aggrieved by this Award of the Tribunal the company appealed.
HELD : The Tribunal erred in holding the word 'establishment ' to be synonymous with 'company '.
In doing so it ignored the indications which are manifest from the language of the Act.
The significant words are those contained in section 2(16) which show that an establishment in a public sector has to be owned, controlled or managed by a Government company or by a corporation of the nature described in the clause.
Obviously therefore an 'establishment in private sector ' defined in section 2(15) to mean an establishment not in the public sector would be one which is owned, controlled or managed by a person or body other than a Government company or a corporation of the nature described in section 2(16).
In this view an establishment cannot be identified with a company.
It would be absurd to say that a company is owned, controlled or managed by a Government company or corporation Obviously, the word 'establishment ' is intended to indicate something different from a company as defined in the Companies Act.
[631 F 632 D] (ii) Alloy Steel was a separate establishment by virtue of the proviso to section 3 of the Act because for each of the undertakings of Hindustan Steel Ltd. including Alloy Steel separate accounts were kept though for the purpose of compliance with the provisions of the Companies Act a consolidated balance sheet and profit and loss account were also prepared.
There was no substance in the contention that the proviso to section 3 applies only to departments undertaking or branches controlled and managed by persons 630 other than companies.
It would be a strange method of construction of language to hold that the establishment referred to in the main part of section 3 will include all different departments undertakings and branches of a company, while it will not do so in the proviso to the same section.
There is no reason for interpreting the proviso to section 3 in this manner simply because in the case of separate departments, undertakings or branches of the establishment of a company, it may not be possible to make a deduction @ 8.5% of the paid up equity share capital.
[635 C D; 633 G 634 H] (iii) Sub Section (1) of section 16 grants exemption from payment of bonus to establishments newly set up for a period of six years following ,the accounting year in which the goods produced or manufactured are sold for the first time and, in the alternative; upto the year when the new establishment results in profit, whichever is earlier.
If the Alloy Steel Project was treated as an establishment newly set up for the purposes of section 16(1) the exemption claimed would be fully justified.
Section 16(2) of the Act makes it clear that the provisions of sub section
(1) are to apply even to new departments, undertakings, or branches set up by existing establishment.
Consequently, even if Alloy Steel Project was treated as a new undertaking set up by the existing establishments of Hindustan Steel Ltd. the exemption under section 16(1) would be available to it.
[637 D E] The proviso to Sub section
(2) of section 16 only comes in the way if bonus is paid in any year to the employees of all the units on the basis of the consolidated accounts.
That had never been done in the case of the Hindustan Steel Ltd. Consequently the Alloy Steel Project should have been treated as a separate establishment newly set up in the year 1961.
, It went into production in 1964 65 and did not earn any profits at all till 1967 68.
Therefore no bonus was payable to the workmen of this undertaking for the year 1965 66 in view of the provisions of section 16(1) of the Act.
[638 A B]
|
Appeal No. 2338 of 1968.
Appeal from the judgment and order dated March 31, 1965 of the Patna High Court in Misc.
Judicial Case No. 1207 of 1964.
Jagadish Swarup, Solicitor General and B. K. P. Sinha, for the appellants.
B. C. Ghosh, P. K. Chatterjee and Rathin Das, for the respondent.
The Judgment of the Court was delivered by Mitter, J.
The question in this appeal is, whether the order of suspension passed on the respondent on July 31, 1964 was properly struck down by the Patna High Court.
The facts are as follows.
The respondent is a member of the Indian Police Service appointed on 25th January, 1937 and at the material time he was holding the substantive rank of Deputy Superintendent of Police in Bihar.
In June 1962 he was posted at Ranchi.
He was transferred to Patna and appointed as Special Officer, Political, General and Transport Department on July 23, 1964.
The order of which the validity is in question ran as follows : "Whereas serious allegations of corruption and malpractices have been made against Shri T. N. Ghosh, 1. P., Deputy inspector General of Police, Southern Range, Ranchi; And whereas the said Shri T. N. Ghosh is also reported to have contravened certain provisions of the All India Services (Conduct) Rules, 1954; And whereas the enquiries made by the Government of Bihar ;Into these allegations have revealed that there is a prima facie case made out against him; And whereas disciplinary proceedings in respect of these matters are contemplated against the said Shri T. N. Ghosh; 717 And whereas the Government of India, after carefully consi dering the available material, and having regard to the nature of the charges and circumstances of the case, are satisfied that it is necessary and desirable to place the said Shri T. N. Ghosh under suspension Now, therefore, the Government of India hereby place the said Shri T., N. Ghosh, under suspension with immediate effect, until further orders, and direct that the said Shri T. N. Ghosh shall, during the period of suspension be paid such subsistence allowance as is admissible under the rules.
By order and in the name of the President of India.
Sd./ K. Sivaraj Deputy Secretary to the Government of India.
" The respondent addressed a memorial to the Secretary to the Government of India, Ministry of Home Affairs on 24th August 1964 complaining against the above order on the ground that it was not sanctioned by the rules i.e. All India Service (Conduct) Rules, 1954.
In particular his grievance was that as there were only allegations against him which had not crystallised into charges an order of suspension could not be made before departmental proceedings were actually started and while they were merely contemplated.
He also asked for communication of the nature of the departmental proceedings which had been started against him within 14 days with a request that the order of suspension be withdrawn in default thereof.
It appears that there was no response to this.
The respondent filed his writ petition on September 14, 1964 praying for the quashing of the order particularly on the above grounds raised in his memorandum.
A counter affidavit to the petition was filed on behalf of the Chief Secretary to the Government of Bihar who was the third respondent in the petition.
The averments in the said affidavit were that a report had been made to the Central Government against the petitioner on July 6, 1964 and having regard to the activities of the petitioner it had become necessary to remove him from the field of activities and as such he had been transferred to, Patna after being relieved of his post on July 1 3, 1964.
It was said further that even before the receipt of the suspension order the petitioner had been actually questioned by section P. Verma, the then Inspector General of Police, Bihar as early as February 8, 1964 apprising the petitioner that his activities had attracted the attention of Government.
It was admitted that departmental enquiry and investigation into the conduct of the petitioner were still going on and as such charges had not been framed against 718 him.
Finally, it was said that the order was not by way of punishment and had been passed pending departmental enquiry into his conduct.
Another counter affidavit was filed on behalf of the Government of India and the Deputy Secretary to the Government of India, respondents 1 and 2 in the petition wherein substantially the same averments were made as in the counter affidavit on behalf of respondent No. 3.
A large number of points were canvassed before the High Court which examined the provisions of different sets of rules and relying particularly on the difference in wording of rule 12 of the Central Civil Services Rules which empowered the appointing authority to place an officer under suspension inter alia, where a disciplinary proceeding against him was contemplated or was pending and rule 7 of the All India Services Rules (quoted in extensor hereinafter) it came to the conclusion that the order of suspension was not proper.
Further, according to one of the Judges of that Court: "To allow a member of that (the AR India) service to be placed under suspension without the formal proceeding in started may cause humiliation to an officer of such high rank without any justification whatsoever.
" According to the other learned Judge who took substantially the same view the order of suspension only indicated that disciplinary proceedings against the petitioner were in contemplation and this was not provided for in rule 7.
In our view it would not be proper to interpret the provisions of the All India Service (Discipline and Appeal) Rules 1955 by reference to the provisions of other rules even if they were made by or under the authority of the President of India.
The All India Services (Discipline and Appeal) Rules 1955 as they stood at the relevant time were a self contained code and we have to examine the provisions thereof to find out whether the order passed on the petitioner was justified.
These rules were promulgated in exercise of the powers conferred by sub section
( 1 ) of section 3 of the All India Services Act 1951 by the Central Government after consultation with the Governments of the States concerned.
They were applicable to members of the Indian Administrative Service and those of the Indian Police Service.
3 of the Rules provided for penalties which might for good and sufficient reasons be imposed on a member of the service.
Suspension is not a penalty covered by this clause.
Cl. 4 indicated the authorities who would institute proceedings and impose penalty against mem 719 bers of the Services.
Cl. 5 which generally dealt with the procedure for imposing penalties provided by the first three sub clauses as follows "(1) Without prejudice to the provisions of the Public Servants Inquiry Act, 1850, no order shall be passed imposing any of the penalties specified in rule 3 on a member of the Service unless he has been informed in writing of the grounds on which it is proposed to take action and has been afforded an adequate opportunity of defending hims elf.
(2) The grounds on which it is proposed to take action shall be reduced to the form of a definite charge or charges, which shall be communicated to the member of the Service charged together with a statement of the allegations on which each charge is based and of any other circumstances which it is proposed to take into consideration in passing orders on the case.
(3) The member of the Service shall be required within such time as may be considered by the Government reasonably adequate in the circumstances of the case, to put in a written statement of his defence and to state whether he desires to be heard in person.
(4) to (10) It was only after the written statement was received from the member that the Government might, if it considered necessary, appoint a Board of Enquiry or an Enquiry Officer to enquire into the charges framed against him.
Other sub clauses of this rule laid down generally the procedure which was to be adopted in the enquiry.
Rule 7 provided as follows : "Suspension during disciplinary proceedings. (1) If having regard to the nature of the charges and the circumstances in any case the Government which initiates any disciplinary proceedings is satisfied it is necessary or desirable to place under suspend the member of the Service against whom such proceedings are started that Government may (a) if the member of the Service is serving under it pass an order placing him under suspension, or (b)if the member of the Service is serving under another Government, request that Government to place him under suspension, pending the conclusion of the inquiry and the, passing of the final order in the case 100SupCI/71 7 2 0 Provided that in cases where there is a difference of opinion between two State Governments, the mater shall be referred to the Central Government whose decision thereon shall be final.
(2) A member of the Service who is detained in official custody whether on a criminal charge or otherwise, for a period longer than forty eight hours, shall be deemed to have been suspended by the Government concerned under this rule.
(3) A member of the Service in respect of or against whom an investigation, inquiry or trial relating to a criminal charge is pending may, at the discretion of the Government under which he is serving, be placed under suspension until the termination of all proceedings relating to that charge. ' if the charge is connected with his position as a Govt.
servant or is likely to embarrass him in the discharge of his duties or involves moral turpitude.
Under rule 8 a member of a Service who was placed under sus pension was to be entitled to receive payment from the Government suspending his subsistence allowance as specified therein.
The crucial question in this case is, whether suspension of a member of the Service can only be ordered after definite charges have been communicated to him in terms of sub cl.
(2) of rule 5 or whether the Government is entitled to place an officer under suspension even before that stage has been reached after a preliminary investigation has been made into the conduct of the officer concerned following allegations of corrupt or malpractice levelled against him.
To determine this it is necessary to find out the object of placing a Government officer under "suspension" in terms of the said rule. 'Suspension ' according to the Oxford Dictionary means "the :action of suspending or condition of being suspended; the action of debarring or state of being debarred, esp.
for a time, from a function or privilege; temporary deprivation of one 's office or position".
A master can, subject to the contract of service, ask his servant not to render any service without assigning any reason but this would not be by way of punishment and the master would have to pay the servant his full wages or remuneration in such an eventuality.
As Halsbury puts it : "Whether or not the master has power to suspend a servant during the duration of the contract of service depends upon the construction of the particular contract.
In the absence of any express or implied term to the contrary, the master cannot punish a servant for alleg 72 1 ed misconduct by suspending him from employment and stopping his wages for the period of the suspension.
" (See Halsbury 's Laws of England, Third Edition, Vol.
25, article 989 page 518).
Rule 7 of the Service Rules expressly provides for suspending of a member of the Service for the purpose of disciplinary proceedings.
When serious allegations of misconduct are imputed against a member of a Service normally it would not be desirable to allow him to continue in the post where he was functioning.
If the disciplinary authority takes note of such allegations and is of opinion after some preliminary enquiries that the circumstances of the case justify further investigation to be made before definite charges can be, framed, it would not be improper to remove the officer concerned from the sphere of his activity inasmuch as it may be necessary to find out facts from people working under him or look into papers which are in his custody and it would be embarrassing and inopportune both for the officer concerned as well as to those whose duty it was to make the enquiry to do so while the officer was present at the spot.
Such a situation can be avoided either by transferring the officer to some other place or by temporarily putting him out of, action by making an order of suspension.
Government may rightly take the view that an officer against whom serious imputations are made should not be allowed to function anywhere before the matter has been finally set at rest after proper scrutiny and holding of departmental proceedings.
Rule 7 is aimed at taking the latter course of conduct.
Ordinarily when serious imputitions are made against the conduct of an officer the disciplinary authority cannot immediately draw up the charges : it may be that the Imputations are false or con cocted or gross exaggerations of trivial irregularities.
A considerable time may elapse between the receipt of imputations against an officer and a definite conclusion by a superior authority that the circumstances are such that definite charges can be levelled against the officer.
Whether it is necessary or desirable to place the officer under suspension even before definite charges have been framed would depend upon the circumstances of the case and the view which is taken by the Government concerned.
There would be nothing improper per se if the rules were to provide for suspension even before definite charges of misconduct had been communicated to the officer concerned.
The question is whether the language of rule 7 is so correlated to that of rule 5 as to lead us to hold that the word "charges" in sub cl.
(1) of rule.
7 must mean a definite charge as mentioned in subcl.
(2) of r. 5.
It may be that even a case where definite charges have been raised against an officer he may satisfactorily explain the circumstances and the grounds alleged against him in his 722 written statement.
It is also possible that after.
the enquiry is conducted it is found that the charges are all baseless.
In principle we can see no difference between the position of an officer against whom definite charges have been framed to which he is required to put in his written statement and a situation where on receipt of allegations of grave misconduct against him the Government is, of opinion that it would not be proper to allow the officer concerned to function in the ordinary way.
The matter is however not res integra and there is a series of decisions of this Court which throw considerable light on the power of a master including a Government to suspend a servant or an officer under rules of service or even de hors such rules.
The law of master and servant including Government servants with regard to suspension of an employee was discussed at some length in The Management of Hotel Imperial V. Hotel Workers ' Union(1).
However rules of service of Government officers did not fall for consideration there.
Champak Lal Chimanlal Shah vs The Union of India(1) was a case where a temporary Government servant 's services were terminated.
The case shows, as is well known, that even More a formal departmental enquiry is launched a preliminary enquiry is usually held to find out whether a prima facie case is made out against a Government servant.
This preliminary enquiry is directed to the collection of facts in regard to the work and conduct of a Government servant in which he may or may not be associated so that the authority concern may decide whether or not to subject the servant concerned to the enquiry under article 311 for inflicting one of the three major punishments mentioned therein and such a preliminary enquiry may even be held ex parte.
In R. P. Kapur vs Union of India & another(3) the general principles governing a master and servant were discussed in some detail and it was said "If there is no express term in the contract relating to suspension and payment during such suspension or if there is no statutory provision in any law or rule, the employee is entitled to his, full remuneration for the period of his interim suspension; on the other hand if there is a term in this respect in the contract or there is a provision in the statute or the rules framed thereunder providing for the scale, of payment during suspension, the payment would be in accordance there with.
On general principles therefore the authority entitled to appoint a public servant would be entitled to suspend him pending a departmental enquiry (1) ; , 482.
(2) (3) ; , 445.
72 3 into his conduct or pending a criminal proceeding, which may eventually result in a departmental enquiry against him.
" There is however a direct authority of this Court in section Govinda Menon vs The Union of India(1).
The appellant before this Court was a member of the Indian Administrative Service.
He was the First Member of the Board of Revenue, Kerala State and was holding the post of Commissioner of Hindu Religious and Charitable Endowments.
On the basis of certain _ complaints containing allegations of misconduct against the appellant in the discharge of his duties as such Commissioner the Kerala Government instituted certain preliminary enquiries and thereafter started disciplinary proceedings against him and also placed him under suspension under rule 7 of the All India Services (Discipline and Appeal) Rules.
One of the grounds urged by the appellant was that the order of suspension which was dated March 8, 1963 was not in compliance with rule 7 inasmuch as definite charges were framed against him only on 6th June, 1963.
On the basis of rule 5(2) it was argued that the word "charges" which occurred in 'this rule and in rule 7 should be given the same meaning and no ,order of suspension could be passed under rule 7 before the ,charges in terms of r. 5(2) were tramed against him.
This was turned down by this Court observing (at p. 582) : "Rule 5(2) prescribes that the grounds on which it is proposed to take action shall be reduced to the form of a definite charge or charges.
The framing of the charge under Rule 5(2) is necessary to enable the member of the Service to meet the case against him.
The language of rule 7(1) is however different and that rule provides that the Government may place a member of the Service under suspension "having regard to the nature of the charge/charges and the circumstances in any case" if the Government is satisfied that it is necessary to place him under suspension.
In view of the difference of language in rule 5(2) and rule 7 we are of the opinion that.
the word charges ' in rule 7(1) should be given a wider meaning as denoting the accusation or imputation against the member of the Service.
" It is worthy of note, that in the order of suspension it was stated as follows "The Government have received several petitions containing serious allegations of official misconduct (1) [1967]2 S.C.R. 565. 724 against Shri section Govinda Menon .
Prelimi nary enquiries caused to be conducted into the allegations have shown prima facie that the officer is guilty of corruption.
The Kerala High Court has also occasion to comment on the conduct of the officer in their judgment in O.P. 2306 of 1962 delivered on, 12th February 1963. .
The judgment in the above case and the preliminary report of the X Branch police have disclosed the following grave charges of serious irregularity and official misconduct on the part of the accused officer The detailed enquiry into 'the charges by the XBranch is in progress.
The evidence in the case has to be collected from a large number of officers who are.
subordinate to the accused officer in his capacity as First Member of the Board of Revenue.
In the interest of the proper conduct of the enquiry it is necessary that the officer should not be allowed to continue in that post.
Having regard to the nature of the charges against the officer and the circumstances the proper course would be to place him under suspension.
Shri section Govinda Menon I.A.S. . is therefore placed under suspension under Rule 7 of the All India Services (Discipline and Appeal) Rules 1955 till the disciplinary proceedings initiated against him are completed. ', It was urged before us that the order of suspension there was different from the one before us.
While there is no doubt that the order against the appellant in the above case was far more detailed both with regard to the nature of the charges and to the necessity of placing him under suspension, in substance there is little difference for the purpose of rule 7 of the Service Rules.
The order in this case dated 31st July 1964 shows that serious allegations of corruption and malpractices had been made against the respondent and he was also reported to have contravened the provisions of the All India Service Conduct Rules and enquiries made by the Government of Bihar into the allegations had revealed that there was a prima facie case made out against him.
Merely because the order mentioned that disciplinary proceedings were contemplated against the respondent, as compared to rule 7 which contains phrases like "the initiation of disciplinary proceedings" and the "starting of such proceedings" we cannot hold that the situation in the present case had not reached a stage which called for an order of suspension.
In substance disciplinary proceedings can be said to be started against an 7 25 officer when complaints about his integrity or honesty are entertained and followed by a preliminary enquiry into them culminating in the satisfaction of the Government that a prima facie case has been made out against him for the framing of charges.
When the order of suspension itself shows that Government was of the view that such a prima facie case for departmental proceedings had been made out the fact that the order also mentions that such proceedings were contemplated makes no difference.
Again the fact that in other rules of service an order of suspension may be made when "disciplinary proceeding ', were, contemplated" should not lead us to take the view that a member of an All India Service should be dealt with differently.
The reputation of an officer is equally valuable no matter whether he belongs to the All India Service or to one of a humbler cadre.
It is the exigency of the conditions of service which requires or calls for an order of suspension and there can be no difference ,in regard to this matter as between a member of, an All India Service and a member of a State Service or a Railway Service.
In the result the appeal is allowed but in the circumstances, of the case we direct the parties to pay and bear their own costs.
V.P.S. Appeal allowed.
| IN-Abs | Serious allegations of corruption and malpractices had been made against the respondent, a member of the Indian Police Service, serving in the State of Bihar.
Inquiries made by the State Government revealed that there was a prima facie case made out against him.
He was suspended by an order which stated that disciplinary proceedings were contemplated against the respondent.
On the question whether the suspension of a member of the service can only be ordered after definite charges have been communicated to him in terms of r. 5(2) of the All India Services (Discipline and Appeal) Rules, 1955, or whether the Government is entitled to place him under suspension even before that stage has been reached after a preliminary investigation, HELD : (1) The fact that in other rules of service there is specific provision for an order of suspension even when disciplinary proceedings were contemplated, does not mean that a member of the All India Service should be dealt with differently.
It would not be proper to interpret the Rules, which from a self contained Code, by reference to the provisions of other rules even if they were made by or under the authority of the President of India.
[718 F G] (2) Rule 7 expressly provides for suspension of a member of the service, having regard to the nature of the charges, for the purpose of disciplinary proceedings.
The word 'charges ' in the rule means accusations or amputations against a member of the service.
If the disciplinary authority takes note of the allegation and is of the opinion after preli minary inquiries that the circumstances of the case justify further investigation to be made before definite charges can be framed it would not be improper to remove the officer from the sphere of his activity either by transfer or suspension inasmuch as it may be necessary to find out facts from people working under him or look into papers which are in his custody.
Ordinarily when serious imputations are made against the conduct of an officer, the disciplinary authorities cannot immediately draw up the charges and in some cases a considerable time may elapse before the superior authority can come to a conclusion that definite charges can be levelled against the officer.
Merely because the order mentions that the disciplinary proceedings were contemplated it cannot be held that the situation in the present case had not reached the stage which called for an order of suspension.
In substance, disciplinary proceedings can be said to have been started when complaints about the integrity of an officer are entertained, followed by a preliminary inquiry into them culminating 716 in the satisfaction of the Government that a prima facie case has been made out against him for the framing of charges.
When the order of suspension itself shows that the Government was of the view that such a prima facie case for launching departmental proceedings has been made out the fact that the order also mentions that such proceedings were contemplated makes no difference.
1721 B F; 723 G; 724 G H; 725 B C] section Govinda Menon vs Union of India, ; , followed.
|
Appeal No. 1056 of 1967.
Appeal from the judgment and decree dated May 12, 1967 of the Calcutta High Court in Appeal from Original Order No. 218 of 1966.
R. H. Dhebar and section P. Nayar, for the appellants.
section T. Desai and P. C. Bhartari, for the respondent.
The Judgment of the Court was delivered by Shelat, J.
This appeal, under a certificate, raises two questions.
The first is as to the nature of the power of the Collector of Customs under the proviso to the %second sub section of section 110 of the Customs Act, 52 of 1962, and the second is as to whether the Collector under that proviso can extend the period 804 for giving notice under section 124 (a) of the Act either after the initial period of six months or the extended period has already expired.
In 1963, the respondent carried on business as a dealer in watches in the name and style of Walton Watch Company in Calcutta.
In 1955, he also used to have another business premises where he carried on the same business in the name of Walton Watch Company.
That business was wound up in that year and he had the stock in trade of that business transferred to his business carried on in the name of Walton Watch Company.
On March 19, 1963, the Rummaging.staff under the appellant raided the respondent 's business premises and seized 218 watches, all of foreign 'Make, 87 of these watches, however, were released on the respondent then and there producing vouchers relating to them.
Later on, 21 more watches were released on September 18, 1963 and February 27, 1964 on more vouchers having been produced.
The case of the Customs authorities, however, was that he was not able to produce documentary evidence in respect of the rest of the watches, and therefore.
Their release was not possible.
On March 6, 1964, the appellant served on the respondent a notice under section 124(a) to show cause why the rest of the said watches should not be confiscated and personal penalty should not be imposed upon him.
Watches imported without licence or ,on which proper import duty has not been paid are undoubtedly liable to confiscation under section 111(d).
1,10, which finds its place in Ch.
XIII dealing with searches, seizure and arrest, provides for seizure, inter alia, of goods.
Under sub section
(1), if a proper officer has "reason to believe" that any goods are liable to confiscation under.
the Act '.
he may seize such goods.
Sub section (2) reads as follows "(2) Where any goods are seized under sub section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Collector of Customs for a period not exceeding six months.
" Sec. 124 provides that no order confiscating any goods or imposing any penalty on any person shall be made unless the owner of the goods or such person is given a notice in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty.
The section does not lay down 805 any period within which the notice, required by it has to be given.
The period laid down in section 110(2) affects only the seizure of the goods and not the validity of the notice.
Since the watches in question were seized on March 19, 1963, the initial period of six months provided under the, second subsection of section 110 expired on September 19, 1963 and the respondent became entitled to the return of the said watches as no show cause notice had till then been issued to him.
But the ' appellant 's case was that an extension for a further period of four months was applied for and was granted by the Collector on September 19, 1963 under his power under the said proviso on the ground that certain inquiries at Bombay and Delhi yet remained to be made.
The extended period of four months expired on January 19, 1964 and a further extension of two months was applied for on January 3, 1964.
But the Collector passed his order granting further extension on February 20, 1964, that is to say, about a month after the first extended period had expired.
Admittedly, both the extension orders were passed ex parte and without any opportunity of being heard having been given to the respondent.
The respondent, therefore, got no chance to resist either of the two applications for extension and to show that no sufficient cause had been shown, and that therefore, no order of extension was justified or should be granted, and the watches should, as provided by section 110(2), be restored to him.
He also got no opportunity to plead before the Collector that the right to have, the watches restored to him having already accrued to him on January 19, 1964, it could not be defeated by an order of extension passed after the first extended period had already lapsed.
Aggrieved by the two orders of extension passed in the manner aforesaid, the respondent moved the High Court of Calcutta under article 226 of the Constitution, contending that the proviso to section 110(2) envisaged only one extension, and that therefore, the second extension was invalid.
The learned Single Judge, who heard the writ petition, rejected this contention holding that the proviso empowered the Collector to grant as many extensions as the completion of the inquiry and the issuance of the notice under section 124(a) required but in no case exceeding six months at a time.
The second contention urged by the respondent was that the period of the first extension having expired on January 19, 1964 and no further extension having been granted by that date, he became entitled to restoration of the said watches and the second order extending the period by two months more granted a month after the expiry of the first extended period would be of no avail to the Customs authorities.
This contention too was rejected on 806 the ground that where there is a prescribed time for doing a thing but an express power is given to an authority to extend that time, such power can be exercised even after the prescribed time has expired unless there is an express provision prohibiting to, do so.
There was no such provision.
The learned Single Judge also held that there was no need to give to the respondent any notice of the applications for extension, the only requirement being that a sufficient cause had to be shown to the satisfaction of the Collector.
The learned Judge also rejected a third contention by the respondent that in the absence of any information with the Customs officers as regards the watches save that they were of foreign manufacture, they could not have 'entertained any reasonable belief that their importation was contrary to or in violation of any statutory provision.
This contention was rejected on the strength of the supplemental affidavits of the Customs officers ordered by the learned Judge.
The result was that the learned Judge dismissed the writ petition negativing, inter alia, the res pondent 's plea as to the restoration of the seized watches.
On an appeal by the respondent, a Division Bench of that High Court took a contrary view.
It held that the watches having been seized on March 19, 1963, the period of six months expired on September 18, 1963, that if a notice under section 124(a) was not given by that time, section 110(2) imposed a statutory obligation on the customs to return the goods to the person from whom they were seized.
The Division Bench observed that even assuming that the first extension which was granted ex parte and without any opportunity to the respondent of being heard were to be valid, the period of four months granted then having expired on January 19, 1964 and no order for further extension having admittedly been made, it was obligatory on the Customs to return the watches to the respondent.
There being such a statutory obligation under section 110(2), there was a corresponding statutory right in the respondent to have them restored to him.
The Divi sion Bench was of the view that such a right having accrued to the respondent, it could not be defeated by an order passed one month after the lapse of the first extended period.
It also held that the words "sufficient cause being shown" used in the proviso meant that the Collector had to decide an application for extension judicially, the reason being that the Collector could not fairly and justly determine that a sufficient cause was shown without hearing the pros and cons of the question, and therefore, he had no jurisdiction to grant extension without giving to the respondent an opportunity of being heard.
In this connection the Division Bench observed "As long as the period of issuing notice has not expired, it might be one thing.
But quite a different 807 set of circumstances arise when the period has expired and the right to the return of the goods is vested in the person from whose possession the goods are seized.
If you are to take away the right y on can only do that for a sufficient cause.
How can the officer concerned decide as to whether a sufficient cause has been shown, so as, to divest a vested right, unless he hears the parties affected.
Even after the supplementary affidavits were filed in this case, it is extremely doubtful whether a sufficient cause has been shown.
" According to the Division Bench, even if the Collector 's function, tinder the proviso were to be treated as an administrative, function, his authority being to determine the question affecting the, rights of the citizen, there was an implied duty to act judicially.
On this reasoning, the Division Bench held that in any event the second order of extension was bad.
It also found that the show cause notice issued under section 124(a) was vague, gave no opportunity to the respondent to explain the allegations contained therein, and therefore, was bad, with the result that the appellant would be required to give a fresh notice.
For the reasons above stated the Division Bench reversed the judgment of the Single Judge and allowed the writ petition.
The correctness of this judgment is the subject matter of this appeal.
We may at this stage mention that counsel for appellant for mulated the following two contentions only : (1) that the liability to return the goods seized under section 110(1) on the expiry of the time prescribed under sub section
(2) is not absolute as it is subject to the period being extended for a period not exceeding six months, that is to say, within the over all period of one year; that therefore, there is no question of any right being vested in the respondent on the expiry of the first six months or the extended period or such right being divested until one year from the date of seizure has expired: and (2) that the proviso to section 1 10 (2) does not contemplate any notice to the respondent as the considerations which would weigh with the Collector or which would be relevant for granting extension would be of such a nature that they could not be disclosed.
such disclosure being against public interest; that only two requirements are envisaged for the extension of time and they are (i) that a sufficient cause is shown, and (ii) that the extension is within one year.
808 As already stated, sub section
( 1 ) of section 1 1 0 authorises seizure.
the only requirement being a reasonable belief on the part of the conceded officer at the time of seizure.
The power of seizure founded on a mere reasonable belief being obviously an extraordinary power, the second sub section envisages completion of the enquiry within a period of six months from the date of seizure.
But it provides that if such an enquiry is not completed within that period and a notice under section 124(a) is, therefore.
not given, the person from whom the goods are seized becomes entitled to their restoration.
However, on the supposition that in some cases such an investigation may not be completed owing to some difficulties, the legislature gave under the proviso power to the Collector, an officer superior in rank and also an appellate authority under section 128, to extend the time on two conditions.
namely, (1) it does not exceed one year, and (2) on sufficient cause being shown.
The policy of the legislature, therefore.
clearly was that in view of the extraordinary power of seizure, the enquiry should ordinarily be completed within six months but since it might not be possible to do so in some cases, it gave power of extension to the Collector.
The legislature was thus careful to entrust the power of extension to a superior officer I who also has the power to hear inquiries under the Act involving penal consequences and also appeals.
Cases where extension would have to be asked for and granted are thus envisaged as exceptions to the general rule of six months laid down in sub section
The second limitation to the power is that such extension can be ranted only on sufficient cause being shown, a phrase often used in provisions for condonation of delay, such as section 5 of the Limitation Act, 1909.
There can be no doubt that the proviso to the second sub section of section II 0 contemplates some sort of inquiry.
The Collector, obviously, is expected not to pass extension orders mechanically or as a matter of routine, but only on being satisfied that there exist facts which indicate that the investigation could not be completed for bona fide reasons within the time laid down in section 110(2), and that therefore, extension of that period has become necessary.
He cannot, therefore, extend the time unless he is satisfied on facts placed before him that there is a sufficient cause necessitating extension.
The burden of proof in such an inquiry is clearly on the Customs officer applying for extension and not on the person from whom the goods are seized.
The question, therefore, is as to the nature of such a function and power entrusted to and conferred on the Collector by the proviso.
It will be noticed that whereas sub section
( 1 ) of section 1 1 0 uses the expression "reason to believe" for enabling a Customs Officer to seize goods, the proviso to sub section (2) uses the expres 809 sion "sufficient cause being shown" It would seem that sub section (1) does not contemplate, an inquiry at the stage of seizure, the only requirement being the satisfaction of the concerned officer that there are reasons to believe that the goods are liable to confiscation by reason of their illegal importation.
Even so, such satisfaction, as laid down in Narayanappa vs Commissioner of Income Tax, Bangalore(1), is not absolutely subjective inasmuch as the reasons for his belief have to be relevant and not extraneous.
It is clear that the legislature was not prepared to use the same language while giving power to 'the Collector to extend time and deliberately used the expression "sufficient cause being shown".
The point is why should the legislature have used such a different expression while enacting the proviso if its intention was to confer power which would depend on a more ' subjective satisfaction as to the cause for extension.
The words "sufficient cause being shown" must mean that the Collector must determine on materials placed before hi that they warrant extension of time.
Where an order is made in bona fide exercise of power and within the provisions of the Act which confers such power, the order undoubtedly is immune from interference by a court of law and therefore, the adequacy of the cause shown may not be a ground for such interference.
But there, can be no doubt at the same time that the inquiry to be held by the Collector has to be on facts, i.e., materials placed before him.
There is there fore no question in such cases of the subjective satisfaction of the Collector ' for, what he is asked to do by the proviso is to determine that the cause shown before him warrants an extension of time.
In Lakhampal 's case(2) this Court noticed a similar diffe rence of language used in Tr.
30(1) (b) and 30 A(9) of the Defence of India Rules, 1962 which dealt with two different types of powers.
Though it was a case dealing with preventive detention, what is important is that the decision primarily depended on the difference in language used in the two rules and the difference it made in the character of the two powers.
A similar expression, though not exactly the same, also came to be construed by the House of Lords in De Verteuil vs Knaggs & Anr.(3), a case often referred to while determining the nature of power.
The question which arose there was whether under section 203 of the Trinidad Immigration Ordinance, No. 161, the government could pass an order transferring indentured labour from one employer to another without notice to the concerned employer against whom complaints as to treatment of the laborers were made.
The section provided that if at any time "it appears to the governor on (1) (2) ; (3) 810 sufficient ground shown to his satisfaction, that all or any of the immigrants indentured on any plantation should be removed therefrom, it shall be lawful for him to transfer the indentures of such immigrants to any other employer.
" Construing this provision, Lord Parmesan observed at p. 560 of the report : "The Ordinance does not prescribe any special form of procedure, but there is an obvious implication that some form of inquiry must be made, such as will enable the Governor fairly to determine whether a sufficient ground has been shown to his satisfaction for the removal of indentured immigrants.
What is the procedure which in such a case the law will imply when the Legislature is silent ? The acting Governor was not called upon to give a decision on an appeal between parties, and it is not suggested that he holds the position of a judge or that the appellant is entitled to insist on the forms used in ordinary judicial procedure.
On the other hand, the acting Governor could not properly carry through the duty entrusted to him without making some inquiry whether sufficient grounds had , been shown to his satisfaction that immigrants indentured on the La Gloria estate of the appellants would be removed.
Their Lordships are of opinion that in making such an inquiry there is, apart from special circumstances, a duty of giving to any person against whom the complaint is made a fair opportunity to make any relevant statement which he may desire to bring forward and a fair opportunity to correct or controvert any relevant statement brought forward to his prejudice." In Kraipak vs Union of India(1) the power of a selection board to prepare a selection list from amongst the public servants for appointment in the senior and junior scales was held to be quasijudicial although the board had no power of appointment itself.
In doing so, this Court observed that the dividing line between judicial and administrative functions was thin and gradually evaporating, and that the functions performed by those doing judicial function and administrative function, where the rights of citizens are affected to their prejudice, had the same object, namely, to do justice and deciding the question fairly and justly.
In the former case, there would be express rules of procedure, but the effect of those rules is only to enable or facilitate to 'decide fairly and justly.
The Court also pointed out that in recent years the concept of quasi judicial power has been undergoing a radical change and noted with approval the decision in Regina vs Criminal Injuries Compensation Board Ex parta Lain (2) where it was (1) (2) 811 held that certiorari would be available not only where, the impugned order infringes immediately enforceable rights but also where it is a paste as a result of which legally enforceable rights may be affected.
If the power of preparing a selection list without the power to appoint, as in Kraipak 's case(), and power to transfer indentured labour from one to another employer, as in De Verteuil vs Knaggs (2) , are held, in the context of their respective provision I to be quasi judicial powers, there is no reason why, when the statute requires the determination of a sufficient cause on facts produced before the Collector should be held not to be a quasi judicial function or at least a function requiring judicial approach.
But it may be said that in both these cases there was a civil right involved and the, power, therefore, had to be held to be quasijudicial.
But in the present case also, the right to restoration of the seized goods is a civil right which accrues on the expiry of the initial six months and which is defeated on an extension being granted, even though such extension is possible within a year from the date of the seizure.
Since the Collector has on facts to decide on the existence of a sufficient cause, although his decision as to sufficiency of materials before him may be within his exclusive jurisdiction, it is nonetheless difficult to comprehend how he can come to his determination unless, as the Division Bench of the High Court has said, he has before him the pros and cons of the question.
An ex parte determination by the Collector would expose his decision to be one sided and perhaps one based on an incorrect statement of facts.
How then can it be said that his determination that a sufficient cause exists is just and fair if he has before him a one sided picture without any means to check it unless there is an opportunity to the other side to correct or controvert it.
The difference in the language used in the first subsection and the proviso to sub section
(2) lends support to the contention that the power in one case may be subjective , and therefore, not calling for an enquiry, and the power in the other is one, the exercise of which necessitates an enquiry into materials placed before the Collector 'for his determination.
In our view, these considerations lead to the conclusion that the power under the proviso is not to be exercised without an opportunity of being heard given to the person from whom the goods are seized.
In a recent decision in Sheikh Mohammed Sayeed vs Assistant Collector of Customs(3) a contrary view has, however, been taken by a single Judge of the High Court of Calcutta.
The extension order there was passed before the expiry of the initial six months ' period.
But the contention raised was that an opportunity to be heard should have been given to the petitioner.
The learned (1) (2) [1918] A.C.557.A.I.R. 812 Judge distinguished the decision of the Division Bench under this appeal (reported in A.I.R. 1968 Cal.
28) on the ground that the question involved in that decision was whether an opportunity of being heard had to be given in respect only of an extension when the right to restoration of the goods in question has already accrued to the party from whom they were seized, and therefore, the decision did not apply to the case before him when such a right had not vested in the petitioner.
I With respect to the learned Judge, the distinction was not correct, firstly, because the first 'order of extension was only assumed to be correct as the Division Bench concentrated its attention on the second order of extension which also involved the question of the right to restoration of the goods having already vested; and secondly, because the Division Bench set aside the extension order on the ground that the power of extension was quasi judicial or at any rate one which required a judicial approach.
The latter ground applied to both the orders, and therefore, if the second 'order of extension was bad, the first was for the same reason necessarily bad.
The order of extension in both the cases would deprive the person from whom the goods are seized of the right to have the goods restored to him on the expiry of six months from the date of seizure.
As for his decision on the nature of the power,, the learned Judge relied on decisions in Collector of Customs vs N. Sampathu Chetty (1), Babulal Amthalal vs Collector of Customs(2), Pukhraj vs Kohli(3) and Nathmal Jalan vs Additional Collector of CUStOMS(4) which were all cases where the exercise of power ended on reasonable belief or reasons to believe.
But he held that the power under the proviso to section 110(2) should be construed on the same princi ples laid down in those decisions.
This is made clear at page 141.
of the report where he observed "In my view the same principles, are attracted in construing the phrase 'on sufficient cause being shown ' . .
With regard to, the nature and sufficiency of the cause, it is the satisfaction of the Collector of Customs that provides the ground and justification for an order extending the time to complete the inquiry. .
If the order of extension is made before expiry of the initial period of six months, or before expiry of the extended period, it cannot in my view be challenged on the ground that notice to show cause, or opportunity of being heard was not given to the party.
" In our view, equating the power, the exercise of which depends on a mere reasonable belief with the power, the 'exercise of which depends on 'sufficient cause being shown ' envisaging at (1) ; (3) A.I.R. S.C. 1559.
(2) A.I.R. 1957 S.C. 877.
(4) 8 1 3 least some sort of inquiry on facts placed before the authority and determination by him on those facts, is not warranted.
Therefore, a conclusion based on such a premise creates difficulty in sustaining it.
Further, the distinction between an order extending before and after the expiry of the initial or the extended period does not make any different as was sought to be made by the learned Judge, when one inquires into the character of the power of extension.
Both would raise precisely the same question, whether the power is purely administrative requiring no opportunity of being heard or judicial or quasi judicial, as in both the cases the right to the goods being restored would be involved.
We cannot also agree with the learned Judge that there is no indication in the Act to suggest that the Collector is required to act judicially, firstly, because the proviso requires determination on facts and not on mere suspicion and a sufficient cause being made out by the applicant officer, and secondly; because a civil right of a citizen to the restoration of the goods on expiry of the period, whether initial or extended, is affected.
The other decision, which takes a contrary view, is of the High Court of Mysore in Ganeshmul Channilal Gandhi vs Col lector of Central Excise().
The grounds on which the learned Judges there took that view were (i) that the power was administrative, and (2) that if notice were to be necessary, the authority which applies for extension would have to make a,disclosure about the investigation, which disclosure would be detrimental to the investigation itself.
For the reasons already given we cannot agree with the first ground.
As for the second ground, we do not see any reason for the apprehension.
So far as the )initial period of six months is concerned, there is no question of disclosure of the investigation.
The legislature itself contemplated that ordinarily such an investigation would be completed within that period.
The question of disclosure would arise only in cases where for bona fide reasons something yet remains to be done.
The only disclosure in such cases would be about the fact that investigation at some place or places, or about certain matters is still incomplete and pending.
No one suggests that the inquiry to be held by the Collector would be similar to the one held in a court of law or that the officer applying for extension would be compelled to disclose the names of his informants or such other matters which would be detrimental to the investigation.
Even in more serious matters, such as applications for remand in criminal cases, opportunity to be heard has to be given No one has yet suggested that such an opportunity is detrimental to the investigation.
The unreported judgment of the High Court (1) A.T.R. 19(8 Myscre F9.
8 14 of Bombay in M/s. Prakash Cotton Mills Pvt. Ltd. vs Assistant Collector of Central Excise ' Bombay(1) does not throw any further light as it is mostly based on the reasoning of the Mysore High Court.
We are not satisfied that as between the right of the person from whom the goods are seized and the supposed danger to the investigation the matter is so weighted down that we would be compelled to hold that the legislature could not possibly have contemplated a judicial approach by the Collector when he orders extension of time, the effect of which would be the deprivation of, or in any event,, postponement of the right to restoration.
In our view, the first question must be answered In favour of the respondent, and therefore, the Division Bench was right in holding that the power under the proviso was quasijudicial, or at any rate, one requiring a judicial approach.
Consequently, an opportunity of being heard ought to have been given to the respondent before orders for extension were made.
The High Court, consequently, was justified in ordering restoration of the watches in question to the respondent.
In this view it is not necessary for us to decide the second question raised by counsel for the respondent.
We are also not dealing with the question as to whether the notice under section 124(a) was vague, and therefore, void as decided by the Division Bench.
That part of the decision of the High Court was not challenged before us, and therefore, we are not called upon to give our decision on that part of the case.
In the result, the judgment of the Division Bench has to be upheld.
The appeal will stand dismissed with costs.
V.P.S. Appeal dismissed.
| IN-Abs | Under section 110(1) of the if a proper officer has ,reason to believe ' that any goods are liable to confiscation under the Act, he may seize such goods.
Section 124 provides that no order confiscating any goods shall be made unless the owner of the goods is given notice in writing informing him of the grounds on which it is proposed to confiscate the goods.
Under section 110(2) where any goods are seized under sub section
(1) and no notice in respect thereof is given under section 124 within six months ,of the seizure, the goods shall be returned to the person from whose possession they were seized; provided, the period of six months may 'on sufficient cause being shown ' be extended by the Collector of Customs for a period not exceeding six months.
On March 19, 1963 goods were seized from the respondent and, on September 19, 1963 an extension for a period of four months was applied for by the customs authorises and was granted by the Collector on the , round that certain inquiries yet remained to be made by them.
On February 20, 1964, that is, one month after the extended period had expired, the Collector passed an order granting further extension for two months.
Both the extension orders were passed without giving any opportunity to the respondent.
The respondent challenged the second extension and the High Court held that the orders of extension were bad as the Colle ctor had to decide the application for extension judicially.
In appeal lo this Court, HELD : The power of extension under the proviso was quasi judicial, or at any rate, one requiring a judicial approach, and therefore, an opportunity of being beard ought to have been given to the respondent before ,ordering extension.
[811 B C] (a) The policy of the Legislature is, that in view of the extraordinary power of seizure the inquiry should ordinarily be completed within six months, but in exceptional cases, the legislature entrusted to a superior officer the power of extension on sufficient cause being shown.
The Collector is not expected to pass extension orders mechanically or as a matter of routine but only on being satisfied that there exist facts which indicate that investigation could not be completed for bona fide reasons within the time of 6 months laid down in section 110(2), [808 C E, F G] (b) Whereas section 110 (1) uses the expression reason to believe for enabling a customs officer to seize the goods, the proviso to sub section
(2) uses the expression sufficient cause being shown.
Sub Section (1) does not contemplate an inquiry at the stage of seizure, the only requirement being the satisfaction of the concerned officer that there are relevant reasons to believe that the goods are liable to confiscation by reason of illegal im 803 portation.
The words sufficient cause being shown mean that the Collector must determine on materials placed before him that they warrant extension of time.
Further, the civil right to have the seized goods restored which accrues on the expiry of the initial six months is defeated on exten Therefore, when the ' statute requires the determination being grantedtion of a sufficient cause on facts produced before the Collector it should be held to be a quasi judicial function or at least a function requiring judicial approach; and there is no, distinction between extension orders passed before and those passed after the expiry of the initial or the extended period.
[808 H; 809 A, C D; 811 C D] (c) When an order is made in bona fide exercise of power and within the provisions of the Act, which confer such power, the order is immune from interference by a court of law and therefore, the adequacy of the cause shown may not be a ground for interference, but the Collector has to hold an inquiry on facts, that is, on material placed before him, and consider the pros and cons of the question.
[809 D E; 811 E] (d) By holding such inquiry there is no danger of disclosure of facts which would be detrimental to the investigation.
The only disclosure would be about the fact that investigation at some place or places and about certain matters was still incomplete and pending.
As between the tight of the person from whom the goods were seized and the supposed danger to the investigation, the matter is not so weighted that it should he held that the Legislature could not possibly have contemplated a judicial approach by the Collector when he orders of extension of time.
[813 G H; 8 14 B D] Kraipak vs Union of India, [1970] .1
S.C.R. 457, followed.
Lakhanpal 's case; , and De Verteuil vs Knaggs, , referred to Sheikh Mohammed Sayeed vs Asstt.
Collector of Customs, A.I.R. 1970 Cal.
134, Ganeshmul Channilal Gandhi vs Collector of Central Excise, A.I.R. 1968 Mys. 89 and M/s. Prakash Cotton Mills Pvt. Ltd. vs Asstt.
Collector of Central Excise, Bombay, M.P. No. 127/1963 dt. 31 8 1970, overruled.
|
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 article 133(1)(b) of the Constitution.
section T. Desai, Tarkeshwar Dayal and section 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 article 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 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 728 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. section 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 article 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. section 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 articles 132(1) and 133(1) of the Constitution.
So far as article 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 article 133(1) and that was permitted by the High Court.
Therefore, ultimately the certificate was prayed for under article 132(1) and article 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 the appellant cannot be considered to be the subject matter of dispute within the meaning 1 of clause (a) of article 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 article 133(1).
The High Court then considered the question of granting a certificate under clause (b) of article 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 article 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 article 1 3 3 ( 1) (c); the High Court has categorically held that the appellant cannot be granted a certificate under article 133 (1) (a).
Though the concluding part of the order granting the certificate states that it has been granted under article 133(1), in the circumstances mentioned above, it is clear that the certificate has been granted only under article ' 1 3 3 (1 ) (b).
This is on the ground that the appellant claimed his right to the office of the Director, Public 730 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. section T. Desai, learned counsel for the appellant urged that the grant of a certificate under clause (b) of article 33(1) is correct.
In the alternative he contended that as the claim made by the appellant for grant of a certificate under article 132(1) and under article 13 3 (1 ) (e) has not been at all discussed or 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 articles 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 vs 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 article 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. 731 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 vs 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 article 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 article 226 of the Constitution." Similarly in Gyan Chand and others vs 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.
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 article ' 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 vs M/s Shah Pannalal Chandulal(1) and Satyanarain Prasad vs State of Bihar(1) regarding the test to be applied for the purpose of granting a certificate under clause (a) or (b) of article 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. section 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 articles 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 article 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 article 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 article 132 ( 1 ) or article 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 article 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) 733 Prasad vs State of Bihar(1)and M/s Shree Krishna Gyanodaya Sugar Ltd. vs 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 appellant is able to satisfy the court that he is eligible to got a certificate under article 132(1) or under article 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 article 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 article 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) (2) A.I.R. 1970 S.C. 2041.
| IN-Abs | 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 articles 132(1) and 133(1)(a) to (c) of the Constitution.
The High Court held that article 133(1)(a) did not apply, did not consider whether articles 133 (1) (c) and 132 were applicable, doubted whether article 133 (1) (b) would apply, but ultimately granted a certificate under Art, 133(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 articles 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 vs State of Bihar ; and M/s Krishna Gyanodaya Sugar Ltd. vs The State of Bihar and Ors.
A.I. R. , followed.
|
ion No. 91 of 1964.
Petition under article 32 of the Constitution of India for the enforcement of fundamental rights and Civil Appeal No. 358 of 1966.
Appeal by special leave from the judgment and order dated September 9, 1963 of the Allahabad High Court in Civil Writ Petition No. 1885 of 1962.
J.P. Goyal and Raghunath Singh, for the petitioner (in W.P. No. 91 of 1964).
A.K. Sen, J. P. Goyal and Raghunath Singh, for the appel lants (in C.A. No. 358/66).
B.Sen and section P. Nayar, for respondent No. 1 (in W.P. No. 91 of 1964) and respondents Nos. 3 and 4 (in C.A. No. 358 of 1966).
N.N. Sharma, for respondent No. 2 (in W.P. No. 91/64) and respondents Nos. 16 and 17 (in C.A. No. 358/66).
843 The Judgment of the Court was delivered by Bbargava, J.
This writ petition and the appeal challenge the validity of the Hindi Sahitya Sammelan Act No. 13 of 1962 (hereinafter referred to as "the Act").
The facts leading up to the passing of this enactment are that, in the year 1910, some eminent educationists assembled at Banaras and founded an Association for the development of Hindi and its propagation throughout the country.
This Association was named as the Hindi Sahitya Sammelan.
On the 8th January, 1914, it was registered as a Society under the No. 21 of 1860, with Head Office at Allahabad, under the name of Hindi Sahitya Sammelan.
The rules and bye laws of the Society laid down the objects of this Association and the manner of its working.
It had three classes of members, viz., special members (Vishisht Sadasya), permanent members (Sthayi Sadasya), and ordinary members (Sadharan Sadasya).
Under the bye laws, apart from the original members constituting the Society, further mem bers could be admitted under these three classifications on being elected by the working committee of the Society.
Under the Rules and bye laws of the Society, other bodies could be constituted for carrying on activities of the Society.
These included a Governing Body, a Working Committee, a Hindi University Council, Literary Council (Sahitya Samiti), Library Committee, Parchar Samiti and Rashtriaya Bhasha Prachar Samiti.
Through the agencies of these various Committees, the Society carried on the work of development and propagation of Hindi, of spreading the use of Devnagri scrip, of holding examinations, and of confer ring Degrees for proficiency in Hindi.
The Society owned landed properties and buildings at Allahabad as well as at some other places such as Warding, and was holding considerable funds for carrying on its activities.
The Society worked very successfully for a number of years.
It appears that in the year 1950, some differences arose between the members of the Society, and attempt was made to alter the constitution, of the Society.
while one section wanted the alterations, another section was opposed to it.
This resulted in litigation.
Three different suits were instituted in the civil Courts at Allahabad in this connection and injunctions were sought by one party against the other.
Ultimately, the Court appointed a Receiver.
In view of these circumstances, the U.P. Legislature passed an Act known as the U.P. Hindi Sahitya Sammelan Act No. 36 of 1956, under which a statutory body was created under the name of Hindi Sahitya Sammelan, and the word "Sammelan" was defined as referring to the Hindi Sahitya Sammelan constitu ted under the Act.
Under that Act.
Under that Act, the mana 844 gement and properties of the original Hindi Sahitya Sammelan, which was a registered Society, were to be taken over by the new statutory Sammelan.
That Act was, however, declared void by the Allahabad High Court on the ground that Act had made the original Sammelan cease to exist and provided for the constitution of a new Sammelan under its terms in which the members of the original Sammelan had no say, so that Act infringed the right of the members of the original Sammelan of forming an association guaranteed by article 19 (1) (c) of the Constitution.
It was further held that Act was not saved under article 19(4) of the Constitution.
Thereafter, the present Act, now challenged in this writ petition and the appeal, was passed by Parliament under Entry 63 of List I of the Seventh Schedule to the Constitution.
The Act itself, in section 2, contained the necessary declaration to give legislative competence to Parliament under that Entry.
The Act first contained in section 2 a declaration in the following words : "Whereas the objects of the institution known as the Hindi Sahitya Sammelan which has its head office at Allahabad are such as to make the instituation one of national importance, it is hereby declared that the institution known as the Hindi Sahitya Sammelan is an institution of national importance.
" Having declared this institution as an institution of national importance, th. , Act proceeded to define "Sammelan" as meaning the institution known as the Hindi Sahitya Sammelan incorporated under this Act, while the word "Society" was defined to mean "the Hindi Sahitya Sammelan which has its head office at Allahabad and is registered under the ." Under section 4(1) of the Act, the Sannnelan was constituted which was to consist of the first members of the Sammelan and all persons who may hereafter become members thereof in accordance with the rules made in that behalf.
This statutory Sammelan was constituted as a body corporate by the name of the Hindi Sahitya Sammelan, and under sub section (2) of section 4, it was to have perpetual succession and a common seal with power, subject to the provision of the.
Act, to acquire, hold and dispose of property and to contract and to sue and be sued by that name.
The Head Office of the Sammelan was to be at Allahabad.
Under subs.(4) of section the first members of the Sammelan were to consist of persons who, immediately before the appointed day. (a) were special members (Vishisht Sadasya) of the Society; 8 45 (b) (were.
life members (Sthayi Sadasya) of the Society.
(c) had been Presidents of the Society; or (d) were awarded the Mangla Prasad Paritoshik by the Society.
This sub section
(4) of section 4 was amended retrospectively with effect from the date that the Act came into force by the Hindi Sahitya Sammelan (Amendment) Act No. 1 of 1963, and the first members of the Sammelan were, under this amendment, declared to be (a) all persons who, immediately before the appointed day, were members of the Society; (b) all persons who, before that day, had been Presidents of the Society; and (c) all persons who, before that day, were awarded the Mangla Prasad Paritoshik by the Society.
It is not necessary to give in detail the other provisions of the Act, except that it may be mentioned that the Act provided for vesting of all property, movable or immovable, or, belonging to the Society in the Sammelan, transferring all rights and Liabilities of the Society to the Sammelan, converting reference to the Society in any law to the Sammelan, and other similar necessary provisions.
The Act itself did not make any provision for the future membership of the Sammelan; but, under section 12(1) (a), the first Governing Body of the Sammelan was directed to make rules in respect of matters relating to membership, including qualifications and disqualifications For membership of the Sammelan.
The first Governing Body was to be constituted under section 8 and was to consist of a Chairman, a Secretary and 13 other members.
This Governing Body was to be constituted by a notification in the Official Gazette by the Central Government.
The thirteen members were to be chosen as follows : (i) one member to represent the Ministry of the Central Government dealing with education; (ii)one member to represent the Ministry of the Central Government dealing with finance; (iii)not more than three members from among the former Presidents of the Society; and (iv)the remaining number from among persons who are, in the opinion of the Central Govern 846 ment, eminent in the field of Hindi language or Hindi literature.
It was this first Governing Body which was to make rules on all matters relating to membership of the Sammelan under section 12 (1 )(a) of the Act.
These rules were not have effect until they were approved by the Central.
Government and were published by the first Governing Body in such manner as the Central Government may, by order, direct.
A copy of the rules was also to be laid before each House of Parliament.
Counsel for respondent No. 1 placed before us a copy of the rules which, according to him, have been made by the first Governing Body with the approval of the Government and have been published as required.
The Rules come into force on 1st of February, 1971.
The petition under article 32, and the petition under article 226, out of which the civil appeal arises, were both moved much earlier and long before these Rules were framed.
These petitions challenged the validity of the Act, without taking into account the actual Rules framed, mainly on the ground that he Act had interfered with the right of the petitioners to form association Linder article 19(1)(c) of the Constitution and was not protected by article 19(4).
In the petition before the Allahabad High Court, the Court held that, since all the members of the Society had also become members of the Sammelan under the Act, there was no infringement of the right to form association, so that the Act could not be declared invalid on that ground.
The writ petition in this Court has been filed by only one member of the Society, while the petition in the High Court and the appeal against the judgment of the High Court, which is before us, were filed by the original Hindi Sahitya Sammelan as one party and 72 members of that Sammelan joining as other petitioning parties. 'In the civil appeal, thus, the grievance that the Act ha$ infringed the fundamental right has been put forward both by the Society itself as well as by 72 of its members, including members of the Working Committee and the Governing Body of the society.
They have all come up to this Court against the decision of the High Court in this appeal by special leave.
In the counter affidavits filed on behalf of the respondents in the writ petition before the High Court as well as in the writ petition in this Court, the position taken up was that the Act, in fact, does not deprive the Society and its members of any rights which they had under the constitution of the Society and did not interfere with their right of association inasmuch as all the members of the Society have been included as members of the Sammelan under the Act.
The High Court, in fact, dismissed the writ petition on accepting this submission put forward on behalf of the respondents.
In the arguments before us, learned counsel for 847 respondent No. 1, however, took UP a different position and urged that the Act keeps the Society in tact as it was, where a new Sammelan is constituted under the Act for the purpose of managing the institution which has been declared as an institution of national importance.
He put this aspect of the case in the forefront, but, in the alternative, he also argued the case on the basis of the position taken up in the counter affidavits in the High Court and in this Court as mentioned above.
We consider it convenient to first deal with the case as was specifically put forward in the counter affidavits.
In these counter affidavits, the position taken up is that, having declared the old Hindi Sahitya Sammelan, which was a Society registered under the , as an insti tution of national importance, Parliament has proceeded to legislate in respect of it under Entry 63 of List I of the Seventh Schedule in order that its administration may not suffer as a result of the quarrels that were going on inter se between the members of the Society.
It was for this purpose that a first Governing Body was constituted to take over the management temporarily.
The Act was designed to reconstitute the Sammelan in such manner that it could work successfully and without difficulties and, in making provision for this purpose, all members of the old Society were included as members of the Sammelan, so that their right of forming association may not be taken away from them.
The Society was never dissolved; instead of the Society remaining a body registered under the , it was converted into a statutory Sammelan under the Act.
It, however, appears on examination of the provisions of the Act that the Sammelan under the Act is composed not only of persons, who were members of the Society, but of others who have been given the right to be members of the Sammelan without the consent of the preexisting members.
Under section 4(4) itself, as retrospectively amended in 1963, apart from persons, who were members of the Society, others, who have been made members of the Sammelan, are all persons who, before that day, had been Presidents of the Society and all persons who, before that day, were awarded the Mangla Prasad Paritoshik by the Society.
These members have been added without any option being available to the existing members of the Society to elect or refuse to elect them as members which was the right they possessed under the constitution of the Society itself.
Further, under section 12 (1) (a), very wide powers were given to the first Governor Body to make rules in respect of matters relating to membership, including qualifications and disqualifications for membership of the Sammelan.
Under this power, the rules framed could make 10 L1100 SupCI71 848 provision for admission of persons as members whom the original members of the Society may never have liked to admit in their Society.
The number of such new members could even be so large as to leave the original members in a small minority with the result that those members could become totally ineffective in the Society.
Even in the Rules actually framed, there is provision for admission of members under various classes.
In addition to the persons mentioned in section 4(4) of the Act, Rule 6 proVides for membership of persons who may become Sabhapatis of the Sammelan for any annual session subsequent to the Act coming into force, and persons who may be awarded Mangala Prasad Paritoshik subsequent to the Act coming into force.
Under Rules 7, 8, and 9, new Vishisht Sadasyas, Sthayi Sadasyas, and Sadharan Sadasyas can be admitted to the membership of the Sammelan on payment of Rs. 1,000/ or Rs. 300/ , as the case may be.
This admission to membership, according to the Rules, will be made by the new Karya Samiti to be elected under the Rules and not by the Working Committee of the original members of the Association.
Further, under section 7(2) of the Act, the Governing Body of the new Sammelan is to consist of such number of persons, not exceeding 55, as the Central Government may from time to time determine; and out of these, a number not exceeding 7 are to be nominated by the, Central Government from among educations of repute and eminent Hindi scholars.
These 7 nominees are to be chosen by the Central Government and on becoming, members of the Governing Body, under Rule.
11 they become members of the Sammelan.
Under Rule 10, educational institutions can also be admitted as Sanstha Sadasyas of the Sammelan by the new Karya Samiti and, thereupon, a representative of each of such institution has right to participate in ' proceedings of the Sammelan, exercising all the rights of a member.
It will, thus, be seen that the Sammelan, which has come into existence under the Act, is not identical with the Sammelan which was registered as a Society under% the .
Certain persons have been added as members by the Act and by the Rules.
Admission of future members is no longer at the choice of the original members who ' had formed the Asso ciation,Persons, in whose admission as members the members of the, Society, had no hand, can become members and get the right of associating with them in the Sammelan, without the original members having any right to obecti.
this is clear interference with the right to form an association which had been exercised by the members of the Society by forming the Society with its constitution, under which they were members and future members could only come in as a result of their choice by being elected by their Working Committee.
We are unable to agree with the High Court that the new Sammelan, as constituted under the Act, 849 is identical with the Society and that all the rights of forming an association, which were being exercised by members of the Society, have been kept in tact under the Act.
It was argued that the right guaranteed by Article 19 (1 (c) is only to form an association and, consequently, any regulation of the affairs of the Association, after it has been formed, will not amount to a breach of that right.
It is true that it has been held by this Court that, after an Association has been formed and the right under article 19 (1) (c) has been exercised by the members forming it, they have no right to claim that its activities must also be permitted to be carried on in the manner they desire.
Those cases are, however, inapplicable to the present case.
The Act does not merely regulate the administration of the affairs of the Society, what it does is to alter the composition of the Society itself as we have indicated above.
The result of this change in composition is that the members, who voluntarily formed the Association, are now compelled to act in that Association with other members who have been imposed as members by the Act and in whose admission to membership, they had no say.
Such alteration in the composition of the Association itself clearly interferes with the right to continue to function as members of the Association which was voluntarily formed by the original founders.
The right to form an association, in our opinion, necessarily, implies that the persons forming the Association have also the right to continue to be associated with only those whom they voluntarily, admit in the Associate on.
Any law, by which members are introduced in the voluntary Association without any option being given to the members to keep them out, or any law which.
takes away the membership of those who have voluntarily Joined it, will be a law violating the right to form an association.
If we were to accept the submission that the right guaranteed by article 19 ( 1 ) (c) is confined to the initial stage of forming an Association and does not protect the right to continue the Association with the membership, either chosen by the founders or regulated by rules made by the Association itself, the right would be meaningless because, as soon as an Association is formed, a law may be passed interfering with its composition.
, so that the Association formed may not be able to function at all.
The right can be effective only if it is held to include within it the right to continue the, Association with its composition as voluntarily agreed upon by the persons forming the Association.
This aspect was recognised by this Court though not in plain words, in the case of O. K. Ghosh and Another vs E. X. Joseph(").
The Court, in that case. was considering the validity of Rule 4 (B) of the Central Civil Service,,, (Conduct) Rules, 1955, which laid down that: (1)[1963] Supp 3 S.C.R. 789. 850 "No Government servant shall join or continue to be a member of any Service Association of Government servants (a)which has not, within a period of six months from its formation, obtained the recognition of the Government under the Rules prescribed in that behalf; or (b)recognition in respect of which has been refused or withdrawn by the Government under the said Rules.
" This Court held: "It is not disputed that the fundamental rights guaranteed by article 19 can be claimed by Government servants.
article 33 which confers power on the Parliament to modify the rights in their application to the Armed Forces, clearly brings out the fact that all citizens including Government servants, are entitled to Claim the rights guaranteed by article 19.
Thus, the validity of the impugned rule has to be judged on the basis that the respondent and his co employees are entitled to form Associations or Unions.
It is clear that Rule 4 B imposes a restriction on this right.
It virtually compels a Government servant to withdraw his membership of the Service Association of Government Servants as soon as recognition accorded to the said citation is withdrawn or if, after the Association is formed, no recognition is Aaccorded to it within six months.
In other words, the right to form an Association is conditioned by the existence of the recognition of the said Association by the Government.
If the Association obtains the recognition and continues to enjoy it, Government servants can become members of the said Association; if the Association does not secure recognition from the Government or recognition granted to it is withdrawn, Government servants must cease to be the members of the said Association.
That is the plain effect of the impugned rule.
" The Court in the above passage, thus, accepted the principle that the Government servants, who may have formed an Association.
could not, be compelled to resign from it by imposition of a condition of recognition of this Association by the Government and that if the Government servants are required to cease to be members that would be a violation of the right under article 19 (1) (c).
The Court, of course, in that case, further proceeded 'to examine whether such a restriction on the right could be justified under 851 article 19(4) or not.
That case, thus, supports our view that the right to form an Association includes the right to its continuance and any law altering the composition of the Association compulsorily will be a breach of the right to form the Association.
This Court had also proceeded on the same basis in the case of State of Madras vs V. G. Row(1).
Though this aspect was not clearly brought out in the judgment, the point, which came up for consideration, was decided on the basis that persons forming, an Association had a right under article 19 (1) (c) to see that the composition of the Association continues as voluntarily agreed to by them.
That decision was given in an appeal from a judgment of the High Court of Madras reported in V. G. Row,v.
The State of Madras(2).
In the High Court, this principle was clearly formulated by Rajamannar, C.J., in the following words : "The word "form" therefore, must refer not only to the initial commencement of the association, but also to the continuance of the association as such.
" The Act, insofar as it interferes with the composition of them Society in constituting the Sammelan, therefore, violates the right of the original members of the Society to form an association guaranteed under article 19(1) (c).
Article 19(4), on the face of it, cannot be called in aid to claim validity for the Act.
Under article 19(4), reasonable restrictions can be imposed only in the interests of the sovereignty and integrity of India, or in the interests of public order or morality.
It has not been contended on behalf of the respondent, nor could it be contended that this alteration of the constitution of the Society in the manner laid down by the Act was.
in the interests of the sovereignty and integrity of India, or in, the interests of public order or morality.
Not being protected under article 19(4), if must be held that the provision contained, in the Act for reconstituting the Society into the Sammelan is, void.
Once that section is declared void, the whole Act becomes.
ineffective inasmuch as the formation of the new Sammelan is the very basis for all the other provisions contained in the Act.
In view of this position emerging in the course of argu ments, Mr. B. Sen put forward an entirely different and alter native case before us which we have mentioned earlier.
position he took up was that the Act nowhere specifically lays.
down that the Society small stand dissolved, while it does constitute a new Sammelan.
According to him, therefore, it should (1) ; (2) A.I.R. 1951 Mad.
852 be inferred that, while the Society still continues to exist in its original form, the law has brought into existence a new Sammelan to which all the functions, properties, etc.
of the Society have passed under the Act.
There are three reasons why this alternative submission cannot be accepted as ensuring the validity ,of the Act.
The first is that the specific case taken by the respondents has been that the Act reconstitutes the Society and does not create a separate and indepedent body in the form of a new Sammelan.
Secondly, even if it be accepted that a new Sammelan has been constituted by the Act, the question will ,arise of the Legislative competence of Parliament to pass such :a law.
Constitution of Societies is under List 11 of the Seventh Schedule.
Parliament purported to exercise legislative power under Entry 63 of List I on the basis of a declaration that the Hindi Sahitya Sammelan, Allahabad was an institution of national importance.
The institution that was declared was the Society itself.
It was not a case where the Society could be distinguished from some other institution which might have been declared as an institution of national importance There can, of course, be cases where a Society may be running a college, a school or some other like institution, in which case Parliament may declare that particular institution as of national importance, without declaring the Society as such In the present case, what section 2 of the Act did was to declare the Society itself as an institution of national importance, and, consequently, Parliament became competent to legislate in respect of the Society.
On the interpretation now sought to, be put forward, the Act keeps that Society in tact, but deprives it of all its functions and properties and transfers them to 'a newly constituted body, viz., the Sammelan, as defined under the Aet.
This Sammelan is itself a body corporate, and that Sammelan has never been declared as an institution of national importance.
The only institutaion that was declared as of national importance was the Society which, of course, earlier, carried the same name as the new Sammelan.
Parliament was, therefore, not competent to legislate in respect of this newly constituted Sammelan which, at no stage, had been declared as an institution of national importance.
The third reason why this submission must be rejected, is that, if we were to hold that Parliament pased this Act so as to transfer all the properties and assets of the Society to the Sammelan, the Act would contravene article 19(1)(f) of the Constitution.
On this interpretation, what the Act purports to do is to take away all the properties of the Society, leaving the Society as an existing body, and give them to the new Sammelan.
This Sammelan is a new, separate and distinct legal entity from the Society.
The Society is, thus ' deprived of all its properties by the Act.
Such a law depriving the Society of its properties al 8 5 3 together cannot be held to be a reasonable restriction in the public interest on the right of the Society to hold the property.
The property, under section 5 of the , vested in the Governing Body of the Society.
The members of the Governing Body, therefore had the right to hold the property under article 19(1)(f) and they having been deprived of that property have rightly approached the Courts for redress of their grievance.
In this connection counsel for the respondents relied on decision of this Court in The Board of Trustees, Ayurvedic and Unnanii Tibia College, Delhi vs The State of Delhi and Another(1), where the Board of Trustees of the Ayurvedic and Unani Tibbit College, Delhi was dissolved by the Tibbia College Act, 1952, and the property, which had vested in the Board of Trustees, passed to the newly constituted Board under the impugned Act.
The Court held that there was no violation of the fundamental rights guaranteed by article 19(1)(f) or article 31 That decision, however, proceeded on the basis that the property of the original Society registered under the had vested in the Board of Trustees which had been dissolved and the property, thereafter, did not vest in the members of the Society in view of the provisions of the Act of 1860.
In these circumstances, it was held that no one could complain that his right to property under article 31 or his right to hold the property under article 19 (1) (f) had been violated by the impugned Act.
In the present case, the applicability of article 19(1)(f) is being considered by us on the assumption that the old Society still exists as it was and, yet all its properties have been transferred to the Sammelan.
If the Society still exists, so does its Governing Body in whom the property of the Society vested.
The Act, thus, deprives the members of the Governing Body of the property which still continued to vest in them in spite of the passing of the Act.
This total deprivation of property, instead of regulating the management of the affairs of the Society or its properties, cannot clearly be justified as a reasonable restriction in public interest.
It is true that, at the time when the Act was passed, litigation was going on between the members of the Society, and the affairs of the Society were probably in a mess.
The remedy, however, could not lie in depriving the Society of its property altogether.
Reasonable restrictions could have been imposed so as to ensure the proper preservation of the property of the Society and its proper management.
If the law is passed not merely for ensuring proper management and administration of the property, but for totally depriving the persons, in whom the property vested, of their (1) [1962] Suppl.
I S.C.R. 156. 854 right to hold the property, the law cannot be justified as a reasonable restriction under article 19(5).
Consequently, even on this alternative position taken up by counsel for the respondents, the Act cannot be held to be valid.
As a result, the petition and the appeal are both allowed with costs.
The Act is declared to be invalid, so that there will be restraint on the concerned bodies, including the Union Government, from taking or continuing any action under the Act.
There will be one hearing fee.
R.K.P.S. Petition and Appeal allowed.
| IN-Abs | The Hindi Sahitya Sammelan (hereinafter referred to as the Society) was a registered society founded for the development and propagation of Hindi.
After a number of years of its successful working differences arose between its members and this resulted in litigation.
in 1956 the Uttar Pradesh legislature passed the U.P. Sahitya Sammelan Act, under which a statutory body was created under the name of Hindi Sahitya Sammelan.
This act was declared void by the Allahabad High Court as violating the freedom of association guaranteed under article 19(1)(c) of the Constitution.
Thereafter, Parliament enacted the Hindi Sahitya Sammelan Act, 1962legislating under entry 63, list I of the Seventh Schedule declaringthat "the institution known as the Hindi Sahitya Sammelan is an institution of national importance".
By the Act a statutory sammelan was constituted as a body corporate by the name of the Hindi Sahitya Sammelan.
Under section 4(1) of the Act the Sammelan was to consist of the first members of the Society and all persons who might become members thereafter in accordance with the rules made in that behalf by the first Governing Body to be constituted by the Central Government by notification.
The Act provided, for vesting in the Sammelan of all property movable or immovable, of or belonging to the society.
Petitions under Article 226 in the High Court and under Article 32 in this Court were filed challenging the constitutionality of the Act mainly on the ground that the Act interfered with the right of the petitioners to form association under Article 19(1) (c) of the Constitution.
The High Court held that since all the members of the society had also become members of the Sammelan under the Act, there was no infringement of the right to form association.
In the appeal and in the petition under Article 32, the respondent contended that having declared the old Hindi Sabitya Sammelan, which was a society registered under the as an institution of national importance, Parliament has proceeded to legislate in respect of it under entry 63 of List I of the Seventh Schedule in order that its administration may not suffer as a result of the quarrels that were going inter be between the members of the society; it was for this purpose that a first Governing Body was constituted to take over the management temporarily; the Act was designed to reconstitute the Sammelan in such a manner that it could worm successfully and without difficulties; and in making provisions for this purpose all members of the old society were included as members of the Sammelan 8 4 1 so that their right to form association may not be taken away from them Alternatively the respondent took up the position that the Act no where specifically laid down that the society shall stand dissolved while it constituted a new Sammelan and therefore, it should be inferred that while the society still continued to exist in its original form the law has brought into existence a new Sammelan to which all the functions and the properties etc. of the society have been passed.
Allowing the petition and the appeal.
HELD : Under section 12(1) (a) very wide powers are given to the first governing body to make rules in respect of matters relating to membership including qualifications and disqualifications for membership of the Sammelan.
Under this power the rules framed could make provisions for admission of persons as members whom the original members of society may never have liked to admit in their Society.
The number of such new members could even be so large as to leave the original members in a small minority with the result that those members.
could become totally ineffective in the society.
Thus the Sammelan which has come into existence, is not identical with the Sammelan which was a registered society under the ., This is clear interference with the right to form a society which has been exercised by the members of the Society by forming the Society with its constitution under which they were members.
The Act does not merely regulate the admi nistration of the affairs of the Society; what it does is to alter the composition of the society itself.
The result of this change in composition is that the members, who voluntarily formed the society are now compelled to act in that Association with other members who have been imposed as members by the Act and in whose admission to membership they had no say.
The right to form association necessarily implies that the persons forming the society have also the right to continue to be associated with only those whom they voluntarily admit in the association.
Any law by which members are introduced in the voluntary association without any option being given to the members to keep them out or any law which takes away the membership of those who have voluntarily joined.
it will be a law violating the right to form association.
[847 H; 849 C E] The right guaranteed by Article 19(1)(c) cannot be confined to the initial stage of forming an association.
if it were to be so confined, the right would be meaningless because as soon as an association is formed, a law may be passed interfering with its composition so that the association formed may not be able to function at all.
The right can be effective only if it is held to include within, it the right to continue the association with its composition as voluntarily agreed upon by the persons forming the association.
And, Article 19(4), on the face of it, cannot be called in aid to claim lidity for the Act.
Therefore the provisioncontained in the Act for reconstituting the society into the Sammelan is void.
The whole Act becomes ineffective in as much as the formation of the new Sammelan is the very basis for all the other provisions in the Act.
[849 F H; 851 E] O.K. Ghosh and Another vs E. X. Joseph, [1963] SUppl.
3 S.C.R. 789; State of Madras vs V. G. Row, ; and V. G. Row vs The State of Madras, A.I.R. 1951 Mad.
147, referred to.
The alternative submission cannot be accepted as ensuring the validity of the Act.
First, the specific case taken by the respondent has been, that the Actreconstitutes the Society and does not create a separate and independent body in the form of a new Sammelan.
Secondly, even if it be acceptedthat a new Sammelan has been constituted, the question of 842 legislative competence of Parliament to pass such a law will arise.
The Sammelan is itself a body corporate and that Sammelan has never been declared as an institution of national importance.
The only institution that was so declared was the society which, of course, earlier carried the same name as the new Sammelan.
Parliament was, therefore, not competent to legislate in respect of this newly constituted Sammelan which at no stage has been declared as an institution of national importance.
Thirdly, if it were to be held that Parliament passed this Act so as to transfer all the properties and assets of the Society to the Sammelan, the Act would contravene Article 19(1)(f) of the Constitution.
The Sammelan is a new, separate and distinct legal entity from the Society.
The Society is thus deprived of all its properties by the Act and such a law depriving the Society of its properties altogether cannot be held to be a reasonable restriction in the public interest on the right of the society to hold the property.
The applicability of Article 19(1(f) is on the assumption that the old Society still exists as it was and yet its properties have been transferred to the Sammelan.
If the Society still exists, so does its Governing Body in whom the property of the Society vested.
The Act thus deprives the members of the Governing Body of the property which still continued to vest in them in spite of the passing of the Act.
This total deprivation of property instead of regulating the management of the affairs of the Society of its property cannot clearly be justified as a reasonable restriction in public interest.
If the law is passed not merely for ensuring proper management and administration of the property, but for totally depriving the persons, in whom the property vested, of their right to hold the property, the law cannot be justified as reasonable restriction under Article 19(5).
[852 B H; 853 E 854 A] The Board of Trustees, Ayurvedic and Unani Tibia College, Delhi vs The State of Delhi & Anr.
[1962] Suppl.
I S.C.R. 156; referred to.
|
TION: Civil Appeal No. 2427 of1966.
Appeal by special leave from the judgment and order dated August 27, 1964 of the Madhya Pradesh High Court in Misc.
Appeal No. 20 of 1964.
section C. Majumdar and R. K. fain, for the appellant.
W. section Barlingay, Ramesh Mali and Ganpat Rai, for the respondent.
The Judgment of S, M. SIKRI, C.J., G. K. MITTER, K. section HEGDE and V. BHARGAVA, JJ. was delivered by HEGDE, J. P. JAGAMOHAN REDDY, J. gave a separate Opinion: Hegde, J. This is an execution appeal.
The decree holders are the appellants herein.
This case has a long and chequered history.
The decree holders obtained a decree against the respondents in the court of Sub Judge, Bankura (West Bengal) for a sum of over Rs. 12,000/ , on December 3, 1949.
On March 28, 1950 they applied to the court which passed the decree to transfer the decree together with a certificate of non satisfaction to the court at Morena in the then Madhya Bharat State for execution.
It was ordered accordingly.
The execution proceedings commenced in the court of Additional District Judge at Morena on September 21, 1950 (Money Execution Case No. 8 of 1950).
The judgment debtors resisted the execution on the ground that the court had no jurisdiction to execute the same as the decree was that of a foreign court and that the same had been passed exparte.
The court accepted that contention and dismissed the execution petition on December 29, 1950.
On April 1, 1951 the Code of Civil Procedure (Amendment) Act, (Act 11 of 1951) came into force.
As a result of that the Code of Civil Procedure (in short the 'Code ') was extended to the former State of Madhya Bharat as well as to various other places.
Meanwhile the decree holders appealed against the order of the learned Additional District Judge, Morena dismissing the execution petition, to the High Court of Madhya Pradesh.
The Madhya Pradesh High Court allowed their appeal.
As against that the judgment debtors appealed to this Court.
This Court allowed the appeal of the judgment debtors and restored the order of the learned Additional District Judge,, 'Morena.
The decision of this Court is reported in Hansraj Nathu Ram vs Lalji Raj and sons of Bankura(1).
Therein this Court ruled that the transfer ordered by (1) 819 the Bankura court was without jurisdiction as on that date 'the Code ' did not apply to the Morena court.
This Court held that Morena court not being a court to which the, Code ' apple, the decree could not have been transport to it It further bed that sections 38 and 39 of 'the Code ' did not afford jurisdiction for such a transfer.
It may be noted that at the time the Bankura Court ordered the transfer of the decree, the Morena court was governed by the Indian Code of Civil Procedure as adapted by the Madhya Bharat Adaptation Order, 1948.
In other words it was governed 'by a law passed by the then Madhya Bharat State.
In the course of its judgment this Court observed that under 'the Code ' " a decree can be executed by a court which passed the decree or to which it was transport for executing and the decree which could be transferred has to be a decree 'passed under the Code and the court to which it could be transferred has to be a court which was governed by the Indian Code of Civil Procedure".
The first stage of the execution proceedings came to an end by the decision of this Court rendered on April 30, 1962.
On February 15, 1963, the decree holders filed another exe cution case before the Bankura court.
Therein they prayed for the transfer of the decree again to the Morena court for execution.
As noticed earlier, by that time 'the Code ' had been extended to the Madhya Bharat State which had become a part of the State of Madhya Pradesh.
The Bankura court again ordered the mans fer of the decree to the Morena court.
The execution proceedings were started afresh in the Morena court on August 31, 1963 (Execution Case No. 1 of 1963).
The judgment debt resisted the execution on various grounds viz. (a) that it is barred by res judicata in view of the decision of this Court referred to earlier , (b) that it is barred by section 48.
of 'the. Code '; (c) that it is barred by limitation; and (d) that the decree is not executable as it is a decree of a foreign court.
The learned Additional District Judge rejected the objections raised by the judgment debtors.
The judgment debtors appealed against that order to the High Court of Madhva Pradesh.
The High Court agreed with the executing court that the execution petition is neither barred by res judicata nor by section 48 of "the Code ', nor is there any bar of limitation.but it disagreed with that court and held that the decree was not evecutable as the court which passed the decree was a foreign court.
In arriving at that conclusion it purported to rely on the decision of this Court in Rai Rajendra Sardar Maloji Narsingh Rao Shitole vs vs Sri Shankar Saran and Ors. (1).
Aggrieved by that decision the decree holders have brought this appeal by special leave.
From the contentions advanced before us, two questions arise 1.
[1963]2 S.C.R. 577. 820 for decision.
They are (1) whether the decree under execution is not executable by courts situate in the area comprised in the former State of Madhya Bharat and (2) whether the decree is barred by section 48 of 'the Code '.
The contention of the Judgment debtors is that the decree under execution being a decree of a foreign court is a nullity qua the courts in the former State, of Madhya Bharat and therefore the same is not executable in the Morena court.
According to the decree holders the decree in question is not a decree of a foreign court as contemplated by 'the Code ' and the court to which the decree is transferred for execution namely the Morena court is a 'court ' ascontemplated by sections 38 and 39 of 'the Code ' and therefore therecan be no valid objection to its execution in the Morena court.
Before referring to the decided cases on the point it is necessary to read the relevant provisions of 'the Code ' as the execution is sought in accordance with the provisions therein. 'Foreign Court is defined in section 2(5) of 'the Code '.
That definition as it stood on the date the decree under execution was passed read thus "foreign court" means a Court situate beyond the limits of British;: India which has no authority in British India and, is: not established or continued by the Central Government.", A new definition of foreign court" was substituted by the Code of Civil Prcedure (Amendment) Act 11 of 1951.
That definition reads "foreign court" means a court situate outside India and not established or continued by the authority of the Central Government".
Whether we take the earlier definition or the present definition into consideration the Bankura court, cannot be considered as a "foreign court" within 'the meaning of that expression in 'the Code '.
Foreign judgment is defined in 'the Code ' as the judgment of 'a foreign court '.
(section 2(6) of 'the Code ').
Hence the decree under execution cannot be considered as a foreign decree for the purpose of the Code.
Section 13 of 'the Code ' provides that "A foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or, between parties under whom they or any of them claim litigating under the same title except (b) where it hasnot, been given on the merits of the case.
" 821 The judgment with which we are concerned in this case was an ex parse judgment.
The Bankura court had no jurisdiction over the judgment debtors.
The Judgment debtors did not submit themselves to the jurisdiction of that court though they were served with a notice of the suit.
Hence if the Bankura court can be considered as a foreign court then s, 13(b) would have come to the rescue of the Judgment debtors and it would have enabled them to pread that the judgment in question was not conclusive and consequenty the decree is not binding against them.
But as the judgment in question cannot be considered as a judgment of a foreign court, they can take no assistance from section 13(b).
But assistance was sought to be taken from section 13(d) which says that the foreign judgments are not conclusive "where the proceedings in which the judgment was obtained are opposed to natural justice".
It was urged on behalf of the judgmentdebtors that as the decree under execution was an ex parte decree, we must hold that the proceedings in which the judgment was obtained were opposed to natural justice.
We are unable to accede to this contention.
As mentioned earlier, the judgment debtors were served with the notice of the suit.
They did not choose to appear before the court, Hence there is no basis for the contention that any principle of natural justice had been contravened.
Further as held earlier the judgment in question is not a foreign judgment.
Reliance was placed on Private International Law in support of the contention that in a personal action, a decree pro nounced in absentee by a foreign court, to the jurisdiction of which the defendant had not in any way submitted himself is an absolute nudity.
It was urged that the Bankura court had no jurisdiction over the judgment debtors and therefore the decree passed being one pronounced in absentem is a nullity.
In support of this contention reliance was placed on the decision of the Judicial Committee in Sirdar Gurdval Singh vs The Rajah of Faridkote(1).
Therein the Judicial Committee observed "In a personal action, to which none of these causes of jurisdiction apply, a decree pronounced in absentem by a foreign Court, to the jurisdiction of which the Defendant has not in any way submitted himself, is by international law an absolute nullity." But the Board qualified those observations by the following words : "He is under no obligation of any kind to obey it; and it must be regarded as a mere nullity by the Courts (1).
21 I.A. 171.
822 of every nation except (when authorised by special local legislation) in the country of the forum by which it was pronounced.
" The above remarks of the Board indicate that even a decree which is pronounced in absentem by a foreign court is valid and executable in the country of the forum by which it was pronounced when authorised by special local legislation.
A decree passed by ' a foreign court to whose jurisdiction a judgment debtor had not submitted is an absolute nullity only if the local legislature had not conferred upon jurisdiction on the domestic courts over the foreigners either generally or under specified circumstances.
Section 20(c) of 'the Code ' confers jurisdiction on a court in India over the foreigners if the cause of action arises within the jurisdiction of that court.
Hence the observation of the Board quoted in some of the decisions of the courts in India including the decision of this Court in Shitole 's case(1) that such a decree is an absolute nullity ' may not be apposite.
It may be more appropriate to say that the decree in question is not executable in courts outside this country.
The board itself had noticed that this rule of Private International law is subject to special local legislation.
Clause (c) of section 20 of 'the Code ' provided at the relevant time and still provides that subject to the limitations mentioned in the earlier sections of 'the Code ', a suit can be instituted in a court within the local limits of whose jurisdiction the cause of action.
wholly or in part, arises.
There is no dispute in this case that the cause of action for the suit which led up to the decree under execution arose within the jurisdiction of Bankura court.
Hence it must be held that the suit in question was a properly instituted suit.
From that it follows that the decree in question is a valid decree though it might not have been executable at one stage in courts in the former Indian States.
This takes us to sections 38 and 39 of 'the Code '.
Section 38 provides that a decree may be executed either by the court which passed it, or by the court to which it is sent for execution.
Section 39(1) to the extent it is material for our present purpose prescribes "The Court which passed a decree may, on the application of the decree holder, send it for execution to another Court (a) if the person against whom the decree is passed actually and voluntarily resides or carries on business, or personally works for gain within the local limits of the jurisdiction of such other Court. . (1) ; 823 Section 40 prescribes "Where a decree is sent for execution in another State, it shall be sent to such Court and executed in such manner as may be prescribed by rules in force in that State.
" Rules are defined in section 2(12) as meaning Rules and Forms contained in the 1st Schedule or made under section 122 or section 125 of 'the Code '.
On a combined reading of sections 2(12), 33, 39 and 40, it follows that a decree can be transferred for execution only to a court to which 'the Code ' applies.
This is what was ruled by this Court in Hansraj Nathu Ram vs Lalji Raja and sonw cf Bankura(1).
But by the date the impugned transfer was made, 'the Code ' had been extended to the whole of India.
In fact the court to which the decree was transferred is now an entirely new court in the eye of the Iaw see the decision of this Court in Shitole 's case(2).
From the foregoing discussion.
, it follows that the decree under execution is not a foreign decree and its transfer to the Morena court is in accordance with the provisions of the Code '.
That being so, the decree under execution satisfies the dictum of this Court in Hansraj Nathu Ram vs Lalji Raja and sons(1) that "a decree can be executed by a court which passed the decree or to which it was transferred for execution and the decree which could be transferred has to be a decree Passed under the Code and the Court to which it could be transferred has to be a Court which was governed by the Indian Code of Civil Procedure.
" It was next urged on behalf of the judgment debtor that in view of the decision of this Court in Shitole 's cave (supra) we must hold that the decree is a nullity and that it cannot be executed at all in the courts situate in the former State of Madhya Bharat.
In Shitole 's case (sunra) this Court was called upon to consider a converse case.
Therein the decree under execution was one passed by a court in Gwalior State in a suit instituted in May 1947.
The defendants were the residents of U.P.
They did not appeal before the Gwalior court though served with the notice.
An ex parte decree was passed against them in November, 1948.
On September, 1951, the Gwalior court transferred the decree for execution to Allahabad and on October 16.
1951, the decree holder filed an application for execution of the decree before the Allahabad Court.
The judgmentdebtors contended that the decree being a decree of foreign court to whose jurisdiction they had not submitted, was a mullity and the execution application in respect thereof was not majntanable.
That contention was accented by this Court.
It may be noted that the Gwalior Court was not a court constituted under the (1) [1963]2 S.C.R. 619.
(2) [1963]2 S.C.R. 577.
824 provisions of 'the Code '.
It was admittedly a foreign court for the purpose of any proceedings under the Code '.
The ratio of that decision is wholly inapplicable to the present case.
The question whether a decree is a foreign decree or whether it can be transferred to another court for execution has to be judged by the provisions of 'the, Code '.
It was ' next contended that in view of section 20 cl.
(b) of 'the Code ' of Civil Procedure (Amendment) Act, 1951 by which the Code is extneded to Madhya Bharat and other areas, the judg ment debtors ' right to resist the execution of the decree is protected.
Section 20(1) of the Act deals with Repeals and Savings.
That section to the extent relevant for our present purpose reads : "If, immediately before the date on which the said Code comes into force in any part B State corresponding to the said Code, that law shall on that date stand repealed.
Provided that the repeal shall not affiec (b) any right, privilege, obligation or liability acquired, accrued or incurred under any law so repealed. . . . ;. . . as if this Act had not been passed.
This provisions undoubtedly protects the rights acquired and privileges accrued under the law repealed by the amending Act.
Therefore the question for decision is whether the non executability of the decree in the Morena court under the law in force in Madhya Bharat before the extension of 'the Code ' can be said to be a right accrued under the repealed law.
We do not think that even by straining the language of the provision it can be said that the non executabity of a decree within a particular territory can be considered as a privilege.
Therefore the only question that we have to consider is whether it can be considered as a 'right accrued ' within the meaning of section 20(1) (b) of the Code of Civil Procedure (Amendment) Act, 1950.
In the first place, in order to get the 'benefit of that provision, the noli executability of the decree must be a right and secondly it must be a right that had accrued from the provisions of the repealed law.
It is contended on behalf of the judjment debtors that when the decree was passed, they had a right to resist the execution of the decree in Madhya Bharat in view of the provisions of the Indian Code of Civil Procedure (as adapted) which was in force in the Madhya Bharat at that time and the same is a vested right.
It was further urged on their behalf that right was preserved by section 20 (1 ) (b) of the Code of Civil Procedure Amendment Act, 825 1950.
It is difficult to ' consider the non executability of the decree in Madhya Bharat as a vested right of the judgmentdebtors.
The non executability in question pertains to the jurisdiction of certain courts and not to the rights of the judgmentdebtors.
Further the relevant provisions of the Civil Procedure Code in force in Madhya Bharat did not confer the right claimed by the judgment debtors.
All that has happened in view of the extension of 'the Code ' to the whole of lndia in 1951 is that the decree which could have been executed only by courts in British India are pow made executable in the whole of India.
The change made is one relating to procedure and Jurisdiction.
Even before 'the Code ' was extended to Madhay Bharat the dccree in question could have been executed either against, the person of the judgment debtors if they hid happened to come to British India or against any of their properties situate in British India.
The execution of the decree within the State of Madhya Bharat was not Permissible because the arm of 'the Code ' did not reach Madhya Bharat.
It was the invalidity of the order transferring the decree to the Morena court that stood in the way of the decree holders in executing their decree in that court on the earlier occasion and not because of any vested rights of the judgment debtors.
Even if the judgment debtors had not objected to the execution of the decree, the same could not have been executed by the court at Morena on the previous occasion as that court was not promly seized of the execution , proceedings.
By the extension of 'the Code ' to Madhya Bharat, want of jurisdiction on the part of the Morena court was remedied and that court is now made competent to execute the decree. ' That a provision to preserve the right accrued under a repealed Act "was not intended to preserve the abstract rights conferred by the repealed Act .
It only applies to specific rights given to an individual upon happening of one or the other of the events specified in statute case Lord Atkins ' observations in Hamilton Gell vs White(1).
The mere right.
existing at the date of repealing statute; to take advantage of provisions of the statute repealed is not a "right accrued" within the meaning of the usual saving clause see Abbot vs Minister for lands (2 ) and G. Ogden Industries Pty. Ltd. vs Lucas(3).
From what has been said above, it follows that the view taken by the High Court that the decree in question is a nullity qua the Morena court cannot be accented as correct.
The decree in question is neither a 'foreign decree ' as contemplated by 'the Code ' nor its transfer to the Morena court impermissible under 'the Code '.
By the provisions of 'the Code ' the Morena court is re (1) (2) (3) [1969] 1 All E. Report 121.
826 quired to proceed with the execution unless there is any valid objection.
We now come to the question whether the execution is barred by section 48 of 'the Code.
(That section was repeated in 1963).
Both the executing court as well as the High Court have taken the view that on the facts of this case, the limitation prescribed in section 48 of 'the Co& ' is extended under section 14(2) of the Limitation Act, 1908.
Both those courts have concurrently come to the conclusion that the previous execution proceedings had been prosecuted by the decree holders with due diligence and with good faith and the same, became infructuous in view of the fact that the Morena court had no jurisdiction to proceed with the execu tion.
The finding that the previous execution proceedings were carried on with due diligence and good faith and that the same became infructuous for want of jurisdiction on the part of the Morena court was not challenged before us.
But it was urged on behalf of the judgment debtors that section 48 prescribed a bar and not a period of limitation and consequently the decree holders cannot take the benefit of section 14(2) of the Limitation Act.
It is necessary to examine the correctness of this contention.
Section 48 read thus "(1) Where an application to execute a decree not being a decree grantincg an injunction has been made, no order for the execution of the same decree shall be made upon any fresh application presented after the expiration of 12 years from (a) the date of the decree sought to be executed or (b) where the decree or any subsequent order directs any payment of money or the delivery of any property to be made at a certain date or at recurring periods, the date of the default in making the payment or delivery in respect of which the applicant seeks to execute the decree.
(2) Nothing in this section shall be deemed (a) to preclude the Court from ordering the execution of a decree upon an application presented after the expiration of the said term of twelve years, where the judgment debtor has, by fraud or force, prevented the execution of the decree at some time within twelve years immediately before the date of the application; or (b) to limit or otherwise affect the operation of article 183 of the First Schedule to the Indian Limitation Act, 1908".
827 article 18 3 of the Indian Limitation Act, 1908 read thus "Description of application.
Period of Time from which period Limitationbegins to run.
To enforce a judgment, decree Tweleve years When a present right to enor order of any Court established force the judgment, decree or by Royal Charter in the exercise order accrues to some person of its ordinary origiial civilcapable of releasing,the right.
jurisdiction or an order of the Provided 'that when the Supreme Court.judgment, decree or order has been revived, or some part of the principle money secured thereby or some interest on such money has been paid, or some acknowledgment of the right thereto has been given in writing signed by the person liable to pay such principal or interest or his agent, to the person entitled thereto or his agent, the twelve years shall be computed from the date of such revivor, payment or acknowledgment or the latest of such revivors payments or acknowledgments, as the case may be.
At this stage it is also necessary to read article 181 of the Limitation Act of 1908.
That Art prescribed that an application for which no period of limitation is provided elsewhere in the Sch.
to the Limitation Act, 1908 or by section 48 of the Code, the period of Limitation is three years and that period begins to run when the right to apply accrues.
article 182 of that Act provided that for the execution of a decree or order of any Civil Court not provided for by article 183 or by section 48 of 'the Code ', the period of limi tation is three years or where a certified copy of the decree or order has been registered six years.
The time from which the period was to run is set out in the 3rd column of the Sch.
The argument advanced on behalf of the judgment debtors is that section 48 is a self containecr Code and the period prescribed therein is a bar and not a period of limitation and hence the decree holders cannot take the benefit of section 14(2).
In support of this argument reliance is placed on sub section 2 (a) of section 48 of 'the Code '.
That sub section undoubtedly lends some support to the contention of the judgment debtors.
It indicates as to when the period prescribed under section 48(1) can be extended.
By implication it can be urged that the period prescribed under section 48(1) of the Code can only be extended under the circumstances mentioned in that clause and not otherwise.
But in assessing the correct 828 ness of that contention we have to take into consideration cl.
(b) of sub section
(2) of section 48 of the Code ' as well as articles 181 and 182 of the Limitation Act, 1908.
These provisions clearly go to indicate that the period prescribed under section 48(1) of 'the Code ' is a period of limitation.
This conclusion of ours is strengthened by the subsequent history of the legislation.
By the , section 48 of 'the Code ' is deleted.
Its place has now been taken by article 136 of the of 1963.
At one stage, there was considerable conflict of judicial opinion as to whether section 48 is controlled by the provisions of the Limitation Act 1908.
But the High Courts which had earlier taken the view that section 48 prescribes a bar and not limitation have now revised their opinion.
The opinion amongst the High Courts is now unanimous that section 48 of 'the Code ' is controlled by the provisions of the Limitation Act, 1908 see Kandaswami Pillai vs Kamappa Chetty(1); Durg vs Panchanti(2) Sitaram vs Chunnilalsa(3); Amarendra vs Manindra ( 4) Krishna Chandra vs Paravatamma(5); and Ramgopal vs Sidratm(6).
We are of the opinion that the ratio of the above decisions correctly lays down the law.
That apart, it would not be appropriate to unsettle the settled position in law.
For the reasons mentioned above this appeal is allowed and the order of the High Court is set aside and that of the trial court restored.
The executing court is directed to proceed with the execution.
The respondents shall pay the costs of the appellants both in this Court as well as in the High Court.
P.Jaganmohan Reddy, J. I agree with my learned brother Hedge J., that the Appeal should be allowed.
In the case of Kishendas vs Indo Carnatic Bank Ltd.(7) I bad while delivering the Judgment of the Bench expressed certain views which may appear to conflict with the view now taken.
In that case the executability of a decree passed by the Madras High Court in 1940 by the City Civil Court Hyderabad on the ground of its be a foreign decree was called in question.
The Respondent went into liquidation and a liquidator was appointed by the original side of Madras High Court.
The liquidator filed an application under Sec.
191 of the Indian Companies Act for the recovery of a sum of Rs. 1375 from the APPellant who was a subject of H.E.H the Nizam and a resident of Hyderabad on account (1) A,I.R. (3) I.L.R. [1944] Nag.250.
(5) A.I.R. 1953 Orissa 13.
(2) I.L.R. [1010] All. 647.
(4) A.I.R. 1955 Cal.
(6) A.I.R. 1943 Bom.
(7) A.I.R. 1958 A.P. 407. 829 of unpaid calls and the Court passed on ex parte decree on 15 8 1940 against the appellant.
The liquidator field an execution petition in that Court praying for a transfer of the decree to the City Civil Court Hyderabad which was ordered on 15 3 1951 when.
the Hyderabad Civil Procedure Code was in force in the Hyderabad Stat under which the decree of the Madras High Court would be a foreign decree and the only way in which the liquidator could recover the decreetal amount was by filing a suit on that decree.
No doubt the Madras High Court could not on that date i.e. 15 3 1951 pass an order directing the transfer of the decree as it was to a Court which was not governed by the Indian Civil Procedure Code (hereinafter called the Code) nor on that date were there any reciprocal arrangements for ex cuting those decrees in the Hyderbad State.
Madras High Court could not therefore transfer a decree passed by it for execution to a Court which did not satisfy the provisions of Sectons 43 to 45 on that date.
It did not also appear from the facts of that case whether any notice was served on the appellant but following the decision of the majority of the High Courts in this country and also relying on the observations of their Lordships of the Privy Council in Sardar Gurdayal Singh vs Raja of Faridkot (1) that a decree pronounced in absentum by a foreign Court the Jurisdiction to which the defendant has not in any way submitted himself is by international law a nullity, I also took the view that the non executability of the decree is to be determired as on the date on which it was passed and that no distinction can conceivably be made between the. decree passed by British Indian Courts before the merger or before the Independence when it was a foreign decree and a decree passed by the Courts of a native State before the Independence or merger in both cases the character of the Judgment would be that of a foreign Judgment and if it suffers from any want of jurisdiction or otherwise it will continue to be subject to that defect.
This Court had also expressed a similar view in Raj Rajendra Sardar Malaji Marsingh Rao Shitole vs Sri Shankar Saran & OrS.(2) when it held that an ex parte decree passed in 1948 by the Gwalior, Court against residents of U.P. who did not appear was not executable in Allahabad even though the Gwalior Court had transferred the decree in October 1957 after the Civil Procedure Amendment Act IT of 1951 come info force after which the Gwalior Court was a Court under the Cade.
It was held by a majority that the decree passed by the Gwalior Court did not change it,, nationality in spite of subsequent constitional changes or amendments in the Code of Civil Procedure.
that if a decree was unenforceable in a particular Court at the time it was passed it would not become enforceable and valid simply because of the political changes that (1) 21 I.A. 171.
(2) [1963]2 S.C.R. 577.
830 took place unless there is a specific provision to the contrary and that the decree being a nullity outside the Courts of the United States (Madhya Bharat) in the absence of any specific Provision it could not be enforced in the United States (Madhya Bharat) Kapur J., speaking for himself, Ralagopala Ayyangar and MUDholker JJ., observed at pages 594 595 thus : "It will not be correct to say that the decree which was a nullity before the Constitution came into force suffered only from the defect of enforcibility by execution.
Sec. 13 creates substantive rights and is not merely procedural and therefore defenses which were open to the Respondents were not taken away by any Constitutional changes in the absence of a specific provision to the contrary.
It is erroneous to say therefore that the decree of the Gwalior Court was unenforceable when passed because of some impediment which the subsequent Constitutional changes had removed; but that decree suffered from a more fundamental defect of being a nullity and the rights and liabilities created under it remained unaffected.
by subsequent changes".
The contention that the decree of the Gwalior Court could be executed after its transfer on September 14, 1951 when the Civil Procedure Code came into force throughout India by virtue of Act 11 of 1951 and that therefore the Gwalior Court had the power to transfer the decree which the Allahabad Court had under the law authority to execute was also negatived for the reason that the "Court which made the order of transfer in September 1951 was then not the Court which passed the decree within the meaning of Sec. 39".
Das Gupta J., with whom Sarkar J., as he then was, concurred, did not find it necessary to deal with the question of foreign decree which as he said the Allahabad Court rightly considered a nullity.
On the second and third question he held that Allahabad had no power to execute the decree under Sec.
38 of the Civil Procedure Code as there was no valid transfer to it from the Court which passed the decree nor did Section 43 of the Civil Procedure Code as it stood applied to the execution of that decree.
Even though the observations in Kishendas 's case find support in the above Judgment the ratio of the decision in that case being that the Madras Court on the date of the order could not transfer the decree to the Hyderabad Court, the facts of the case however do not warrant an application of the principles of international law or of the decree being a nullity.
The earlier execution proceedings ended unsuccessfully with the decision in Hansraj Nathu Ram vs Lalji Raja & Sons of Bankura(1).
It was decided in that case, (1) [1963]2 S.C.R. 619. 831 that Morena Court not being a Court to Which the Code applied the decree could not have been transferred and that Section 38 and 39 of the Code did not afford jurisdiction for such transfer as the Morena Court at the time of transfer was governed by the Madhya Bharat Civil Procedur Code and not by the Code.
What is relevant in the present case is that when the decree holder again applied to the Bankura Court for execution of his decree by the Morena Court after the decision of this Court in Hansraj 's case, both the Court that passed the decree and the Court to which it is transferred for execution were Courts under the Code, as such no question of the Bankura decree being a foreign decree or it being a nullity could arise.
The Morena Court on the date when the order of transfer of the decree was passed by the Bankura Court is not a Court governed by the Gwalior law or Madhya Bharat law as such the impediment to executability of the Bankura decree no longer exists nor could it be considered in the light of Section 20(c) of the Amendment Act 11 of 1951 as having saved any right or privileges under the repealed procedure code of Gwalior or Madhya Bharat.
Whatever may be the views expressed in the several decisions a view which I was also inclined to take in the decision referred to, though on the facts of that case it may not have been necessary, on a further a fuller Qonsideration I agree with great respect with the views of my learned brother Hegde, J., that no question of a vested right or a privilaeae arises to entitle the Respondent to challenge the execution proceedings in Morena Court.
The decree granted by Bankura Court was executable by the Courts governed by the same Code by the Court which passed it or by the Court to which it transferred.
Once the Code is ' made applicable to the whole of India by the Amendment Act II of 1951 the decree is no longer a foreign decree qua the Morena Court which is a Court under the Code to which the Bankura Court could transfer the decree for execution.
No doubt in Shitole case it was observed that Section 13 of the Code creates substantive rights and not merely procedural and therefore defence that were open to the Respondents were not taken away by any Constitutional changes but the ratio of the decision was that the Gwalior Court not being a Court that passed the decree after the coming into force of Act IT of 1951 the Allahabad Court could not execute it.
That im.
pediment does not exist now in that the Bankura Court has transferred the decree to a Court under I the Code. 'Me plea that Section 48 Civil Procedure Code presents a bar of limitation is also not tenable.
In the result I agree that the appeal should beallowd as directed by my learned brother.
G.C. Appeal allowed.
| IN-Abs | The appellants obtained a decree against the respondent in the court of Sub Judge, Bankura (West Bengal) on December 3, 1949.
On March 28, 1950 they applied to the court which passed the decree to transfer the decree with a certificate of non satisfaction of the court at Morgan in the then State of Madhya Bharat.
It was ordered accordingly.
The Judgment debtors resisted the execute on the ground that the court had no jurisdiction to execute the same as the decree was that of a foreign court and that the same had been passed ex parte.
The court accepted that contention and dismissed the execution petition on December 29, 1950.
On April , 1951 the Code of Civil Procedure (Amendment) Act 2 of 1951 came into force.
By this Act the Code was extended to the former State of Madhya Bharat as well as various other places.
Meanwhile the appellants appealed against the order of the Additional District Judge Morena dismissing the execution petition to the High Court of Madhya pradesh.
The appeal was allowed.
In further appeal this Court 'restored the order of the Addl.
District Judge, Morena.
Thereafter on February 15, 1963 the appellants filed another execution case before the Bankura Court praying for the transfer of the decree to the Molrena Court for execution.
The Bankura Court again ordered the transfer of the decree of the Morena Court.
The judgment debtors resisted execute on the flowing grounds : (1) that it was barred by yes judicature in view of the aforesaid decision of this Court; (2) that it was barred by section 48 of the Code of Civil Procedure; (3) that it was barred by limitation and (4) that it was not executable because it was the decree of a foreign court.
The Addl.
District Judge rejected the objections.
The High Court in appeal agreed with the executing court that the execution petition was neiber barred by resjudicata nor was there any bar of limitation but it disagreed with that court and held that the decree was not executable as the court which passed the decree was a foreign court.
The decree holders filed the present appeal by special leave.
The questions which fell for consideration were : (i) whether the decree under execution was not executable by courts situate in the area comprised in the former State of Madhya Bharat; (ii) whether the decree was barred by section 48 of the Code.
HELD:Per Sikri C.J., Mitter, Hyde and Bhargava JJ.
(1) (a) On the date when the decree under execution was passed foreign court ' was 8 1 100 SupCII71 816 defined in section 2(5) of the Code as a court situate beyond the limits of British India which had no authority in British India and was not established or continued by the Central Government.
After the amendment of the Code of Civil Procedure in 1951. 'foreign court ' under the Code means a court situate outside India and not established or continued by the authority of the Central Government.
Whether we take the earlier definition or the present definition the Bankura Court could not be considered as a foreign court within the meaning of that expression in the Code. 'Foreign judgment ' is defined as the 'judgment of a foreign court '.
Hence the decree under execution could not be considered as a foreign decree for the purpose of the Code.
[820 D G] Accordingly the judgment debtors could not take advantage of the provision in section 13(b) of the Code under which the ex parte decree of a foreign court is not conclusive.
Nor could they take advantage of section 13(d).
They were served with notice of suit but did not choose to appear before the court.
Hence, there was Po basis for the contention that any principle of natural justice has been contravened.
Further section 13(d) was not applicable because the judgment in question was not a foreign judgment.
[821 D] (b) Under Private International Law a decree passed by a foreign court to whose juri diction a judgment debtor had not submitted is an absolute nullity only if the local legislature had not conferred jurisdiction on the domestic courts over the foreigners either generally or in specified circumstances.
Clause (c) of section 20 of the Code provides that subject to the limitations mentioned in the earlier sections of the Code a suit can be instituted in a court within the local limits of whose jurisdiction the cause of action wholly or in part, arises.
This provision confers jurisdiction on a court in India over foreigners when the cause of action arises within its jurisdiction.
There was not dispute in the present case that the cause of action for the suit which led up to the decree under execution arose within the jurisdict on of the Bankura Court.
Hence, it must be held that the suit in question was properly instituted.
Accordingly the decree in question was a valid decree though it might not have been executable at one stage in courts in the former Indian States [822 B F] Sardar Gurdyal Singh vs The Rajah of Faridkot, 21 I.A. 171, referred to.
(c) A combined reading of sections 2(12), 38, 39 and 40 of the Code shows that a decree can be transferred for execution only to a court to which the Code apple .
This is what was ruled by this Court in Hansraj Nathu Ram 's case.
But by the date the transfer in the present case was made, the Code had been extended to the whole of India.
It followed that the transfer of the decree in question which was not a foreign decree, to the Morena Court, was in accordance with the provisions of the Code.
[823 B D] Hansraj Nathu Ram vs Lalii Raja & Sons of Bankura, , applied.
Narsingh Rao Shitole vs Shri Shankar Saran & Ors., ; , distinguished.
(d) Section 20(1)(b) of the Code of Civil Procedure Amendment Act, 1951 by which the Code was extended to Madhya Bharat and other areas undoubtedly protects the right acquired and privileges accrued under the law repealed by the amending Act.
But even by straining the language of the provision it cannot be said that the non executabilitv of the decree within a particular territory can be considered a privilege [824 E F] 817 Nor is it a 'right accrued ' within the meaning of section 20(1) (b) of the Code of Civil Procedure (Amendment) Act, 1950.
In the first peace in order to get the benefit of this provision the non executability of the decree must be a right, and secondly it must be a right that had accrued from the provisions of the repealed law.
It Was difficult to consider the non executability of the decree in Madhya Bharat as a vested right of the judgment debtors.
The non executability in question pertained to the jurisdiction of certain courts and not to the "rights of the judgment debtors.
Further the relevant provision of the Code of Civil Proedue in force in Madhya Bharat did not confer the, right claimed by the judgment debtors.
All that had happened in view of the extension of +he Code to the whole of India in 1951 was that the decrees which could have been executed only by courts in British India were made ' executable in the whole of India.
The change made was one relating to procedure and jury diction.
By the extension of the Code to Madhya Bharat, want of jurisdiction on the part of the Morena Court was remedied and that court was now competent to execute the decree [825 A E] Hamilton Gell vs White , Abbot vs Minister for Lands, and G. Ogden Industries Pvt. Ltd. vs Lucas, , applied.
(ii)The execution was also not barred, by section 48 of the Cod .
For considering the true impact of cl.
(b) of sub section
2 of section 48 of the Code provisions of articles 181 and 182 of the Limitation Act, 1908 have also to be taken into consideration.
These provisions clearly go to indicate that the period prescribed under section 48(1) of the Code is a period of limitation.
This interpretation is strengthened by the subsequent history of the legislation.
By the section 48 of the Code is deleted.
It , place has not been taken by article 136 of the Limtation Act of 1963 The High Courts also are now unanimous that section 48 of tile (ode is controlled by the provisions of the Limitation Act, 1908.
[828 A C] Kandaswami Pillai vs Kamappa Chetty, A I R, , Durg vs Poncham, I.L.R. [1939] All.
647, Sitaram vs Chunnilalsa, I.L.R. , Amarendra vs Manindra, A.I.R. '1955 Cal.
269, Krishna Chandra v Parovatamma, A.I.R. 1953 Orissa 13 and Ramgopal vs Sidram, A.I.R. 1943 Bom.
164 referred to.
Per Jaganmohan Reddy, J. (Concurring) No question of 'a vested right or privilege arose to entitle the respondent to challenge execution proceedings in Morena Court.
The decree granted by the Bankura Court was executable by the Courts governed by the same Code, by talk Court which passed it or by the Court to which it was transferred.
One the Code was made applicable to the whole of India by Amendment Act 11 of 1951 the decree was no longer a foreign decree qua the Morena Court which was a court under the Code to which the Bankura Court could transfer the decree for execution.
No doubt in ' Shitole 's case it was observed that section 13 of the Code creates substantive rights and not merely procedural and therefore defenses that were open to the resno dents were not taken away by any constitutional changes, but the ratio of the decision was that the Gwalior Court not being a court that passed the decree after the coming into force of Act 11 of 1951 the Allahabad Court could not execute it.
The impediment did not exist now in that the Bankura Court bad transferred the decree to a court under the Code.
the plea that section 48 Civil Procedure Code presents a bar of limitation was also not tenable.
[831 F H] 818 Kishendas vs Indo Carnatic Bank Ltd. A.I.R. 1958 A.P. 407 Sardar Gurdayal Singh V. Raja of Firidkote, 21 I.A. 171, Rai Rajendra Sardar Maloji Narsingh Rao Shirole vs Shri Shankar Saran, ; and Hansaj Nathuram Y. Lalji Raja
|
No. 1 of 1970.
Petition under article 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 article 3 2 of the Constitution, challenging the Punjab Development of Damaged Areas Act 10 of 1951 (hereinafter called 'the Act ') as being violative of article 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 article 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 article 31 (2) as it stood at the time when 765 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 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 766 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.
(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.
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.
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 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 767 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 (d) the estimated value of the other sources of Income from the scheme which remain out 5 Ll 100SupCI/71 standing.
768 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.
(3) subject to the provisions of the , 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.
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 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 article 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 article 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 770 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 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 article 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 771 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 persons who have applied 772 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 in High Court in letters Patent Appeal No. 187 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 article 31(2) of the Constitution.
773 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.
In our view none of the objections are sustainable either on the ground of discrimination under article 14 or on the scheme are being unreasonable or not in the interest of general public violating article 19 (1) (f) & (g) nor on the ground of the compensation payable being inadequate or insufficient so as to infringe the guarantee under article 31(2) of the Constitution of India.
The petition is accordingly dismissed with costs.
V.P.S. Petition dismissed.
| IN-Abs | 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 section 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 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 article 32, on the questions whether (1) the Act is violative of article 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 article 19(1 ) (f) and (g); and (3) the acquisition and compensation provisions of the Act violate article 31(2).
HELD : (1) There is no violation of article 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 section 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 article 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 section 20 referred to a Tribunal.
The 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 article 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 section 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 section 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]
|
iminal Appeals Nos. 248 to 251 of 1968.
Appeals from the judgment an order dated August 13, 1968 of the Calcutta High Court in Criminal Appeals Nos.
425 to 428 of 1968.
L.M. Singhvi and section P. Nayar, for the appepant (in all the appears).
The respondent did not appear.
The Judgment of the Court was delivered by Ray, J.
These appeals are by certificate from the, judgment dated 13 August, 1968 of the High Court at Calcutta holding that 8 60 the memorandum of appeals from an order of, acquittal were barred by Article 114 of the .
The appeals were directed against orders of acquittal passed by the Presidency Magistrate, Calcutta on 4 April, 1968.
The four petitions of appeal were presented in the High Court on 1 July, 1968 by the learned Advocate authorised by the, Vakalatnama executed by the Assistant Registrar of Companies, West Bengal described as the appellant in all the_ petitions.
The Assistant Registrar of Companies, West Bengal filed petitions of complaint before the Chief.
Presidency Magistrate, Calcutta alleging that the certain officers/directors of the Standard Paint Works (P) Ltd. of 44 Beadon Row, Calcutta mentioned therein were guilty of offence for non compliance with provisions contained in the by reason of default in filing Annual Return of the Company together with the Annual Accounts and Balance sheet.
Section 210 of the requires annual accounts and balance, sheet of the company to be filed within the time mentioned in the section.
If any person being a director of the company fails to take all reasonable steps to comply with the provisions of section 210, he shall, in respect of each offence.
be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.
The complainant in filing the petitions of complaint prayed for exemption of personal appearance under proviso to section 247 of the Code of Criminal Procedure read with section 621(1)A of the .
The Presidency Magistrate passed the orders of acquittal in all the cases.
Section 417 of the Code of Criminal Procedure speaks of appeal in case of acquittal.
Sub section (3) of that:section is as follows "If such an order of acquittal is passed in any case instituted upon complaint and the.
High Court, on an.
application made to it by the complainant.
in this behalf, grants special leave to appeal from the order of acquittal, the complainant may present such an appeal to the High Court".
Section 417 (4) of the Code of Criminal, Procedure states that no application under sub section (3) for the grant of special leave to appeal from an order of acquittal shall be entertained by the High Court after the expiry of 60 days from the date of the order of acquittal.
No 8 application was made to the High Court in cornpiance with section 417 (3) of the Code of Criminal Procedure.
861 On behalf of the appellant it was contended both in the High, Court and in this Court that the appeals were preferred under section 624B of the .
Section 624B is as follows "Notwithstanding anything contained in the Code of Criminal Procedure, 1898, the Central Government may, in any case arising out of this Act, direct any company prosecutor or authorise any other person either by name or by virtue of his office, to present an appeal from an order of acquittal passed by any Court other than a High Court and an appeal presented by such prosecutor or other person shall be deemed to have been validly presented to the appellate Court.".
The contention on behalf of the appellant that the right of appeal is conferred by section 624B of the is unacceptable.
Section 624B only speaks of the Central Government directing or authorising any person to present an appeal from the order of acquittal.
Section 417(1) of the Code of Criminal Procedure enacts that in case of acquittal the State Government may direct the Public Prosecutor to present an appeal to the High Court.
Section 624B of the empowers the Central Government to present appeals through persons mentioned in that section.
Presentation of appeal by the Central Government is a similar provision to section 417(1) of the Code of Criminal Procedure.
Chapter XXXI of the Code of Criminal Procedure relates to, appeals.
Appeal is a creature of statute.
The right to appeal is governed by the Code of Criminal Procedure. , Section 404 of the Code of Criminal Procedure states that no appeal shall lie from any judgment or order of a Criminal Court except as provided for by the Code of Criminal Procedure or by any other law for the time being in force.
Section 624B of the does not confer any right of appeal from any order passed by a Criminal Court in respect of any offence under the provisions of the .
The right to appeal to the High Court in the present cases of acquittal is governed by section 417 of the Code of Criminal Procedure.
Article 114 of the requires appeal under sub section (3) of section 417 of the Code of Criminal Procedure to be filed within 30 days from the date of the grant of special leave.
No application for the grant of special leave to appeal from an order of acquittal was made within 60 days from that order of acquittal.
The orders of acquittal were passed on 4 April, 1968.
862 The petitions of appeal were presented on 1 July, 1968.
The appeals were rightly not entertained by the High Court because first there was no application for grant of special leave under section 417(3) of the Code of Criminal Procedure; secondly, the appeals were incompetent without grant of special leave, and thirdly these were barred by limitation.
An appeal under section 417(3) against acquittal is competent only when there is special 'leave granted by the High Court.
On obtaining special leave the appeal is thereafter filed within 30 days of the grant of leave to escape the mischief of the period of limitation under Article 114 ,.of the .
A provision in the which confers right of appeal is section 483.
It speaks of appeals from orders made and the decisions given in the matter of winding up of the companies by the Court and it enacts that such appeals shall lie to the same Court to which, in the same manner in which, and subject to the same ,conditions under which, appeals lie from any order or decision of the Court in cases within its ordinary jurisdiction.
Section 624B is not such a section which can be said to be conferring a right of appeal.
Section 624B only mentions as to the person through whom appeal is presented.
The appeals therefore fail and are dismissed.
V.P.S. Appeals dismissed.
| IN-Abs | The appellant filed complaints before the Chief Presidency Magistrate alleging that the officers of the respondent had committed an offence under the .
They were acquitted on April 4, 1968.
On July 1, 1968, appeals were filed in the High Court by the appellant (cornplainant) but the High Court held that they were barred by article 114 of the .
In appeal to this Court, it was contended that the appeals were filed not under section 417 Cr.P.C, but under section 624B of the .
HELD:(1) Section 404, Cr.P.C., provides that no appeal shall lie from any order of a criminal court except as provided by the Code or by any other law for the time being in force.
But section 624B does not confer any right of appeal from an order of acquittal passed by a criminal court in respect of an offence under the .
It only em powersthe Central Government to present appeals through persons mentioned in that section.
[1861 E G] (2) Section 417, Cr.
P.C. provides right of appeal in cases of acquittal and if the order of acquittal is passed in a case instituted upon complaint, an application for special leave to appeal from such order should be filed within 60 days from the date of the order of acquittal, and under article 114 of the , the appeal should be filed within 30 days from the date of the grant of special leave.
The appeals were not rightly entertained in the present case, because (a) there was no application for grant of special leave under section 417(3), Cr.
P.C., (b) the appeals were incompetent without grant of special leave; and (c) they were barred by limitation.
[860 G H; 861 H; 862 A D]
|
Appeal No. 2034 of 1969.
Appeal from the judgment and order dated May 7, 1969 of the Punjab and Haryana High Court in Civil Writ No. 850 of 1969.
K. L. Gosain N. N. Goswamy, section K. Mehta, K. L. Mehta and K. R. Nagaraja, for the appellant.
Harbans Singh and R. N. Sachthey, for respondents Nos. 1 and 2.
section V. Gupte and section K. Gambhir, for respondent No. 18.
The Judgment of the Court was delivered by Hegde, J.
This appeal by certificate arises from the decision of a Division Bench of the Punjab and Haryana High Court in a writ petition wherein the appellants challenged the validity of proceedings under sections 4, 6, 9 and 17 (2) (c) of the Land Acquisition Act, 1894 as amended by the Punjab Legislature.
For convenience sake we shall refer to that amended Act as 'the Act '.
The High Court dismissed the writ petition.
It appears that several contentions were sought to be advan ced before the High Court but in this Court only three con tentions have been pressed for our consideration i.e. (1) the acquisition in question being one for a company proceedings should have been taken under sections 38 to 44(B) of the Act, the same having not been taken, the Proceedings taken are void; (2) there was no urgency and hence recourse should not have been had to section 17 of the Act and (3) Section 17(2) (c) is inapplicable to the facts of the case.
Now we may state the facts,relevant for the purpose of deciding the questions in dispute.
873 On 14/17 March, 1969, Government of Haryana issued a notification under section 4 of the Act notifying for acquisition the land concerned in this case.
The notification further directed that action under section 17 (2) (c) of the Act shall be taken on the ground of urgency and the provisions of section 5 A shall not apply in regard to the said acquisition.
The preamble to the said notification says that "whereas it appears to the Governor of Haryana that land is likely to be required to be taken by Government, at public expenses, for a public purpose, namely for the setting up a factory for the manufacture of Chine ware and Porcelain ware including Wall Glazed Tiles etc.
at village Kasser.
Tehsil Jhajjar, District Rohtak, it is here by notified that the land in the locality described in the specification below is likely to be required for the above purpose".
On March 18, 1969 the Government isued a notification under section 6 of the Act acquiring the land for a public purpose On March 28, 1969 notices under section 9 of the Act were served on the appellants.
On April 8, 1969, the appellants filed the writ petition giving rise to this appeal.
The allegations in the writ petition include the assertion that there was no urgency in the matter of acquiring the land in question and therefore there was no justification for having recourse to section 17 and thus deprive the appellants of the benefit of, section 5 A of the Act.
It was further alleged therein that the acquisition in question was made for the benefit of a company and hence proceedings should have been taken under sections 38 to 44(B) of the Act and that there was no public purpose involved in the case.
It was further pleaded that the land acquired was not waste and parable land and that section 2 (c) of the Act did not confer power on the Government to dispense with the proceedings under section 5 A.
In the counter affidavit filed by the Deputy Director of Industries (Administration), Government of Haryana On behalf of the State of Haryana, the above allegations were all denied.
Therein it is stated that at the instance of the State of Haryana, Government of India had issued a letter of intent to a company for setting up a factory for the manufacture of Glazed Tiles etc.
in village Kasser.
That project was to be started with the collaboration of a foreign company, known as Pilkington Tiles Ltd. The scheme for setting up the project had been finalised and approved by the concerned authorities.
on November 26, 1968, the Government wrote to one of the pro moters of the project, Shri H. L. Somany asking him to com plete the "arrangements for the import of capital equipment and acquisition of land in Haryana State for setting up of the proPosed factory".
It was further stated in that communication the Government was pleased to extend the time for compleing the Project upto April 30, 1969.
Under those circumstances it 8 74 had become necessary for the State of Haryana to take imme diate steps to acquire the required land.
It was under those circumstances the Government was constrained to have recourse to section 17 of the Act.
The Government denied the allegation that the facts of this case did not come within the scope of section 17 (2) (c).
It was also denied that the acquisition in question was not made for a public purpose.
We have earlier seen that in the notification issued under section 4, it had been stated that the acquisition was made "at public expenses, for a public purpose" namely for the setting up a factory for the manufacture of China ware and Porcelain ware including Wall Glazed Tiles etc.
In the writ petition it was not denied that the acquisition in question was made at "public expenses".
All that was challenged in the writ petition was that the purpose for which the acquisition was made not a public purpose.
There is no denying the fact that starting of a new industry is in public interest.
It is stated in the affidavit filed on behalf of the State Government that the now State of Haryana was lacking in industries and consequently it was become difficult to tackle the problem of unemployment.
There is also no denying the fact that the industrialization of an area is in public interest.
That apart, the question whether the starting of an industry is in public interest or not is essentially a question that has to be decided by the Government.
That is a socioeconomic question.
This Court is not in a position to go into that question.
So long as it is not established that the acquisition is sought to be made for some collateral purpose, the declaration of the Govern.
men+ it is made for a public purpose is 'not open to challenge, Section 6(3) says that the declaration of the Government that the acquisition made is for public purpose shall be conclusive evidence that the land is needed for a public purpose.
Unless it is shown that there was a colorable exercise of power, it is not open to this Court to go behind that declaration and find out whether in a particular case the purpose for which the land was needed was a public purpose or not see Smt.
Somavanti and ors.
vs The State of Punjab(1) and Raja Anand Brahma Shah vs State of U.p.(2).
On the facts of this case there can be hardly any doubt that the purpose for which the land was acquired is a public purpose.
In view of the pleadings referred to earlier it is not open to the appellant to contend that the State Government had not contributed any Amount towards the cost of acquisition, We were informed at the bar that the State Government had contributed (1) (2) ; 875 a sum of Rs. 100/ towards the cost of the land which fact is also mentioned in the award of Land Acquisition Officer.
That being so it was not necessary for the Government to proceed with the acquisition under Part VII of the Act see Somavanti 's case(1).
Now coming to the question of urgency, it is clear from the facts set out earlier that there was urgency, The Government of India was pleased to extend time for the completion of the of project upto April 30, 1969.
Therefore urgent steps had to be taken for pushing through the project.
The fact that the St ate Government or the party concerned was lethargic at an earlier stage is not very relevant for deciding the question whether on the date on which the notification was issued, there was urgency or not the conclusion of the Government in a given case that there was urgency entitled to weight, if not conclusive.
This takes us to the question of applicability of section 17 (2) (c) to the facts of the case.
The appellant had denied in the affidavit that the entire land acquired is either waste or arable Iand That contention of his has not been examined by the High Court.
Therefore we have to proceed on the basis that the case does not come within the scope of section 17(1).
The State has also not purported to act under section 17 (1).
It has purported to act under section 17 (2) (c).
Therefore we have to see whether the State could have proceeded on the facts of this case under section 17 (1) (c).
Section 17 as amended by the Punjab Act 2 of 1954, Punjab Act 17 of 1956 and Punjab Act 47 of 1956 to the extent necessary for our present purpose reads thus : "17 (1) In cases of urgency whenever, the appropriate Government so directs, the Collector, though no such award has been made, may, on the expiration of fifteen days from the publication of the notice mentioned in section 9, sub section (1) take possession of any waste or arable land needed for public purposes or for a Company.
Such land shall there upon,vest absolutely in the Government free from all encumbrances.
Explanation (2) In the following cases, that is to say (a) Whenever owing to any sudden change in the channel of any navigable river or other unforeseen emergency, it becomes necessary for any Railway Administration to acquire the 'immediate possession of any land for the maintenance of their traffic or for the purpose of making thereon a river side or ghat, station or of (1) 876 providing convenient connection with or access to any such station; (b) Whenever in the opinion of the Collector it becomes necessary to acquire the immediate possession of any land for the purpose of any library or educational institution or for the construction, extension or improvement of any building or other structure in any village for the common use of the inhabitants of such village, or any godown for, any society registered under the (Act 11 of 1912), or any dwelling house for the poor, or the construction of labour colonies or houses for any other class of people under a Govermnent sponsored 'Housing Scheme or any irrigation tank, irrigation or drainage channel, or any well, or any public road; (c) Whenever land is required for a public purpose which in the opinion of the appropriate Government is of urgent importance, the Collector may, immediately after the, publication of the notice mentioned in sub section (1) and with the previous sanction of the appropriate Government enter upon and take possession of such land, which shall thereupon vest absolutely in the Government free from all encumbrances.
Provided that the Collector shall not take possession of any building or part of a build ing under this sub section Without giving to the occupier thereof at least ' forty eight hour 's notice of his intention so to do .
(3) In every case under either of the preceding subsections the Collector shall at the time of taking possession offer to the persons interested compensation for the standing crop and three (if any) on such land and for any other damage sustained by them caused by sudden dispossession . (4) In the case of any land to which in the, opinion of the appropriate Government, the provisions of subsection (1) or sub section (2) are applicable, the appropriate Government may direct that the provisions of section 5 A shall not apply. 877 Herein we are only concerned with the scope of section 17 (2) (c) as the vires of section 17(2) is not challenged.
Section 17(2)(c) if read by itself is plain.
It seems to permit the appropriate Government to direct that the provisions of Section 5 A shall not apply whenever land is required for public purpose which in the opinion of the appropriate Government is of urgent importance.
The conditions precedent for the application of section 17 (2) (c) are ( 1 ) that the land must be required for a public purpose and (2) the appropriate Government must be of the ,opinion that the purpose in question is of urgent importance.
But it was urged on behalf of the appellants that we should apply ejusdem generie rule in interpreting section 17 (2) (c).
The contention on behalf of the appellants was that though section 17 (2) (c) read by itself covers a very large field, that provision should be given a narrower meaning because of the provisions in section 17(2) (a) and (b).
It was urged that as the general words contained in section 17 (2) (c) follow the specific words of the same nature, in section 17 (2) (a) and (b), those general words must be understood as applying to cases similar to those mentioned in section 17 (2) (a) and (b).
The ejusdem generis rule is not a rule of law but is merely a rule of construction to aid the courts to find out the true intention of the legislature.
If a given I provision is plain and unambiguous and the legislative intent is clear, there is no occasion to call into aid that rule ejusdem generis rule is explained in Halsbury 's Laws of England (3rd Edn.).
36 p. 397 paragraph 599 thus "As a rule, Where in a statute there are general words following particular and specific words,, the general words must be confined to things of the same kind as those specified, although this, ' as a rule of construction, must be applied with caution, subject to the primary rule that statutes are to be construed in accordance with the intention of Parliament.
For the ejusdem rule to apply, the specific words must constitute a category, class or genus; if they do constitute such a category, class or genus, then only things which belongs to that category, class or genus fall within the general words.
It is observed in Craies on Statute Law (6th Edn.) p. 181 that : "The ejusdem generis rule is one to be applied With caution and not pushed too far, as in the case of many decisions, which treat it as automatically appli 878 cable, and not as being, what it is, a mere presumption in the absence of other indications of the intention of the legislature.
The modem tendency of the law, it was said, is "to attenuate the application of the rule of ejusdem generis".
To invoke the application of the ejusdem generis rule there must be a distinct genus or category.
The specific words must apply not to different objects of a widely differing character but to something which can be, called a class or kind of objects.
According to Sutherland Statutory Construction (3rd Edn.) Vol.
II p. 395, for the application of the doctrine of ejusdem generis, the following conditions must exist.
(i) The statute contains an enumeration by specific words; (ii) The members of the enumeration constitute a class; (iii) The class is not exhausted by the enumeration; (iv) A general term follows the enumeration and (v) There is not clearly manifested an intent that the general term be given a broader meaning than the doctrine requires.
The scope of the ejusdem generis rule has been considered by this Court in several decisions.
In State of Bombay vs Ali Gulshan(1); it was observed: "Apart from the fact that the rule must be confined within narrow limits, and general or comprehensive words should recive their full and natural meaning unless they are clearly restrictive in their intendment, it is requisite that there must be a distinct genus, which must comprise more than one species, before the rule can be applied.".
In Lilavati Bai vs The State of Bombay,(2) it was observed "The rule of ejusdem generis is intended to be applied where general words have been used following particular and specific words of the same nature on the established rule of construction that the legislature presumed to use the general words in a restricted sense,; that is to say, as belonging to the same genus ' as the particular and specific words.
Such a restricted mean (1) ; (2) ; 879 ing has to be given to words of general import only where the context of the whole scheme of legislation requires it.
But where the content and the object and mischief of the enactment do not require such restricted meaning to be attached to words of general import, it becomes the duty of the courts to give those words their plain and ordinary meaning," The same view was reiterated by this Court in K. K. Kochini vs State of Madras and Kerala(1).
Bearing in mind the principles set out earlier, we shall now consider whether the general import of the words, in section 17 (2) (e) should be cut down in view of section 17 (2) (a) and (b).
Under cl.
(a) of section 17(2), the acquisition is to be made by the Railway Administration when owing to any sudden change 'in the, channel of any navigable river or other unforeseen emergency it becomes necessary for the administration to acquire the immediate possession of any land for the maintenance of the traffic or for the purpose of making thereon a river side or ghat station or for providing convenient connection with or access to any such station.
We would like to emphasize that under this provision, the acquisition can only be made by the Railway Administration and that when it considers that immediate possession (of any land is necessary for the purposes mentioned therein, Under el.
(b) of sub section
(2) of section 17, before an acquisition can be made, the Collector must form an opinion that it has become necessary to acquire the immiediate possession of the land concerned for the ' purposes mentioned therein.
Under cl.
(c) of section 17(2), the acquisition can be made only when the appropriate Government forms the opinion that because of urgent importance, the concerned land has to be acquired for the purposes mentioned in that provision.
Under el.
(a) the derision to acquire has to be made by the Railway Administration.
Under el.
(b), the acquisition can be made only on the formation of the required opinion by the Collector.
Under el.
(c) the acquisition can be made only when the requisite opinion is formed by the appropriate Government.
Further under el.
(a) the acquisition has to be made to meet certain unforeseen emergency as a result of which the immediate possession of the land is necessary.
Under el.
(b) the Collector must form an opinion that it has become necessary to acquire the immediate possession of land but under el.
(c) the requirement is that the appropriate Government must form the opinion that the acquisition is of urgent importance.
Under cls.
(a), (b) and (c) of sub section
(2) of section 17, the decision to acquire land has, not to be made by the (1) A.I.R. 1960 S.C. 105.0.
(1) A.I.R. 1960 s.c. 1050 880 same authority but by different authorities.
Further the conditions under which the acquisition has to be, made differ from clause to clause.
Therefore there is no basis to say that the general words in cl.
(c) follow the particular and specific words in cls.
(b) and (c).
Nor can it be said that the specific words contained in cls.
(a) and (b) constitute a category, 'class or genus.
Hence we are unable to accept the contention that in interpreting cl.
(c) of section 17(2), we should apply the rule of ejusdem generis.
As none of the contentions taken by the appellants are ac ceptable, thise appeal fails and is dismissed.
But in the circumstances of the case we make no order as to costs.
K.B.N. Appeal dismissed.
| IN-Abs | In March 1969, the respondent State issued a notification under section 4 of the Land Acquisition Act, 1894, as amended by the Punjab Legislature, for acquisition of the appellants ' land.
The notification stated that the land was likely to be required to be taken by Government, at public expense, for a public purpose, namely,.
the setting up of a factory for the starting of an industry and, further that action under section 17(2)(c) would be taken on the, ground of urgency and provisions of section 5A will not apply in regard to the said acquisition.
The appellants filed a writ petition in the High Court questioning the validity of the acquisition on the ground, inter alia, that there was no urgency in the mattelr, of requiring the land ', therefore recourse to section 17 was not justified.
The state government pleaded that since the Government of India had extended the time for completion of the project till April 30, 1969, it, had become necessary to take immediate steps to acquire the land.
The High Court dismissed the petition.
In the appeal to this Court it was contended that (i) the acquisition in question being one for the benefit of a Company, proceedings should have been taken under sections 38 to 44B of the Act,, and that there was no public purpose involved in the case; (ii) there was no urgency and hence recourse could not be had to section 17 of the Act; and (iii) section 17(2) (c) was inapplicable to the facts of the case, because, though section 17(2)(c) read by itself covered a very large field, applying the ejusdem generis Rule that provision had to be given a narrower meaning because of the provisions of section 17(2)(a) and (b).
Dismissing the appeal, HELD : (i) On the facts of the case the purpose for which land was acquired was a public purpose.
The question whether the starting of an industry is in public interest or not is essentially a question that has to be decided by the Government.
So long as it is not established that the acquisition is sought to be made for some collateral purpose or that there is a colourable exercise of power the declaration of the government that it is made for a public purpose is not open to challenge.
[874 E G] Smt; Somavanti and Ors vs State of Punjab, [1963] 2 S.C.R. 774 and Raja Anand Brahma Shah vs State of U.P., ; , referred to.
In view of the fact that the State Government had contributed towards the cost of acquisition it was not necessary to proceed with the acquisition under Part VII of the Act.
[875 A] 8 7 2 (ii) On the facts of the case there was urgency.
The conclusion of the Government in a given case that there was urgency is entitled to weight, if not conclusive.
(iii) In interpreting cl.
(c) of section 17(2) the rule of ejusdem generis, ,cannot be applied.
If a given provision is plain and unambiguous and the legislative intent is clear there is no occasion to call into aid that rule.
Under cls.
(a), (b) and (c) of sub section
(2) of section 17 the decision to acquire, land has not to be made by the same authority but by different authorities.
Further, the conditions under which the acquisition has to be made differ from clause to clause.
Therefore, there is no basis to say that the general words in cl.
(c) follow the particular and specific words in cls.
(b) and (c).
[877 E; 879 H] State of Bomby vs Ali Gulshan, , Lilavati Bai vs Stat of Bombay, ; , K, K. Kochuni vs State of Madras, A.I.R. 1960 S.C. 1050, referred to.
|
iminal Appeal No. 83 of 1954.
Appeal by Special Leave granted by the Supreme Court by its Order dated the 14th September, 1953 from the Judgment and Order dated the 5th June, 1953 of the High Court of Judicature for the State of West Bengal at Calcutta in Criminal Revisions Nos. 1205 and 1204 of 1952.
Ajit Kumar Dutta, (A. K. Dutt and section Ghose, with him), for the appellants.
C. K. Daphtary, Solicitor General of India, (P. A. Mehta, P. G. Gokhale and N. C. Chakravarty, with him), for the respondent.
1027 1954.
November 30.
The Judgment of the Court was delivered by MUKHERJEA, J.
This appeal, which has come before us on special leave, is directed against a judgment of Chunder, J. of the Calcutta High Court dated the 5th of June, 1952, rejecting the appellants application for quashing of certain criminal proceedings started against them and pending before a special court constituted under a notification of the Government of West Bengal issued under West Bengal Act XII of 1952.
To appreciate the contentions raised on behalf of the appellants it would be necessary to narrate a few antecedent facts.
The two appellants along with four other persons, one of whom as died since then, were placed on trial before the First Special Tribunal, Calcutta, which was one of the Tribunals constituted under the Criminal Law Amendment Ordinance XXIX of 1943 passed by the Governor General of India under section 72 of the Government of India Act, 1935, on charges of bribery as also of conspiracy under section 120 B of the Indian Penal Code, read with section 420 of the Code which was later on replaced by section 409.
The trial ended in conviction of all the accused, though not on all the charges brought against them and by its judgment dated the 26th May, 1952, the Tribunal sentenced them to various terms of imprisonment and fine.
It may be convenient to refer here to two of the provisions of Ordinance XXIX of 1943 under which the trial was held and which are material for our present purpose.
One of these relates to the composition of the special tribunal and section 4(1) of the Ordinance lays down that "a special tribunal constituted under this Ordinance shall consist of three members".
This provision was modified by section 3 of Ordinance I of 1950 which lays down that so far as the First Special Tribunal at Calcutta is concerned, for the words "three members" occurring in section 4(1), the words "two members" shall be substituted.
The other material provision is contained in section 5(1) of the Ordinance as it stood after the amendment of 1946, 132 1028 read with sub section (2) of the same section.
Section 5 (1) provides that "the Central Government may from time to time, by notification in the official Gazette, allot cases for trial to each special tribunal" , and section 5(2) lays down that "the special tribunal shall have jurisdiction to try the cases for the time being respectively allotted to them under sub section (1) in respect of such of the charges for offenses specified in the schedule as may be preferred against the several accused".
The result, therefore, is that although a number of offenses are specified in the schedule, it is not all cases of these offenses which are to be tried by the special tribunal but only such of them as the Central Government may, in its discretion, allot to the tribunal.
To proceed with the narrative of facts, there were separate appeals taken by all the five accused against the judgment of the special tribunal, mentioned above, to the High Court of Calcutta under the provisions of the Ordinance itself.
The appeals were heard by a Division Bench consisting of Chakravartti, C. J. and Sinha, J.
The learned Judges did not enter into the merits of the cases but allowed the appeals on two points of law which, according to them, vitiated the entire trial.
It was held in the first place that the special tribunal, which consisted of three members to wit Mr. Barucha, Mr. Joshi and Mr. Bose at the material time, legally ceased to exist on and from the 16th of December, 1949, when Mr. Bose, one of the members, resigned.
It is true that the Amending Ordinance I of 1950 was passed on the llth of January, 1950, but as the tribunal was not reconstituted as a fresh tribunal by means of a fresh notification in the gazette as required by section 3 of the new Ordinance, the two remaining members could not be regarded as a legally constituted tribunal within the meaning of the Ordinance and all the proceedings before it after the resignation of the third member, including the judgment delivered by it were void.
It was held in the second place that as section 5(1) of the Ordinance XXIX of 1943 as it stood after the amendment of 1946, read with section 5(2) autho 1029 rises a special court to try not all cases of offences specified in the schedule but only those which the State Government may in its discretion direct it, became repugnant to Article 14 of the Constitution as soon as the Constitution came into force.
The trial held after the 26th of January, 1950, was therefore bad and although no evidence was taken after that date the discriminations in the shape of departures from normal procedure were involved even in the stage of arguments and pronouncement of judgment against the accused, and the conviction and sentence must consequently be set aside.
After holding the trial to be bad by reason of the illegalities mentioned above, the learned Judges proceeded to consider what should be the final order passed in the appeals.
Having regard to the voluminous evidence on the record, they did not consider it proper to make an order of acquittal in these cases.
They indeed felt distressed by the fact that the accused had already undergone the strain of a protracted and harassing trial for nearly four years but held that such considerations could not weigh with a court so as to restrain it from making an order which the law requires.
The order passed by the High Court was that the accused should be retried in accordance with law by a court of competent jurisdiction, it being left to the State Government to decide whether actually the trial should be proceeded with or not.
This order was pronounced on the 29th of April, 1952.
On the 30th of July, 1952, the West Bengal Act XII of 1952 came into force following an ordinance laying down similar provisions which amended in certain respects the provisions of the West Bengal Criminal Law Amendment (Special Courts) Act of 1949.
On the 22nd August, 1952, three special courts were constituted by a notification of the Government of West Bengal under section 4(2) of this Act of 1949, one of them being described as the West Bengal Second Special Court; and by a notification dated the 19th of September, 1952, Mr. N.L. Some was appointed Special Judge to preside over this Court.
On the 8th of October, 1952, a notification was issued allotting the case against the 1030 Appellants and their co accused to this second court for trial and on the 12th of November, 1952, a fresh petition of complaint was filed by one Kalidas Burman, Inspector of Police, Delhi Special Establishment, against the accused under section 120 B, read with section 409 and sections 409 and 109 of the Indian Penal Code.
On the 21st of November following, summonses were issued in pursuance of the complaint and within 6 days from that date all the five accused moved the High Court of Calcutta and rules were issued in their favour calling upon the State Government to show cause why the process issued on the basis of the petition of complaint filed by Kalidas Burman should not be quashed.
All these rules came up for hearing before Chunder, J. sitting singly and the rules were discharged on the 5th of June, 1953.
The appellants, who were the petitioners in Revision Cases Nos. 1204 and 1205 of 1952, prayed for leave to appeal to this court against this order of the single Judge which was rejected.
They subsequently obtained special leave from this court, on the strength of which the case has come before us.
The substantial point raised by Mr. Dutt, who appeared in support of the appeal, is, that section 12 of the West Bengal Act XII of 1952 operates as a bar to the trial of this case under the Act.
It is argued that under orders of the High Court passed in the appeals, it is the original case, which was commenced before the First Special Tribunal, Calcutta, under the Central Ordinance XXIX of 1943 which is being retried by the special court constituted under the West Bengal Act XII of 1952.
This case, it is pointed out, was pending before the High Court on the 9th April, 1952, which was the date of the commencement of the West Bengal Ordinance preceding the Act and to such cases the provisions of the Act have been expressly made inapplicable by section 12.
It is to be noted that the West Bengal Criminal Law Amendment (Special Courts) Act, (Act XXI of 1939) was amended by the West Bengal Ordinance VIII of 1952 which came into force on the 9th of April, 1952, and this Ordinance was subsequently replaced by 1031 West Bengal Act XII of 1952.
Section 12 of the Act provides as follows: "Nothing in this Act shall apply to any proceedings pending on the date of the commencement of the West Bengal Criminal Law Amendment (Special Courts) Amending Ordinance 1952 in any court other than a special court".
Mr. Dutt contends that the present case is nothing but a continuation of the original case which was tried by the First Special Tribunal of Calcutta under the Central Government Ordinance XXIX of 1943 and against the decision of which Tribunal appeals were taken to the High Court.
The appeals were pending before the High Court when Ordinance VIII of 1952 was passed and consequently section 12 of Act, XII of 1952 would exclude the application of the provisions of the Act to the present case.
For a proper determination of the question it would be necessary first of all to examine the precise scope and object of section 12 of the West Bengal Act XII of 1952.
This, as said above, has only amended certain provisions of the earlier Act XXI of 1949.
Act XXI of.1949 provides for the establishment of special courts presided over by special Judges and they are to follow a particular procedure in the trial of cases assigned to them which differs in certain respects from the procedure laid down in the Code of Criminal Procedure and to that extent is prejudicial to the accused.
Section 4(1) of Act XXI of 1949, as it stood before the amendment of 1952, provided that "the Provincial Government may from time to time by notification in the official gazette allot cases for trial to a special Judge"; and subsection(2) of the section laid down that "the special Judge shall have jurisdiction to try cases for the time being allotted to him under sub section (1) in respect of such of the charges for the offences specified in the schedule as may be preferred against the several accused, and any such case which is at the commencement of this Act or at the time of such allotment pending before any court or any other special Judge shall be deemed to be transferred to the special Judge to whom it is allotted".
The result of 1032 the combined operation of the two sub sections therefore was that all the cases of offences specified in the schedule were not to be tried by a special court but those only could be tried, which the Provincial Government in its discretion might allot to it.
Further there was nothing to prevent the Provincial Government from allotting a case already pending before an ordinary court to a special court constituted under this Act.
A provision which allows the Government an unfettered discretion to choose from amongst the cases of offences, specified in the schedule to the Act, which of them, it would allot to the special tribunal for trial according to the special procedure, the rest being left to be tried in the ordinary way, became, after the coming into force of the Constitution, open to the charge of being obnoxious to the equal protection clause embodied in Article 14 of the Constitution.
This defect was removed and the chance of discrimination eliminated by the Amending Ordinance VIII of 1952, which was afterwards enacted into Act XII of 1952.
Section 4 of the Ordinance replaced section 4 of the Act and sub section (1) of this section laid down that "notwithstanding anything contained in the Code of Criminal Procedure, 1898 or in any other law, the offences specified in the schedule shall be triable by special courts only".
There was no provision in this new section of the Ordinance, corresponding to section 4(2) of the Act under which cases of offences specified in the schedule pending before ordinary courts could be transferred to special courts.
This in sense was anomalous and as the position created by section 4(1) of the Ordinance was that offences specified in the schedule were compulsorily triable by special courts, a difficulty could legitimately arise with regard to cases pending before ordinary courts and the question could be raised whether the ordinary courts would have jurisdiction at all to proceed with trial of these cases after the enactment of section 4(1) of the Ordinance.
It seems clear that in order to obviate this difficulty section 12 was introduced in Act XII of 1950, which replaced Ordinance 1033 VIII of 1952, and the section expressly provides that the Act would not apply to proceedings pending before any court other than a special court on the date that Ordinance VIII of 1952 came into force.
All these pending cases, therefore, could not be allotted to or tried by a special court under the Act.
The question, for our consideration is whether the prohibition created by section 12 is attracted to the facts of the present case.
Now what was pending before the High Court on the 9th April, 1952, were the appeals taken by the appellants and their co accused against the judgment of the First Special Tribunal, Calcutta, constituted under the Central Ordinance XXIX of 1943.
We may agree with the learned counsel for the appel lants that the High Court not being a special court, the provisions of section 12 of the Act could not apply to these proceedings, but this by itself would be of no assistance to the appellants .
To attract the operation of section 12, it is necessary to show that the proceedings which are now before the Special Court under West Bengal Act XII of 1952 were pending before a court other than a special court on the 9th April, 1952.
In our opinion the expression "proceedings in a court other than a special court" occurring in section 12 means and refers to proceedings relating to trial of a case in the original court and not to proceedings in appeal.
If we look to the provisions of Act XII of 1952, we would find that all of them relate to matters concerning constitution, jurisdiction, and powers of the special courts and the special rules of procedure which they are to apply in the trial of cases, and not one of them has any reference to an appeal.
The object of the legislature in enacting section 12, as stated above, was that cases pending before an ordinary or a non special court at the date when the Ordinance came into existence and which were being tried in the ordinary way, should not be brought on to or tried by the special courts in spite of the provi sion of the new section 4(1) introduced by the Ordinance into the Act.
This reason manifestly could have no application to appellate proceedings, for there 1034 could be no question of cases pending in appeals being allotted to special courts for trial.
How the case is to proceed further if the appellate court directs a rehearing would depend entirely on the order which the appellate court passes and is competent in law to pass.
If the appeal court directs retrial by an ordinary court, as the court competent to try the case or that is the implication of the order, the jurisdiction of the special court would be barred not by reason of section 12 of the Special Act but by reason of the order made by the appeal court.
In our opinion the pendency of the appeals before the High Court on the relevant date could not attract the operation of section 12, but as the appeals were taken to the High Court from the decision of a court other than a special court as contemplated by Act XII of 1952, whether the retrial directed by the High Court could be held by a court under Act XII of 1952, would depend on the nature and effect of the order which the High Court has made.
The High Court did not acquit the accused, nor make any order of discharge in their favour.
They set aside the conviction and sentence and directed the retrial of the accused by a competent court in accordance with law if the Government chose to proceed against them.
We agree with Mr. Dutt that ordinarily an order of retrial means a further trial by the same Tribunal which took cognizance of the case and before which the case must be deemed to be pending until it is finally disposed of in one way or other recognized by law.
In this case the accused were neither acquitted, nor discharged, but the High Court set aside the proceedings of the special court on the ground that the trial held by it became void on and from the 26th January, 1950, as section 5(1) of the Ordinance under which the allotment of the case was made and the Tribunal acquired jurisdiction to try it became void and inoperative as soon as the Constitution came into force, by reason of its being in conflict with Article 14 of the Constitution.
The Special Tribunal, therefore, from which the appeals came to the High Court must be held according to the decision of 1035 the High Court itself to have lost seisin of these cases after the 26th January, 1950, and they had no jurisdiction to proceed with the trial.
As the High Court directed these cases to be tried by a competent court, they could not possibly be sent back for trial to the Special Tribunal assuming that any such Tribunal existed or could be constituted by the Central Government.
The only court which was competent to try these cases would be the special court under Act XII of 1952 and its jurisdiction could not be ousted as the order of the High Court itself proceeded on the footing that no trial could be held by the Tribunal con stituted under Ordinance XXIX of 1943.
The jurisdiction of the special court not being ousted by section 12 of the Act or by the order of the High Court, we are unable to hold that the proceedings before it should be quashed.
The result is that the appeal is dismissed.
| IN-Abs | Section 12 of the West Bengal Act XII of 1952 provides: " Nothing in this Act shall apply to any proceedings pending on the date of the commencement of the West Bengal Criminal Law Amendment (Special Courts) Amending Ordinance 1952 in any court other than a Special Court".
On appeal taken by the appellants to the High Court of Cal cutta against their conviction by the First Special Tribunal Calcutta constituted under the Criminal Law Amendment Ordinance of 1943 the High Court set aside the conviction on the ground, inter alia that the Special Tribunal was not properly constituted.
The High Court directed that the accused should be retried in accordance with law by a court of competent jurisdiction, it being left to the State Government to decide whether actually the trial should be proceeded with or not.
On the 30th July 1952 the West Bengal Act XII of 1952 came into force following an Ordinance laying down similar provisions which amended in certain respects the provisions of the West Bengal Criminal Law Amendments (Special Courts) Act of 1949.
In August 1952 three Special Courts were constituted by a notification of the Government of West Bengal, one of them being described as West Bengal Second Special Court.
The case against the appellants was allotted to this second court for trial.
It was contended on behalf of the appellants that section 12 of the West Bengal Act XII of 1952 was a bar to the trial of the pre sent case under the Act and that under the orders of the High Court passed in the appeals it was the original case which was commenced before the First Special Tribunal Calcutta under Central Ordinance XXIX of 1943 which was being retried by the Special Court constituted under West Bengal Act of 1952.
The present case was pending before the High Court on the 9th April 1952 which was the date of the commencement of the West Bengal Ordinance preceding the Act and to such cases the provisions of the Act had been made expressly inapplicable by section 12 and that the present case was nothing but a continuation of the original case which was tried by the First, Spe 1026 cial Tribunal Calcutta under the Ordinance of 1943 and against the decisions of which appeals were taken to the High Court.
Held, (repelling the contention) that what was pending before the High Court on the 9th April, 1952 were the appeals taken by the appellants (and their co accused) against the judgment of the First Special Tribunal Calcutta constituted under the Central Ordinance XXIX of 1943 and in order to attract the operation of section 12 it was necessary to show that the proceedings which were pending before the Special Court under West Bengal Act XII of 1952, were pending before a Court other than a Special Court on 9th April 1952.
The expression "proceedings in a court other than a Special Court" occurring in section 12 means and refers to proceedings relating to The trial of a case in the original court and not to proceedings in appeal.
The object of the legislature in enacting section 12 was that cases pending before an ordinary or a non special court at the date when the Ordinance came into existence and which were being tried in the ordinary way should not be brought to trial or tried by the Special court in spite of the provisions of the new section 4 (1) introduced by the Ordinance into the Act.
This reason manifestly could have no application to appellate proceedings for there could be no question of cases pending in appeals being allotted to special courts for trial.
How the case was to proceed further, if the appellate court directed a rehearing would depend entirely on the order which the appollate court passed and was competent in law to pass.
Accordingly, as the High Court did not acquit the accused or make an order of discharge but simply set aside the conviction and sentence directing the retrial of the cases by a competent court, the only court which was competent to try these cases would be the Special Court under Act XII of 1952 and its jurisdiction could not be ousted as the order of the High Court itself proceeded on the footing that no trial could be held by the Tribunal constituted under Ordi nance XXIX of 1943.
|
Appeal No. 23 of 1967.
Appeal by special leave from the judgment and order dated October 9, 1963 of the Patna High Court in M.J.C. No. 824 of 1963.
section N. Prasad and R. B. Datar, for the appellant.
B. P. Jha, for respondents Nos. 1 and 2.
The Judgment of the Court was delivered by Shelat, J.
This appeal, by special leave, is against the judgment of the High Court of Pitna dismissing in limine the writ petition Med by the appellant challenging the order of his dismissal from service passed by the Government of Bihar.
865 The appellant was first appointed as a stenographer, Sub Inspector of Police in 1940 in the Police Service of the State.
After the requisite training in the Police Training College at Hazaribagh, he was posted as a Sub Inspector in 1950 in Champaran District.
In 1954, he was promoted to officiate as an Inspector of Police.
In June 1955, he worked in Saharsa District as an officiating Inspector of Police.
In July 1955, he received a notice to show cause why disciplinary proceedings should not be taken against him in a matter relatng to certain cloth recovered at Katihar Police Station in a Police Case under sections 379 and 414 of the Penal Code.
The appellant submitted his reply denying any misapropriation by him.
On September 26, 1955, he was served with a charge sheet heet alleging misappropriation and connivance by him of misappropriation by two constables named therein .
This was followd by an enquiry held by the Deputy Superintendent of Railway police at Samastipur.
The appellant alleged that the enquiry was held at partially behind his back and was, therefore, bad. ' In April 1956, the Deputy Superintendent of Police submitted his findings to the Superintendent of Railway Police, Samastipur holding that the charges against the appellant had been established.
These findings were than submitted to the Inspector General of Police with a recommendation that the appellant should be awarded exemplary punishment.
In September 1957, the Inspector General served a second show cause notice on the appellant to show cause why he should not be dismissed.
The appellant submitted his reply and also appeared in person.
By his order dated September 30, 1958, the Inspector General exonerated the appellant from the said charges.
But on the basis of certain adverse remarks in the confidential character roll of the appellant, he passed an order reverting the appellant to his substantive rank of Sub Inspector of Police for a period of one year.
This order clearly was one of penalty.
Admittedly, there was no charge against the appellant founded on the said adverse remarks.
The adverse remarks on the basis of which the order of reversion was passed were, as the said order itself pointed out, never notified to the appellant.
Nor was any opportunity to explain those remarks ever afforded to the appellant before the order of reversion was passed.
Aggrieved by the said order the appellant filed an appeal before the Government.
On November 7, 1959, the Government set aside the order of reversion passed by the Inspector General.
That was the relief prayed for by the appellant in his said appeal.
The order was set aside on the ground that no opportunity had been given to the appellant to explain the said adverse remarks, 866 and that therefore, it was legally unsustainable.
But the Govern , ment passed instead an order of dismissal disagreeing with the findings of the Inspector General and agreeing with the findings given by the enquiry officer, by whom the appellant had been found guilty.
On a further appeal to the Governor having been dismissed by the Government, the.
appellant filed a writ petition in the High Court.
On January 18, 1962, the High Court allowed the writ petition setting aside the Government 's order of dismissal, but directed that the appellant 's appeal should go back to the Government for disposal according to law. ', The Government thereupon served a notice on the appellant to show cause why he should not be dismissed from service.
That notice was issued on, the strength of rr.
851 (b) and 853 A of the Bihar & Orissa Manual, 1930.
The appellant thereupon gave his reply and requested for a personal hearing.
The request for personal hearing was rejected.
About a year after the High Court 's order quashing the Government 's order of dismissal, the Government issued an order dated March 5, 1963 reinstating the appellant, but at the same time suspending him from service.
On June.
15, 1963, the Government passed the order dismissing the appellant from service.
Hence, the appellant filed once more the present petition which the High Court dismissed in limine.
The question is whether it was competent for the Government, in an appeal filed by the appellant against the said order of reversion passed by the Inspector General Police, to set aside the findings of that officer by which he exonerated the appellant from the said charges against him, which findings were not appealed against by the department, and then pass an order of dismissal accepting the findings of the enquiry officer.
The appellant was governed by the , 5 of 1861.
Sec. 2 of the Act deals with the constitution of the police force and provides that the entire police establishment under a State Government shall, for the purposes of the Act, be deemed to be one police force, and shall be constituted is such manner as shall from the to time be ordered by the State Government.
3 provides that "The superintendence of the police throughout a general police district shall vest in and, shall be exercised by the State Government to which such district is subordinate.
" Under section 4, the admistration of the police throughout a general police district is vested in the Inspector General of Police, and in such Deputy Inspectors General of Police and Assistant InspectorsGeneral as the State Government shall deem fit.
7 runs as follows "Subject to the provisions of article 3 1 1 of the Constitution, and to such rules as the State Government may 867 from time to time make under this Act, the InspectorGeneral, Deputy Inspectors General, Assistant inspectors General and District Superintendents of Police may at any time dismiss, suspend or reduce any police officer of the sub ordinate ranks whom they shall think remiss or negligent in the discharge of his duty, or unfit for the same, or may award any one or more of the following punishments to any police officer of the subordinate rank who shall discharge his duty in a careless or negligent manner, or who by any act of his own shall render himself unfit for the discharge thereof, namely.
" The section then sets out the punishments which the said officers can impose, namely, fine, confinement to quarters, deprivation of good conduct pay and removal from any office of distinction or special emolument.
It is clear that the Act itself confers on the Inspector General power to impose in suitable cases the penalty of dismissal, suspension and reduction, subject of course, to the provisions of article 311 and the rules made under the Act.
The power of superintendence conferred on the State Government by section 3 must, therefore, be read in the light of the provisions of section, 7 under which the Legislature has conferred specific powers to the officers mentioned therein.
Therefore, the State Government cannot interfere with, under the purported exercise of the general power of superintendence under section 3 with an order passed by any one of the officers mentioned in section 7 in exercise of the power conferred on them by that section, unless there is some provision which authorises or envisages such interference.
Under section 46(2), the State Government has been given the power to make rules from time to time by notification in the official gazette consistent with the Act, Inter alia : "(a) to regulate the procedure to be followed by Magistrates and police officers in the discharge of any duty imposed upon them by or under this Act; (c)generally, for giving effect to the provisions of this Act.
" It would seem that in pursuance of the rule making power under section 46 (2) rules have been made which are to be found in the Bihar & Orissa Police Manual, 1930.
The Manual has not been produced before us.
But we find r. 851 set out by the High Court 868 in its judgment in the first writ, petition filed by the appellant, reported in Makeshwar Nath vs Bihar(1).
The rule so set out reads 'as follows : "General rules as to appeals (a). . (b) Against an order of, dismissal, removal reduction, withholding of promotion or peri odical increment. there shall be one appeal in each case as follows; Against an order passed by a Superintendent, to the Deputy Inspector_General; Against an original order passed by a Deputy Inspector General, to the Inspector General; Against an original(order passed by the Inspector General, to the Local Government.
(c) The order of the appellate authority on any such appeal shall be final.
" Under this rule an appeal would lie before the Government against the order of the Inspector General reverting the appellant to his substantive post of Sub Inspector for one year.
Such an appeal was in fact filed by the appellant.
But no appeal was filed by the department against the order of the Inspector General exonerating the appellant of the charges of misappropriation and connivance of misappropriation by the two constables.
Under r. 851 (b), therefore, the only question before the Government was whether the order of reversion should be sustained or not.
There was no other matter by way of an appeal before the Government by the department or by any one else being aggrieved against the order of the Inspector General by which he held that the charges.
against the appellant had not been established.
That being so, the Government could pass in exercise of its appellate power under r. 851 (b) such an order as it thought fit in the appeal filed by the appellant, i.e. either upholding the order of reversion or setting it aside.
In the absence, of any other appeal, the Government could not sit in judgment over the findings of the Inspector General given by him under the power conferred upon him by section 7 of the Act.
An appeal before the Government having been provided for under r. 851 (b), presumably both by the delinquent police officer, as also by the department, if aggrieved by an order passed by the Inspector General, there would also be no question of the Government exercising, its general power of superintendence under section 3 of the Act.
The (1) A.I.R. 1962 Pat.
276. 869 exercise of such a power is ordinarily possible when there is no provision for an appear unless there are other provisions providing for it.
The order of dismissal passed by the Government in the appeal filed by the appellant therefore, was not sustainable.
We are, however, informed by counsel that the Government of Bihar has framed two rules, r. 853 and r. 853 A. Rule 853, a copy, of which has been furnished to us, provides "Memorials and Revision.
No petition or memorial which is a representation against an order passed in a disciplinary case shall be submitted to any authority other than the authority which under the rule for the time being in force is empowered to enter am the appeal.
No memorial or revision was filed either by the appellant or any one else before the Government, which was the appellate authority which could entertain such a memorial or revision.
Assuming that under r. 853 the Government could suo moto revise the order of the Inspector General, an appeal having been filed before I it, it could not so act.
The fact that the power of revision is con feared on the authority possessed of appellate power indicates that the power of revision is intended to be used when an appeal could not for some reason be filed and the appellate authority felt that the order was so unjust or unreasonable that it shold act under its revisional power.
That was not the case of the Government before us.
Nor did the Government say so in the impugned order.
Therefore, there was no occasion for the Government to revise the order passed by the Inspector General exonerating the appellant of the charges preferred against him.
In its order, dated January 31, 1963, the Government, no doubt, has referred to rr.
8 5 1 (b) and 8 5 3 A as being the rules under which it purported to act for the purpose of making the impugned order of dismissal.
Rule 851 (b), as already pointed out, however, confers no such power.
As regards r. 853 A, it is neither set out in the impugned order, nor in the statement of case of the respondent State.
We called for its production, or even its copy but counsel for the State expressed his inability to produce the same.
Further, counsel for the appellant told us that even if r.853 A had been framed, it cannot operate because so far it has, not been published in the official gazette as required by section 46(2).
Counsel for the State was not in a position to throw any light whether the said rule has been framed or not and if framed whether it was notified in the Gazette.
In these circumstance he could not rely upon that rule to sustain the order of dismissal passed by the Government.
We have, therefore, to go upon r. 851 (b), which clearly does not empower the Government to pass an order such as the one impugned by the appellant on the ground 870 of its revisional power or any such similar power under section 3 of the Act.
In the absence of any other provision of law or any rule conferring on the State Government the, power to pass an order of dismissal in exercise of its revisional power or power of general superintendence, the general principle must prevail, namely, that an appellate authority in an appeal by an aggrieved party may either dismiss his appeal or allow it either wholly or partly and uphold or set aside or modify the order challenged in such appeal.
It cannot surely impose on such an appellant a higher penalty and condemn him to a position worse than the one he would be in if he had not hazarded to file an appeal.
Since under r. 851 (b) an appeal to the Government has been provided for and the Government had under that rule the appellate authority to dispose of appeals filed before it against the original order passed by the Ins pector General, it could not resort to any general power of superintendence except in cases where there is a provision conferring such a power in addition to its appellate authority and in the manner envisaged by such a provision.
In our view, the High Court was not right in dismissing the appellant 's writ petition.
The appeal has, therefore, to be allowed and the order of the State Government quashed as being without jurisdiction.
The consequence is as if the appellant was never dismissed, and continued to remain in the, police force to which he was attached.
The respondent State will pay to the appellant the costs both of this appeal and also of the writ petition filed by him in the High Court.
G.C. Appeal allowed.
| IN-Abs | At the relevant time the appellant was in the service of the State of Bihar as officiating Inspector of police.
After a departmental inquiry against him the report of the enquiry officer was submitted to the Inspector General of Police with the recommendation that the appellant should be given exemplary punishment.
Under section 7 of the the Inspector General had power to impose in suitable cases penalty of dismissal, suspension and reduction.
The Inspector General exonerated the appellant, from the charges laid against him but on the basis of certain adverse remarks in the confidential character roll of the appellant he passed an order reverting the appellant to the substantive rank of sub inspector of police for a period of one year.
These adverse remarks had never been notified to the appellant nor was,any opportunity to explain them ever offered to him before the order of reversion was passed.
In appeal the State Government set aside the order of reversion passed by the Inspector General on the ground that no opportunity had been given to the appellant to explain the adverse remarks, but the Government instead passed an order of dismissal disagreeing with the findings of the Inspector General and agreeing with the findings given by the enquiry officer by whom the appellant had been found guilty.
On further appeal to the Governor having been dismissed by the Government the appellant filed a writ petition in the High Court.
The High Court allowed the writ petition but directed that the appellant 's appeal should go back to the government for disposal according to law.
The Government thereupon served notices on the appellant to show cause why he should not be dismissed from service.
The notice was issued oh the strength of rr.
851(b) and 853 of the Bihar and Orissa Police Manual, 1930.
The appellant thereupon gave his reply.
About a year after the High Court 's order quashing the Government 's order of dismissal, the Government issued an order reinstating the appellant but at the same time suspending him from service.
This was followed by an order dismissing the appellant from service.
The appellant once more filed a petition in the High Court which was dismissed in liming.
By special leave the present appeal, was filed.
The question for consideration was, whether it was competent for the Government, in an appeal filed by the appellant against the order of reversion passed by the Inspect(* General of Police to set aside the findings of that officer by which he exonerated the appellant from charges against him, which findings were not appealed against by the department, and then pass an order of dismissal accepting the findings of the enquiry officer.
HELD:(1) The Act itself confers on the Inspector General power to impose in suitable cases the penalty of dismissal, suspension and reduc L1100Sup.
Cl/71 864 tion,subject to the provisions of article 311 and the rules made under the Act.
The power of superintendence conferred, on the State Government by s.3 must, therefore, be read in the light of the provisions of section 7 under which the legislature has conferred specified powers to the officers mentioned therein.
Further, an appeal before the Government having been provided for under r. 851 (b), presumably both by the delinquent police officer, as also the department, if aggrieved by an order passed by the Inspector General, there would also be no question of the Government exercising its general power of superintendence under section 3 of the Act.
The exercise of such a power is ordinarily possible when there is no provision for an appeal unless there are other provisions providing for it.
[867 D 869 A] (ii)Under r. 851(b) the only question before the Government was whether the order of revision should be sustained or not.
There was no other matter by way of an appeal before the Government by the department or by anyone else being aggrieved against the order of the Inspector General by which he held that the charges against the appellant had not been established.
That being so, the Government could pass in exercise of its appellate power, under r. 851 (b) such an order as it ' thought fit in the appeal filed by the appellant i.e., either upholding the order of reversion or setting it aside.
In the absence of any other appeal, the Government could not sit in judgment over the findings of the Inspector General given by him under the power conferred on him by section 7 of the Act [868 E G] (iii)The order of the Govertunent could not also be defended under r. 853.
Assuming that under r. 853 the Government could suo moto revise the order of the Inspector General, on appeal having been filed before it, it could not so act.
The fact that the power of revision is conferred on the authority possessed of appellate power indicates that the power of revision is intended to be used when an appeal could not for some reason be filed and the appeuate authority felt that the order was so unjust or unreasonable that it should act under its revisional power.
That wae not the case of the Government in the present case.
[869 D E] [whether the order of the Government could be defended under r. 853A could not be considered because the existence of the rule was not proved.]
|
Appeal No. 1059 of 1970.
Appeal from the judgment and order dated February 18, 1970, of the Gujarat High Court in Special Civil Application No. 387 of 1968.
D. V. Patel and Vineet Kumar, for the appellant.
I. N. Shroff, for the respondent.
The Judgment of the Court was delivered by Grover, J.
This appeal by certificate arises out of a writ petition filed by the respondent which is a Society registered under the Bombay Cooperative Societies Act 1925 challenging the collection of octroi by the appellant which is the Una Nagar Panchayat.
The appellant is a local body constituted under the Gujarat Panchayat Act 1961, hereinafter called the "Act, which came into force with effect from April 1, 1963.
Prior to its enactment the Bombay Municipal Act 1901, as applied to Saurashtra, was in force in that region of the present State of Gujarat.
Under its provisions Una Municipality was constituted.
It was collecting octroi on commodities which were imported into the municipal limits of Una under the Saurashtra Terminal Tax and Octroi Ordinance 1949.
Under section 3 of that Ordinance the Government could impose the tax mentioned thereunder in the cities and towns specified or included later in Schedule 1.
One of these taxes was a terminal tax on goods imported into or exported from the terminal tax limits.
Octroi as defined by section 2(2) included a terminal tax.
Section 4 gave the power to the Government to make rules by notification for the purpose of carrying out the purposes of the Ordinance.
Rules were framed under section 4 in the Gujarati language.
It was provided therein that the collection of Octroi and terminal tax would be done through the Sudhrai of the area entered in the schedule to the ordinance.
It is apparent that under the Ordinance it was ' the State Government which imposed the octroi or the terminal tax in the cities and towns specified in the Schedule and the Sudhrai was only an agency for collection thereof.
By a notification dated December 12, 1949 issued under the Ordinance the Government of.
the erstwhile State of Saurashtra included the town of Una in the Schedule 'to the Ordinance.
Thus 409 octroi and terminal tax, became leviable in that town on certain.
commodities imported there.
Section 9 of the Ordinance must also be noticed.
According to it the Government was to maintain it separate fund in respect of all monies received by it on account of any of the taxes specified in section 3 for every city or town or 'local area specified in Schedule I and such fund after deducting there from the expenditure incurred in connection with the levy and collection of such tax was to be applied for the benefit of the inhabitants of the city or town or local area for which it was maintained.
The purpose of levying the octroi duty or terminal tax.
under the Ordinance clearly was to add t o the revenue of the local body for the benefit of the people residing within the Jurisdiction of that particular local body.
So long as Una Municipality remained a municipality as con stituted under the Act of 1901, there was no difficulty in the matter of collection of the octroi.
After the Act came into force the Nagar Panchayat replaced the Municipality in Una.
It continued to collect the octroi till 1967 when the respondent, for the first time, raised an objection that it was not entitled to do so.
As the Nagar Panchayat persisted in making the collection a petition.
under article 226 of the Constitution was filed in the Gujarat High Court.
It has been held by the High Court that since in the Rules, promulgated under the Ordinance in Gujarati the collecting agency has been described as Sudhrai which means a municipality the Nagar Panchayat was not competent to collect the octroi under the Ordinance as it did not fall within the meaning or definition of the term "municipality".
In, our judgment the High Court was in error in coming to the conclusion that the Nagar Panchayat was not entitled to carry on the work of collection of octroi under the Ordinance even though, the Ordinance which imposed liability to pay remained in force.
Under section 307 of the Act where any local area was declared to be a grain or nagar under section 9 and if that area was co extensive with the limits of a municipal district or municipal borough the municipality functioning in such local area was to cease to exist and in its place an Interim Gram Panchayat was to be constituted.
According to clause (c) of that section the unexpended balance of the municipal fund and property including arrears of rates, taxes and fees belonging to the municipality and all rights and powers which vested in the municipality were to vest in the Interim Gram or Nagar Panchayat fund until a new panchayat was constituted in accordance with the provisions of section 308(1).
Clause (g) provided that all officers and servants in the employ of the municipality were to become officers and servants.
of the Interim Panchayat under the Act.
Clause (k) was in the following terms 410 "Any law (other than the municipal law) or any rule, by law, notification or order issued under such law, which was applicable to and in force in the local area immediately before it was declared as a gram or nagar under section 9, shall continue to apply to and to be in force in the local area until it is super seded".
Section 308 dealt with the term of office of an Interim Panchayat and the steps to be taken to hold election for a new Gram or Nagar Panchayat.
The appellant in the present case is indisputably the duly constituted Nagar Panchayat.
Section 307 of the Act leaves no room for doubt that wherever it Nagar Panchayat was constituted in place of the municipality the municipality disappeared and all its funds including the right to realise taxes etc., vested in the Nagar Panchayat.
In other words it was the Nagar Panchayat which was to function as the local body in the area previously constituted as a municipality.
Clause (k) of section 307 clearly saved all laws or rules which were applicable to the local area which formed a municipality and they were to continue to, apply and to remain in force in the area for which the Nagar Panchayat came to be constituted.
By no stretch ,of reasoning could it be said that the Ordinance did not become applicable to the cities and towns specified in Schedule I which came to be constituted as Grams or Nagars under the Act.
It is true that no fresh rules were promulgated under the Ordinance adapting the new terminology but even about the word Sudhrai It is, a moot point whether it means only a municipality as constituted under the Act of 1901.
An argument was raised before the High Court that the Guja rati expression "sudhrai" meant any local self governing authority.
The High Court observed that this expression as used in the Octroi rules could not have a wider connotation than the expression " municipality" in section 9 of the Ordinance.
When section 307(k) of the Act saved the operation of all, laws and rules etc., other than the municipal law the intention of the legislature was precise and definite and it is futile to suggest that the Ordinance was not covered by this saving clause.
The object underlying clause (c) of section 307 was to vest in the Nagar Panchayat the entire municipal fund including the arrears of taxes and fees as also the powers and rights relating thereto which previously vested in the municipality.
The octroi which was being collected under the Ordinance clearly fell within the ambit of clause (c).
The power and the right, therefore, had passed to the Nagar Panchayat and it was fully entitled to exercise it.
Even if in the rules framed under the Ordinance certain expression created a difficulty that could not defeat the right and the power conferred on the Nagar Panchayat 411 by the Act of realising and collecting the octroi which was being done under the Ordinance as saved by clause (k) of section 307.
If on account of the absence of proper adaptation in the rules made under the Ordinance any difficulty is being experienced in the collection of octroi it is always open to the State Government to make those clarifications and adaptations and indeed it would be expedient and desirable to do so.
So long as the new rules are not framed under the Ordinance or adaptations are not made thereunder the Nagar Panchayat can certainly make the (collection and through the officers who discharge the same duties as were being performed by their counterparts mentioned in the rules.
This is what seems to have been done up till 1967 without any objection by any one.
| IN-Abs | The Appellant, Nagar Panchayat, Una, a local body, was constituted under the Gujarat Panchayat Act, 1961, which came into force 'from April 1, 1963.
Prior to this enactment, the Bombay Municipal Act, 190 1, as applied to Saurashtra, was in force in that region of the present State of Gujarat and under its provisions the Una Municipality was constituted.
This Municipality was collecting octroi on commodities imported into the municipal limits of Una under the Saurashtra Terminal Tax and Octroi Ordinance 1949.
Section 3 of that Ordinance empowered the State Government to impose the tax mentioned thereunder in the cities and towns specified or included later in Schedule 1.
One of these taxes was a terminal tax on goods imported into or exported from the terminal, tax limits.
Section 4 gave powers to the Government to make rules by notification for the purpose of carrying out the purposes of the Ordinance.
Rule 4, which was framed in Gujarati language, provided that collection of octroi and terminal tax would be done through the "Sudhrai" of the area entered in the schedule to the Ordinance.
After the Act of 1961 came, into force and the Nagar Panchayat replaced the Municipality, it continued to collect the actroi till 1967, when the respondent filed a petition under Article 226 challenging the competence of the Nagar Panchayat to collect the octroi.
The High Court held that since in the Rules promulgated under the Ordinance in Gujarati the collecting Agency had been described as "Sudhrai" which means Municipality, the Nagar Panchayat was not competent to collect the octroi under the Ordinance as it did not fall within the meaning or definition of the term "Municipality".
On appeal to this Court, HELD : Allowing the appeal : The High Court was in error in coming to the conclusion that the Nagar Panchayat was not entitled to carry on the work of collection of octroi under the Ordinance even though the Ordinance which imposed liability to pay remained in force.
Section 307 of the Act leaves no room for doubt that wherever a Nagar Panchayat was constituted in Place of the municipality, the municipality disappeared and all its funds including the right to realise taxes etc.
vested in the Nagar Panchayat.
In other words it was the Nagar Panchayat which was to function as the local body in the area previously constituted as a municipality.
Clause (k) of section 307 clearly saved all laws or rules which were applicable to the local area which formed a municipality and they were to continue to, apply and to remain in force in the area for which the Nagar Panchayat came to be constituted.
There was no force in the contention that the Ordinance did not become applicable to the cities and towns specified in Schedule I which came to be constituted as Grams or Nagars under the Act.
[410 C] 408 Even if in the rules framed under the Ordinance certain expression created a difficulty that could not defeat the right and the power conferred on the Nagar Panchayat by the Act of realising and collecting the octroi which was being done under the Ordinance as saved by clause (k) of section 307.
[410 H]
|
minal Appeal No. 241 of 1968.
Appeal by special leave from the judgment and order dated September 9, 1968 of the Rajasthan High Court in Criminal Appeal No. 134 of 1968.
section V. Gupte, D. P. Singh, R. K. Jain and V. J. Francis, for the appellants.
Debabrata Mukherjee and R. N, Sachthey, for the respondent.
The Judgment of the Court was delivered by Ray, J.
This is an appeal by special leave against the order and judgment dated 9 September, 1968 of the High Court Rajasthan.
883 The question for consideration is whether the Additional Special Judge, Rajasthan, Jaipur could proceed with the trial of Criminal Case No. 2/68/Spl.
as directed by the order of the High Court.
, That case was initiated under a sanction accorded ' by the Central Government under section 197 of the Code of Criminal Procedure and section 6 (1) (a) of the Prevention of Corruption Act and the appellants along with four civilians were charged, with offences punishable under sections 120 B, 161, 165A. 4,20, 409 and 467 A of the Indian Penal Code and section 5(2) of the Prevention of Corruption Act read with sections 5 (1 ) (a) and 5 (1 ) (d) of the Prevention of Corruption Act.
The Special Police Establishment, Jaipur Branch on 27 January, 1966 put up before the Special Judge, Jaipur a charge sheet against the four appellants and four civilians.
One of the civilians turned approver.
The four appellants thereafter made an application on 13 September, 1966 before the Special Judge that they were Commissioned Officers of the Indian Army and without complying with the provisions of section 549 of the Code of Criminal Procedure and the Rules thereunder called the "Criminal Courts and Court Martial (Adjustment of Jurisdiction) Rules," the Special Judge could not proceed against the appellants in the criminal court which under the is described as a civil court as opposed to court martial under the Army Acts.
The Special Judge rejected that application on 10 October, 1966 and ordered that the case would be put up for further proceedings on 16 January, 1967.
A revision application was thereafter moved in the Rajasthan High Court.
The High Court of Rajasthan by order and judgment dated 20 December, 1966 said that the Special Judge would proceed in accordance with the provisions of Rules 3 and 4 of the Rules framed under section 549 of the Code of Criminal Procedure.
In compliance with the aforesaid order of the High Court, the Special Judge on 12 January, 1967 gave notice to the Commanding Officer, 123 Infantry Battalion (T.A.), Jaipur notifying under Rule 4 of the Criminal Courts and Court Martial (Adjustment of Jurisdiction) Rules, 1952 that the appellants along with three civilians were charged with the offences as indicated above and charges would be "framed against the accused after the expiry of a period of seven days from the date of the service of the notice".
On 16 January, 1967 the OfficerCommanding wrote to the Special Judge for Rajasthan that in exercise of the powers conferred upon him by Rule 5 of the Criminal Courts and Court Martial (Adjustment of Jurisdiction) Rules, 1952 the Officer Commanding gave notice that the four Officers meaning thereby the appellants belonged to his Unit and that the appellants would be tried by Court Martial under the for the offences alleged to have 884 been committed by the in as set out in the notice of the Special Judge and that the Court of the Special Judge was requested to stay the proceedings against the four appellants with immediate effect.
The letter concluded by stating that the four appellants might be delivered immediately to Major R. N. Kesar who was carrying the notice to be handed over to the Court by hand.
On 17 January, 1967 the State of Rajasthan made an appli cation before the Special Judge that under section 122 of the army Act, 1950 a period of three years was provided after which no Court Martial proceedings could be commenced against the Army Officers and the period of limitation was to be computed from the date of such offence.
The charges of conspiracy and corruption against the appellants were alleged to have been committed in the month of December, 1962 and the end of the year 1963 and as such, according to the State of Rajasthan, the limitation for the purpose of Court Martial expired with the close of the year 1966.
The State of Rajasthan submitted that the Special Judge took cognizance of the case on the basis of sanction granted by the Central Government and there were two orders one from the highest authority of the Government, namely, the President of India sanctioning the prosecution of the appellants by a competent criminal court and the other by an Officer Commanding for holding a Court Marlial and therefore the matter might be referred to the Central Government for clarification.
The Special Judge on 17 January, 1967 held that along with the appellants three civilians were charged with the commission of offence and they could not be tried by Court Martial.
The Special Judge requested the Com manding Officer to make a reference to the Central Government within seven days failing which the Special Judge would make a reference to the Central Government.
The Special Judge did not deliver the four appellants to the Commanding Officer.
On 28 January, 1967 the Officer Commanding, 123 Infantry Battalion (T.A.), Jaipur wrote to the Special Judge that the notice under Rule 5 of the Criminal Courts and Court Martial (Adjustment of Jurisdiction) Rules, 1952 served by the Officer on the Special Judge by letter dated 16 January, 1967 might be treated ,as cancelled.
On 21 March, 1968 the appellants made an application before the Additional Special Judge, Jaipur that the Commanding Officer acted illegally and without jurisdiction in cancelling the earlier notice dated 16 January, 1967 and the Commanding Officer should have made a reference to the Chief of the Army Staff.
The appellants prayed that they might be handed over to the Commanding Officer in terms of the letter dated 17 January, 1967 issued by the Commanding Officer asking the Special Judge to deliver the appellants, to the Army authorities.
On 5 April, 1968 the Additional 885 Special Judge held that the Officer Commanding revised his discretion and intimated by letter dated 28 January, 1967 that the earlier notice dated 16 January, 1967 issued under Rule 5 requiring delivery of the appellants to the Army authorities for trial by Court Martial was cancelled and therefore the Special Judge would try the case and not deliver the appellants to the army authorities.
The appellants thereafter made an application to the High Court of Rajasthan under section 435 read with section 561 A of ,the Code of Criminal Procedure for quashing the proceedings before the Additional Special Judge and for directing the Special Judge to hand over the appellants to be tried by Court Martial.
The High Court by order dated 9 September, 1968 dismissed the revision application and directed the Special Judge, Rajasthan to conduct the trial expeditiously, because sufficient time had elapsed since the submission of The charge sheet by the Special Police Establishment Branch, Jaipur.
Counsel on behalf of the appellants contended that the order of the High Court was wrong for 3 reasons : First, that the Special Judge having issued a notice on 12 January, 1967 under Rule 4 of the Criminal Courts and Court Martial (Adjustment of Jurisdiction) Rules, 19,52 to the Officer Commanding and having received a reply dated 16 January, 1967 from the Officer, the Special Judge had no jurisdiction to deal with an application of the State made on 17 January, 1967 and pass an order on 17 January, 1967 on the stay application that the Commanding Officer should make a reference to the Central Government.
The second contention was that the Commanding Officer had no power to cancel the intimation dated 16 January, 1967 by the subsequent letter dated 28 January, 1967.
Thirdly, it was said that the sanction for prose caution accorded by the Central Government had no relevance to section 549 of the Code of Criminal Procedure read with the Rules.
Counsel on behalf of the respondent on the other hand contended that the Officer Commanding by letter dated 28th January, 1967 cancelled the earlier notice dated 16th January, 1967 with the result that no Court Martial proceeding was to be commenced against the appellants.
It was said on behalf of the respondent that the competent military authority had power and jurisdiction to cancel the letter dated 16th January, 1967.
Secondly, it was said that the Special Judge had jurisdiction and authority to try and dispose of the case which was pending on 30th June, 1966 in the criminal court by virtue of the provisions contained in the Criminal Law Amendment (Amending) Act, 1966.
The third, contention was that the Special Judge, was justified in making an order on 17th January, 1967 requesting the competent military authority to make a reference to the Central Government failing which the Special Judge would make a reference to the Central Government.
886 In order to appreciate the rival contentions reference has to be made to sections 125 and 126 of the Any Act and Rules 3 to 9 of the Criminal Courts and Court Martial (Adjustment of Jurisdiction) Rules, 1952 made by the Central Government in exercise of the powers under section 549 of the Code of Criminal Procedure.
Sections 125 and 126 of the are framed for the purpose of ensuring that there is no conflict between the criminal court and the Court Martial.
Section 125 confers discretion on the Officer Commanding of the army corps division or brigade in which the accused is serving to decide before which court proceedings shall be instituted in respect of an offence legend to be committed by the accused.
If the decision will be for institution of proceedings before the Court Martial direction is given for detention of the accused in military custody.
Section 126 provides that where a criminal court having jurisdiction is of opinion that proceedings shall be instituted before it in respect of any alleged offence, the criminal court, may require the Officer Commanding mentioned in section 125, of the either to deliver the offender to the Magistrate or to postpone proceedings pending a reference to the Central Government.
Section 126(2) of the provides that the Officer Commanding shall either deliver the offender to the Magistrate or shall refer the question to the Central Government whose order upon such reference shall be final.
These two sections of the AnY Act do not leave any room for doubt that if after commencement of Court Martial proceedings the ordinary criminal court intends to proceed against an accused who is subject to, the control of the , the criminal court will have to adopt either of the two courses mentioned The order of the Central Government shall be final in cases of, reference by the criminal court to the Government.
In the present case there was in the beginning suggestion by the Officer Commanding of institution of Court Martial pro ceedings.
When the Special Judge found on the application made by the State on 17 January, 1967 that section 122 of the raised the bar of limitation with regard to initiation of Court Martial proceedings and further found that there were civilians.
charged along with the appellants, it was not unjustified in asking the Officer Commanding to make a reference to the Government in order to prevent any competition or conflict between the criminal courts and Court Martial.
On 17th January, 1967 as matters stood, the Special Judge had the intimation from the Officer Commanding that Court Martial proceedings would be instituted.
Therefore on a reading of section 126 of the Army 887 Act the Special Judge requested the Officer Commanding to refer the question to the Central Government for determination as to, the Court before which proceedings would be started.
Section 549 of the Code of Criminal Procedure empowers the Central Government to make Rules as to the case in which persons subject, to military, naval or air force law be tried by a court to which the Code of Criminal Procedure applies or by Court Maritial.
When any such person is brought before the Magistrate and charged with an offence for which he is liable to be tried either by a court or by Court Martial, the Magistrate ' shall have regard to such Rules and shalt in appropriate cases deliver him together with the statement of the, offence of Which he is accused to the Commanding Officer for the purpose of being tried by Court Martial.
There are 9 rules under section 549 of the Code of Criminal Procedure.
These Rules are called Criminal Courts and Court Martial (Adjustment of Jurisdiction) Rules, 1952.
Broadly stated, rules 3 to 9 are, as follows Under rule 3, (a) a Magistrate may proceed against a person subject to military, naval or air force laws without being moved by 'a competent military, naval: or air force authority, or (b) by being moved by such authority.
, Under rule 4 if the Magistrate is of opinion that he will precede against such a person without being moved by the competent military, naval or air force authority, he shall give written notice, to the Commanding Officer of the accused and until the expiry of a period of seven days shall not (a) convict or acquit the accused, or (b) hear him in defence or (c) frame in writing a charge, or (d) make an order committing the accused for trial by the High Court or by the Court of Sessions under section 213 of the Code of Criminal Procedure Under Rule 5 where within, the period of seven days or at any time thereafter before the Magistrate has done any act or issued any order, the Commanding Officer gives notice to the Magistrate that the accused should be tried by Court Martial, the Magistrate shall stay the proceedings and if the accused is in his power or under this control the Magistrate shall deliver him to the relevant authority Under rule 6 where a Magistrate has been moved by the competent military, naval or air force Authority under rule 3(b) and the Commanding Officer subsequently gives notice to the Magistrate that the accused shall be tried by Court Martial, such Magistrate,.
if he has not before receiving such notice done any act or issued any order referred to in rule 4, shall stay proceedings and, if the accused is in his power, or under his control, shall deliver him to the relevant authority.
Under rule 7 where an accused person having been delivered by the Magistrate under rule 5 or 6 is not tried by a court martial for the offence of which he is accused, 888 or other effectual proceedings are not taken against him, the Magistrate shall report the circumstance to the State Government which may, in consultation with the Central Government take appropriate steps to ensure that the.
accused person is dealt with in accordance with law.
Under rule 8, where it comes to the notice of the Magistrate that a person subject to military, naval or air force law has committed an offence, proceedings in respect of which are instituted before him and that the presence of such a person cannot be procured unless through military, naval or air force, authorities the Magistrate may by a written notice require the Commanding Officer of such person either to deliver such a person to a Magistrate to be named in the said notice for being proceeded against according to law, or to stay the proceedings against such person before the court martial if since instituted, and to make a reference to the Central Government for determination as to the Court before which the proceedings should be instituted.
Under rule 9 where a person subject to military, naval or air force law has committed an offence which in the opinion of the competent military, naval or air force authority, as the case may be, ought to be tried by a Magistrate in accordance with the civil law in force or where the Central Government has on a reference mentioned in rule 8, decided that proceeding$ against such person should be instituted before a Magistrate the Commanding Officer of such person shall after giving a written notice to the Magistrate concerned, deliver such person under proper escort to that Magistrate.
These Rules enjoin coming of criminal courts and Court Martial.
Before proceeding against the person subject to military law, the Magistrate is required to give notice to the Commanding Officer.
If within the period of seven days or before the Magistrate has done, any, act or issued any order the Commanding Officer gives notice that the accused should be tried by a Court Martial the criminal court shall stay proceedings.
If thereafter the court martial proceeding is not taken the Magistrate may report to the State Government which may in consultation with the Central Government take appropriate steps to ensure that the accused is dealt with in accordance with law.
Where.
it comes to the notice of the Magistrate that proceedings ,,ought to be instituted before him he may by written notice require the Commanding Officer to deliver the accused to the 'Magistrate or require the Commanding Officer to stay the Court ',Martial proceedings if instituted and to make a reference to the ,Central Government for determination as to the Court before which the proceedings shall be instituted.
Rule 8 again supports The step taken by the Magistrate in the present case, on 17th 889 January, 1967 when he required the Commanding Officer to make a reference to the Central Government.
Under rule 9 if the relevant authority of the armed forces is of opinion that the criminal court ought to try the offender or if the Central Government on a reference to it is of similar opinion the offender is delivered to the Magistrate.
Rule 9 is also attracted in the present case by reason of two features, viz., the Officer Commanding on 28th January, 1967 informed that no Court Martial proceeding would be instituted, and, secondly, the military authorities never asked the criminal court to deliver the appellants to the military authority.
The facts and circumstances indicate that the competent military authority formed the opinion that the appellants should be tried by the Special Court.
This Court in the case of Ram Sarup vs The Union of India(1) considered the question whether section 125 of the could be said to be discriminatory and violative of Article 14 of the Constitution.
In that case Ram Sarup who was subject to the was tried by the General Court Martial found guilty and sentenced to death.
He then filed a petition under Article 32 of the Constitution for a writ of habeas corpus and a writ of certiorari setting aside the order of the Court Martial and the order of the Central Government.
It was contended there that section 125 of the left to the unguided discretion of the Officer mentioned in that section to decide whether the accused should be tried by a court martial or by a criminal 'court.
This Court repelled that contention and held "there is sufficient material in the Act which indicates policy which is to a guide for exercising discretion and it is expected that the discretion is exercised in accordance with it.
The Magistrate could question it and the Government in case of difference of opinion between the views of the Magistrate and the Army authorities decide the matter finally".
In Ram Sarup 's case (supra) this Court further examined the meaning of sections 125 and 126 of the and section 549 'of the Code of Criminal Procedure and Rues 3 to 9 of the Criminal Courrts Court Martial (Adjustment of Jurisdiction) Rules, 1952 made under the Code of Criminal Procedure and laid down two pro,positions; First, if the Magistrate will find that the military authorities do not take effectual proceedings under the within a reasonable time the Magistrate can report the cirCumstance to the State Government which may in consultation with the Central Government.take appropriate steps to ensure that the accused is dealt with in accordance with law.
Secondly, whenever there will be difference of opinion between the criminal (1) ; 890 court and the military authorities about the forum where an accused is to be tried for the particular offence committed by him, final choice about the forum of the trial of a person accused of a civil offence meaning thereby an offence triable by criminal court rests with the Central Government.
This Court in the recent decision in Som Datt Datta vs Union of India & Ors.(1) considered the effect of rule 3 of the Rules framed under section 549 of the Code of Criminal Pro cedur The petitioner in that case made an application under Article 32 for a writ of certiorari for quashing the proceedings before the Court Martial whereby he was found guilty of charges under sections 304 and 149 of the Indian Penal Code and sentenced to 6 years ' rigorous imprisonment.
The contention in that case was that having regard to the provisions of section 125 of the and having further regard to the fact that the Army Officer had in the first instance decided to hand over the matter for investigation to the Civil Police and by reason of absence of notice under Rule 5 of the Rules under section 549 of the Code of Criminal Procedure that the petitioner should be tried by Court Mar tail, the criminal court alone had jurisdiction under rule 3 to try the petitioner.
This Court held that the action of the Officer under section 125 of the constituting a court martial indicated that decision was taken under section 125 of the for institution of Court Martial proceedings.
Rule 3 was said to be applicable to a case where the Police had completed the investigation and the accused was brought before the Magistrate after submission of the charge sheet.
Rule 3 could not be invoked where the Police metered started investigation.
In Some Datt Datta 's case (supra) this Court said about sections 125 and 126 of the "These two sections of the provide a satisfactory machinery to resolve the conflict of jurisdiction having regard to the exigencies of the situation in particular case.
" In the present case the special Judge gave notice to the Officer Commanding.
The Officer Commanding had first said that Court Martial proceedings would be instituted.
The Officer Commanding thereafter cancelled that intimation.
There is no further aspect of conflict between the criminal court or the Court Martial in the present case.
The appellants contended that they should be delivered to the Army authorities.
The Army authorities did not want delivery of the appellants to them for any Court Martial proceedings.
On the contrary, the Army authorities indicated in no uncertain terms that the Special Judge should proceed with the case.
When Special Judge asked the Army authorities to make a reference (1) ; 891 to the Government the Army authorities instead of making a reference to the Government cancelled their first intimation about ,the institution of Court Marial proceedings with the result that the Officer Commanding expressed the opinion that the appellants ought to be tried by a Magistrate in accordance with law of the land.
This Court in the recent unreported decision in Joginder Singh vs State of Himachal Pradesh(1) considered the question as to whether the trial and conviction by the Assistant Sessions Judge in respect of an offence, under section 376 of the Indian Penal Code violated provisions of the read with criminal Courts and Court Martial (Adjustment of Jurisdiction) Rules, 1952.
The contention in that case was that the criminal court did not follow the provisions contained in section 126 of the read with rules 3 and 4 of the Criminal Courts and Court Martial (Adjustment of Jurisdiction) Rules, 1952.
It was particularly emphasised in that case that it was for the competent officer to decide in the first instance that the appellant should be tried by Court Martial.
This Court referred to the earlier decision of this Court in Major E. G. Barsay vs State of Bombay (2) for the proposition that there was no exclusion of Jurisdiction of the ordinary criminal courts in respect of offences which are also triable by Court Martian.
Sections 125 and 126 of the leave no doubt in that matter.
Rule 3 (a) of the Criminal Courts and Court Martial (Adjustment of Juris diction) Rules also indicates that the criminal court can of its own motion start proceeding against an accused who is subject to the .
The several provisions of the and the Rules also indicate that the criminal court is not powerless when it is of opinion that the case should be tried in a criminal court and in case of conflict between the criminal court and the Court Martial the order of the Central Government is final decision as to the forum of trial of the offence.
In Joginder Singh 's case (supra) this Court examined the Rules and said that the absence of a notice under rule 4 was not fatal in the facts and circumstances of the case because the competent military authority knowing the nature of the offence released the accused from military custody and handed him over to the civil authorities, and the action amounted to a decision by the military authorities that the accused in that case was to be tried by an ordinary criminal court and not by Court Martial.
The provisions of the , the Rules under section 549 of the Code of Criminal Procedure and the decision of this (1) Criminal Appeal No.34 of 1969 decided on 30 11 1970 (2) ; 892 Court all support the conclusion that the Special Judge in the present case was justified in asking the Officer Commanding to make a reference to the Central Government and that the Officer Commanding in the facts and circumstances of the case expressed the opinion that the appellants should be tried by criminal courts because there would in fact be no Court Martial proceedings.
The contention on behalf of the appellants that the Officer Commanding having once exercised the discretion under rule 5 could not cancel the discretion is unacceptable.
The Officer Commanding upon consideration of facts and circumstances and particularly in the context of the communication of the Special Judge on 17th January, 1968 intimated on 28 January, 1967 that the previous letter dated 16 January, 1967 was cancelled.
There are no allegations of malafide or abuse of power to challenge the propriety of the exercise of power and discretion.
The Officer Commanding did not lack authority of jurisdiction to communicate to the Special Judge that Court Martial proceedings would not be instituted.
The Criminal Law Amending Act , 1966 being Act No. 22 of 1966 has an important bearing on the present appeal.
Section 5 of Act 22 of 1966 is as follows : "(1) Notwithstanding anything contained in this Act or in the principal Act as amended by this Act, (a) cases pending immediately before the 30th day of June, 1966, before a Special Judge in which one or more persons subject to military naval or air force law is or are charged with and tried for an offence under the principal Act together with any other person or persons not so subject, and (b) cases pending immediately before the said date before a Special Judge in which one or more persons subject to military, naval or air force law is or are alone charged with and tried for an offence under the principal Act and charges have already been framed against such person or persons shall be tried and disposed of by the special Judge.
(2) Where in any case pending immediately before the 30th day of June, 1966, before a special Judge one or more persons subject to military naval or air force law is or are alone charged with and tried for an offence under the principal Act and charges have not been framed against such person or persons before the said date, 893 Or where, on appeal or on revision against any sentence passed by a special Judge in any case in which one or more persons so subject was or were alone tried, the Appellate Court has directed that such person or persons be, retired and on such retrial charges have not been framed against such person.
or persons before the said date, then, in either case, the special Judge shall follow the procedure laid down in section 549 of the Code of Criminal Procedure, 1898, as if special Judge were a Magistrate.
The question is whether the present appeal relates to a case Pending immediately before 30 June, 1966 before a Special Judge within the meaning of section 5(1)(a).
Sanstion was accorded on 29 October, 1965 under section.
197 of the Code of Criminal Procedure.
A charge sheet was submitted before the Special.
Judge on 27 January, 1966.
On 5 March, 1966 the case was adjourned to 4 July, 1966 at the request of the Public Prosecutor for enabling the Public Prosecutor to supply the copies of documents envisaged by section 113 of the Code of Criminal Procedure.
The case was numbered 4/66/Spl.
The word 'pending 9 came up for consideration before this Court in Asgarali Nazarali Singaporawalla vs The State of Bombay(1).
Criminal Law Amendment Act.
1952 provided for the trial of all offences under section 161, 165 or 165 A of the Indian Penal Code or sub section (2).
of section 5 of the Prevention of Corruption Act, 1947 exclusively by Special Judges and directed the transfer of all such trial pending on the date of the, coming into force of the Act to Special Judges.
The Presidency Magistrate continued the trial and acquitted the appellant.
Upon appeal by the State Government the High Court held that from the date of the commencement of the.
Act the Presidency Magistrate lost all jurisdiction to continue I the trial and ordered retrial ' by the Special Judge.
It was contended that on the date of the coming into force of the Criminal Law Amendment Act, 1952, viz., 28 July, 1952, the case was not pending because no Special Judge was appointed until 26 September, 1962 and the trial also came to an end on 26 September, 1962.
This Court did not accept that contention because the, accused was not called upon his defence on 28 July, 1962 and the examination of the.
accused ' under section 342 of the Code of Criminal Procedure took Place after that date and the accused filed his writer statement on 14 August, 1952 and the addresses by the prosecution as well as the defence continued right UP to 26 September, 1952.
The word 'pending ' will ordinarily mean that the matter is not concluded and (1) 8 94 the court which has cognizance of it can make an order on the matter in issue.
The test is whether any proceedings can be taken in the cause before the court or tribunal where it is said to be pending.
The answer is that until the case is concluded it is pending.
Judged by these tests it will appear that this present appeal relates to a case pending before 30 June, 1966.
The next question is as to what meaning should be given to the words 'charged with and tried for an offence under the principal Act ', occurring in section 5(i)(a).
Counsel for the appellants contended that the words "charged with and tried for an offence" would mean that charges 'had been actually framed and trial commenced.
There is a distinction between clauses (a) and (b) of sub section (1) of section 5 of Act 22 of 1966.
Clause (a) deals with persons who are subject to the military, naval or air force law being charged with and tried for an offence together with a person or persons not so subject whereas clause (b) deals only with persons who are subject to military, naval or air force law.
In the present case, the appellants are persons who were subject to military law and they were charged along With civilians.
Therefore, clause (a) is attrached.
It is in connection with a case which concerns only persons subject to military, naval or air force law that under section 5(1)(b) it is en.acted that a case is not only to be pending before 30 June, 1966 before a Special Judge but that charges should also have been framed against such persons.
The absence of framing of charges ,in clause (a) and requirement of framing charges in clause (b) repels the construction suggested by counsel for the appellants that charges should have been framed in the present case in order to make it a case pending within the meaning of section 5 (1) (a) of the 1966 Act.
The words, "charged with and tried for an offence" mean that there are accusations and allegations against the person.
The words "charged with" are used in section 5 (1) (a) in contra distinction to the words "charges have already been framed" in section 5 (1) (b) of the Act.
Therefore the use of separate words in the two separate clauses: (a) and (b) is significant to indicate that the statute speaks of the words charged with" in clause (a) not in the sense of "charges have been framed" in clause (b).
The legislative intent is abundantly clear from the use of separate words.
Sections 251, 251A, 252, 253 and 254 of the Code of Criminal Procedure throw some light as to the meaning to be given to the words "charged with and tried for an offence '.
In the trial of warrant cases instituted on a police report, the Magistrate is to ;follow the procedure specified in section 251A and the present is one such.
Section 251A contemplates that the Magistrate on the commencement of the trial shall satisfy himself that 89 5 the documents referred to in section 173 have been furnished to the accused and if he finds that the accused has not been furnished with such documents or any of them he shall cause them to be so furnished.
In the present case, it will appear that in the month of March, 1966 the Public Prosecutor made an application to the Special Judge for adjournment of the case till the month of July, 1966 to enable copies of papers to be given to the accused under section 173 of the Code of Criminal Procedure.
Under section 251A(2) if, upon consideration of all the documents referred to in section 173 and making such examination, if any, of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, the Magistrate considers the charge against the accused to be groundless, he shall discharge him.
This provision that the Magistrate may discharge the accused where the charge against the accused appears to be groundless indicates that the words "charged with" cannot be said to mean framing of a charge.
It is because the charge or the allegation or accusation against the accused is groundless that he is.
discharged.
Again, in section 252 it will appear that the Magistrate in any case instituted otherwise than on a police report shall proceed to hear the complainant and take evidence` in support of the prosecution.
Under section 253, if, upon taking the evidence referred to in section 252, and making such examination of the accused as the Magistrate thinks necessary, he finds that no case against the accused has been made out, the Magistrate shall discharge him.
The provisions contained in sections 252 and 253 are cases where the Magistrate deals with warrant case instituted not on a police report but upon a complaint.
These three sections i.e. sections 251A, 252 and 253 indicate that an accused can be discharged by the Magistrate if the charge appears to be groundless.
Charge is framed under section 254 of the Code of Criminal Procedure when the Magistrate upon evidence and examination is of opinion that there is ground for presuming that the accused has committed an offence which the Magistrate is competent to try and which could be ordinarily punished by them that he shall frame in writing a charge against the accused.
The charge under section 255 of the Code of Criminal Procedure is read and explained to the accused and he shall be asked whether he is guilty or has any defence to make.
The Special Judge therefore has jurisdiction to try and dispose of the case.
It is a case pending before 30 June, 1966 and under Act 22 of 1966 it is to be tried and disposed of by the Magistrate.
The letter dated 28 January, 1966 is an additional reason to indi L1100SupCI/71 896 cate that the appellants are not required to be delivered to the competent military authorities.
It is also in evidence that no court martial proceeding is pending and the appellants are to be Tried by the Special Judge.
The judgment of the High Court is upheld.
The appeal therefore fails and dismissed.
R. K. P. section Appeal dismissed.
| IN-Abs | On January 27, 1966, a charge sheet against the four appellants and four civilians was put up before the special judge On January 12, 1967 the Special Judge gave notice to the commanding officer notifying under rule 4 of the Criminal Courts and Courts Martial (Adjustment of Juris diction) Rules, 1952, framed under section 549 of the Code of Criminal Procedure, that charges would be framed against the accused.
On January 16, 1967, the Officer Commanding wrote to the Special Judge, in exercise of the powers conferred on him rule 5 of the 1952 Rules, that the four appellants belonging to his unit would be tried by Court Martial under the , and the Court of the Special Judge was requested to stay the proceedings with immediate effect.
On January 17, 1967, the State of Rajasthan made an application before the Special Judge.
stating that the period of limitation for the purpose of Court Martial had already expired and that the Special Judge take cognisance of the case on the basis of sanction by the Central Government.
The Special Judge requested the Commanding Officer to make a reference to the Central Government.
On January 28, 1967, the Commanding Officer wrote to the Special Judge that the notice dated January 16, 1967, under Rule 5, served on the Special Judge might be treated as cancelled.
Thereupon the appellants.
made an application before the Special Judge challenging the legality of the action of the Commanding Officer in canceling the notice dated January 16, 1967 and praying that they be delivered to the Army authorities.
The Special Judge held that since the notice dated January 16, 1967 had been cancelled, he had jurisdiction to try the case.
A revision.
against this order was dismissed and the High Court directed the Special Judge to conduct the trial.
In the appeal to this Court it was contended that the High Court was Wrong, because, the Special Judge had no jurisdiction to deal with the: application of the State made on January 17, 1967 and pass an order that the Commanding Officer 'should make a reference to the Central Government; and that the Commanding Officer had no pow(* to cancel, the intimation dated January 16, 1967.
The respondent contended that the effect of the cancellation of the notice dated January 16, 1967, was that no Court Martial proceeding was to be commenced and that in any event the Special Judge had jurisdiction and authority to try and dispose of the case which was pending on June 30 1966 in the Criminal Court by virtue of the provisions contained in the Criminal Law Amendment.
(Amending) Act, 1966.
Dismissing the appeal, 882 HELD : The provisions of the , the Rules under Section 549 of the Criminal Procedure Code and the decisions of this Court all support the conclusion that the Special Judge in ;he present case was justified in asking the Officer Commanding to make a reference to the Central Government and that the Officer Commanding in the facts and circumstances of the case expressed the opinion that the appellants should be tried by criminal courts because there would in fact be no Court Martial proceedings.
The contention that the Officer Commanding having once exercised the discretion under Rule 5 could not cancel the discretion is unacceptable.
There are no allegations of mala fide or abuse of power to challenge the propriety of the exercise of power and discretion.
Ranjit Sarup vs The Union of India & Anr., [1964] 5 S.C.R. 931, SVorn Datt Datta vs Union of India & Ors., ; ; Ioginder Singh vs State of Himachal Pradesh, Criminal Appeal No. 34 of 1969 decided on 30 11 1970 and Major E. G. Barsay vs State of Bombay, [1962] 2 section R. 195: referred to.
The present appeal relates to a case "pending" immediately before June 30 1966, before a Special Judge, within the meaning of section 5(1) (a) of the Criminal Law Amendment Act, 1966.
The word "pending" win ordinarily mean that the matter is not concluded and the meet which has.
cognisance of it can make an order on the matter in issue.
The test is whether any proceedings can be taken in the cause before the Court or tribunal where it is said to be pending.
Judged by these tests the present appeal relates to a case pending before June 30, 1966.
It is not necessary that charges should have been framed in order to make it a case pending within the meaning of Section 5 (1) (a) of the 1966 Act.
The words "Charged with and tried for an offence" mean that there are accusations and allegations against a person.
The words "charged with are used in Section 5(1)(a) in contradistinction to the words "Charges have already been framed" in Section 5 (1) (b) of the Act.
Further.
Sections 251A, 252 and 253 of the Code of Criminal Procedure throw light as to the meaning to be given to the words "charged with 'and tried for an offence".
|
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 section P. Nayar, for the respondent.
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. section 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 910 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 article 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 article 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 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 vs 911 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 article 311 of the Constitution stands concluded by two decisions of this court.
In Jagatrai Mahinchand Ajwani vs 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 article 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 section P. Bell vs Union of India (3).
Both these decisions fully cover the case of the appellant so far as the applicability of article 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 section 241(2) 'of the Government of India Act 1935 he was entitled to the protection of section 240 of that Act.
Chapter I of Part 10 of that Act related to the Defence Services.
According to sections 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.
912 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 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 section 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 section 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 vs Ajodhya Prasad(1) and State of Mysore vs 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.
913 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.
R.K.P.S. Appeal dismissed.
| IN-Abs | 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 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 vs Union of India C.A. 1185 of 1965 dt. 6 2 67 and section P. Bahl vs 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 vs Secretary of State, A.I.R. 1937 P.C. 31, The State ,of Uttar Pradesh & Others vs Ajodhya Prasad, and State of Mysore vs M. H. Bellary, ; , 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.
|
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.
N. Shroff, for respondent No. 1.
K. L. Hathiand section 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 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 section 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 sections 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 article 19(1) (f) and article 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 section 129 (c) read with sections 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 section 129(c) by giving power to tax without laying down the maximum rate was violative of article 19(1) (f) and/or article 31 or article 14.
The High Court also 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 sections 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 section 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 sections 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 section 129(c) basing its decision mainly on the authority of the Corporation of Calcutta vs Liberty Cinema,(1) wherein the validity of section 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 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) ; 948 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 article 265 of the Constitution and section 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 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 vs Zaveri Keshavtal(1) by pointing out that that decision was under the Bombay (1) 6 Guj.
L.R.701.
949 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.
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.
129 deals with property taxes.
(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 950 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 section 453 form part of the Act.
Besides the said rules, sections 454 and 455 authorise the 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 sections 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 section 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 section 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 article 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 section 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 section 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.
951 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, section 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.
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 section 86, no payment can be made out of the Municipal Fund unless it is covered by the current budget grant.
Furthermore, section 88 lays down that the moneys credited in the Municipal Fund shall be applied in payment of sums, charges and costs necessary for carrying the Act into effect, or payment directed or sanctioned by or under the Act.
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 section 95, the Commissioner is required annually to lay before the Standing Committee estimates of income and expenditure, and under section 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 sections 97 and 98 for budget estimate 'B ' prepared by the Transport Manager.
It is after all this has been, done that the Corporation under section 99 determines, on or before the 20th of February of each year, the rates at which property taxes under section 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 section 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 section 99, the rates at which the property taxes are to be levied are those provided in section 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 section 455 subject to the sanction of the State Government.
Under section 4 56, the State Government can at any time require the Corporation to make rules under section 454 in respect of any purpose of matter specified in section 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. vs 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 section 127.
In Pandit Banarsi Das Bhanot vs 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 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 vs 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 ; 953 "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 vs 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.
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 section 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) ; (3) 1968(3) S.C.R.251.
954 (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 section 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 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 section 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) ; (2) ; 955 Rules 9 to 21 of the Taxation Rules are headed "Assessment Book".
A comparison of these rules with sections 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.
(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 section 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 ward assessment books, section 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 section 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 956 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".
(2) provides that "the said ward assessment book sub 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 section 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 958 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 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 section 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 section 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 section 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.
(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.
Since the object of r. 19 is 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 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 sections 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.
| IN-Abs | The appellant was owner of immovable property situate within the limits of the municipal corporation, Ahmedabad City.
Under the power reserved to it by section 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 other rate payers in writ petitions before the High Court.
The High Court inter alia held (i) that section 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 section 455 subject to sanction of the State Government.
Under section 456 the State Government can at any time require the Corporation to make rules under section 454 in respect of any purpose or matter specified in section 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 section 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 vs Liberty Cinema, [1965] 2 S.C.R. 477, Municipal Corporation of the City of Ahmedanwd vs Zaveri Keshavia, , Western India Theatres Ltd. vs Municipal Corporation of the City Poona, [1959] Supp. 2 S.C.R. 71, Pandit Banarsi Das Bhanot vs Madhya Pradesh, ; and Devi Das vs Punjab ; referred to.
Municipal Corporation of Delhi vs Birla Mills, ; followed.
(2) The tax levied on the basis of one assessment book was not invalid, Rule 10 differs from section 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 section 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 section 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 section 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 section 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.
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 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 sections 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]
|
Appeal No. 219 of 1967.
Appeal from the judgment and decree dated December 16, 1965 of the Andhra Pradesh High Court in C.C C. Appeal No. 24 of 1969.
M. C. Chagla, R. Y. Pillai and N. Nettar, for the appellants.
C. K. Daphtary, Rameshwar Nath and Swaranjit Sodhi, for respondent No. 1 (A).
V. A. Seyid Muhammad and section P. Nayar, for respondent No. 3.
7 3 7 The Judgment of the Court was delivered by Ray, J.
This is an appeal by certificate against the judge ment dated 15 December, 1965 of the Andhra Pradesh High Court dismissing the appellants ' suit and setting aside, the decree in favour of the appellant passed by the Additional Chief Judge, City Civil Court, Hyderabad on 18 October, 1958.
Shah Abdul Rahim a resident of the pity of Hyderabad died on 26 September, 1905 leaving behind him four sons Abdul Hai, Ghulam Nooruddin, Abdul Razak and Ghulam Ghouse Mohiuddin and two daughters Kamarunnissa Begum and Badiunnissa Begum.
Shah Abdul Rahim had large movable and immovable properties. 'Me sons and the daughters entered into two agreements in the month of July, 1908 and appointed arbitrators to partition the Matrooka properties of Syed Shah Abdul Rahim.
On 1 August, 1908 the arbitrators made an Award partitioning, the properties.
On 13 August, 190 8 there was a decree in the Darul Khaza Court, Hyderabad confirming the Award of 1 August, 1908.
The appellant filed the suit out of which the appeal arises on 24 July, 1941 for setting aside the decree dated 13 August, 1908 confirming the award and for partitioning certain Matrooka properties.
In 1942, the suit was dismissed.
An. appeal was preferred to the High Court of Hyderabad.
During the pendency of the appeal Abdul Hai died in 1950 and his legal representatives were brought on the record of the suit in the month of February, 1952.
The appeal filed in the year 1943 was disposed of by the High Court of Andhra Pradesh in April 1957 remanding the case to the City Civil Court, Hyderabad.
On 18 October, 1958 the Additional Chief Judge, City Civil Court, Hyderabad decreed the suit in favour of the appellant and cancelled the decree of the Darul Khaza Court dated 13 August, 1908.
On appeal the Andhra Pradesh High Court on 15 December, 1965 set aside the decree passed by the Additional Chief Judge.
The undisputed facts are these When Abdul Rahim died in 1905 Abdul Hai the eldest son was major.
The appellant was a minor.
There were two references to arbitration .
Before the arbitrators the appellant a minor was represented by his brother Ghulam Nooruddin as the guardian.
The parties to the arbitration agreements were Abdul Hai, Ghulam Nooruddin, Abdul Razak the appellant represented by his guardian Nooruddin, Qamarunnissa Begum and Badiunnisa Begum.
It will appear from the award that before the arbitrators there was no dispute ,between the parties and the arbitrators did not think it necessary to frame any issues.
Before the arbitrators the plaintiffs marked 738 with the letter 'F ' a plan showing properties attached to the Khankah and Dargah and those properties were market as Exhibits B 1 to B 10 and the plaintiffs relinquished their title to properties marked Exhibits B 1 to B 10 and further stated "neither at present nor in future will they have any share and right in the said property".
As to properties marked B 1 to B 10 the parties stated ,before the arbitrators that Abdul Hai was the Sajjada Nashin of the Dargah and was in possession of, the Dargah and khankah properties.
The award was made a rule of court within a short time upon a plaint filed by Nooruddin, Abdul Razak, the appellant represented by Nooruddin as the guardian and the two sisters Qamarunnisa Begum and Badiunnisa Begum.
The defendant was Abdul Hai.
The facts recited in the decree are these.
Syed Shah Nooruddin a pious person of Hyderabad had his Khankah situated at Nampalli.
The Dargah of the said pious man was also situated in the same locality.
After Syed Shah Nooruddin 's death his son in law, Abdur Rahim became the Sajjada of the Khankah and the Dargah Shariff.
The Sajjada had control over all the expenses ,of the Dargah and Khankah and the entire property attached to the Dargah and Khankah remained in possession of the Sajjadana,sheen and all the expenses of the Dargah and Khankah were met from the income.
After the death of Abdur Rahim, Abdul Hai became the Sajjadanasheen and was having control over the Dargah and Khankah.
Abdur Rahim left three adult sons and one minor son and also two adult daughters.
Apart from the property attached to the Dargah and Khankah Abdur Rahim left personal Matrooka properties.
There might have been a dispute between the parties regarding the partition of these properties.
But the parties settled the dispute by mutual consent and by agreement referred the matter to arbitration for the settlement of the dispute. 'The arbitrators made an award.
The decree recited that the properties marked with the letter 'F ' in the plan annexed to the award were Khankah and Dargah Shariff properties in the possession of the defendant Abdul Hai for meeting the expenses of the Khankah and no one has any right or claim over the property 'at present ' or 'in future.
The decree concluded by stating that the bargah and Khankah properties were not liable to partition and none ,of the plaintiffs "shall have any right or claim regarding the same".
The appellant impeached the award and the decree upon the award inter alia on the grounds that the award was void by reason of lack of lawful guardian on behalf of the appellant to protect ,and represent the rights and interests of the minor in the arbitration proceedings and in the proceedings resulting in the decree upon the award.
The appellant also claimed that the award and 739 the decree should be avoided because the properties marked Exhibits B 1 to B 10 were not Dargah and Khankah properties in fact and were treated in the award and the decree to be Dargah and Khankah on the wrongful representation of Abdul Hai.
The, appellant in the year 1938 discovered for the first time the true and correct facts that the same were not Khankah and Dargah properties and therefore claimed the same as divisible upon partition amongst the heirs of Abdul Rahim.
The trial Court held that the award and the decree thereon were obtained by fraud and the decree was to be set aside.
The reasoning given by the trial Court was that it was established one the evidence that Abdul Hai was in full possession and enjoyment of the whole of the property of Abdul Rahim including the property marked as Exhibits B 1 to B 10.
In the letter dated 13, August, 1938 Exhibit P 8 Abdul Hai denied that the property was waqf property belonging to the Dargah and asserted that it was.
owned and possessed by him and relinquished by his relatives.
The letter was held by the trial Court to indicate that Abdul Hai knew that the property was the property of his father which be inherited along with his brothers and sisters and in spite of such knowledge and belief he caused it to be represnted before the arbitrators that the property belonged to the Dargali and that the same was in his possession as Sajjadanasheen.
The trial Court further held that the appellant came to know the real state of affairs from the letter of, Abdul Hai dated 13 August, 1938 and therefore the suit was not barred by limitation.
The trial Court therefore passed a decree for cancellation of the decree passed upon the award and passed a preliminary decree for partition of ' the Matrooka properties including the properties marked as.
Exhibits B 1 to B 10 in the award.
In the High Court four questions were considered.
First, whether apart from the appellant any other party was a minor at the time of the arbitration agreement and whether there was a dispute which could be referred to arbitration.
Second, whether there was proof that at the time of the arbitration agreement and the award Abdul Hai made a fraudulent and false representation to his brothers and sisters and made Them believe that the properties belonging to the Sajjadanasheen were the properties of Dargah and Khankah which were not partible and by representation and fraud prevented the partition of those properties.
Third, whether the appellant had knowledge that Abdul Hai had claimed the properties as the ancestral properties of the Sajjadanasheen earlier than the time when the appellant said he had knowledge and whether the suit was barred by limitation.
Fourth, what would be the effect of the filing of the written statement by the defendant 740 No. 6 in the year 1958 and the omission of defendant No. 7 to Me any written statement to obtain partition of the properties in the event of the decree and the award being set aside The High Court held that the appellant was a minor but the ,other parties were not minors.
The High Court Held that the reference to the arbitration and the a ward thereon were void The High Court held that the decree of the Darul Khaza Court upon the award was not a nullity and the present suit should have been filed within three years of the appellant obtaining majority.
The High Court also held that the decree of the Darul Khaza Court was not obtained by fraud. 'Me High Court held that Abdul Hai ,asserted in the year 1927 that the Dargah and the Khankah properties were his personal properties and from that date Abdul Hai asserted his title adverse to the appellant and the other plaintiffs and the appellant and the other plaintiffs knew in 1927 of the adverse claim of Abdul Hai.
Therefore, the suit was barred by limitation.
The minority of the appellant is a fact found both by the trial ,Court and the High Court.
It is an admitted fact that the appellant 's guardian was his brother Nooruddin at the time of the arbitration proceedings and at the time of the decree on the award.
The brother is not a lawful guardian under the Mohammedan Law.
The legal guardians are the father, the executor appointed by the fathers will, the fathers father and the executor appointed by the will of the father 's father.
No other relation is entitled to the guardianship of the property of a minor as of right.
Neither the mother nor the brother is a lawful guardian though the father ,or the paternal grand father of the minor may appoint the mother, brother or any other person as executor or executrix.
In default ,of legal guardians a duty of appointing guardian for the protection and preservation of the minor 's property is of the court on proper application.
It was held by this Court in Mohd. Amin & Ors.
vs Vakil Ahmed & Ors.(1) relying on the dictum in Imambandi vs Mutsaddi(2) that where disputes arose relating to succession to the estate of a deceased Mohammedan between his three sons, one of whom was a minor, and other relations, and a deed of settlement embodying an agreement in regard to the distribution of the properties belonging to the estate was executed by and between the parties, the eldest son acting as guardian for and on behalf of the minor son the deed was not binding on the minor son as his brother was not his legal guardian and the deed was void not only qua the minor, but with regard to all the parties including those who were sui juris.
It is clear on the authority of this decision that the arbitration agreement and the award and the decree (1) ; (2) 45 T.A. 73 741 are all void in the present case by reason of lack of legal guardian of the appellant.
There is intrinsic evidence in the award, that the parties effected a settlement.
Counsel on behalf of the respondent relied on a copy of an application in the Court of the Darul Khaza in the proceedings for passing the decree upon the, award in support of the contention that the court appointed Nooruddin as the guardian of the appellant.
It is stated in the application that the defendant No. 3 (sic) meaning thereby plaintiff No. 3 the present appellant is a minor and Nooruddin is the real brother and the appellant is under the guardianship of Nooruddin.
The application was for permission to Me the suit.
There is no order for appointment of a guardian.
Further, the Court in appointing the guardian of property of a minor is guided by circumstances for the welfare of the minor.
There is no justification to hold that Nooruddin was either "the legal guardian or a guardian appointed by the Court.
The decree which was passed on the award appears on an examination of the pleadings and the decree itself that the parties proceeded to have the decree on the basis of the award without any contest as and by way of mutual settlement.
It will, appear from the decree that it was admitted by the parties that Abdul Hai was in possession of the Dargah and Khankah and that Abdul Hai alone was the Sajjadanasheen of the Khankah.
The relinquishment of property by Nooruddin on behalf of the minor is not binding on the minor.
There was no legal sanction 'behild such compromise in the arbitration and in the proceedings result ing in a decree upon the award.
There was no legal guardian.
The rights and interests of the minor were also not protected particularly when there was conflict of interest between the minor and Abdul Hai.
The arbitration agreement, the award and the decree of the Daral Khaza Court on the award are therefore void.
The High Court held that the appellants suit was barred by limitation by reason of knowledge of the appellant that Abdul Hai was in adverse possession since the year 1927 or 1928.
In regard to the properties which the appellant claimed in the suit as liable to partition, it is established that all parties proceeded on the basis that Exhibits B 1 to B 10 in the award were not Matrooka pro perties but Dargah and Khankah properties.
If, in fact, they are not Dargah and Khankah properties but Matrooka properties, these should be available to co owners for partition unless there are legal impediments.
The estate of a deceased Mohamedan devolves on his heirs at the moment of his ' death.
The heirs succeed to the estate as tenants in common in specific shares.
Where the heirs continue to hold the estate as tenants in common without 742 dividing it and on of them subsequently brings a suit for recovery of the share the period of limitation for the suit does not run against him from the date of the death of the deceased but from the date of express ouster or denial of title and Article 144 of Schedule 1 to the Limitation Act, 1908 would be the relevant Article.
Counsel on behalf of the respondent submitted that there were two impediments to the appellant 's claim for partition of the properties.
One was that the decree passed by the Court of Darul Khaza upon the award was not obtained by fraud and could not be set aside by reason of limitation.
The other was that the appellant came to know in the year 1927 that Abdul Hai adversely claimed properties as his own and therefore the appellant 's claim was barred by limitation.
The High Court held that the appellant was aware of the attachment of the personal and the Dargah and Khankah properties by the Government of the Nizam in the year 1927 as also release in the same year of the properties attached.
The High Court had that when parties had knowledge of the attachment of the properties it could not be postulated that they would have no knowledge of the contentions of Abdul Hai as to release of the Dargah and Khankah properties on the ground that those were not Dargah and Khankah but personal properties of Abdul Hai.
Knowledge of release of properties would not amount to ouster of the appellant from the property or of abandonment of rights.
The evidence of the appellant was that in 1350 Fasli corres ponding to the year 1941 the appellant came to know that a letter had been written by Abdul Hai to the Ecclesiastical Department of the Government of the Nizam in the year 1938 to the effect that the properties shown as Dargah and Khankah in the award F. and the decree were not Dargah and Khankar properties.
The appellant also came to know from the same letter that all the properties including those stated to be Dargah and Khankah properties in the award were attached by the Government of Nizam in the year 1927 and after enquiry by the Government of the Nizam all the properties were :released in the year 1927.
The appellant further came to know from that letter that Abdul Hai claimed the properties as his own.
Thereupon the appellant demanded from Abdul Hai partition of the property as Matrooka.
Abdul Hai asked the appellant to consult lawyer.
On the evidence it would be utterly wrong to speculate that the appellant knew of the contentions advanced in 1927 by Abdul Hai for the release of the properties by stating that they were not Dargah and Khankah properties.
There was no sub section at the.
743 time of the examination of the appellant that he was aware in,.
1927 of the contentions of Abdul Hai.
The High Court relied on Exhibit A 38 a letter dated 19 October, 1927 written by the,, appellant to Abdul Hai to impute knowledge of the attachment.
and release of the properties.
The appellant was never confronted with at letter.
it was never suggested to the appellant that the letter could be construed as attributing to the appellant the knowledge of any adverse claim made by Abdul Hai with" regard to the properties.
In that letter the appellant stated that.
be was indebted to the elder brother Abdul Hai for his kindness.
The appellant also stated that the expenditure incurred in connection with the litigation would be divided into four parts and the amount incurred on behalf of the appellant could be recovered from his account.
This letter dated 19 October, 1927 does not at all have the effect of establishing that the appellant had knowledge of any adverse claim of the appellant.
The appellant was never shown the letter to explain what litigation he referred to.
No inference can be drawn against the appellant without giving him an opportunity to have his say in that matter.
It is unfortunate that Abdul Hai died during the pendency of the suit and before the, trial.
Not only his oral evidence but also the correspondence that Abdul Hai had with the Government of the Nizam in the year 1927 did not find way into the record of the suit.
It would be totally misreading the appellant 's letter of the, year 1927 as impressing the appellant with the knowledge of ' ouster by Abdul Hai of the appellant from the properties forming the subject matter of the suit.
There are two letter of great importance.
One is dated 13 August, 1938 and marked Exhibit P 8 written by Abdul Hai to, the Director of Endowment, Government of Hyderabad and the other is dated 7 September, 1938 written by the Ecclesiastical Department of the Government of Hyderabad to the Secretary of the Endowments, Ecclesiastical Department of the Government of ' Hyderabad.
The letter of Abdul Hai was written in answer to an application made about that time to the Government of the Nizam by One Sheikh Abdur Rahim a tenant against whom Abdul Hai bad filed a suit for recovery of rent.
Abdur Rahim made an allegation that the properties in respect of which Abdur Hai filed a suit were Dargah and Khankah properties.
The complaint of Abdur Rahim was however dismissed and the matter was not allowed to be reopened on the strength of the orders of the Government recited by Abdul Hai in, his letter.
In answer Abdul Hai recorded these facts.
The Nizaim in the month of April, 1927 appointed the Secretary of the Ecclesiastical Department and the Commissioner of Police to enquire and report as to which of the properties were attached to the Dargah and which were per 744 sonal private properties.
Another Commission was appointed by the Nizam to enquire into the proper use of the endowed properties.
The Ecclesiastical Department by Letter dated 28 December, 1927 held that only the villages Debser and Sangvi were found to be under the Dargah.
All properties of the parties which had been attached by the Nizam were released by letter dated 3 January, 1928 excepting the two villages.
Abdul,Hai by letter dated 16 January, 1928 to the Government of the Nizam stated that the properties marked Exhibits B 1 to B 10 in the award and the decree of the Court of Darul Khaza did not belong to the Dargah and Khankah.
Abdul Hai further pointed out that the Nizam by a firman dated 11 November, 1927 had issued orders ,saying that according to the opinion of the Council the Govern ment 's supervision should be lifted from the 'maash ' referring thereby to the properties which had been attached by the Nizam and the same should be given over into the possession of Abdul 'Hai.
The other letter dated 5 January, 1939 from the Government ,of the Nizam stated that only two villages were held to be Dargah and the Government of the Nizam had made thorough enquiries and held that there was no other Dargah and Khankah properties and the question could not be re opened.
It is established in evidence that the properties which wore ,described as.
Dargah and Khankah properties before the arbitrators and the decree of the Darul Khaza Court are not Dargah and Khankah properties.
Abdul Hai obtained an adjudication and an order of the Government of the Nizam in the year 1927 that only two villages of Debser and Sangvi belonged to the Dargah and the rest were not Dargah and Khankah properties.
The appellant knew that there was litigation about the year 1927 about the properties.
It is not in evidence as to what that litigation was or which properties were concerned there with because the letter was not shown to the appellant.
Even if it be assumed that all parties treated the properties marked Exhibits B 1 to B 10 as Dargah properties upto the year 1927 and thereafter there was an adjudication on the representation of Abdul Hai that the properties were not Dargah and Khankah the parties would be entitled to tile same.
The only way in which the parties could lose their rights to the property would be on the finding that there was adverse possession or ouster.
The decree of the Darul Khaza Court will not be an obstacle to the claim of the appellant for partition, of the properties, because the properties are admittedly not Dargah and Khankah properties but Matrooka properties.
The arbitration proceedings were void by reason of lack of legal guardian of the appellant to enter into 745 a compromise.
The decree of the Darul Khaza Court is also invalid and not binding on the appellant for the same reason.
If all parties proceeded upon a basis that these were Dargah and Khankah properties and that basis is wiped out by the Government of the Nizam the, parties to their position as heirs to the Matrooka property.
The award and the decree by reason of evidence of facts discovered since the judgement and the decree of the Darul Khaza Court cannot be allowed to stand because the effect of the discovery of the facts is to make it "reasonably probable that the action will succeed.
In Birth vs Birch(1) the Court of Appeal held that a judgment will be set aside on the ground of fraud if evidence of facts discovered since the judgment raise a reasonable probability of the success of the action.
The principle can be stated in the words of Westbury, L.C. in Rolfe vs Gregory(2) "when the remedy is given on the ground of fraud, it is governed by this important principle, that the right of the party `defrauded is not affected by lapse of time, or generally speaking by anything done or omitted to be done so long as he, remains, without any fault of his own, in ignorance of the fraud that has been committed .
This decision was referred to by the Calcutta High Court in Biman Chandra Datta vs Promotha Nath Ghose(3) where the dictum of Westbury, L.C. was restated by holding that where a plaintiff had been kept from knowledge, by the defendant, of the circumstances constituting the fraud, the plaintiff could rely upon section 18 of the Limitation Act to escape from the bar of limitation.
In the present case, it is apparent that until the year 1927 the appellant and the other parties were clearly kept out of the knowledge of the true character of the properties.
Even after 1927 it cannot be said on the evidence on record that the appellant had any knowledge of the true character of the properties or ouster or adverse possession of Abdul Hai.
The reasons are that Abdul Hai never alleged against the appellant and the other parties openly that he was enjoying the properties to the total exclusion of the appellant and the other brothers.
Possession by one co owner is not by itself adverse to other co owners.
On the contrary, possession by one co owner is presumed to be the possession of all the co owners unless it is established that the possession of the co owner is in denial of title of co owners and the possession is in hostility to co owners by exclusion of them.
In the present there is no case to evidence to support this conclusion.
Ouster is an unequivocal act of assertion of title.
There has to be open denial of title to the parties who are entitled to it by excluding and ousting them.
(1) 1902 Probate Division 131 (2) [18 64] ; (3) I.L.R. 746 Section 18 of the Limitation Act, 1908 provides that when a person having a right to institute a suit has by means of fraud been kept from the knowledge of such right or of the title on which it is founded, the time limited for instituting a suit against the person guilty of the fraud shall be computed from the time when the fraud first became known to the person affected thereby.
In Rahim boy vs Turner(1) Lord Hobliouse said "When a man has committed a fraud and has got property thereby it is for him to show that the person injured by his fraud and suing to recover the property has had clear and definite knowledge of those facts which constitute the fraud, at a time which is too remote to allow him to bring the suit".
Therefore if the plaintiff desires to invoke the aid of section 18 of the Limitation Act he must establish that there has been fraud and that by means of such fraud he has been kept from the knowledge,of his right to sue or of the title whereon it is founded.
In the present case, he have with reasonable diligence discovered it.
There was active properties were Matrooka and not Dargah and Khankah.
When Abdul Hai got the properties released by reason of the decision of the Government of the Nizam in the year 1927 the properties became divisible among the appellant and his brothers and sisters.
The existence of the right of the appellant was kept concealed by Abdul Hai.
The appellant was not aware of the right nor could lie have with reasonable diligence discovered it.
There was active concealment by Abdul Hai of the fact that the properties were not Dargah and Khankah having full knowledge of the fact.
It was only in 1941 (1350 Fasli) that the appellant came to know of the Matrooka character of the properties.
It was then that the appellant also came to know that Abdul Hai had kept the character of properties concealed from the parties and entirely misstated and misrepresented the character of the properties by mis leadin the parties and obtaining by consent an award and a decree thereon without any contest.
The cause of action for partition of properties is said to be a perpetually recurring one" See Monsharam Chak ravarty & Ors.
vs Gonesh Chandra Chakravarty & Ors.
In Mohammedan Law the doctrine of partial partition is not applicable because the heirs are tenants in common and the heirs of the deceased Muslim succeed to the definite fraction of every part of his estate.
The share,,, of heirs under Mohamedan Law are definite and known before actual partition.
Therefore on partition of properties belonging to a deceased Muslim there is division by metes and bounds in accordance with the specific share of each heir being already determined by the law.
(1) 20 I.A.1 (2) 17 C.W.N.521 747 In the present case the suit is for partition of properties which were by consent of parties treated as Dargah and Khankah but which were later discovered to be Matrooka properties in fact and therefore the declaration in the award and the decree on the award that those were Dargah and Khankah properties cannot stand and the entire partition is to be lie opened by reason of fraud in the earlier proceedings.
In the present case, the overwhelming evidence is that because of the representation of Abdul Hai that he was the Sajjadanasheen and the properties marked Exhibits B 1 to B 10 were Dargah and Khankah properties, that all the parties treated the properties as Dargah and Khankah before the arbitrators and in the decree upon the award.
The very fact that there was never any contest indicates that the compromise and settlement between the parties was on the basis that the properties were Dargah and Khankah.
It was absolutely within the knowledge of Abdul Hai as to what the true character of the properties was.
The other parties did not have any opportunity of knowing the same.
Abdul Hai knew the real character, concealed the true character and suggested a different character and thereby mislead all the parties.
Again, when Abdul Hai approached the Government of the Nizam and got the properties released by asserting that they were not Dargah and Khankah properties in the year 1927.
Abdul Hai did not inform the same to any of the parties.
The unmistakable intention of Abdul Hai all along was to enjoy the properties by stating these to be Dargah and Khankah.
When the parties came to know the real character of the properties even then Abdul Hai was not willing to have partition.
On these facts it is established that the fraud committed by Abdul Hai relates "to matters which prima facie would be a reason for setting the judgment aside".
That is the statement of law in Halsbury 's Laws of England, Third Edition, Volume 22, paragraph 1669 at page 790.
For these reasons we accept the appeal and set aside the judgment of the High Court and restore the judgment and decree of the trial court.
The appellant will be entitled to costs of this Court.
The parties will pay and bear their own costs in the High Court.
G.C Appeal allowed.
| IN-Abs | Shah Abdul Rahim was Sajjadanasheen of a Dargah and Khankah in Hyderabad.
He had four sons and two daughters.
After his death in 1905 he was succeeded as Sajjadanasheen by his eldest son Abdul Hai Shah Abdur Rahim left Matrooka property apart from the properties appertaining to the Dargah and Khankah.
The matter of the partition of Matrooka properties was referred to arbitrators.
The appellant who was Abdur Rahim 's youngest son was a minor at the time and was represented in the arbitration proceeding by his brother Nooruddin.
The properties Exhibits B 1 to B 10 were acknowledged by the parties before arbitrators to be in the possession of Abdul Hai as Dargah and Khankah properties and any right or claim to them was renounced by Abdul Hai 's brothers and sisters.
The arbitrators gave their award on August 1, 1908 partitioning the properties.
On August 13, 1908 there was a decree in the Darul Khaza Court confirming the aforesaid award.
The properties B 1 to B 10 thereafter remained in the possession of Abdul Hai.
In 1927 Abdul Hai got an adjudication from the Nizam 's Government that the Dargah and Khankah properties consisted only of two villages and that properties B 1 to B 10 were not Dargah and Khankah properties.
In 1938 Abdul Hai wrote a letter to the Nizam 's government again asserting that properties B 1 to B 10 were his personal properties.
The appellant filed a suit on 24th July 1941 for setting aside the decree dated.
August 13, 1908, passed by the Darul Khaza Court and for partition of the Matrooka properties left by his father including properties B 1 to B 10.
He impeached the award and the decree on the ground that he was not represented by 1 lawful guardian.
He claimed that the award and decree should be avoided because they were based on the wrongful representation of Abdul Hai that they were Dargah and Khankah properties.
The trial court decreed the suit holding : (1) that the award and decree in question were obtained by fraud; (2) that the letter written by Abdul Hai in 1938 showed that he was aware of the Matrooka character of the properties but kept this fact from his brothers and sisters; (3) that the appellant 73 5 came to know the facts from the said letter of 1938 and the suit was not therefore barred by limitation.
The High Court in appeal held (1) that the appellant was a minor and therefore reference to the arbitration and the award thereon were void; (2) that the decree passed by the Damlkhaza Court was not a nullity since the appellant did not file his suit within three years after attaining majority; (3) that the decree was not obtained by fraud; (4) that Abdul Hai asserted in 1927 that the properties in question were his personal properties and this assertion of title adverse to the appellant and his brothers and sisters became known to them in 1927 and for this reason also the suit was barred by limitation.
in ' appeal by certificate to this Court, HELD: The appeal must be allowed, (i) The minority of the appellant was a fact found by the trial court and the High Court.
The appellant 's brother who represented him in the arbitration and court proceedings was not a legal guardian, nor was he appointed by the Court.
The relinquishment of property by Nooruddin on behalf of the minor was not binding on the minor whose interests were not protected.
The arbitration proceedings, the award and the decree of the Darul Khaza Court on the award were therefore void.
[740 D, 741 E F] Mohd. Amin & Ors.
vs Vakil Ahmed & Ors, ; and Imambandi vs Mutsaddi, 45 I.A. 73, referred to. ' (ii) The estate ' of a deceased Mohammedan devolves on his heirs at the moment of his death.
The heirs succeed to the estate as tenants in common in specific shares.
When the heirs continue to hold the estate as tenants in common without dividing it and one of them subsequently brings a suit for recovery of the share the period of limitation for the suit does not run against him from the date of the death of the deceased but from the date of express ouster or denial of title and article 114 of Sch. 1 to the Limitation Act 1908 would be the relevant Article.
[741 H, 742 A] (iii) The cause of action for partition of properties is a perpetually recurring one '.
In Mohammedan Law the doctrine of partial partition is not applicable because the heirs are tenants in common and the heirs of the deceased Muslim succeed to the definite fraction of every part of his estate.
In the present case the suit was for partition of properties which were by consent of parties treated as Dargah and Khankah but which were later discovered to be Matrooka properties in fact and therefore the declaration in the award and the decree on the award that those were Dargah and Khankah properties could not stand and the entire partition had to be reopened by reason of fraud in the earlier proceedings.
[746 G 747 B] Monsharam Chakravarty & Ors.
vs Gonesh Chandra Chakravarty & Ors., , referred to.
(iv) The decree of the Darul Khaza Court could not be an obstacle to, the claim of the appellant for partition of the properties, because the properties were admittedly not Dargah and Khankah properties but Matrooka Properties.
If all parties proceeded upon a basis that these , were Dargah and Khankah properties and that basis is wiped out by the adjudication by the Government of the Nizam, the parties are restored to their position as heirs to the Matrooka property.
The award and the decree by reason of evidence of facts discovered since the judgment and the decree of the Darul Khaza Court could not be allowed to stand because the effect of the discovery of the facts was to make it "reason ably probable that the action will succeed".
[744 H 745 B] 1100Sup CI/72 73 6 Birch vs Birch, [1902] Probate Division 131, referred to.
(v) When a plaintiff has been kept from knowledge by the dependent of the circumstances constituting the fraud, the plaintiff can rely upon section 18 of the Limitation Act to escape from the bar of limitation.
When Abdul Hai got the properties released by reason of the decision of the Government of the Nizam in the year 1927 the properties became divisible among the appellant and his brothers and sisters.
The existence of the right of the appellant was kept concealed by Abdul Hai.
The appellant was not aware of the right nor could he have with reasonable diligence discovered it.
There was active concealment by Abdul Hai of the fact that the properties were not Dargah and Khankah having full knowledge of the fact.
It was only in 1941 that the appellant came to know of the Matrooka character of the properties.
[745 E, 746 E] Rolfe vs Gregory, ; , Boman Chandra Datta vs Promotha Nath Ghose, L.L.R. and Rahimboy vs Turner, 20 I.A. 1. referred to.
(vi) On the facts of the case it was established that the fraud committed by Abdul Hai relates "to matters which prima facie would be a reason for setting the judgment aside".
[747 E F] Halsbury 's Laws of England, Third Edition, Vol. 22, para 1669 at p. 790.
referred to.
(vii) The plea of adverse possession must also fail.
It was apparent that until the year 1927 the appellant and the other parties were already kept out of the knowledge of the true character of the properties.
Even after 1927 it could not be said on the evidence On record that the appellant had any knowledge of the true character of the properties or of ouster or adverse possession of Abdul Hai.
Possession by one co owner is not by itself adverse to other co owners.
On the contrary possession by one co owner is presumed to be the possession of all the co owners unless it is established that the possession of the co owner is in denial of title of co oweners and the possession is in hostility to co owners by exclusion of them.
In the present case there was no evidence to support this conclusion.
Ouster is an unequivocal act of assertion of title.
There has to be open denial of title to the parties who are entitled to it by excluding and ousting them.
[745 F H]
|
Appeal No. 500 of 1966.
Appeal by special leave from the judgment and order dated July 27, 1965 of the Mysore High Court in Second Appeal No. 235 of 1960.
B. R. L. Iyengar and E. C. Agrawala, for the appellant.
R. Gopalakrishnan, for the respondent.
8 The Judgment of the Court calling for a report was delivered by Shah, J.
The appellant was appointed on April 10, 1949, HeadMistress of St. Aloysius Higher Elementary School, Urva then in State of Madras.
On June 1, 1955, the Manager of the School reduced her to the post of an Assistant Teacher.
Her appeal to the District Educational Officer, South Kanara, against the action of the Manager was rejected.
In second appeal, the Divisional Inspector of Schools, Coimbatore, by order dated July 5, 1956, allowed the appeal and directed the District Educational Officer to issue instructions to the Management of the School to reinstate the appellant as Head Mistress.
But no effect was given to that order by the Management.
On June 26, 1957, the appellant filed the suit out of which this appeal arises claiming a, mandatory injunction directing the Management of the School to reinstate her to the post of Head Mistress and damages for loss resulting from the wrongful action of the Management.
It was the appellant 's case that the school was receiving grantin aid from the Government of Madras and was subject to the supervision and control of the Education Department of the Government of Madras, and since the reorganization of the States, of the Mysore Government of the affairs of the school, said the appellant, were conducted according to the rules and regulations framed by the Government and embodied in the rules relating to the elementary schools framed under the Madras Elementary Education Act, 1920, and on that account the order passed by the Manager removing her from the post of Head Mistress stood vacated, and refusal of the Manager to reinstate her was illegal, because the Manager was bound by rr. 13 & 14 framed under the Madras Elementary Education Act to obey the order passed by the Divisional Inspector of Schools on an appeal preferred by her.
The suit was resisted by the Management.
They contended that they were not bound by the Madras Elementary Education Act or the rules framed thereunder; that the Manager alone was responsible for the "efficiency, strength and progress" of the school and for the internal discipline, which were all matters left to his discretion and the Management could not be compelled to reinstate the appellant as Head Mistress when she did not command their confidence.
The Trial Court held that the appellant was not entitled to claim reinstatement as Head Mistress, because the action of the Management removing the appellant 's from the post of Head Mistress was not illegal.
The Trial Court also held that the orders 9 passed by the Educational authorities were not binding on the Manager and the action taken by the Manager "though severe", could not be declared illegal.
In appeal the District Court reserved the Judgment passed by the Trial Court and decreed the appellant 's suit and issued a mandatory injunction directing the Management of the School to reinstate the appellant as Head Mistress of the School.
Against that decree a Second Appeal was preferred to the High Court of Mysore.
The High Court reversed the decree passed by the District Court and ordered that the appellant 's suit do stand dismissed.
Against that order this appeal is preferred with special leave.
The principal question which fell to be determined before the High Court was whether the rules framed under the Madras Elementary Education Act, 1920, which conferred authority upon the educational authorities of the State, were statutory and enforceable at the instance of a person prejudicially affected by breach thereof.
The Madras Elementary Education Act 8 of 1920 which originally contained 56 sections has been amended from time to time by Madras Acts 2 of 1932, 2 of 1934, 11 of 1935, 13 of 1938, 2 of 1939, 15 of 1951, 28 of 1943, 8 of 1946 and 23 of 1950.
As a result of these amending Acts a large number of the provisions of the Madras Elementary Education Act, 1920, have been modified or repealed.
Section 41 which provided for the recognition of elementary schools and section 42 which provided for admission of elementary schools to grant in aid, stood repealed by Act 2 of 1939.
By section 56 the State Government was authorized to make rules not inconsistent with the Act to carry out all or any of the purposes of the Act, and by sub section
(2) of section 56 it was provided : "In particular and without prejudice to the generality of the foregoing provisions they may make rules (f) laying down the registers, statements, reports, returns, budgets and other information to be maintained or furnished by local authorities, by panchayats, and by managers of elementary schools under private management and the time within which any statement, report, return, budget or other information shall be furnished; (h) declaring the conditions subject to which schools may be admitted to recognition or aid." 10 Rules were framed under the Act for the first time by the Govt.
of Madras in 1922.
These rules provided for the grant of recognition and aid to elementary schools, and for prescribing conditions of service and qualifications of teachers and the authority of the District Educational Inspector and higher authorities.
The provisions relating to the recognition of the elementary schools and admission of primary elementary schools to grantsin aid were, as stated earlier, repealed by Act 2 of 1939, but the power to frame rules, especially for the purpose of declaring the conditions subject to which schools may be admitted to recognition or aid, was retained.
It also appears that even after Act 2 of 1939 which repealed Ch.
IV was enacted, rules relating to the power of the Educational authorities were republished on August 29, 1949, and Part II of the Rules dealt with matters relating to recognition of schools and grant in aid.
In the view of the High Court, after repeal of sections 41 & 42 of the Act, those rules could only have effect as executive instructions.
On this question it appears that there has been some difference of opinion in the High Courts.
A Full Bench of the Kerala High Court in Chandrasekharan Nair and others vs Secretary to Govt.
of Kerala and others,(1) approving their earlier judgment in Joseph Valamangalam vs State of Kerala(1) held that the rules contained in Part II headed "Rules for grant of recognition and aid to Elementary Schools" framed under the Madras Elementary Education Act, 1920, were mere executive directions having no statutory authority.
The High Court of Andhra Pradesh in Jalli Venkatswamy V.
The Correspondent, Kasturiba Gandhi Basic Senior School kenetipuram(3) was apparently of the view that these rules had statutory operation.
The High Court of Madras in A. Ramaswami Ayyangar vs State of Madras (Education Department)(1) held that the rules were administrative and not statutory in their effect, and the management could dispense with the services of its employee (a teacher) after giving three months ' notice in the usual course, without assigning any special reason, and the employee could not invoke the aid of the Court for an order to quash the proceedings of the management dispensing with his services on the ground of non compliance with those rules.
(1) A. I. R. 1961 Kerala 303.
(3) A. I. R. (2) A. I. R. 1958 Kerala 290.
(4) A. I. R. 11 In this case, the question whether an. order made by the Educational authorities in exercise of the powers conferred upon them by rules is liable to be enforced by action in a civil court at the instance of s person affected by the action of the school authorities falls to be determined.
It is unfortunate that counsel have not been able to place before us the Act, and the rules in force at the material time.
Counsel appearing at the Bar are also unable to inform us about the authority in the exercise of which the rules were originally framed and were reissued after the repeal of Ch.
IV of the Act.
Before we can decide this appeal, we must have before us a copy of the relevant rules in force at the material time, and evidence about the authority under which the rules were framed and continued, the sanction behind the enforcement of the rules, if any, and the manner in which the rules were being administered by the Madras Government and thereafter by the State of Mysore when the District of South Kanara merged with that State under the States Reorganization Act, 1956.
We direct that the papers be sent down to the Trial Court and that the Trial Court do report to us after taking evidence on the questions set out earlier.
The Trial Court may, if so advised, issue a summons to the Educational authorities of the State of Madras or take other steps to ensure production of the documents bearing on the questions on which report is directed to be made.
Enquiry may especially directed to the question whether the State of Madras, or the state of Mysore, have on any earlier occasion enforced the orders passed by the Educational authorities in appeals and the power in exercise of which they have been enforced.
The Trial Court to submit the report within six months from the date on which the papers reach that Court.
The judgment of the Court after receipt of the report was delivered by Shelat, J. Prior to June 1, 1955, the appellant was working as the Head Mistress in the respondent school.
On April 22, 1955, the management of the School served certain charges on her and called upon her to reply to the same.
Her reply was found to be unsatisfactory, and thereupon, by an order passed by the management on June 1, 1955 she was reduced to the position of an Assistant Teacher.
She thereafter filed an appeal against the management before the District Educational Officer, South Kanara.
Her appeal was rejected.
A further appeal by her before the Divisional Inspector of Schools, Coimbatore, succeeded and the Divisional Inspector directed the management to restore her to her original position as the Head Mistress.
The management declined to do so and she filed the suit from which this appeal arises.
12 The suit was on the basis: that since the school had obtained recognition and grant in aid under the Madras Elementary Education Act, VIII of 1920, and the rules made therefore by the Government, it was under the supervision,first of the Education Department of the Madras Government,and.
after reorganization of States, that of the Mysore Government.
According to her, the Act and the said rules were binding on the school and gave her a right to enforce against the management the said order of the Divisional Inspector.
The order reducing, her to the position of an assistant teacher stood vacated by the order of the Divisional Inspector and the respondent school, therefore, was bound to comply with that order and restore her to the position of the Head Mistress, The management contested the suit, maintaining that the order of reduction passed by it was within its power, that there was nothing in the Act or the rules which warranted any interference with its right of internal management of the school and gave no right to the appellant to enforce in, a court of law the order passed by the Divisional Inspector, that order being only a matter between the Education Department and the management.
The Trial Court accepted the school 's contention and dismis sed the suit.
In an appeal against that dismissal, the District Judge took a different view and held that the order of the Department was legally enforceable by the appellant since it was passed in an appeal provided by the said rules.
He set aside the dismissal of the suit and passed a decree in favour of the appellant.
On a second appeal by the school, the High Court went into the legislative history of the Act and on an examination of the rules accepted the contention of the management that the relations hip between the parties was that of master and servant and no mandatory injunction could be issued directing restoration of the appellant as the Head Mistress as that would be tantamount to specific performance of a contract of personal service not permissible under section 21(b) of .
The High Court also held that the rules, under which the appellant had filed the said appeal and the said order was made, were only administrative instructions by the Government to its educational officers and not statutory rules which would give rise to a remedy enforceable at law at the instance of an employee of a school aggrieved against its management.
Against this judgment, the appellant obtained special leave from this Court and filed this appeal.
The appeal first came up for hearing in March 1970 before Shah, J. (as he then was) and Grover, J. Not satisfied with the record before them, the learned Judges postponed the hearing of the appeal and called for a report from the Trial Court on certain matters found wanting in the record, In accordance with that order, the Trial Court took additional evidence, both oral and 13 documentary, and dispatched its. report along with a copy of the rules, the Madras Gazette in which they were published and certain other materials.
From; those materials as also from the judgment of the Kerala High Court reported in Rev. Fr. Joseph vs Kerala(1) it is possible to, trace the charges which the Act and the rules have undergone from time to time.
Such a legislative, history of the Act is important to a certain extent as it throws light on the character of the rules and the power under which they were framed from time to time.
Counsel for the appellant urged that in spite of the changes made from time to time in the Act, the rules with which we are concerned in this appeal have retained their original character of being statutory rules.
, They must, therefore, be, held to have been made under section 56 and particularly under cl.
(h) of its sub section
(2), which empowers the Government to make rules in respect.
of recognition as an elementary school and the aid which the Government gives to it from public funds.
The argument was that despite the changes in the Act, particularly the deletion of certain provisions of the Act, to which we shall presently come, the definition of an 'elementary school ' in the Act takes in schools recognised by the Director of Public Instruction of the State Government, and since such a recognised school is the essence of the scheme of elementary education provided by the Act, the rules have to be treated as statutory rules made,under, cl.
(h) of section 56(2) which is still retained in the Act.
Before we proceed to.
consider these contentions it is necessary to examine briefly the Act and its legislative history.
The Act was, first passed as Madras Act, VIII of 1920, and then contained seven chapters with 56 sections.
It underwent several changes.
from, time to time, and particularly when the Madras Elementary Education (Amendment Act.
II of 1939 was passed by which Chapter II, IV, VI and section 55 in Ch.
were deleted.
The Act was passed with the object of making better provisions for elementary education and envisaged imparting of such education through elementary schools, including those run by private managements, but recognised by the Government through its Education Department.
Sec. 3(vi) of the Act defines such an elementary school as one recognised by the Director of Public Instruction or by such authority as may be empowered by him in that behalf.
56 authorized the Government to make rules not inconsistent with the provisions of the Act "to carry out all or any of the purposes (1) A. I. R. 1958 Kerala 290.
14 of this Act", and in particular cl.
(h) of sub section
(2) for "declaring the conditions subject to which schools may be admitted to recognition or aid." Ch. II, before its deletion in 1939, provided for the constitution of District Educational Councils, their duties, their funds, budget and audit.
VI, by sections 41 to 43 in it, dealt with recognition of schools and admission of private managed schools to grant in aid.
These chapters, as stated earlier, were repealed in 1939.
The Rules were first framed in 1922 under section 56 and contained provisions regarding recognition and aid.
These Rules were clearly statutory rules.
Curiously, although Chs. 11 and IV were deleted in 1939, cl.
(h) of section 56(2) was allowed to remain in the Act.
It appears that the rules regulating recognition and aid were framed in 1922 because so long as Chs. 11 and IV were in the Statute, they had to be made to implement the purposes set out in those chapters.
But with the repeal of those chapters, those Rules could not be continued as they could no longer be regarded as rules for carrying out the purposes of the Act as section 56(1) enjoins The Madras Government appears to have appreciated such a re sult arising from the repeal of those chapters and therefore, reframed the rules and published them in the Gazette of August 29, 1930.
The new Rules were divided into two parts.
The first part contained rules dealing with matters provided for in sections 3(i)(v) and (viii), section 36(1) and (2), section 44, section 48, section 50(iii) and (v) and section 51.
Part II Rules did not set out or refer to any of the sections in the Act as Part I Rules did.
The reason was that rules in Part 11 dealt with recognition and aid in respect of which there were, after the 1939 amendment, no corresponding provisions in the Act.
It is also of some significance that when published in 1939 the rules in Part I were headed "Rules framed under the Madras Elementary Education Act, 1920", while the rules contained separately in Part II were not given any such heading or title.
Further, it appears that when these Part II Rules were published in August 1939 there was no previous publication of them as required by section 56(1) of the Act.
I in Part II Rules deals with recognition.
The power to grant or withdraw such a recognition is conferred on the officers of the Education Department.
Under r. 5, applications for recognition of schools or additional standards in such schools are to be made to the District Educational Officer.
An appeal is provided against his decision before the Divisional Officer.
The rules then lay down certain requirements on the basis of which recognition would be given or withheld.
Rule 13(1) provides, inter alia, for the maintenance of a teacher 's service register by the manager of the school specifying therein the terms of service under which a teacher is recruited.
The register would include 15 particulars showing whether a teacher is appointed temporarily or on probation or on a permanent basis, his salary, the scale of pay, if any, etc.
Under the rule, the manager has to get the register countersigned by the Deputy Inspector of Schools.
The rule further provides that no qualified teacher can be appointed on ;a temporary basis or for a stipulated period.
All appointments to permanent posts have initially to be made on probation and on expire of the probation period the teacher would be deemed to be permanent.
(2) of r. 13 provides that no teacher can leave the service of a school without giving three months ' notice, or three months ' salary in lieu thereof.
Under sub cl.
(ii) of cl.
(2) of that rule, the management has the power to terminate the service of any member of the staff, whether permanent, temporary or probationary, without any notice on the grounds set out therein.
But, three months ' notice would be required if the termination of service is for reasons other than those set out in sub cl.
(ii), e.g., for wailful neglect of duty, serious misconduct, gross insubordination, incompetence etc.
The first provision to sub cl.
(ii) requires, however, that before such notice of termination is given the teacher has to be informed in writing of the charges against him and a reasonable opportunity to be heard has to be given to him.
The second proviso to that subclause requires the management to consult the Deputy Inspector and obtain his approval about the propriety of the action proposed against a teacher.
The rule then provides : "When, on a teacher 's appeal, the District Educational Officer orders reinstatement, the management shall forthwith reinstate him within 10 days of the receipt of the orders, notwithstanding a further appeal submitted or proposed to be submitted by the management to the Divisional Inspector and shall inform in writing the Deputy Inspector of Schools and the District Educational Officer of the fact of having done so.
Failure to comply with such orders of the District Educational Officer may entail action against the management under rule 14 below.
" Sub cl.
(vi) of r. 13(2) provides for appeals, first, before the District Educational Officer, and then, before the Divisional Inspector of Schools.
Under r. 14, the Director of Public Instructions has the power to declare, after enquiry, a teacher to be unfit for employment in a recognised school.
Under r. 14 A, he can refuse or withdraw recognition from a school in which is employed a teacher whom he has declared to be unfit, or when the school is under the management of a person declared unfit by him.
Recognition can also ' be withdrawn under rr.
26 to 28, 28 A and 28 B on the grounds set out therein.
11 of Part II Rules contain rules in regard to aid, such as teaching grants, maintenance grant etc., 16 and Ch.
III contains rules with regard, to grants for school buildings, building sites and play grounds.
II and IV of the Act, which contained provisions for recognition and aid, having been repealed, these rules, reissued and published afresh in August 1939, cannot be said to be rules "to,, carry out all or any of the purposes of this Act", as provided by section 56(1).
No doubt, cl.
(h) of sub section (2) of section 56 was still retained even after Chs. 11 and IV were deleted, and therefore, the Government could perhaps claim to have the power to frame statutory rules "declaring the conditions subject to which schools may be admitted to recognition or aid".
But even if the Government were to claim to have framed rules under the sanction contained in cl.
(h) of section 56(2), such rules would not satisfy the condition precedent for such rule making, namely, that they can be made only "to carry out all or any of the purposes of this Act".
, Such rules, therefore, even if made, would not be rules made under section 56.
Besides, the fact is that when Part 11 Rules were published in the gazette of August 28, 1939, they were not claimed to have been made under the power reserved to the Government under section 56.
If they were claimed to have been so made, they would, firstly, have been pre published as required by section 56(1), and secondly, the Government would not have made the distinction between Part I and Part II Rules, which it did, by giving a title to the former, namely, that they were made under the Act, and omitting to give such a title to the latter.
These facts support the contention of the respondent school that Part 11 Rules cannot be said to be statutory rules framed under section 56, although the power to make such rules is still retained with the Government by reason of cl.
(h) being still there in section 56(2).
Ordinarily, the relations between the management of an ele mentary school and the teachers employed in it would be governed by the terms of the contract of employment and the law of master and servant in the absence of any statute controlling or abrogating such a contract of employment and providing to the contrary.
The mere fact that such a school has obtained recognition and aid from the education department would not mean that the relationship between its management and its employees has ceased to be governed by the contracts of employment under which the employees are recruited and by the law of master and servant unless there is some provision in the Act overriding that law as one finds in statutes dealing with industrial disputes and similar other matters.
There is in fact no such provision in the Act and none was pointed out to us.
The result is that the relations between the management and the teachers even in a recognised elementary school have to be regarded as being governed by the contracts of employment 17 and the terms and conditions contained therein.
Part II Rules, which cannot be regarded as having the status of statutory rules made under section 56, cannot be said to have the effect of controlling the relations between the management of a school and its teachers or the terms and conditions of employment of such teachers or abrogating the law of master and servant which ordinarily would govern those relations.
But it cannot also be gainsaid that as the Government has the power, to admit schools to recognition and grants in aid, it can, de hors the Act, lay down conditions under which it would grant recognition and aid.
To achieve uniformity and certainty in the exercise of such executive power and to avoid discrimination, the Government would have to frame rules which, however, would be in the form of administrative instructions to its officers dealing with the matters of recognition and aid.
If such rules were to lay down conditions, the Government can insist that satisfaction of such conditions would be condition precedent to obtaining recognition and aid and that a breach or non compliance of such conditions would entail either the denial or withdrawal of recognition and aid.
The management of school, therefore, would commit a breach or non compliance of the conditions laid down in the rules on pain of deprivation of recognition and aid.
The rules thus govern the terms on which the Government would grant recognition and aid and the Government can enforce those rules upon the management.
But the enforcement of such rules is a matter between the Government and the management, and a third party, such as a, teacher aggrieved by some order of the management, cannot derive from the rules any enforceable right against the management oh the ground of a breach or noncompliance of any of the rules.
To illustrate the point, suppose the management of a school were to terminate the service of a teacher after giving one month 's notice, or one month 's salary in lieu thereof in 'accordance with the contract of employment between the feather and the management, such a termination would be valid.
But the 'Government can insist that since its rules provide for three months ' 'notice, the management cannot terminate the service of a teacher by giving only one month 's notice.
Though in the absence of 'statutory provision having the effect of controlling or superseding the contract of employment agreed to between the parties, the termination would in law be valid, nevertheless, the Government can withdraw, under Part II Rules, the recognition and aid it has given to the school since its rules governing recognition and aid were riot complied with.
But that does not mean that Part II Rules confer upon a third party, viz., an aggrieved employee of a school, any remedy enforceable at law in the event of the management of an elementary school refusing to comply with these 18 rules which, inter alia, enjoin upon a school to abide by the directions given thereunder by the education officers of the Government named therein.
in the absence of any provision in the Act governing the relations between the management and a teacher employed by it or controlling the terms of employment of such a teacher and Part II Rules not being statutory rules, the appellant could not be said to have had a cause of action for enforcing the directions given by the Divisional Inspector to restore her as the Head Mistress in the appeal filed by her.
Appeals against orders passed by the management against a teacher are provided for under r. 19 so as to enforce the satisfaction of conditions under which recognition and aid would be granted or withdrawn, and not for regulating, as between the teacher and the management, the relations of master .and servant arising under the contract of employment.
In Rev. Fr. Joseph vs Kerala,(1) the Kerala High Court had to consider the question of these rules being statutory or not as one of, the schools, whose writ petition among others it was trying, was governed by the Madras Elementary Education Act, 1920 and the rules made, by the Madras Government.
After tracing legislative,, history of the Act, as also of the rules, the High Court held that Part II Rules did not have any statutory origin and were, therefore, only administrative instructions by the Government to its educational officers, and therefore, did not vest in the school any, statutory right for grant in aid.
This decision was later approved by a full bench of that High Court in Chandrasekharan Nair vs Secretary to Government of Kerala(2) where that Court once again held that Part II Rules were administrative rules.
Similarly, in A. Ramaswami Ayyangar V. Madras,(3) the High Court of Madras negatived the contention that these rules, dealing with recognition and aid, could be invoked by an, employee against the management of a private elementary school to enforce a right allegedly arising under the rules.
The High Court held that the rules were, not statutory , rules, and that therefore.
they could not enlarge the scope of the contract of employment between such an employee of, the school and the management embodied in the school register, and that the rules affected the relations between the school and the Government, and not a third party.
In Govindaswami vs Andhra,(1) a learned Single Judge of the Andhra High Court, took the view that the powers and functions of the State 's educational officers under these rules in relation to recognition a ad aid were quasi judicial and held that these rules were Statutory (1) A. 1.
R. 1958 Kerala 290.
(3) 1962(1) M. L. J. 269.
(2) A. I. R. 1961 Kerala 303.
(4) 1962(1) An.
W. R. 263.
19 rules.
But this view was on an assumption that even Part II Rules were made under section 56(2)(h) of the Act.
Such an assumption was made without any enquiry whether they were so made and without taking into account the fact of the deletion of Chs.
II and IV from the Act in 1939, and its impact on the rule making power of the Government, the re issuance of the rules thereafter and the distinction made by the Madras Government itself between Part I and Part 11 Rules in the headings which it gave to those two parts.
The more recent view of the Andhra High Court, however, is reflected in Moss vs The Management(1) where a Division Bench of that High Court has held that Part 11 Rules relating to recognition and aid are not statutory rules but are only executive instructions, and therefore, are not legally enforceable in a court of law.
On the reasons aforesaid, the suit filed by the appellant must be held to be misconceived, and consequently, the High Court righty dismissed her suit.
The appeal fails and is dismissed.
But in the circumstances of the case, we decline to make any order as to costs.
V. P. section Appeal dismissed.
(1) 1970(II) An.
W. R. 157.
| IN-Abs | The appellant, who was working as the Headmistress in the respondent school was reduced to the position of an Assistant Teacher.
Her appeal to the District Educational Officer under.
13(2)(vi) of Part 11 of the rules published by the State Government in the Gazette on August 29 1939, was rejected, but on a further appeal by her to the Divisional Inspector of Schools, the management of the school was directed to restore her to the position of Headmistress.
As the management did not do so, she filed a suit for the issue of a mandatory injunction to the respondent and for damages.
On the question whether the rules under which the appeal was filed and the order was made were only administrative instructions by the Government to its educational officers and not statutory rules which would give rise to a remedy enforceable at law at the instance of an employee of a school aggrieved against the management, HELD: (1) Section 56 of the Madras Elementary Education Act, 1920, authorized the Government to make rules to 'carry out all or any of the purposes of this Act ', and under sub section 2(h) for declaring the conditions subject to which schools may be admitted to recognition or aid, and rules were framed in 1922.
The Act was amended by Amendment Act of 1939, by which Chs. 11, IV, VI and section 55 were deleted.
The existing rules therefore could not be continued as they could not be regarded as rules for 'carrying out the purposes of the Act. ' Hence they were reframed and published in the Gazette in 1939 in two parts.
[13F, H; 14D].
(a) The first part contained rules dealing with matters provided for in the various sections.
The rules in Part II could not refer to any section because, they related to matters such as recognition and aid dealt with in sections and Chapters which were repealed by the 1939 amendment, and hence, Part II rules did not set out or refer to any section of the Act.
[14E].
(b) The rules in Part I were headed 'Rules framed under the Madras Elementary Education Act, 1920 ', but the Rules in Part 11 were not given any such heading or title.
[14F].
(c) There was no previous publication of the rules in Part 11 as required by section 56(1).
[14F G].
(d) The rules in Part 11 could not be claimed to have been made under section 56(2) (h) dealing with the conditions subject to which schools may be admitted to recognition or aid, because they did not satisfy the condition precedent for such rule making, namely, that they could be made only 'to carry out all or any of the purposes of the Act ', [16D F].
7 Therefore, the rules in Part 11 could not be said to be statutory rules framed under section 56.
[16F] (2) But the Government had the power de hors the Act to lay down conditions under which it could recognise and grant aid.
To achieve uniformity and certainty in the exercise of such executive power and to avoid discrimination, Government could frame rules which would however only be administrative instructions to its officers.
[17B D] The rules in the present case, relating to recognition and aid, thus governed the terms on which Government would grant recognition and aid and Government could enforce the rules on the management by the denial or withdrawal of such recognition or aid, if there was a breach or noncompliance of the conditions laid down in the rules.
But the enforcement of such rules was a matter between the Government and the management, and a third party, such as a teacher aggrieved by same order of the management, could not derive from the rules any enforceable right against the management on the grounds of a breach of or non compliance with any of the rules.
[17D E; 19B C] (3) The relation between the management of the elementary school and the teachers employed in it would be governed by the terms of the contract of employment and the law of master and servant in the absence of any statute or statutory rules controlling or abrogating such a contract and providing to the contrary.
[16F G] The result is that the relations between the managements and the teachers even in a recognised elementary school have to be regarded as being governed by the contracts of employment and the terms and conditions contained therein.
Part II Rules, which cannot be regarded ,is having the status of statutory rules made under section 56 cannot be said to have the effect of controlling the relations between the management of a school and its teachers.
[16H; 17A B] Therefore, the appellant could not be said to have had a cause of action for enforcing the directions given by the Divisional Inspector to restore her as the Headmistress in the appeal filed by her.
Appeals against orders passed by the management against a teacher are provided for under r. 13 so as to enforce the satisfaction of conditions under which recognition and aid would be granted or withdrawn, and not for regulating as between the teacher and the management, the relations of master and servant arising under the contract of employment.
[18B C] Chandrasekharan Nair vs Secretary to Government of Kerala, , A. Ramaswami Ayyangar vs State of Madras, , and Moss.
vs The Management, , approved.
Govindaswami vs Andhra, , overruled
|
minal Appeal No. 240 of 1968.
972 Appeal by special leave from the judgment and order dated February 8, 1968 of the Punjab and Haryana High Court in Criminal Revision No. 237 of 1967.
section Lakshminarasu, for the appellant.
B. D. Sharma and R. N. Sachthey, for the respondent.
The Judgment of the Court was delivered by Vaidiafingam, J.
In this appeal, by special leave, the appellant accused challenges the judgment and order dated February 8, 1968, of the Punjab & Haryana High Court in Criminal Revision No. 237 of 1967, confirming the conviction and sentence passed against him for an offence under section 29 of the (hereinafter to be referred as the Act).
The appellant was at the relevant period a constable having roll number 857.
He was originally recruited in 1950 to the police service in the composite Punjab State; and on the formation of the State of Haryana, he was allotted to Haryana.
The appellant was posted to do duty at the police lines,, Kamal, before November 25, 1963.
It was reported by the Lines Officer on November 25, 1963 that when roll call was taken on the evening of that day at about 6.30 p.m., the appellant was found absent.
The report also refers to the absence of certain other police officers, with whom we are not concerned.
The judicial magistrate, Karnal, issued what is stated to be a notice dated January 10, 1966 to the appellant, alleging that he was found absent from duty from the police lines at the time of roll call on November 25, 1963.
He was asked to "plain why he should not be held guilty under section 29 of the Act.
The appellant stated that he would neither plead guilty nor would he admit that he remained absent from duty.
He has further stated that he was mentally upset in view of the sudden deaths of his mother and brother in law, and also due to his children being cut off from him.
He wound up, his answer by saying that he was under medical treatment in the civil hospital, Karnal, and the doctor therein sent him to Patiala.
He was tried for an offence under section 29 of the Act on the ground that he was absent from duty on November 25, 1963.
The judicial magistrate, by his order dated March 4, 1966, found the appellant guilty of the offence and sentenced him to pay a fine of Rs. 51 and in default to undergo simple imprisonment for seven days.
The learned magistrate considered the plea of the accused regarding his having undergone treatment in the civil hospital, as also the evidence of the doctor who has spoken to this fact, and held that the case of the accused requires a very sym 9 7 3 pathetic consideration.
But nevertheless the magistrate found that as the appellant was technically guilty of the offence under section 29 of the Act, with which he was charged, he has be punished Accordingly; he convicted him and imposed the fine, as stated above.
The appellant challenged his conviction and sentence 'before the learned Sessions Judge as well as the High Court, but was unsuccessful.
Though several contentions regarding the legality of the conviction have been taken by Mr. Lakshmi narasu, learned counsel nominated to represent the appellant by the Legal Aid Society of the Supreme Court Bar Association, in the view that we take regarding the prosecution being barred by limitation under section 42 of the Act, it becomes unnecessary to refer to those contentions and deal with them.
We have already referred to the fact that the allegations against the appellant related to hi absence from duty on November 25 , 1963, stated to be an offence under section 29 of the Act.
The notice issued by the judicial magistrate was on January 10, 1966.
The contention that is taken by Mr. Lakshminarasu based on section 42 of the Act is that the prosecution against the appellant has been commenced beyond the period of three months, as provided in section 42 of the Act and therefore, the trial and other proceedings leading upto the conviction of the appellant ate illegal and void.
The counsel pointed out that the act complained of was the appellant 's absence from duty at the time of the roll call on November 25, 1963.
The earliest step taken in this case for prosecuting the appellant was on January 10, 1966 when the judicial magistrate issued the notice to the apple ant calling upon him to explain why he should not be held guilty under section 29 of the Act.
That notice was issued long after the expiry of three months from the date of the commission of the offence complained of.
In fact.
Mr. Lakshminarsu argued that the date of filing 'the complaint will be the date when prosecution is commenced.
But he was willing to assume that the issue of the notice on January 10, 1966.
, is a step in the prosecution.
Even then he argued that the prosecution is barred under section 42 of the Act.
It is no doubt true that this point has not been taken as such before any of the courts; but in the statement given on February 9, 1971 regarding the propositions of law to be advanced before this Court, this contention has been specifically raised.
A copy of the said statement has been given to the counsel for State the same day.
However, the point that is raised is a pure question of law, not involving any further investigation of facts.
We therefore permitted counsel for the appellant to raise this legal contention.
974 The question therefore is whether the prosecution initiated against the appellant in this case is barred by limitation under section 42 of the Act.
" the material part of section 42, relevant for the present purpose reads as follows "All .
prosecutions against any person, which may be lawfully brought for anything clone or intended to be done under the provisions of this Act, or under the general police powers hereby given shall be commenced within three months after the act complained of shall have been committed, and not, otherwise, From the section quoted above, it will he clear that the period of three months prescribed for commencing a prosecution under the said section is only with respect to prosecution of a person or something done or intended to be done by him under the provisions of the or under the general police powers given by the Act.
It is clear that the appellants prosecution was initiated against him for.
something done under the provisions of the Act, namely, noncompliance with the requirement to be on duty as required under the, .
Therefore, under section 42 of 'the Act, the prosecution should have been commenced against the appellant within three months after the act complained of has been committed.
The act complained of was atieged to have been committed on November 25, 1963.
Even treating the notice issued by the judicial magistrate is amounting to commencement of prosecution, it took place only on January 10, 1966, long after the expiry of three months from the date of the commission of the offence.
Therefore, the prosecution, commenced against the appellant is barred by limitation under section 42 of the Act.
In this case there is no controversy that the offence with which the appellant was charged was one under section 29 of the Act and for the said offence he was tried and convicted.
Mr. B. D. Sharma, learned sounsel for the respondent State, faced with this situation urged that in the notice issued by the judicial magistrate, Karnal, to the appellant on January 10, 1966, it was specifically stated that the appellant was absent not only on November 25, 1963, but that he also continued to be absent as before.
According to the learned counsel, this clearly means that even on the date when the notice was issued to the appellant, that is, on January 10, 1966, the appellant was absent and was guilty of an offence under section 29 of the Act and hence the prosecution has cornmeal within the period mentioned in section 42 of the Act.
We are not inclined to accept this contention.
A perusal of the order of" the trial magistrate, the learned Sessions Judge and the High Court, clearly shows that the appellant was tried on the specific charge of having absented himself from duty on November 25, 975 1963.
The notice issued 'by the magistrate on January 10, 1966 also refers to the report of November 25, 1963 about the appellant 's being absent on that evening at roll call., For his absence on November 25, 1963 he was called upon to show cause why he should not be held guilty under section 29 of the Act.
Further it is also seen from the examination of the accused under section 342.
Code, of Criminal Procedure, that a specific question was put to him "It is in evidence against you that you were absent from the Police Lines Kamal on 25 11 63 and as such were marked absent at the time of Roll call.
What do you say to it ?" We may also refer to the decision of this Court in Maulud allegation against the appellant related to his absence on November 25, 1963 and it was the evidence in that regard that was put to the appellant for offering his explanation.
All the above facts clearly show that the appellant was tried and convicted for an offence under section 29 of the Act in which case the prosecution for such An offence should have been done within the time laid down thereunder.
We may also refer to the decision of this Court in Maulud Anand vs State of Uttar Pradesh(1) wherein it alas been held that if there is a prosecution of a police officer for an offence under section 29 of the Act, such a prosecution should be one within the period of limitation mentioned in section 42 of the Act.
In that case the appellant therein, a Head constable, was charged and tried, along with another person, for various offences under the Indian Penal Code, such as sections 304A and 218/109.
The other accused was acquitted but the head constable was convicted under section 218 I.P.C. One of the contentions raised by the appellant before this Court was that as the prosecution was launched against him more than three months after the commission of the ' offence, it was barred by limitation under section 42 of the Act.
This Court after a perusal of the scheme of sections 36 and 42 of the Act rejected the contention of the appellant.
This Court held that the head constable was prosecuted and convicted for offences not under the Act but under the Indian Penal Code.
To such prosecution, it was held that section 42 did not apply.
On the other hand, it was held that section 42 of the Act applies to a prosecution against a person for an offence under section 29 of the Act.
The conclusion arrived at by us that the prosecution in the case on hand is barred by section 42 of the Act is also supported by the decision quoted above.
To conclude, it is clear that the prosecution against the appellant has been commenced beyond the period of three months and as such it is barred by limitation under section 42 of the Act.
Hence (1) [1963] Supp. 2 S.C.R. 38. 9 7 6 the orders of the High Court and the two subordinate courts are set aside.
in consequence, the conviction of the appellant as well as the levy of fine are also set aside.
The appeal is allowed and fine, if collected, shall be refunded.
to the appellant.
G.C Appeal allowed.
110O Supp.
C.I.(P)/71 2500 2 6 72 GIPF.
| IN-Abs | The appellant was a constable in the police force ' of Haryana State.
At the relevant time he was posted to do duty at the police lines, Karnal.
It was reported by the Lines Officer that he was not present at the roll call on the evening of November 25, 1963.
The Judicial Magistrate gave him a notice in January 1966 asking him to explain why he should not he held guilty under section 29 of the police 'Act 1891 being absent on the aforesaid date.
The appellant explained that he was mentally upset on account of the death of two near relatives and was himself ill.
The, Magistrate held that the appellant was technically guilty, even though his case required sympathetic consideration.
In this view he sentenced the appellant to pay a fine of Rs. 51 and in default to undergo simple imprisonment for seven days.
Appeals before the Sessions Judge and the High Court failed.
In appeal to this Court by special leave it was contended on behalf of the appellant, that since more than three months, had intervened between the commission of the alleged offence and the commencement of the prosecution, the trial was time barred by limitation under section 42 of the .
This point was raised in this Court for the first time but had been stated in the statement of propositions of law to be advanced before the Court, and a copy of the same had been supplied to the counsel for the State.
Allowing the appeal, HELD : (i) The question of limitation being purely one of law requiring no fresh investigation into facts the appellant could be permitted to raise it for the first time in this Court.
[973 H] (ii)The appellant 's prosecution was initiated against him for something done under the provisions of the Act, namely non compliance with the requirement to be on duty as required under the .
Therefore under section 42 of the Act the prosecution should have been commenced against the appellant within three months of the commission of the act complained of.
The act complained of was alleged to have been committed on November 25, 1963.
Even treating the notice issued by the judicial magistrate as amounting to commencement of prosecution, it took place only on January 10, 1966, long after the expiry of three months from the date of the commission of the offence.
Therefore the prosecution commenced against the appellant was barred by limitation under section 42 of the Act.
[974 D E] Maulud Ahmad vs State of Uttar Pradesh, [1961] Supp. 2 S.C.R. 38, distinguished.
|
minal Appeal No. 165 of 1968.
Appeal by special leave from the judgment and order dated February 8 1968 of the Allahabad High Court in Criminal Appeal No. 2305 of 1965.
916 A. section R. Chari J. P. Goyal and G. section Chatterjee, for the appellant.
O. P. Rana, for the respondent.
The Judgment of the Court was delivered by Dua, J.
In this appeal by special leave the appellant Matru alias Girish Chandra challenges his conviction under section 302 read with section 34, I.P.C. and under section 382, I.P.C.
For the former offence he was sentenced to imprisonment for life and for the latter to rigorous imprisonment for four years.
Both the sentences were directed to ran 'concurrently.
The appellant, along with Mohar Singh and Saheb Singh were committed to the court of Sessions for trial for offences under sections 302/34, I.P.C. for the murder of Smt.
Omwati, wife of Ram Chander (P.W. 1) and of their three years old son Sua Lal and under section 382, I.P.C. for committing theft of cash, armaments and other things from the house of the deceased.
The offences were alleged to have been committed on May 29, 1964 between 10 and II a.m. in the township of Shamsabad.
The appellant and the deceased were admittedly next door neighbors in Mohalla Chaukhanda at the relevant time.
Rain Chandra had two sons, the elder one Ramji being six years old.
On the day of occurrence at about 9 a.m.
Ram Chandra left his house for his shop about three, furlongs away, leaving behind in the house his wife and two sons.
About an hour later Omwati sent the elder son to the shop with some food for his father.
A few minutes later Ram Chandra sent to his house some vegetables through his servant.
After sometime his servant returned to the shop and informed Ram Chandra that his wife was lying in the house in pool of blood.
After calling his nephew to look after the shop Ram Chandra immediately went to his house and found his wife lying dead in the courtyard near the well whereas his 3 year old son Sua Lal was lying dead in a room close to the courtyard.
The box inside the room also appeared to have been opened and its contents pilfered.
Some gold and silver omaments which his deceased wife was wearing that morning were found missing.
Information of the occurrence was lodged at the police station Shamsabad at about 12.40 in the afternoon.
But as he did not suspect anyone he merely stated the circumstances in which he came to know of the occurrence and found his wife and child dead in the house.
It was stated in the report that Rs. 200/ in cash and three ornaments including a ring had been taken away by the miscreants.
Matru, appellant, who was the next door neighbour came to Ram Chandra 's house before the first information report was lodged and remained with him till the 917 report was made to the police.
The investigating officer found blood at both the places where the two dead bodies were lying.
The blood stained and unstained earth was collected and sealed.
Next morning it appears Chhotey Lal (P.W. 2) and Nathu Lal (P.W. 10) went to see Ram Chandra between 6, and 7 a.m. Chhotey Lal informed him that he (Chhotey Lal) had seen Matra and two unknown persons entering Ram Chandra 's house at about 10 or 10.30 a.m. on the previous day and Nathu Lal gave him the information that at about 11 a.m. on the day of the occurrence he had seen Matru and.
two other persons coming out of his house.
These witnesses at that time did not attach any importance to the three persons entering and after some time coming out of Ram Chandra 's house.
However, later when they leamt about the double murder in Ram Chandra 's house between 1 0 and II a.m. they thought that they should tell Ram Chandra what they had seen on the morning of May 29 at about the time of the occurrence.
It is said that about six months prior to the occurrence relations between Omwati and the wife of Matru, appellant, had become strained.
One of Matru 's daughter was married and the other was of marriageable age but both were living with their parents.
Omwati suspected that some 'people used frequently to visit Matru 's house without any cogent reason and also gave currency to this fact.
Matru 's wife naturally resented this.
About six months prior to, the occurrence an incident is stated to have taken place which gave rise to a quarrel between the two women.
Matru 's wife threw a stone which struck Omwati on her head.
Ram Chandra did not attach much importance to this incident considering it to a matter of common occurrence amongst womenfolk.
Later, however, Omwati seems to have told her husband that she had been threatened by Matru 's wife with dire consequences.
Ram Chandra advised his wife not to have anything to do with Matru 's wife.
After the occurrence, the appellant, it appears, remained in his house till the inquest was over but thereafter he seems to have disappeared.
On receiving in formation about Matru and his two companions going into his house and coming out a short while later round about the time of the occurrence, Ram Chandra informed the investigating officer what he had been told by Chhotey Lal and Nathu Lal.
The Sub Inspector searched the appellant 's house at about 9 a.m. on May 30, but he was not found there, nor was any incriminating thing found in the house.
A search for the appellant was made but he could not be traced till three days later.
On June 1, when the investigating officer learnt that Matru was likely to go to his village to see his children he was apprehended and on search of his person a spectacle case containing a pair of spectacles and a gold ring was recovered from the folds of his dhoti.
Complicity 918 of Mohar Singh because known to the police on Matru 's interrogation.
But Mohar Singh could not be arrested till September 13, 1964.
When arrested, he offered to recover a shawl, one of ,the stolen properties, which he had sold to Darbarilal (P.W. 17) for Rs. 70/ .
The shawl was accordingly recovered at Mohar Singh 's instance from Darbarilal.
Saheb Singh was also arrested on suspicion.
The Sessions Judge found the appellant guilty of murder and also of an offence under section 382, I.P.C. Since there was no evidence of specific part played by the appellant the extreme penalty was not imposed on him.
As observed earlier under section 382, I.P.C. he was sentenced to four years rigorous imprisonment.
Mohar Singh was, acquitted of the offence under section 302/ 34, I.P.C. as also of the offence under section 382, I.P.C. He was, however, convinced for an offence under section 411, I.P.C. and sentenced to rigorous imprisonment for two years.
Saheb Singh was given benefit of doubt and acquitted.
The only evidence against Saheb Singh was that of his by Nathu Lal (P.W. 10) which was not corroborated by any other evidence and identification alone in the circumstances was considered unsafe for convicting him.
Both the convicts appealed to the High Court.
That Court came to the conclusion that Matru had a motive to commit the crime and that Chhotey Lal (P.W. 2) and Nathu Lal (P.W. 10) were reliable witnesses and that the investigation was neither tainted nor unfair to the accused.
The statement of Ram Chandra (P.W. 1), husband of the deceased, and his conduct throughout also appeared to be quite strains forward.
The ring, which had been recovered from Matru 's possession at the time of his arrest was held to be the one which the deceased was wearing when her husband left the house in the morning of the occurrence.
This was considered to be a very incriminating circumstance.
All these circumstances taken along with the fact that Matru had absconded were held to connect the appellant with the crime beyond reasonable doubt.
Mohar Singh, from whose possession nothing had been recovered was given benefit of doubt and acquitted.
The recovery of the shawl from Darbarilal in the absence of any writing was not considered to be incriminating enough to justify Mohar Singh 's conviction because it did not exclude reasonable doubt about his innocence.
In this Court it was strongly argued on behalf of the appel lant Matru that the circumstantial evidence does not establish his complicity in the offence charged.
The Police investigation was also assailed and it was submitted that identification of the articles 919 alleged to have been stolen and later recovered was not of much value because the articles alleged to have been recovered were commonly available and had no distinguishing marks of identification Objection was also raised to the admissibility of exhibit Ka 4, a letter Written by the deceased to her father in which reference was made to injury received by her as a result of a brick thrown by Matru 's wife.
This ground was not included in the original memorandum of appeal dated May 1, 1968 presented in this Court but permission to raise this ground was sought by means of an application dated July 25, 1968 which was allowed by this Court while granting special leave.
It was contended that this letter was inadmissible in evidence as it did not contain any statement relating to the cause of Omwati 's death or to the circumstances of the transaction which resulted in her death.
According to the argument this letter did not fall within the purview of any of the clauses of section 32, Indian Evidence Act under which alone it could be hold admissible in evidence.
Shri Chari also submitted that the other two co accused having been acquitted, section 34, I.P.C. became inapplicable to the case of the appellant and his conviction under section 302 read with section 34, I.P.C. must be held to be con trary to law.
For this submission he relied on Prabhu Babaji Navle vs State of Bombay.(1) Finally counsel argued on the authority of Hanumant vs State of M.P.(2) that in case of circumstantial evidence the circumstances from which the conclusion of guilt is to be drawn should be fully.
established and all the established facts should be consistent only with the hypothesis of the guilt of the accused.
In the present case the circumstantial evidence is not of conclusive nature and tendency, said Shri Chari.
Normally this Court doe& not go into the evidence and appraise it for itself in criminal appeals under article 136 of the Constitution because this Article does not confer a right of appeal on a party.
It merely clothes this Court with discretionary power to scrutinise and go into the evidence in special circumstances in order to satisfy itself that substantial and grave injustice has not been done.
In the case before us we are persuaded to go into the evidence because of several exceptional features.
It was a case of circumstantial evidence and the two accused who had been charged along with the appellant under section 302 read with section 34, I.P.C. were acquitted.
The appellant a neighbdur of the deceased, remained With her husband at the place of occurrence till the report was made to the police on the day of the murder.
Indeed, he accompanied Ram Chandra for lodging the report.
The question of admissibility and value of exhibit Ka 4 and the probative value of the identification proceedings of the articles alleged to have been stolen and recovered were also seriously canvassed at the Bar.
And apart from the argument that the circumstantial evidence on (1) A.1 R,1956 S.C.51.
(2) [1952] S.C.R. 1091.
920 the record does not exclude reasonable possibility of the appellants innocence, the further question was raised that if these two pieces of evidence, namely exhibit Ka 4 and the identification of the, articles were to be ignored then there was absolutely no evidence on which a serious argument about the appellant 's guilt could be founded.
Now, the deceased Omwati and her infant son were undoubtedly both murdered at about IO or 1 1 on the morning of May 29, 1964.
Ram Chandra Gupta, the husband of Omwati had no reason to suspect Matru, appellant, (his neighbour) of this crime.
In the F.I.R. exhibit Ka.
IO no one was named as a sus pect and only the following articles of property were stated to be missing :, 1.
Gold chain weighing about 3 tolas, plain twisted design worth Rs. 375/ 2.
One pair of gold jhumki together with kundal weighing 1 1/2 tolas worth, Rs. 1501 ; 3.
One gold ring longitudinal design weighing 1/2 tola worth Rs. 75/ .
this was stated to have been worn by the deceased; and 4.
Currency notes worth Rs. 200/ stated to have, been in the box.
It may here be pointed out that when P.W. I Ram Chandra came into the witness box he attempted to prove exhibit Ka 3, a supplementary list of missing articles which list, he said, had been handed over to the investigating officer soon after the preparation of the inquest report.
The production of this list was objected to and though the trial court relied on it, the High Court ruled it out as hit by section 162, Cr.
P.C. The position, therefore, remains that the description of the ring in the F.I.R. is the only description we have on the record and also that there is no mention of the spectacle case and the spectacles in the F.I.R. Suspicion fell on the appellant only when Chhotey Lal, barber (P.W. 2) and Nathu Lal (P.W. 10) saw Ram Chandra on the following morning (May 30, 1964) and informed him of what they had separately seen on the morning of the 29th at about the time of the alleged murder.
What they conveyed to Ram Chandra has already been noticed by us.
It was on the basis of this information that Ram Chandra is said to have informed the investigating officer about his suspicion against the appellant.
The recovery of the articles, even if the evidence of these two witnesses is believed, would have a material bearing on the case because if the recovery proceedings of the articles said to have been recovered 92 1 from the appellant 's possession does not inspire confidence and it is not possible to hold beyond reasonable doubt that these were the very articles found missing from the house of the deceased, then it may be extremely difficult to sustain the appellant 's conviction on the prosecution evidence.
In this connection particular importance attaches to the ring stated to have been worn by the deceased because if that ring is not proved to be the same which is alleged to have been worn by the deceased Omwati at the time of her murder then no inference would seem to arise against the appellant.
The prosecution case against the appellant is mainly sought to be established by the evidence of P.W. 2 and P.W. 10 and by the evidence relating to the recovery from the appellant of the, articles alleged to belong to the deceased supported by the evidence of motive on the part of the appellant for committing this crime 'and corroborated by the appellant 's alleged conduct in trying to mislead Ram Chandra and the investigating officer and ' finally by disappearing after the lodging of the F.I.R. The trial court, as also the High Court, both relied on these four pieces. of evidence for convicting the appellant.
To begin with it is notworthy that Ram Chandra himself does.
not seem to have thought that the appellant was inimical towards.
the deceased and he did not suspect the appellant of complicity in the murder.
According to his own testimony it was only after Chhotey Lal (P.W. 2) and Nathu Lal (P.W. 10), had informed him about what they had seen on the morning of May 29, that he recollected that about five or six months prior to the occurrence there was an altercation between Omwati and the appellant 's wife.
This would clearly indicate that the alleged altercation had not left any serious impact on the mind of Ram Chandra and theapperant 's admitted presence in the house of Ram Chandra till ' the lodging of the F.I.R. indicates that relations between Ram Chandra and the appellant were not openly hostile or unfriendly.
The evidence of P.W. 2 shows that the appellant and two other persons came out of the appellant 's house and entered the house of Ram Chandra on the morning of May 29, and the evidence of P.W. 10 shows that the appellant and two otherpersons came out of Ram Chandra 's house and entered that of the appellant on the same morning a little later.
This evidencehaving been believed by the two courts below may be accepted.
But so far as the question of time when these two witnesses saw the appellant and two other persons going.
into and coming out of Ram Chandra 's house is concerned they seem to have given the time from their impression Ram Chandra (P.W. 1) does not say that P.W. 2 and P.W. 10 had told him on the morning of May 30 that when they saw the appellant and his two com 922 panions on May 29, they had a Potli with them.
It also seems somewhat unbelievable that the appellant with his companions should have entered the house of Ram Chandra with the pur,Pose of committing murder and theft in broad daylight particularly when P.W. 2, a barber who knew him and lives about one furlong away from his house had actually seen him.
It is un.likely that the appellant should have failed to notice P.W. 2.
It is in the evidence of P.W. 2 that the, appellant and his companions came out of the appellant 's house and entered that of Ram Chandra when the witness called out the name of Panditji meaning thereby Puttulal Pandit.
Again, if the appellant and his two companions had committed the gruesome murder of Omwati and Sualal (Omwati aged 25 years had 4 incised wounds, 3 in the neck and one in the abdominal cavity and :Sualal, 3 years old, had three incised wounds on his neck and one on his right wrist) within half ;In hour and had also stolen the articles including a ring, a gold kundal, jhumki and silver iori worn by the deceased on her person and also broken open a box and removed therefrom a shawl and Rs. 200/ within a short span of half an hour as alleged by the prosecution, then it is somewhat surprising that 'their movements and behaviour should not have reflected any abnormality.
At least Nathu Lal does not seem to have noticed any abnormal behaviour which Would excite his suspicion.
Now, the appellant and his companions were seen by P.W. 2 and P.W. 10, broadly speaking, between 1 0 and 1 1 in the morning.
We would give these two witnesses a margin for their inaccuracy in regard to the time as deposed by them in the witness box.
P.W. 2, it may be reCalled, gives the time as between 10 and 10.30 a.m. when he saw the appellant and his companions and.
P.W. 10 gives the time between 10.30 and 11 a.m. when he saw them coming out of the house of P.W. 1.
The F.I.R. was lodged at 12.40 p.in.
which means that Ram Chandra (P.W. 1) must have arrived at his house a little earlier.
The appellant, according to P.W. 1, had been with him when the F.I. Report was got written at his house and he went along with P.W. 1 for lodging the said report.
The behaviour and conduct of the appellant, judged by normal standards, is not suggestive of his involvement in such heinous crime, unless he was an experienced criminal (of which there is no suggestion) with extraordinary balance of mind and a disciplined control over his senses and faculties.
In the absence of any direct evidence this consideration cannot be completely ruled out as irrelevant when weighing the circumstantial evidence in a case like the present.
This takes us to the recovery of the alleged stolen articles from the appellant and their identification.
The main evidence 923 of recovery consists of the statements of Head Constable Ahibaran Singh (P.W. 5) and of Nathu (P.W. 10) and the recovery memo exhibit Ka 1 dated June 1, 1964.
P.W. 5 has.
deposed in his examination in chief that he did not know the appellant.
According to him, an approver had informed him at about 7 p.m. on June 1, that the appellant would be coming to his house that evening to meet his children.
At about 7.30 p.m.,: P.W. 5 along with Bankey, Nathu, Dilasa and two constables sat near Bankey 's house waiting for the appellant.
It was the approver who pointed out the appellant, whereupon, on being.
interrogated by the witness, the appellant tried to run away.
He was, however, apprehended.
In the course of this process the appellant received some injuries.
Now, the person described as the approver has not been produced as a witness and indeed even his identity has not been disclosed.
It is noteworthy that there is no mention of any approver anywhere else on the record.
What is still more intriguing is that even though Nathu was not previously known to the witness, within half an hour of the information about the appellant 's expected visit to his house P.W. 5 managed to collect Nathu and two other persons for arresting him.
The statement made by P.W. 5 in this connection makes interesting reading.
He said: "I received information through an approver at about 7 P.M. that he shall come home to meet his children from the jungle of Imadpur by night.
At this I sat near the house of Bankey by the side of the passage, alongwith Bankey, Nathu, Dilasa and two constables.
Matru, accused present in court came from the side of Imadpur at about 7.30 O 'clock.
The approver pointed him out.
On being interrogated by me, he took to his heels.
I caught him after surrounding and causing slight injuries to him, When I duly searched his person in presence of the witnesses, the case exhibit 3, was recovered from the right plant of the dhoti which he was Wearing.
On opening it, the spectacles, exhibit 2 and ring exhibit I were found in it.
I prepared their memo, exhibit Ka 1 correctly at that spot immediately and obtained the signatures and thumb impressions of the witnesses over it.
I sealed the, articles there after sewing them in cloth.
Before the arrest of Matru, I and the witnesses had searched each other 's persons.
" In cross examination it was elicited from him: "The approver had not told me that he was carrying articles also with him.
I took the witnesses for 924 help.
I did not recognise him also.
Imadpur might be about half a mile from the place where I arrested him.
I did not make people, sit on any other way.
I sat on that very way.
I took Nathu with me while he was coming out of a temple in Mauza Jatpura.
I took Bankey from Bazar Kalan and Dilasa from Mauza Jatpura.
I had not told the witnesses that there was possibility of article s being recovered from him.
I did not know Nathu from before.
I might have seen him.
I did not know that his name was Nathu.
Matru was at a distance of about ten paces towards the South of me when I saw him for the first time.
He was coming from the western side.
" Now, considering the fact that it was only at about 7 p.m. that the approver had informed P.W. 5 that the appellant was coming to 'his house and at 7.30 p.m. the arrest was actually made, it seems to be somewhat surprising that he should have within that short time collected Nathu, whom he did not know before, Bankey and Dilasa from various places and come to the spot in time for ,effecting the appellant 's arrest and search.
Bankey and Dilasa have also not been produced as witnesses.
Nathu, who has appeared as P.W. 10, has stated in his examination in chief about the arrest and search of the appellant in the following words: "On the fourth day of murder, i.e., after a gap of two days at about 7 p.m. the Head constable took me, Bankey and others with him.
One person was keeping his face covered.
He asked me to accompany him saying that he had to arrest a man.
He had taken Dilasa as well.
We sat in moballa Tikuriya near the house of Bankey.
We searched the persons of the cons tables and Head Constable.
We searched the persons of us all.
A little later, Matru accused, present in court came from the western side.
The person who was with us pointed out that he was Matru.
Matru started running away.
At this the Head Constable and the constables caught hold of him.
They gave him one or two danda blows while trying to catch him.
When his person was searched, a case for keeping spectacles, containing a pair of spectacles and a gold ring, was recovered from the right phant of Matru accused.
All these things were sewn in cloth and sealed on the spot.
Memo was prepared there on the spot.
It was read ,out.
My thumb impression was also obtained.
(exhibit Ka 1 read over) Yes.
These very contents were read.
,out (Shown exhibit 1 3 says) Now, I shall not be able to 925 identify the articles as to whether they are the same or some other.
It happened long ago.
" P.W. 16, Jamuna Prasad, retired police constable is another witness who claims to have been present at the time when Matru was arrested.
He was at that time posted as a constable at P. section Shamsabad.
In examination in chief he said nothing about the appellant 's arrest or the recovery of the articles) from him.
It was only in cross examination that he & posed that he was with P.W. 5 at the time of the appellant 's arrest and after arresting him the party returned to the police station at about 8 or 8.30 p.m.
His version is: "Diwanji (presumably referring to P.W. 5) had a talk with one person in my presence.
After that he asked me to go along with him.
So I accompanied him.
We met Bankey witness in Kalan Bazar.
I cannot tell whether Bankey has got some shop or not or if he has got it, where is it ? We met Nathu near the Maria.
After arresting Matroo, we returned to the Police Station at about 8 or 8.30 O 'clock in the evening." He has, however, given no details of the articles recovered nor about the appellant 's search.
The testimony of these witnesses is far from impressive and the story of recovery is difficult to accept on its face value.
The memo of recovery is exhibit Ka 1.
It purports to have been prepared at 7.30 p.m. on June 1, 1964.
According to it on Matru 's search, a spectacle case containing "a spectacle and a gold ring as per description given below corresponding to the case as offence No. 67 under sections 302/380, I.P.C. was recovered from the right side of the phent of his dhoti.
" The description of the articles recovered, according to this memo, is 1.
One spectacle case of black colour, having dark blue colour inside; 2.
One spectacle, having brown frame.
, white glasses, not circular, half frame; 3.
One gold ring, longitudinal deSign, having green enamel with lengthwise, with red and blue flowery design on the enamel.
The ring is somewhat bent.
It is signed by Head Constable, Ahibaran Singh and attested by Bankey, Dilasa and Nathu.
It does not mention the place where the search was effected though the memo is stated to have been prepared in a shop without giving any particulars of the shop.
This memo does not materially add to the oral testimony of recovery.
This is all the evidence of recovery of the articles.
We 926 do not find it safe on this evidence to hold that the articles mentioned in exhibit Ka 1 were recovered from the appellant Possession at the time of his arrest on June 1, 1964 at 7.30 p.m.
Neither P.W. 5, the investigating H. C. nor Nathu, (P.W. 10) can be considered to be witnesses on whom implicit reliance can be placed without proper corroboration from a more disinterested and dependable source.
Having not been impressed by the evidence of recovery, the identification test of the articles can be of little help to the prosecution, though even on that point the prosecution evidence is equally uninspiring.
Identification tests, it may be pointed out, do not constitute substantive evidence.
Such tests are primarily meant for the purpose of helping the investigating agency with an assurance that their progress with the investigation into the offence is proceeding on right lines.
Now, although the articles are stated to have been recovered on June 1, the test identification was held by Shri Jwala Prasad Srivastava, Magistrate, on October 23, 1964.
The reason for this delay as suggested is that similar articles had to be procured for mixing up with the articles recovered.
But the manner in which this delayed identification has been held in this case is highly un satisfactory.
Jwala Prasad Srivastava, Magistrate, First Class,, who had conducted the test identification appeared as P.W. 21, in his examination in chief he said: "Even before the dates for identification proceedings were fixed but the identification could not be conducted because similar articles had not been received.
The articles were opened and shown to the contractor once so that correct articles could be brought.
On 13 7 64 he made an application that the articles should be shown to him.
The articles must have been shown to him within some days after that.
The date must have been mentioned there but that order sheet is missing.
Even then I took a precaution that none except the Contractor and the court mohair should see the articles.
Just after showing the articles to the contractor, I got the same sealed in the court room in my presence.
In cross examination he said : "The khol (case) exhibit 3 was old.
Out of the khols which were mixed, one or two were perhaps new.
That too was 'Similar (dissimilar ?) but the dissimilarity was not so much, that I ought to have noted it (shown paper No. 49/147 of S.C. File) Yes, this note is mine. 'The case of the spectacle is old one whereas the mixed cases were new ' (marked exhibit Kha 19).
The counsel for the accused persons moved an application 627 on the same day after the identification proceedings.
I had, read it.
The allegations regarding the ring, were not correct.
So I did not note them in my order.
The order sheet of some particular dates regarding the identification proceedings, were preserved ? The same has been found.
The order sheet of two dates has been found.
Out of them, one bears the signature of my predecessor.
I recognise the same.
(marked exhibit Kha 21).
The other one does not bear the signature of any one.
I do not remember exactly who presented the application exhibit Kha 11.
Perhaps it was moved but the contractor 's man.
That man used to come frequently.
Marginal note on exhibit Ka 11 shown.
That encircled in red pencil and (marked X) I do not recognise the same.
I cannot tell who made this entry and when.
At present I cannot tell on which date the articles were shown.
I did not find any such entry in the record which could tell on which date the articles were shown to the contractor.
Only the word "allowed" is written with the date 13 7 64. . articles before me.
I do not remember his name.
I can only recognise him by face.
It is quite wrong that on 1 9 64 these articles were brought to the court and were shown to the witnesses.
I do not remember orally on which date these articles were taken out from the malkhana.
It is wrong to say that all the articles which were to be mixed, were dissimilar.
Only the cases of the spectacles were somewhat new.
The statement of this witness reveals the unsatisfactory manner ' of dealing with the test identification.
We are unable to place any reliance on these proceedings.
This takes us to the question of motive.
We have already noticed that the altercation between the deceased Omwati and the appellant 's wife does not seem to have been taken seriously by either party.
The proceedings under section 107, Cr. P. C. to which a reference has been made were started by Ram Chandra against the appellant after the occurrence in question and, therefore, they are not relevant on the question of motive for the present offence of murder.
The appellant 's counsel questioned the admissibility of exhibit Ka 4, the letter said to have been written by the deceased to her father, on the ground that it did not fall within the purvi ew of section 32, Indian Evidence Act.
The objection appears prima facie on plain reading of the section to possess L1100 SUP CI/71 929 merit.
But even if this letter were to be held admissible we are not satisfied that the motive which this letter suggests is of strong and impelling nature so as to induce the murder of Omwati and her infant child.
The motive suggested by this letter, coupled with the testimony of P.W. 2 and P.W. 10, may at best give rise only to a suspicion against the appellant; but suspicion however strong cannot take the place of roof.
The appellant 's conduct in absconding was also relied upon.
Now, mere absconding by itself does not necessarily lead to a firm conclusion of guilty mind.
Even an innocent man may feel panicky and try to evade arrest when wrongly suspected of a grave crime; such is the instinct of self Preservation.
The act of absconding is no doubt relevant piece of evidence to be considered along with other evidence but its value would always depend on the circumstances of each case.
Normally the courts are disinclined to attach much importance to the act of absconding, treating it as a very small item in the evidence for sustaining conviction.
It can scarcely be held as a determining link in completing the chain of circumstantial evidence which must admit of no other reasonable hypothesis than that of the guilt of the 'accused.
In the present case the appellant was with Ram Chandra till the F.I.R. was lodged.
If thereafter he felt that he was being wrongly suspected and he tried to keep out of the way we do not think this circumstance can be considered to be necessarily evidence of a guilty mind attempting to evade justice.
It is not inconsistent with his innocence.
One other circumstance which on the facts of this case also deserves notice is the non recovery of the weapon of offence and the fact that no stains of blood were noticed by any one on the appellant 's clothes even though he was with Ram Chandra right upto the loding of the F.I.R. and even accompanied him for that purpose.
The courts below seem to us to have failed to take into consideration all the relevant facts and circumstances of the case.
As proof of the appellant 's guilt depended solely on circumstantial evidence it was incumbent on the courts below to properly consider and scrutinise all the material factors and circumstances for determining whether the chain of circumstantial evidence is so complete as to lead to the only conclusion of the appellant 's guilt.
In our view, the cumulative effect of the circumstantial evidence in this case falls far short of the test required for sustaining conviction.
We are, therefore, constrained to allow this appeal, set aside the appellant 's conviction and acquit him.
V.P.S. Appeal allowed.
| IN-Abs | The appellant and two others were charged with the offences of murder of a woman and her three year old son by brutally stabbing them, and theft of cash and ornaments from the house of the deceased.
The offences were alleged to have been committed between 10 and 11 a.m.
About six months prior to the occurrence there was a quarrel between the deceased and the wife of the appellant who was the next door neighbor during which the deceased received an injury.
The deceased wrote about this incident to her father.
On the day of the occurrence when the husband of the deceased received information of the murder he rushed home from his shop and gave information of the occurrence to the police at about 12.40 p.m. but, as he did not suspect anyone, he merely, mentioned the circumstances in which he had come to know of the murder.
The appellant was with him till the time when the First Information Report was lodged.
Next morning one person informed the husband of the deceased that he had seen the appellant and two unknown persons entering the house of the deceased at about 10 or 10.30 a.m. on the previous day and another person gave the information that about 11.00 a.m. he had seen the appellant and two other persons coming out of his house.
The husband of the deceased passed on the information to the police.
By that time the appellant had disappeared.
Three days later, he was appellant handed.
On search of his person a spectacle case containing a pair of spectacles and a gold ring were recovered from the folds of his dhoti.
The Sessions Judge found the appellant guilty of murder and the High Court confirmed the conviction.
The other two accused were acquitted.
On appeal to this Court, HELD : The cumulative effect of circumstantial evidence in the present case falls short of the test required for sustaining a conviction.
When proof of guilt depended solely on circumstantial evidence, it was incumbent on the courts to properly consider and scruitinise all the material factors and circumstances for determining whether the chain of circumstantial evidence is so complete as to lead to the only conclusion of guilt.
[928 F H] (1) Normally this Court does not go into evidence and appraise it for itself in criminal appeals under article 136 of the Constitution, because, the Article does not confer a right of appeal.
It merely clothes this Court with discretionary Power to scrutinise and go into the evidence in special circumstances in order to satisfy itself that injustice has not been done.
In the present case the exceptional features were that it was a case of cir cumstantial evidence, the identification of the stolen articles was unsatisfactory, and the other two accused who had been charged along with the appellant, had been acquitted.
[919 F G] (2) (a) The husband of the deceased himself did not think that the appellant was inimical towards the deceased and he did not suspect him 915 of complicity in the murder.
The alleged altercation between the deceased and the appellant 's wife did not leave any serious impact on the mind of the husband of the deceased, and the appellant 's admitted presence in the house of the deceased till the lodging of the F.I.R. indicated that relations between them were not hostile or unfriendly.
[921 D F] (b) The letter written by the deceased to her father about the quarrels does not prima facie fall within the purview of section 32, Indian Evidence Act.
But even if this letter were held to be admissible the motive which it Suggested was not of such a strong and impelling nature as to induce the murder of the deceased and her infant child.
[927 H, 928 A B] (3) (a) It is unbelievable that the appellant and his companions entered the house of the deceased for the purpose of committing murder and theft in broad day light when persons who knew him were likely to see him entering the house.
The movements and behavior of the appellant did not show any abnormality.
On the contrary, the behavior and conduct of the appellant, Judged by normal standards, was not suggestive of his involvement in such a heinous crime.
In the absence of direct evidence this consideration could not be ruled out as irrelevant.
[922 A B, D E, G H] (b)The appellant 's conduct in absconding does not necessarily lead to the inference of a guilty mind.
Even an innocent person may feel panicky and try to evade arrest when wrongly suspected of a grave crime.
Normally courts are disinclined to attach much importance to the act of absconding.
of the accused, treating it as a very small item in the evidence for sustaining conviction.
[928 B D] (4) The evidence 'regarding the recovery of the articles from the appellant 's possession at the time of his arrest was not acceptable without proper corroboration from a more disinterested and dependable source.
Also, the ring said to have been recovered was of a common design and easily available.
[926 A C] (5) The identification of the ring was also unsatisfactory.
Identification tests do not constitute substantive evidence.
They are primarily meant for the purpose of helping the investigating agency with an assurance that their progress with the investigation into the offence is proceeding on right lines.
[192O F G, 926 G H] In the present case, although the articles were recovered three days after the occurrence the test identification was held by the Magistrate nearly four months later.
The reason for the delay was suggested that similar articles had to be procured for mixing up with the articles recovered; ,but in fact the delayed identification had been held in a highly unsatisfactory manner, in that the articles mixed up were dissimilar.
[926 C D] (6) The weapon with which the crime was committed was not recovered, and, no stains of blood were noticed by anyone on the, appellants clothes even though he was with the husband of the deceased right up to the lodging of the F.I.R. and even accompanied him for that purpose.
[928 E F]
|
minal Appeal No. 267 of 1968.
Appeal from the judgment and order dated September 26, 1968 of the Bombay High Court in Criminal Appeal No. 244 of 1967.
36 A.S.R. Chari, R. Nagaratnam, Janendra Lal and B. R. Agarwal, for the appellant.
H. R. Khanna and B. D. Sharma, for the respondent.
The Judgment of the Court was delivered by Vaidialingam, J.
This appeal by the first accused, on certi ficate, is directed against the judgment of the Bombay High Court dated September 26, 1968, in Criminal Appeal No. 244 of 1967 confirming his conviction and sentence passed against him by the Presidency Magistrate, Mazgaon, Bombay for offences under section 120B I.P.C. read with section 135 of the Customs Act, 1962 (Act 52 of 1962) (hereinafter to be referred as the Act) and also under section 135 of the in respect of the articles claimed to have been recovered from his possession.
The short point that arises for consideration in this appeal is whether section 24 of the Evidence Act is a bar to the admissibility in evidence of the statement exhibit T given by the appellant to the Customs Officers on a summons issued to him under section 108 of the Act.
The appellant along with six others was charged under the sections mentioned above and after being found guilty was sentenced to undergo one year 's rigorous imprisonment and to pay a fine of Rs. 2,000/ for the charges under section 120B I.P.C. read with section 135 of the Act.
He was also sentenced to undergo one year 's rigorous imprisonment and to pay a fine of Rs. 2,000/ for the charge under section 135 of the Act.
The sentences were directed to run concurrently.
In default of payment of fine, he was also sentenced to undergo further rigorous imprisonment for the period mentioned in the judgment of the Presidency Magistrate.
The case against the appellant was that he and several other persons entered into a conspiracy during the period from June, 1963 to the end of December, 1963 to smuggle wrist watches and other luxury goods such as Nylon Textiles, toilet requisites, plying cards, cigarette lighters, saffron etc.
from Dubai to India through Mechanized sailing vessel and land the said imported and smuggled goods surreptitiously at any coast near Bombay and then to bring the smuggled goods to Bombay by Motor vehicles.
It was further alleged that in pursuance to the said conspiracy such articles were actually smuggled in the month of December, 1963.
The various parts played by the appellant along with the other accused had been given in the evidence of the prosecution witnesses.
P. W. 19, Inspector in the Rummaging Division Town Intelligence in the Bombay Customs, on receipt of information in or about December 21, 1963 about the smuggling of the goods conducted searches in various places and seized several smuggled articles.
37 During the pendency of the trial, the third and the fifth accused died and the second accused who was present for some time later absconded necessitating separation of his trial.
Some other accused could not be traced at all.
Therefore, the trial proceeded against the appellant and accused Nos. 4, 6, and 7.
It is not necessary to refer to the pleas of accused Nos. 4, 6 and 7 as they have been acquitted of all the charges by the Presidency Magistrate.
The appellant had filed a lengthy written statement on October 24, 1966 denying the.
charges levelled against him.
He had stated that he was not in any manner concerned with any conspiracy.
He also denied, that any articles had been recovered by the Customs Officers from the houses mentioned by them and stated that in any event he had nothing to do with any of those articles.
He pleaded that his brother Cama was inimical towards him and that the latter in connivance with the Customs authorities had foisted this criminal case against him making false allegations.
The appellant alleged that he had left Bombay for Ajmer to pay his respects to the Darga on December 21, 1963 and returned to Bombay on January 2, 1964, when he was apprehended by the Customs authorities and kept in detention, in the first instance, till January 7, 1964.
During this period of detention he was conti nuously harassed and interrogated by P. Ws. 5 and 19 and forced to put his signature on January 7, 1964 to a statement already got written and prepared by P. W. 5.
He was threatened that if he did not put his signature on the said statement, his mother and another brother will be prosecuted.
He further alleged that it was represented to him that the statement to which he was being asked to put his signature was intended only to be used against the second accused and no part of it was meant to be used against him.
It may be stated at this stage that the statement recorded from the appellant by P. Ws. 5 and 19, on January 7, 1964 is exhibit T.
The statement referes to various matters concerning his relationship with the other accused as well as his connection with several articles which had been seized and which were the subject of the charges.
We do not think it necessary to refer to exhibit T in any great detail nor to the various seizures of articles made by the Customs authorities.
It is enough to state that the conviction of the appellant has been substantially, based on the confessional statement exhibit T after finding independent corroboration furnished by other evidence on record in respect of the statements contained in exhibit T. Objections were taken to the admissibility in evidence of exhibit
T. on the ground that it is hit by article 20(3) and sections 24 and 25 of the Evidence Act.
All these objections were overruled both by the Presidency Magistrate as well as the High Court.
The findings of the Presidency Magistrate and accepted by the High Court are 38 that exhibit T is a voluntary statement and it was a true disclosure made by the appellant.
The allegation of the appellant that he was forced to Put his signature to exhibit T which had already been prepared by P. Ws. 5 and 19 and that he was induced to put his signature on the representation that it will be used only against.
the second accused and not against the appellant, was rejected.
The further findings are that exhibit T was a voluntary statement made by the appellant and that his plea that he was kept under illegal, detention from January 2, 1964 to January 7, 1964 was false.
It has also been found that exhibit T is not hit either by article 20(3) or by sections 24 and 25 of the Evidence Act.
The only contention that has been raised before us by Mr.
A.S. R. Chari, learned counsel for the appellant, is, that in view of section 24 of the Evidence Act, exhibit T, the statement of the appellant recorded by the Customs authorities under the Act, is not admissible in evidence at the trial for the offences in respect of which the appellant was charged and tried.
His further contention is that as the conviction has been based substantially on the state ments contained in exhibit T, the conviction is illegal.
The other contentions based on article 20(3) and section 25 of the Evidence Act which were taken in the High Court have not been taken before us.
In fact those contentions are no longer available to the appellant in view of the decisions of this Court.
According to Mr. Chari when the statement exhibit T was recorded by the Customs officials, the appellant was in the position of an accused.
It is in evidence that P. W. 5, who recorded the statement warned the appellant that he was bound to state the truth as the officer was conducting a judicial proceeding to which the provisions of sections 193 and 228 1.
P. C. apply.
This, according to the learned counsel, amounts to a threat and as the statement exhibit T has been procured on the basis of such a threat, it is inadmissible in evidence.
On the other hand, Mr. H. R. Khanna, learned counsel for the State has referred us to the findings recorded by the Presidency Magistrate and accepted by the High Court regarding voluntary nature of exhibit T.
The counsel also pointed out that the fact that P. W. 5, who recorded the statement exhibit T from the appellant, informed him that he was bound to speak the truth as it was a# judicial proceeding to which section 1931.
P. C. applies, does not amount to any threat in law so as to attract section 24 of the Evidence Act.
We will now reter to the circumstances under which exhibit T was recorded as found by both the Courts.
Consequent on in formation received by the Customs authorities, several raids were conducted from December 21, 1963.
The appellant went to the Customs House at about 8 A.M. on January 7, 1964.
By about 39 8.30 A.M. summons under section 108 of the Act was served on him.
From 11.30 A.M. onwards to about 8.30 P.M. the process of recording of the statement exhibit T. from the appellant continued excepting for a short break of about 21 hours for lunch, tea and other requirements.
The appellant was arrested immediately after his statement exhibit T was completed.
The seizures of the entire contraband goods were completed by about December 25, 1963.
Though the attention of the appellant was drawn to sub section 4 of section 108 of the Act, he was not informed or warned that his statement was likely to be used in the event of any prosecution against him for the said offence.
Undoubtedly exhibit T contained various incriminating facts regarding the complicity of the appellant with the offences alleged against him.
The Inspector of Customs, P. W. 5, who recorded the statement exhibit T and P. W. 19, have both admitted that they questioned the appellant till the statement exhibit T was finally completed at 8.30 P.M. on January 7, 1964.
Both of them have also asserted that they had not given any threat or ,offered any inducement to the appellant before the statement exhibit T was made.
P. W. 5 has deposed that he drew the attention of the appellant to the last paragraph of the summons issued under section 108 of the Act.
In fact in exhibit T the appellant states that he had received summons No. 3 of 1964 dated January 7, 1964 issued to him under section 108 of the Act.
He has further stated that he had read the summons and that he had further understood that giving false evidence is an offence punishable under section 193 of the Indian Penal Code.
P. W. 5 has further deposed that he had explained to the appellant the provisions of section 1931.
P. C. and that the statement was being recorded as if he was in court and that the appellant was bound to speak the truth and that if he made a false statement he would be prosecuted.
Based upon these answers of P. W. 5, Mr. Chari, urged that it is clear that P. W. 5 has administered a threat to the appellant and it was in consequence of such a threat that the appellant gave the statement exhibit T and thereby has placed himself in a grave jeopardy of action being taken against him under the Act.
Before we refer to section 24 of the Evidence Act, it is desirable to advert to the relevant provisions of the .
Sections 107 and 108 are as follows : "section 107 Power to examine persons Any officer of customs empowered in this behalf by general or special order of the Collector of Customs may, during the course of any enquiry in connection with the smuggling of any goods, (a) require any person to produce or deliver any document or thing relevant to the enquiry; 40 "(b) examine any person acquainted with the facts and circumstances of the case.
section 108.
Power to summon persons to give evidence and produce documents (1) Any gazetted officer of customs shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making in connection with the smuggling of any goods.
(2) A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned.
(3) All persons so summoned shall be bound to attend either in person or by an authorized agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and pro duce such documents and other things as may be required Provided that the exemption under section 132 of the Code of Civil Procedure, 1908, shall be applicable to any requisition for attendance under this section.
(4) Every such enquiry a,, aforesaid shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code.
" Section 122 of the Act deals with confiscation of goods and levy of penalty.
Section 124 deals with the procedure to be adopted before ordering the confiscation of any goods or imposing any penalty on any person.
Section 135 deals with prosecution before a criminal court in the circumstances mentioned in cls, (a) and (b) and that prosecution is without prejudice to any action taken under the Act.
This Court had to consider in Romesh Chandra Mehta vs State of West Bengal(1) whether an officer of customs under the was a police officer and whether the statements made to him were hit by article 20(3) of the Constitution and inadmissible in evidence under section 25 of the Evidence Act.
A further question also arose whether an officer of customs acting, (1) 41 under the Act is in any event a police officer within the meaning ,of section 25 of the Evidence Act and hence the confessional statements made to him were inadmissible in evidence.
After a consideration of the scheme of the , this Court held that a Customs Officer does not exercise, when inquiring into, a .suspected infringement of the , powers of investigation which a police officer may in investigating the commission of an offence and that he is invested with the power to enquire into infringements of the Act primarily for the purpose of adjudicating about forfeiture and penalty.
Further it was held that the said officer has no power to investigate an offence triable by a Magistrate and that he can only make a complaint in writing before a competent Magistrate and hence section 25 of the Evidence .Act has no application.
It was further held that the steps taken by the Customs Officer are for the purpose of holding an enquiry under the and for adjudging confiscation of ,goods dutiable or prohibited and imposing penalties and that the Customs Officer does not at that stage accuse the person suspected of infringing the provisions of the with the corn.mission of any offence.
Finally, it was held that a person examined under section 17 1 A of the does not stand in the character of an accused person inasmuch as there is no formal accusation made against him by any person at that time and hence any statement made by such a person to a, Customs Officer is not hit by article 20(3) of the Constitution.
The scheme of the Act was also considered in the said deci sion and some points of difference between the Act and the were noted.
But notwithstanding the slight difference in the powers exercised by a, Customs Officer under the Act, it was held that the Customs Officer under the Act is not a police officer within the meaning of section 25 of the Evidence Act.
It was emphasized that the proceedings taken by him are for the purpose of holding an enquiry into suspected cases of smugly and that the Customs Officer is for all purposes an officer of the Revenue.
It was laid down that as the Customs Officer under the Act is not a police officer, the statement made before him by a person, who is arrested or against whom an enquiry is made, are not covered by section 25 of the Evidence Act.
It was further laid down that until a complaint is filed before a Magistrate, the person against whom an enquiry is commenced under the does not stand in the character of a person accused of an offence under section 135.
The discussion on this aspect is wound up by this Court as follows : ". .
The Customs Officer even under the Act of 1962 continues to remain a revenue officer primarily concerned with the detection of smuggling and enforcement and levy of proper duties and prevention of entry 42 of proper duties and prevention of entry into India of dutiable goods without payment of duty and of goods of which the entry is prohibited.
He does not on that account become either a police officer, nor does the information conveyed by him, when the person guilty of an infraction of the law is arrested, amount to making of an accusation of an offence against the person so guilty of infraction.
Even under the Act of 1962 a formal accusation can only be deemed to be made when a complaint is made before a Magistrate competent to try the person guilty of the infraction under sections 132, 133, 134 and 135 of the Act.
Any statement made under sections 107 and 108 of the by a person against whom an enquiry is made by a Customs Officer is not a statement made by a person accused of an offence.
" From this decision it follows that a Customs Officer conduc ting an enquiry under sections 107 or 108 of the Act is not a police officer and the person against whom the inquiry is made is not an accused and the statement made by such a person in that inquiry "is not a statement made by a person accused of an offence".
The same position has been reiterated in the latter case of Illias vs Collector of Customs, Madras.(1) Now coming to section 24 of the Evidence Act, it runs as follows "Section 24 : Confession caused by inducement, threat, or promise, when irrelevant in criminal proceeding : A confession made by an accused person is irrelevant in a criminal proceeding, if the making of the confession appears to the Court to have been caused by any inducement, threat or promise having reference to, the charge against the accused person, proceeding from a person in authority and sufficient, in the opinion of the Court, to give the accused person grounds which would appear to him reasonable for supposing that by making it he would gain any advantage or avoid any evil of a temporal nature in reference to the proceedings against him.
" To attract the provisions of this section, the following facts have to be established : (a) that the confession has been made by an accused, person to a person in authority; (b) that it must appear to the Court that the confession.
has been obtained by reason of any inducement. threat or promise proceeding from a person in authority; (1) (1969] 2 section C. R. 613.
43 (c) that the inducement, threat or promise must have reference to the charge against the accused person; and (d) the inducement, threat or promise, must, in the opinion of the Court, be such that the accused in making the confession believed or supposed that by making it he would pin any advantage or avoid any evil of temporal nature in reference to the proceedings against him.
We have already pointed out that when the appellant ap peared, before the Customs Officers on the morning of January 7, 1964, he was served with a summons under section 108 of the Act and that it was after the receipt of the summons, the appellant gave the statement exhibit T. From the decision in Ramesh Chandra Mehta vs State of West Bengal(1), it is clear that when an inquiry is being conducted under section 108 of the Act, and a statement is given by a person against whom the inquiry is being held it "is not a statement made by a) person accused of an offence and the person who gives the statement does not stand in the character of an accused person." Therefore the first essential fact to be established, to attract section 24, referred to above, is lacking in this case, as the appellant was not an "accused person".
We have already stated that it has been found by both the Courts that the statement exhibit T is a voluntary statement made by the appellant.
Mr. Chari attempted to bring the statement exhibit T under section 24 of the Evidence Act because of P. W. 5 having informed the appellant that the statement was being recorded as if he was a court and that the appellant was bound to speak the truth and that if any false statement is made, he would be prosecuted.
P. W. 5 has also stated that he explained section 193 1.
P. C. to the appellant.
According to the learned counsel this conduct of P. W. 5 clearly amounts to a threat being administered to the appellant.
It is not in dispute that P. W. 5, who recorded the confes sion, is a person in authority within the meaning of section 24 of the Evidence Act.
But the question is whether, when P. W. 5 drew the attention of the appellant to the fact that the inquiry is a judicial proceeding to which section 1931.
P. C. applies and that the appellant must speak the truth, it can be considered to be a threat. . proceeding from a person in authority" under the section.
We are not inclined to accept the contention of Mr. Chari that in the circumstances mentioned above any threat has proceeded from a person in authority to the appellant, in consequence (1) 44 of which the statement exhibit T was given.
Section 108 of the Act gives power to a Customs Officer of a gazetted rank to summon any person to give evidence in any inquiry in connection with the smuggling of any goods.
The inquiry made under this section is by virtue of sub section (4) deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code.
A person summoned under section 108 of the Act is bound to appear and state the truth when giving evidence.
If he does not answer he would render himself liable to be prosecuted under section 228 1.
If, on the other hand, he answers and gives false evidence, he would be liable to be prosecuted under section 193 I. P. C. for giving false evidence in a judicial proceeding.
In short a person summoned under section 108 of the Act is told by the statute itself that under threat of criminal prosecution he is bound to speak what he knows and state it truthfully.
But it must be noted that a compulsion to speak the truth, even though it may amount to a threat, emanates in this case not from the officer who recorded the statement, but from the provisions of the statute itself.
What is necessary to constitute a threat under section 24 of the Evidence Act is that it must emanate from the person in authority.
In the case before us there was no such threat emanating from P. W. 5, who recorded the statement of P. W. 19, who was guiding the proceedings.
On the contrary the officers recording, the statement were only doing their duty in bringing to the notice of the appellant the provisions of the statute.
Even if P. W. 5 had not drawn the attention of the appellant to the fact that the inquiry conducted by him is deemed to be a judicial proceeding, to which section 193 I. P. C. applies, the appellant was bound to speak the truth when summoned under section 108 of the Act with the added risk of being prosecuted, if he gave false evidence.
Further, it is to be seen that it is not every threat, inducement or promise even emanating from the person in authority that is hit by section 24 of the Evidence Act.
In order to attract the bar, it has to be such an inducement, threat or promise, which should lead the accused to suppose that "by making it he would gain any advantage or avoid any evil of temporal nature in reference to the proceedings against him".
In the case before us what is it that the appellant has been told ? He has been told that the law requires him to tell the truth and if be does not tell the truth, lie may be prosecuted under section 193 I. P. C. for giving false evidence.
we have held, does not constitute a threat under section 24 of the Evidence Act.
The plea of the appellant was that he was compelled to make the statement under the threat that otherwise his mother and another brother will be prosecuted.
He has further stated that he was induced to make the statement on the belief that it will be used only against the second accused and not against him.
These pleas of the appellant have been disbelieved by both the 45 trial court and the High Court.
, Therefore, it follows that even assuming that there was an inducement or threat, the appellant had no basis for supposing that by making the statement he would gain any advantage or avoid any evil with reference to the proceedings in respect of which an inquiry was being conducted by the Customs Officers.
Therefore, even on this ground also section 24 of the, Evidence Act has no application.
For all the above resons we hold that by the mere fact that the Customs Officer P. W. 5, who recorded the statement exhibit T, explained the provisions of section 193 1.
P. C. and informed the appellant that he was bound to tell the truth and that he is liable to be prosecuted if he made a false statement, there was no threat given to the appellant.
We accordingly hold that section 24 of the Evidence Act has no application and the statement exhibit T was properly admitted in evidence in the trial of the appellant.
Both the Courts have found that there is also independent evidence to corroborate the truth of the statements in exhibit T.
The question of admissibility of exhibit T in evidence, having been decided against the appellant, no other point has been argued before us.
In the result the appeal fails and is dismissed.
K.B.N. Appeal dismissed.
| IN-Abs | The appellant was convicted for offences under the .
He challenged the legality of his conviction on the ground that his statement to the customs authorities made on a summons issued under s, 108 of the Act and on which the conviction was substantially based was not admissible in evidence in view of section 24 of the Evidence Act.
It was contended that the statement was procured by threat in as much as the officer who recorded the statement warned the appellant that he was bound to state the truth as the officer was conducting a judicial proceeding to which sections 193 and 228 of the Penal Code applied.
Dismissing the appeal, HELD,: (i) A statement by a person against whom an inquiry is being held under section 108 is not a statement made by a person accused of an ,offence.
Therefore, the essential ingredient to attract section 24, namely that the confession must be made by an accused person, is lacking in this case.[143 D] Romesh Chandra Mehta vs State of West Bengal, and Illias vs Collector of Customs, Madras ; , relied on.
(ii) A compulsion to speak the truth emanates in this case riot from ,the officers who recorded the statement but from the provisions of the statute itself.
What is necessary to constitute a threat under section 24 of the Evidence Act is that it must emanate I e from ' the person in authority.
The officers recording the statement were only doing their duty in bringing to the notice of the appellant the provisions of the statute.
[44 C E] (iii) To be told that the law required him to tell the truth and if he did not tell the truth he was liable to be prosecuted under section 193 Penal ,Code, for giving false evidence did not constitute a threat under section 24 of the Evidence Act.
(iv) Even assuming that there was an inducement or threat, the appellant bad no basis for supposing that by making the statement he would gain any advantage or avoid any evil with reference to the proceedings in respect of which an inquiry was being conducted by the customs officers.
Therefore, even on this ground section 24 of the Evidence Act has no application.
[44 G H]
|
Appeal No. 217 of 1953.
Appeal from the Judgment and Order dated the.
16th day of January, 1950, of the Income tax Appellate 120 942 Tribunal, Calcutta in Income tax Appeal No. 4658 of 1948 49 and E.P.T.A. No. 1137 of 1948 49.
N. C. Chatterjee and Veda Vyas, (section K. Kapoor and Ganpat Rai, with them) for the appellant.
C. K. Daphtary, Solicitor General for India (G. N. Joshi, with him) for the respondent.
October 29.
The Judgment of the Court was delivered by MEHR CHAND MAHAJAN C.J.
The appellant is a public limited joint stock company incorporated under the Indian Companies Act, 1915, with its registered office at Calcutta.
It carries on the business of manufacture and sale of cotton yarn and piece goods.
On the 28th of July, 1944, the Income tax Officer issued a notice to it under section 22(2) of the Indian Income tax Act calling upon it to file the return of its income for the assessment year 1944 45 (account year being 1943 44).
Before the expiry of the due date for filing the return the account books of the appellant company together with the documents relevant to the accounts, were taken into custody by the Sub Divisional Officer, Narayanganj and it is alleged that these remained in the custody of the court of the Sub Divisional Magistrate till January, 1950, when they were handed back to the appellant.
In this situation the assessee pleaded for extension of time to furnish the return.
This request was refused, and a show cause notice was issued under section 28(3) of the Act calling upon the appellant company why penalty should not be imposed upon it for its failure to file the return.
An officer of the company appeared before the Income tax Officer and explained the cause for this default.
In order to, ascertain whether the explanation furnished by the assessee was genuine, the Income tax Officer made inquiries from the court concerned about this matter.
He also made a request to the court to allow him, access to the books of account.
The court, however, neither acceded to the demand that books of account be made available to the assesse nor did it permit the Income tax Officer to have access to them.
The 943 Income tax Officer having thus satisfied himself about ,the genuineness of the assessee 's explanation, condoned the default in filing the return and dropped the proceedings taken against the company under section 28(3) of the Act.
It seems that no further action in the matter was taken by the department till the year 1947.
During that year the company requested the department toreador the proceedings.
The proceedings having been revived the appellant company furnished the return of its income for the assessment year 1944 45 on the 16th March, 1948.
This return, however, was not a complete document as without the assistance of the books the profits could not be computed according to the ,provisions of law.
On receipt of the return the Income tax Officer issued a notice under section 23(2) of the Act calling upon the company to supply further information on a number of points and to prepare certain statements indicated in the notice.
This requisition had to be complied with by the 19th March, 1948.
On that date the Chief Accounts Officer of the company appeared before the Income tax Officer and asked for further time till the middle of the following week for furnishing the requisite particulars.
This request was, however, refused and assessment was completed on the 20th March, 1948.
The excess profits assessment was also made final on the 23rd March, 1948.
The relevant part of the assessment order is in these terms: "From the point of view of profits, 1943 was a very good year, if not the best, for all cotton mills.
Expenses on cotton and fuel shows that production was undoubtedly higher whereas it is found that the gross profit disclosed by this company is low.
I conclude that full amount of sales have not been accounted for.
It is expected that actually the rate of gross profit should have been higher this year.
In view of the higher costs of establishment, I take it that the rate of about 40%, i.e., near about the rate disclosed in 1942 accounts, should have been maintained.
I add back the Rs. 36 lakhs for unaccounted sales".
It may be mentioned that in the return the company had disclosed a gross :profit of 28 per cent,.
on 944 sales amounting to Rs. 1,78,96,122.
The total amount of sales in the year 1942 was of the amount of Rs. 1, 15,69,582, disclosing a gross profit of 41 percent.
The establishment expenses, however, during that year were in the sum of Rs. 15,94,101, while during the accounting year relevant to the year under assessment these had gone up to Rs. 34,74,735 on account of labour troubles.
A number of other causes were mentioned by the assessee for the low rate of profit during the relevant period; but the Income tax Officer took no notice of them.
On appeal this order was upheld by the Appellate Assistant Commissioner.
The assessee then appealed to the Tribunal against these decisions.
What happened before the Tribunal may well be stated in terms of the Tribunal 's order itself. 'this is what is mentioned in the judgment of the Tribunal: "At the end of the hearing of this appeal on 25th of November, 1949, the Income tax Appellate Tribunal requested the departmental representative to produce for the examination of the Income tax Appellate Tribunal the gross profit rates shown or assessed in the cases of other similar cotton mills.
The departmental representative wanted 3/4 days ' time to collect information on this point.
On this the appellant also wanted to be allowed to produce information regarding the gross profit rates shown or assessed by other similar cotton mills, and he was also allowed to produce information on the point.
On or about the 29th November the counsel for the appellant requested that he should be allowed time till Saturday the 3rd of December to file the above information and time for this purpose was allowed to him.
On the 3rd December Mr. Banerjee the appellant 's counsel saw the Account.
ant Member in his chamber and wanted to produce written arguments and a trunk full of books and papers in support of his case.
Mr. Banerjee was told that the arguments in the case had finished on the 25th and he was allowed time only to supply to the court the gross profit rates shown or assessed in the cases of other similar cotton mills.
He was told that it was pot fair to the other side to take notice of any 945 additional evidence or record at that stage and his trunk of books and papers was returned to him.
During the discussion of Mr. Banerjee with the Accountant Member Mr. Banerjee produced a report ' showing that the gross profit rates of some mills in Bengal on the average amounted to 23 per cent.
In the statement showing 23 per cent.
gross profit rates there was another item called 'Pool profit ' which was bigger than the gross profits rate.
Mr. Banerjee was asked to explain what this word 'Pool profit ' meant but he had no information on this point. .
For want of this information we are afraid it is not possible for us to attach a great deal of importance to the gross profit percentage of 23 per cent.
mentioned in the books produced by Mr. Banerjee.
Mr. Banerjee during this discussion further produced a book showing the wastage expected.
In that book certain quality of cotton had been mentioned and it was said that wastage of 34 per cent.
was normal.
In the case of the assessee he has shown a wastage of 9 per cent.
in 1942, 26 per cent.
in 1943 and 19 per cent. ' in 1944.
The figure of 34 per cent.
shown in that book would therefore seem to refer to a particular quality of cotton very much inferior to the cotton generally used by the appellant.
The department 's main case on the question of wastage is based on the appellant 's own books according to which his wastage in the year under review amounted to three times the wastage in the year previous.
In the light of all this information it appears to us that the Income tax Officer was justified in making a substantial addition to the gross profit shown by the appellant.
Coming to the question of what the amount of addition should be the departmental representative has on our request filed a number of cases of other cotton mills which show a gross profit rates varying between 49 per cent.
and 22 per cent.
and in one case even 13 per cent. has been shown. .
In the face of all the above facts it appears to us that the Income tax Officer was justified in coming to the conclusion that all sales had not been brought into 946 the books.
We have, however, considered all facts relevant to this case and are of the opinion that the addition to the sales should be reduced from Rs. 36 lakhs made by the Income tax Officer to Rs. 16 lakhs Which would reduce the gross profit rate to about 35 per cent.
The sum and substance of these decisions is that the Income tax Officer estimated the gross profit on sales at 40 per cent.
by a pure guess, while the Tribunal reduced it to 35 per cent.
by applying some other rule of thumb.
It is not clear from either of these judgments on what material these estimates were based.
Dissatisfied with the decision of the Tribunal, the assessee wanted the Tribunal to state a case and refer to the High Court for its decision ten questions of law.
It seems that Dr. Pal who represented the assessee before the Tribunal had only argued one question namely, whether the estimate of profit made by the Income tax Officer was excessive or whether it was justified on the material on the record.
The other points raised in the memorandum of appeal regarding the validity or the correctness of the procedure of assess ment had been abandoned.
The questions which were submitted to the Tribunal.
and which it was asked to refer to the High Court concerned all the points including those abandoned before the Tribunal.
The Tribunal came to the conclusion that no question of law arose on its order, and it, therefore, dismissed the application made by the assessee.
It appears that the assessee then applied to the High Court under section 66(2) of the Act for the issue of a mandamus to the Tribunal directing it to refer to the High Court the very same questions of law which it had refused to refer.
This application was summarily rejected.
The High Court also refused an application for leave to appeal to this Court.
Having exhausted all the remedies that were available to him under the Income tax Act, the assessee then made an application to this Court for special leave against the order of the Income tax Tribunal under the provisions of article 136 of the Constitution.
Leave was allowed and this appeal is now before us by virtue of that leave.
947 Mr. Chatterjee, the learned counsel for the appellant, contended inter alia that the assessment order made under section 23(3) of the Income tax Act had been made in violation of the principles of natural justice, inasmuch as it was not based on any material whatsoever and that the evidence tendered by the appellant had been improperly rejected.
It was further said that the Tribunal acted without jurisdiction in relying on the data supplied by the Income tax department behind the back of the appellant company, and without giving it an opportunity to rebut or explain the same.
Reliance was placed on the decision of a Full Bench of the Lahore High Court in Seth Gurmukh Singh vs Commissioner of Income tax, Punjab(1), for the proposition that while proceeding under sub section (3) of section 23, the Income tax Officer, though not bound to rely on evidence produced by the assessee as he considers to be false, yet if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose to the assessee the material on which he is going to found that estimate; and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and that he should further give him ample opportunity to meet it.
It was said that the Tribunal failed to disclose to the assessee the material that the departmental representative had given to it regarding the rates of gross profit of cotton mills varying between 49 per cent.
and 13 per cent., and that if that disclosure had been made, the assessee would have satisfied the Tribunal that the mills which had shown gross profits at rates mentioned above had no similarity of any kind with the appellant company 's mill or to other mills in Bengal and therefore those rates had no relevancy in the enquiry as to gross profits of the assessee company 's mill.
It was also argued that both the Income tax Officer and the Tribunal acted arbitrarily and on suspicion in estimating the rate of (1) 948 gross profit.
In conclusion the learned counsel urged that now that the books of account of the company were available, it was only just and fair that the 'Income tax Officer and the Tribunal should examine these book,% in order to determine the correctness of the return furnished by the assessee.
The learned Solicitor General who appeared for the Commissioner of Income tax, West Bengal, combated the contentions raised by 'Mr. Chatterjee on a two fold ground: (1) In the first instance, without questioning the jurisdiction of this Court to grant special leave against an order of an Income tax Tribunal, he argued that such leave should not be granted when remedies provided by the Income tax Act itself were available for correcting errors of the Tribunal, and had been taken but without success.
It was said that the power conferred on this Court by article 136 of the Constitution being an extraordinary power, its exercise should be limited to cases of patent and glaring errors of procedure, or where there has been a failure of justice because of the violation of the rules of natural justice or like causes but that this discretionary power should not be exercised for the purpose of reviewing findings of fact when the law dealing with the subject has declared those findings as final and conclusive.
(2) That the finding given by the Income tax Officer and affirmed by the Appellate Assistant Commissioner and the Tribunal was based on material and it could not be said that these bodies had acted arbitrarily in this matter.
It was contended that the Income tax Officer has very wide powers and is not fettered by technical rules of evidence and pleadings, and that the only restriction on his judgment is that he must act honestly on the material however inadequate before him, but not capriciously or arbitrarily.
It was suggested that owing to the disparity of the rate of wastage the Income tax Officer was entitled to reach the conclusion that the assessee had not disclosed the full sales made by him during the accounting year, and that on that basis he was entitled on his own information to make an estimate of the rate of gross profit.
949 As regards the first contention of the learned Solicitor General, we are unable to accede to it.
It is not possible to define with any precision the limitations on the exercise of the discretionary jurisdiction vested in this Court by the constitutional provision made in article 136.
The limitations, whatever they be, are implicit in the nature and character of the power itself.
It being an exceptional and overriding power, naturally it has to be exercised sparingly and with caution and only in special and extraordinary situations.
Beyond that it is not possible to fetter the exercise of this power by any set formula or rule.
All that can be said is that the Constitution having trusted the wisdom and good sense of the Judges of this Court in this matter, that itself is a sufficient safeguard and guarantee that the power will only be used to advance the cause of justice, and that its exercise will be governed by well established principles which govern the exercise of overriding constitutional powers.
It is, however, plain that when the Court reaches the conclusion that a person has been dealt with arbitrarily or that a Court or tribunal within the territory of India has not given a fair deal to a litigant, then no technical hurdles of any kind like the finality of finding of facts or otherwise can stand in the way of the exercise of this power because the whole intent and purpose of this article is that it is the duty of this Court to see that injustice is not perpetuated or perpetrated by decisions of Courts and tribunals because certain laws have made the decisions of these Courts or tribunals final and conclusive.
What we have said above sufficiently disposes of the first contention raised by the learned Solicitor General.
As regards the second contention, we are in entire agreement with the learned Solicitor General when he says that the Income tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub section (3) of section 23 of the Act, the Income tax Officer is not entitled to 950 make a pure guess and make an assessment without reference to any evidence or any material at all.
There must be something more than bare suspicion to support the assessment under section 23(3).
The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh vs Commissioner of Income tax, Punjab (Supra).
In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions.
Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative.
Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and, lastly, it declined to take all the material that the assessee wanted to produce in support of its case.
The result is that the assessee had not had a fair hearing.
The estimate of the gross rate of profit on sales, both by the Income tax Officer and the Tribunal seems to be based on surmises, suspicions and conjectures.
It is somewhat surprising that the Tribunal took from the representative of the department a statement of gross profit rates of other cotton mills without showing that statement to the assessee and without giving him an opportunity to show that statement had no relevancy whatsoever to the case of the mill in question.
It is not known whether the mills which had disclosed these rates were situate in Bengal or elsewhere, and whether these mills were similarly situated and circumstances.
Not only did the Tribunal not show the information given by the representative of the department to the appellant, but it refused even to look at the trunk load of books and papers which Mr. Banerjee produced before the Accountant Member in his chamber.
No harm would have been done if after notice to the department the trunk had been opened and some time devoted to see what it contained.
The assessment in this case and in the connected appeal,* we are told, was above the figure of Rs. 55 lakhs and it was meet and proper when dealing with a matter of this magnitude not to employ *civil Appeal NO 218 Of 1953, not reported, 951 unnecessary haste and show impatience, particularly when it was known to the department that the books of the assessee were in the custody of, the Sub Divisional Officer, Narayanganj.
We think that both the Income tax Officer and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion.
It is thus a fit case for the exercise of our power under article 136.
In the result we allow this appeal, set aside the order of the Tribunal and remand the case to it with directions that in arriving at its estimate of gross profits and sales it should give full opportunity to the assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in the books of account or elsewhere and it should also disclose to the assessee the material on which the Tribunal is going to found its estimate and then afford him full opportunity to meet the substance of any private inquiries made by the Income tax Officer if it is intended to make the estimate on the foot of those enquiries.
It will also be open to the department to place any evidence or material on the record to support the estimate made by the Income tax Officer or by the Tribunal in its judgment.
The Tribunal if it thinks fit may remit the case to the Income tax Officer for making a fresh assessment after taking such further evidence as is furnished by the assessee or by the department.
The coats; of these proceedings will abide the result.
Case remitted.
| IN-Abs | It is not possible to define with any precision the limitations of the powers conferred on the Supreme Court by article 136 of the Constitution.
This is an overriding and exceptional power and should be exercised sparingly and with caution and only in special and extraordinary situation.
Beyond this no set formula, or rule can stand in the way of or fetter the exercise of the power conferred on the Supreme Court under article 136 of the Constitution.
Sufficient safeguard and guarantee for the exercise of this power lie in the trust reposed by the Constitution in the wisdom and good sense of judges of the Supreme Court.
This power is not hedged in by technical hurdles of any kind when it is called in aid against any arbitrary adjudication or for advancing the cause of justice or for giving a fair deal to a litigant so that in justice may not be perpetrated or perpetuated.
Conclusiveness or finality given to any decision by any domestic law cannot dater the Supreme Court from exercising the power conferred under article 136 of the Constitution.
The powers given to the Income tax Officer under section 23(3) of the Indian Income tax Act, 1922, however wide, do not entitle him to base the assessment on pure guess without reference to any evidence or material.
An assessment under 9.
23(3) of the Act cannot be made only on bare suspcion.
An assessment so made without disclosing to the assessee the information supplied by the departmental representative and without giving any opportunity to the assessee to rebut the information so supplied and declining to take into consideration all materials which the assesses wanted to produce in support of his case constitutes a violation of the fundamental rules of justice and calls for the powers under article 136 of the Constitution.
Seth Gurmukh Singh vs Commissioner of Income tax, Punjab (1944 I.T.R. 393) approved.
|
minal 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.
126 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.
The respondents were, however, acquitted of the charge under Section 406, 1.
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 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, exhibit 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.
127 2.
Only after spending once Rs. 5.50 np.
send your promising children to America or England for Education.
By spending Rs. 5.
50 nP. only once, you can meet your daily necessities.
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, exhibit 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.
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.
128 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.
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 129 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. SCHEDULE section 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.
of India, Founder of full House Talkie Formula Regd.
by Govt.
of India No. 104 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/71 130 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, exhibit 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 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 131 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.
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, vs Emperor In that case (1) A. I. R. 132 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 vs Emperor (1).
The headnote brings out the decision thus : "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 vs 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) (2) A. 1.
R. 1960 All.
(3) A.I.R.1944Mad 410.
| IN-Abs | The respondents organised a money circulation scheme.
For alleged cheating and misrepresentation in connection therewith they were convicted by the Sessions Judge, Bhopal under section 120B and section 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 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 vs Emperor, A.I.R. 1939 Cal.
327 and Hari Das Barat vs Emperor, , approved.
Nadir Barga Zaidi vs 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]
|
Appeal No. 974 of 1968.
Appeal from the judgment and order dated December 22, 1967 and January 3, 1968 of the Calcutta High Court in Civil Rule No. 3369(W) of 1966.
L. M. Singhvi and section P. Nayar, for the appellant.
A. K. Dutta and K. Rajendra Chowdhary, for respondents Nos. 1 to 3.
Santosh Chatterjee and G. section Chatterjee, for respondent No.4 The Judgement of the Court was delivered by Grover, J.
This is an appeal from a judgment of a learned single judge of the Calcutta High Court who granted a certificate under article 132(1) of the Constitution.
It involves primarily the question whether the cession of a territory by India as a result of a treaty with Pakistan would be compulsory acquisition of the property comprised in that territory by the Union of India and would, therefore, attract the provisions of article 31 of our Constitution.
At the outset it may be mentioned with reference to a preli minary objection which has been raised by the respondents that the judgment under appeal was delivered by the learned single Judge in a petition under article 226 of the Constitution and it appears that on an oral prayer made to him he granted a certificate under article 132(1) even though under the Letters Patent of the High Court an appeal lay to a division bench of that court.
This Court has said on an earlier occasion in clear and unequivocal terms that the practice of a single Judge deciding the case and giving a certificate under article 132(1) for appeal to this Court, al though technically correct, was an improper practice.
The right of the parties to file an appeal in the High Court itself against the decision of the single Judge should not be short circuited.
Indeed 246 in R. D. Agarwala & Another etc.
vs Union of India & Ors.(1) the certificate was cancelled.
In Union of India vs J. P. Mitter(2) it was observed that a certificate by a single judge under article 132(1) should be given in very exceptional cases where a direct appeal was necessary.
Even though the present case may be of an exceptional kind we have been deprived of the benefit of the judgment of a larger bench of the High Court on points which are of substantial importance.
Presumably a number of matters which had no bearing on the real questions to be determined and which have been dealt with by the learned single judge would have been either satisfactorily disposed of or would not have been the subject matter of discussion by the court, being irrelevant and unnecessary, if the decision had been given by a larger Bench.
The facts may be shortly stated.
On September 10, 1958, an agreement was entered into between the Government of India and Pakistan called the Indo Pakistan Agreement.
Item No. 3 of the agreement related to Berabari Union No. 12 which was a group of, villages lying within the territory of India.
This territory was to be so divided as to give one half area to Pakistan.
The other half adjacent to India was to be retained by India.
Subsequently a doubt arose whether the implementation of the agreement relating to Berubari Union required Legislative action either by way of an Act of Parliament relatable to article 3 of the Constitution or by way, of a suitable amendment of the Constitution in accordance with the provisions of article 368 or both.
A similar doubt had also arisen in respect of another item of the agreement which related to the exchange of certain enclaves but with which we are not concerned.
The President of India made a reference to this Court under article 143(1), of the Constitution for its advisory opinion.
The opinion was deliverted on March 14, 1960.
(In Re ': The Berubari Union and Exchange of Enclaves Reference Under Article 143 (1) of the Constitution of India(3).
As mentioned in the advisory opinion Berubari Union No. 12 had an area of 8 75 Sq.
Miles and a, population of 10 to 12 thousand residents.
It was situated in the district, of Jalpaiguri.
This Court expressed the view that since the agreement between India and Pakistan a mounted to cession of a part of the territory of India in favour of Pakistan its implementation would naturally involve the alteration of the content of and the consequent amendment of Article and of the relevant part of the First Schedule to the Constitution which could be made only under Article 368.
Pursuant to the opinion delivered by this Court the Parliament enacted (1) C. As.
2634/69 & 63/70 decided on 23 2 70.
(2) ; (3) 247 the Constitution (Ninth Amendment) Act 1960 on December 28, 1960.
In order to implement the provisions of the above Act a physical division of the Berubari Union in accordance with the agreement and demarcation of the portion that was to go to Pakistan was necessary.
Some of the, inhabitants of the Berubari Union filed a petition under Article 226 of the Constitution challenging its proposed partition with the object of transferring its southern part to Pakistan.
The Writ petition was dismissed and an appeal was brought to this Court which was disposed of on August 11, 1965.
(Ram Kishore Sen & Others vs Union of India & Ors.)(1).
It was held that the Ninth Constitution Amendment Act had been passed by the Parliament in the manner indicated in the advisory opinion of this Court.
No merit was found on the other points which were agitated.
The appeal was dismissed.
On June 11, 1965, the respondents filed another petition under Article 226 of the Constitution before the High Court challenging the validity of the proposed demarcation principally on the ground right of citizenship conferred by also of their property without payment of compensation.
D. D. Basu J. called for an affidavit in opposition and after hearing lengthy arguments delivered an elaborate judgment A.I.R. 1967 Cal. 216) directing the issue of rule nisi limited to ground No. 3 of the writ petition.
This ground was: "For that no Act of the State is involved in the transfer of Berubari Union No. 12 to Pakistan and as such your petitioners are entitle to compensation in terms of article 31(2) of the Constitution inasmuch as the operation of transfer involves deprivation of their right to property for which no provision has been made in the Constitution 9th Amendment Act, 1960." According to the allegation in the writ petition respondent Dhanoswar Roy had 2 acres 64 decimals of khas land in the area in question.
It was also claimed that the respondents had their household property, ancestral homes and cultivated lands in the Berubari Union No. 12.
The constitutional question formulated by the learned judge was whether compensation under Article 31(2) of the Constitution was to be provided for the respondents before the demarcation in implementation of the Constitution (Ninth Amendment) Act took place,.
We may mention some of the material conclusions of the learned judge out of the numerous matters dealt with by (1) ; 248 him.
These are: (1) the treaty making power must be exercised subject to the fundamental rights guaranteed by the Constitution.
(2) Once it is established that a treaty making law involves a transfer which attracts article 31(2) it cannot be exempted from the requirements of that Article on the ground that it is a treaty of "cession".
(3) Although under the International Law the private rights of the inhabitants of the ceded territory are not instantly affected they shall have no legal right to assert against the new State under its own municipal law to which such inhabitants shall be subject from the moment the cession is complete.
(4) As a result of cession it would be competent for the Government of Pakistan to deal with the disputed territory as absolute owner in complete disregard of the existing rights of the respondents.
"The rights of the Government of Pakistan under its municipal law would in no way be less than what would have happened if the lands were vested in that Government by a direct Act of the Government of India.
Such vesting the Government of India could arrange for only after acquiring the disputed lands".
(5) The present case will not be covered by clause 2(A) of Article 31 of the Constitution as so far all the cases which have been held to fall within its purview have been those in which there was exercise of the regulatory power of the State.
(6) The cession of the disputed properties sought to be implemented by the impugned demarcation involved compulsory acquisition of those properties by the Union of India within the meaning of article 31(2) and unless competent legislation is enacted to provide for compensation the Union cannot announce the appointed day within the meaning of section 2(A) of the Constitution (Ninth Amendment) Act 1960 and for constructing pillars to demarcate Berubari Union No. 12 for the purpose of effecting the transfer of the specified portion to Pakistan.
According to Dr. Singhvi learned counsel for the appellant the High Court has fallen into serious errors inasmuch as it has proceeded on many assumptions, reasoned on a priori theories and has founded its judgment on certain premises which do not exist either in fact or in law.
Stress has been laid on the true import of "cession".
According to all authorities on International Law "cession" is the transfer of sovereignty over the State territory by the owner State to another State"(1).
Under the International Law two of the essential attributes of sovereignty are the power to ac quire foreign territory as well as the power to cede national territory in favour of foreign State(2) (supra at p. 281).
Hardship is certainly involved in the fact that in all cases of cession the inhabitants of the territory ceded lose their old citizenship and have to submit to a new sovereign whether they like it or not.
As the object of cession is sovereignty over the ceded territory all such (1) Oppenheim 's International Law Vol. 1, 8th Edn.
at pp.
547, 551.
(2) 249 individuals domiciled thereon as are subjects of the ceding State become ipso facto, by the cession, subjects of the acquiring .,State(1) (supra at p. 551).
Dr. Singhvi says that the first premise on which the High Court has proceeded is that as a result of cession it would be ,competent for the Government of Pakistan to deal with the disputed territory as an absolute owner in complete disregard of the .existing rights of the respondents.
In other words it has been assumed that the Government of Pakistan will not recognise owner ship or other similar rights of the respondents in the lands and properties which belong to them.
This, Dr. Singhvi claims, is contrary to the rule enunciated by Chief Justice Marshall in United States vs Juan Perchman(2) in the following words : "The modern usage of nations, which has become law, would be violated; that sense of justice and of right which is acknowledged and felt by the whole civilised world would be outraged, if private property should be generally confiscated and private rights annulled.
The people change their allegiance; their relation to their ancient sovereign is dissolved; but their relations to each other and their rights of property, remain undisturbed.
" The rule set forth in the Perchman case has been followed in over forty American cases and has been accepted as the rule of Inter,national law in English, French, German and Italian law(3).
This Court has had occasion to consider fully the Perchman 's case as also the English law apart from several other autho rities on International law and the decisions of the Permanent Court of International Justice.
In State of Gujarat vs Vora Fiddali Badruddin Mithibarwala(4) the following passage from the judgment of Mudholkar J., at pages 590, 591 gives tersely the position which obtains in our country : "Thus while according to one view there is a State succession in so far as private rights are concerned according to the other which we might say is reflected in our laws, it is not so.
Two concepts underline our law; one is that the inhabitants of acquired territories bring with them no rights enforceable against the new sovereign.
The other is that the municipal courts have (1) Oppenheim 's International Law Vol.
1,8th Edn.
at pp.
547, 551.
(2) 8 L. ed.
(3)Extracts from the Law of Nations (2nd Edn. of.
F. B. Sayre, "Change of Sovereignty and Private Ownership of Land," 12 XIXL A. J. I. L. (1918), 475, 481, 495 497.
(4) ; 250 no jurisdiction to enforce, any rights claimed by them, even by virtue of the provisions of a treaty or other transaction internationally binding on the new sovereign unless their rights have been recognised by the new sovereign.
" The above case related to rights pertaining to the exploitation of the forests which were claimed under a Tharao which was held by the 'majority to be a grant to the jagirdars by the ruler of the erstwhile Sant State which merged in the )Dominion of India as from June 10, 1948.
It wag thus held that the rights derived by the inhabitants of 'the 'ceded territory from its former rulers could not be enforced by them against the new sovereign in the courts of that sovereign unless they had been recognised by the 2,1 new sovereign.
It is altogether unnecessary to discuss the principles established by.
the decisions of this Court further because they can afford no Assistance in deciding no question arises of how the private a particular territory would be affected ceaded to India.
The session involved the present case in which rights of the inhabitants of if the same Were to be is of territory to Pakistan and no evidence was placed before the High Court from which it could be concluded that inder the Pakistan laws the private rights of the inhabitants therein would not be respected in accordance with the ordinary principles of International law.
In this situation it would be a wholly wrong approach to conclude that the respondents are bound to loge all their property rights in the territory which is being ceded by India to Pakistan.
Even on the assumption that the respondents will not be entitled to enforce their private rights in the municipal courts of Pakistan unless they are recognised by the new sovereign it is incomprehensible how such a prospect or possibility can attract the applicability of article 31(2) of our Constitution so as to entitle the respondens to compensation as provided thereby.
Nor can we understand the process of reasoning by which the High Court has reached the result that cession would be tantamount to vesting by the direct act of the Government of India of the properties of the respondents in Pakistan.
ln order to determine whether the case of the respondent,% would fill within article 3.1(2) ,it is necessary to set out that provision as also para 2A of that, Article which was added by the Constitution (4th Amendment) Act 1955: (2)"No property shall be compulsorily acquired or requisitioned save.
for a public purpose and save by authority of a law which provides for compensation for the property so aquired or requisitioned and either fixes the amount of the compensation or specifies the principles on which, and the manner in which, the compensa 251 tion is to be determined and given; and no such law shall be called in question in any court on the ground that the compensation provided by that law is not adequate." (2A) Where a law does not provide for the transfer of the ownership or right to possession of any property to the State or to a corporation owned or controlled by the State it shall not be deemed to provide for the compulsory acquisition or requisitioning of property, notwithstanding that it deprives any person of his property.
" As far back as 1950 Mukherjea J. (as he then was) gave the meaning of "acquisition ' in Charanjit Lal Chowdhury vs Union of India(1) in the following words: "Acquisition means and implies the acquiring, of the entire title of the expropriated owner, whatever the nature or extent of that title might be.
The entire bundle of rights which were vested in the original holder would pass on acquisition to the acquirer leaving nothing in the former".
But in the State of West Bengal vs Subodh Gopal Bose & others(2) the view taken in the judgment of the majority was that clauses 1 and 2 of Article 31 were not mutually exclusive in scope and content but should be read together and understood as dealing with the same subject.
Thus a wider meaning was given to acquisition, deprivation contemplated in clause being no other than the acquisition or taking possession of the property referred to in clause(2).
In Dwarkadas Shrinivasa of Bombay vs The Sholapur Spinning & Weaving Co. Ltd. & Others(3) this Court, While confirming the above principle, held that the word "acquisition" had quite a wide concept, meaning the procuring of property or taking of it permanently or temporarily and it was not confined only to the acquisition of a legal title, by the State in the property taken possession of.
This was the position relating to article 31 as it stood before the Constitution (4th Amendment) Act, Clause 2A was inserted in 1955 with the object of superseding the majority decision in Subodh Gopal 's(2) case as also in Saghir Ahmed vs The State of Uttar Pradesh(4) in which the earlier decisions were followed.
It was pointed out in Gultapalli Nageswdra Rao & other vs Andhra Pradesh State Road Transport Corporation & Another(5) "The Constitution (Fourth Amendment) Act, 1955 Amended clause (2) of article 31 and inserted clause 2A in (1) ; At p. 902.
(2) ; (3) ; (4) ; (5) [1959] Suppl.
1 section C. R. 319. 252 that article.
The amendments, in so far as they are relevant to the present purpose, substitute in place of the words 'taken possession or acquired ' the words ` compulsorily acquired or requisitioned ' and provide an explanation of the words 'acquired and requisitioned ' in clause (2A).
The result is that unless the law depriving any person of his property provides for the transfer of the ownership or right to the possession of any property to the State, the law does not relate to acquisition or requisition ' of property and therefore the limitations placed upon the legislature under cl.
(2) will not apply to such law.
" It is therefore essential that in order to constitute acquisition or requisitioning there must be, transfer of the ownership or right to possession of any property to the State or to a corporation owned or controlled by the State.
Article 12 provides that in Part III (in which Article 31 appears) unless the context otherwise requires the State "includes the Government and Parliament of India and the Government and the legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.
The effect of the Constitution (Ninth Amendment) Act 1960 by which part of the Berubari Union No. 12 shall be ceded to Pakistan can by no stretch of reasoning be regarded as a transfer of the ownership or right to possession of any property of the respondents to the State within the meaning of article 12 of the Constitution.
The amendment of 1955 makes it clear that mere deprivation of property unless it is acquisition or requisitioning within the meaning of clause (2A) will not attract clause (2) and no obligation to pay compensation will arise thereunder.
Cession indisputably involves transference of sovereignty from one sovereign State to another.
There is no transference of ownership or right to possession in the properties of the inhabitants of the territory ceded to the ceding State itself.
The Constitution (Ninth Amendment) Act having been enacted in accordance with the Advisory opinion of this court(1) there can be no impediment in the way of ceding part of Berubari Union No. 12 pursuant to the Indo Pakistan Treaty 1958.
The view of the High Court that the cession of the said territory involves transfer of the ownership and other private property rights to Pakistan through the Union of India which was outside clause(2A) of Article 31 and was covered by clause(2) of that Article is to say the least wholly untenable and cannot be sustained.
In our judgment no question of acquisition within article 31(2) is involved in the present case and even though a good deal of hardship may result to the respondents owing to the change of sovereignty they (1) 253 cannot claim compensation for the simple reason that there has been no transfer of the ownership of their property to the State namely the Union of India which would attract the applicability of article 31(2).
The appeal, therefore, succeeds and it is hereby allowed.
In view of the nature of the points decided there will be no order as to costs.
K.B.N. Appeal allowed.
| IN-Abs | Pursuant to the Indo Pakistan Agreement, 1958, and after this Court 'section Advisory opinion in In re the Berubari Union and Exchange and Enclaves, , Parliament enacted the Constitution (Ninth Amendment) Act, 1960 for cession of part of the territory of India to Pakistan.
In order to implement the provisions of the Act a physical demarcation of the portion that had to be ceaded was necessary.
The respondents filed a petition under article 226 of the Constitution before the High Court challenging the validity of the proposed demarcation principally on the ground that they would be deprived of their property without compensation.
A single Judge of the High Court held that the cession of the territory involved transfer of ownership and other private property rights to Pakistan through the Union of India, which, though outside cl 2A of article 31 was compulsory acquisition within the meaning of article 31(2).
The single Judge granted a certificate under article 132(1) for appeal to this Court.
HELD:(i) No question of acquisition within the meaning of Article 31(2) is involved in the present case.
The Constitution (Fourth Amendment) Act, 1955, makes it clear that mere deprivation of property unless it is acquisition or requisitioning within the meaning of cl.
2A will not attract cl.
(2) and no obligation to pay compensation will arise thereunder and it is essential under clause (2) that in order to constitute acquisition or requisitioning there must be transfer of the ownership or right to possession of the property to the State or to a corporation owned or controlled by the State.
Cession indisputably involves transference of sovereignty from one sovereign State to another.
But, there is no transference of ownership or right to possession in the properties of the inhabitants of the territory ceded to the ceding State itself.
The effect of the Constitution (Ninth Amendment) Act, 1960, can by no stretch of reasoning be regarded as transfer of the ownership or right to possession of any property of the respondents to the "State" within the meaning of Article 12 of the Constitution.
[202C F, H] Charanjit Lal Chowdhury vs Union of India, [1950] S.C.R. 869, 902, State of West Bengal vs Subodh Gopal Bose & Ors.
; , Dwarkadas Shrinivas of Bombay vs Sholapur Spinning & Weaving Co. Ltd. & Ors.
; , Saghir Ahmed vs State of Uttar Pradesh, ; and Gullapalli Nageswara Rao & Ors.
vs Andhra Pradesh State Road Transport Corporation & Anr.
[1959] Supp. 1 S.C.R. 319, referred to.
245 (ii) This Court has on earlier occasions, observed that the practice of single Judge deciding the case and giving a certificate under Article 132 (1) for appeal to this Court, although technically correct, was an improper practice and that such a certificate should be given only in very exceptional cases where a direct appeal was necessary.
The present case may be of an exceptional kind; but this Court has been deprived of the benefit of the judgment of a larger Bench of the High Court on points which are of substantial importance.
[246B] R.D. Agarwala. & Anr.
vs Union of India & Ors.
C.A. Nos.
2634/69 etc.
dt. 23 2 1970 and Union of India vs J. P. Mitter; , , referred to.
|
Appeal No. 1128 of 1967.
20 1 S.C. India/71 306 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.
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 article 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. section 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 307 308 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.
" 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) vs 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) 309 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 310 establishment employing such number of persons less than fifty as may be specified in the 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 311 (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 , 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 (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 312 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 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. 313 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 314 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 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.
| IN-Abs | 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.
Provident Fund Commissioner sought to enforce the provisions of the Employees ' Provident Funds Act, 1957, and the Provident Fund Scheme, 1952, against him.
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 section 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 section 1(3)(b) in the light of the provisionsof s: 16 and section 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]
|
Appeal No. 1942 of 1966.
Appeal from the Judgment and decree dated April 23, 1963 of the Patna High Court in First Appeal No. 420 of 1955.
Sarjoo Prasad and R. C. Prasad, for the appellant.
U. P. Singh, for respondent No. 8.
300 The Judgment of the Court was delivered by Grover, J.
This is an appeal by certificate from a decree of the Patna High Court in a suit instituted by the appellant against the State of Bihar which was impleaded as defendant No. 1, the other defendants being the Jagdishpur Zamindari Co. Ltd. (defendant No. 2) and some of its directors defendants 3 to 5.
According to the allegations in the plaint one of the methods of making advances followed by the plaintiff Bank was that the constituents pledged their merchandise on a cash credit system with the Bank and took advances on the pledged goods.
The Bank held the goods as security for the advances made and , 'be constituents either provided the Bank with godown or the Bank kept the pledged goods in godowns of its own and charged rents from the constituents.
The defendant No. 2 entered into a cash credit system agreement with the plaintiff 's Arrah Branch, the arrangement being that the sugar would be pledged under the cash credit system.
On December 16, 1946 the advance made to defendant No. 2 stood at Rs. 3,20,486 2 0 and the Bank held 6239 bags of different varieties of sugar as security.
These bags were kept in godowns provided by defendant No. 2.
The key of the lock of each godown was in the custody of the Bank.
It was alleged that in December 1949 under cover of an illegal seizure order issued by defendant No. 1 the Rationing Officer and the District Magistrate, Patna, got the locks of the godown broken open and forcibly and illegally removed 1818 bags of 27D quality of sugar.
They total quantity removed weighed about 5,000 maunds.
No payment was made to the plaintiff Bank which held the bags of sugar as pledgee under the cash credit agreement.
It is unnecessary to refer to other facts stated in the plaint except to mention that according to the plaintiff it was entitled to recover the sugar which had been seized illegally or to recover the price of that sugar as per schedule 2 of the plaint which the plaintiff would have got if the quantity of sugar which had been seized had been sold in the market on the material day.
The plaintiff prayed for a decree for the return of 1818 bags of 27D quality sugar and, alternatively for re covery of Rs. 1,81,700 9 3 with interest by way of damages for illegal removal and detention of sugar or.
price thereof.
Alternatively a decree for Rs. 93,910 10 9 was claimed against defendant No. 2 and the other defendants.
The suit was resisted by defendant No. 1 on the ground that the seizure had been effected pursuant to lawful orders which had been made and that the sale proceeds of about 5000 mds. of sugar were included in the sum of Rs. 1,50,039 10 9 which was deposited in the treasury but which was later on attached under the orders of Certificate Officer, Patna, under the Public Demands 301 Recovery Act on account of arrears of sugar cess amounting to Rs. 2 lakhs due from the Bhita Sugar Factory with which defendant No. 2 had entered into an arrangement pursuant to which the entire quantity of sugar including 5000 maunds which had been seized had come into possession of defendant No. 2.
The other defendant also resisted the suit on various grounds.
A number of issues were framed on the pleadings of the parties.
We may only mention issue No. 6(a) which will be material for determination of the points which we have been called upon to decide "Was the sugar seized by the government in possession of the Bank as a pledgee at the time of the seizure and have the rights of the Bank as such pledgee been determined by the seizure in question?" The trial court held that the order of seizure in respect of the stock of sugar was valid.
It was further held that the plaintiff 's right as a pledgee could not be extinguished by seizure of the sugar in its possession and though the attachment order of the Certificate Officer was legal and binding on defendant No. 2 it was not binding on the Bank (plaintiff) and it could be effective only in respect of that portion of the price which was not necessary for the liquidation of the dues of the plaintiff from defendant No. 2.
A decree was passed in favour of the plaintiff against defendant No. 1 only for Rs. 93,910 10 9 with interest at 6% per annum from the date of the suit till realisation.
Defendant No. 1 (State of Bihar) filed an appeal to the High Court.
The High Court was of the view that in the presence of the finding that the plaintiff had not been wrongfully deprived of the sugar on account of the lawful seizure or its price owing to the certificate proceedings started by the Cane Commissioner the plaintiff was not entitled to any decree against the State.
But it was entitled to a decree against defendant No. 2 and the other defendants.
Consequently a decree against defendant No. 1 was set aside and instead of decree was granted against the other defendants.
Now it is common ground that the plaintiff (which is the appellant before us) held the sugar which was seized from its custody as security for payment of the debts or advances made to defendant No. 2 in its cash credit account.
There were arrears of certain cess due from defendant No. 2.
As stated before, the Cane Commissioner took proceedings under the Public Demands Recovery Act and attached the price of the sugar which had been deposited by the appropriate authorities in the Government Treasury instead of being paid to the plaintiff.
The Cane Commissioner indisputably did not have any right of priority over the other creditors of defendant No. 2 and, in particular, the secured creditors.
Section 172 of the Contract Act defines a pledge to mean the bailment of goods as security for payment of debt or 302 performance of a promise.
The bailor is called the "pawnor" and the bailee is called the "pawnee".
Section 173 of that Act provides that the pawnee may retain the goods pledged not only for the payment of the debt or performance of the promise but also for the interest of the debt etc.
Section 176 is in the following terms : "If the pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawner upon the debt or promise, and retain the goods pledged as a collateral security ; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale.
" If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance.
If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor.
" Section 180 is to the effect that if a third person wrongfully deprives the bailee of the use of the possession of the goods bailed or does him any injury the bailee is entitled to use such remedies as the owner might have used in the like case if no bailment had been made and either the bailor or the bailee may bring a suit against a third person for such deprivation or injury.
According to Section 181 whatever is obtained by way of relief or compensation in any such suit shall, as between the bailor and bailee.
be dealt with according to their respective interests.
Relying on the above two sections the High Court came to the conclusion that a pawnee has merely the possession of the goods coupled with a power to sell them on default by the pawnor but the latter retains the ownership subject to a lien to the extent of the debt enforceable by exercise of the power of sale.
In the present case the sugar had been seized and then sold.
The sale proceeds would have been available to defendants 2 to 5 subject to the claim of the plaintiff against them but it ceased to have any lien on the pledged property or the sale proceeds against any third party including the State as soon as it was legally deprived of the possession of the pledged goods.
According to the Statement in Halsbury 's Laws of England "Pawn" has been described as a security where by contract a deposit of goods is made a security for a debt and the right to the property vests in the pledgee so far as is necessary to secure the debt; in this sense it is intermediate between a simple lien and a 303 mortgage which wholy passed the property in the thing conveyed(1).
"The Pawnee hag a special property or special interest in the thing pledged, while the general property therein continues in the owner.
That special property or interest exists so that the Pawnee can compel payment of the debt or can sell the goods when the right to do so arises.
This special property or interest is to be distinguished from the mere right of detention which the holder of a lien possesses, in that it is transferable in the sense that a Pawnee may assign or pledge his special property or interest in the goods (2) "where judgment has been obtained against the pawnor of goods and execution has issued thereon, the sheriff cannotseize the goods pawned unless he satisfied the claim of the pawnee".
(based mainly on Rogers vs Kennay(3).
"On the bankruptcy of the pawnor the Pawnee is a secured creditor in the bankruptcy with respect to things pledged before the date of the receiving order and without notice of a prior available act of bankruptcy.
(4) It has not been shown how the law in India is in any way different from the English law relating to the rights of the Pawnee vis a vis other unsecured creditors of the pawnor.
In our judgment the High Court is in error in considering that the rights of the Pawnee who had parted with money in favour of the pawnor on the security of the goods can be defeated by the goods being lawfully seized by the Government and the money being made available to other creditors of the pawnor without the claim of the Pawnee being fully satisfied.
The Pawnee has special property and a lien which is not of ordinary nature on the goods and so long as his claim is not satisfied no other creditor of the pawnor has any right to take away the goods or its price.
After the goods had been seized by the Government it was bound to pay the amount due to the plaintiff and the balance could have been made available to satisfy the claim of other creditors of the pawner.
But by a mere act of lawful seizure the Government could not deprive the plaintiff of the amount which was secured by the pledge of the goods to it.
As the act of the Government resulted in deprivation of the amount to which the plaintiff was entitled it was bound to reimburse the plaintiff for such amount which the plaintiff in ordinary course would have realized by sale of the goods pledged with it on the pawnor making a default in payment of debt.
The approach of the trial court was unexceptionable.
The plaintiff 's right as a Pawnee could not be extinguished by the seizure of the goods in its possession inasmuch as the pledge of the (1) 3rd Edn.
29 page 211.
(2) Halsbury 's Laws of England 3rd Ed.
29 p. 218 219.
(3) (4) Halsbury 's Laws of England 3rd Ed.
29 p. 222.
304 goods was not meant to replace the liability under the cash credit agreement.
It was intended to give the plaintiff a primary right to sell the goods in satisfaction of the liability of the pawnor.
The Cane Commissioner who was an unsecured creditor could not have any higher rights than the pawnor and was entitled only to the surplus money after satisfaction of the plaintiff 's dues.
Defendants 3 to 5 did not file any appeal against the judgment of the High Court.
The decree passed by the High Court against them would, therefore, stand.
In the view that we have taken the appeal is allowed, the judgment and decree of the High Court dismissing the suit against the State, of Bihar is hereby set aside and a decree is granted against the State of Bihar in the same terms as was granted by the trial court.
The appellant will be entitled to costs throughout.
G.C. Appeal allowed.
| IN-Abs | Certain sugar was pledged with the plaintiff bank (appellant herein) by Defendant No. 2 under a cash credit agreement.
Part of the said sugar was seized under the Public Demands Recovery Act in connection with a demand of sugar cess by the Cane Commissioner.
The sugar was sold and the sale proceeds were attached towards the payment of cess.
No payment was made to the plaintiff bank, which thereupon filed the present suit to enforce its claim.
The trial court granted a decree against the State of Bihar for the price of the sugar.
The High Court however held that no decree could be granted against the State as the seizure was lawful.
HELD:The pawnee had special property and a lien which was not of ordinary nature on the goods and so long as his claim was not satisfied no other creditor of the pawnor had any right to take away the goods or its price.
After the, goods had been seized by the Government it was bound to pay the amount due to the plaintiff and the balance could have been made available to satisfy the claim of other creditor of the pawnor.
But by a mere act of lawful seizure the Government could not deprive the plaintiff of the amount which was secured by the pledge of the goods to it.
As the act of the Government resulted in deprivation of the amount to which the plaintiff was entitled it was bound to reimburse the plaintiff for such amount which the plaintiff in ordinary course would have realized by sale of the goods pledged with it on the pawnor making a default in the payment of debt.
[303E G] The trial court was right in holding that the plaintiff 's right as a pawnee could not be extinguished by the seizure of the goods in its possession inasmuch as the pledge of the goods was not meant to replace the liability under the cash credit agreement.
It was intended to give the plaintiff a primary right to sell the goods in satisfaction of the liability of the pawnor.
The Cane Commissioner who was an unsecured creditor could not have any higher rights than the pawnor and was entitled only to the surplus money after satisfaction of the plaintiffs dues.
[303G 304B]
|
Appeal No. 800 of 1967.
Appeal from the judgment and decree dated January 15, 1964 of the Patna High Court in Appeal from Original Decree No. 321 of 1959.
D. Goburdhun and R. Goburdhun, for the appellant.
R. C. Prasad, for respondent No. 1.
The Judgment of the Court was delivered by Hidayatullah, C.J.
This is an appeal against the judgment of the High Court at Patna, dated January 15, 1964, affirming the decision of the court of first instance.
The case arose in the,following circumstances One Chaudhary Lal Behari Sinha, who was the uncle of the two plaintiffs (respondents in this appeal), made an endowment by a will executed by him on December2, 1908, by which certain properties were endowed in favour of an Idol called 'Ram Janakiji ' also known as Shri Thakurji, installed in the family house of the testator.
The testator said that his parents had installed this idol inside their house and they used to perform the puja and he had also been performing the puja since the time he had attained the age of discretion.
The testator went on to say that he had married two wives but no son had been born to him from either of them, al though he had a daughter and there was also a daughter 's daughter.
When he made the will, he had his two wives living, two sister 's sons, Babu Uma Kant Prasad and Babu Gauri Kant Prasad, and a daughter 's daughter Giriraj Nandini Kuari.
By the will, he ar 6 5 2 ranged for the seba puja, ragbhog, samaiya, utsava of Thakurji, and for the festivals and expenses of the sadabart of the visitors, to be carried on, just as he had been doing.
He nominated his two wives and his sister Ram Sakhi Kuari widow of Babu Gudar Sahai, as 'mutwallie, managers and executives ' so long as they remained alive.
He ordained that they should look after the management of the estate of Shri Thakurji with unanimous opinion, as had been done since long, that after their death, a son of a Srivastava Kayastha and Visnu upasak (worshipper of Lord Visnu) should be appointed 'Mutawalli, manager and executive ' of the estate of Shri Thakurji, and that his wives and sister should appoint him during their life time with the advice of and in consultation with a certain Shri Jawharikh, resident of Baikunthpur, who was his guru.
He divided the house into two parts.
The inner apartment of the house was to remain in the possession of his wives and sister during their life time and the entire outer house together with the house situated at Sitamarhi, was to belong to the estate of Shri Thakurji.
All money in cash and the movable properties belonging to him would remain in the custody of his wives.
To the will was appended a schedule which showed the details of the properties.
That included four villages in sixteen annas share, three villages in eight annas share, and one village in twelve annas share.
The will also made certain bequests in favour of some of his other relations, but with, them we are not concerned.
They are minor as compared with the properties dedicated for the upkeep, of Shri Thakurji.
When the Bihar Hindu Religious Trusts Act, 1950, came to be passed, a notice was sent to the plaintiffs by the Board constituted under that Act, calling upon them to file certain particulars on the basis of the Act, in view, as the notice said, of the properties constituting a public Hindu Religious trust.
The present suit out of which this appeal arises was thereupon filed by the plaintiffs after serving a notice under section 78 of the Act upon the Board, for a de claration that the suit properties were not subject to the Bihar Religious Trusts Act, and were private endowments.
Vast oral evidence was tendered in the case on behalf of the plaintiffs, and certain documents were filed.
On the basis of the evidence in the case, which was accepted by the learned trial judge, it was decided that the endowment was private to which the Act was not applicable.
Before the learned trial judge, reference was made to a decision of this Court, reported in Deoki Nandan vs Murlidhar(1).
To that case, we shall come presently.
The learned trial judge distinguished that case and held that endowment in the present case could not be held to be a public trust, because it was in favour of a family deity.
1[1961] 3 section C. R. 220.
653 An appeal was unsuccessful in the High Court.
The High Court agreed with the learned trial judge that the endowment created a private and not a public trust.
The High Court did not consider the evidence in the case, which, according to the leamed Judges, had been adequately summed up by the trial judge and whose conclusion was accepted.
Before the High Court also, the same case of this court was cited.
But it was also again distinguished on the grounds.
that this idol was a family idol and had not changed its character since the endowment or at the time of the endowment.
In this appeal, the only question that has been raised is whether the trust is a public trust, to which the Bihar Hindu Religious Trusts Act attaches, or is a private trust which does not come within the purview of that Act.
Mr. Goburdhun, who argued the case, pointed out a number of circumstances from which, he said, it could be easily inferred that the endowment was a public one and that the Act applied. 'According to him, the testator was childless and, therefore, there was no need for him to preserve the property for his family, that he had dedicated large properties for the upkeep of the idol, and the largeness of the properties indicated that it must have been for the benefit of the worshippers drawn from the public and not from the family, that on the extinction of the line of shebaits consisting of the two wives and the sister of the testator, the shebaitship was to go to a person of a different community on the advice of a stranger and that there was no mention in any of the deeds that the public were not to be admitted to the worship of Thakurji.
He also relied upon the same case to which we have referred, and also upon a decision of this Court in Swami Saligramacharya vs Raghavacharya and others(1).
As early as (Babu Bhagwan Din and others vs Gir Har Saroop and others) (2), the Privy Council distinguished between public and private endowments of religious institutions, particularly, temples and idols, and Sir George Rankin laid down certain principles to which attention may be drawn, because they were referred to in that Supreme Court ruling on which Mr. Goburdhun strongly relies.
Sir George Rankin said that the dedication to the public was not to be readily inferred when it was known that a temple property was acquired by grant to an individual or family.
He also observed that the fact that the worshippers from the public were admitted to the temple was not a decisive fact, because worshippers would not be turned away as they brought in offerings, and the popularity of the idol among the public was not indicative of the fact that the dedication of the properties was for public.
This ruling was referred to in the case on which Mr. Goburdhunrelies.
(1) CA.
No. 645 of 1964 decided on 4 11 15.
(2) 67 I.A 1.
654 In that case, emphasis was laid on two matters and they are decis ive of the case we have here.
The first no doubt was that the dedicator in that case had no male issue, and that it would be unusual for a person to tie up the property for the use of a diety with.out creating a public trust, but the second was that a ceremony or pratishtha (installation of the idol), which was equivalent to utsarg (dedication), was performed and, therefore, the idol itself became; a _public idol after the ceremonies.
This is not the case here where an idol had existed from before as a family idol.
In the earlier case ,of this Court the installation of the idol and the dedication were ,both done at the same time, and the installation was public.
This, in our opinion, was a very cardinal fact in that case.
This) was emphasized not, only by the trial judge but also by the learned Judges of the High Court.
The facts here are that the idol had been in the family for a number of *ears and only the family was doing the seba puja in the Thakur Dwara, and there is no mention anywhere that the public ever looked after this idol and were allowed a share in the worship as of right.
Further, by the will also the author of the dedication did not make it clear that the public were ,to be admitted as of right thereafter.
The whole of the arrangement shows that the further looking after of the Thakurji was to be the concern of the family, and it was only under the nomination of the family that a particular person of the Vaishavanava belief was to be in charge after the demise of the members of the family who were to become the mutawalls after the death of the testator.
It is obvious that in this family there was no male issue and, there fore, there was nobody to carry on worship and make arrangements for the seba puja of the Thakurji, as had been done in the family. 'Some other kind of arrangement had to be made and this arrangement was made by the will.
No more can be read into it than what is said there.
Now, if it was intended that this should have been a public endowment, it is quite obvious that when the testator died, the testator would have thought of somebody from the public instead of the ladies who could not carry on the puja except through others.
It was after his own death and his wives and sister were not available that a particular person was to be chosen for the seba puja.
There is no arrangement here that public were to look after or manage the Thakurji.
At no stage any intervention of the public is either intended or allowed by the will in question.
Two other documents were brought to our notice, but they may be disposed of summarily.
The first is a mortgage deed, exh.
B, in which there is a recital about the property which was the subject of the endowment.
But that document is silent about the nature of the endowment and is of no significance.
The other document is a judgment of the Assistant Commissioner of Agricultural 655 Income tax, exh.
C, in which exemption was claimed in regard to income as was set apart for charitable and religious trusts in terms of the trust deed.
This is an attempt to show that the family regarded it as a public trust.
What a person does with a view to claiming exemption from income tax or for that matter, agricultural income tax, is not decisive of the nature of the endowment.
The nature of the endowment is to be discovered only from the tenor of the document by which the endowment is created, the dealings of the public and the conduct and habits of the people who visit such a temple or Thakur Dwara.
The claim to exemption was with a view to saving some income of the endowed property.
It might have been motivated from other considerations and not that it was a public endowment.
This brings us to the second case which was cited before us.
But even in that case, a reference was made by the learned Judges to the earlier case and they have extracted a passage from the earlier judgment, in which it was observed that "when property is dedicated for the worship of a family idol, it is a private and not a public endowment, as the persons who are entitled to worship at the shrine of the deity can only be the members of the family, and that is an ascertained group of individuals.
But where the bene ficiaries are not members of a family or a specified individual, then the endowment can only be regarded as public, intended to benefit the general body of worsh ippers".
In the present case, the idol was a family idol and the worshippers had all along.
been the members of the family.
Indeed, the evidence is overwhelming on that score.
The learned trial judge mentions that very important and leading persons gave evidence in that behalf.
In the judgment of the trial judge, a list is given which includes P.Ws.
3,7,12,14,15 and 16 of village Kusmari.
In addition there are P.W. 17, who is an advocate of Sitamarhi, P.W. 6 who is a respectable witness, being a chemist, P.W. 8 who is also a pleader, and P.Ws II and 13 who are mokhtears and acquainted with Somari Kuer.
These respectable persons had occasion to know the family of Chaudhury Lal, Behari Singh, and, therefore, were competent to speak on the fact that Shri Ram Janakiji were the family deities of Chaudhury Lal Behari Singh.
In the case to which we were presently referring, the circumstances connected with the establishment of the temple were such that they could be only consonant with a public endowment.
It was no doubt at private temple of which the sole proprietor was one Madrasi Swamiji, but he, however, by the execution of the deed, decided to open the temple to the public.
He was a man with no family and could not have installed the deity for the members of his family.
It was pointed out in that case that the deed was of such a recent date that evidence of subsequent conduct would not alter nature of the endowment as determined from the deed and that the decision was on a 6 56 question of fact.
Even if we were to treat it as a question of law, because whether the trust is public or private, partakes of both fact and law, and we are satisfied in the present case the evidence is entirely one sided.
There is not one circumstance to show that the endowment was public endowment, and this being the case, we do not see any reasons to differ from the decision already arrived at.
On the whole, we have not been able to discover any reason why we should depart from the unanimous opinion of the High Court and the court below.
Both the courts are agreed that the oral evidence as well as the documents indicate only a private trust and that there is nothing to show that the endowment enjoyed a public character at any time.
The cases before this Court, which were cited earlier are easily distinguishable.
The result is that the appeal fails.
The High Court in its order did not award costs to the plaintiffs.
The reasons given by the High Court for denying costs to the Plaintiffs apply here also.
We, accordingly, order that the costs shall be borne as incurred.
R.K.P.S. Appeal dismissed.
| IN-Abs | An uncle of the two respondents made a will in December, 1908 by which certain properties were endowed by him in favour of an idol which certain properties were endowed by him in favour of an idol will that he had two wives and no son had been born to either of them.
He nominated his two wives and his sister as "Mutawallies, managers and executives" to administer the endowment during their life time and also provided that in consultation with his Guru they should appoint a successor to themselves.
Upon the coming into force of the Bihar Hindu Religious Trusts Act, 1950, a notice was sent to the respondents by the Board constituted under the Act calling upon them to file certain particulars as required under the provisions of the Act on the view that the properties constituted a Public Hindu Religious Trust.
The respondents thereafter filed a suit against the Board for a declaration that the said properties were not subject to the Act and were private endowments.
After considering substantial oral and documentary evidence, the Trial Court held that the endowment was private to which the Act was not applicable.
An appeal to the High Court was dismissed.
In the appeal to this Court it was contended that it could easily be inferred from the facts and circumstances that the endowment was a public one.
The testator was childless and, therefore, there was no need for.
him to preserve the property for his family; that he had dedicated large properties for the upkeep of the idol, and the largeness of the properties indicated that it must have been for the benefit of the worshippers drawn from the public and not from the family; that on the extinction of the line of shebaits consisting of the two wives and the sister of the testator, the shebaitship was to go to a person of a different community ,on the advice of a stranger and that there was no mention in any of the ,deeds that the public were not to be admitted to the worship of the idol.
HELD: Dismissing the appeal, (i) On the facts, it was clear that the idol had been in the family for a number of years and only the family was doing its regular worship; there was nothing to show that the public ever looked after this idol or were allowed a share in the worship as of right.
Nor did the author of the dedication by his will make it clear that the public were to be admitted as of right.
The whole arrangement showed that the further looking after of the idol was to be the concern of the family, and it was only under the nomination of the family that a particular person of the Vaishavnava belief was to be in charge after the demise of the members of the family who were to become mutawallis after the death of the testator.
, It was ,obvious that in this family as there was no male issue and, therefore,, there was nobody to carry on worship and make arrangements for the seba puja 651 of the idol, as had been done in the family for a long time, some other kind of arrangement had to be made and this arrangement was made by the will.
No more can be read into it than what was said there.
[654 C] (ii) There was no force in the contention that merely because an exemption was claimed in regard to the income of the endowment as being for charitable and religious purposes, this would make the endowment a public one.
What a person does with a view to claiming exemption from income tax or agricultural income tax, is not decisive of the nature of the endowment.
The nature of the endowment is to be discovered only from the tenor of the document by which the endowment is created, the dealings of the public and the conduct and habits of the people who visit such a temple or Thakur Dwara.
The claim to exemption was with a view to saving some income of the endowed property.
It might have been motivated from other considerations and not that it was a public endowment.
[655 A C] Babu Bhagwan Din and others vs Gir Har Saroop and others, referred to.
Deoki Nandan vs Murlidhar ; ; Sivami Saligrama.
charya vs Raghavacharya and others, Civil Appeal 645 of 1964 decided on 4 11 65; distinguished.
|
' Appeal No. '435 of 1967.
Appeal from the judgment and decree dated September 30, 1966 of the Bombay High Court Nagpur Bench in Letters Patent No. 4 of 1964.
22 I S C. India/71 338 section T. Desai and A. G. Ratnaparkhi for the appellant.
Rameshwar Dial, Jaishi Ram Goel and A. D. Mathur for the respondent.
The Judgment of the Court was delivered by Shelat J.
By a deed of lease, dated May 5, 1906, the prede cessor in title of the respondent let out to the appellant 's father an open portion of land measuring 26 ft.
x 225 ft.
out of a larger plot.
The lease was for constructing buildings and for a period of 30 years certain at the annual rate of Rs. 130.
The lease contained, iner alia, the following : "Even after the prescribed time limit, I shall have a right to keep my structure on the leased out land, so long as I like, and I shall be paying to you the rent every year as stated above.
You will have no right to increase the rent and I shall also not pay it, myself and my heirs shall use this land in whatever manner we please.
After the lease period, we shall, if we like, remove our building_ right from the foundation and vacate your land.
In case we remove our structure before the stipulated period, we shall be liable to pay to you,, the rent for all the thirty years, as agreed to above. . .
In case I were to sell away the buildings, which I shall be constructing on the above land, to anyone else, then, the purchaser shall be bound by all the terms in this lease deed. . .
The trouble between the parties started when the respondent commenced construction on the rest of the land in a fashion so as to be in close vicinity to the western boundary of the leased land to house an industry, called Sudha Industries.
The appellant filed the suit in 1958, out of which this appeal arises, urging that the said lease was a permanent lease, that buildings had been constructed on the leased land partly in 1906, and the rest in 1909 and 1922, that the said plot of land was subsequently demarcated into two survey numbers, 94 and 93, that a strip of land, 4 ft. in width and measuring 650 sq.
immediately to the west of survey No.,94 and forming part of survey No. 93 was covered by the said lease and was in his possession as part of the leased land or was acquired by him as accession.
Pending the suit the appellant amended the plaint asserting that the portion let out under the said deed of lease was 5850 sq.
in the aggregate, which included the said strip, of land and annexed a new plan showing details of the land which according to him was leased out under the said deed.
339 Out of the structures put up by the appellants father, the central building, as shown in the plan produced by the appellant, has windows on the ground, first and second floors, all opening on the western side.
The eaves of that building protrude on that side by about 2 1/2 ft. with the result that the rain water falls over the said strip of land.
According to the plaint.
there is a drain partly in plot No. 94 and partly over the said strip of land which carries the entire waste, water from the said building.
According to the appellant, the said construction made by the respondent shut off light and air which he had been enjoying from the aforesaid windows.
He had other complaints also to make and claimed amongst other things a declaration that the said strip of land was part of the leased land covered by the said deed, or in the alternative, that he bad acquired it by way of accession, and prayed for a permanent injunction against shutting off light and air through the said windows and interference with his rights over the said strip of land either as the lessee thereof or as and by way of easements over it.
The respondent 's answer to the suit briefly was that the appellant was not entitled to the said strip of land either as failing under the said lease or as accession.
The respondent also denied that the appellant was entitled to any of the reliefs claimed by him, that the said lease was not a permanent lease but was for a period of 30 years in the first instance, but being a lease for constructing buildings thereon and being transferable, could at best be for the lifetime of the lessee, the appel lant 's father.
He also averred that part of the land comprised in plot No. 93 used to be let out from time to time to persons including the, appellants father, who had executed a separate rent note, dated July 21, 1935, and who had under the said note been in possession thereof as a lessee from 1935 to 1941, and that 'he having been permitted a,% such a lessee the use of the said strip of land to enable him access to the said leased portion of survey No. 93, there was no question of his having acquired any easementary rights by prescription over the said strip of land.
The Trial Court partially decreed the appellant 's suit, in that it rejected the appellant 's claim to the said strip of land, but granted a declaration of easement for light and air, through the said windows and for carrying said drain over the decree the appellant filed an appeal before the respondent also filed cross objections.
The dismissed the appellant 's appeal with the result that the appellant 's waste and rain water through the said strip of land.
Against that judgment and District court District Court and allowed the cross objections suit was dismissed.
A second appeal filed by the appellant in the High Court was heard by a Single Judge, who, held that the said lease was a permanent lease, that the appellant had acquired the said strip of land as accession to the leased land and as a consequence of those findings 340 granted a mandatory injunction directing removal of any con struction or projection by the respondent over the said :strip of land.
In view; of his finding that the said strip of land had always been in the.possession of the appellant and earlier of his father ever since 1906 and thus had been acquired as an accession, he considered it unnecessary to go into the question of easementary rights claimed by the appellant.
The principal ground on which the Single Judge founded his; judgment was that the lease was both, transferable and heritable, and therefore, had to be held as a permanent lease.
Aggrieved by the:.judgment and decree passed by the learned Single Judge, the respondent filed a letters patent appeal wherein three principal questions were canvassed , (1) whether the said lease was a permanent lease, (2) whether the strip of land in dispute was covered by the said lease, or in the alternative, acquired as accession, and (3) in.
the: alternative;: whether, the appellant had acquired easementary rights over the said strip of land (a) of light and air,.
(b) of passage and (c) of draining water, both waste and rain, over, the said strip of land.
The Letters Patent Bench answered all the, three questions, against the appellant holding that the said lease being a lease for building purposes and transferable, was a lease for an indefinite period, and therefore, for the lifetime of the: lessee, the said Dhanji, that the said strip.
of land was neither,covered.
under the said lease, nor acquired as accession through adverse possession, and lastly, that.
except for the drain extending upto 32 ft.
constructed on the said strip of land.
the appellant had not acquired any other easementary, rights over it.
As to light and air, ,the Bench held that the appellant failed to establish that the obstruction caused by the respondent 's construction was such as to give him an actionable claim against the res pondent.
The result was that except for the said drain,theBench dismissed the appellant 's suit.
Mr. Desai for the appellant raised three contentions in sup port of the appeal; (1) that on a proper interpretation of the document of lease.
the lease was a permanent lease, (2) that there was an accession in respondent of the said strip of land within the meaning of section 108,(d) of the , and therefore '.
the said strip of land must be deemed to be comprised in the lease. and (3) that the appellant had acquired by prescription rights of easement of light and air, of throwing rain water and draining waste water through the said drain and of passage over the said strip of land Under section 15 of the Easements Act, 1882.
On the question of interpretation of the document of lease, Mr. Desai supported, the View taken by the Single Judge.
The learned Single Judge construed the document to mean (a) that the 'lease was for building purposes, (b) that It was in the first 341 instance for 30 years certain (c) that the lessee was to continue to enjoy all rights as a lessee even after the expiry of 30 years, and (d) that the lesser could not increase the rent even after the expiry of 30 years.
The most important: term of the said lease.
said the Single Judge, was "the one which provides for the leasehold right continuing to the heirs and successors".
The Letter Patent Bench, however, felt that on a proper construction of the document, the lease was for an indefinite period, and though transferable, did not provide for any hereditary rights.
, In support of that conclusion the Bench pointed out that the view consistently taken by the High Court of Bombay, right from the decision in Vaman Shripad vs Maki,(1) was that such a lease is to be construed as one for the lifetime of the lessee and not as a permanent lease.
The only solitary case where a lease for an indefinite period was construed as permanent was that in Sonabai vs Hiragavri, (2) but subsequent decisions of that High Court had dissented from that decision and had consistently held leases for indefinite periods as leases for the lifetime of the lessee.
(see Donkangonda vs Revanshiddappa (3).
In Bavasaheb vs West Patent Co.(4) Sonabai 's case (2) was once again dissented from, the High Court reiterating that a lease for an indefinite period is ordinarily to be construed as one for the lifetime of the lessee and that a distinction should be made between a transferable and a. heritable lease.
The High Court.
there observed (1) that if a lease were to be for a definite period and before that period was over, the lessee died, the leasehold rights during the remainder of the period would enure for the benefit of his heirs, unless the document stipulated that in such an event the rights of the lessee were not to enure for the benefit of his successors, (2) that if the lease was for an indefinite 'period, it would not enure for the benefit of the lessee 's heirs.
such a lease would usually be for the lifetime of the lessee himself unless it clearly appeared from the contract that the benefit of the lease was intended to accrue to the lessee 's successors.
, Whether a lease was permanent or for the lifetime only of the lessee, even where it was for building structures and was transferable, depended upon the, terms of the lease and the Court must, therefore, look at the substance of it to ascertain whether the parties intended it to be a permanent lease.
But the fact that the lease provided that the lessee could continue in possession of the property so long as he.
paid 'the stipulated rent did ' hot mean that the 1ease.
was for perpetuity.
It would usually be regarded as a lease for an indefinite period and as such.
for ' the lessee 's lifetime.
The High Court also pointed out that the fact that tenancy rights were transferable,, as provided (1) I.L.R. (2) (3) (4) 56 Bom.
L.R.61 342 by section 108(j) of the , did not mean that they were also heritable.
In two of its decisions, Runge Lail Lobes vs Wilson(1) and Promada Nath Roy vs section Chowdhry(2) the Calcutta High Court took the view that where the purpose of the lease was for constructing buildings, the court could presume, even though the document did not in terms so provide, that the lease was intended to be permanent.
To the same effect was also the decision in Navalram vs Javerlial(3).
On the other hand in Lekhraj Roy vs Kunhya Singh(4) where the lease was for the period of the continuance of ,the lessors ' mokurruri, the Privy Council held that if it could be ascertained what the term was.
the rule of construction that a grant of an indefinite nature enured for the lifetime of the grantee would not apply.
But, if the grant was made to, a person for an indefinite period, it enured, generally speaking, for his lifetime and passed no interest to his heirs unless there were words showing an intention to grant a hereditary interest.
In Abdul Rahim vs Sarafalli (5) the Bombay High Court adhered to the view consistently taken by it that the lease there was for the lessee 's lifetime.
The lease there contained terms similar to those before us.
It was for building a factory and although it provided for 25 years certain in the first instance it also provided that after the expiry of that period the lessee would continue to take the agreed rent so long as the lessee remained in possession and further provided for the lessee 's right to remove the factory when he decided to hand over the land to the lessor.
The conflict of opinion amongst these decisions has since then been resolved by the decision in Bavasaheb 's case(6) having been expressly approved by this Court in Sivavogeswara Cotton Press vs Panchaksharappa (7) The lease here was for building factories and other structures and was for a period of 20 years certain.
It, however, provided that the lessee could continue to remain in possession so long as he desired and observed the terms of the lease which provided for a higher rent for the first 10 years after the expiration of the said 20 years and a still higher rent thereafter.
(14) of the lease in addition provided that it was to be binding "on me, my heirs, executors, administrators, successors and assigns, as well as on.
your heirs, executors, administrators, successors and assigns. .
The question was as to the (1) [1899]I.L.R.26 Cal.204.(2) Cal.
(3) (4) [1876 77] L. R. 4 I. A. 223.
(5) (6) 56 Bom.
L. R. 61.
(7) 343 nature of the lease.
At page 885 .of the report, the Court remarked that cl.
(14) was a very important clause "which though coming as the last clause must govern all the stipulations between the parties.
Thus the terms conditions of the km which created the rights and obligations between the lessor and the lessee were specifically declared to be binding on the heirs and successors in interest of the lessor the lessee".
The Court then examined various decisions of the different High Courts including Navalram 's case Promnada Nath Roy 's case (2) and lastly, Bavwaheb 's case (3).
As to the last case, the Court at page 889 of the report expressed its "complete agreement" with the observations of Gajendragadkar, J. (as he then was), namely, that the nature of the tenancy created by a document must be determined by construing the document as a whole, that if the tenancy is for building purposes, prima facie it might be arguable that it was intended for the life time of the lessee or might in certain cases be even a permanent lease, and lastly, that, whether it was a tenancy for life or a permanent tenancy must ultimately depend upon the terms of the contract itself.
As can be seen from an earlier passage on that very same page, the Court distinguished Bavagaheb 's (3) case on the ground that the lease there did not contain a provision similar to cl.
(14) in the case before it.
Besides, the Court sought an additional support for its conclusion that the lease was permanent in the provision which stipulated that the rent would be Rs. 350 a year for the first 20 years, Rs. 400/ for the next 10 years and Rs. 500/ thereafter until the lessee continued to occupy the land, which provision indicated that the lease was not intended to be only for the life time of the lessee.
It is clear from the decision that what clearly weighed with the Court was the fact that the document of lease distinctly indicated that the parties intended that the rights under the lease were to be hereditary.
The question.
therefore,.
is whether the lease under consideration is of the type in the case of Sivayogeswara Cotton Press.(4).
Looking at the document (exhibit P 4) as a whole.
the lease un doubtedly is for building a residential structure.
Though it is for 30 years certain, the lessee was entitled to remain in possession of the land so long as he paid the stipulated rent, which the lessor was not entitled to increase.
But, though the lease is for building structure and the period is indefinite there are at any rate no (1) (2) Cut.
(3) 56 Bom.
L.R. 61.
(4) ; 344 express words indicating that the leasehold rights thereunder were intended to be heritable.
On the other hand it expressly provides, as was the case in Abdul Rehim(1) for the right of the lessee to remove the structures, meaning thereby vacating the land, if he so desired.
The clause providing for such removal is not that the lessee would remove the structures on default in payment of rent, but depends on his own volition, a clause indicative of the parties not having intended the lease to be permanent.
For, if it was intended to be permanent, there was no necessity for providing such a right.
But the argument was that there are words in the document indicative of the lease having been indented to be heritable as was the case in Sivayogeswara Cotton Press (2).
The mere fact, however, that a lease provides for the interests thereunder to pass on to the heirs of the lessee would not always mean that It is a permanent lease.
Such a provision can be made in two ways resulting in two different consequences.
A lease may provide a fixed period and then include a provision that in the event of the lessee dying before the expiry of such period, his heirs would be entitled to have the benefit of the lease for the remainder of the period.
In such a case, although, the lease may provide for the heirs to succeed to the interests in the leased land, it would only mean that such heirs succeed to the rights upto the expiry of the lease period.
If the lease, on the other hand, were foran indefinite period, and contain a provisions for the rights thereunder being heritable, then such a lease, though ordinarily for the lifetime of the lessee, would be, construed as permanent.
The question, therefore, is to which of these two classes, of leases the present lease belongs.
After reciting the purpose for which it was made, the term of 30 years and the rent.
the, deed provides: "Even after the prescribed time limit, I shall have a right to keep my structure on the leased out land, so long as I like, and I shall be paying to you the rent every year as stated above." Though the period is 30 years, this part of the document would make the lease for an indefinite period which would ordinarily mean a lease for the lifetime of the lessee.
What follows then, however gives, scope for the argument that it is not merely for the lifetime of.
the, lessee: "You will have no right to increase the rent and I shall also not pay it, myself and my heirs shall also not pay it, myself and my heirs shall use this land in whatever manner we please.
After the lease period, we (1) (2)[1962] 3 S.C.R. 876. 345 shall, if we like, remove our building right from the foundation and vacate your land.
In case we remove our structure before the stipulated period, we shall be liable to pay to you, the rent for all the thirty years, as agreed to above." And further: "In case I were to sell away the buildings, which I shall be constructing on the above land, to anyone else, then, the purchaser shall be bound by all the terms in this lease deed.
" This part of the document undoubtedly gives the lessee the right to transfer by sale the leasehold interest.
But, as already stated, a clause enabling the leasehold interest to be transferred does not render such interest heritable.
The effect of these clauses is that the first part of the document ensures that the lessor cannot charge rent higher than the agreed rent even if the lessee were to remain in possession after the period of 30 years.
That part is consistent with the lease being for an indefinite period, which means for the lifetime of the lessee.
The next part provides for the right to remove the structures "after the lease period".
The words "after the lease period" mean either at the end of the 30 years, or on the death of the lessee, because, it also says that if the lessee were to remove the buildings before the expiry of 30 years, he would have to pay the rent for the remainder of that period.
This part of the document does not show the intention that the lease was to be a permanent lease.
It merely ensures the right to remove the structures if the lessee or his heirs so desired on the expiry of the lease period, i.e., either at the end of 30 years, or after the lifetime of the lessee.
The heirs are mentioned here to provide for the contingency of the lessee dying before the expiry of 30 years and also for the contingency of his living beyond that period and continuing to occupy the land.
In the event of the first contingency, the lessee 's heirs would continue in possession till the expiry of 30 years and then remove the structures if they wished.
In the case of the second contingency, the, heirs of the lessee would have the right to remove the structures on the death of the lessee.
In either event the right provided for is the right to remove the structures.
It is not a provision for the lease being heritable and its being consequently a permanent lease.
Thus, the lease is for a period certain, i.e., 30 years and on the expiry of that period if the lessee still were to continue to pay the rent, for his lifetime.
In the event of his dying before that period, the benefit of the lease would enure to his heirs till the completion of 30 years.
They would be entitled to remove the structures either 346 at the end of the 30 years if the lessee were to die before the expiry of that pariod or at the end of the lessee 's fife were he to continue to be in possession of the leased property after the expiry of 30 years.
But the lease did not create hereditary rights so that on the death of the lessee his heirs could succeed to them.
In this connection it is necessary to note that, as translated in English, it would appear as if the document uses the pronoun 'I ', meaning as if the lessee in the earlier part and the pronoun "we", meaning the lessee and his heirs, in the latter part.
Such a translation, however, is not correct.
We ascertained from Mr. Ratnaparkhi who after looking at the original Marathi assured us that the pronoun used throughout is ami, which means "we,", a term often used in documents written in regional language for the executant instead of the singular 'I '.
In our view the lease before us is clearly distinguishable from that in the case of Sivayogeswara Cotton Press(1) where the leasehold rights were in clear terms made heritable and where the Court held that cl.
(14), though placed last in the document, governed all its There is no provision in the present cast comparable with such a clause.
The lease was undoubtedly for an indefinite period which only means that it was to enure for the lessee 's lifetime.
Reference in it of the heirs of the lessee is only for the.
limited purposes set out earlier and not for making the leasehold interests heritable.
We do not find in the document words such as those in Sivayogeswara Cotton Press (1) would compel us to the conclusion that the lease was intended to be permanent.
That leads us to the second contention of Mr. Desai.
Under section 108(d) of the , if any accession is made to the leased property during the continuance of a lease, such accession is deemed to be comprised in the lease.
If the accession is by encroachment by the lessee, and the lessee acquires title thereto by prescription, he must surrender such accession together with the leased land to the lessor it the expiry of the term.
The presumption is that the land so encroached upon is added to the tenure and forms part thereof for the benefit of the tenant go long as the km continues and afterwards for the benefit of the landlord The of the appellant.
in the plaint in regard to an accession was vague and confused.
Para 2 of the plaint simply stated that the said strip of land was part of plot No. 93, but was used by the appellant as a passage.
para 7(a) of the plaint, however,used the word "accession to the leasehold rights of the plaintiff in respect of the nazul plot No. 94", but did not say that such (1) ; 347 accession came about as a result of or by means of adverse possession.
In para 8(a), which was inserted in the plaint by an amendment in 1959, an alternative plea was made that the said strip of land was part of the land under the lease.
The written statement of the respondent denied the user of the said strip of land by the appellant and also the plea of accession thereof to the leased land.
But the appellant 's case was only that the building which his father had constructed extended upto the end of the western boundary of plot No. 94, with the result that (a) the eaves of that building projected over plot No. 93 by about 21 ft., that its windows on that side opened on plot No. 93 and a drain was constructed by the side of the appellant 's western boundary through which waste water flowed from that building.
According to the appellant 's case, the said strip of land, which withou t doubt forms part of plot No. 93, was used by the appellant as a passage for going to a well situate in plot No. 93.
Plot No. 93, however, was an open plot until recently, except for a small structure on its northern side, so that there was no definite or well marked passage which was used by the appellant in order to reach the said well.
The projection of the eaves or the opening of the windows on to the said strip of land were not asserted as acts of adverse possession or encroachment but as easementary rights.
The appellant did not claim any right to the said well as admittedly the use of the said well for drawing water was with the consent of the lessor.
Therefore, the use of the passage for going to the well would be incidental to the permissive use of the said well As regards the drain, the appellant 's evidence was that it passe partially through the said strip of land.
Originally a kachha drain, it was made pucca upto a distance of 32 ft. in 1923.
No width of it, however, was shown.
Obviously, there can, therefore, be no adverse possession over the whole of the 4 ft wide strip of land.
The Letters Patent Bench has pointed out three circumstances as emerging from the evidence which clearly negative the case of accession by adverse possession: (1) that the original plot was given two numbers, 94 and 93 in 1929, plot No. 93 being shown as commencing from the western wall of the appellant 's building, (2) that no protest was ever made against such a demarcation by the appellant or his father, and (3) a clear admission by the appellant in cross examination that according to him the said strip of land was covered by the lease deed add was 'not an acquisition over and above the leased land under that deed.
Parties to a suit are, it is true, entitled to make contradictory pleas in the alternative in their pleadings.
But at the stage of the evidence, no serious attempt was made by the appellant to establish accession by adverse possession.
On the contrary, the appel 348 lant sought to make out a case of easementary rights by prescription, a case incompatible with the claim of, adverse possession where a party claims title over the land of another as his own and therefore there would be no dominant tenement claiming a right by prescription over a servient tenement.
In this state of the evidence the Letters Patent Bench, in our judgment, was right in rejecting the claim of accession which the learned Single Judge had erroneously accepted.
As regards the appellant 's claim to the easementary rights, assuming that a lessee can claim such rights over an adjacent property belonging to his lessor, section 15 of the Easements Act requires that the access and use, on the basis of which an easement is claimed, must be as and by way of easement and without interruption for a period of 20 years.
The enjoyment must be, in other words, as of right and not permissive either under a licence or an agreement.
In Abdul Rashid vs Brahman Saran(1) a Full Bench of the Allahabad High Court held, on the principle embodied in section 12, that the possession of a tenant being in law the possession of his landlord, the tenant cannot acquire by prescription an easement in favour of his holding except on behalf of his landlord.
The Full Bench, however, made a distinction between an easementary right of way and an easementary right of light and air mentioned in the first two paragraphs of section 15, and held that though a lessee of land, who is the owner of the building on such land, cannot acquire by prescription an easement of a right of way or one to flow water over another land of the lessor, so far as the use of light and air or support for his building is concerned he is the owner of the building and may under the first two paragraphs of section 15 acquire such easements as he would not acquire them for any one except himself under section 12.
This decision was followed in Haji Abdulla Harron vs Municipal Corporation, Karachi(2).
But in Ambaram vs Budhalal(3) the High Court of Bombay differed from the Allahabad High Court holding that the distinction in English law arising from the language of sections 2 and 3 of the Prescription Act, 1832 between an easement of light and air on the one ]hand and of easement of way on the other, did not hold good under the Easements Act as no such distinction is made in sections 4 and 12 of the Act, that it is under section 12 that an easement is acquired and not under section 15 which provides for not the persons who can acquire easementary rights but the method by which they can be acquired, and therefore, the principle laid down in sections 4 and 12 would apply, namely, that if the lessee acquires a right to light and air, he does so on behalf of the owner and therefore he cannot acquire it on behalf of the owner (1) I.L.R. [1938] All.
(2) A.T.R. 1939 Sind 39.
(3) 349 as against such owner.
There is thus clearly a conflict of view between the two High Courts.
It is, however, not necessary to resolve this conflict in this case as the question of easements in the present case can be disposed of in another way.
IV of the Act deals with the disturbance of easements and section 33, therein provides that the owner of any interest in the dominant heritage or the occupier of such heritage may institute a suit for the disturbance of the easement provided that the disturbance has actually caused substantial damage to the plaintiff.
Under Explanation II read with Explanation I to the section, where the disturbance pertains to the right of free passage of light passing through the openings to the house, no damage is substantial unless the interference materially diminishes the value of the dominant heritage.
Where the disturbance is to the right of the free passage of air, damage is substantial if it interferes materially with the physical comfort of the plaintiff.
In Ravachand vs Maniklal (1), it was held that an easement by prescription under sections 12 and 15 of the Act is in fact an assertion of a hostile claim of certain rights over another man 's property and in order to acquire the easement the person who asserts the hostile claim must prove that he had the consciousness to exercise that hostile claim on a property which is not his own and where no such consciousness is proved he cannot establish a prescriptive acquisition of the fight.
Therefore, if the owner of a dominant tenement has, during the period of prescription, exercised rights, on the footing that he is the owner but which he later on claims as an easement over a servient tenement, then, his exercise of those rights is not exercised as an easement and he must fail in a claim for an easement.
As already stated, a party to a suit can plead inconsistent pleas in the alternative such as the right of ownership and a right of easement.
But, where he has pleaded ownership and has failed, he cannot subsequently turn around and claim that right as an easement by prescription.
To prove the latter, it is necessary to establish that it was exercised on some one else property and not as an incident of his own ownership of that property.
For that purpose, his consciousness that he was exercising that right on the property treating it as someone else 's property is a necessary ingredient in proof of the establishment of that right as an easement.
In his evidence, the appellant did not claim the right of passage or of light and air or of draining his waste and rain water over the said strip of land as rights over the respondent 's property.
On the contrary, he made it clear that the said strip of land fell (1) I.L.R. 350 under the document of lease.
"I have a right on both, the properties under the lease dead itself".
he declared in his.
evidence, and added, "whatever rights I have acquired are under the lease deed itself and not afterwards" His claim that the strip of land was included in the leased land could not succeed because he had to admit that although two different municipal numbers, 94 and 93, were given as early as 1929 to the portions of the land, 94 to the portion under his possession, and 93 to that under the possession of the respondent, no complaint was ever made to, the municipality or any other authority that the strip of land which he claimed to be covered under the lease should be included in his plot, namely, No. 94.
In 1940, and again in 1955, when transfer deeds in respect of plot No. 94 were executed by him, the area mentioned therein was described as measuring 5182 sq.
"ft., which would not include the strip of land forming part of plot No. 93.
Having thus failed in his claim that the said strip of land was acquired either as accession or as one covered by the lease deed, he could not turn round and successfully claim that he had during the requisite period exercised rights over it on the footing of an owner of a dominant tenement exercising those rights over a servient tenement of another.
Assuming, however, that the said strip of land was used by him as a passage, the evidence clearly showed that it was permissive.
There was evidence of a permission having been asked for from the respondent 's father by the appellant for installing a handpump over the respondent 's well in plot No. 93.
If the appellant, and previously his father, were permitted to draw water from that well the use of the well for drawing water and of the strip of land as a passage for going to the well was clearly permissive and not as an open hostile use over the lessor 's property.
The appellant himself admitted that his father had taken a portion of plot No. 93 on lease paying separate rent therefore at Rs .45/ a year, and had put up thereon a tin shed which stood there from 1935 to 1941.
It is clear that the strip of land was allowed to be used as a passage both to the well and the said tin shed.
He admitted two letters, dated September 30, 1958 and December 4, 1959, having been written by him to the respondent both relating to rent due, by him in respect of :the said land on which the said tin shed stood.
On these facts it is impossible to sustain the right of passage over the said strip of land as an easementary right by prescription for a continuous period of 20 years.
As to the light and air through the windows on the western side, it is clear from Explanations II and III to section 33 that to constitute an actionable obstruction of free passage of light or air to the openings in a house it is not enough that the light or air is less than before.
There must be a substantial privation of light, enough to render the occupation of the house uncomfortable, 351 according to the ordinary notions of mankind.
See Colls vs Home and Colonial Stores(1).
The plan produced in evidence shows that the central part of th e appellant 's building has five windows on the ground floor, five in addition to one smaller window on the first floor and four on the second floor.
All these windows are in the rear side of the building and open out an to the said strip of land.
There can be no doubt and the plan shows clearly that as a consequence of construction by the respondent, there would be a deprivation, partially though it would be, of light and air previously enjoyed 'by the appellant through these windows, especially as they are on the western side.
On the ground floor, all the five windows are affected.
On the first floor, only three windows are affected, and that too partially.
On the second floor, none of the four windows is affected at all.
Thus, so far as the ground and first floors are co , the appellant would not have the same amount of light and air.
as before.
But the evidence shows that there are openings, doors and windows, on each of these floors on the front side, i.e., on the eastern side.
There was some evidence also that the ground floor bad so far been used as a godown ,or a store room, though the appellant a that he had been using it also as a living room.
No attempt, however, was made on behalf of the appellant to establish that the obstruction caused by the respondent 's construction had been such as to amount to a substantial privation, so as to render occupation of the house by him uncomfortable.
In the absence of such proof he was rightly nonsuited by the High Court.
As regards the drain, we say nothing, as part of the appel lant 's claim in regard to it has been allowed by the High.
Court and there are no cross objections against it by the respondent.
In the view that we take, the appellant Cannot succeed on any one of the three questions raised by his counsel.
The appeal, therefore, fails and has to be dismissed with costs.
V.P.S. Appeal dismissed.
| IN-Abs | In 1906 the predecessor in title of the respondent leased out an open portion of land to the appellant 's father.
The lease was for building a residential structure, and the appellant constructed a house.
Though it was for 30 years certain, the lessee was entitled to remain in possession of the land so long as he paid the stipulated rent, which the lessor was not entitled to increase.
There were no express words indicating that the leasehold rights were intended to be heritable.
The deed provided for the right of the lessee to remove the structures after the lease period, meaning thereby vacating the land, if he so desired.
It gave the lessee the right to transfer by sale the leasehold interest.
In 1929, the original plot was given two numbers 94 and 93 the latter being the western portion in the possession of the respondent lessor and the former being the eastern portion leased out to the appellant.
There was a strip of land, 4 ft.
in width, immediately to the west of survey No. 94 and forming part of survey no 93.
This strip of land was used by the appellant for passage for going to a well situated in plot No. 93.
The appellant 's father had taken a portion of plot No. 93, including the strip, on lease, paying separate rent therefore and put up thereon a tin shed which stood there from 1935 to 1941.
Sometime thereafter the respondent commenced construction on survey No. 93 in close vicinity to the appellant 's plot On the questions: (1) Whether the lease was a permanent lease; (2) there was an accession in respect of the strip of land within the meaning of section 108(d) of the , and therefore, the strip of land must be deemed to be comprised in the lease; and (3) whether the appellant had acquired by prescription, rights of easement of light and air and of passage over the strip of land under section 15 of the Easements Act, 1882.
HELD: (1) The question as to whether a lease was permanent or for the life time only of the lessee, even where it was for building structures and was transferable, depends upon the terms of the lease.
The mere fact that a lease provides for the interests thereunder to pass on to the heirs of the lessee would not always mean that it is a permanent lease.
Such a provision can be made in two ways resulting in two different consequences.
The lease may provide a fixed period and then include a provision that in the event of the lessee dying before the expiry of such period his heirs would be entitled to have the benefit of the lease for the remainder 336 of the period.
In such caes, although the lease may provide for the heirs to succeed to the interests in the leased land it would only mean that such heirs succeed to the rights up. 'to the expiry of the lease period.
If the lease provided that the lessee could continue in possession of the property so long as he paid the stipulated rent, it would usually be regarded as lease for an indefinite period and as such for the lessee 's life time.
In such a case, if the lease contains a provision for the rights thereunder being heritable, then, such a lease,, though ordinarily for the lifetime of the lessee, would be construed as permanent.
[341F H; 344C E] In the present case, since the lessee was entitled to remain in possession even after the lease period it was a lease for an indefinite period.
But there was no provision in the deed making the lessee 's right heritable ' and therefore, it was not a permanent lease but only for the lifetime of the lessee.
[344A; 346D E] (a) The words, if the lessee were to remove the buildings before the expiry of 30 years he would have to pay rent for the remainder of the period, do not show an intention to create a permanent lease.
The clause providing for such removal is not that the lessee would remove the structures on default of payment of rent but on his own volition, a clause indicative of the parties not having intended the lease to be permanent.
[344B; 345E F] (b) The words 'after the lease period ' mean either at the end of 30 years or at the death of the lessee.
Therefore, the clause that after the lease period we shall, if we like, remove our buildings ', merely ensures the right to remove the structures if the lessee or his heirs so desired on the expiry of the lease period, that is, either at the end of 30 years or after the lifetime of the lessee.
The heirs are mentioned here to provide for the contingency of the lessee dying before the expiry of 30 years and also for the contingency of his living beyond that period and continuing to occupy the land.
In the event of the first contingency, the lessee 's heirs would continue in possession till expiry of 30 years and then remove the structures if they wished.
In the case of the second contingency the heirs of the lessee would have a right to remove the structures on the death of the lessee.
In either event the right provided for is the right to remove the structures.
It was not a provisions for the lease being heritable and its being consequently a permanent lease.
[345D H] (c) The pronoun used in the document is the vernacular equivalent of 'we ' used for the executant instead of the singular 'I ' and does not mean the lessee and his heirs.
[346B C] Sivavogeswara Catton Press vs M. Panchaksharappa, ; , Lekhraj Ray vs Kunhya Singh, 1876 77 L.R. 4 I.A. 223 Vaman Shripad vs Maki, I.L.R. , Donkangonda vs Ravanshivappa, , Bavasaheb vs West Patent Co. 56 Bom.
L.R. 61 and Abdul Rahim vs Sarafalli, , referred to.
Sonabai vs Hiragayri, , Runge Lall Lobes vs Wilson, Cal. 204, Promoda Nath Roy vs section Chowdhry, Cal.
648 and Navalram vs Javerilal, , disapproved.
(2) Under section 108(d) of if any accession is made to the leased property during the continuance of a lease, such accession is deemed to be comprised in the lease.
[346F] 337 In the present case, the appellant made no serious attempt to establish accession by adverse possession.
[347H] (a) When the plots were separately demarcated including the strip in the respondent 's portion no protest was ever made against such a demarcation by the appellant or his father.
[347G] (b) The appellant made a categorical statement in evidence, that according to him the said strip of land was covered by the lease deed and was not an acquisition over and above the leased land under the deed, but the evidence showed that strip was not so included.
[347G H], (c) The appellant sought to make out a case of easementary right by prescription, a case incompatible with the claim of adverse possession [348A B] (3) Under sections 12 and 15 of the Easements Act an easement by prescription can be acquired by assertion of hostile claim of certain rights over another man 's property.
In order to acquire the easement the person who asserts the hostile claim must prove that he had, the consciousness to exercise that hostile claim on a property which is riot his ' own, and where no such consciousness is proved, he cannot establish a prescriptive acquisition of the right.
Where he has pleaded ownership and has failed, he cannot subsequently turn round and claim that right as an easement by prescription.
To prove the latter it is necessary to establish.
that it was exercised on someone else 's property and not as an incident of his own ownership of that property.
[349D G] In the present case, the appellant having claimed, though unsuccessfully, that the strip of land was included in the leased land or that there was an accession, he could not successfully claim that during the ' requisite period he exercised rights over it as the owner of a document tenement.
Further,.
he could not claim any right of passage because his use of the strip as a passage was permissive.
[350C E] As to light and air through.
the windows on the western side the appellant could succeed only if there was a substantial privation of light, enough lo render the,occupation of his house uncomfortable according to ordinary notions of mankind [350H 351IA] In the present case, the plan showed that as a consequence of construction by the respondent there would be a partial deprivation of light and air.
But no attempt was made on behalf 'of the appellant to establish that the obstruction caused by the respondent 's construction had been such as to amount to substantial privation so as to render the occupation of the house by the appellant uncomfortable.
[351 C E] Rayachand vs Maniklal, I.L.R. [1946] Boni.
184 (F.B.), approved Colls vs Home and Colonial Stores, ; , applied [The question,whether under sections 4.and,12 of the, Easement Acta lessee can acquire a right to light and air as against the owner, left open] [349A]
|
Appeals Nos. 1164 and 1165 of 1967.
Appeals from the judgment and order dated December 1, 1965 of the Madhya Pradesh High Court, Indore Bench in Misc.
Petition Nos. 18 and 19 of 1964.
M. section K. Sastri, M. N. Shroff for I. N. Shroff, for the appellant (in both the appeals).
B. R. L. lyengar, R. A. Gupta and K. B. Rohatgi, for the respondent (in C. As.
No. 1164 of 1967).
P. C. Bhartari, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the respondent (in C. A. No. 1165 of 1967).
The Judgment of the Court was delivered by Mitter, J.
The State of Madhya Pradesh has come up in appeal to this Court from two orders of the State High Court allowing two writ petitions filed by the two respondents herein for quashing the orders of eviction made against them under Section 3 of the Madhya Pradesh Government Premises (Eviction) Act.
The facts in Civil Appeal No. 1164 of 1967 are as follows.
Many years back, a former Ruler of the Indian State of Jhabua in Central India had given a jagir to his mistress, Paswanji Smt.
Navratanbai.
Navratanbai had either purchased or constructed two houses on College Marg.
According to the Writ Petition fled in the High Court the acquisition was out of her private funds. 'his was not however admitted in the return to the petition.
The successor of the former Ruler Dilipsingh purported to forfeit the jagir in the year 1943.
The order of forfeiture is not on record but is sought to be borne out by an order dated 1st April, 1948, evidently made in anticipation of the merger of the State in the Union of Madhya Bharat which took place on June 29, 1948.
The order addressed to Paswanji Navratanbai ran : "In September 1943 your jagir was confiscated to the State and you were granted Rs. 100 per month by way of allowance vide Parwana No. 1735 dated 23 9 1943 and this amount was being paid to you on behalf of the Huzur from the civil list because such types of allowances etc.
are paid from it.
But now as new arrangements are being 409 made regarding the states of Malwa and there is likelihood of reduction in the percentage of the civil list, therefore, the aforesaid monthly allowance shall henceforth be paid to you every month from State, Treasury from generation to generation.
You may reside in the two big houses of Khasgi during your lifetime in which you are residing at present.
After your lifetime both these houses shall be taken in possession of the Huzur.
You shall have no right to sell or mortgage or create any charge on these houses.
" There is another Huzur order on record dated 30th March, 1948 purporting to declare a large number of immovable properties as the private property of the Ruler and the ruling family.
Among the properties set out at the foot of the order are mentioned : "6.
(e) All houses which are occupied by Bapu Ram singh.
(f) All houses which are in the occupancy of Navratanbai".
When the question of settling the list of private properties of the Rulers of the integrating Estates in Madhya Bharat came up before the Government of India, the Political and External Department of the Madhya Bharat Secretariat passed an order recording a ;decision regarding the settlement of private properties of the State of Jhabua.
The memorandum dated July 25, 1949 of the Madhya Bharat Secretariat, Political and External Department, shows that each department concerned had to take action for handing over all the property to the Ruler concerned and to see that no property out of the properties belonging to the Ruler and/or the State before the formation of Madhya Bharat was left with the Ruler excepting the properties in the enclosed list.
The relevant list,, for the Ruler of Jhabua did not include the properties occupied either by Bapu Ramsingh or Paswanji Navratanbai.
Paswanji Navratanbai protested against the inclusion of her houses in the list of private properties made out by the Ruler of Jhabua and addressed a memorandum to the Raj Pramukh of Madhya Bharat Union for amendment of the inventory submitted by the said Ruler.
No steps appear to have been taken to evict Navratanbai from the said premises in her lifetime.
On 30th April 1962 the Executive Engineer District Dhar, submitted an application under Section 3 read with Section 4 of the Madhya Pradesh Government Premises (Eviction) Act, 1952 for eviction of the respondents in Appeal No. 1164 of 1967 from the two properties formerly belonging to Navratanbai before the.
Sub Divisional Officer Jhabua, Constituted the competent authority under the Act.
An order of eviction made 410 by the Sub Divisional Officer was upheld in appeal to the, Collector.
Shivkunwarbai, widow of late Bapu Gordhansinghji son of Navratanbai filed a writ petition in the High Court for quashing.
the said order.
Appeal No. 1164/1967 is from the said order.
The facts in the other appeal i.e. 1165 of 1967 are similar to the facts just narrated.
In this case the same former Ruler had granted a jagir to his son Ramsingh by his mistress Paswanji Bhagirathibai.
The succeeding Ruler purported to forfeit the jagir and granted a monthly allowance of Rs. 100.
An order similar to the one dated 30th March 1948 already mentioned was passed while the order of April 1, 1948 affected Ramsingh as it did Navratanbai in the other case.
There was an order of eviction as in the other case followed by a writ petition to the High Court.
The central question in these two appeals is, whether the State of Madhya Bharat ever became entitled to these properties in the facts and circumstances mentioned which justified its attempt to evict the respondents under the provisions of the Act of 1952.
This would depend on the finding as to whether these properties were taken over by the Union of Madhya Bharat following the merger of the State of Jhabua therein in 1949.
The fact that some only of the properties set forth in the declaration of 1st April 1948 and claimed by the Ruler as private property "were accepted as such" by the Government of Madhya Bharat does not lead to the inference that all the other items of property in the said declaration were taken over by an Act of State.
There must be some positive evidence of such Act.
It is also possible that the list had wrongly included properties belonging to citizens of the State of Jhabua about which there was no adjudication.
The records only show that out of the list of properties submitted by the Ruler, a certain number of them was treated by the Government of India as being his private properties.
There was no finding with regard to the others that they appertained to the Ruler as distinct from his private property.
As these properties originally belonged to the predecessors in interest of the respondent i.e. in C. A. 1166/1967 and the respondent in C. A. 1165/1967 there must be some evidence of displacement of their title before the Eviction Act could be made applicable to them.
In order to succeed in the appeals the appellant must first establish that the properties had been confiscated by the Ex Ruler and had ceased to belong to Navratanbai or Bapu Ramsingh.
The order of April 1, 1948 records the confiscation of the jagirs and does not record that the houses in the possession of Navratanbai were similarly confiscated, assuming that confiscation was possible by a mere order of this type.
On the other hand, the order shows that Bai Navratanbai was to have full use of the houses for her lifetime but she was not to sell or mortgage the 411 same.
The declared that after her lifetime the property would be taken possession of by the Huzur does not amount to an order of confiscation and a re grant thereof for the donee 's lifetime.
If the properties remained the property of Nawatanbai after the passing of the said order of 1948 nothing was done thereafter to show that she lost her interest in the provides or that the same passed to the Union of Madhya Bharat ailed from the said Union to the State of Madhya Pradesh.
When attempts are made to deprive a person of his lawful inheritance it must be shown by irreproch able evidence that the person in possession ceased to have any interest therein at a particular point of time and that by some process of law the property vested in the person seeking to eject he former lawful possessor.
There is no such evidence in this case.
It follows that the properties, the subject matter of the two appeals, never became the properties of the Ruler of Jhabua ownership whereof passed to the Union of Madhya Bharat and from the Union to the State of Madhya Pradesh.
Section 3 of the Madhya Pradesh Premises (Eviction) Act, 1952 enables the competent authority under the Act to order inter alia that the person in un auhorised occupation lot any Government premises to vacate the same within 30 days of the date of the service of the notice in terms of the section.
Section 4 empowers the competent authority to assess damages on the ground of use and occupation by any person in unauthorised occupation of any Government premises.
In order to enable Government to take proceedings successfully under either of these sections, it must satisfy the Court that the premises in respect whereof action was taken was Government premises.
As the State failed to establish this fact the question of eviction under the Act could never arise.
In the result, the appeals are dismissed with costs.
G.C. Appeals dismissed.
| IN-Abs | The ruler of the erstwhile State of Jhabua granted jagirs to N and R. The Jagirs were forfeited in 1943.
On March.
30, 1948 the Ruler made an order purporting to declare a large number of immovable properties, including certain houses in the occupation of N and R as his private proper.
On April 1, 1948 the Ruler made another order purporting to grant to N and R the right to continue to occupy the said houses during their life time without any right to sell, mortgage or create any charge thereon.
On June 29, 1948 the State of Jhabua merged in the State of Madhya Bharat.
The Government of the State of Madhya Bharat did not recognise the claim of the erstwhile Ruler of Jhabua to all the properties claimed by him as his private properties.
The properties in the occupation of N and R were among those not recognised as the Ruler 's private property.
The possession of N on the properties in her occupation was not disturbed in her lifetime.
On April 30, 1962 the Executive Engineer District Dhar, submitted an application under section 3 read with section 4 of the Madhya Pradesh Government Premises (Eviction) Act, 1952 for the eviction of R and the successor in interest of N from the properties respectively occupied by them.
Orders of eviction made by the Sub Divisional Officer were upheld by the Collector in the appeals filed before him.
The high Court however allowed the writ petitions filed by N 's successors in interest and by R and quashed the orders of eviction against them.
The State of Madhya Pradesh appealed.
HELD: The appeal must be dismissed, The evidence showed that some only of the properties set forth the declaration of April, 1, 1948 and claimed by the Ruler as private property "were accepted as such by the Government of Madhya Bharat: there was no finding with regard to the others that they appertained to the Ruler as distinct from his private properties.
In order to succeed the, appellant had to show that the properties had been confiscated by the Ex ruler and had ceased to belong to N and R. [410E G].
As the properties originally belonged to N and R there must be some evidence of the displacement of their title before the Eviction Act could be made applicable to them.
The order of April 1, 1948 passed by the Ruler could not be interpreted as an order of confiscation.
It was not proved that the ownership of the properties had passed to the Ruler and thereafter first to the State of Madhya Bharat and then to the State of Madhya Pradesh [410G H] 408 In order to enable Government to take Proceedings successfully under either section 3 or 4 of the Act, it must satisfy the Court that the premises in respect whereof action was taken was Government premises.
As the State 'ailed to establish this fact the question of eviction under the Act could never arise.
[411E].
|
ivil 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.
K. R. Chaudhuri, for the appellant.
B. V. Subramanyam, A. Subba Rao for A. V. Rangam, for respondent No. 1.
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 exhibit 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 211 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 exhibit 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 (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.
212 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 213 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.
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 exhibit 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 exhibit 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 exhibit 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 exhibit 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 214 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 exhibit 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 exhibit A 7 and exhibit 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 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 exhibit A 6, it is necessary to refer to the circumstances leading to the execution of exhibit A 6.
On October 15, 1952 under exhibit 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.
215 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.
at Vijayawada of the approximate value of about Rs. One Lakh.
Resolution: Sanctioned Rs. 25,000.
" 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 216 be seen in exhibit A 67.
he has signed that same id Telugu.
exhibit 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 exhibit 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.
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 exhibit
A 3, loan application exhibit A 2, agreement for cash credit on the security of pledged goods, exhibit 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, , 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 deposit of title.
, deeds.
was made to secure the loan advance to him under exhibit A 67.
Under exhibit 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. . . " 217 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 (exhibit A 22).
He sent a reminder in that connection on April 1, 1954 (exhibit 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 exhibit 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 218 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 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 exhibit 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 exhibit A 7 and A 8 were deposited under exhibit A 6.
These allegations were repudiated ' by the appellant in his registered reply notice exhibit A 19 date& April 21, 1954.
From the above discussion it is clear that apart from exhibit 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 exhibit 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 exhibit 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 219 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 section 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. 7 501 in ward No. 22 and bearing No. 21612 N. T. section 663 Block No. 13 (sic) Ward No. 9 measuring 0.28 (sic) and the other O.27(sic) 2.
Registration Extract House site measuring 1140Sq.
of Sale Deed D/ 30 12 36.
bearing Town section 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. section No. 663 Block No. 13 of Ward No. 9, Vijayawada Town.
220 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 exhibit A 6 as it was presented before him late in the evening.
The language of exhibit 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 exhibit 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.
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 section 17 of the .
As observed by this Court in Rachpal Maharaj vs 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 and no registered instrument is required under section 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 section 17 of the Indian , 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) ; 221 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 vs 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 vs 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.
vs 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 vs 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) 51),I.A.77.
(5) It Ben.
L.R.(O.C.J.)405.
222 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 :" 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 sections 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.
| IN-Abs | 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 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 vs Bhagwandas Daruka & Ors., ; Pranjivandas Mehta vs Chan Ma Phee, L.R. 43 I.A. 123, Shaw vs Foster: ,341 and Subramonian The language of exhibit 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 exhibit 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 exhibit 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 section 17 of the .
[22OA D] 14 1 section C. India/71 210 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 sections 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.
|
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.
section 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.
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.
2127 and 2128 of 1970).
section 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).
369 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 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.
vs 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/71 370 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 Konathala Venkata Ramana & Budha Apparao vs 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.
371 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 article 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 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 372 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 article 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 373 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 article 14 and an attack under article 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 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 article 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 section T. Desai contends that the High Court had erroneously struck down Sec. 9 of the Amendment Act.
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 374 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 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.
| IN-Abs | The appellants carried on the business of Commission Agents in Jaggery in Andhra Pradesh.
They arranged for the sale of 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 section 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 section 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 section I 1 substituted for the existing section.
This section 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 article 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 section 9 Agents who had not collected the tax from their Principals were exempted from tax.
Under section I I Agents who had collected the tax were made liable to pay the same.
In writ petitions under article 226 filed by Agents it was contended that section II as amended and section 9 of the Amending Act were violative of article 14.
The High Court held that section 1 1 was valid but section 9 violated article 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 what he had collected he had not suffered any loss nor any disadvantage which would entitle him to seek a remedy under article 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],
|
No. 606 of 1970.
Petition under article 32 of the Constitution of India for en forcement of fundamental rights.
R. B. Datar, for the petitioner.
Niren De, Attorney General and section P. Nayar, for the respon dents.
The Judgment of the Court was delivered by Dua, J.
The only question raised in this writ petition under article 32 of the Constitution relates to the constitutional validity of r. 3 of the Rules for Selection of candidates for admission to the Pre Professional/B.Sc.
Part 1 Course leading to M.B.B.S. in the Government Medical Colleges and for certain seats in the private Medical Colleges in the State of Mysore framed by that State on July 4, 1970 (hereinafter called "the Selection Rules").
The petitioner Kumari N. Vasundara claims to have passed the Pre University Examination of the Bangalore University with physics, chemistry and biology as optional subjects securing 78% marks in these subjects.
She applied for admission to the Pre Professional Course leading to the M.B.B.S. in the Government Medical Colleges, but the Selection Committee, after interviewing her on September 14, 1970, rejected her application on the ground that she bad not resided in the State of Mysore for a period of ten years prior to the date of her application as required by r. 3 of the Selection Rules.
It is not disputed that but for the condition requiring residence in Mysore State for a period of ten years prior to the date of her application she was otherwise eligible for admission under the Selection Rules in another respects.
Rule 3 reads as under: domiciled and resident in the,State of Mysore for not 383 less than ten years at any, time prior to the date of the application for a seat, shall be eligible to apply Provided that this provision shall not apply (a) in the case of persons applying for seats referred to in clauses (a), (b) (c) (d) and (e) of sub rule (1) of rule 4, (b) in the case of children of Central Government employees.
serving on duty in the State on the date of making the application and (c) in the case of children of Mysore Government employees including children of members of all India Services borne on the Mysore State Cadre who (i)are serving or have, served outside the State of Mysore on deputation during the relevant period, and (ii)are in the service of the State on the date of making the application or have retired from service not more than four years prior to the date of making the application." Shri Datar, the learned counsel for the petitioner, challenged the constitutional validity of r. 3 on two grounds.
The first challenge is founded on the ground of violation of the right to equality guaranteed by article 14 of the Constitution.
According to his argument the impugned rule has, by imposing the condition of residence for a minimum period of ten years in the State of Mysore in addition to the condition of being domiciled in that State, created an artificial classification which suffers from unconstitutional discrimination, between the Indian citizens domiciled in the State of Mysore who have resided there for ten years or more and those who have resided there for less than ten ' years.
The period of ten years of residence selected in this rule is not only arbitrary but is highly unreasonable, based on no rational or intelligible principle, said the counsel.
Its unreasonableness was illustrated by submitting that students normally pass the Pre University Examination at the age of 16 or 17 years.
To expect such students to have resided in the State of Mysore for ten years in order to, be eligible for admission to the Pre Professional/B.Sc.
Part 1 Course leading to M.B.B.S. would mean that the children of those Indian citizens having their domicile in the State of Mysore who happen, for compelling reasons, to reside in other States in the Indian Union before their children have completed ten years of residence in the State of Mysore would be deprived of the opportunity of having medical education in their own State of domicile.
This argument was elaborated by submitting that if all other States in the Union were also to frame similar rules 384 insisting on residence for ten or more years then the children of ' those citizens, who are compelled by the necessity of earning their livelihood, to shift their residence from one State to another at short intervals, without completing ten years of residence in any one State, would never be able to get admission in any State.
Fixing a period of ten years of residence in the State ' according to Mr. Datar, is arbitrary and fanciful having no rational relationship or nexus with the object or purpose of framing the rules, namely, of selecting the best talent or the most meritorious students for admission to the Medical Colleges.
The Attorney General on behalf of the respondents sub that by the impugned rule the State Ms attempted to select those students who are more likely to serve as doctors in the State after they pass out.
In this connection our attentions was drawn to the counter affidavit filed by the State.
The Attorney General further contended that it was for the State to determine the sources from which to select candidate and the selection so made deserves to be, upheld.
in support of the validity of the rule he drew our attention to the decision of this Court in Chitra Ghosh & Another vs `Union of India and Others(1) and to a decision of the Mysore High Court in K. Shivashankar vs University of Mysore & Others(2).
This Court in Minor P. Rajendran vs State of Madras & Ors.(3) while dealing with the rules made by the State of Madras for the selection of candidates for admission to the First Year integrated M.B.B.S. course, struck down, as violative of article 14, the rule which allocated seats on district wise basis.
A bench of five judges observed in that case: "The question whether district wise allocation is violative of article 14 will depend on what is the object to be achieved in the matter of admission to medical colleges.
Considering the fact that there is a larger number of can didates than seats available selection has got to be made.
The object of selection can only be to secure the best possible material for admission to colleges subject to the provision for socially and educationally backward classes.
Further whether selection is from the socially and educationally backward classes or from the general pool, the object.
of selection must be to secure the best (1) ; (2) (3)[1968] 2 section C. R. 786.
385 possible talent from the two sources.
If that is the object it must necessary follow that that object would be defeated if seats are allocated district by district.
it cannot be and has not been denied that the object of selection is to secure the WA possible, talent from .the two sources so that the country may have the "best possible doctors".
If that is the object, the argument on behalf of the petitioners/appellant is that that object cannot possibly be served by allocating seats district wise ' It is true that article 14 does not forbid classification, but the classification has to be justified on the basis of the nexus between the classification and the object to be achieved, even assuming that territorial classification may be a reasonable classification.
The fact however that the classification by itself is reasonable is not enough to support it unless there is nexus between the classification and the object to be achieved.
Therefore, as the, object to be achieved in a case of the kind with which we are concerned is to get the best talent for admission to professional colleges, the allocation of seats districtwise, hat no reasonable relation with the object to be achieved.
If anything, such allocation will result in many cases in the object being destroyed, and if that is so, the classification.
even if reasonable, would result in discrimination, inasmuch as better qualified candidates from one district may be X X rejected while less qualified candidates from other districts may be admitted from either of the two sources.
The argument that candidates coming from various districts would settle down in those districts to serve the people there was not accepted, because there was no material on the record giving facts and figures suggesting that candidates from a particular district would generally settle down in that district.
It was not even so stated in the affidavit filed on behalf of the State of Mysore, in that case.
The Court, however, took care to clarify the legal, position by adding: "We may add that we do not mean to say that territorial classification is always bad under all circumstances.
But there is no doubt that district wise classification which is being justified on a territorial basis in these cases is violative of article 14, for no justification worth the name in support of the classification has been made out.
" In Chitra Ghosh 's case (1) this Court said: "TThe main purpose of admission to a medical college is to impart education in the theory and practice of me (1) ; 25 1 S.C. India/71 386 dicine.
As noticed before the sources from which students have to be drawn are primarily determined by the authorities who maintain and run the institution, e.g., the Central Government in the present case.
In Minor P. Rajendran vs State of Madras (1968) 2 S.C.R. 786it has been stated that the object of selection for admission is to secure the best possible material.
This can surely be achieved by making proper rules in the matter of selection but there can be no doubt that such selection has to be confined to the sources that are intended to supply the material.
If the sources have been classified in the manner done in the present case it is difficult to see how that classification has no rational nexus with the object of imparting medical education and also of selection for the purpose" The decision in Minor P. Rajendran 's case C) was distinguished on the ground that in that case the classification made district wise had been considered to possess no reasonable relation with the object sought to be achieved.
It was also observed in Chitra Ghosh 's case (2).
"It is the Central Government which bears the financial burden of running the medical college.
It is for it to lay down the criteria for eligibility.
From the very nature of things it is not possible to throw the admission open to students from all over the country.
The Government cannot be denied the right to decide from what sources the admission will be made.
That essentially is a question of policy and depends inter alia on an overall assessment and survey of the requirements of residents of particular territories and other categories of persons for whom it is essential to provide facilities for medical education.
If the sources are properly classified whether on territorial, geographical or other reasonable basis it is not for the courts to interfere with the manner and method of making the classification." According to this observation which merely re affirms the settled law, if the sources are properly classified on reasonable basis, then courts are not expected to interfere with the manner and method of making the classification.
Reasonable basis of course must mean that the basis is not arbitrary or fanciful, but bears a just, rational and intelligible relation with the object sought to be achieved by the classification.
(1) ; (2) ; 387 in D. P. Joshi vs The State of Madhya Bharat and Another this Court had while upholding by majority the rules, made by the State of Madhya Bharat, for admission to the Mahatma Gandhi Memorial Medical College, Indore, charging capitation fee from non Madhya Bharat students laid down that in those ,rules the word "domicile" was used in its popular sense conveying the idea of residence.
Venkatarama Ayyar, J., speaking for the majority said: "It was also urged on behalf of the respondent that the word "domicile" in the rule might be.
construed not in its technical legal sense, but in a popular sense as meaning "residence and the following passage in Wharton 's Law Lexicon, 14th Edition, page 344 was quoted as supporting such a construction: "By the term 'domicile ', in its ordinary acceptation, is meant the place where a person lives or has his home .
In this sense the place where a person has his actual resi dence, inhabitancy, or commorancy, is some times called is domicile".
In Mcmullen vs Wadsworth was observed by the Judicial Committee that "the word 'domicil ' in article 63 (of the Civil Code of Lower Canada) was used in the sense of residence, and did not refer to international domicile".
What has to be considered is whether in the present context "domicile" was used in the sense of residence.
The rule requiring the payment of a capitation fee and providing for exemption therefrom refers only to bona fide residents within the State.
There is no reference to domicile in the rule itself, but in the Explanation which follows, clauses (a) and (b) refer to domicile, and they occur as part of the definition of "bona fide resident".
In Corpus Juris Secundum, Volume 28, page 5, it is stated: "The term 'bona fide residence ' means the residence with, domiciliary intent.
" There is therefore considerable force in the contention of the respondent that when the rule making authorities referred to domicile in clauses (a) and (b) they were thinking really of ;residence.
In this view also, the contention that the rule is repugnant to article 15(1) must fail." (1) ; 388 Under the impugned rule in that case no capitation fee was to charged from the students who ,were bona fide residents of Madhya Bharat, and the, expression "bona #de resident" for the purpose of the rule '.
was defined as (to quote the relevant portion): "one who is (a) a citizen of India whose original domicile is in Madhya Bharat, provided he has not acquired a domicile elsewhere, or (b) a citizen of India, whose original domicile is not in: Madhya Bharat but who has acquired a domicile in Madhya Bharat and has resided there for not less than 5 years at the date .
on which he applies for admission, or (c) a person who migrated from Pakistan before September 30, 1948 and intends to reside in Madhya Bharat permanently, or (d). . . .
In our view the word "domicile 'a used in r. 3, in the present case is also used to convey the idea of intention to reside or remain in the State of Mysore.
If classification based on residence does not impigne upon the principle of equality enshrined in article 14 as held by this Court in the decision already cited which is binding upon us, then the further condition of the residence in the State being there for at least ten years would also seem to be equally valid unless it is shown by the petitioner that selection of the period of ten years makes the classification so unreasonable as to render it arbitrary and without any substantial basis or intelligible differentia.
The object of framing the impugned rule seems to be to attempt to impart medical education to the best talent available out of the class of persons who are likely, so far as it can reasonably be foreseen, to serve as doctors, the inhabitants of the State of Mysore.
It is true that it is not possible to say with absolute certainty that all those admitted to the medical colleges would necessarily stay in Mysore State after qualifying as doctors: they have indeed a fundamental right as citizens to settle anywhere in India and they are also free, if they so desire and can manage, to go out of India for further studies or even otherwise.
But these possibilities are permissible and inherent in our constitu tional set up and these considerations cannot adversely affect the constitutionality of the otherwise valid rule.
The problem as noticed in Minor P. Rajendran 's case (1) and as revealed by a large number of cases which have recently come to this Court Is that the number of candidates desirous of having medical educa (1) ; 389 tion is very much Luger than the number 'of seats available in medical colleges.
The need and demand for doctors in our country is so great that young boys and girls feel, that in medical profession they can both get gainful employment and serve the people.
The State has therefore to formulate with reasonable foresight a just scheme of classification for imparting medical ,education to the available candidates which would serve the object and purpose of providing broad based medical aid to the people of the State and to provide medical education to those who are best suited for such education.
Proper classification inspired by this consideration and selection on merit from such classified groups therefore cannot be challenged on the ground of inequality violating article 14.
The impugned rule has not been shown by the petitioner to suffer from the vice of unreasonableness.
The counter affidavit filed by the State on the other hand discloses the purpose to be that of serving the interests of the residents of the State by providing medical aid for them.
The petitioner 's argument that candidates whose parents have ,of necessity to remain out of Mysore State and who have also by ,compelling reasons to shift their residence frequently from one State to another without completing ten years in any one State, would suffer because their parents cannot afford to arrange for their children 's residence in Mysore State for ten years during the first 17 years of their age, merely suggests that there is a likelihood of some cases of hardship under the impugned rule.
But ,cases of hardship are likely to arise in the working of almost any rule which may be framed for selecting a limited number of candidates for admission out of a long list.
This, however, would not render the rule unconstitutional.
For relief against hardship in the working of a valid rule, the petitioner has to approach elseWhere because it relates to the policy underlying the rule.
Redress for the grievance against the wide.
gap between the number of ,seats in the medical colleges and the number of candidates aspiring to become doctors for earning their own livelihood and for serving the needs of the country, is also to be sought elsewhere and not in this Court, which is only concerned with the constitutionality of the rule.
For the aforesaid reasons this petition fails and is dismissed but without costs.
K. B. N. Petition dismissed.
| IN-Abs | Rule 3 of the rules for selection of candidates for admission to the pre professional course leading to M.B.B.S. in the Government Medical Colleges in the State of Mysore provided that "no person who is not a citizen of India and who is not domiciled and resident in the State of Mysore for not less than ten years at any time prior to the date of the application for a seat, shall be eligible to apply".
The petitioner 's application for admission was rejected on the ground that she had not resided in the State for a period of ten years as required by r. 3.
She challenged the constitutional validity of r. 3 on the ground of violation of right to equality guaranteed by article 14 of the Constitution.
It was contended that the impugned rule, by imposing the condition of residence in addition to the condition of being domiciled in the State created an artificial classification which suffered from, unconstitutional discrimination.
In support of the validity of the rule it was urged that by the rule the State only attempted to select those students who were more likely to serve as doctors in the State and it was for the State to determine the sources from which to select candidates.
Dismissing the petition, HELD:The word "domicile" in r. 3 is used to convey the idea of intention to reside or remain in the State of Mysore.
If classification based on residence does not impinge upon the principle of equality, as held by this Court in D. P. Joshi vs State of Madhya Bharat, then the further condition of residence in the State for at least ten years would also be equally valid unless it is shown that selection of the period of ten years makes the classification so unreasonable as to render it arbitrary and without any substantial basis or intelligible differentia.
The object of framing the impugned rule is to impart medical education to the best talent available, out of the class of persons who are likely, so far as it can reasonably be foreseen, to serve as doctors the inhabitants of the State.
The State has to formulate with reasonable foresight a just scheme of classification for imparting medical education to the available candidates which would serve the object and purpose of providing broad based medical aid to the people of the State and to provide medical education to those who are best suited for such education.
Prover classification inspired by this consideration and selection on merit from such classified groups, therefore, cannot be challenged on the ground of inequality violating article 14.
The petitioner has not shown that they impugned rule suffer from the vice of unreasonableness.
[388 D 389 C] 382 There is likelihood of some casts of hardships under the impugned rule.
But cases of hardships are likely to arise in the working of almost any rule which may be framed for selecting a limited number of candidates for admission out of a long list.
This would not render the rule unconsti tutional.
[389 E] D.p.
Joshi vs The State of Madhya Bharat and Anr., ; , relied on.
Chitra Ghosh & Anr.
vs Union of India and Ors., ; and Minor P. Rajendran vs State of Madras & Ors., ; , referred to.
|
ons Nos. 330 to 333 of 1954.
Under article 132 of the Constitution of India for the enforcement of Fundamental Rights.
P.B. Das, (B. Sen, Balaprasad Singh and Ganpat Rai, with him) for the petitioner.
M. C. Setalvad, Attorney General for India, and C. A. Daphtary, Solicitor General for India (O. N. Joshi, Porus A. Mehta and P. G. Gokhale, with them) for the respondents.
October 21.
The Judgment of the Court was delivered by MEHR CHAND MAHAJAN C.J.
Writ Petitions Nos.
330 to 333 of 1954, though presented by different persons, raise identical questions for consideration and decision and can be conveniently disposed of by one judgment.
789 In April, 1947, Taxation on Income (Investigation Commission) (Act, 1947, Act XXX of 1947) was passed by the Central Legislature.
By section 3 of the Act the Central Government was empowered to constitute an Income tax Investigation Commission for investigating matters relating to taxation on income with particular reference to the question whether the existing law was adequate for preventing the evasion thereof.
Section 5(1) of the Act further empowered the Central Government to make a reference by the 30th June, 1948, to the Commission for investigation and report of any cases wherein it had prima facie reason for believing that a person had, to a substantial extent, evaded payment of taxation on income.
The date for making the reference was subsequently extended to 1st of September, 1948.
By an Amendment Act passed in 1948 it was provided that the life of the Commission, in the first instance, would be up to the 31st of March, 1950, but that it could be further extended to 31st of March, 1951.
By subsequent legislations the life of the Commission has been extended to December, 1955.
The procedure prescribed by the Act for making the investigation under its provisions is of a summary and drastic nature.
It constitutes a departure from the ordinary law of procedure and in certain important aspects is detrimental to the persons subjected to it and as such is discriminatory.
The substantial differences in the normal procedure of the Income tax Act for catching escaped income and in the procedure prescribed by Act XXX of 1947, were fully discussed by this Court in Suraj Mal Mohta vs Sri A. V. Visvanatha Sastri(1) and require no further discussion here.
Sub section (4) of section 5 of the Act provided that the Central Government could refer to the Commission cases of persons other than those whose cases had been referred to it by the 1st of September, 1948, under section 5(1) if, after investigation, the Commission made a report to that effect.
Thus, two categories of oases under Act XXX of 1947 could be referred to the Investigation Commission by the Central Government, (1) (1955] 1 S.C.R. 448.
101 790 namely, those falling under section 5(1) and those falling under section 5(4) of the Act.
In accordance with the provisions of section 5(1) of the Act the Central Government on the 31st of December, 1947, referred to the Investigation Commission the cases of the four petitioners for investigation and report.
It is alleged by each of these petitioners that no action was taken by the Commission on these references during the original period of its life or even during the extended period provided by the Amendment Act of 1948.
If a report had been submitted in these cases during the original period of the life of the Commission, the problems that now arise would not have arisen, because the Act being a pre Constitution Act was good law before the Constitution and acts done thereunder before the commencement of the Constitution could not be impugned on the basis of the provisions of Part III of the Constitution which came into force on the 26th January, 1950.
Those provisions had no retrospective operation and could not affect the validity of this law or the completed proceedings taken thereunder.
Be that as it may, it appears that nothing happened in these cases till January, 1952, when it is alleged an official of the Commission summoned the petitioners for a preliminary discussion which took place in February, 1952, and since then the petitioners have from time to time been called upon to produce a number of statements and books of account, but the investigation has not proceeded beyond the preliminary stages and the Commission itself has admittedly not commenced any proceedings in these cases, though a period of nearly seven years has elapsed since the references were made, with the result that subsequent events have intervened and, in our opinion, have made these references to the Commission abortive.
As already stated, the Constitution of India came into force on the 26th January, 1950, and the pre Constitution laws had then to stand the test for their validity on the provisions of Part III of the Constitution.
Article 14 of this Part guarantees to all persons the right of equality before the law and equal protection of the laws within the territory of India.
This article not 791 only guarantees equal protection as regards substantive laws but procedural laws also come within its ambit.
The implication of the article is that all litigants similarly situated are entitled to avail themselves of the same procedural rights for relief, and for defence with like protection and without discrimination.
The procedural provisions of Act XXX of 1947 had therefore to stand the challenge of article 14 and could only be upheld provided they withstood that challenge.
The question was canvassed in this Court in April, 1954, in Suraj Mal Mohta vs Sri A. V. Visvanatha Sastri (supra).
What happened in that case was that the Investigation Commission, while dealing with the case of another assessee referred to it under section 5(1) of the Act, reported to the Central Government that Suraj Mal Mohta and other members of the family had evaded income tax and their cases should be referred to it under the provisions of sub section (4) of section 5.
The reference was accordingly made with the result that Suraj Mal Mohta applied to this Court under article 32 for an appropriate writ restraining the Commission from taking any action against him under the provisions of Act XXX of 1947.
It was there contended that the provisions of sections 5(1), 5(4), 6, 7 and 8 of the Act had become void after the coming into force of the Constitution, being discriminatory in character, and that these provisions contravened the guarantee of article 14 of the Constitution.
This Court upheld this contention and granted an appropriate writ to Suraj Mal Mohta.
It there expressed the opinion that sub section (4) of section 5, on its plain reading, was not limited to cases of persons who, to a substantial extent, had evaded taxation but that it dealt with all those persons whose cases fell within the ambit of section 34 of the Indian Income tax Act, and that being so, there was no justification for discriminating them in matters of procedure from those dealt with under the Indian Income tax Act, and thus sub section (4) of section 5 was hit by article 14 of the Constitution and was void and unenforceable.
The result of this decision was that the Commission was restrained from dealing with Mohta 's case.
The provisions of section 5(1) 792 of the Act were also attacked in that case as contravening article 14 of the Constitution, but the Court refrained from expressing any opinion about their constitutionality as that question had no relevancy then.
The consequence of that decision was that a certain provision of Act XXX of 1947 was declared void and unenforceable to the extent of its repugnancy to the provisions of Part III of the Constitution under article 13(1) thereof Its validity however during the pre Constitution period was beyond question.
What this Court said in its judgment in Suraj Mal Mohta vs Sri A. V. Visvanatha Sastri (supra) has perhaps resulted in the filing of these petitions which were presented to this Court on the 16th of July, 1954, after the decision in that case had been pronounced.
In the petitions, as originally drafted, the provisions of section 5(1) of Act XXX of 1947 were impugned on the ground that they contravened the guarantee of equal protection of the laws enacted in article 14 of the Constitution and for that reason the Commission had no jurisdiction to deal with the cases of the petitioners by applying the discriminatory and drastic procedure of the impugned Act.
It was alleged that the petitioners belonged to the same class of persons as were dealt with under the ordinary law enacted in section 34 of the Indian Income tax Act.
Before these petitions could come to a hearing and a day after they were presented to this Court, the Indian Income tax (Amendment) Ordinance VIII of 1954 was promulgated by the President and this was subsequently made into an Act on the 25th of September, 1954.
The Indian Income tax (Amendment) Act, XXXIII of 1954, though assented to by the President on the 25th of September, 1954, came into force with effect from the 17th of July, 1954.
The provisions of this Act furnished an additional ground of attack to the petitioners on the continuance of proceedings by the Commission in these cases under the provisions of Act XXX of 1947.
An application was therefore made seeking permission to, urge additional grounds.
This was not opposed by the learned Attorney General and was allowed.
In the additional grounds it was urged that the relevant 793 sections of Act XXX of 1947, which affected the petitioners, had been impliedly repealed by the amended Act of 1954 and ceased to have any legal force and that the Commission could no longer proceed under those provisions against the petitioners.
It was further contended that the amended section 34 of the Indian Income tax Act was comprehensive in its scope, and all persons that were dealt with under section 5(1) of Act XXX of 1947 had been brought within its ambit, and that being so, there was no basis left for giving them discriminatory or special treatment different from those similarly situated, and who were to be dealt with under section 34 of the Indian Income tax Act as amended.
It was said that assuming but without admitting that section 5(1) of Act XXX of 1947 was based on a rational classification and was not hit by article 14 of the Constitution because of that circumstance, it had now, because of the amendment in section 34 of the Income tax Act, become void, as the classification which saved it from the mischief of article 14 if at all, had become ineffective, its distinctive characteristics having disappeared, and that the persons falling within the class defined in section 5(1) now belong to the same class as is dealt with by section 34 as amended.
Two questions were thus canvassed before us: (1) Whether section 5(1) of Act XXX of 1947 infringes article 14 of the Constitution inasmuch as it is not based on a rational classification ? (2)Whether, after the coming into force of the Indian Income tax (Amendment) Act, 1954, which operates on the same field as section 5.(1) of Act XXX of 1947, the provisions of section 5(1) of Act XXX of 1947, assuming they were based on a rational classification, have not become void and unenforceable, as being discriminatory in character.? In our opinion, for the purpose of deciding these petitions, it is not necessary to express any opinion on the first question because we think the second contention is well founded and is sufficient to determine the case in favour of the petitioners.
The provisions of section 15(1) of Act XXX of 1947 could only be supported, if at all, for a differential 794 treatment of persons dealt with in that section in matters of procedure, on the ground that these persons constituted a separate class, and the classification was rational.
Parliament has, however, by amending section 34 of the Indian Income tax Act, now provided that cases of those very persons who originally fell within the ambit of section 5(1) of Act XXX of 1947, and who it was alleged formed a distinct class, can be dealt with under the amended section 34 and under the procedure provided in the Income tax Act.
Both categories of persons, namely, those who came within the scope of section 5(1) as well as those who came within the ambit of section 34, now form one class.
In other words, substantial tax dodgers or war profiteers who were alleged to have formed a definite class according to the contention of the learned AttorneyGeneral under section 5(1), and whose cases needed special treatment at the hands of the Investigation Commission, now clearly fall within the ambit of amended section 34 of the Indian Income tax Act.
That being so, the only basis for giving them differential treatment, namely, that they formed a distinct class by themselves, has completely disappeared, with the result that continuance of discriminatory treatment to them comes within the mischief of article 14 of the Constitution and has thus to be relieved against.
All these persons can now well ask the question, why are we now being dealt with by the discriminatory and drastic procedure of Act XXX of 1947 when those similarly situated as ourselves can be dealt with by the Income tax Officer under the amended provisions of section 34 of the Act.
Even if we once bore a distinctive label that distinction no longer subsists and the label now borne by us is the same as is borne by persons who can be dealt with under section 34 of the Act as amended; in other words, there is nothing uncommon either in properties or in characteristics between us and those evaders of income tax who are to be discovered by the Income tax Officer under the provisions of amended section 34.
In our judgment, no satisfactory answer can be returned to this query because the field on which amended section 34 operates 795 now includes the strip of territory which previously was occupied by section 5(1) of Act XXX of 1947 and two substantially different laws of procedure, one being more prejudicial to the assessee than the other, cannot be allowed to operate on the same field in view of the guarantee of article 14 of the Constitution.
The learned Attorney General attempted to combat this contention on a two fold ground: (1) That the class of persons dealt with under section 5(1) of Act XXX of 1947 was not only the class of substantial taxdodgers but it was a class of persons whose cases the Central Government, by 1st of September, 1948, had referred to the Commission and that class had thus become determined finally on that date, and that that class of persons could be dealt with by the Investigation Commission under the drastic procedure of Act XXX of 1947, while section 34 of the Indian Income tax Act as amended empowered the Incometax Officer to deal with cases other than those whose cases had been referred under section 5(1) to the Investigation Commission : (2) That in any case the proceedings having started before the Commission in pursuance of the reference under section 5(1) of Act XXX of 1947 those proceedings cannot be affected by the amendment, it having no retrospective operation.
Both these contentions, in our opinion, are not well founded.
As regards the first contention canvassed by the learned Attorney General it seems to us that it cannot stand scrutiny.
The class of persons alleged to have been dealt with by section 5(1) of the impugned Act was comprised of those unsocial elements in society who during recent years prior to the passing of the Act had madesubstantial profits and had evaded payment of tax on those profits those cases were referred to the Investigation Commission before 1st September, 1948.
Assuming that evasion of tax to a substantial amount "could form a basis of classification at all for imposing a drastic procedure on that class, the inclusion of only such of them whose cases had been referred before 1st September, 1948, into a class for being dealt with by the drastic procedure, leaving other tax evaders 796 to be dealt with under the ordinary law will be a clear discrimination for the reference of the case within a particular time has no special or rational nexus with the necessity for drastic procedure.
Further it seems that this very class of persons is now included within the ambit of the amended section 34 of Act XXXIII of 1954.
The draftsman of this section has apparently attempted to remedy whatever defects in the classification made under section 5(1) of Act XXX of 1947 had been pointed out during the discussion in Suraj Mal Mohta 's case in this Court.
The preamble of the Act states that the Act is intended to provide for assessment or reassessment of persons who to a substantial extent had evaded payment of tax during a certain period and for matters connected therewith.
The language employed here bears close likeness to that employed in section 5(1) of the impugned Act.
The Act has inserted the following sub section in section 34 of the Indian Income tax Act : " (I A) If, in the case of any assessee, the Income. tax Officer has reason to believe (i)that income, profits or gains chargeable to income tax have escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September, 1939, and ending on the 31st day of March, 1946; and (ii)that the income, profits or gain which have so escaped assessment for any such year or years amount or are likely to amount to one lakh of rupees or more; he may, notwithstanding that the period of eight years or, as the case may be, four years specified in subsection (1) has expired in respect thereof, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub section (2) of section 22, and may proceed to assess or reassess the income, profits or gains of the assessee for all or any of the years referred to in clause (1) and thereupon the provisions of this Act shall, so far as may be, apply accordingly It was argued in Mohta 's case as well as in these petitions that the classification made in section 5(1) of 797 the impugned Act was bad because the word "substantial" used therein was a word which had no fixed meaning and was an unsatisfactory medium for carrying the idea of some ascertainable proportion of the whole, and thus the classification being vague and uncertain, did not save the enactment from the mischief of article 14 of the Constitution.
This alleged defect stands cured in the amended section 34 inasmuch as the Legislature has clearly indicated in the statute what it means when it says that the object of the Act is, to catch persons who to a substantial extent had evaded payment of tax, in other words, what was seemingly indefinite within the meaning of the word "substantial" has been made definite and clear by enacting that no evasion below a sum of one lakh is within the meaning of that expression.
Again, the classification of section 5(1) was criticized on the ground that it did not necessarily deal with persons who during the period of war had made huge profits and evaded payment of tax on them.
The amendment made in section 34 has remedied this defect also.
The amended section clearly states that the amended section will operate on income made between the 1st September, 1939, and the 31st March, 1946, and tax on which has been evaded.
It is thus clear that the new sub section inserted in section 34 by the provisions of Act XXXIII of 1954 is intended to deal with the class of persons who were said to have been classified for special treatment by section 5(1) of Act XXX of 1947.
The learned Attorney General frankly conceded that to a certain extent the two sections overlapped, but he urged that the overlapping was not complete and that those remained still outside it whose cases had already been referred to the Investigation Commission.
We are unable to uphold this contention in view of the clear language employed in the amended Act and this contention is therefore negatives.
The second contention raised by the learned Attorney General is, in our opinion, concluded by a number of earlier decisions of this Court wherein it has been held that when an Act is valid in its entirety before the date of the Constitution, the part of the proceedings regulated by the special procedure and 102 798 taken during pre Constitution period cannot be questioned however discriminatory it may have been, but that if the discriminatory procedure is continued after the date of the Constitution, then a person pre judicially affected by it can legitimately ask why he is now being differently treated from others similarly situate vide Kesava Madhaya Menon vs The State of Bombay(1), and Lachmandas Kewalram Ahuja and Another vs The State of Bombay(2).
The same propositions were re stated by this Court in Syed Qasim Razvi vs State of Hyderabad(1), and in Habeeb Mohammad vs State of Hyderabad(1).
In the cases of these petitioners, as already pointed out, the proceedings taken by the Investigation Commission against them under the discriminatory procedure of the impugned Act against them have not been com.
pleted and are pending and that being so, no justification remains for continuing these proceedings against them under the procedure of the impugned Act when other persons of their class and having the same common characteristics can be dealt with by the Income tax Officer under the provisions of the amended Act and the procedure of the ordinary law of the land.
For the reasons given above we are of the opinion that assuming the provisions of section 5(1) of Act XXX of 1947 could be saved from the mischief of Article 14 of the Constitution on the basis of a valid classification, that defence is no longer available in support of it after the introduction of the new sub section in section 34 of the Income tax Act, which sub section is intended to deal with the same class of persons dealt with by section 5(1) of the impugned Act.
The result is that proceedings before the Investigation Commission can no longer be continued under the procedure prescribed by the impugned Act.
We 'therefore direct that an appropriate writ be issued against the Commission prohibiting it from proceeding further with the cases of these petitioners under the provisions of Act XXX of 1947.
In the peculiar circumstances of this case we make no order as to costs in these petitions.
Writ issued.
| IN-Abs | Parliament by amending section 34 of the Indian Income tax Act, 1922, by passing the Indian Income tax (Amendment) Act (XXXIII of 1954) has now provided that oases of those very persons who originally fell within the ambit of section 5(1) of Taxation on Income (Investigation Commission) Act, 1947 (XXX of 1947) and who, it 788 was alleged, formed a distinct class, can be dealt with under the amended section 34 and under the procedure provided in the Indian Income tax Act.
Both categories of persons, namely, those who came within the scope of section 5(1) as well as those who came within the ambit of section 34, now form one class.
Held, that after the coming into force of the Indian Income tax (Amendment) Act, 1954 (XXXIII of 1954) which operates on the same field as section 5(1) of Act XXX of 1947 the provisions of section 5(1) of Taxation on Income (Investigation Commission) Act, 1947 (XXX of 1947), assuming they were based on a rational classification, have become void and unenforceable as being discriminatory in character.
Article 14 of the Constitution not only guarantees equal protection as regards substantive laws but procedural laws as well.
When an Act is valid, in its entire by before the date of the Constitution the part of the proceedings regulated by the special procedure and taken during the pre Constitution period cannot be questioned however discriminatory it may have been but the discriminatory procedure after the coming into force of the Constitution cannot be continued.
Suraj Mal Mohta vs Sri A. V. Viavanatha Sastri (A.I.R. , Keshava Madhava Menon vs The State of Bombay ; , Lachmandas Kewalram Ahuja and Another vs The State of Bombay ([1962] S.C.R. 710), Syed Qasim Razvi vs State of Hyderabad ([1953] S.C.R. 589) and Habeeb Mohammad vs State of Hyderabad ([1953] S.C.R. 661) referred to.
|
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.
479 Debabrata Mukherjee, D. N. Mukherjee and section 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 article 311(2) which was in force on that date.
The impugned orders were accordingly made in terms of article 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 Article 311(2) has been reproduced in the judgment of my learned brother, it is, However, desirable to reproduce both the amended and unamended article 480 311(2) so as to understand if any substantial or material change in the legal position was intended by the amendment: 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 section 240(3) of the Government of India Act, 1935.
The proviso to section 240(3) had only two clauses corresponding to cls(a) & (b) of the unamended article 311(2).
A bench of five Judges of this Court in Khem Chand vs The Union of India and Others (1) ; 481 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 vs I. M. Lall(1) and to the decision of the Privy Council on appeal in High Commissioner for India vs I. M. Lall(2) explained the Privy Council decision and clarified the meaning scope and ambit of the unamended article 311(2) in these words: "In our judgment neither of the two views can be accepted as a completely correct exposition of the intendment of the provisions of section 240(3) of the Government of India Act, 1935, now embodied in article 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) (2) L.R. [1948 75 I.A. 225.482 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 article 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.
It may be recalled that the amended article 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 section 240(3) of the Government of India Act, 1935, and unamended article 311(2) of the Constitution.
As already noticed, under section 240(3) of the Act of 1935 and the unamended article 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 483 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 section 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 section 240(3) and is so in article 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 proceeds 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 article 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 article 311(2), it does not in our view detract from its effectiveness as operating to exclude the applicability of the amended cl.(2) of article 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.
No doubt article 311(2) is intended to afford a sense of security to government servants covered by sub article(1) and the safeguards provided by sub article(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) ; 484 considered less important, ' when construing sub article
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 article 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 article 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 article 311 and not to the amended article, and it is further kept in view that the amendment of article 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 article(2) of article 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 485 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, 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 486 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 article 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 article 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 article 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 article 311 of the Constitution, as it stands after amendment by the Constitution (Fifteenth Amendment) Act, 1963 reads as follows : "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 487 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 article 311.
It is specially to be noted that, in the first paragraph of the order, the 488 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 article 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 article 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 article 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 article 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 489 (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 article 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 Court in Khem Chand vs 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 vs 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 ; (2) [1959] Suppl. section C. R. 892.490 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 article 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 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 article 311(2).
It has to be 491 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 article 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 article 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 vs 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 rule; or (1) [1969] Vol.VI Assam Law Reports 192.492 (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 article 320(3) of the Constitution.
It is the principal clause of article 320(3) which lays down when the Public Service Commission shall be consulted.
Sub clause (c) of clause (3) of article 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 article 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 article 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.
" 493 This illustration again merely indicates the correct legal position that the Commission must be consulted as required by article 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 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 article 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. vs Manbodhan Lal Srivastava.(1) That decision was further affirmed in the State of Bombay vs 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 article 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) ; (2) Civil Appeal No. 289 of 1958 decided on 6th May, 1960.
| IN-Abs | 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, that they ought to be dismissed from service and that the Governor was satisfied in terms of article 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 article 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 article 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 article 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 section 240(3) of the Government of India Act, 1935 and unamended article 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 article 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 article 311(2) it did not detract from its effectiveness as operating to exclude the applicability of the amended cl.
(2) of article 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 vs Union of India & Ors.
[1958] S.C.R. I Secretary of State for India vs I.M. Lal, and High Commissioner for India vs 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 article 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 article 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 article 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 article 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. vs Manbodhan Lal Srivastava, ; and State of Bombay vs 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:
|
Appeal No. 1794 of 1970.
Appeal from the judgment and order dated October 28, 1969 of the Mysore High Court in Tax Referred Case No. 12 of 1967.
Jagdish Swarup, Solicitor General, A. N. Kirpal and B. D. Sharma, for the appellant.
M. K. Ramamurthi, J. Ramamurthy and Vineet Kumar, for the respondent.
section Swaminathan and R. Gopalakrishnan, for the intervener.
The Judgment of the Court was delivered by Miter, J.
The question involved in this appeal is, whether three several sums appropriated by the Directors of the respondent towards reserves on the 8th August 1963 Gut of the profits of the 522 year ending 31st March, 1963 should be added to other items for computation of the capital of the respondent as on the 1st day of April, 1963 in terms of rule 1 of the Second Schedule to the hereinafter referred to as the 'Act '.
The Act which received the assent of the President on 2nd May, 1964 is an Act to impose a special tax on the profits of certain companies.
Under section 4 of the Act a tax known as surtax become chargeable on every company for every assessment year commencing on and from the 1st day of April 1964 in respect of so much of its chargeable profits of the previous year as exceeded the statutory deduction, at the rates specified in the Third Schedule.
Under section 2(3) "assessment year" means the period of twelve months commencing on the 1st day of April of every year.
"Chargeable profits" is defined in section 2(5) as the total income of an assessee computed under the Income tax Act, 1961 for any previous year or years, as the case may be, and adjusted in accordance with the provisions of the First Schedule.
"Statutory deductions", ignoring the provisos, means in terms of section 2(8) an amount equal to 10 per cent of the capital of the company as computed in accordance with the provisions of the Second Schedule or an amount of Rs. 2,00,000/ whichever is greater.
The Second Schedule to the Act contains the rules for computing the capital of a company for the purposes of surtax.
Rule 1 of the Second ' Schedule with which alone we are concerned in this section reads: "Subject to the other provisions contained in this Schedule, the capital of a company shall be the aggregate of the amounts, as on the first day of the previous year relevant to the assessment year, of (i) its paid up share capital; (ii) its reserves, if any created under the proviso (b) to clause (vi b) of sub section (2) of section 10 of the Indian Income tax Act, 1922 (XI of 1922), or under subsection (3) of section 34 of the Income tax Act, 1961 (LXIII of 1961); (iii) its other reserves as reduced by the amounts credited to such reserves as have been allowed as a deduction in computing the income of the company for the purposes of the Indian income tax Act, 1922 ( XI of 1922), or the Income tax Act, 1961 (XLIII of 1961); (iv) its debentures, if any; and (v) any moneys borrowed by it from Government or the Industrial Finance Corporation of India or the 523 Industrial Credit and Finance Corporation of India or any other financial institution which the Central Government may notify in this behalf in the Official Gazette or any banking institution (not being a financial institution notified as aforesaid) or any person in a country outside India : Provided that such moneys are borrowed for the creation of a capital asset in India and the agreement under which such moneys are borrowed provides for the repayment thereof during a period of not less than seven years.
Explanation.
For the removal of doubts it is hereby declared that any amount standing to the credit of any account in the books of a company as on the first day of the previous year relevant to the assessment year which is of the nature of item (5) or item (6) or item (7) under the heading "RESERVES AND SURPLUS" or of any item under the heading "CURRENT LIABILITIES AND PROVISIONS" in the column relating to "Liabilities" in the "Form of Balance sheet" given in Part I of Schedule VI to the (1 of 1956), shall not be regarded as a reserve for the purposes of computation of the capital of a company under the provisions of this Schedule.
" In terms of section 4 of the Act the first assessment year for the purpose of the Act in respect of the company was that commencing on and from the first day of April, 1964.
The previous year in respect of which the chargeable profits had to be ascertained commenced on the first of April 1963 and ended on the 31 st March, 1964.
The capital of.
the company in terms of rule 1 of the Second Schedule would be its paid up share capital and inter alia reserves as would come under clauses (ii) and (iii) of rule 1 to the Second Schedule.
The reserves in this case to which exception is being taken by the appellant as components of the capital of the company are the following three sums: (1) Rs. 2,56,000 as plant modernisation and rehabilitation reserve; (2) Rs. 1,00,000 as loan redemption reserve, and (3) Rs. 89,557/ as development rebate reserve.
These are three of the items of reserve which the directors of the respondent in their report to the general body of the shareholders proposed as appropriations out of the profits of the year ending on 31st March, 1963.
The sole contention on behalf of the appellant is that these appropriations having been made on the 8th August, 1963 could not be treated as components of capital "as on the first day of the previous year" i.e. 1 4 1963, in terms of rule 1 to the Second 524 Schedule.
The learned Solicitor General submitted that these could only be taken into consideration in the subsequent year commencing on the 1st of April 1964 on the ground that on the 1st of April 1963 they only formed a part of the mass of undistributed profits, no portion of which had been earmarked or set apart for any particular purpose.
In our view, this is not the correct way of appreciation of the action of the directors.
It is well known that the accounts of the company have to be made up for a year up to a particular day.
In this case that day was the 31st March, 1963.
If it was reasonably practicable to make up the accounts up to the 31st March 1963 and present the same to the directors of the respondent on April 1, 1963 they could have made up their minds on that day and declared their intention of appropriating the said and other sums to reserves of different kinds.
But the fact that they could not do so for the simple reason that the calculation and collection of figures of all the items of income, expenditure of the company for the year ending March 31, 1963 was bound to take some time cannot make any difference to the nature or quality of the appropriation of the profits to reserves as determined by the directors after the first of April, 1963.
Their determination to appropriate the sums mentioned to the three separate classes of reserves on the 8th August 1963 must be related to the 1st of April 1963 i.e. the beginning of the accounts for the new year and must be treated as effective from that day.
A case very similar to the one before us came up for consi deration before the Bombay High Court in Commissioner of In come tax, Delhi vs Aryodya Ginning & Manufacturing Co. Ltd. (1) In that case the profits of the company for the year ended 31st December 1948 were shown as Rs. 28,56,997 14 2.
The directors made certain appropriations which included Rs. 11,08,000 to reserve fund and Rs. 1,50,000 to dividend reserve fund.
The report of the directors was made on April 27, 1949 and a general meeting of the shareholders held on 27th June 1949 adopted the report and recommendation of the directors.
The company was assessed to business profits tax chargeable under the Business Profits Tax Act for the accounting period 1st January to 31st March 1949 and the question which arose was: what was the capital of the com pany for the accounting period.
The company contended that its paid up capital should be increased by the amount of reserves constituted by the recommendation made by the directors and accepted by the share holders.
The Commissioner of Income tax went up to the High Court on a reference contending that as the reserve was not sanctioned till 27th June 1949 it could not be looked (1) 525 at or considered as reserves on a day prior thereto.
The learned Judges of the Bombay High Court were of the view that the resolution of 27th June, 1949 had a retrospective effect inasmuch as it referred to the profits of the year ending on 31st December, 1948, the appropriations to be made in the balance sheet as of that date and the reserves which should be constituted and shown in the balance sheet as on 31st December 1948.
The High Court observed that when one looked at the balance sheet of the year ended 31st December 1948 the amounts mentioned were shown respectively in the reserve fund and the dividend reserve fund and the shareholders by passing a resolution on 27th June, 1949 did not decide that these amounts should constitute reserves as from that date but they accepted the recommendation of the directors that these amounts should constitute reserves as of 31st December, 1948.
The learned Solicitor General referred to a judgment of the Madras High Court in Commissioner of Income tax vs Vasantha Mills Ltd. (1) where the Madras High Court dissented from the view expressed by the Bombay High Court on the ground that there could be no reserve until there was allocation in fact by a person having the requisite authority to order that allocation.
In our view, although such allocation was factually not possible on the very first day of a year but allocation on a later day should be treated as effective from that day in view of the fact that the division of undistributed profits became effective from that day.
In this view of the matter, we are of opinion that the High Court had come to the correct conclusion and the appeal should be dismissed.
The appellant will pay the costs of the respondent.
K.B.N. Appeal dismissed.
| IN-Abs | On the question whether three several sums appropriated by the Directors of the respondent company towards reserves on the 8th August, 1963 out of the profits of the year ending 31st March, 1963, should be added to other items for computation of the capital of the respondent as on the 1st day of April, 1963 in terms of rule 1 of the Second Schedule to the , HELD: The fact that the directors were unable to appropriate the SUMS to reserves of different kinds cannot make any difference to the nature or quality of the appropriation of the profits to reserves as determined by the directors after 1st April, 1963.
Their determination to appropriate the sums mentioned to the three separate classes of reserves on the 8th of August, 1963 must be related to the 1st of April, 1963 i.e. the beginning of the accounts for the new year and must be treated as effective from that day.
[524D] Commissioner of Income tax, Delhi vs Aryodya Ginning & Manufacturing Co. Ltd., and Commissioner of Income tax vs Vasantha Mills Ltd., , referred to.
|
Appeal No. 2108 of 1966.
Appeal from the judgment and decree dated January 15, 1965 of the Allahabad High Court, Lucknow Bench in Special Appeal No. 82 of 1963.
Danial A. Latifi and M. I. Khowaja, for the appellant.
C. B. Agarwala and Akhtar Husain, for respondent No. 3.
The Judgment of the Court was delivered by Ray, J.
This appeal is by certificate from the judgment dated 15th January, 1965 of the Allahabad High Court.
The appellant son of Sardar Mujibul Rahman Khan a zamindar of a number of villages in the District of Kheri, Uttar Pradesh impeached the orders of the Board of Revenue of Uttar Pradesh dated 30 August, 1960 and 6 September, 1960 whereby the Board 442 issued three directions.
The first was to stop payment of instalment money or the bonds by the treasuries.
The second was to direct the Compensation Officer to hand over bonds of the face value of Rs. 32,000 reported to be remaining with him for liquidation of debts.
The third was an order attaching movable and immovable properties belonging to the appellant and his brother.for liquidation of debts.
The principal question in this appeal is whether the first res pondent, the Board of Revenue Uttar Pradesh had authority to pass, the order impugned in this appeal.
The third respondent Raja Shatranjai the decree holder was a creditor of the appellant 's father Sardar Mujibul Rahman Khan on the basis of a mortgage deed.
Raja Shatranjai obtained a decree on the said mortgage debt for Rs. 1,31,040 1 0 and Rs. 1931 1 0 as costs.
The decree is dated 28 September, 1939.
The decree was passed under the provisions of the Uttar Pradesh Encumbered Estates Act, 1934 (hereinafter referred to as the1934 Act).
The decree was passed on the application of Sardar Mujibul Rahman Khan under section 4 of the 1934 Act for the liquidation of his debts.
The debtor was a zamindar in the District of Lakhimpur Kheri.
The decree was transferred to the Deputy Commissioner of Kheri for liquidation of debts.
Meanwhile the U. P. Zamindari Abolition and Land Reforms.
Act, 1951 (hereinafter referred to as the 1951 Act) came into, force.
The proprietary rights of the intermediaries vested in the State Government and the intermediaries were entitled to receiver compensation in lieu thereof.
The judgment debtor was an intermediary.
Notices were issued to the intermediaries to take delivery of the bonds or receive payment in cash on specified dates.
The appellant on the death of his father became entitled to 2/3rd of the Zamindari property and compensation therefore.
He took delivery of the compensation bonds of the value of Rs. 42,750/from the Compensation Officer, Lakhimpur while bonds of the value of Rs. 21,250 were received by his brother Hikmat Hakim Khan.
The total amount of bonds received by the appellant and his brother aggregated Rs. 64,000.
On 14 April, 1959 the decree holder applied to the Collector, Kheri for an order that the appellant and his brother do return the bonds which they had received from the Compensation Officer failing which their movable and immovable properties to the extent of these bonds be attached for liquidation of their debts.
The Collector on 17 August, 1959 rejected the application.
The decree holder preferred an appeal.
The appeal was dismissed by the Additional Commissioner, Lucknow on.
17 February, 1960.
The decree holder thereupon commenced revision proceedings before 443 the Board of Revenue.
On 30 August, 1960 a member of the Board of Revenue allowed the revision.
On 6 September, 1960 another member of the Board of Revenue concurred in the order.
The Board asked the Collector to take one or other of the three steps, namely, the treasuries to stop payment of money on installment in respect of the compensation bonds or direct the Compensation Officer to hand over bonds of the face value of Rs. 32,000 reported to be remaining with him for the liquidation of the debts or to attach the movable properties of the appellant and his brother for the liquidation of debts.
The appellant thereafter made an application to the High Court under Article 226 of the Constitution for an order quashing the order and directions of the Board of Revenue.
The learned Single Judge quashed the order of the Board of Revenue save and except the direction directing the Compensation Officer to hand over bonds of the face value of Rs. 32,000 reported to be remaining with him for liquidation of debts.
Thereafter the decree holder preferred an appeal.
The Bench of the High Court was divided in their opinion.
The matter was placed before the third learned Single Judge.
The order of the High Court was that direction No. 3 of the Board of Revenue, namely, attachment of movable and immovable properties of the appellant and his brother was quashed.
The High Court upheld the other two orders of the Board of Revenue in regard to stoppage of payment of installment money on the bonds by the treasuries and direction on the Compensation Officer to hand over the bonds of the face value of Rs. 32,000 remaining with him for liquidation of the debts.
Counsel for the appellant contended that the Board of Reve nue did not have any power to issue the directions.
In the present case, the decree was passed under section 14 of the 1934 Act.
Under section 19 of the 1934 Act the Special Judge passing the decree is to send the same to the Collector for execution in accordance with the provisions of Chapter V of the 1934 Act.
The Special Judge under section 19 of the 1934 Act is also to inform the Collector of the nature and extent of the amount of the secured debt which is not legally recoverable otherwise than out of the compensation and rehabilitation grants payable to the Landlord in respect of the mortgaged estate.
The U. P. Zamindari Abolition and Land Reforms Act, 1950 (hereinafter referred to as the 1950 Act) came into force on 26 January, 1951.
a result of the 1950 Act sections 23A and 23B were introduced into the 1934 Act.
Section 23A speaks of compensation and rehabilitation grant to be placed at the disposal of the Collector.
Section 23B 444 speaks of liquidation of secured debts recoverable both from compensation and rehabilitation grant.
The sections are set out hereunder : "23A. Compensation and rehabilitation grant to be placed at the disposal of the Collector : The Collector shall require the Compensation Officer and Rehabilitation Grants Officer as may be necessary to place at his disposal in pursuance of section 70 of the U. P. Zamindari Abolition and Land Reforms Act, 1950, the amount of compensation money and rehabilitation grant payable to the landlord in respect of his proprietary rights in land reported to be liable to attachment or sale under the provisions of sub section (2) of section 19.
23B. Liquidation of secured debt recoverable from compensation and under rehabilitation grant.: (1) Without prejudice to the provisions of Section 8 of the U. P. Zamindar 's Debt Reduction Act, 1952.
the amount or the bonds on account of compensation or rehabilitation grant received by the Collector in pursuance of the requisition under Section 23 A shall be expended or utilised by the Collector in liquidation of the amount of the secured debt which having regard to the provisions of the U. P. Zamindar 's Debt Reduction Act, 1952 was secured on the proprietary rights in land in respect of which such money has been received.
(2) If any balance out of the compensation and rehabilitation grant received by the Collector in pursuance of the requisition under Section 23 A remains in the hands of the Collector after utilising the same in accordance with the provisions of sub section (1), such balance shall be utilised by the Collector in discharging the debts, other than the debts, referred to in the said sub section in order of priority".
Both these sections of the 1934 Act refer to section 70 of the 1950 Act.
Section 70 of the said Act is as follows : "Compensation money to be placed at the disposal of the Court or authority : Where before any Court or authority any suit or proceeding is pending which directly or indirectly affects or is likely to affect the right of any person to receive the whole or part of the compensation determined under Chapter III, the Court or authority may require the Compensation Officer to place at its disposal the amount so payable and thereupon the same shall be disposed of in accordance with the orders of such Court or authority".
445 The Collector, therefore, by reason of the provisions of the 1934 Act and the 1950 Act requires the Compensation Officer and the Rehabilitation Officer to place the amount of compensation at his disposal.
The Collector on receipt of the grant is to expend or utilise the same in liquidation of the amount of the secured debt and if the balance remains it is to be utilised in discharging the debts other than those mentioned in section 23 B (1) of the 1934 Act, in order of priority.
By reason of the provisions contained in section 70 of the 1950 Act and section 23A of the 1934 Act the compensation money is sent for by the Collector for the purpose of liquidation of secured debt on which decree is passed.
The Compensation Officer under rule 77(1) of the Zamindari Abolition and Land Reforms Rules, 1952 could issue notice to the intermediary directing him to take delivery of the bonds.
The issue of a notice would not clothe the intermediary with the right to take away the bonds because under section 18 of the 1934 Act the decree holder becomes entitled to recover the amount of the decree in the manner and to the extent mentioned in the 1934 Act.
The proviso to section 18 of the 1934 Act enacts that the secured debt shall be recoverable from the compensation and rehabilitation grants as though the security had not been extinguished.
The question, in the present case, is whether the appellant could lawfully obtain delivery of the bonds from the Compensation Officer.
Sections 23A and 23B of the 1934 Act require that the amount or the bonds on account of compensation or rehabilitation grant received by the Collector shall be expended or utilised by the Collector in liquidation of the amount of the secured debt.
Under section 23B of the 1934 Act the bonds are received by the Collector in pursuance of the requisition under section 23A of the 1934 Act.
The absence of the service of a requisition cannot confer a right on the judgment debtor to take away the compensation money or bonds.
The principle is actus curia neminem gravabit.[445E F] The decree holder under the provisions of the relevant statutes was entitled to be paid out of the compensation grant monies in satisfaction of the decree.
If the Collector had required the Compensation Officer under section 23A of the 1934 Act to place at his disposal pursuant to section 70 of the 1950 Act the compensation money, the bonds could not have been taken delivery of by the appellant.
The Board of Revenue rightly gave the directions to secure compliance with the provisions of the statute, and performance of statutory duty by the Collector as well as the Compensation Officer.
The appellants were not entitled to, receive the bonds without satisfying the decree.
The appellants were wrong in doing so.
The appellant could not take advantage of his own wrong.
That is why the Board of Revenue correctly, directed the 446 stoppage by the treasuries of payment of instalment money on the bonds.
The other direction by the Board of Revenue requiring the Compensation Officer to hand over the bonds remaining with the Compensation Officer was in aid of valid compliance with sections 23A and 23B of the 1934 Act as well as section 70 of the 1950 Act.
The jurisdiction and authority of the Board of Revenue in the present appeal touched directly on the performance of statutory obligations by statutory authorities.
The compensation bonds are required by the statute to go to the Collector for liquidation of secured debts.
The judgment debtor is not entitled to the compensation bonds without liquidation of the debts in accordance with the provisions of the statute.
The High Court rightly upheld the directions of the Board of Revenue.
The appeal is therefore dismissed.
The parties will pay and bear their own costs in this Court.
G.C. Appeal dismissed.
| IN-Abs | There was a decree under the provisions of the U.P. Encumbered Estates Act, 1934 against the appellant 's father on the basis of a mortgage deed.
The decree was transferred to the Deputy Commissioner for liquidation of debts.
Meanwhile the U.P. Zamindari Abolition and Land Reforms Act, 1951 came into force.
Compensation for proprietary rights as an intermediately vested in the State Government became payable to the judgment debtor.
On the death of his father the appellant and his brother became entitled to his property as well as the compensation payable to him.
The appellant and his brother received bonds of the aggregate value of Rs. 64,000.
Bonds of the face value of Rs. 32,000 remained with the compensation officer.
In 1959 the decree holder applied to the Collector for an order that the appellant and his brother do return the bonds which they had received from the compensation officer failing which their properties were to be attached.
The matter went up to the Board of Revenue.
The Board asked the Collector to take one or the other of three steps, namely, (1) to stop payment of instalment money on the bonds by the treasuries or (2) direct the compensation officer to hand over bonds of the face value of Rs. 32,000 remaining with him for the liquidation of the debts or (3) to attach the movable properties of the appellant and his brother for the liquidation of debts ' The appellant thereafter made an application to the High Court under article 226 of the Constitution for an order quashing the order and direction to the Board of Revenue.
The Division Bench, in appeal against the order of the Single Judge, quashed the direction of the Board of Revenue according to which the properties of the appellant and his brother were to be attached.
The High Court upheld the other two orders of the Board of Revenue in regard to stoppage of payment of instalment money on the bonds by the treasuries and direction to the Compensation Officer to hand over the bonds of the face value of Rs. 32,000 remaining with him for liquidation of the debts.
in appeal to this Court the appellant contended that the Board of Revenue did not have power to issue the said directions.
HELD: By reason of the provisions contained in section 70 of the U.P. Zamindari Abolition and Land Reforms Act, 1950 and section 23A of the U.P.
Encumbered Estates Act, 1934 the compensation money is sent for by the Collector for the purpose of liquidation of secured debts on which decree is passed.
The Compensation Officer under r. 77(1) of the Zamindari Abolition and Land Reforms Rules, 1953 could issue notices to the intermediary directing him to take the bonds because under section 18 of the 1934 Act the decree holder becomes entitled to recover the amount of the decree in the manner and to the extent mentioned in 1934 Act.
The proviso 441 to section 18 of the 1934 Act enacts that the secured debt shall be recoverable from the compensation and rehabilitation grant as though the security had not been extinguished.
[445C D] Further, section 23A and section 23B of the 1934 Act require that the amount from the bonds on account of compensation or rehabilitation grant received by Collector shall be expended or utilised by the Collector in liquidation of the amount of the secured debt.
Under section 23B of the 1934 Act the bonds are received byCollector in pursuance of the requisition under section 23A of the 1934 Act.
The absence of the service of a requisition cannot confer a right on thejudgment debtor to take away the compensation money or bonds.
The principle is actus curia neminem gravabit.
[445E F] The decree holder under the provisions of the relevant statutes was entitled to be paid out of the compensation grant monies in satisfaction of the decree.
If the Collector had required the Compensation Officer under section 23A of the 1934 Act to place at his disposal pursuant to section 70 of the 1950 Act the compensation money, the bonds could not have been taken delivery of by the appellant.
The Board of Revenue rightly gave the directions to secure compliance with the provisions of the statute and performance of the statutory duty by the Collector as well as the Cornpenation Officer.
The appellants were not entitled to receive the bonds without satisfying the decree.
That is why the Board of Revenue correctly directed the stoppage by the treasuries of payment of instalment on the bonds.
[445G H] The other direction of the Board of Revenue requiring the Compensation Officer to hand over bonds remaining with the Compensation Officer was in aid of valid compliance with sections 23A and 23B of the 1934 Act as well as section 70 of the 1950 Act.
[446A] The jurisdiction and authority of the Board of Revenue touched directly on the performance of statutory obligations by statutory authorities.
The High Court rightly upheld the directions of the Board of Revenue.
[446B]
|
minal Appeal No. 167 of 1968.
Appeal from the judgment and order dated January 18, 1968 of the Allahabad High Court in Criminal Revision No. 1482 of 1966.
O. P. Rana, for the appellant.
Bashir Ahmed and section Shaukat Hussain, for the respondent.
The Judgment of the Court was delivered by Dua J.
The State of U.P. has appealed to this Court on certificate of fitness granted by the Allahabad High Court from 495 that court 's order dated January 18, 1968, acquitting the respondent of an offence punishable under section 14 of the Foreigners Act (Act No. 31 of 1946).
This appeal was originally heard by us on January 11 & 14, 1971, when it was considered desirable to send for the original records of the case from the courts below and also to call for the Me relating to the inquiry held by the Central Government under section 9(2) of the (Act No. 57 of 1955) into the question of the acquisition of citizenship of Pakistan by the respondent.
On July 11, 1963, the respondent was arrested for 'over staying in India as a, foreigner and on March 6, 1965, he was charged by the City Magistrate, Varanasi, with the commission ,of an offence punishable under section 14 of the Foreigners Act (Act No. 31 of 1946).
The charge reads : "I, D. section Sharma, City Magistrate, Varanasi, hereby charge you Rahmatullah as follows : That you being a Pakistani Citizen entered into India on 1 4 55 on Pakistani Passport No. 283772 dated 15 3 55 and Indian visa No. 16326 Category C dated 22 3 55 and got your extension to stay in India up to 25 5 56 after which date you are overstaying in India illegally without any passport and visa : and thereby committed an offence punishable u/s 14 of Foreigners Act within my cognizance, and hereby I direct you to be tried on the said charge by me." According to the prosecution case against the respondent as put in the Trial Court, he was a Pakistani national and had on April 1, 1955, entered India on a Pakistani passport dated March 15, 1955, and an Indian Visa dated March 22, 1955, obtained by him as a Pakistani national, but even after the expiry of the permitted period he was overstaying in India without a valid passport or visa).
The original visa, it is not disputed, expired on June 21, 1955, but it was extended thrice, the last extension being valid only up to May 25, 1956.
Thereafter the respondent went underground and has since been residing in India illegally.
He was treated after several years and was arrested on July 11, 1963.
The respondent pleaded in defence that though he had entered India on a Pakistani passport he was not a Pakistani national.
On the contrary he claimed to be an Indian citizen and therefore rightfully living in India.
According to him he had been born in India of Indian parents in 1932 and was an Indian citizen under the Constitution.
496 During the pendency of the present criminal proceedings an inquiry was made by the Central Government under section 9(2) of the read with r. 30 of the Citizenship Rules, 1956, and by means of an order dated November 5, 1964, it was determined that the respondent had acquired citizenship of Pakistan after January 26, 1950, and before March 15, 1955.
March 15, 1955 was apparently fixed because on that date the respondent had secured his Pakistani passport.
In that inquiry the respondent was given full opportunity of adducing proof in support of his plea.
The respondent was informed of the determination of the Central Government on March 29, 1965 in the Trial Court.
The City Magistrate, Varanasi, trying the case came to the conclusion that the respondent had voluntarily gone to Pakistan and had stayed there for 8 or 9 months.
The fact that he had obtained a Pakistani passport was in the opinion of that court an indication of his intention to have gone to that country with the object of becoming a Pakistani national.
The argument that the determination in regard to the respondent 's citizenship was made by the Central Government after the commencement of the present proceedings was considered by the Trial Court to be irrelevant because the determination by the Central Government was immune from challenge and whether it was made before or after the framing of the charge was immaterial.
The respondent was held to be a Pakistani national and as it was not denied that he had entered India on a Pakistani passport and also that on the expiry of the period for which he had been permitted to stay in India including the extended period, he had stayed on in this country without obtaining valid permit, he was convicted of an offence under section 14 of the Foreigners Act.
He was sentenced to rigorous imprisonment for 18 months and to pay a fine of Rs. 200/ and in default of payment of fine to rigorous imprisonment for a further period of three months.
The Sessions Judge dismissed the respondent 's appeal holding that the charge had been framed against him several months after the determination by the Central Government that he was a Pakistani national.
According to that court the order of the Central Government was dated November 5, 1964, and it was communicated by the Sahayak Sachiv, U. P. to the Senior Superintendent of Police, Varanasi, on December 28, 1964.
On revision the High Court disagreed with the view of the courts below.
According to the High Court the respondent was not a foreigner when he entered India though he had obtained 497 a Pakistani passport.
Having not entered as a foreigner the respondent 's case was held to be outside para 7 of the Foreigners Order, 1948, made under section 3 of the Foreigners Act.
The High Court held the respondent to be a foreigner when he was prosecuted for an offence under section 14 of the Foreigners Act.
But in its opinion that fact could not attract para 7 of the Foreigners Order, 1948 made under section 3 of the Foreigners Act.
On this reasoning the respondent 's conviction was set aside and he was acquitted.
In this Court, to begin with, it was argued on behalf of the State that section 2(a) of the Foreigners Act defines a "foreigner" to mean a person who is not a citizen of India.
If, therefore, the respondent is not a citizen of India, then being a foreigner his prosecution and conviction under section 14 of the Foreigners Act was unassailable, contended Shri Rana.
The order of the High Court acquitting the respondent was, therefore, contrary to law, he added.
This submission is misconceived.
The definition of the word "foreigner" relied upon by the counsel was substituted for the earlier one by the Foreigners Law (Amendment Act 11 of 1957) with effect from January 19, 1957.
Quite clearly the new definition is of no assistance in determining the status of the respondent at the time of his entry into India in 1955.
The word "foreigner" according to the definition as in force in 1955 meant, a person who (i) is not a natural born British subject as defined in sub sections (1) and (2) of section 1 of the British Nationality and Status of Aliens Act, 1914, or (ii) has not been granted a certificate of naturalization as a British subject under any Jaw for the time being in force in India, or (iii) is not a citizen of India.
The , having been published in the Gazette of India on December 30, 1955, was also not in force at the time when the respondent entered India.
We may, therefore, turn to the Constitution to see if the respondent was a citizen of India at the time of the commencement of the Constitution.
Clause (a) of Article 5 clearly covers the case of the respondent who was born in the territory of India, and had his domicile in this territory at the commencement of the Constitution.
Being a citizen of India at the commencement of the Constitution in 1950, unless he lost his citizenship under some law between the commencement of the Constitution and his entry into India in 1955, the respondent would continue to be an Indian citizen till such entry.
Even on behalf of the appellant no serious attempt was made to show that the respondent had lost his Indian citizenship in any other manner except on the basis of his having obtained a Pakistani passport and on the basis of the determination of the question of his citizenship by the Central Government on November 5, 1964.
Indeed after some faint argument the appellant 's learned counsel based his case exclusively on the determination 32 1 section C. India/71 498 by the Central Government, and in our opinion on the existing record rightly so.
According to his submission the determination made by the Central Government under section 9(2) of the is final and since the respondent has been held to have acquired citizenship of Pakistan before March 15, 1955, his entry into India after that date and his subsequent continued stay in this country after the expiry of the extended period on May 22, 1955, would amount to an offence punishable under section 14 of the Foreigners Act.
As will presently be shown the real question which arises for our decision lies in a short compass and the relevant facts essential for the decision are no longer in dispute.
When the respondent entered India on April 1, 1955, he was in possession of a Pakistani passport and a visa to which no objection was taken by the Indian authorities.
He did not enter India clandestinely, and he is not being tried for having entered India in violation of any law.
Indeed his visa was, admittedly extended by the appropriate authority up to May 22, 1965.
As he was clearly a citizen of India at the commencement of the Constitution and the question arose whether he had lost Indian citizenship thereafter, the Central Government had to determine under section 9 of the the question of the acquisition of Pakistan nationality by the respondent.
This Court in Government of Andhra Pradesh vs Syed Mohd. Khano after referring to its earlier decision in lzhar Ahmad Khan vs Union of India(1) made the following observation : "Indeed, it is clear that in the course of the judgement, this Court has emphasised the fact that the question as to whether a person has lost his citizenship of this country and has acquired the citizenship of a foreign country has to be tried by the Central Government and it is only after the Central Government has decided the point that the State Government can deal with the person as a foreigner.
It may be that if a passport from a foreign Government is obtained by a citizen and the case falls under the impugned Rule, the conclusion may follow that he has "acquired the citizenship of the foreign country" , but that conclusion can be drawn only by the appropriate authority authorised under the Act to enquire into the question.
Therefore, there is no doubt that in all cases where action is proposed to be taken against persons residing in this country on the ground that they have acquired the citizenship of a foreign State (2) [1962] Supp.
3 section C. R. 235.
(1) [1962] Supp. 3 section C. R. 288.
499 and have lost in consequence the citizenship of this country, it is essential that question should be first considered by the Central Government.
In dealing with the question, the Central Government would undoubtedly be entitled to give effect to the impugned R. 3 in Sch.
III and deal with the matter in accordance with the other relevant Rules framed under the Act.
The decision of the Central Government about the status of the person is the basis on which any further action can be taken against him." In that case an argument was raised on the authority of lzhar Ahmad Khan 's case(1) that as soon as a person acquired a passport from a foreign Government his citizenship of India automatically came to an end, but it was repelled.
in Shuja Ud Din vs The Union of India and Another(2) this pondent there was born in India in 1924 and had lived in this 'Country all along tiff about the end of 1954.
At the end of 1954 or the beginning of 1955 he went to Pakistan from where he returned on January 20, 1955 on a passport granted by the Pakistan Government which had a visa endorsed on it by the Indian authorities permitting him to stay in this country upto April 1955.
He applied to the Central Government for extension of the time allowed by the visa, but there was no material to show what orders, if any, were made on it.
The respondent having stayed in this country beyond the time specified in the visa, on September 3, 1957 he was served with an order under section 3(2)(c) of the Foreigners Act, requiring him to leave India.
On his failure to comply with this order he was prosecuted under section 14 of the Foreigners Act.
His defence was that he was an Indian national.
The Magistrate trying him rejected his defence and convicted him holding that he had disowned Indian nationality by obtaining a Pakistan passport and that by refusing to extend the time fixed by the visa the Central Government had decided that the respondent was a foreigner under section 8 of the Foreigners Act and that such a decision was final.
He was convicted by the Trial Court and the conviction was upheld by the Sessions Judge.
The High Court in revision set aside his conviction.
On appeal this Court held that neither the Magistrate nor the Sessions Judge was competent to come to a finding of his own that the respondent, an Indian national, had disowned his nationality and acquired Pakistan nationality for under section 9(2) of the that decision could only be made by the prescribed authority.
The respondent in that case, according to this Court, had become an Indian citizen under article 5(a) of.
the Constitution when it (1) [1962] Supp.
3 section C. R. 233 (2) ; 500 came into force and there being no detention by the Central Government that he had lost his nationality thereafter.
the order of the High Court acquitting him was upheld.
in Shuja Ud Din vs The Union of India and Another (1) this Court speaking through Gajendragadkar, J. as he then was, said: "it is now well settled that the question as to whether a person who was a citizen of this country on January 26, 1950, has lost his citizenship thereafter, has to be determined under the provisions of section 9 of the (No. LVII of 1955).
There is also no doubt that this question has to be decided by the Central Government as provided by Rule 30 of the Rules framed under the in 1956.
The validity of section 9 as well as of Rule 30 has been up held by this Court in the case of Izhar Ahmad Khan and Ors.
vs Union of India and Ors.
It has also been held by this Court in The State of Madhya Pradesh vs Peer Mohd. and Anr.
Appeal No. 12 of 1961 decided on Sept. 28, 1962) that this question has to be determined by the Central Government before a person who was a citizen of India on January 26, 1950, could be deported on the ground that he has lost his citizenship rights thereafter under section 9 of the .
Unless the Central Government decides this question, such a person cannot be treated as a foreigner and cannot be deported from the territories of India.
" In Abdul Sattar Haji Ibrahim Patel vs The State of Gujarat(2), Gajendragadkar, C. J., speaking for a bench of five Judges approved the decisions in the cases of Izhar Ahmed Khan(3) and Syed Mohd. Khan(4), it being emphasized that the decision of the Government of India is a condition precedent to the prosecution by the State of any person on the basis that he has lost his citizenship of India and has acquired that of a foreign country.
That an inquiry under section 9 of the can only be held by the Central Government was again reaffirmed by this Court in Mohd. Ayub Khan vs Commissioner of Police, Madras (5).
In view of these decisions it seems to us to be obvious that till the Central Government determined the question of the respondent having acquired Pakistan nationality and had thereby (1) C. A. No. 294 of 1962 decided on Oct. 30, 1962.
(2) Cr.
A. No. 153 of 1961 decided on Feb. 17,1964.
(3) [1962] Supp.
3 section C. R.235.
(4) [1962] SUPP.
3 section C. R. 288.
(5) 501 lost Indian nationality, he could not be treated as a foreigner and no penal action could be taken against him on the basis of his status as a foreigner, being national of Pakistan.
It is not the appellant 's case before us that any directions under the law governing foreigners were given to the respondent after November 5, 1964, which were disobeyed entailing his prosecution, and indeed it is admitted that he was not even informed of the decision of the Central Government till March 29, 1965.
It is also noteworthy that at the time when the Central Government determined his nationality he was being tried in this country by the criminal court after having been arrested and bailed out, and he was not free to leave this country for proceeding to Pakistan.
In the background of these facts it appears to us that the wide charge as framed against him was misconceived and he could not be convicted of overstaying in this country at least till he was duly found to be a Pakistani national and to have ceased to be an Indian citizen.
The order of the Central Government is clearly final, and it has remained unchallenged by the respondent even after he was informed of this order on March 29, 1965.
We have seen the proceedings of the Central Government and we find that the respondent had been given full opportunity of putting forth his case.
The binding nature of that order was not, and indeed it could not be, questioned before us.
The determination by the Central Government in this case could not have the effect of retrospectively rendering a penal offence an act which was not so at the time of its commission.
The respondent even though held to be a Pakistani, and therefore a foreigner, before the charge was framed against him is entitled to the protection of our laws.
As a result of the foregoing discussion, the High Court was in our opinion right in setting aside the respondent 's conviction on the charge framed.
It will of course be open to the Central Government to take such suitable action against the respondent under the Foreigners Act or under any other provision of the law which may be applicable to him, for the purpose of either deporting him or otherwise dealing with him as is thought fit.
This appeal, however, must fail.
Y.P.S. Appeal dismissed.
| IN-Abs | The respondent was a citizen of India at the commencement of the Constitution in 1950.
He entered India on April 1, 1955, with a Pakistani passport dated March 15, 1955, and overstayed in India beyond the permitted period.
He was arrested in 1963 and was charged with an offence under section 14 of the Foreigners Act, and convicted.
While the criminal proceedings were pending, the Central Government, under section 9(2) of the , read with r. 30 of Citizenship Rules, 1956, determined on November 5, 1964, that the respondent had acquired citizenship of Pakistan after January 26, 1950, and before March 15, 1955.
The High Court set aside the conviction.
On appeal to this Court, HELD: (1) The respondent was not a 'foreigner ' within the meaning of the Foreigners Act before its amendment in 1957.
[500 G H] (2) Having been a citizen of India at the commencement of the Constitution and not being a foreigner under the Foreigners Act at the date of his entry, till the Central Government determined the question of the respondent having acquired Pakistan nationality and thereby lost Indian nationality, he could not be treated as a foreigner and no penal action could be taken against him.
[497 G; 501 ' A B] (3) The order of the Central Government dated November 5, 1964 determining that the respondent was a Pakistani was final, but the determination by the Central Government could not have the effect of retrospectively rendering his stay in India before that date a penal offence.
It was not as if he was given any directions after November 5, 1964, which were disobeyed by him entailing his prosecution.
[501 C E]
|
No. 254 of 1968.
Petition under article 32 of the Constitution of India for the enforcement of fundamental rights.
V. M. Tarkunde, V. M. Limaye and section section Shukla for the petitioners.
V. section Desai, M. C. Bhandare and section 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 663 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 article 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 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 664 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 article 32 but this Court held that it is protected by article 31A of the Constitution and is therefore valid.
We shall presently refer to that 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 665 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 vs State of Bombay (1) on the ground that it was beyond the competence of the legislature; that legislation not being protected by article 31(A) had infringed articles 14, 19 and 31 of the Constitution; and that it was a piece of colourable legislation vitiated in part by excessive (1) ; 666 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 article 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 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 article 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 article 31A(1)(a) of the Constitution.
For the aforesaid reasons it was held that the Amendment Act was not vulnerable as being violative of articles 14, 19 and 31 of the Constitution.
This decision concludes the most important question whether the petitioner 's fundamental rights are infringed under articles 14, 19 and 31 as the parent Act as well as the amending Act is now protected by article 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 article 31A applies the petitioner cannot complain that his rights under articles 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 667 is not such as would take it put of article 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 articles 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 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 article 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 668 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 article 31A of the Constitution.
Shri Tarkunde has referred us to the case of Maharana Shri Jayvantsinghji Ranmalsinghji etc.
vs The State of Gujarat (1) in support of his contention that the impugned Act infringes article 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.
669 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 section 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 vs The State of Bombay (1) and Shri Ram Ram Narain Medhi vs 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 article 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 article 19(1)(f) of the Constitution and was not saved by clause 5 thereof nor are the cases before them protected by article 31A. section 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) ; (2) [1959] Suppl.
1 S.C.R. 489.
670 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 ' section 32H.
If any tenant claimed on that date that he was a permanent tenant, he had to establish his claim in accordance with section 83 of the Revenue Code.
Such a claim could be contested by the tenure holder whenever 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 section 5 of the impugned Act, 1958, is in the circumstances, a reasonable restriction within the meaning of article 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.
| IN-Abs | 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 article 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 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 article 32 but this Court held that it was protected by article 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 article 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 article 31A.
HELD: Once it has been held that Art 31A applies to an Act the petitioner cannot complain that his rights under articles 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 article 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 articles 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 article 31A of the Constitution.
[667B C] The petition must accordingly be dismissed.
Sri Ram Ram Narain Medhi vs State of Bombay, 119591 1 Supp.
S.C.R. 489, referred to and held inapplicable.
|
No. 217 of 1968.
Petition under article 32 of the Constitution of India for the enforcement of fundamental rights.
Bishan Narain, B. B. Sinha, section N. Misra, section section 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 article 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.
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 637 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 638 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. 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.
639 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 article 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 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 articles 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 640 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 article 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 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 641 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 article 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 article 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 article 311, the said circumstance will not give a right to the petitioner to approach this Court under article 32.
The stand taken by the petitioner is that his right to get 41 1 S.C. India/71 642 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 articles 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 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 articles 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.
643 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 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 644 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 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 645 that he was absent only from March 11.
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 646 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 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 647 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 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 article 311 of the Constitution.
According to the respondents there is no violation of article 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, article 311 applies to such cases as is laid down by this Court in Jai 648 Shanker vs 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 article 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 article 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) ; 649 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 650 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 articles 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 article 32.
To this aspect, we have already adverted to earlier and we now proceed to consider the same.
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 articles 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 articles 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.
651 The question whether the pension granted to a public servant is property attracting article 31(1) came up for consideration before the Punjab High Court in Bhagwant Singh vs Union of India (1).
It was held that such a right constitutes "property" and any interference will be a breach of article 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 vs 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 article 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 vs 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 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 Punjab 1.(3) I. L. R. 1967 Punjab & Haryana 278 652 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 vs Ranojirao Shinde and another (1) had to consider the question whether a "cash grant" is "property" within the meaning of that expression in articles 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 article 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 article 19(1)(f) and it is not saved by sub article (5) of article 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 articles 19(1)(f) and 31(1) of the Constitution, and as such the writ petition under article 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) ; 653 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 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.
| IN-Abs | 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 article 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 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, article 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 article 311.
[647GH ; 648D E] Jai Shankar vs State of Rajasthan, ; , 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 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 article 31(1) and by a mere executive order the State had no power to withhold it.
Similarly, the said claim is also property under article 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 vs 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.
|
Appeal No. 564 of 1967.
Appeal by special leave from the judgment and order dated August 9, 1966 of the Allahabad High Court in S.T.R. No. 563 of 1962.
P. Rana, for the appellant.
The respondent did not appear.
The Judgment of the Court was delivered by Grover, J.
The only point for decision in this appeal by special leave is whether the cloth manufactured by means of 942 looms worked by power can be regarded as "cloth manufactured by mills" for which sales tax was payable at the rate of 6 pies in a rupee in terms of the notification dated June 8, 1948 issued under section 3A of the U.P. Sales Tax Act, 1948.
The general rate of tax on sale of cloth otherwise was 3 pies per rupee.
The High Court on a reference made under the relevant provisions of the Act held that cloth manufactured by means of power looms could not fall under the term "cloth manufactured by the mills".
The approach of the High Court was that since the word "mills" had not been defined either by the Act or by the notification mentioned before the meaning of the words "cloth manufactured by the mills" must be considered according to the common understanding of mankind.
Reference was made to the dictionary meaning as given in Webster ' New International Dictionary, Vol. 2.
According to the dictionary two things were required (1) a building and (2) a machinery, in order to constitute a "mill".
The meaning of the word "machine", according to the dictionary in a popular and mechanical sense is. . . . more or less complex combination of mechanical parts, as levers, gears sprocket wheels, pulleys, shafts and spindles, ropes, chains, and bands, cams and other turning and sliding pieces, springs, confined fluids etc., together with the frame work and fastenings, supporting and connecting them, as when it is designed to operate upon material to change it in some pre conceived and definite manner. . .
According to the High Court looms which are merely worked by power would hardly fall within the meaning of the word "ma chine".
It has been pointed out that looms worked by hand or by power have not been shown by any evidence to be different.
It does not appear to have been disputed before the High Court that a building having looms worked by manual labour would not be a mill.
The court found no difference between building containing looms worked by manual labour or by power.
According to Words and Phrases, Vol.
27 the term "mill" in modem usage, includes various machines or combinations of machinery, as cotton mills, fulling mills, powder mills, etc., to some of which the term "manufactory" or "factory" is also applied.
In our judgment although the dictionary meaning may be of considerable assistance in deciding the point before us but what has to be seen is the context in which the word "mills" is used in the notification.
It is common ground that if cloth was manufactured by looms worked by manual labour the notification was not applicable and the rate of tax per rupee was 3 pies but if he cloth was manufactured by mills then the rate was to be 6 pies.
Thus cloth has been divided broadly into two categories, mill made and loom made.
It is quite obvious that loom made cloth would include all cloth manufactured on looms.
It is difficult to understand how the energy by which the looms are worked 943 would make any difference.
In other words whether the energy is supplied manually or by power cannot convert the essential character of the cloth, namely, its manufacture on looms.
As regards mill made cloth the actual process of weaving Is more or less automatic, preconceived and definite and it involves the functioning of machinery.
Ramchandra Iyer J., in Sri Dhandapani Power loom Factory, Erode vs Commercial Tax Officer, Coimbatore and Anr.(1), was right in observing that mill cloth is a familiar variety of cloth and everybody knows what a am is.
In popular language, a power loom cloth is never associated with a mill cloth.
According to Mcnaghten J., in Ellerker vs Union Cold Storage Co. Ltd., (2) a mill is building where goods are subjected to treatment or processing of some sort and where machinery is used for that purpose.
The illustrations given were: "The miller in his corn mill grinds wheat into flour, ,or oats into oatmeal.
So too, at a scutching mill the miller scutches the flax, to prepare it for spinning.
The saw mill, the rolling mill, the flatting mill, the puffing mill and the cotton mill are all buildings where goods are treated or subjected to some process.
" It must be remembered that the meaning of the word "mill" ,or "mills" would vary according to the context in which that word is used.
In the above case a company carried on a large ,cold storage business.
In some of the cold stores part of the building was used for the manufacture of ice for sale; others were ,only used for the purpose of storage.
It was held that all the premises fell within the meaning of the words in Schedule D Cases 1 and 11, r. 5(2) of the Income tax Act which were : Mills factories or other similar premises.
Counsel for the appellant has sought to argue that once the looms worked by power are used In a building the essential characteristics of "mills" would be satisfied and if any cloth is manufactured on those looms it would be cloth manufactured by " mills" within the meaning of the notification.
The falacy (1) 12 section T. C. 304.
(2) 944 in this argument is that by the same reasoning a building in which looms worked by manual labour are to be found would also have to be regarded as "mills".
This would be contrary to the accepted and popular meaning of handloom or power loom cloth and mill made cloth.
We are satisfied that the distinction which was kept in view when the notification was promulgated was between the aforesaid two categories or types of cloth involving essentially a difference in the process by which it was manufactured.
We would accordingly uphold the view of the High Court and dismiss the appeal.
There will be no order as to costs.
K. B.N. Appeal dismissed.
| IN-Abs | Under the notification dated June 19, 1948 issued under section 3(A) of the U.P. Sales Tax Act, 1948, sales tax at the rate of 6 pies in a rupee was payable on "cloth manufactured by mills".
Tax at that rate was sought to be levied on cloth manufactured by means of looms worked by power on the basis that it was "cloth manufactured by mills" within the meaning of the notification.
The High Court held that cloth manufactured by power looms could not fall under the term "cloth manufactured by mills".
Dismissing the appeal, HELD:What has to be seen is the context in which the word "mill" is used in the notification.
The notification, divides cloth broadly into two categories mill made and loom made.
Loom made cloth would include all cloth manufactured on looms and, therefore, whether the energy is supplied manually or by power cannot convert the essential character of the cloth, namely, its manufacture on looms.
As regards mill made cloth the actual process of weaving is more or less automatic, pre conceived and definite and it involves functioning of machinery.
In popular language a power loom cloth is never associated with a mill cloth.
[942H943A] Further, it cannot be said that once the looms worked by power are used in a building the essential characteristics of mills would be satisfied.
To hold so would be contrary to the accepted and popular meaning of hand loom or power loom cloth and mill made cloth.
The distinction which was kept in view when the notification was promulgated was between the aforesaid two categories or types of cloth involving essentially a difference in the process in which it was manufactured.
[943H 944B] Sri Dhandapani Power Loom Factory, Erode vs Commercial Tax Officer, Coimbatore & Anr., 12 S.T.C. 304 and Ellerker vs Union Cold Storage Co. Ltd., , referred to.
|
Appeal No. 848 of 1971.
Appeal by special leave from the judgment and order dated December 7, 1970 of the Delhi High Court in S.A.O. No. 110 D of 1966, Hardev Singh, K. P. Kapur and H. L. Kapur, for the appel lant.
S.K. Mehta, K. L. Mehta and K. R. Nagaraja, for the res pondent.
936 The Judgment of the Court was delivered by Vaidialingam, J.
In this appeal, Mr. Hardev Singh, learned counsel on behalf of the tenant appellant, challenges the judgment and order dated December 7, 1970 of the Delhi High Court in S.A.O. No. 110 D of 1966.
Special leave has been granted by this Court limited to the question whether the High Court was justified, in view of section 39(2) of the Delhi Rent Control Act, 1958 (hereinafter called the Act) in setting aside the decisions of the two subordinate authorities, dismissing the application filed by the respondent landlord for evicting the appellant.
The facts leading up to this appeal may be briefly stated.
The appellant took on lease, the first floor of the premises in question from the respondent on January 22, 1964 on a monthly rent of Rs. 250.
The respondent who was the owner of the entire premises was then occupying the ground floor.
The landlord filed an application, before the Rent Controller on November 26.1964 for eviction of the appellant from the portion in his occupation as lessee, on two grounds; (a) that the tenant has sub let a part of the premises, and (b) that he required the premises bona fide for his occupation as a residence himself and his family members.
The latter claim was based under cl.
(e) of the proviso to sub section (1) of section 14 of the Act, which is as follows: "that the premises let for residential purposes are required bona fide by the landlord for occupation as a residence for himself or for any member of his family dependent on him, if he is the owner thereof, or for any person for whose benefit the premises are held and that the landlord or such person has no other reasonably suitable residential accommodation;" The tenant opposed the claim of the landlord on both the grounds.
He denied the allegation of sub letting.
He also contended that the landlord 's requirement for his occupation was not bonafide.
The tenant 's plea was that the portion of the premises in his occupation was sufficient for his purpose.
The Rent Controller accepted the plea of the tenant that there was no subletting.
He also accepted his plea that the requirement of the landlord for his occupation was not bona fide.
On these findings, the landlord 's application was dismissed.
These two findings were also confirmed in the appeal filed by the landlord before the Rent Control Tribunal.
The question.
regarding sub letting, having been decided against the landlord by both the Tribunals, no longer survives and it was also not agitated before the High Court.
It may be stated at this stage that the findings of both the tribunals on the question of bonafide requirement were recorded against the landlord, on the sole ground that the landlord must 937 have foreseen his requirement for additional accommodation even at the time when he let out a part of the premises on January 22, 1964 to the appellant and therefore he was not entitled to ask for eviction under cl.
(e) of the proviso to sub section (1) of section 14 of the Act.
It is the view of both the Tribunals that when eviction is asked for within about I I months of the letting, the claim of the landlord cannot be considered to be bonafide.
The landlord carried the matter in appeal before the High Court under section 39 of the Act.
That section runs as follows : "39(1) Subject to the provisions of sub section (2), an appeal shall lie to the High Court from an order made by the Tribunal within sixty days from the date of such order ; Provided that the High Court may entertain the appeal after the expiry of the said period of sixty days, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal in time.
(2)No appeal shall lie under sub section (1), unless the appeal involves some substantial question of law.
Before the High Court, counsel for both parties made a representation that the Rent Control Tribunal has not recorded a finding on the question whether the premises avaiable with the landlord can be considered to be "reasonably suitable residential accommodation" as contemplated by cl.
(e) of the proviso to section 14 (1).
Hence they made a joint request to remand the case to the Tribunal for a finding on the said question on the basis of the evidence already on record.
Accepting this joint request, the learned Judge remanded the case to the Tribunal.
The latter, after a consideration of the materials on record as well as the extent of the premises in the occupation of the landlord and also having due regard to the number of family members living with the latter, held, in his report dated May 4, 1970, that the portion of the premises in the occupation of the landlord was not reaso nably sufficient for a family consisting of the landlord, his wife, his son, son 's wife and their children.
On this basis, he recorded a finding that the premises in the occupation of the respondent were not reasonably suitable for his residence.
So far as we could see, the correctness of these findings recorded by the Rent Control Tribunal, in favour of the landlord, do not appear to have been challenged by the tenant before the High Court when the appeal came up for final hearing.
On the other band, we find that the same contentions that were raised regarding the bonafide requirement of the landlord and which found 938 acceptance at the hands of the Rent Controller and the Tribunal before remand were again raised by the tenant appellant before the High Court.
That is, in short, the appellant herein was contesting before the High Court, the appeal of the landlord, ignoring the findings of the Tribunal dated May 4, 1970.
The main point that was urged by the appellant before the High Court was that as the two subordinate Tribunals have recorded concurrent findings negativing the claim of the landlord regarding his bonafide requirement of the premises, the appeal filed by the landlord did not involve any substantial question of law.
On this basis the appellant pressed for the dismissal of the landlord 's appeal.
On the other hand, the respondent urged that both the subordinate Tribunals have not properly considered the question of the landlord 's requirement; and that the findings recorded against him were on irrelevant consideration.
According to the landlord the various material factors which have to be taken into account for adjudicating upon such a claim, have not been properly borne in mind by both the Tribunals.
Quite naturally the landlord placed considerable reliance on the findings recorded on May 4, 1970 in his favour by the Tribunal.
The High Court rejected the contention of the appellant that it has no jurisdiction to consider the correctness of the findings.
recorded by the two subordinate authorities especially when the relevant matters to be taken into account for deciding such a question have not been borne in mind by those authorities.
The High Court is of the view that the rejection by the Rent Controller and the Tribunal of the claim of the landlord on the sole ground that he should have anticipated his requirement for the, next 10 or II months when he let out the premises on lease on January 22, 1964, was erroneous.
The High Court has further observed that none of the subordinate authorities have held that after letting out the premises on January 22, 1964 and before filing the application for eviction on November 26, 1964, the landlord has made any demand from the tenant for payment of higher rent.
Finally, the High Court having due regard to the above circumstances and the size of the family of the landlord and the findings recorded by the Tribunal on May 4, 1970 held that the, decision of the two subordinate authorities dismissing the landlord 's application was erroneous.
On the other hand, the learned Judge held that the landlord has made out his claim under cl.
(e) of the proviso to section 14(1) of the Act.
On this reasoning the learned Judge reversed the decision of the Rent Controller and the Tribunal and allowed the application of the landlord for eviction of the appellant.
The appellant was given six months ' time for vacating the premises.
Mr. Hardev Singh, learned counsel for the appellant, has very strenously urged that in view of the concurrent findings" 939 recorded by the two subordinate tribunals, there was no question of law, much less a substantial question of law arising for consideration before the High Court in the appeal filed by the landlord.
Hence he urged that the interference by the High Court with the concurrent findings so recorded was not justified.
Learned counsel further pointed out that the landlord has not made out his claim under cl.
(e) of the proviso to section 14(1) of the Act.
Mr. Hardev Singh referred us to certain decisions of this Court dealing with the question, under what circumstances it can be con sidered that a substantial question of law arises.
We do not think it necessary, in the circumstances of this case, to refer to those decisions, as in our opinion they have no bearing on the short question that arises for consideration before us, namely, the power of the High Court under section 39, to consider the correctness of a finding regarding bonafide requirement under cl.
(e) of the proviso to section 14(1) of the Act.
As we have already pointed out, the sole question that has to be decided by us is whether the High Court in reversing the decisions of the Rent Controller and the Tribunal, in the circumstances of this case, can be considered to have exceeded its jurisdiction under section 39(2).
We are satisfied that the High Court has not exceeded its jurisdiction in any manner.
The argument of Mr. Hardev Singh that the High Court has exceeded its jurisdiction under section 39(2) of the Act when it reversed the finding of the two subordinate authorities on the question of bonafide requirement has, in our opinion, no substance.
In Smt.
Kamla Soni vs Rup Lal Mehra(1), this Court observed as follows: ".
Whether on the facts proved the requirement of the landlord is bona fide, within the meaning of section 14(1)(e) is a finding on a mixed question of law and fact. .
From the above observations it is clear that an inference drawn by the subordinate authorities that the requirement of the respondent was not bonafide, could not be regarded as conclusive.
The High Court, in proper cases, has ample jurisdiction to interfere with that finding and record its own conclusions on the basis of the materials on record.
We may also point out that in the case before us the position is made worse for the appellant in view of the finding recorded by the Tribunal in favour of the landlord on May 4, 1970.
We have already pointed out the circumstances under which a finding was called for by the High, Court.
The High Court has accepted those findings and held in favour of the landlord that he has (1) C. A. No. 2150 of 1966 decided on 26 9 1969.
940 made out a case under cl.
(e) of the proviso to section 14(1) of the Act.
Mr. Hardev Singh referred us to the decision of this Court reported in Bhagwan Dass and another vs section Rajdev Singh and another(1), wherein it has been observed : "A second appeal lies to the High Court against the decision of the Rent Control Tribunal under Section 39(2) of the Delhi Rent Control Act, 1958, only if the appeal involves some substantial question of law.
The Rent Controller and the Rent Control Tribunal, on a consideration of the relevant terms of the agreement and oral evidence and the circumstances found that a clear case of sub letting was established.
On that finding no question of law, much less a substantial question of law, arose.
" The first part of the above extract lays down the nature of the jurisdiction exercised by the High Court under section 39(2) of the Act.
In that decision, on facts, it was found both by the Rent Controller and the Tribunal, on a relevant consideration of the materials on record, that a case of sub letting was established.
On such a finding concurrently arrived at by both the authorities, it was held by this Court that no question of law, much less a substantial question of law arose for consideration before the High Court.
But the facts in the case before us are entirely different.
We have already pointed out that the question that fell to be considered by the High Court was whether the claim made by the landlord under cl.
(e) of the proviso to section 14(1) of the Act was bonafide.
As already pointed out, this Court, in Smt.
Kamla Soni vs Rup Lal Mehra(1), has held that a finding on such an issue is not one of fact alone but is a finding of mixed question of law and fact, and that it was open to the High Court when exercising its jurisdiction under section 39(2) of the Act, to consider the correctness or otherwise of such, a finding.
The findings recorded on such an issue by the subordinate tribunals are not conclusive.
From the above discussion, it follows that the High Court has not exceeded its jurisdiction under section 39(2) of the Act.
In consequence, the appeal fails and is dismissed.
In the circumstances of the case, parties will bear their own costs.
V.P.S. Appeal dismissed.
(1) A. I. R. (2) C. A. No 2150 of 1966 decided on 26 9 1969.
| IN-Abs | The respondent, who was the landlord of certain premises, filed an application under section 14(1)(e) of the Delhi Rent Control Act, 1958, for the eviction of the appellant, who was the lessee, on the ground inter alia, that the respondent required the premises bonafide for his occupation as a residence for himself and his family members.
The Rent Controller found that the requirement of the landlord was not bonafide and dismissed the application.
The order was confirmed in appeal by the Rent Control Tribunal.
The respondent filed an appeal to the High Court under section 39(2) of the Act.
Before the High Court both parties agreed that the case should be remanded to the Tribunal for a finding on the question whether the premises available with the respondent could be considered to be 'reasonably suitable residential accommodation ' as contemplated by section 14(1)(e).
On remand, the Tribunal reported that the premises in the occupation of the respondent were not reasonably sufficient for the respondent and his family.
The appellant however contended before the High Court, ignoring this finding of the Tribunal that on the concurrent findings of the two sub ordinate authorities that the landlord 's requirement was not bonafide, there was no question of law involved and so the High Court had no jurisdiction under section 39(2) to consider the correctness of those findings.
The High Court rejected the contention and held, that, in view of the finding on remand the decision of the subordinate authorities dismissing the respondent 's application was erroneous.
In appeal to this Court, HELD:This Court in Kamla Soni vs Rup Lal Mehra, C.A. No. 2150 of 1966 dated 26 9 1969 held that a finding on the issue whether the requirement of a landlord is bonafide is a finding on mixed questions of law and fact and not on facts only.
Therefore, it was open to the High Court, when exercising jurisdiction under section 39(2), to consider in proper cases the correctness of such a finding.
[939E G]
|
l Appeals Nos. 1449 to 1454 of 1967.
Appeals by special leave from the judgments and orders dated December 15, 1966 of the Madhya Pradesh High Court in Misc.
Petitions Nos.
303 of 1966 etc.
I. N. Shroff, for the appellants (in all the appeals).
M. N. Phadke, K. L. Hathi and P. C. Kapur, for the respondents (in C.As.
1449, 1450 and 1452 of 1967).
V.S. Desai, K. L. Hathi and P. C. Kapur, for the respondents (in C.As.
1453 and 1454 of 1967).
The Judgment of the Court was delivered by Grover, J.
All these appeals arise out of writ petitions that were filed in the High Court of Madhya Pradesh challenging the notices of demand issued by the Deputy Transport Commissioner for payment of the amount of passenger tax said to be due under the Madhya Pradesh Motor Vehicles (Taxation of Passengers) Act, 1959, hereinafter referred to as the 'Act '.
By a common judgment dated November 8, 1966 the High Court allowed the petitions and quashed the demand notices.
The appeals may be divided into two categories.
In C. As. 1449 and 1453 of 1967 returns had been duly filed as contemplated by section 5 of the Act but no tax had been deposited as required by section 6.
Demand 9 85 notices were issued in respect of the tax payable pursuant to the returns some years later.
Proceedings were also taken as no payment was made for recovery of the tax as arrears of land revenue.
In the other four appeals the returns were never filed but it appears the authorities did take certain proceedings under section 7 of the Act and in some cases accounts of the respondents were checked and their liability determined.
When demand notices were sent and recoveries sought to be made the writ petitions were filed.
The High Court did not go in these matters fully ,and treated all the petitions as if the facts were similar.
Section 3 of the Act which is the charging section provides that there shall be levied and paid to the State Government a tax on all passengers carried by stage carriages at a rate equivalent to 15 % of the fare inclusive of the tax payable to the operator of a stage carriage.
The tax has to be collected by the operator of a stage carriage and paid to the State Government in accordance with the provisions of the Act.
Under section 5 the operator must deliver to the tax officer or to such prescribed officer as may be specified a return in the prescribed form and manner either daily or at such intervals as may be prescribed.
Section 6 lays down that the tax payable during any month in accordance with the return submitted under section 5 shall be paid into a Government treasury by the operator and the receipt evidencing such payment has to be forwarded to the Tax Officer.
Sections 8, 9 and 10 are in the following terms "(8) Fares escaping assessment.
If, for any reason, the whole or any portion of the tax leviable under this Act, for any month has escaped assessment, the Tax Officer may, at any time within, but not beyond, one year from the expiry of that month, assess the tax which has escaped assessment, after issuing a notice to the operator and making such inquiry as the officer may ,consider necessary.
(9)Penalty for non payment of tax.
Where the whole orany portion of the tax payable to the State Government in respect of any stage carriage for any month or portion thereof in pursuance of sections 6, 7 and 8 has not been paid to it in time the Tax Officer may, in his discretion, levy in addition to the tax so payable, a penalty not exceeding 25 per cent of the maximum tax which would have been payable to the State Government if the stage carriage had carried its full complement of passengers during such month or portion thereof.
(10)Recovery of tax, etc, (1 ) In the cases referred, to in sections 7, 8 and 9 the, Tax Officer shall serve on the operator a notice of demand for the sums payable 9 86 to the State Government and the sums specified in such notice may be recovered from the operator as arrears of land revenue.
(2)The tax shall be a first charge on the stage carriage in respect of which it is due as also on its accessories and such stage and the accessories thereof may be attached and sold for the recovery of the tax under the appropriate law relating to the recovery of arrears of land revenue.
" Section 12 provides for an appeal against a notice of demand ' served under section 10.
The scheme of the above provisions apparently is that the operator of a stage carriage has to submit a return in accordance with section 5 and pay tax into the Government treasury every month as provided by section 6.
No question can arise of any assessment order being made under section 7 by the Tax Officer where the returns are found to be correct and complete.
It is only where either no returns have been submitted or where the return submitted appear to the Tax Officer to be incorrect or incomplete that the Tax Officer has to follow the procedure laid down in section 7 and determine the tax payable by the operator.
The High Court was of the view that even where returns had been filed and accepted as correct the Tax Officer has to pass a proper assessment order holding the operator liable for payment of tax in accordance with the return submitted by him.
In other words no notice of demand can be issued until the Tax Officer makes such an order quantifying the amount of tax.
We are unable to accede to the contention which prevailed ' with the High Court that even where returns had been submit ted but the tax has not been paid the Tax Officer is bound to, make an order before serving a notice of demand even though the demand is strictly in accordance with the returns which have been submitted.
Section 7 rules out any such course to be followed by the Tax Officer.
It is only when the returns have not been submitted or when return submitted are found to be incorrect and incomplete that the Tax Officer has to make an inquiry, and determine the sum payable by the operator by way of tax.
Similarly if there has been escapement of tax proceedings have, to be taken under section 8 and an order has to be made after an enquiry.
The position would be same if penalty is sought to be levied, under section 9.
But where returns have been accepted as correct nothing more need be done except to recover the tax due which has not been paid and no asessment order need be passed in view of the express language of section 7.
987 We are satisfied that in the two appeals, i.e., C. As. 1449 and 1453/67 in which returns had been filed the Tax Officer was not bound to make any order quantifying the amount of tax before issuing the notice of demand.
The amount sought to be realized was quantified in the returns themselves vide Form IV read with Rule 4(2)(c) of the M. P. Motor Vehicles (Taxation of Passengers) Rules.
It has not been shown that any penalty was sought to be imposed in those two cases.
The order of the High Court, therefore, in these appeals cannot be sustained and is hereby set aside and the writ petitions are ordered to be dismissed.
As regards C. As.
1450, 1451, 1452 and 1454/67, it appears, as has been stated earlier, that some proceedings were held of the nature contemplated by section 7 and the notices of demand were issued after orders had been duly made by the Tax Officer.
But this is a matter which was not examined in each case by the High Court and we would like to express no opinion with regard to it.
These appeals are also allowed and the orders of the High Court are set aside.
The High Court will rehear and redecide the same in accordance with law.
There will be no order as to costs in all.
the appeals.
K. B. N, Appeals allowed.
| IN-Abs | Under the Madhya Pradesh Motor Vehicles (Taxation of Passengers) Act, 1939, where returns have been accepted as correct nothing more need be done except to recover the tax due which has not been paid and no assessment order need be passed in view of the express language of section 7.
It is only when the returns have not been submitted or when returns submitted are found to be incorrect and incomplete that the tax officer has to make an enquiry and determine the sum payable by the operator by way of tax.
Simmilarly if there has been escapement of tax, proceedings have to be taken under section 8 and an order has to be made after an enquiry.
The position would be the same if penalty is sought to be levied under section 9.
[986F H; 987A]
|
Appeal No. 15 of 1968.
Appeal from the judgment and decree dated August 11, 1964 of the Allababad High Court in first Appeal No. 11 of 1957.
C. B. Agrawala, O. P. Rana and R. Bana, for the appellants.
Grover, J. This is an appeal by certificate from the judgment of the Allahabad High Court dacreeing the suit filed by the respondent company for recovery of a sum of Rs. 21,000/ on account of rent or damages in respect of storage charges for 4,000 Maunds of potatoes for which space had been reserved in the cold storage by the company The plaintiff respondent brought a suit against the State of Uttar Pradesh and impleaded three other defendants who were, at the material time.
in the service of the State.
Defendant No. 3 was a Horticulturist in the Department of Agriculture.
He negotiated with the plaintiff for storing Government potatoes in a cold storage which belonged to the plaintiff.
It was agreed that the Government potatoes would be sent for storage and the plaintiff would be entitled to charge at a certain rate per maund.
It was understood that 4,000 maunds of potatoes would be sent for storage.
How ever, no potatoes were sent although the plaintiff had reserved the requisite space in the storage which remained unoccupied during the season.
It appears that defendant No. 3 A. P. Gupta was acting on behalf of Srivastava defendant No. 2 who was Deputy Director, Horticulture.
Both these defendants were acting upon instructions from Sri Ram Krishna defendant No. 4 who was Assistant Development Commissioner, Planning Lucknow.
The suit was therefore filed against the State and the other three defendants to recover the storage charges amounting to Rs. 21,000/ .
3 Although, all the defendants raised a common plea that there was no contract between the parties for the storage of potatoes and that the entire matter remained at the stage of negotiations the real plea taken on behalf ' of the State was that no contract had been entered into in accordance with article 299 (1) of the Constitution.
The trial court upheld the objection of the State and dismissed the suit against it but it held the other defendants jointly liable for the storage charges.
The High Court on appeal by the defendants set aside the decree against defendants Nos. 2 and 4 but maintained it against defendant No. 3.
No appeal, however, was filed by the plaintiff against the State.
As the judgment of the High Court proceeded mainly on the provisions of sub section (3) of section 230 of the Contract Act the whole of that section may be set out : section 230. "In the absence of any contract to that effect an agent cannot personally enforce contracts entered into by him on behalf of his principal, now is he personally bound by them.
Such a contract shall be presumed to exist in the following cases: (1) Where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad; (2) Where the agent does not disclose the name, of his principal; (3) where the principal,though disclosed,cannot be, sued.
According to the High Court the entire transaction had been entered into by the defendant on behalf of the, Government.
As the State Government was not liable by virtue of article 299 of the Constitution section 230 (3) would be applicable and defendant No. 3, who was apparently acting as an agent of the State Government, would become personally liable under the contract.
Certain observations in Chatturbhuj Vithaldas Jasani vs Moreshwar Parshrain & Others (1) appear to lend support to this view.
In that case also no formal contract had been.
(1) ; 4 entered into as required by article 299 (1) of the Cons titution.
The court observed that the Chairman of the Board of Administration had acted on behalf of the Union Government and his authority to contract in that capacity had not been questioned.
Both sides ,acted in the belief and on the assumption that the goods were intended for Government purposes.
The only flaw was that the contracts were not in proper form and because of this technical difficulty the principal could not have been sued.
But that was just the kind of case that section 230 (3) of the Indian Contract Act was designed to meet.
The Government might not be bound by the contract but it was very difficult to say that such contracts were void and of no effect.
There would be nothing to prevent ratification especially if that was for the benefit of the Government However, in a subsequent decision in State of West Bengal vs M/s B. K. Mondal and sons, (1) Gajendragadkar J., delivering the majority judgment of Bench said at page 885 with reference as he then was, the Constitution to the above observation: "The contract which is void may not be capable of ratification, but, since according to the Court the contract in question could have been ratified it was not void in that technical sense.
That is all that was intended by the observation in question.
We are not prepared to read the said observation or the final decision in the case of Chatturbhuj as supporting the proposition that notwithstand ing the failure of the parties to comply with article 299 (1) the contract would not be invalid.
Indeed, Bose, J., has expressly stated that such a contract cannot be enforced against the Government and is not binding on it.
" The effect of the reference to section 230 (3) of the Contract Act in Chatturbhui"s case(2)was not directly considered 'but in a large number of Subsequent decisions this Court has taken the view that the provisions of article 299 (1) (corresponding to section 175 (3) of the Government of India ' Act (1935) are mandatory and contain a prohibition against a contract being entered into (1) [1962] Supp. 1 S.C.R. 876.
(2) ; , 5 except in the manner prescribed by the aforesaid provisions.
We need only refer to the recent judgment in Mulamchand vs State of Madhya Pradesh (1).
After referring to the earlier decisions Ramaswami, J. observed at page 221 : "The principle is that the provisions of section 175 (3) of the Government of India Act, 1935 or the corresponding provisions of article 299 (1) of the Constitution of India are mandatory in character and the contravention of these provisions nullifies the contracts and makes them void.
There is no question of estoppel or ratification in such a case.
" It is clear that the observations in Chatturbhuj 's case(2) have been regarded either as not laying down the law correctly or as being confined to facts of that case.
The consensus of opinion is that a contract entered into without complying with the conditions laid down in article 299 (1) is void.
If there is no contract in the eye of the law it is difficult to see how section 230 (3) of the Contract Act would become applicable.
Although the High Court did not rely on section 235 of the Contract Act the trial court bad held that the defendants had no authority to enter into a contract on behalf of the State Government but still they purported to do so.
There was an implied warranty of authority which had to be presumed and the plaintiff was entitled to receive compensation for breach of that warranty under section 235 of the Contract Act.
Section 235 provides that a person untruly representing himself to be the authorised agent of another, and thereby inducing a third person to deal with him as such agent, is liable, if his alleged employer does not ratify his acts, to make compensation, to the other in respect of any loss or damage which he has incurred by so dealing.
The High Court did not base its decision on the above section.
But it seems that section 235 also can become applicable only if there is a valid contract in existence.
This appears to follow from the words "if his alleged employer does not ratify his acts." ' The contract should thus be such that it is (1) ; (2) ; 6 capable of ratification.
;In the present case where the con tract was entered into 'Without complying with the re quirements of article 299 (1) of the Constitution the question of ratification could not arise because on the view which has already been followed such a contract is void and is not capable of ratification.
However, we do not wish to express any final opinion on the applicability of section 235 of the Contract Act to cases where the contract suffers from the infirmity that the requirements of article 299 (1) of the Constitution have not been complied with.
The reason is that before the High Court no contention appears to have been advanced on behalf of the plaintiff based on section 235 of the Contract Act nor has the plaintiff 's counsel chosen to satisfy us that even if section 230 (3) was not applicable the decree should be sustained on the ground that relief could be granted by virtue of section 235 of the Contract Act.
The appeal thus succeeds and the judgment and decree of the courts below are hereby set aside and the suit of the plaintiff is dismissed.
In the circumstances of the case the parties are left to bear their own costs throughout.
| IN-Abs | The respondent company had a cold storage.
It filed a suit against the Government of Uttar Pradesh and three of its officials claming rent or damages on the allegation that under an agreement negotiated by Defendant No. 3 under instructions from Defendants Nos. 2 and 4 on behalf of the State Government (defendant No. (1) space had been reserved in its cold storage by the company for the storage of Government potatoes but no potatoes had been sent for storage.
On behalf of the State Government it was pleaded that no contract was entered into in accordance with article 299(1) of the Constitution.
The trial court upheld the objection of the State and dismissed the suit against it, but it held the other defendants liable for the storage charges.
The High Court on appeal by the defendants set aside the decree against defendants Nos. 2 and 4 but maintained it against defendant No. 3.
According to the High Court the entire transaction had been entered into by the defendant No. 3 on behalf of the Government and since the State Government was not liable by virtue of article 299 of the Constitution the said defendant would be liable under section 230(3) of the Contract Act.
In appeal to this Court by certificate, HELD : Except in Chatturbhuj 's case which lent some support to the High Court 's view, this Court has taken the view that the provisions of article 299(1) are mandatory and contain a prohibition against a contract being entered into otherwise than in the manner prescribed by the aforesaid provisions.
The observations in Chaturbhuj 's case have been regarded in subsequent decisions as either not laying down the law correctly or as being confined to the facts of that case.
The consensus of opinion is that a contract entered into without complying, with the conditions laid down in article 299(1) is void.
If there is no contract in the eye of the law it is difficult to see how section 230(3) of the, Contract Act would become applicable.
(5 D] The appeal must accordingly be allowed.
Chatturbhuj Vithaldas Jasani vs Moreshwar Parashram & Ors, ; , not followed.
State of West Bengal vs M/s. B. K. Mondal & Sons.
[1962] Supp. 1 S.C.R. 876, and Mulamchand vs State o/ Madhya Pradesh; , , applied.
[For the reasons stated in the judgment the court did not give any final opinion on the question of applicability of section 235 of the Contract 2 Act to cases when the contract Suffers from the infirmity that the requirements of article 299(1) of the Constitution have not been complied with]
|
iminal Appeal No. 83 of 1953.
Appeal under article 132(1) of the Constitution of India from the Judgment and Order dated the 25th August 1953 of the High Court of Judicature at Patna in Criminal Appeal No. 410 of 1951.
B. K. Saran and M. M. Sinha, for the appellants.
M. C. Setalvad, Attorney General for India (R.C.prqsad, with him) for the respondent.
1047 1954.
December 2.
The Judgment of the Court was delivered by DAS J.
This is an appeal from a judgment of the High Court of Judicature at Patna which raises a substantial question of law as to the interpretation of the Constitution of India.
The appeal arises out of a criminal trial held in the district of Hazaribagh in the State of Bihar.
The case against the appellants was investigated by the local police and on the 4th June, 1951 a challan was submitted before the Sub Divisional Magistrate.
The Sub Divisional Magistrate passed the following order in the order sbeet: "Let the record be sent to the Dy.
Commr., Hazaribagh for.
transferring it to the file of the Spl.
Magistrate for trial".
On the record being placed before the Deputy Commissioner, the latter passed following order: "Perused S.D.0 's order sheet.
Withdrawn and transferred to the file of Mr. section F. Azam, Magte.
with powers u/s 30, Cr. P. C. for favour of disposal".
The appellants were then tried by Mr. section F. Azam, Magistrate of the first class exercising powers under section 30 of the Code of Criminal Procedure on charges under sections 366 and 143 of the Indian Penal Code and each of them was convicted under both the sections and sentenced to rigorous imprison ment for five years under section 366, Indian Penal Code, no separate sentence having been passed under section 143.The appellants preferred an appeal to the High Court of Judicature at Patna.
The appeal was heard by a Bench consisting of section K. Das and C. P. Sinha, JJ.
There was a difference of opinion between the two learned Judges as to the constitutionality of section 30 of the Code of Criminal Procedure.
section K. Das, J., took the view that the impugned section did not bring about any discrimination or inequality between persons similarly circumstanced and consequently did not offend the equal protection clause of the Constitution, while C. P. Sinha, J., was of the opinion that 1048 the section was hit by article 14.
The appeal was thereupon placed before Reuben, C. J., who in agreement with section K. Das, J., held that section 30 did not violate the inhibition of article 14.
The learned Chief Justice upheld the conviction but reduced the sentence.
On application by the appellants the High Court granted them a certificate under article 132(1) and the present appeal has been filed accordingly.
The learned Advocate appearing in support of the appeal contends before us, as was done before the High Court, that there had been an infraction of the fundamental rights guaranteed to the appellants under article 14 of the Constitution of India.
The complaint is that the appellants had been tried by a section 30 Magistrate and not by a Court of Session.
A section 30 Magistrate is enjoined by that section to try the case brought before him as a Magistrate and accordingly in cases like the present case he will follow the warrant procedure which is different from the procedure followed by a Court of Session.
The substance of the grievance is that a trial before the Sessions Judge is much more advantageous to the accused person in that he gets the benefit of the commitment proceedings before a Magistrate and then a trial before the Sessions Judge with the aid of the jury or assessors.
It has not been seriously questioned before us that in spite of the risk of imposition of a punishment heavier than what a section 30 Magistrate can inflict, a trial by a Sessions Judge is of greater advantage to the accused than a trial before a Magistrate under the warrant procedure.
We have, therefore, to see whether this apparent discrimination offends against the equal protection clause of our Constitution.
The provisions of article 14 of the Constitution have come up for discussion before this Court in a number of cases.
, namely, Chiranjit Lal Chowdhuri vs The Union of India(1), The State of Bombay vs F. N. Balsara(2), The State of West Bengal vs Anwar Ali Sarkar(3), Kathi Raning Rawat vs The State of Sau (1) ; (2) ; (3) ; 1049 rashtra(1), Lachmandas Kewalram Ahuja vs The State of Bombay(2) and Qasim Razvi vs The State of Hyderabad(3) and Habeeb Mohamad vs The State of Hyderabad(4).
It is, therefore, not necessary to enter upon any lengthy discussion as to the meaning, scope and effect of the article in question.
It is now well established that while article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation.
In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped togetber from others left out of the group and (ii) that differentia must have a rational relation to the object sought to be achieved by the statute in question.
The classification may be founded on different bases; namely, geographical, or according to objects or occupations or the like.
What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration.
It is also well established by the decisions of this Court that article 14 condemns discrimination not only by a substantive law but also by a law of procedure.
The contention now put forward as to the invalidity of the trial of the appellants has, therefore to be tested in the light of the principles so laid down in the decisions of this Court.
There are no less than four modes of trial prescribed by the Code of Criminal Procedure, namely,(i) trial of sessions cases, (ii) trial of warrant cases, (iii)summary trials and (iv) trials before a High Court and a Court of Session and the procedure in each of these trials is different.
Section 28 of the Code of Criminal Procedure which is to be found in Chapter III which deals with "Powers of Courts" reads as follows: "28.
Subject to the other provisions of this Code, any offence under the Indian Penal Code may be tried (1) ; (3) ; (2) [1952] S C R. 710.
(4) ; 1050 (a) by the High Court, or (b) by the Court of Session, or (c) by any other Court by which such offence is shown in the eighth column of the second schedule to be triable".
Section 30, as it now stands, provides: "30.
In Assam, Madhya Pradesh, Punjab, Oudh, Madhya Bharat, Hyderabad, Mysore, Patiala and East Punjab States Union and Rajasthan, in all Part C States and in those parts of the other States in which there are Deputy Commissioners or Assistant Commissioners the State Government may, not withstanding anything contained in section 28 or section 29, invest the District Magistrate or any Magistrate of the first class, with power to try as a Magistrate all offences not punishable with death".
Section 34 puts a limit to the power of punishment of a section 30 Magistrate in terms following: "34.
The Court of a Magistrate, specially empowered under section 30, may pass any sentence authorised by law, except a sentence of death or of transportation for a term exceeding seven years or imprisonment for a term exceeding seven years".
It will be noticed that section 28 begins with the clause "subject to the other provisions of this Code".
This means that the section and the second schedule referred to therein are controlled by the other provisions of the Code including the provisions of section 30.
Further, the text of section 30 itself quite clearly says that its provisions will operate "notwithstanding anything contained in section 28 or section 29".
Therefore, the provisions of section 28 and the second schedule must give way to the provisions of section 30.
It is not, however, claimed by the learned Attorney General that section 30 abrogates or overrides altogether the provisions of section 28 and the second schedule in the sense that in the specified territories Magistrates empowered under section 30 become the only tribunal competent to try all offences not punishable with death to the exclusion of all other Courts mentioned in the 8th column of the second schedule.
1051 If that had been the position, then there could be no question of discrimination, for, in that situation, section 30 Magistrate 's Court would be the only Court in which all offences not punishable with death would become triable.
As already stated, this extreme claim is not made by the learned Attorney General.
The effect of the State Government investing the District Magistrate or any Magistrate of the first class with power under section 30 is to bring into being an additional court in which all offences not punishable with death become triable.
In other words, the effect of the exercise of authority by the State Government under section 30 is, as it were, to add in the 8th column of the second schedule the Magistrate so em powered as a Court before whom all offences not punishable with death will also be triable.
The question is whether this result brings about any inequality before the law and militates against the guarantee of article 14.
Section 30, however, empowers the State Government in certain areas to invest the District Magistrate or any Magistrate of the first class with power to try as a Magistrate all offences not punishable with death.
There is an obvious classification on which this section is based, namely, that such power may be conferred on specified Magistrates in certain localities only and in respect of some offences only, namely, all offences other than those punishable with death.
The Legislature understands and correctly appreciates the needs of its own people which may vary from place to place.
As already observed, a classification may be based on geographical or territorial considerations.
An instance of such territorial classification is to be found in the which came up for discussion before this Court and was upheld as valid in The State of Punjab vs Ajaib Singh(1).
section K. Das, J., and the learned Chief Justice have in their respective judgments referred to certain circumstances, e.g. the distance between the place of occurrence and the headquarters where (1) ; 135 1052 the Court of Session functions at considerable intervals, the inconvenience of bringing up witnesses from the interior, the difficulty of finding in the backward or out of the way places sufficient number of suitable persons to act as jurors or assessors, all of which make this classification quite a reasonable one.
In this sense, the section itself does not bring about any discrimination whatever.
The section only authorises the State Government to invest certain 'Magistrates with power to try all offences not punishable with death and this authority the State can exercise only in the specified places.
If the State invests any Magistrate with powers under section 30 anybody who commits any offence not punishable with death and triable by a Court of Session under section 28 read with the second schedule is also liable to be tried by the section 30 Magistrate.
The risk of such liability falls alike upon all persons committing such an offence.
Therefore, there is no discrimination in the section itself.
The learned counsel for the appellants, however, contends, on the strength of the decision of the Supreme Court of America in Yick, Wo vs Peter Hopkins(1) that "though a law be fair on its face and impartial in operation, yet, if it is administered by public authority with an evil eye and an unequal hand so as practically to make illegal discrimination between persons in similar circumstances materially to their rights, the denial of equal justice is still within the prohibition of the Constitution".
The contention is that although the section itself may not be discriminatory, it may lend itself to abuse bringing about a discrimination between persons accused of offences of the same kind, for the police may send up a person accused of an offence under section 366 to a section 30 Magistrate and the police may send another person accused of an offence under the same section to a Magistrate who can commit the accused to the Court of Session.
It is necessary to examine this contention with close scrutiny.
When a case under section 366, Indian Penal (1)[1886] 118 u.s. L.Ed. 220.
1053 Code., which is a case triable by a Court of Session under the second schedule, is put up before a section 30 Magistrate, the section 30 Magistrate is not necessarily bound to try the case himself.
Section 34 limits the power of the section 30 Magistrate in the matter of punishment.
If the section 30 Magistrate after recording the evidence and before framing a charge feels that in the facts and circumstances of the case the maximum sentence which he can inflict will not meet the ends of justice he may, instead of disposing of the case himself, act under section 347 and commit the accused to the Court of Session.
Here, whether the accused person shall be tried by the section 30 Magistrate or by the Court of Session is decided not by the executive but is decided according to the discretion judicially exercised by the section 30 Magistrate himself.
Take the case of another person accused of an affence under section 366 which is sent up by the police to a Magistrate who is not empowered under section 30.
Such Magistrate after perusing the challan and other relevant papers may, if he thinks that the ends of justice will be met if the case is tried by a section 30 Magistrate, submit the case to the District Magistrate with his own recommendations for such action as the latter may think fit to take under section 528 of the Code of Criminal Procedure.
That is what was done in the instant case.
On the other hand, he may take evidence under section 208 and after the evidence has been taken, make up his mind judicially whether he should proceed under section 209 or section 210.
He may consider that in the facts and circumstances of the case disclosed in the evidence the ends of justice require that the accused person should be committed to the Court of Session and in that event he will proceed to frame a charge and follow the provisions of sections 210 to 213.
If, however, the Magistrate is satisfied on the facts of the case that the ends of justice will be sufficiently met if the accused is tried by a section 30 Magistrate having jurisdiction in the matter, the Magistrate may report to the District Magistrate and the latter may, in his discretion, withdraw the case under section 528 of the 1054 Code of Criminal Procedure to himself and may enquire into or try such case himself or refer it for enquiry or trial to any other Magistrate competent to try the same.
In such a case there is exercise of judicial discretion at two stages, namely, under section 209 by the Magistrate before whom the accused was sent up for enquiry and also by the District Magistrate acting under section 528 of the Code of Criminal Procedure.
It is thus clear that the ultimate decision as to whether a person charged under section 366 should be tried by the Court of Session or by a section 30 Magistrate does not depend merely on the whim or idiosyncrasies of the police or the executive Government but depends ultimately on the proper exercise of judicial discretion by the Magistrate concerned.
It is suggested that discrimination may be brought about either by the Legislature or the Executive or even the Judiciary and the inhibition of article 14 extends to all actions of the State denying equal protection of the laws whether it be the action of anyone of the three limbs of the State.
It has, however, to be remembered that, in the language of Frankfurter, J., in Snowden vs Hughes(1), "the Constitution does not assure uniformity of decisions or immunity from merely erroneous action, whether by the Courts or the executive agencies of a State".
The judicial decision must of necessity depend on the facts and circumstances of each particular case and what may superficially appear to be an unequal application of the law may not necessarily amount to a denial of equal protection of law unless there is shown to be present in it an element of intentional and purposeful discrimination (See per Stone, C.J., in Snowden vs
Hughes (supra).
It may be mentioned at once that in the present case there is no suggestion whatever that there has been at any stage any intentional or purposeful discrimination as against the appellants by the Sab Divisional Magistrate or the District Magistrate or the section 30 Magistrate who actually tried the accused.
Further, the discretion of judicial officers is not arbitrary and the law provides for revision by (1) ; ; 1055 superior Courts of orders passed by the Subordinate Courts.
In such circumstances, there is hardly any ground for Apprehending any capricious discrimination by judicial tribunals.
On the facts and circumstances of this case we find ourselves in agreement with section K. Das, J., and Reuben, C. J., and hold that no case of infringement of fundamental right under Article 14 has been made out.
In the circumstances, we dismiss this appeal.
Appeal dismissed.
| IN-Abs | It is well settled that while Article 14 of the Constitution forbids class legislation, it does not forbid reasonable classification for the purposes of legislation.
In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and, (ii) that differentia must have a rational relation to the object sought to be achieved by the statute in question.
The classification may be founded on different bases; namely geographical, or according to objects or occupations or the like.
What is necessary is that there must be nexus between the basis of classification and the object of the Act under consideration.
Further Article 14 condemn,,; discrimination not only by a substantive law but also by a law of procedure.
The Constitution does not assure unanimity of decisions or immunity from merely erroneous action, whether by the courts or the executive agencies of a State.
Section 30 of the Code of Criminal Procedure does not infringe the fundamental right guaranteed by Article 14 of the Constitution.
Chiranjit Lal Chowdhuri vs The Union of India ( ; , The State of Bombay vs F.N. Balsara ([1951] S.C.R. 682), The State of West Bengal vs Anwar Ali Sarkar ([1952] S.C.R. 284), Kathi Raning Rawat vs The State of Saurashtra ([1952] S.C.R. 435), Lachmandas Kewalram Ahuja vs The State of Bombay ([1952] S.C.R. 710), Qasim Razvi vs The State of Hyderabad ([1953] S.C.R. 581), Habeeb Mohamad vs The State of Hyderabad ([1953] S.C.R. 661), The State of Punjab vs Ajaib Singh ([1953] S.C.R. 254), Yick Wo vs Peter Hopkins ([1886] ; 29 L. Ed. 220) and Snowden vs
Hughes ([1944] ; ; , referred to.
|
Appeal No. 2293 of 1970.
45 Appeal by special leave, from the order dated May 4, 1970 of the Central Registrar of Co operative Societies, New Delhi in Appeal No. CR/1/70.
Harbans Singh, for the appellant.
Remeshwar Dial and A.D. Mathur, for the respondent.
The Judgment of the Court was delivered by Sikri, C. J.
This appeal by special leave is against the order of the Central Registrar of Cooperative Societies New Delhi dismissing the appeal filed by Panchshila Industrial Cooperative Society (Multi Unit) appellant before us against the award passed by the Arbitrator (Deputy Registrar of Cooperative Societies Rohtak) dated October 7, 1969, in respect of the dispute between the Gurgaon Central Cooperative Bank Ltd., Gurgaon respondent before us, and the appellant.
The Central Registrar held that he was not the appropriate appellate authority against the award in question.
The only question which arises before us is whether the Central Registrar was the appropriate authority on the facts of this case.
The relevant facts are these.
The respondent Bank approached the Registrar of Cooperative Societies Haryana for resolving a dispute between the Bank and one of its members appellant before us.
The Registrar by his order dated February 17, 1968, in exercise of the powers vested in him under section 56 of the Punjab Co operative Societies Act, 1961, referred the dispute to the Deputy Registrar Cooperative Societies Rohtak for decision.
The arbitrator gave the award on October 7, 1969, directing that the appellant do pay to the respondent in all Rs. 16,05,658 20 together with interest at the rate of six and a half per cent per annum until the realisation of the principal amount viz. Rs. 11,52,535 00.
The appellant as mentioned above filed an appeal against this award before the Central Registrar.
The respondent Bank is a co operative society governed by the provisions of the Punjab Co operative Societies Act 1961.
Section 55(1) of this Act inter alia provides that if any dispute touching the constitution management or the business of a co operative society arises between a member 46 and the society such dispute shall be referred to the Re gistrar for decision and no Court shall have jurisdiction to entertain any suit or other proceeding in respect of such dispute.
Section 55(2) provides that for the purposes of sub section (1) a claim by the society for any debt or de mand due to it from a member or the nominee heirs or legal representatives of a deceased member whether such debt or demand be admitted or not, shall be deemed to be a dispute touching the constitution, management or the business of the co operative society.
Sub section (3) of section 55 provides that "if any question arises whether a dispute referred to the Registrar under this section is or is not a dispute touching the constitution management or the business of a cooperative society, the decision thereon of the Registrar shall be final and shall not be called in question in any court.
" There is no doubt that the dispute between the respondent Bank and the appellant fell within section 55 and was properly referred to arbitration under that section.
It is however, contended that the appellant was registered in December 1955 under the Punjab Cooperative Societies Act, 1955, and by virtue of the , and section 5A of the Multi Unit Co operative Societies Act, 1942, the appellant has ceased to be governed by the provisions of the Punjab Co operative Societies Act because it has become a multi unit co operative society.
There is no doubt that by virtue of the , and section 5A of the Multi Unit Co operative Societies, Act, 1942, the appellant has become a multi unit co operative society and the Multi Unit Co operative Societies Act applies to it.
But that Act is for the incorporation, regulation and winding up of co operative societies with objects not confined to one State, and it has no impact on section 55 of the Punjab Co operative Societies Act, 1961, inasmuch as the appellant remains a member of the co operative society, namely, the respondent Bank.
There is nothing in the provisions of the Multi Unit Co operative Societies Act to indicate that a multi unit co operative society cannot be a member of a co operative society governed by the Punjab Act of 1961.
If the appellant continues to be a member, then the terms of section 55 apply and a dispute can be referred to arbitration under that section.
An appeal against the at award lies under section 68 of the Punjab Act of 47 1961 to the Government of the decision or order was made by the Registrar, and to the Registrar if the decision or order was made by any other person.
It is quite clear therefore, that the Central Registrar had no jurisdiction to hear the appeal.
The learned counsel next contends that the Central Registrar should not have dismissed the appeal but returned the memorandum of appeal for presentation to the proper authority.
There is no statutory provision enabling the Central Registrar to do so.
At any rate, if an appeal is filed before the appropriate authority under the Punjab Co operative Societies Act, 1961, that authority will no doubt take into consideration the provisions of section 14 of the , read with section 29(2) and decide whether the appeal should be entertained or not.
In the result the appeal fails and is dismissed with costs.
K.B.N. Appeal dismissed.
| IN-Abs | The respondent bank is a co operative society governed by the Punjab Co operative Societies Act, 1961.
A dispute between the bank and the appellant, one of its members, was referred by the Registrar of Co operative Societies, in exercise of the powers vested in him by section 55 of the Act, to the Deputy Registrar, Co operative Societies for arbitration.
The appellant filed an appeal against the award before the Central Registrar of Co operative Societies.
The Central Registrar dismissed the appeal holding that he was not the appropriate appellate authority, under the Act.
In appeal to this Court the appellant con tended that it was registered in 1955 under the Punjab Co operative Societies Act 1955 and by virtue of the and section 5(A) of the Multi Unit Co operative Societies Act, 1942, it had ceased to be governed by the provisions of the Punjab Co operative Societies Act, because, it had become a multi unit co operative Society.
Dismissing the appeal, HELD : There is nothing in the provisions of the Multi unit Cooperative Societies Act to indicate that a multi unit co operative society cannot be a member of a co operative society governed by the Punjab Act of 1961.
The multi unit co operative societies Act is for the incorporation, regulation and winding up of co operative societies with objects not confined to one State and it has no impact on section 55 of the Punjab Co operative Societies Act, 1961, in as much as the appellant remains a member of the Co operative Society, namely, the respondent bank.
If the appellant continues to be a member then the terms of section 55 apply and a dispute can be referred to arbitration under that section.
An appeal against that award lies under section 68 of the Punjab Act of 1961 to the government if the decision or order was made by the Registrar and to the Registrar if the decision or order is made by any other person.
Therefore the Central Registrar had no jurisdiction to hear the appeal.
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Appeals Nos. 1687 and 1688 of 1968 Appeals from the judgment and order dated August 29, 30, 1967 of the Calcutta High Court in Income Tax Reference No. 16 of 1964.
section Mitra, R. N. Sachthey and B. D. Sharma, for the appellant (in both the appeals).
M. C. Chagla, section M. Jain, B. P. Maheshwari and R. K. Maheshwari for the respondent (in both the appeals).
The Judgment of the Court was delivered by Hegde, J.
These appeals by certificate arise from the decision of the Calcutta High Court in Income tax Reference No. 16 of 1964 on its file.
Therein the High Court was considering a reference made by the Income Tax Appellate Tribunal 'B ' Bench Calcutta under section 66 (1) of the Indian Income Tax Act, 1922 to be hereinafter referred to as 'the Act '.
The question of law which was referred for the opinion of the High Court reads thus : "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that in view of the capital loss of Rs. 12,00,000/ suffered by the assessee on account of depreciation in the value of the shares of Messrs. Elphinstone Mills Ltd. payment of any dividend at all during any of the two relevant accounting years would have been unreasonable ?" The assessment years with which we are concerned in these appeals are 1955 56 and 1956 57, the corresponding accounting years being the years ending on June 30, 1954 and June 30, 1955.
The assessee is a limited company doing business as selling agents of a Textile Mill.
For the assessment year 1955 56 the assessee was assessed on a total income of Rs. 1,61,089/ and taxes paid were Rs. 69,973/ leaving a distributable balance of Rs. 91,116/ .
According to the Profit & Loss Account, however, the company suffered a net loss of Rs. 11,63,874/ and this was due to the loss of Rs. 12,00,000/ on account of depreciation in the value of 83 shares held by the company in Elphinstone Mill Ltd. of Bombay.
The Income tax authorities disallowed an amount of Rs. 11,88,000/ out of this loss on the ground that it relates to the price paid for the shares purchased for the sake of acquiring the managing agency of the: Elphinstone Mills Ltd. The Tribunal upheld the disallowance on the ground that the amount of Rs. 11,88,COO/was a loss relating to shares held by the company in its, investment account.
The company however, did not declare any dividend for the year in question.
The Income tax Officer in exercise of his powers under Section 23 A(1) levied additional super tax @ /4/ per rupee on the distributable surplus of Rs. 91,116/ .
In so doing be ignored.
the loss in the value of the, shares in Elphinstone Mills.
Ltd. For the assessment year 1956 57 the total income assessed was Rs. 1,07,429/ and the taxes payable thereon were Rs. 46,668/ leaving a distributable surplus of Rs60,761/ .
In this year also the company did not declare any dividend because of the loss referred to earlier.
The. income tax Officer, however, again invoked the provisions of Section 23A (1) and levied additional super tax @ /4/ per rupee on the surplus of Rs. 60,761/ .
In appeal, the Asstt.
Commissioner took the view that the loss incurred by the company was a capital loss.
But all the same as there was no commercial profits in the relevant accounting years it was not reasonable to expect the assessee company to declare any dividend in respect of those years in view of the capital loss incurred and he,.
therefore, cancelled the orders of the Income tax Officer under section 23A (1).
Aggrieved by the Order of the Appellate Assistant Commissioner, the department appealed to the Tribunal.
The Tribunal agreed with the conclusions reached by the Appellate Assistant Commissioner.
It held that under the circumstances the Directors were justified in 'not declaring any dividend in respect of the profits that had accrued in the accounting years.
At the instance of the Commissioner, the Tribunal submitted to the High, Court of Calcutta the question of law set out by us earlier.
The High Court answered that question in favour of the assessee.
8 4 The Tribunal the final fact finding authority has ,come to the conclusion that the assessee had incurred a capital loss of Rs. 12,00,000/ as a result of the depreciation of the value of the shares of Elphinstone Mills Ltd. The question is whether that was a relevant circumstance for not 'declaring any dividend.
The further ,question is whether the Directors of the assessee company acted as prudent businessmen in refraining from ,declaring any dividend.
Section 23A (1) of the Act reads : " Where the Income tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company within the twelve months immediately following the expiry of that previous year are less than the statutory percentage of the total income of the company of that previous year as reduced by (a) the amount of income tax and super tax payable by the company in respect of its total income, but excluding the amount of any super tax payable under this section (b) the amount of any other tax levied under any law for the time being in force on the company by the Government or by a local authority in excess of the amount, if any, which has been allowed in computing the total income; and (c) in the case of a banking company, the amount actually transferred to a reserve fund under section 17 of the Banking Companies Act, 1949; the Income tax Officer shall, unless he is satisfied that, having regard to the losses incurred by the company in earlier years or to the smallness of the profits made in the previous year, the payment of a dividend or a larger dividend than that declared would be unreasonable, make an order in writing that the company shall, apart from the sum deter mined as payable by it on the basis of the assessment under section 23, be liable to pay super tax at the rate of fifty per cent in the case of a company whose business consists wholly or mainly in the 85 dealing in or holding of investments, and at the rate of thirty seven per cent in the case of any other company on the undistributed balance of the total income of the previous year, that is to say, on the total income as reduced by the amounts, if any, referred to in clause (a), clause (b) or clause (c) and the dividends actually distributed, if any." Whether in a particular year dividend should be declared or not is a matter primarily for the Directors of a company.
The Income tax Officer can step in under Section 23A (1) only if the Directors unjustifiably refrain from declaring dividend.
If the Directors of a company had reasonable grounds for not declaring any dividend, it is not open for the Income tax Officer to constitute himself as a super Director.
As observed by this Court in Commissioner of Income tax, West Bengal, vs Gangadliar Bannerjee and Co. (Pvt.
) Ltd. ' the Income tax Officer, in considering whether the payment of a dividend or a larger dividend than that declared by a company would be unreasonable within the meaning of Section 23A of the Act does not assess any income to tax.
He only does what the directors should have done putting himself in their place.
Though the object of the section is to prevent evasion of tax, the provision must be worked not from the standpoint of the tax collector but from that of a businessman.
The reasonableness or unreasonableness of the amount distributed as dividends is judged by business considerations, such as the previous losses, the present profits, the availability of surplus money and the reasonable requirements of the future and similar others.
The Income tax Officer must take an overall picture of the financial position of the business.
He should put himself in the position of a prudent businessman or the director of a company and deal with the problem with a sympathetic and objective approach.
On the facts found by the Tribunal, there can be hardly any doubt that the assessee had suffered a capital loss of Rs. 12,00,000/ .
In our opinion, in view of the the said loss, any reasonable body of Directors of a company would have done just what the Directors of the (1) 86 assessee company did.
We think, that the Income tax officer took an erroneous view of the scope of Section 23A (1).
Mr. Mitra, learned counsel for the department contended that the assessee had not in fact incurred any loss though the value of the shares had gone down in the market.
As the assessee was still in possession of those shares, there was still a possibility of avoiding the anticipated loss.
Hence there was no occasion to take note of the depreciation in the value of the shares in the matter of declaration of dividends.
This is an unacceptable contention.
The Directors of a company will be justified in taking things as they stand and not befool themselves in the wild hope that the value of the shares may come up again.
They are expected to act as hard headed businessmen.
They are not expected to gamble with the future of the concern.
The question is not whether the value of the shares may not go up in future but whether the Directors were justified in not declaring dividends in view of the loss incurred.
The Income tax Officer overlooked the fact the Directors were naturally more interested in the stability of their concern rather than in increasing the tax payable to the Government.
Before the High Court, it appears to have been urge Mr. Mitra rightly did not press that plea that the loss incurred being a capital loss the same cannot be taken into consideration in the application of Section 23A (1).
This very contention was examined and rejected by the Judicial Committee in Commissioner of Income tax vs Williamson Diamonds Ltd.(1).
In that case their Lordships were con sidering the scope of section 21 (1) "(Consolidation) Ordinance, 1950 of Tanganyika.
" That provision corresponds very closely to Section 23A (1) of the Act.
Dealing with the scope of that provision, their Lordships observed: "It does not follow from what has been said that capital losses should not be taken into account by the Commissioner.
Two matters are mentioned specifically in the words which give him a direction the first is 'losses ' (as interpreted above) and the second is "smallness of profit." The Commissioner (1) 87 is directed to come to a decision upon the question whether "the payment of a dividend or a larger divdend than.
that declared" his unreasonable. "The form of the word used no doubt lends itself to, the suggestion than regard should be paid only to the two matters mentioned, but it appears to their Lordships that it is impossible to arrive at a conclusion as to reasonableness by considering the two matters mentioned isolated from other relevant factors.
Moreover, the Statute does not say 'having regard only ' to losses previously incurred by the company and to the smallness of the profits made.
No answer which can be said to be in any measure adequate, can be given to the question "unreasonableness" considering these two matters only.
Their Lordships are of the opinion that the Statute by the words used while making sure that "losses and smallness of profit" are never lost sight of require all matters relevant to the question of unreasonableness to be considered capital loss, if established is one of them.
" We respectfully agree with these observations.
For the reasons mentioned above, these appeals fail and they are dismissed with costs.
One hearing fee.
G.C. Appeals dismissed.
| IN-Abs | The assessee was a limited company doing business as selling agents of a Textile Mill.
During the previous years relevant for the assessment years 1955 56 and 1956 57 the company had assessable profits but did not declare dividend, because capital loss far in excess of profits was incurred by it due to fall in value of its share holdings.
The Income tax Officer exercised his powers under section 23A (1) and levied additional super tax on the distributable surplus in the relevant years.
The Appellate Assistant Commissioner, the Tribunal and the High Court however, took the opposite view, holding that in the circumstances it was not reasonable to expect the company to declare dividend.
In appeal to this Court by the Revenue, HELD : Whether in a particular year dividend should be declared or, not is a matter primarily for the Directors of a company.
The Income tax Officer can step in under section 23A(1) only if the Directors unjustifiably refrain from declaring dividend.
If the Directors of a company had reasonable grounds for not declaring any dividend, it is not open for the Income tax Officer to constitute himself as a super Director.
Though the object of the section is to prevent evasion of tax, the provision must be worked not from the standpoint of the tax collector but from that of a business man.
[85C E] Commissioner of Income tax, West Bengal vs Gangadliar Bannerjee & Co. (P) Ltd. 57 , relied on.
In the present case in view of the capital loss of Rs. 12 lacs as found by the Tribunal, any reasonable body of Directors of a company would have done just what the Directors of the Assessee company did.
The Income tax Officer took an erroneous view of section 23A (1).
[85H] The fact that the company continued to hold the shares whose value could possible go up again was irrelevant.
The Directors of a company will be justified in taking things as they stand and not be fool themselves in the wild hope that the value of the shares may come up again.
[86C] It would be incorrect to say that capital loss cannot be taken into consideration in the application of section 23A(1).
[86E F] Commissioner of Income tax vs Williamson Diamonds Ltd. , applied. 82
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Appeal No. 1125 of 1970.
Appeal under section 116 A of the Representation of the People Act, 1951 from the judgment and order dated March 26, 1970 of the Assam and Nagaland High Court in Election Petition No. 2 of 1969.
S.V. Gupte, S.K. Ghose, Advocate General, Nagaland, Naunit Lal, A. R. Bharthakar, R. C. Choudhry and B. K. Dass, for the appellant.
A. section R. Chari, R. K. Garg, D. P. Singh, R. K. Jain, V. J. Francis and section Chakravarty, for the respondent. 425 On January 14, 1971 the Court passed, the following ORDER After hearing the arguments we are of the view that unders.
116A of the Representation of the People Act, 1951 as amend ed by the Act of 1966, the respondent is entitled to support the judgment of the High Court without preferring an appeal against, an order made against him if the ultimate decision in the petition is in his favour.
The reasons for this order will be given hereafter.
The Judgment of the Court was delivered by Hegde, J.
The decision on the question of law considered by this Bench was announced on the 14th of this month.
We are now proceeding to give our reasons in ' support of that decision.
On September 14, 1970, two of us (Shah, C.J. and Grover, J.) passed the following order "This appeal raises an important question of procedure.
We have heard leaned Counsel appearing on behalf of the parties.
Mr. Gupte appearing for the appel lant contended that the charge under section 123(6) read with section 77 of the Representation of the People Act was not made out.
Mr. Chari appearing on behalf of the respondent contended that he was entitled to submit without preferring a substantive appeal to this Court that the charges in respect of which the appellant has been absolved by order of the High Court are proved and he should be permitted to raise those questions in this appeal.
Our attention has not been invited to any case which interprets the provisions of section 116(A) of the Representation of the People Act at it stands after the amendment made in the year 1967.
In view of the importance of the question, we direct that the case be referred to a larger bench of five judges.
Hearing expedited.
Though, the entire appeal was referred to a larger bench for decision, at the hearing it was considered advisable to decide only the question of law set out in the order and not the whole case.
We accordingly heard arguments only on that question.
In our opinion that question is concluded by the decision of this Court in Ramanbhai Ashabhai Patel vs Debhi Ajitkumar Fulsinji and ' Ors.
(1) (1) ; 426 Mr. section V. Gupte , learned Counsel for the appellant tried to distinguish that decision on two grounds viz. (1) that the decision in question was rendered in an appeal to this Court by special leave and as such the jurisdiction of this Court was much wider than that conferred on this Court by section 116A of the Representation of the People Act, 1951 and (2) that the scope of an appeal under section 116A before, its amendment in 1966 was different than from its scope at present.
We are unable to accept either of these two contentions.
In the above decision, it was ruled that this Court has power to decide all the points arising from the judgment appealed against and even in the absence of an express provision like 0.
XLI, r. 22 of the Code of Civil Procedure, this Court can devise appropriate procedure to be adopted at the hearing and 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.
The decision of, the Court did not rest either on the ground that the appeal before it was brought by special leave of this Court or on the interpretation of section 116A as it than stood.
The reasons behind the rule laid down by this Court are found at p. 725 of the report.
Therein it is observed : "It is true that the rules framed by this Court in exercise of its rule making powers do not contain any provision analogous to 0.
XLI, rule 22 of the Code of Civil Procedure which permits a party to support the judgment appealed against upon.
a ground which has been found against him in that judgment.
The provision nearest to, it is the one contained in 0.
XVIII, r. 3 of the Rules of this Court which requires parties to file statement of cases.
Sub rule (1) of that rule provides that Part I of the statement of the case shall also set out the contentions of the parties and the points of law and fact arising in the appeal.
It further provides that in Part II a party shall set out the propositions of law to be urged in support of the contentions of the party lodging the case and the authorities in support thereof.
There is no reason to limit the provision of this rule only to those contentions which deal with the points found in favour of that party in the judgment appealed from.
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 0.
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 427 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." The decision referred to above will govern the question of law with which we are connected in this case.
The appeal was already directed by the Chief Justice to be posted before the Bench presided over by Mitter J. for further hearing.
| IN-Abs | In an election petition there were charges under section 123(6) read with section 77 of the Representation of the People Act, 1951 against the appellant.
The High Court decided against him.
although absolving him of certain charges.
The appellant filed an appeal in this Court under section 116A of the Representation of the People Act, 1951 as amended in 1966.
The respondent contended that he was entitled to submit without preferring a Substantive appeal to this Court that the charges in respect of which the appellant had been absolved by the High Court were proved and he should therefore be allowed to raise those questions.
On the matter being referred to a large bench , HELD : The respondent 's contention must be accepted.
In Rambhai Ashabhai Patel 's case it was ruled that this Court has power to decide all the points arising from the judgment appealed against and even in the absence of an express provision like OXLI r. 22 of the Code of Civil Procedure, this Court can devise appropriate procedure to be adopted at the hearing and 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.
The decision of the Court did not rest either on the ground that the appeal before it was brought by special leave or on the interpretation of section 116A as it then stood.
[426 D G] Rai anbhai Ashabhai Patel vs Debbi Ajitkumar Pulsinji & Ors. ; , followed and applied.
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l Appeals No. 1834 and 1169 of 1968.
Appeals from the Judgment and order dated February 21, 22 1967 of the Calcutta High Court in Wealth Tax Reference No. 138 of 1962.
section T. Desai, section A. Aiyar, R.N. Sachthey and B. D. Sharma, for the appellant (in C.A. No. 1169/68 and the respondent (in C. A. No 1834 of 1968) A. C. Mitra, N. R. Khaitan, P. Khaitan, Krishna Sen and B.P. Maheswari for the respondent (in C. A. No. 1169.
of 1968 ) and the appellant (in C. A. No. 1834 of 1968. ) The Judgment of the Court was delivered by Grover, J.
These appeals have been brought from a judgment of the Calcutta High Court by certificate in a Wealth Tax Reference.
Civil Appeal No. 1834 of 1968 is of the assessee and the other appeal has been filed by the Commissioner of Wealth Tax, West Bengal.
It is necessary to deal with the appeal of the Commissioner of Wealth Tax as the other appeal shall also stand disposed of once the question is answered in the Commissioner 's appeal.
The assessee is a public limited company.
In the assessment year 1948 49 the assessee revalued its assets enhancing the existing book value by Rs. 1,45,00,0001which was credited to the capital reserve account.
In assessing the wealth tax payable by the assessee for the assessment year 1957 58 the relevant valuation date being March 31, 1957 the Wealth Tax Officer proceeded under section 7 (2) of the Wealth Tax Act, hereinafter called the 'Act ' and took the valuation of the assets at Rs. 5,10 40,897 as shown in the balance sheet on the relevant date.
The assessee claimed that a sum of Rs. 1,45,00,0001 by which 106 the book value of the fixed assets was enhanced in 1948 49 should be deducted in the computation of the net value.
It is not clear from the order of the Wealth Tax Officer, who rejected the claim, as to what was the ground taken for claiming this deduction.
Before the Appellate Assistant Commissioner it was contended on behalf of the assessee that the capital reserve was not out of profits and was only a notional reserve and therefore it should be excluded when global valuation of the assets was being made.
It was urged that the figure of reserve was purely artificial and had no relation to the working of the company and should not be taken into account in the valuation of the net assets.
The Appellate Assistant Commissioner did not accede to the contention and confirmed the assessment.
The Appellate Tribunal found that a similar point had come up for decision before a special bench of the Tribunal consisting of three members in Bombay ' and had been decided in favour of the assessee.
Following that decision the Tribunal allowed the appeal and held that the department was not justified in valuing the assets at the enhanced figure for the purpose of computation of the net wealth of the assessee.
The relevant question that was referred was as follows "Whether on the facts and in the circumstances of the case the Tribunal was justified in excluding the sum of Rs. 1,45,00,000/ from the net valuation of the assets as shown in the balance sheet of the assessee as on 31 3 57.
" The High Court was of the view that the Revenue had taken the stand before the Tribunal that the motive of the assessee in revaluing the assets at a higher figure was to declare the bonus share which, however, could not be so declared as the permission of the Central Government was withheld in that behalf.
According to the High Court there was a motive for revaluation of the assets and therefore the valuation in the balance sheet could not furnish the correct basis.
It was pointed out that the conduct of the assessee was "far from what was to be desired" because even in the successive balance sheets the revaluation figure appeared even after the assessee had failed to get the permission of the Central Government to issue bonus shares.
107 But according to the High Court an erroneous figure did not become a correct figure by lapse of time.
The following portion of the judgment of the High Court may be reproduced: "The Tribunal was, therefore, in a sense right in excluding a sum of Rs. 1,45,00,000/ from the net value of the assets as shown in the balance sheets of the assessee as on March 31, 1957.
We, however, make it clear that in answering question No. 1 in the affirmative we did not mean that the net value of the assets should be taken at the figure as appearing in the balance sheet reduced by Rs. 1,45,00,000/ .
What we mean to say is that in valuing the assets the addition of Rs. 1,45,00,000/ may not have been correctly made.
This does not, however, mean that the net value of the assets must be the balance sheet figure reduced by Rs. 1,45,00,000/ .
That net value will have now to be ascertained under section 7 (1) of the Wealth Tax Act, now that we have expressed the opinion that the balance sheet in the instant case has not found the unequivocal approval both of the assessee and of the Revenue authorities.
" It is quite clear that under section 7 (2) of the Act the Wealth Tax Officer may determine the net value of the assets of the business as a whole having regard to the balance sheet of the business as on the valuation date.
it must be remembered that under section 211 of the Indian , every balance sheet of a company must give a true and fair figure of the state of its affairs as at the end of the financial year.
If the assessee has shown the net value of the assets at a certain figure in the balance sheet the Wealth Tax Officer would be entitled to accept it on the footing that the assessee knew best what the valuation of the assets was.
It was, however, open to the assessee to satisfy the authorities that the said figure had been enhanced or increased or inflated "for acceptable reasons".
It was equally open to the Wealth Tax Officer not to accept the figure given by the assessee but to arrive at another figure if he was satisfied for good reasons that the valuation given in the balance sheet was wrong.
Theer 108 can be no doubt that section 7 (2) (a) of the Act contemplates that the book value in the balance sheet should be taken as the primary basis of valuation and if any adjustment is required it is open to the Wealth Tax Officer to make such an adjustment in the valuation as given in the balance sheet as may be necessary in the circumstances of the case.
(See Kesoram Industries and Cotton Mills Ltd. vs Commissioner of Wealth Tax (Central) Calcutta.(1) In the present case the sole reason which at the stage of the appeal before the Tribunal came to be disclosed for inflating the valuation by Rs. 1,45,00,000 in the assessment year 1948 49 was that the assessee contemplated issuing bonus shares for which the consent of the Central Government was necessary under section 3 of the .
The same was not granted.
The assessee, however, did not produce the order of the Central Government showing the reasons for which permission was declined to the issuance of bonus shares.
It continued to show the enhanced or inflated valuation in the balance sheet throughout.
The circumstances in which bonus shares are issued are well known.
A company may not require any new money but it may reasonably wish to bring the nominal amount of its issued share capital more into line with the true excess of assets over liabilities.
Unless it takes this step its annual profits will appear to be disproportionately high in relation to its nominal capital.
By means of issuing bonus shares the reserve or share premium account or some part of the same are capitalised or converted into share capital.
The capitalisation of free i.e. voluntary reserves merely means that undistributed profits have been permanently ploughed back and converted into share capital which cannot be returned to the members by way of dividend.
(vide Modern Company Law by L.C.B. Gower, p. 110).
It is quite clear that the main idea underlying the issue of bonus shares is to bring the nominal amount of the issued share capital of the company into line with the true excess of assets over liabilities.
This will involve a genuine and correct valuation of assets and not their under valuation or inflation.
It must be remembered that the power to (1) ; 109 issue shares for increasing the capital is of a fiduciary nature and must be exercised bona fide for the general advantage of the company.
No evidence in the shape of an affidavit or any other material was placed before the wealth tax.
authorities by the assessee demonstrating how it became necessary to inflate the valuation by Rs. 1,45,00,000 for the purpose of issuing bonus shares.
It was not even the case of the assessee that the value was inflated under expert acturial suggestion or under some misapprehension or mistaken advice.
In this situation the only possible conclusion can be that the assessee could not advance any convincing and acceptable reasons for the alleged inflation.
The Wealth Tax Officer could reject the figure given by the assessee in the balance sheet if he was, for sufficient reasons, satisfied that that figure was wrong.
The facts and circumstances which have been discussed above show that the Wealth Tax Officer was fully justified in accepting the figure which the assessee himself had given in the balance sheet as the correct figure and proceed to make the assess ment in accordance with that figure.
The High Court should have, therefore, answered the question in the negative and in favour of the Commissioner of Wealth Tax The appeal of the Commissioner of Wealth Tax i.e. C.A. 1169/68 is allowed and the question is answered accordingly.
The appeal of the assessee i.e. C. A. 1834/68 consequently becomes infructuous and must be dismissed in view of the answer returned in the other appeal.
The Commissioner will be entitled to the costs incurred in this Court (one hearing fee) as also in the High Court.
V.P.S. Appeal dismissed.
| IN-Abs | In the assessment year 1948 49, the assessee, a public limited company revalued its assets and enhanced the book value by Rs. 145,00,000 and continued to show the inflated valuation in the balance sheets for subsequent years.
For the assessment year 1957 58, the Department took the valuation of the assets as shown in the balance sheets.
The assessee, however, claimed that the said Rs. 45,00,000 should be deducted in the computation of the net value.
Before the Tribunal, it was stated that the reason for the inflation was that the assessee contemplated issuing bonus shares for that amount, but it did not do so because the necessary consent of the Central Government was not grant ed.
The Tribunal decided in favour of the assessee but the High 'Court, on reference, held that there was a motive for the revaluation ,of the assets and therefore the valuation in the balance sheet could not be accepted as a correct basis and that the net value would have to be ascertained by the Wealth tax Officer under section 7 of the Wealth tax Act.
Both the assessee and the Revenue appealed to this Court.
HELD: (1) Under section 211 of the Indian , every balance sheet must give a true and fair figure of the state of its affairs as at the end of the financial year.
Under section 7 of the Wealth tax Act the Wealth Tax Officer may determine the net value of the assets of the business having regard to the balance sheet of the business as on the valuation date it is open to the Wealth tax Officer to accept the figure given by the assessee or to arrive at another figure if he was satisfied for good reasons that the valuation given in the balance sheets was wrong.
Equally it is open to the assessee to satisfy the authorities that .the said figure had been enhanced, for "acceptable reasons".
[107 E H] (2) The main idea underlying the issue of bonus shares is to bring the nominal amount of the issued share capital of the company into line 'with the true excess of assets over liabilities.
But the taking of this ,step would involve a genuine and correct valuation of assets and not their under valuation or inflation, especially when the power of the Company to issue bonus shares is of fiduciary nature and must be ,exercised bonafide for the general advantage of the company.
[108G H., 109A] (3) In the present case, no evidence was placed before the Wealth Tax Officer for demonstrating how it became necessary to inflate the valuation by Rs. 1,45,00,000 for the purpose of issuing bonus 105 shares, nor was it shown that it was so done under expert acturial suggestion under some misapprehension or mistake.
The Wealth Tax Officer was therefore fully justified in accepting the figure which the assessee had himself given in the balance sheet as the correct figure and making the assessment in accordance with that figure.
[109B E] Kesoram Industries and Cotton Mills Ltd., vs Commissioner of Wealth Tax (Central) Calcutta, ; referred to.
|
appeal No. 1923 of 1966.
Appeal by special leave from the order dated February 14, 1966 of the Central Govt.
Labour Court, Rajasthan, Jaipur in Misc.
Application No. CLC 4 of 1964.
G. L. Sanghi and P.M. Tiwari for the appellant.
111 M. K Ramamurthi, J. Ramamurthi and Vineet Kumar, for the respondent.
The Judgment of the Court was delivered by Mitter, J.
This appeal by special leave is from an order of the Central Government Labour Court, Rajasthan passed on February 14, 1966 on an application under section 33 C (2) of the filed by the respondent, Hari Har Nath Bhargava, holding that the latter was entitled to supervisory allowance under paragraph 164 (b) (9) of the Sastry Award even for the period when the latter was not actually performing supervisory duties.
The facts in this case may be shortly stated.
The respondent was appointed a clerk by the State Bank of Jaipur in 1949.
He was transferred to Kota in the year 1952.
He was entrusted with supervisory work from 6th April, 1954.
The bank executed a power of attorney in his favour on May 31, 1954 in pursuance of a resolution of its Board of Directors passed on 20th May, 1954.
He was transferred from Kota to Jaipur on July 12, 1955.
On December 27, 1955 he was posted at Sikar where he had to perform supervisory duties.
On January 1, 1956 he was promoted to the cadre of junior officers of the bank.
On March 31, 1964 the respondent filed an application before the Central Government Labour Court, Rajasthan under section 33 C (2) praying for computation of special allowance under what is known as the Sastry Award on the ground that he had been discharging supervisory duties from 6th April, 1954 to 1st January, 1956.
By this time the Bank of Jaipur had amalgamated with the Bank of Bikaner and the amalgamated bank, the appellant before us, came to be known as the State Bank of Bikaner and Jaipur.
The execution of the power of attorney dated 29th May, 1954 was admitted but the appellant denied "that the duties entrusted to the respondent constituted performance by him of any supervisory nature of work".
A point was also taken that although no period of limitation is laid down by any statute with regard to applications under section 33 C of the Act the respondent 's claim being a stale one should not be entertained.
112 The appellant amended its written statement in 1965 wherein it was stated that the respondent was only required to perform the functions enumerated in the power of attorney as and when so directed by the bank.
As a matter of fact, he had been entrusted with supervisory duties from 6th April, 1954 to 12th July, 1955 and thereafter from 27th December, 1955 to 6th January, 1956.
The respondent was examined before the Labour Court where he said that he was "the second signatory at Kota during the period, April 1954 to middle of July 1955".
At the Jaipur branch where he was transferred, there were many signatories above him, while at Sikar there was only another such signatory and he was the second officer.
Obviously what he meant by the word "signatory" was a person authorised by the bank to discharge the functions covered by the power of attorney.
The relevant portion of the said power of attorney read "The Bank do here by nominate constitute and appoint Shree Hari Har Nath Bhargava in the service of the said bank at Kota to be the true and lawful attorney of the said bank at its registered office at Jaipur aforesaid or at any other place or places in India where the said bank may have or establish branches or agencies and to which he may from time to time or at any time be appointed by the said bank as Branch Manager, Agent, Sub Agent, Accountant, or in any capacity whatever for and in the name of and on behalf of the said bank to do, transact jointly with Secretary, Manager, Sub Manager etc.
the matters and things mentioned thereafter.
" The matters mentioned included the endorsement of "hundies, drafts, cheques, warrants, railway receipts, pension bills and other negotiable and mercantile instruments and to commence, prosecute, enforce, defend, answer and oppose any suit or other legal proceedings and demands touching any matters in which the bank was or may thereafter be interested or concerned.
" 113 It is worthy of note that after the execution of the power of attorney the respondent was empowered to, discharge functions which could only be described as.
supervisory in nature and unless there was a command or direction that he should not act thereon or unless the power of attorney was cancelled his authority, to act in a supervisory capacity would continue in force.
The Sastry Award is not on record in extenso but paragraph 164 thereof quoted by the Labour Court shows; that certain categories of employees were to be considered as fit for special allowances.
These included inter alia stenographers, cashiers (other than routine clerks), supervisors, clerks in charge, departmental in charges and head clerks.
The award noted that although scales of basic pay and dearness allowance for clerical and subordinate staffs had been laid down for doing ordinary duties, there were certain posts even in these grades for which an incumbent required special qualifications or skill for the efficient discharge of the duties assigned and an extra payment in such cases was necessary by way of, recognition of and compensation for the skill or responsibility.
The award further noted that : "Having regard to the numerous banks of varying sizes and resources, it is not possible to have one general pattern of allowances for such special types of work. .
It is neither easy nor desirable to bring them all into one fairly general rule regardless of the bank 's past practice or present capacity." Paragraph 162 of the award shows that there were three, ways in which this extra payment might be provided for (1) The employee might be given additional increments in the same scale.
(2) He might be paid a lump sum allowance in addition to his other emoluments.
This was said to have the advantage of carrying a man even beyond the usual maximum limit.
(3) He might be given a higher scale leading up to a higher maximum. 114 According to the award it was on the whole better to adopt either the first or the second method or sometimes even a combination of both.
According to the Labour Court the underlying idea behind the said award was that when one general scale for clerical service had been provided in the award, it was thought just and proper that persons with special qualifications or skill required for discharging work carrying with it greater responsibility than the usual work should definitely get higher emoluments than the ordinary workmen.
The Labour Court said that "this did not mean that the person of the same qualifications and skill who had been granted the powers of attorney by the bank should be allowed special allowance only for any particular period unless a man was temporarily appointed to do supervisory work".
In the result, the Labour Court allowed the respondent supervisory allowance at Rs. 40 p.m. with ,effect from 6th April, 1954 to 31st December, 1955 with, consequential benefits.
It is to be noted however that although a point had been taken in the written statement of the bank about the delay in the filling of the application under section 33 C it had not been pressed before the Labour Court.
Mr. Sanghi appearing for the appellant was prepared to concede that so far as the periods 6th April, 1954 to 12th July, 1955 and 27th December, 1955 to 31st December, 1955 were concerned he was not contesting the claim.
But in so far as the period 13th July, 1955 to 27th December, 1955 was concerned, his client was pressing the appeal as a matter of principle as this would constitute a test case by which other similar cases might fall to be decided.
This Court had to deal with a case where an identical question arose.
In State Bank of Hyderabad vs V. A. Bhide (1) this Court had to consider the claims of the respondents in that appeal for payment of special allowance granted to supervisors under what were known as the Sastry and Desai awards.
It was there contended on behalf ,of the appellant bank that in order to claim the supervisory allowance the parties must establish that the main or essential duties entrusted to them and actually discharged by (1)[1969] them were duties and functions of a supervisory nature.
This Court considered the Sastry and Desai awards and observed (at p. 727) : ". before a person can claim the supervisory special allowance, he must establish that he has discharged the duties and functions which are similar to 0r the same as the duties or functions assigned to supervisors coming under category 9.
This decision [Lloyds Bank Ltd. vs Panna Lal Gupta and others (1)] also makes it clear that in deciding the status of an employee claiming the special allowance, the designation of the employee is not decisive and what determines the status is a consideration of the nature of the duties and functions assigned to the employee concerned.
" In our view the payment of a special allowance is called for when an employee discharges duties of a supervisory nature or is accorded the status of a person competent to discharge functions of a supervisory character.
If no power of attorney is execute& as in this case but in fact the employee is asked to render services of a supervisory character and the employee does such work at the request of the bank, he becomes entailed to the allowance.
Once however a power of attorney giving the wide powers of agency as was done in this case is executed, it should be held that the management had placed him in a category of persons with responsibility and the employee was to discharge the responsibility without any further request in that behalf.
It may be that the initial giving of power of attorney was necessitated by the fact that at Kota there was only one officer besides the respondent who could discharge duties like endorsing hundies, drafts etc.
and it became necessary for the bank to have a second officer who could carry on this kind of work.
But the power of attorney does not show that the bank thought it necessary to clothe the respondent with the said powers only for discharging his duties when he was at Kota.
The power of attorney was operative at any branch of the bank irrespective of the capacity which might be occupied by the respondent at a particular point of time.
It may be (1) 116 that at Jaipur there was a number of officers superior to the respondent who were empowered to discharge duties mentioned in the power of attorney but this does not necessarily lead to the inference that the respondent lost his responsibility or was denuded of the powers while he was at Jaipur.
If he discharged any of the duties men tioned in the power of attorney the same would be lawful and would be binding on the bank.
The fact that he was not actually called upon to discharge such functions did not take away from his responsibility or status of a person ,competent to discharge functions of a supervisory character and we see no reason why he should be deprived of supervisory allowance unless the bank gave him notice that he was not to act on the power of attorney while at Jaipur.
We therefore hold that the Labour Court had come to the correct conclusion.
Mr. Sanghi tried to urge the point that the Labour ,Court should not have entertained the application as being inordinately belated and that even though the Labour Court did not adjudicate on this point it was open to the bank to urge it before us.
We made it clear that we were not going to entertain this plea in view of the fact that although the point had been taken in the written statement of the bank, it was not agitated before the Labour Court and further was not taken even in the special leave petition.
In the result, the appeal is dismissed.
The order for costs made at the time of the grant of the special leave will stand.
S.C. Appeal dismissed.
| IN-Abs | The respondent, a clerk of the appellant bank, was entrusted with supervisory work and a general power of Attorney was executed in his favour to endorse Hundies cheques, warranty, Railway receipts, pension bills and other negotiable and mercantile instruments and to prosecute, defend, answer and oppose any suit etc.
on behalf of the appellant bank.
The respondent filed an application before the Labour Court, Rajasthan under section 33C (2) of the , praying for computation of special allowance under the Sastri Award, on the ground that he was discharging supervisory duties.
The Labour Court, allowed supervisory allowance of Rs. 40 p.m. with consequential benefits.
In appeal to this Court the appellant bank ,contended that since the respondent was not called upon to perform the functions enumerated in the power of attorney, he is not entitled to any special allowance.
Dismissing the appeal.
HELD : (i) The payment of a special allowance was called for when an employee discharged duties of a supervisory nature or was accorded the status of a person competent to discharge functions of a supervisory character.
[115d] (ii) Since the Management by the power of Attorney, had placed the respondent in a category of persons with responsibility and entrusted him with functions of a supervisory character and the employee was to discharge that responsibility, he was entitled to supervisory allowance no matter, whether he was actually called upon to discharge such functions or not for a certain period of time.
[1 15F, 11 6B] State Bank of ' Hyderabad vs V. A. Bhinde, [1969] 2 L. L. J. 713, referred to.
|
Appeal No. 344 of 1967.
Appeal from the judgment and order dated July 8, 1966 of the, Bombay High Court in Appeal No. 17 of 1964.
V. A. Seyid Muhammad and section P. Nayar, for the appellant.
section J. Sorabjee, J. R. Gagrat and B. R. Agarwala, for the respondents.
The Judgment of the Court was delivered by Shelat, J.
This appeal, by certificate, arises from the res pondent 's suit in respect of fines and penalties recovered from them by the Collector of Customs, Bombay for the alleged contravention of section 3 of the Imports and Exports (Control) Act, 1947 and.
section 167(8) of the .
The respondents held an import licence dated July 10, 1956 permitting them to import parts and accessories of motor cycles and scooters as per appendix XXVI of the Import Policy Book for July December 1956.
Under the said licence, the respondents, imported certain goods which arrived in two consignments, each containing 17 cases, by two different ships.
According to the respondents, the goods so imported by them were motor cycle parts which their licence authorised them to import.
The Customs authorities, on the contrary.
held, on the examination of the goods, that they constituted 51 sets of "Rixe Mopeds complete in a knocked down condition".
The Deputy Collector of Customs thereupon held an enquiry in pursuance of two show cause notices issued by him.
The result of the enquiry was an order under which the Deputy Collector directed confiscation of the said goods with 'an option to the respondents to pay certain sums in lieu of confiscation and also personal penalties.
That order was passed on the basis that the goods imported were not parts and accessories of motor cycles and scooters permissible under entry 295 of the Schedule to the 560 Import Control Order, but were motor cycles/scooters in completely knocked down condition, prohibited under remark II against entry 294, a licence in respect of goods covered by it would authorise import of motor cycles and Scooters.
The order of the Deputy Collector dated November 19, 1957 reads as under: "On examination of the goods and scrutiny of the documents relating to the Bills of Entry stated above, it was ascertained that M/s. Tarachand Gupta & Bros. had imported 51 sets of "Rixe" Mopeds complete (except tyres, tubes and saddles) in a knocked down condition.
The total number of consignments covered by the aforesaid two Bills of Entry were.
sufficient to give exactly 51 sets complete, Rixe 'Mopeds ' (except for tyres, tubes and saddles which would in any case have required a separate licence).
The packing was also such as to show that those were nothing but "Mopeds" in a disassembled condition, since each of the cases contains components relating to three mopeds.
Moreover, it was found that major components such as the frames, completely fitted with electrical wires and control cables and grips had been imported in equal numbers.
All these went to show that the goods were not imported as spare parts but as complete vehicles in a knocked down condition.
The goods were therefore, considered to be correctly classifiable under item 75(2) of the I.C.T. corresponding to section No. 294, IV of the I.T.O. Schedule.
The licence under which clearance was sought, could not, therefore, be accepted.
" The Deputy Collector rejected the respondents ' contention that the two consignments which arrived in two different ships at different dates should be viewed separately, that the machines were incomplete as they were without tyres, tubes and saddles and therefore they could not be said to constitute motor cycles in knocked down condition.
He held, on the other hand, that though the goods were not in completely knocked down condition it made no difference as the tyres, tubes and saddles were easily obtainable in India and their absence did not prevent the machines being otherwise complete.
He also found that there was a trade practice under which traders were supplying motor cycles without tyres, tubes and saddles unless the purchaser specially asked for these parts.
According to him, the goods could not be regarded as spare parts but were 'Mopeds in disassembled condition".
In the suit filed by the respondents in the High Court against the said order, the Trial Judge held, on the authority of the 561 Secretary of State vs Mask & Co.(1) that an order of a statutory tribunal, such as the Collector of Customs under the , which the statute makes final, subject, of course, to an appeal provided under it, can be set aside in a suit before a civil court on two grounds only, namely, where the provisions of the Act have not been complied with, or where the tribunal has failed to act in conformity with the fundamental rules of judicial procedure.
He rejected the respondents ' contention that the case fell within the first ground and held that however erroneous the Collector 's decision might be since it was within his jurisdiction to decide whether the goods fell under one entry or the other, a civil court had no jurisdiction to grant relief.
He also held that the order could not be said to be without or in excess of jurisdiction and was, therefore, not a nullity.
The order consequently required to be set aside if the respondents were to have any relief, and therefore, article 14 of the Limitation Act, 1908 applied.
On that basis he held the respondents ' suit to be time barred and dismissed it.
We may, at this stage,, mention that in 'a similar matter involving import of spare parts and accessories under a licence relating to entry 295, the Collector 's order, on the basis that the goods fell under entry 294, as the spare parts in question could, it all the different indents were taken together, constituted auto cycles in completely knocked down condition, was held to be bad as "the Collector 's approach to the matter was wholly wrong by a Division Bench of the same High Court in D. P. Anand vs M/s. T. M. Thakore & Co.(2) According to that judgment, the jurisdiction of the Collector was to ascertain whether the goods, such as they were, were properly imported under the licence relating to goods under entry 295, i.e., whether they were spare parts and accessories, and not to go further and find out whether they would, when put together, constitute auto cycles in completely knocked down condition as envisaged by entry 295, and therefore, the order was amenable to interference by the High Court.
The Trial Judge held, on the authority of this judgment that on merits the Collector of Customs was in error in holding the respondents guilty of importing goods not covered by the licence held by them and that the Collector would have been bound by that judgment had it been delivered before he passed the impugned order.
He, however, was of the view that whereas the High Court in D. P. Anand 's case(2) interfered with the order in its writ jurisdiction.
a suit could not lie as the impugned order was within the jurisdiction of the Collector and the mere fact that he applied a wrong entry did not invest the civil court with the jurisdiction to entertain a suit and set aside such an order.
(1) (1940) 67 I.A. 222 (2)Civil appeal No. 4 of 1959, decided on August 17, 1960 (H.C) 562 The Letters Patent Bench of the High Court, following the judgment in Anand 's case,(1) agreed with the Trial Judge that on merits the Collector was in error.
Following that judgment, the Bench also, held that the Collector 's jurisdiction was limited to ascertain whether or not the goods imported by the respondents were spare parts and accessories covered by entry 295 in respect of which they undoubtedly held the licence, .
and therefore, he could not have lumped together the two consignments which, though imported under one licence, arrived separately and were received on different dates and could not have come to the conclusion that the plaintiffs (i.e. the respondents herein) had imported 51 "Rixe" mopeds in a completely knocked down condition.
The, Bench also held that upon the principle laid down in Anand 's case(1) it was not for the Collector to ascertain whether the goods, if assembled together, would constitute 51 "Rixe" Mopeds in C.K.D. condition The respondents were entitled to import the said goods, and therefore, section 167(8) of the did not apply and the respondents consequently could not have been held guilty of breach either of that section or section 3 of the Imports and Exports (Control) Act.
The Bench also held that the decision of this Court in Girdharilal Bansidhar vs Union of India(2) did not overrule but only distinguished the judgment in Anand 's case,(1) and therefore, the binding force of that decision remained unshaken.
Regarding the jurisdiction of civil courts, the Division Bench held that where the question is simply whether one or the other entry applies and the tribunal, to which jurisdiction is entrusted in that behalf, decides it erroneously, even then its order, made final by the statute conferring such jurisdiction, cannot be made the subject matter of a suit.
On the other hand, where its jurisdiction is confined to see whether the importation is under a particular entry or not, but while deciding such a question, the tribunal ,takes into account extraneous considerations, such as an entry which has no bearing upon the question, the case would fall outside the ambit of the powers of th statutory authority.
The question, in other words, would then be, whether the tribunal has exceeded its jurisdiction and therefore acted in non compliance with the provision of the statute under which it has to decide the question.
The Division Bench deprecated the attempt on the part of the Collector in considering the two consignments together and making out a case that the two, when put together, would make it possible to regard the goods as ' "Rixe" Mopeds in C.K.D. condition.
Such 'an attempt, the Bench observed, was "a new classification conjured up by the authorities to rope in the imports as being illegal which according to the terms of the licence and entry No. 295 would be clearly legal".
Lastly, the Division Bench disagreed with the Trial Judge who had held that the article (1) C.A. No. 4 of 1959 decided on Aug. 17, 1960 (H.C.) (2) ; 563 in the Limitation Act applicable was article 14, on the ground that once it was accepted that the order was in excess of jurisdiction it was a nullity, and therefore, there was no question of its having to be set aside.
Following A. Venkata Subba Rao vs Andhra Pradesh, (1) it held that the suit fell under article 62, and therefore, was within time.
Counsel for the Union of India challenged the correctness of ,the judgment of the Division Bench and urged that the had clearly vested in the Collector the authority to decide whether the goods in question fell within entry 295 or not and for which the respondents had been granted the licence.
His decision, subject, of course, to an appeal and revision provided under the Act, being final, could not be challenged in a suit save under the well recognized exceptions that his decision was not in compliance with the provisions of the Act, or that he had failed to follow the fundamental principles of judicial procedure.
The present case, according to him, was one of importing "Rixe" Mopeds in C.K.D. condition, not permissible either under entry 295 or entry 294, and therefore, was a case where the importer,misusing his licence, had attempted to do indirectly what he could not do directly.
There was, according to him, no question of the Collector 'acting in excess of his jurisdiction or in non compliance with the provisions of the Act, and therefore, the Trial Judge was right in holding that no suit lay against his action.
Before we proceed to consider these contentions it is expedient first to look at the provisions of the relevant law.
Under section 3 of the Imports and Exports (Control) Act, 1947, the Central Government by an order can provide for prohibiting, restricting or otherwise controlling inter alia the import of goods of any specified description and all goods to which any such order applies are deemed to be goods of which the import has been prohibited by the and all the provisions of that Act are to have effect accordingly.
The Imports (Control) Order 1955, passed under the power reserved under the Act, by cl.
(3) thereof, provides that no person shall import any goods of the description specified in Sch.
I thereto except under and in accordance with a licence granted by the Central Government or by an officer specified in Sch.
Sub cl.
(2) of cl.
(3) provides that if it is found that the goods imported under a licence do not conform to the description given in such a licence under which they are claimed to have been imported, then without prejudice to any action that may be taken against the licensee under the in respect of such importation, the licence may be treated as having been utilised for importing the said goods.
(1) ; 564 Entries ' 294 and 295 of section II of of Sch.
I of the Import Trade Control Policy for the period July December 1956 are in this connection the relevant entries.
Entry 294 deals with import ,of motorcycles and scooters.
Remark (ii) in its column No. 6 lays down that "Licences granted under this item will not be valid for the import of motor cycles/scooters in a completely knocked down condition".
Remark (iii), however, provides that applications from approved manufacturers for import of motor cycles,/ scooters in C.K.D. condition will be considered ad hoc by the Chief Controller, Imports in consultation with Development Wing.
Entry 295 deals with "Articles (other than rubber tyres and tubes) adapted for use as parts and accessories of motor cycles and motor scooters, except such articles as are adapted for use as parts and accessories of motor cars".
Entry 41 in deals with import of rubber tyres and tubes and other manufactures of rubber not otherwise specified.
Section 167(8) of the provides that goods shall liable to confiscation if the goods, the importation of which is for the time being prohibited or restricted by or under Ch.
IV, are imported contrary to such prohibition or restriction and any person concerned in any such importation shall be liable to penalty prescribed therein.
Section 188 of the Act makes an order.
passed in appeal against the Collector 's order, final subject only to the power of revision under section 191.
The position then is, under 'entry 294 above cited import under the requisite licence of motor cycles and scooters was permitted.
However, a licence permitting import of motor cycles and scooters could not be used for import of motor cycles and scooters in C.K.D. condition.
Even then, the prohibition was not absolute because approved manufacturers could apply and get licences to import motor cycles 'and scooters in C.K.D. condition, albeit on an ad hoc basis.
It is thus clear that entry 294 deals with the import of motor cycles and scooters and the import, though only by approved manufacturers, of motor cycles and scooters in C.K.D. condition.
The entry is complete in itself so far as import of motor cycles 'and scooters complete and assembled and also in C.K.D. condition is concerned.
The words "completely knocked down condition" in the entry are not used in any technical sense, and therefore, must be given their ordinary dictionary meaning, i.e., "made or constructed so as to be capable of being knocked down or taken apart, as for transportation; in parts ready to be assembled".
(see Webster 's New International Dictionary, Vol.
P. 1371 and, also Words and Phrases.
Permanent Edition,% Vol. 23, p. 560).
Under entry 295, except for rubber tyres and tubes for whose import a separate licence could be obtained under entry 41 of 565 Part V, there are no limitations as to the number or kind of parts or accessories which can be imported under a licence obtained in respect of the goods covered thereunder.
Prima facie, an importer could import all the parts and accessories of motor cycles and scooters and it would not be a ground to say that he has committed breach of entry 295 or the licence in respect of the goods described therein, that the parts and accessories imported, if assembled, would make motor cycles and scooters in C.K.D. condition.
There are no remarks against entry 295, as there are against entry 294, that a licence in respect of goods covered by entry 295 would not be valid for import of spares and accessories which, if assembled, would make motor cycles and scooters in C.K.D. condition.
Apart from that, the. goods in question did not admittedly contain tyres, tubes and saddles, so that it was impossible to say that they constituted motor cycles and scooters in C.K.D. condition.
The first two could not be imported and were in fact not imported because that could not be done under the licence in respect of goods covered by entry 295 which expressly prohibited their import and a separate licence under entry 41 of Part V would be necessary.
The third, namely, saddles were not amongst the goods imported.
No doubt, there was, firstly, a finding by the Collector that a trade practice prevailed under which motor cycles and scooters without tyres, tubes and saddles could be sold.
Secondly, the tyres and tubes could be had in the market here and so also saddles, so that if an importer desired, he could have sold these goods as motor cycles and scooters in C.K.D. condition.
The argument was that since there was a restriction in entry 294 against imports of motor cycles and scooters in C.K.D. condition, the importer could not be allowed to do indirectly what he could not do directly.
The argument apparently looks attractive.
But the question is what have the respondents done indirectly what they could not have done directly.
In the absence of any restrictions in entry 295, namely, that a licence in respect of goods covered by entry 295 would not be valid for import of parts and accessories which, when taken together, would make them motor cycles and scooters in C.K.D. condition, the respondents could import under their licence all kinds and types of parts and accessories.
Therefore, the mere fact, that the goods imported by them were so complete that when put together would make them motor cycles and scooters in C.K.D. condition, would not amount to a breach of the licence or of entry 295.
Were that to be so, the position would be anomalous as aptly described by the High Court.
Suppose that an importer were to import equal number of various parts from different countries under different indents and at different times.
and the goods were to reach here in different consignments and on different dates instead of two consignments from the same 566 country as in the present case.
If the contention urged before us were to be correct, the Collector can treat them together and say that they would constitute motor cycles and scooters in C.K.D. condition.
Such an approach would mean that there is in entry 295 a limitation against importation of all parts and accessories of motor cycles and scooters.
Under that contention, even if the importer had sold away the first consignment or part of it, it would still be possible for the Collector to say that had the importer desired it was possible for him to assemble all the parts and make motor cycles and scooters in C.K.D. condition.
Surely, such a meaning has not to be given to entry 295 unless there is in it or in the licence a condition that a licensee is not to import parts in such a fashion that his consignments, different though they may be, when put together would make motor cycles and scooters in C.K.D. condition.
Such a condition was advisedly not placed in entry 295 but was put in entry 294 only.
The reason was that import of both motor cycles and scooters as also parts and accessories thereof was permitted, of the first under entry 294 and of the other under entry 295.
A trader having a licence in respect of goods covered by entry 294 could import assembled motor cycles and scooters, but not those vehicles in C.K.D. condition, unless he was a manufacturer and had obtained a separate licence therefor from the Controller of Imports who, as aforesaid, was authorised to issue such a licence on an ad hoe basis.
Thus the res triction not to import motor cycles and scooters in C.K.D. condition was against an importer holding a licence in respect of goods covered by entry 294 under which he could import complete motor cycles and scooters and not against an importer who had 'a licence to import parts and accessories under entry 295.
If Dr. Syed Mohamad 's contention were to be right we would have to import remark (ii) against entry 294 into entry 295, a thing which obviously is not permissible while construing these entries.
Further, such a condition, if one were to be implied in entry 295, would not fit in, as it is a restriction against import of motor cycles and scooters in C.K.D. condition and not their parts and accessories.
There is, therefore, no question of a licensee under entry 295 doing indirectly what he was not allowed to do directly.
What he was not allowed to do directly was importing motor cycles and scooters in C.K.D. condition under a licence under which he could import complete motor cycles and scooters only.
That restriction, as already observed, applied to a licensee in respect of goods described in entry 294 and not a licensee in respect of goods covered by entry 295.
The result is that when the Collector examines goods imported under a licence in respect of goods covered by entry 295 what he has to ascertain is whether the. goods are parts and accessories, 567 and not whether the goods, though parts and 'accessories, are so comprehensive that if put together would constitute motor cycles and scooters in C.K.D. condition.
Were he to adopt such an approach, he would be acting contrary to and beyond entry 295 under which he had to find out whether the goods imported were of the description in that entry.
Such an approach would, in other words, be in non compliance of entry 295.
The question then is whether such a reading of the two entries is in any way contrary to the decisions of this Court.
In Girdharilal Bansidhar,(1) the principle laid down was that the High Court in its writ jurisdiction does not sit in appeal over the correctness of the decision of the authorities under the on appreciation of entries in the Hand Book or in the Indian Tariff Act.
In that case, the appellant, who had a licence to import iron and steel bolts, nuts, etc., imported nuts and bolts which were the components of 'Jackson Type Single bolt oval plate belts fasteners", which were described in the bill of entry as 'store bolts and nuts '.
The Customs found that these were in reality the actual components of Jackson Type Single belt oval plate belts fasteners, import whereof was totally prohibited.
The Collector, while arriving at his decision, took into account also the fact that washers, the third component of the prohibited article, were imported by a firm owned by the appellant 's relations.
On these facts, this Court held (1) that importing components of a prohibited article was importing the prohibited article, (2) that the evidence that washers imported by the relations of the appellant was considered by the Collector as evidence to confirm his conclusion that the nuts and bolts imported by him were in reality the components of the prohibited article, and (3) that where the decision of the statutory authority is whether an item falls under one or the other entry, the High Court could not interfere with that decision on the groun d that it is erroneous.
That is because when a statute confers power on an authority to decide a particular question, its decision, even if it is erroneous,, is still within its jurisdiction.
What needs to be observed in that decision is that the Collector 's decision was, under which of the two competing entries the imported items fell, that is, whether the goods were bolts and nuts or were components of the prohibited article.
And the Court there laid down the well established principle that the High Court, under article 226, could not interfere with the decision of the authority upon whom jurisdiction to decide the question, whether the goods fell under one or the other entry, was conferred on the ground that it was erroneous.
Further, the nuts and bolts imported by the appellant could only be, used as Components of the prohibited article.
In other words, the import was of parts of the (1) ; 568 prohibited article and therefore of the prohibited article.
It was, therefore, that the Court held (1) that the Customs ' decision was not incorrect, and (2) that the importer could, not be allowed to do indirectly what he could not do directly.
It will be noticed that the Bombay decision in D. P. Anand 's case(1) was not dissented from but only distinguished, and therefore, the High Court in the present case was justified in following it.
It is true, however, that counsel for the appellant there relied on that decision in support of his proposition that a ban on a completed article cannot be read as a ban on the importation of its constituents, which, when assembled, would result in the prohibited article, and this Court pointed out in answer that in D. P. Anand 's case,(1) the imported components could not have when assembled, made up the completed article because of the lack of certain essential parts which admittedly were not available in India and could not be imported.
The real distinction, however, between the two cases was that the decision of the Collector in D. P. Anand 's case(1) was not, as was the decision in Girdharilal 's case, (2) under which of the two competing entries the imported goods fell but that the imported goods in question, if assembled, together, would not be the goods covered by the entry, and therefore, not the goods in respect of which the licence was granted.
Further, the articles in question, even when assembled together, were not prohibited articles as in Girdharilal 's case (2).
Girdhari lal 's case(2) is clearly distinguishable because it is not as if motor cycles and scooters are prohibited articles as was the case there.
The restriction is not against licensees importing motor cycles and scooters under entry 294 and parts and accessories under entry 295 but against the licensees under entry 294 importing motor cycles and scooters in C.K.D. condition.
The question in the instant case was not under which of the two entries, 294 or 295, the goods fell, but whether the goods were parts and accessories covered by entry 295.
In Firm Illuri Subbayya Chetty & Sons vs Andhra Pradesh, ( 3 the suit filed by the appellants was for recovery of a sum paid by way of purchase tax under the Madras General Sales Tax Act, 1939.
The cause of action was that the amount had been illegally recovered.
Relying on section 18A of the Act, this Court held that the expression "any assessment made under this Act" in that section was wide enough to cover all assessments made by the appropriate authorities under the Act and even if an assessment was incorrect, so long as it was within the jurisdiction of the authorities, it was not non compliance of the statute, and therefore, was not covered by the principle laid down in the case of Mask & Co.(4) The Court observed: (1) C.A. 4 of 1959 dt.
Aug. 17, 1960(H.C.) (2) ; (3) [1964] 1.S.C.R. 752.
(4) [1948] L.R. 67 I.A. 222.
569 "There is no justification for the assumption that if a decision has been made by a taxing authority under the, provisions of a taxing statute, its validity can be chal lenged by a suit on the ground that it is incorrect on merits and as such it can be claimed that the provisions of the said statute have not been compiled with." This principle was repeated in Dhulabliai vs Madhya Pradesh(1) where it was held that where a statute gives finality to the orders of the special tribunal the civil court 's jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit, i.e., to correct an assessment which is erroneous.
The Court also pointed out that in the Firm Illuri Subbayya Chetty & Sons ' case, (2) it had been said that Mask & Co. 's case(3) was an authority for the proposition that non compliance with the provisions of the statute would render the entire proceedings before the authority illegal and without jurisdiction.
The case of Panthulu vs Andhra Pradesh (4) illustrates as to when an authority can be said to have acted in non compliance with the provisions of the statute under which it derives its authority.
Section 3(2) of the Madras Estates Land (Reduction of Rent) Act, XXX of 1947 authorised the State Government to fix the rates of rent in respect of each class, of ryoti land in each village in the State after considering the recommendations of the special officer and the remarks of the Board of Revenue.
Section 8(1) provided that no order passed under section 3(2) could be challenged in a civil court.
The suit filed by the appellants disputed the legality of the notification reducing the rates of land in respect of the dry delta ryoti lands in a village on the ground that the class of land had been determined to be delta ryoti lands on the basis only of the settlement register which did not contain any entry with respect to the village in question, that the settlement register could not be treated as conclusive and that proper factual enquiry was necessary. 'Me High Court held that the suit was not main tainable by reason of section 8(1).
Dua, J., speaking for the Bench.
held that under section 2 the special officer had to determine the average rate of cash rent per acre for each class of ryoti land such as wet, dry or garden. 'Ibis could only be done on relevant material.
The special officer, however, had based his determination on a report of his assistant, who had considered the entry in the settlement register of another village.
That meant that the special officer had made his determination on irrelevant evidence, i.e., on the register which did not contain any data with respect to the land in the village in question.
On these facts he hold that the (1) ; (3) [1948] L.R.67 I.A. 222.
(2) ; (4) [1970] 2 S.C.R.714 570 .determination by the special officer was based on no evidence with the result that it was in violation of the fundamental principles of judicial procedure.
A fortiori, the order of the Government made, under section 3(2) on the basis of the recommendations of the special officer was not in conformity with the provisions of the Act and was therefore outside the purview of section 3(2) and consequently section 8(1) was inapplicable.
Thus, sec.
8(1) was held not to apply because the Government 's determination could not be said to be one under section 3 (2).
The words "a decision or order passed by an officer of Customs under this Act" used in section 188 of the must mean a real and not a purported determination.
A determination, which takes into consideration factors which the officer has no right to take into account, is no determination.
This is also the view taken by courts in England.
In such cases the provision excluding jurisdiction of civil courts cannot operate so as to exclude an inquiry by them.
In Anisminic Ltd. vs The Foreign Compensation Commission(1) Lord Reid at pages 213 and 214 of the Report stated as follows : "It has sometimes been said that it is only where a tribunal acts without jurisdiction that its decision 'is a nullity.
But in such cases the word "jurisdiction" has been used in a very wide sense, and I have come to the conclusion that it is better not to use the term except in the narrow and original sense of the tribunal being entitled to enter on the enquiry in question.
But there are many cases where, although the tribunal had jurisdiction to enter on the enquiry, it has done or failed to do something in the course of the enquiry which is of such a nature that its decision is a nullity.
It may have given its decision in bad faith .
It may have made a decision which it had no power to make.
It may have failed in the course of the enquiry to comply with the requirements of natural justice.
It may in perfect good faith have misconstrued the provisions giving it power to art, so that it failed to deal with the question remitted to it and decided some question which was not remitted to it.
It may have refused to take into account something which it was required to take into account.
Or it may have based its decision on some matter which, under the provisions setting it up, it had no right to take into account.
I do not intend this list to be exhaustive.
But if it decides a question remitted to it for decision without committing any of these errors it is as much entitled ,to decide that question wrongly as it is to decide it rightly." (1) [1969]1 All E.R. 208.
571 To the same effect are also the observations of Lord Pearce at page 233.
R, vs Fulham, Hammersmith and Kensington Rent Tribunal(1) is yet another decision of a tribunal properly embarking on an enquiry, that is, within its jurisdiction, but at the end of it making an order in excess of its jurisdiction which was held to be anullity though it was an order of the kind which it was entitled to make in a proper case.
The principle thus is that exclusion of the jurisdiction of the civil courts is not to be readily inferred.
Such exclusion, however, is inferred where the statute gives finality to the order of the tribunal on which it confers jurisdiction and provides for adequate remedy to do what the courts would normally do in such a proceeding before it.
Even where a statute gives finality, such a provision does not exclude cases where the provisions of the particular statute have not been complied with or the tribunal has not acted in conformity with the fundamental principles of judicial procedure The word "jurisdiction" has both a narrow and a wider meaning.
In the sense of the former, it means the authority to embark upon an enquiry; in the sense of the latter it is used in several aspects, one of such aspects being that the decision of the tribunal is in non compliance with the provisions of the Act.
Accordingly, a determination by a tribunal of a question other than the one which the statute directs it to decide would be a decision not under the provisions of the Act, and therefore, in excess of its jurisdiction.
The respondents ' licence admittedly authorised them to import goods covered by entry 295.
They could, therefore, legitimately import, on the strength of that licence, all and several kinds of parts and accessories of motor cycles and scooters.
The only question, therefore, before the Collector was whether the respondents ' licence covered the goods imported by them, i.e., whether the goods were parts and accessories.
If they were, the imports were legitimate and no question of their being nut covered by the licence or the respondents having committed breach of section 3 of the Imports and Exports (Control) Act or section 167(8) of the could possibly arise.
What the Collector, however, did was that he put the two consignments together and held that they made up 51 'Rixe ' Mopeds in C.K.D. condition and were, for that reason, not the articles covered by entry 295 but articles prohibited under remark (ii) of entry 294.
But entry 294 deals with the motor cycles and scooters complete and assembled.
Remark (ii) against that entry prohibits an importer who held a licence to import motor cycles and scooters from importing motor cycles and scooters in C.K.D. condition.
Remark (ii) containing that prohibition had nothing to do with entry 295 which did not (1) 572 contain any limitations or restrictions whatsoever against imports of parts and accessories.
That being so, if an importer has imported parts and acces sories, his import would be of the articles covered by entry 295.
The Collector could not say, if they were so covered by entry 295, that, when lumped together, they would constitute other articles, namely, motor cycles and scooters in C.K.D. condition.
Such a process, if adopted by the Collector, would mean that he was inserting in entry 295 a restriction which was not there.
That obviously he had no power to do.
Such a restriction would mean, that though under a licence in respect of goods covered by entry 295 an importer could import parts and accessories of all kinds .and types, he shall not import all of them but only some, so that when put together they would not make them motor cycles and scooters in C.K.D. condition.
In the present case even that was not so because he would have to buy tyres, tubes and saddles to convert them into motor cycles and scooters into C.K.D. condition.
That would be tantamount to the Collector making a new entry in place of entry 295 which must mean non compliance of that entry and acting in excess of jurisdiction during the course of his enquiry even though he had embarked upon the enquiry with jurisdiction.
, In our view that was precisely what the Collector did.
This is, therefore, not one of those cases where between ,two competing entries the statutory authority applied one or the ,other, though in error, and where, a civil court cannot interfere.
In this view the order was in non compliance of the provisions ,of the statute, and therefore. was covered by the exceptions laid down in Mask & Co. 's case(1).
It was not an order in respect of which the Collector was invested with jurisdiction.
That being so, 'the provision excluding the jurisdiction of the civil courts was not applicable.
Indeed, the order was a nullity and article 14 of the Limitation Act of 1908 could not be applied to hold the suit time barred.
Even if Art, 14 applied, it would not be time barred, if, as the High Court pointed out, the date of the appellate order was taken into consideration.
The judgment of the Division Bench of the High Court, there fore, must be upheld.
Consequently, the appeal fails and is dismissed with costs.
V.P.S. Appeal dismissed.
(1) [1948] L.R. 67 IA.
| IN-Abs | Under cl. 3 of the Imports (Control) Order, 1955, passed under section 3 of the Imports and Exports (Control) Act, 1947, no person shall import any goods of the description specified in Sch.
I except in accordance with a licence, and if it was found that the goods imported did not conform to the description in the licence, then, without prejudice to any action that may be taken against the licensee under the Sea Customs Act, such goods would be treated as having been imported without a valid licence in that behalf.
Under Entry 294 of section 11 of Part IV of Sch.
I of the Import Trade Control Policy (July to December 1956), import of motor cycles and scooters was permitted under an appropriate licence, but such a licence could not be used for their import in a completely knocked down (C.K.D.) condition except by approved manufacturers.
That is, there was no absolute phohibition for their import in C.K.D. condition.
The words completely knocked down conditions are not used in any technical sense and have the dictionary meaning of "made or constructed so as to be capable of being knocked down or taken apart as for transportation; in parts ready to be assembled".
Under Entry 295, except for rubber tyres and tubes, for whose import a separate licence could be obtained, there are no limitations as to the number or kind of parts or accessories of motor cycles and scooters which can be imported under a license obtained in respect of the goods.
There are no remarks against this entry as there are against Entry 294, that the licence would not be valid for import of spares and accessories which, if assembled, would make motor cycles and scooters The respondents ' licence authorised them to import goods covered by Entry 295, and they imported certain goods which arrived in two different consignments and on two different dates.
They did not contain tyres, tubes and saddles so that it was impossible to say that they constituted motor cycles and scooters in C.K.D. condition.
The Collector of Customs and the Central Board of Revenue in appeal, however, put the two consignments together and held that trade practice did not require the supply of tyres and tubes and saddles while supplying motor cycles, and that therefore they made up mopeds in C.K.D. condition and were, for that reason, not the articles covered by Entry 295 but articles prohibited under Entry 294.
The goods were directed to be confiscated with an option to the respondents to pay certain 'sums in lieu of confiscation, and personal penalties.
The respondent filed a suit in the High Court and the trial Judge dismissed it on the authority of Secretary of State vs Mask & Co. [1948] L.R. 67 I.A. 222, and that the suit was time barred under article 14 of the Limitation Act.
In appeal, the Divisional Bench followed Anand vs Thakore & Co., a decision of that High Court, and allowed the appeal.
In appeal to this Court, 558 HELD: (1) The mere fact that the goods imported by the respondents wereso complete that when put together would make motor cycles and scooters in C.K.D. condition would not amount lo a breach of the licence or of entry 295.
The restriction not to import motor cycles and scooters in C.K.D. condition was against an importer holding a licence in respect of the goods covered by entry 294 under which he could import complete and assembled motor cycles and scooters, and not against an importer who had a licence to import parts and accessories under entry 295.
[565 G H; 566 E] (2)When the Collector examines goods imported under a licence in respect of goods covered by Entry 295, what he has to ascertain is whether the goods are parts and accessories, and not whether the goods, though parts and accessories, are so comprehensive that if put together would constitute motor cycles and scooters in C.K.D. condition, because, it would then mean that there is in the entry a limitation against importation of all parts, and accessories of motor cycles and scooters.
Such an approach, would be acting contrary to and beyond entry 295, and in non compliance of the entry and would lead to the anomalous result that even if the importer had sold away one consignment or part of it, the Collector could still say that had the importer desired it was possible for him to assemble all parts and make motor cycles and scooters in C.K.D. condition.
[566 A C, H; 567 A B] (3)This Court in Girdhari Lal Bansidhar vs Union of, India; , , laid down that the High Court under article 226 of the Constitution, could not, on the ground that it was erroneous, interfere with the decision of the authority upon whom jurisdiction was conferred to decide the question whether the goods fell under one or other entry, that is, under which of two competing entries the goods fell.
This Court also held that the import of parts of a prohibited article was import of the prohibited article, and that the importer could not be allowed to do indirectly what he could not do directly, and distinguished the case in Anand vs Thakore & Co. In Anand 's case, it was held that the jurisdiction of the Collector was only to ascertain whether the goods were spare parts and accessories and not to find out whether if put together they would constitute auto cycles in C.K.D. condition.
[567 B C; 568 B E] (4)In the present case also the question before the Collector was whether the respondents ' licence covered the goods imported by them, that is; whether the goods were parts and accessories.
It is not, therefore, one of those cases where between two competing entries the statutory authority applied one or the other and where a civil court cannot interfere even if the statutory authority committed an error., [572 C E] (5) Exclusion of jurisdiction of Civil Courts is not to be readily inferred.
Such exclusion is inferred when the statute gives finality to the order of the tribunal on which it confers jurisdiction and provides for adequate remedy to do what the courts would normally do in such a proceeding before it.
Even where the statute gives finality such a provision does not exclude cases where the provisions of the particular statute have not been complied with or the tribunal has not acted in conformity with fundamental principles of judicial procedure, and a determination by a tribunal of a question other than the one which the statute directs it to decide would be a decision not under the provisions of the Act.
[571 B E] Firm illuri Subbayya Chetty & Sons vs Andhra Pradesh, ; , Dhulabhai vs Madhya Pradesh, [1968] 3 S.C.R. 662, Panthulu vs Andhra Pradesh, ; , Anisminic Ltd. vs Foreign Com 559 pensation Commissioner; , and R. vs Fulham, Hammersmith and Kensington Rent Tribunal, , referred to.
(6)Therefore, the decision in the present case was covered by the exception laid down in Mask & Co. 's case and the provision excluding the jurisdiction of the civil court would not be applicable.
Since non compliance with the provisions of the Act would be acting in excess of jurisdic tion the Collector 's order was a nullity and article 14 of the Limitation Act, 1908, could not be applied.
Even if it was applicable, the suit would not be barred if the date of the appellate order of the customs authorities was taken into consideration.
[572 E F]
|
Appeal No. 1369 of 1968.
Appeal from the judgment and order dated August 1, 1967 of the Andhra Pradesh High Court in Case Referred No. 68 of 1964.
section T. Desai, J. Ramanurthi, R. N. Sachthey and B. D. Sharma, for the appellant.
M. Natesan and K. Jayaram, for the respondent.
The Judgment of the Court was delivered by Grover, J.
This is an appeal by certificate from the judgment of the Andhra Pradesh High Court in a case referred under section 66(1) of the Income Tax Act, 1922 (hereinafter referred to as the Act).
The respondent who is the assessee is a registered firm running a hotel at Secunderabad with branches at Sultan Bazar and King Kothi in Hyderabad.
During the previous year ending 30th September, 1959 relating to the assessment year 1960 61, the assessee incurred an expenditure of Rs. 57,154/ in installing sanitary fittings and of Rs. 1,370/ for pipe line fittings.
The assessee claimed development rebate on these two items at the rate of 25 per cent under section 10(2)(vi b) of the Act amounting in the aggregate to Rs. 14,629/ .
The Income Tax Officer disallowed the claim.
On appeal, the Appellate Assistant Commissioner upheld the disallowance.
An appeal was taken to the Appellate Tribunal.
The Tribunal rejected the appeal holding that the definition of "plant" must necessarily be the same, whether it was for claiming depreciation under section 10(2)(vi) or for development rebate under section 10(2)(vi b).
Accordingly, it was held that the sanitary and pipe line fittings did not fall within the meaning of the word "plant".
On being moved under section 66(1) of 170 the Act, the following question was referred for the opinion of the High Court : "Whether the sanitary fittings and pipelines, installed in the King Kothi branch of the Hotel, constituted 'plant ' within the meaning of sec.
10(5) of the Indian Income tax Act and whether the assessee is entitled to develop ment rebate in respect thereof under sec.
10(2) of the Act The High Court answered the question in the affirmative and in favour of the assessee.
The only question that was argued before the High Court and which has been debated before us is whether sanitary and pipe line fittings in a building which is run as a hotel would fall within the meaning of the word "plant" in section 10(2)(vi b) of the Act.
Section 10(1) of the Act provides that tax shall be payable by an assessee in respect of the profits and gains of any business profession or vocation.
Sub section (2) gives the allowances which have to be made in computation of such profits and gains.
Clause (vi) of that sub section relates to the depreciation in respect of "such buildings, machinery, plant or furniture being the property of the asses see".
Clause (vi b) of section 10(2) is as follows: "(vi b) in respect of a new ship acquired or new machinery or plant installed after the 31st day of March, 1954, which is wholly used for the purposes of that business carried on by the assessee, a sum by way of development rebate in respect of the year of acquisition of the ship or of the installation of the machinery or plant, equivalent to. . .
Section 10(5) provides inter alia that in sub section (2) " plant" includes "vehicles, books, scientific apparatus and surgical equipment purchased for the purpose of the business, profession or vocation".
171 The main argument of the learned counsel for the Commissioner of Income Tax who is the appellant is that the word "plant" should not have been given a wide meaning and should have been interpreted according to the common understanding in commercial circles among persons who deal in plant and machinery.
It is asserted that the development rebate cannot be claimed in respect of the items which have become a part of the building itself.
It has also been pointed out that the assessee while claiming depreciation allowance has included the assets in question under the head "furniture and fittings" the rate claimed being 9 per cent which was duly allowed by the Income Tax Officer.
This rate of 9 per cent was applicable under Rule 8 only to furniture and fittings used in hotels etc.
If the assets were to be treated as plant, only the general rate of 7 per cent would be applicable.
The definition of "plant" must necessarily, therefore, be the same whether it be for claiming depreciation under section 10(2)(vi) or for development rebate under section 10(2)(vi b).
It has also been suggested that the primary meaning of the word "plant" has connection with mechanical or industrial business or manufacture of finis hed goods from raw goods and that sanitary and pipe line fittings could not possibly satisfy those conditions.
Now it is well settled that where the definition of a word has not been given, it must be construed in its popular sense if it is a word of every day use.
Popular sense means "that sense which people conversant, with the subject matter with which the statute is dealing, would attribute to it".
In the present case, section 10(5) enlarges the definition of the word "plant" by including in it the words which have already been mentioned before.
The very fact that even books have been included shows that the meaning intended to be given to "plant" is wide.
The word "includes" is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute." When it is so used, these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include.
The word "include" is also susceptible of other constructions which it is unnecessary to go into.
172 The case J. Lyons and Company Limited vs Attorney General (1) relied upon by the learned counsel for the appellant apart from being distinguishable hardly supports the contention of the appellant.
In that case, it was I held that electric lamps and fittings in a tea shop were not part of the apparatus used for carrying on the business but were part of the setting in which the business was carried on, and, therefore, were not "plant", within the meaning of certain provisions of the War Damage Act, 1943.
It was observed at page 286 "if these articles are plant, it can only be by reason that they are found on premises exclusively devoted to trade purposes.
Trade plant alone need be considered". ' The meaning of "plant" as given in Yar mouth vs France (2) was accepted as correct.
According to that meaning "plant" includes whatever apparatus or instruments are used by a businessman in carrying on his business".
In our judgment, the more apposite decision is that of the Court of Appeal in Jarrold (Inspector of Taxes) vs John Good & Sons Ltd. (3) There the nature of the assessee 's business required that its office accommodation should be capable ' of sub division into a number of rooms varying in size etc.
according to the requirements from time to time of the agencies which it carried on.
The office accommodation consisted of a large open floor space in which partitions could be erected so as to subdivide the floor space into a number of rooms of any size.
Certain partitions were made which were screwed to the floor and ceiling only and could be easily moved if it was desired to alter the size of number of the rooms.
The question was whether these partitions were plant within sections 279 and 280 of the English Income Tax Act 1952, so as to entitle the company to allowances under those sections.
There the material words in the statute were "where the person carrying on a trade in any year of assessment has incurred expenditure on the provision of machinery or plant for the purposes of the trade.
" It was held that the partitions were "plant" as they were used in the carrying out of the company 's trade or business.
Donovan, L.J. held that the partitions were used to enable the trader to cope with the vicissitudes of (1) 1.
(2) (3) 173 the business as it increased and diminished and relied on the finding of the commissioners that the flexibility of accommodation which the partitions provided was a commercial necessity for the company.
Further illustrations were given of assets which would fall within the meaning of "plant".
"The heating installation of a building may be passive in the sense that it involves no moving machinery, but few would deny it the name of plant".
The same thing could, no doubt be said of many air conditioning and water softening installations".
It cannot be denied that the business of hotelier is carried on by adapting a building or premises in a suitable way to be used as a residential hotel where visitors come and stay and where there is arrangement for meals and other amenities are provided for their comfort and convenience.
To have sanitary fittings etc.
in a bath room is one of the essential amenities or conveniences which are normally provided in any good hotel, in the present times.
If the partitions in Jarrold 's case (supra) could be treated as having been used for the purpose of the business of the trader, it is incomprehensible how sanitary fittings can be said to have no connection with the business of the hotlier.
He can reasonably expect to get more custom, and earn larger profit by charging higher rates for the use of rooms if the bath rooms have sanitary fittings and similar amenities.
We are unable to see how the sanitary fittings in the bath rooms in a hotel will not be "plant" within s.10(2)(vi b) read with Section 10(5) when it is quite clear that the intention of the Legislature was to give it a wide meaning and that is why, articles like books and surgical instruments were expressly included in the definition of "plant".
In decided cases, the High Courts have rightly understood the meaning of the term "Plant" in a wide sense.
(See Commissioner of ' Income tax, U.P. vs Indian Turpentine and Rosin Co. Ltd.).
(1) If the dictionary meaning of the word "plant" were to be taken into consideration on the principle that the literal construction of a statue must be adhered to unless the context renders it plain that such a construction cannot be put on the words in question this is what is stated in Webster 's Third New International Dictionary: (1) 17 4 "Land, buildings, machinery, apparatus and fixtures employed in carrying on trade or other industrial business.
It is, however, unnecessary to dwell more on the dictionary meaning because looking to the provisions of Act, we are satisfied that the assets in question were required by the nature of the hotel business which the assessee was carrying on.
They were not merely a part of the setting in which hotel business was being carried on.
The High Court was right in not accepting the reasoning of the Tribunal based on the rates relating to depreciation under s.10(2)(vi) and the assessee having claimed that the sanitary and pipe line fittings fell within the meaning of "furniture and fittings ' in Rule 8(2) of the Rules.
It has been rightly observed that the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred by the Act or whittle down its effect.
If the assessee had claimed higher depreciation allowance that would not detract from the meaning of the word plant in clause (vi b) of section 10(2).
In the result, this appeal fails and it is dismissed with costs.
V.P.S. Appeal Dismissed.
| IN-Abs | During the assessment year 1960 61, the assessee, a registered firm running hotels, incurred expenditure in installing sanitary and pipeline fittings in its hotels.
On the question whether such fittings in a building run as a hotel fell within the meaning of the word 'plant ' in section 10(2)(vi b) of the Income tax Act, 1922, and the assessee was therefore entitled to development rebate under that sub section, the High Court, in reference, answered in favour of the assessee.
Dismissing the appeal to this Court, HELD: (1) Apart from the dictionary or literal meaning of the word 'plant ', the context of the provisions of the Act shows that sanitary and pipe line fittings are 'plant ' under section 10(2)(vi b) read with section 10(5).
[173H; 174A B] In computing the profits and gains of a business under section 10(1) o the Act allowances by way of depreciation in respect of 'plant ' under section 10(2)(vi) and by way of development rebate in respect of 'plant ' under section 10(2)(vi b) have to be made.
Under section 10(5), 'plant ' includes vehicles, books, scientific apparatus and surgical equipment purchased for the purpose of the, business profession or vocation.
Where a word is not defined in a statute, it must be construed in its popular sense, that is, that sense which people conversant with the subject matter with which the statute is dealing, would attribute to it.
The word 'includes ' is generally used to enlarge the meaning of words or phrases used in the statute so that, words and phrases may be construed as comprehending not only such things as they signify according to their nature and import, but also these things which the interpretation clause declares that they shall include.
The fact that even books have been included in 'plant ' shows that the meaning given to 'plant ' is wide.
It should cover sanitary and pipe line fittings.
[170E H; 171E H, 173F] To have such fittings in a bath room is one of the essential amenities or conveniences which are normally provided in any good hotel, and the hotelier can reasonably expect to get more custom and earn a larger profit by charging higher rates.
Therefore, the fittings in the present case, were not merely a part of the setting in which the hotel business was being carried on, but were required for the purpose of the hotel business.
[173C G] C.I.T., U.P. vs Indian Turpentine and Rosin Co. Ltd., (1 970) , approved.
Jarrold (Inspector of Taxes) vs John Good & Sons Ltd., , applied.
169 J. Lyons Co. Ltd. vs Attorney General, and Yar mouth vs France, , referred to.
(2) The fact that the assessee while claiming depreciation allowance had included the fittings in question under the head 'furniture and fittings ' and claimed higher depreciation allowance than what would be applicable to 'plant ', would not detract from the meaning of the word 'plant ' in section 10(2)(vi b).
[174C E]
|
Appeal No. 1899 of 1967.
Appeal by special leave from the judgment and order dated August 24, 1966 of the Calcutta High Court in Income tax Reference No. 91 of 1962.
G. C. Sharma, F. Kuwnaria, B. R. Diwan and P. K. Mukherjee, for the appellant.
Jagadish Swarup, Solicitor General, 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 the judgment of the Calcutta High Court in an Income tax Reference.
The assessee who is the appellant is a public limited company doing the business of jute and manufacturing of jute goods.
The method of accounting followed by the assessee is the mercantile system.
During the assessment year 1955 56 (the previous year ended on 31st December, 1954), the assessee claimed a deduction of Rs. 1,49,776/on account of sales tax determined to be payable by the sales tax authorities on the sales made by the assessee during the.
aforesaid previous year.
The sequence of dates may be mentioned.
The income tax return was filed on 13th January, 1956.
The demand notice was served by the Sales Tax authorities on the 21st November 1957.
On 9th November, 1959, the assessee filed a revised return claiming the aforesaid deduction.
The assessee had taken the order by which the demand for such tax had been created to the higher departmental authorities, as it was contesting its liability to the extent that had been determined.
The Income tax Officer, however, completed the assessment on 11th March, 2 7 9 1960 before any final decision was given in the proceedings relating to the assessment of sales tax.
According to the Income Tax Officer, the assessee was not entitled to claim the deduction of the aforesaid amount of sales tax inasmuch as it had denied its liability to pay that amount and had made no provision in its books with regard to the payment of that amount.
The Appellate Assistant Commissioner confirmed the order of the Income tax Officer.
The Appellate Tribunal dismissed the,, appeal of the assessee.
The following question of law was referred by the Tribunal for the opinion of the High Court: "Whether on the facts and in the circumstances of the case, amount of Rs. 1,49,776/ .
which was claimed by the assessee as a deduction on account of sales tax was deductible as a business expense?" The High Court was of the opinion that unpaid and disputed sales tax liability could not form the basis of a claim for deduction for the purposes of income tax.
The reasoning of the High Court mainly was that for the purpose of claiming a deduction under section 10(2) (xv) or the Income Tax Act, 1922 (hereinafter called the "Act"), mere legal liability was not enough.
There had to be an expenditure in the first place and it must be laid Out or expended wholly and exclusively for the purpose of such business.
The High Court further held that unpaid and disputed sales tax could not be validly deducted in the computation of business income even under section 10 (1) of the Act.
It has been submitted on behalf of the assessee that sales tax paid or unpaid would be admissible deduction under section 10 (2)(xv) as well as under section 10 (1).
It is pointed out that if the method of accounting adopted by the assessee is cash system,, it would qualify for deduction only in the year in which it has been actually paid.
If the method of accounting is mercantile system, then the deduction will be permissible in the year to which the liability relates irrespective of the point of time wheel the liability has actual been discharged.
Section (10)5 provides that in sub section (2) "paid" means actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed, under the section.
The argument proceeds that in order 19 L1245 Su CI/71 280 therefore, that sales tax may qualify for deduction under section 10 (2) (xv), it has to be in the nature of an 'expenditure ' which has either been actually paid during the year of account or for the payment of which, the liability has been incurred in the accounting year, according as the method of accounting followed by the assessee is cash system or mercantile system.
It is indisputable that the amount of sales tax paid or payable by the assessee is an 'expendi ture ' within the meaning of section 10 (2) (xv).
The amount in question was thus a kind of expenditure about which there can be no doubt that it had been laid out or expended wholly or exclusively for the purpose of business carried on by the assessee.
The submission on behalf of the assessee in the alternative is that apart from valid deductibility of sales tax as an expenditure under section 10 (2) (xv) of the Act, it is a permissible deduction even under section 10 (1).
The profits of a business which are to be assessed to tax must be real profits and they have to, be ascertained on ordinary principles of commercial trading and commercial accounting.
Where an assessee is under a liability or is bound to make certain payment from the gross receipts, the profits and gains can only be net amount after 'such an amount is deducted from the gross profits or receipts.
In Commissioner of Income tax, West Bengal II vs Royal Boot House,(1) it was held that where the assessee followed the mercantile system of accounting and, without disputing the liability to pay the Sales Tax had made a provision for its payment in its account even though he had not actually paid the tax over to the authorities, the assessee was entitled to deduction in respect of the provision for sales tax from his income under section 10(2) (xv) of the Act.
It was, pointed out that under the provisions of the Sales Tax statutes, the liability to pay the tax was not dependent upon assessment or demand but was an obligation to pay the tax either annually, quarterly or monthly, as the case might be.
This case was and has been sought to be distinguished by the Revenue on the ground that the liability to pay the Sales Tax had not been disputed and the assessee had made a provision for its payment in its account As, will be presently (1) 281 seen this distinction is without substance and does not affect the true legal position.
Now under all sales tax laws including the statute with which we are concerned, the moment a dealer makes either purchases or sales which are subject to taxation, the obligation to pay the tax arises and taxability is attracted.
Although that liability cannot be enforced till the quantification is effected by assessment proceedings, the liability for payment of tax is independent of the assessment.
It is significant that in the present case, the liability had even been quantified and a demand had been created in the sum of Rs. 1,49,776/ by means of the notice dated 21st November, 1957 during the pendency of the assessment proceedings before the Income Tax Officer and before the finalisation of the assessment.
It is not possible ' to comprehend how the liability would cease to be one because the assessee had taken proceedings before higher authorities for getting it reduced or wiped out so long as the contention of the assessee did not prevail with regard to the quantum of liability etc.
An assessee that follows the mercantile system of accounting is entitled to deduct from the profits and gains of the business such liability which had accrued during the period for which the profits and gains were being computed.
It can again not be disputed that the liability to payment of sales tax had accrued during the year of assessment even though it had to be discharged at a future date.
In Pope The King Match Factory vs Commissioner of Income tax, Madras (1) a demand for excise duty was served on the assessee and though he was objecting to it and seeking to get the order of the Collector of Excise reversed, he debited that amount in his accounts.
on the last day of his accounting year and claimed that amount as a deductible allowance on the ground that he was keeping his accounts on the mercantile basis.
The Madras High Court had no difficulty in holding that the, assessee had incurred an enforceable legal liability on and from the date on which he received the Collector 's demand for payment and that his endeavor to get out of that liability by preferring appeals could not in any way detract from or retard the efficacy of the liability which (1) 28 2 had been imposed upon him by the competent excise authority.
In our judgment, the above decision lays down the law correctly.
The main contention of the learned Solicitor General is that the assessee failed to debit the liability in its books of accounts and, therefore, it was debarred from claiming the same as deduction either under section 10 (1) or under section 10 (2) (xv) of the Act.
We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although under the law, a deduction must be allowed by the Income Tax Officer, the assesses will lose the right of claiming or will be debarred from being allowed that deduction.
Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter.
The assessee who was maintaining accounts on the mercantile system was fully justified in claiming deduction of the sum of Rs. 1,49,776/being the amount of sales tax which it was liable under the law to pay during the relevant accounting year.
it may be added that the liability remained in tact even after the assessee had taken appeals to higher authorities or Courts which failed.
The appeal is consequently allowed and the judgment of the High Court is set aside.
The question which was referred is answered in favour of the assessee and against the Revenue.
The assessee will be entitled to costs in this Court and in the High Court.
Appeal allowed.
| IN-Abs | The appellant was a public limited company doing the business of jute and manufacturing of jute goods.
It followed the mercantile system of accounting.
Before the Income tax Officer in connection with the assessment year 1955 56 the appellant claimed a deduction on account of assessed sales tax.
The demand of sales tax waS contested by the appellant before the higher sales tax authorities but before the matter was finalised the Income tax Officer completed the assessment.
He disallowed appellant 's claim for deduction of sales tax on the ground that the liability, to pay sales tax had not been accented by the appellant and no provision had been made in its books with regard to payment of the assessed amount.
The authorities Linder the Act dismissed the appeals.
The High Court in reference was of the opinion that unpaid and disputed sales tax liability could not form the basis of a claim for deduction In appeal by special leave to this Court the appellant submitted that sales tax paid or unpaid would be admissible deduction under s.10(2)(xv) as well as section 10(1) of the Income tax Act, 1922, and that where the mercantile system of accounting was observed the deduction would be permissible in the year to which the liability relates irrespective of the point of time when the liability has been actually discharged.
HELD: Under all sales tax laws including the statute applicable to the present case the moment a dealer makes either purchase or sales which are subject to taxation, the obligation to pay tax arises and taxability is attracted.
Although that liability cannot be enforced till the quantification is effected by assessment proceedings, the liability for payment of tax is independent of the assessment.
In the present case the liability had even been quantified.
The liability could not cease to be one merely because the assessee had taken proceedings before higher authorities.
An assessee that follows the mercantile system of accounting is entitled to deduct from the profits and gains of the business such liability which had accrued during the period for which the profits and gains were being computed even though it had to be discharged at a future date.
[281B F] Commissioner of Income tax West Bengal II vs Royal Boot House, and Pope The King Match Factory vs Commissioner of Income tax Madras, , applied.
278 The contention that since the assessee had failed to debit the liability in its books of accounts, it was debarred from claiming the same as deduction either under s.10(1) or s.10(2)(xv) of the Act could not be accepted.
Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can existence or absence of entries in the books of accounts be decisive or conclusive in the matter.
[282 C E] The appeal must accordingly be allowed.
|
Appeal No. 2435 of 1966.
Appeal from the judgment an order dated November 6, and December 6, 1962 of the Bombay High Court in First Appeal No. 453 of 1960.
3 3 5 V. section Desai.
R. G. Samant, P. C. Bhartari and J. B. Dada chanji,for the appellants.
V. M. Tarkunde, K. R. Chaudhuri.
K. Rajendra Chaudhuri and Hari Singh, for the respondents.
The Judgment of the Court was delivered by Ray, J.
This appeal is by certificate against the judgment dated 6 November/6 December, 1962 of the Bombay High Court dismissing the appellants ' suit filed on 14 September, 1959 against the respondents, inter alia, for possession of suit property.
By an indenture of lease dated 16 March, 1944 the respon dents became lessees of the appellants for a period of 5 years, from 1 March 1943 in respect of the agricultural lands belonging ,to Jivanji Jamasji Mistry 's Adarian Charities.
The appellants terminated the tenancy of the respondents by notice to quit dated 25 October, 1955.
The notice to quilt was effective on the expiry of 31 March, 1957.
The appellants without prejudice to the October, 1955 notice gave another notice to quilt dated 10 June, 1958 to deliver possession within 7 days.
The respondents contended that they were protected tenants under the Bombay Tenancy Acts 1939 and 1948 and, therefore,.
the appellants would not be entitled to possession.
The trial Court held that after 31 March, 1957 the respon dents continued in possession and the appellants allowed the respondents to continue in possession by extending the term of the lease at least for one year up to 31 March, 1958.
The trial Court hold that the notice dated 25 October, 1955 terminating the tenancy with effect from 31 March, 1957 could not therefore be relied on by the appellants.
As to the notice dated 10 June, 1958 the trial Court held that it was not a valid notice and a proper three months notice expiring with the year on 31 March, 'shouldhave.
been given by the appellants.
On appeal the High Court held that it was not necessary to consider whether the respondents had acquired the status of protected tenants.
The High Court held that the lease which was operative from 1 March, 1943 for a period of 5 years was under section 23(1)(b) of the Bombay Tenancy Act, 1939 as amended, in 1946 deemed to be for a period of not less than 10 years.
The lease was therefore effective up to 28 February, 1953.
Meanwhile the Bombay Tenancy and Agricultural Lands Act, 1948 came into force on 28 December, 1948.
The High Court held that section 5 of the Bombay Act, 1948 as it originally stood was in terms similar to section 23 of the 1939 Act but as a result of amendment of section 5 of the 1948 Act by the Bombay Act 33 6 XXXIII of 1952 the period of the lease was renewed up to 28 February, 1963 and therefore the appellants could not obtain a ,decree for posession.
Though section 5 of the 1948 Act as amended by the Bombay Act of 1952 was repealed by Bombay Act XIII of 1956 the High Court held that the tenants had acquired the vested right of protection against termination of tenancy merely on the ground of ,expiry of the duration fixed by agreement.
The High Court said that it was not necessary to decide whether the respondents had acquired the status of protected tenants.
The High Court held that by reason of the provisions of section 5 of the 1948 Act as amended in 1952 the respondents acquired renewed tenancy up to 28 February, 1963 and unless the plaintiff landlord could show that rights so acquired had ended they could not claim possession.
When the appeal came up for hearing before this Court on 13 February, 1970 this Court sent the matter back to the High Court for submitting a report.
on two questions.
First, whether on 1 March, 1953 , the respondents were protected tenants.
Second, if the respondents were protected tenants on 1 March, 1953 whether on that account the respondents had the right 'to ,claim the benefit of section 5 and other relevant sections of the Bombay Tenancy and Agricultural Lands Act 67 of 1948.
The High Court recorded the findings on 27 January, 1971.
The High Court recorded the answers that the respondents were protected tenants on 1 March, 1953 and, secondly, the respondents did not have the right to claim the benefit of section 5 or other relevant sections of the Bombay Tenancy and Agricultural Lands Act, 1948.
The respondents challenged the second finding of the High Court.
The Bombay Tenancy Act, 1939 came into effect on 2 April.
Section 3 of the 1939 Act spoke of a tenant who would be deemed to be a protected tenant if he held land continuously for a period of not less than 6 years immediately preceding 1 January, 1938 and cultivated such land personally during the said period.
The Bombay Tenancy Amendment Act, 1946 introduced changes into the 1939 Act.
These were sections 3A and 23.
Under section 3A of the 1946 Amendment Act every tenant on the expiry of one year from the date of the coming into force of the 1946 Amendment Act would be deemed to be a ' protected tenant for the purpose of the Act and his rights as protected tenant would be recorded in the Record of Rights, unless his landlord has within the said period made an application to the relevant authority for a declaration that he was not a protected tenant.
Under section 23 of the 1946 Amendment Act no lease of any land after the coming into force of the said section in the relevant 33 7 area was to be for a period of less than 10 years and secondly every lease subsisting on the said date, namely, coming into force of the Act or made after the said date in respect of any land in such area shall be deemed to be for a period of not less than 10 years.
The leases subsisting on the date when the 1946 Amendment Act came into force could not be terminated before the expiry of the period of 1 0 years only on the ground.
that the period of lease had expired but such a lease could be terminated by a tenant by surrendering the lease.
The Bombay Tenancy Amendment Act 1946 was brought into force from 8 November, 1946 throughout the Province of Bombay.
The effect of the 1946 Amendment Act in the present case was that the lease which was subsisting on that date, viz., 8 November, 1946 was deemed to be for a period of not less than 10 years from 1 March, 1943 when the lease came into effect.
The other important change as a result of the 1946 Amendment Act was that under section 3A of the Act the tenant was deemed to be a protected tenant for the purpose of this Act and his rights were to be recorded in the Record of Rights.
The facts found by the High Court in the present case are that the tenant respondents" rights were recorded and the appellants did not make an application after the coming into force of the 1946 Amendment Act that the respondents were not protected tenants.
Therefore, the res pondents were protected tenants and the lease was effective for10 years from the date of the lease.
This extension of the lease for 5 years beyond the period of 5 years mentioned in the lease was by virtue of the provisions in the statute.
The Bombay Tenancy Act, 1939 was repealed by the Bombay Tenancy and Agricultural Lands Act, 1948 referred to, as the 1948 Act.
It may be stated here that the 1948 Act repealed the whole of the Bombay Tenancy Act, 1939 except sections 3, 3A and 4 which were also modified in the manner mentioned in Schedule 1 to the 1948 Act.
In the present case, the High Court has recorded the finding that the respondents were protected tenants on 1 March, 1953.
That finding is not challenged by either side in the present appeal.
The respondents have challenged the other finding of the High Court that the respondents did not have the right to claim the benefit of section 5 or other relevant sections of the 1948 Act.
The rival contentions in the present appeal are on the effect of section 5 of the 1948 Act which was introduced as an amendment by Bombay Act 33 of 1952 in substitution of section 5 as it originally stood in the 1948 Act.
On behalf of the respondents it is said that they were protected tenants under the 1948 Act and the lease of the respondents which had come into existence on 338 1 March, 1943 was extended up to 28 February, 1953 and as a result of an amendment of section 5 by the 1952 Amending Act the period of the lease was extended up to 28 February, 1963, and therefore, the appellants could not claim eviction.
The appellants on the other hand contended that the respondents who had a subsisting lease dated 1 March, 1943 for 5 years received the benefit of statutory extension of the period by another 5 years up to 28 February, 1953, and on 1 March, 1953 the respondents were protected tenants who had an unlimited period of tenancy which could be terminated in accordance with the provisions of section 34 of the 1948 Act.
It was also said on behalf of the appellants that section 5 which was introduced into the 1948 Act by the Amending Act of 1952 which came into effect on 12 January, 1953 did not at all apply to protected tenants but only to ordinary tenants.
Even if it were assumed that section 5 of the 1948 Act as amended by the 1952 Act applied, it was said ,on behalf of the appellants that as a result of the Bombay Amending Act 13 of 1956 which came into effect on 1 August, 1956 section 88B introduced by the Amending Act of 1956 removed section 5 from the statute and the appellants were not entitled to invoke any protection under that section of the statute.
In order to appreciate these contentions it is necessary to refer to section 5 which was introduced into the 1948 Act by the Amending Act of 1952 which is as follows "5 (1) No tenancy of any land shall be for a period of than ten years.
Provided that at the end of the said period and thereafter at the end of each period of ten years in succession, the tenancy shall, subject to the provisions of sub sections (2) and (3); be deemed to be renewed for a further period of ten years on the same terms and conditions notwithstanding any agreement of the contrary.
(2)The landlord may, by giving the tenant one year 's notice in writing before the end of each of the period referred to in sub section (1), terminate the tenancy with effect from the thirty first day of March in the last year of each of the said period, if he bona fide requires the land for any of the purposes specified in sub section (1) of section 34, but subject to the provisions of sub sections (2) and (2A) of the said section, as if such tenant was a protected tenant.
(3)Notwithstanding anything contained in sub section (1): 33 9 (a) every tenancy shall, subject to the provisions of sections 24 and 25, be liable to be terminated at any time on any of the grounds mentioned in section 14; and (b) a tenant may terminate the tenancy at any time by surrendering his interest as a tenant in favour of the landlord : Provided that such surrender shall be in writing and shall be verified before the Mamlatdar in the prescribed manner".
The question in the forefront is whether section 5 introduced by the Amending Act of 1952 applied to protected tenants.
Counsel on behalf of the respondents contended not only that the said section 5 applied to protected tenants but also that if the said section 5 were held to be applicable only to ordinary tenants the respondentswho were protected tenants could claim the benefit of ordinarytenants by virtue of their position of contractual tenants.
The 1948 Act recognised a tenant to be a protected tenant if such person had been deemed to be a protected tenant under sections 3, 3A or 4 of the Bombay Tenancy Act, 1939.
Section 34 of the 1948 Act provided that notwithstanding anything contained in section 14 a landlord might terminate the tenancy of a protected tenant on the grounds and in the manner as provided in that section.
It therefore follows that a protected tenant had been given security under the 1948 Act for an unlimited duration and he could be accepted either on grounds mentioned in section 14 or for grounds mentioned in section 34 of the 1948 Act.
A protected tenancy therefore did not come to an end on the expiration of any particular period.
A protected tenancy could be brought to termination only on the grounds and in the manner mentioned in sections 14 and 34 of the 1948 Act.
It is also ncoticeable that no new protected tenancy could come into existence under the 1948 Act.
Section 5 of the 1948 Act as it originally stood provided that no tenancy could be for a period of less than ten years and no tenancy was to be terminated before the expiry of the period of 10 years except on the grounds mentioned in section 14.
Therefore, under section 5 of the 1948 Act as it originally stood, tenants other than protected tenants were given a security to the extent of 10 years only.
Persons other than protected tenants could under sections 14(2) and 15 of the 1948 Act be allowed 34 0 to hold over and in such case of holding over the tenancy "of such a tenant shall be deemed to have been renewed for a further period of 10 years from the date of the expiry on the same terms and conditions".
Therefore, under the 1948 Act prior to the amendment in 1952 there was on the one hand a protected tenant with a security for an unlimited period whose tenancy could be terminated for grounds and in the manner mentioned in sections 14 and 34 of the 1948 Act and on the other hand a person other than protected tenant who had a security for a period of 10 years with the possibility of a landlord allowing such a tenancy to hold over in which case he would have a further period of 10 years.
Unless :the tenancy was terminated in accordance with the provisions of the Act.
It is in this context that section 5 was introduced into the Act by the Amending Act of 1952.
The effect of the amended section 5 came up for consideration by this Court in Trimbak Damodhar Raipurkar vs Assaram Hiraman Patil & Ors.(1) The facts in that case were these.
A tenancy came into existence on 5 February, 1953 for 5 years.
Under the provisions of section 23 (1) (b) of the 1939 Act as amended in 1946 the subsisting lease was deemed to be for a period of not less than 10 years.
During the subsistence of the tenancy the 1948 Act came into existence.
A notice was given to the tenants calling upon them to deliver possession after expiration of the period of tenancy on 31 March, 1953.
Meanwhile, the 1952 Amending Act had come into effect on 12 January, 1953.
The tenant in that case relied on section 5 as amended in 1952.
That case was of an ordinary tenant and not of a protected tenant.
This Court held that the Amending Act 1952 repealed section 14(2) of the 1948 Act, amended section 5 of the 1948 Act and the effect of the amendment in that case was stated as follows : "Shortly stated the effect of this amendment was that the tenancy of the respondents, who were till then ordinary tenants as distinct from protected tenants, could not be terminated on the expiry of their tenancy except by giving one year 's notice and that too on the ground that the lands were required by the landlord for bona fide personal cultivation and that the income of the said lands would be the main source of income of the landlord".
Prior to the Amending Act of 1952 the tenancy of an ordinary tenant could be terminated on the grounds mentioned in section 14 before the expiry of the period of 10 years.
An ordinary tenant however could hold over under section 14(2) of the 1948 Act.
After the amendment of section 5 and the repeal of section (1) [19621 supp.
1 section C. R. 700 3 4 1 14(2) of the 1948 Act a tenancy contemplated in section 5 of the Act would at the end of each period of 10 years subject to the provisions of sub sections (2) and (3) be deemed to be renewed for a further period of 10 years.
This was a new protection afforded to tenancies mentioned in section 5 of the Act.
The second sub section of section 5 as amended in 1952 provided that the landlord by giving one year 's notice in writing before the end of each period of ten years referred to in section 5 (1) of the Act could 'terminate the tenancy with effect from the thirty first day , of March in the last year of each of the said period, if the landlord bona fide required the land for any of the purposes specified in section 34(1) but subject to the provisions of sub sections (2) and (2A) as if such tenant was a protected tenant.
On the one hand a tenant under section 5 as amended in 1952 could have a renewal of a further period of 10 years and on the other the landlord could terminate the tenancy at the end of the period of 10 years by giving a notice as mentioned in section 5(2) of the Act as amended in 1952.
The decision of this Court in Trimbak Damodhar Raipurkar 'section case (supra) noticed the distinction between ordinary tenants and protected tenants and applied section 5 as amended in 1952 to.
the case of an ordinary tenant as distinct from a protected tenant.
This decision also held that there was a statutory extension of the duration of the lease by virtue of the provisions of the Act.
It could not be said that when a lease for 5 years was extended as, a result of the provision of the statute that extension was in terms of the contract.
In Trimbak Damodhar Rajpurkar 's case (supra) this Court held that before the lease could expire on 31 March,, 1953 in that case the period of the lease had been extended for 10 years as a result of the amendment of section 5 by the Amending Act of 1952 which came into effect on 12 January, 1953, and it could not be terminated save and except as specified by a valid notice or a surrender.
The notice given in the month of March, 1952 in that case which called upon the tenant to deliver posses sion on the expiry of the statutory period of 10 years on 31 March, 1953 proved abortive by reason of the operation of the amendment of section 5 renewing the term of the tenancy for the period of ten years.
The principal reason as to why section 5 as amended in 1952 does not apply to a protected tenant is that the tenancy of a protected tenant under the 1948 Act was of unlimited time and the tenant other than a protected tenant had a security only for 10 years and it is only under section 5 as amended in 1952 that such a tenant other than a protected tenant became entitled to renewal of the tenancy for a further period of 10 years in succession as mentioned in the said section.
Secondly, section 5 and, in parti 3 42 cular, sub section (2) thereof as amended in 1952 spoke of termination of tenancy by the landlord by giving the tenant one year 's notice in writing if the landlord bona fide required the land for any of the purposes specified in sub section (1) of section 34 but subject to the provisions of sub sections (2) and (3) of the said section as if such a tenant was a protected tenant.
The words "as if such a tenant was a protected tenant ' indicate that the legislature treated section 5 as applying to tenancies other than protected tenancies.
If the word 'tenancy ' 'occurring in section 5 of the Act as amended in 1952 related to protected tenancy the words as if such a tenant was a protected tenant ' in section 5(2) would not have been necessary.
In the third place, section 5 of the 1948 Act as amended in 1952 was in Chapter II of the Act.
Chapter 11 related to general provisions regarding tenancies.
Sections 31 and 34 of the 1948 Act which related to protected tenants occurred in Chapter III of the 1948 Act.
The heading of Chapter III of the 1948 Act before the amendment thereof in 1956 was 'Protected tenants their special rights and privileges '.
The recognition of protected tenant was only under section 31 of the 1948 Act.
The termination of a tenancy of a protected tenant was specifically provided for only in section 34 of the Act.
Section 34 itself provided that notwithstanding anything contained in section 14 the tenancy of a protected tenant could be terminated as.
mentioned in section 34 of the Act.
It is true that section 14 of the Act occurred in Chapter 11 but that section was attracted only for termination of tenancy of a protected tenant because of the grounds mentioned in section 14.
These were spe cific provisions for protected tenants.
Fourthly, the termination of tenancy of a person other than a protected tenant after the amendment of section 5 in 1952 on the grounds mentioned in section 34 of the Act was by applying the grounds as if such tenant was a protected tenant.
It is, therefore, manifest that if section 5 as amended in 1952 applied to protected tenants the manner of termination of tenancy mentioned in section 5, namely, by giving one year 's notice in writing before the end of each period of ten years would have been totally inconsistent with the manner of termination of tenancy of a protected tenant.
A protected tenant had unlimited security of tenure with the exception of termination by one year 's notice on the grounds mentioned in section 34 whereas the tenancy of one other than a protect would continue to be, renewed for a period of ten years section 34 (1)only at the end of each period of ten years.
Fifthly, under the1948 Act no new protected tenancy could come into existence whereas a tenancy other than that of a protected tenant would continue to be renewed for a period of ten years in succession unless the tenancy was terminated at the end of one such period of ten years.
Finally, if a protected tenancy of 343 unlimited time was brought within the ambit of section 5 as amended in 1952 the protected tenancy would be contemplated to be renewed for periods of ten years in succession.
Any such renewal for periods of ten years would be destructive of the protected tenant 's unlimited security as to duration of tenancy.
In view of our conclusion that section 5 of the 1948 Act as amended in 1952 does not apply to protected tenancy for the reasons indicated above, it is not necessary to consider another contention advanced on behalf of the respondents that apart from protected tenancy section 5 of the 1948 Act as amended could be invoked as a part of contractual tenancy.
The reason is obvious.
The protection afforded by section 30 of the 1948 Act to contractual terms of tenancy is that the rights or privileges vested in the tenancy under any contract cannot be abridged or limited.
The provisions contained in section 5 of the 1948 Act as amended are provisions of the statute not applicable to protected tenants and a protected tenant cannot therefore claim the protection of such a statutory provision far less on the ground that it is a right or privileges arising out of any contract.
It has to be borne in mind that section 5 as amended in 1952 speaks of the fictional renewal of a tenancy for periods of ten years.
A protected tenant on the other hand acquired the statutory "Status or irremovability" when the 1948 Act recognised a protected tenant and nothing more was required to be done to renew or extend the duration of statutory tenure.
To apply the renewal of tenancy for periods of ten years under the amended section 5 would be to rob the protected tenancy of its unlimited security and truncate it into tenancy for period of ten years renewable as mentioned therein.
In the present case the tenancy under the lease which was for a 5 years commencing 1 March, 1943 was operative in duration upto 29 February, 1948.
The respondents by virtue of section 23 (1) (b) of the Tenancy Act of 1939 as amended in 1946 became entitled to an extension of 5 years under the statutory provisions.
This Court in Trimbak Damodhar Raipurkar 's case (supra) noticed that the extension of the duration of the lease was virtue of a statute.
This is described as a 'Statory security of tenure". "Various statutes give security of tenure to tenants.
The co called statutory tenancy created under the Rent Acts . . upon the determination of contractual tenancy is not, properly speaking, a species of tenancy, it is a personal right in the tenant not to have an order for possession made against him unless certain specified conditions are fulfilled; it is a " status of irremovability" (See Woodfall Landlord 'and Tenant, 27th Edition, Vol.
1 paragraph 703 pp.
295 to 296).
An ordinary tenant could invoke in aid the provisions of section 5 of the 344 1948 Act as amended in 1952 and even in that case the extended terms would be under the statute and #lot as part of the contractual term.
A protected tenant, as is the case here, is disentitie to be within the scope of the amended section 5.
The 1948 Act was amended by the Bombay Amending Act 13 of 1956 which came into effect on 1 August.
As a result of the 1956 amendment section 5 which had been introduced into the Act by the amended Act of 1952 ceased to be on the statute and a new section 5 was substituted.
But the new section 5 substituted in 1956 has no relevance to the present appeal.
The contention on behalf of the respondents was that section 5 as amended in 1952 had conferred a vested right on the respondents and therefore the deletion of the amended section 5 by the 1956 amendment could not take away the vested rights of the respondents.
The contention on behalf of the appellants as to the effect of substitution of the amended section 5 by a totally different section 5 of 1956 was first that section 5 did not apply and even if it applied it did not create a vested right and secondly if the statute conferred any protection or privilege the statute could ,take away such a protection or privilege.
This Court in Sidram Narsappa Kamble vs Sholapur Borough Municipality & Anr.(1) considered the effect of the 1956 Amendment Act in relation to protected tenants.
In the present appeal, in view of our conclusion that section 5 of the 1948 Act as amended in 1952 did not apply to protected tenants, it is not necessary to consider the contention advanced on behalf of the respondents whether they had any vested right in the amended section 5.
For these reasons the findings of the High Court dated 27 January, 1971 are upheld and the judgment dated 6 November 6 December, 1962 is set aside.
Counsel for both the parties submitted that the matter that matter would have to be remanded to the High Court for consideration as to whether there was a valid termination of tenancy.
The matter is remanded to the High Court for decision of the appeal as to whether there was a valid termination of tenancy.
(1) ; 345 In view of the fact that this is an old litigation we hope that the matter will be heard as soon as is convenient to the High Court.
The order of costs passed by the High Court is set aside.
Costs of this appeal will abide the result of the decision of the High Court.
The successful party would be entitled to costs.
| IN-Abs | The respondents were lessees of the appellants for a period of 5 years from March 1, 1943.
They were protected tenants under the Bombay Tenancy and Agricultural Lands Act, 1948.
They contended that the appellants landlords could not claim eviction, because, being protected tenants their lease was extended by statute up to February 28, 1953, and as a result of the amendment of section 5 of the 1948 Act by amending Act of 1952 the period of lease was further extended upto February 28, 1963.
On the question whether a protected tenant could claim the benefit of section 5 as amended by amending Act of 1952, HELD : Section 5 of the 1948 Act as amended in 1952 did not apply to protected tenancy.
The principal reason was that the tenancy of a protected tenant under the 1948 Act was of unlimited time.
Whereas a tenant other than a protected tenant had a security only for 10 years and it was only under section 5 as amended in 1952 that a tenant other than a protected tenant became entitled to renewal of the tenancy for a period of 10 years in succes sion as mentioned in the said section.
Any such renewal, for periods of ten years, of a protected tenancy, would be destructive of the protected tenant 's unlimited security as to duration of tenancy.
Secondly, if section 5 as amended in 1952 applied to protected tenants the manner of termination of tenancy mentioned in section 5, namely, by giving one year 's notice in writing before the end of each period of ten years would have been totally inconsistent with the manner of termination of tenancy of a protected tenant.
The tenancy of a protected tenant could be terminated by one year 's notice on the grounds mentioned in section 34 whereas the tenancy of one other than a protected tenant, could be terminated on the grounds mentioned in section 34(1) only at the end of each period of ten years.
Thirdly, if the word tenancy occurring in s.5as amended in 1952 related to protected tenancy the words "as if such atenant was a protected tenant in section 5(2) would not have been necessary".
And finally, section 5 as amended in 1952 was in Ch.
II which contained general provisions regarding tenancies and sections 31 and 34 of 1948 Act which related, to protected tenants occurred in Ch.
III of the 1958 Act.
[341 H 342 H] Trimbak Damodhar Rajpukar vs Assaram Patil, [1962] Supp.
1 S.C.R. 700, referred 'to.
|
l Appeals Nos. 1239 to 1241 of 1966.
Appeals by special leave from the Award dated October 1, 1965 of the Industrial Tribunal, Maharashtra, Bombay in Reference (I.T.) Nos. 84, 112 and 121 of 1959.
K. T. Sule, M. G. Phadnis and Vineet Kumar, for the appel lants (in all the appeals).
G. B. Pai, P. N. Tiwari and P. K. Rele, for the respondents (in all the appeals).
3 7 5 P. Jaganmohan Reddy, J.
These three Appeals are by the P. Jaganmohan Reddy,J.
These three appeals are by the Workmen of the three Respondent Companies respectively Civil Appeal No. 1239 of 1966 is against Greaves Cotton & Co. Ltd., Civil Appeal No. 1240 of 1966 is against Greaves Cotton & Crompton Parkinson Pvt. Ltd., (later amalgamated in 1966 and a new Company formed as Crompton Greaves Ltd.), and Civil Appeal No. 1241 of 1966 is against Kenyon Greaves Pvt. Ltd. On the 29th April 1958 a charter of demands was presented by the Workmen through their Trade Union Greaves Cotton and Allied Companies Employees Union to the Respondents in the above three Appeals and to Russian & Hornby India Pvt.
Ltd. These demands were in respect of the wage scale, dearness allowance, leave gratuity etc.
After the conciliation proceedings under sub section (4) of Section 12 of the (hereinafter called the 'Act ').
had failed, the disputes in respect of the aforesaid matters were ultimately referred by the Maharashtra Government to Shri P. D. Sawarkar for adjudication under Section 10 (1) (d) read with 12 (5 ) of the Act.
In respect of demands made against Greaves Cotton & Co. Ltd., the reference was made on 8 4 59 and 24 12 59; against Greaves Cotton & Crompton Parkinson Pvt. Ltd. on 30 5 59 and 24 12 59 and that against Kenyon Greaves Pvt. Ltd., on 8 6 59 and 9 1 60 respectively.
We are here not concerned with the other references.
By an Award dated 3rd June, 15th and 16th June 1960 the Sawarkar Tribunal revised the wage scales and dearness allowance of all workmen employed by those Companies.
Ruston & Hornby India Pvt. Ltd. appealed against the Awards to this Court which by a common Judgment dated 14th November 1963 held that the wage scale and dearness allowance fixed by the Industrial Tribunal for the clerical and subordinate staff did not require any interference and to that extent dismissed the Appeal.
It however set aside the wage scale and dearness allowance fixed for factory workmen and remanded the matter to the Tribunal for fresh fixation of wage scale and dearness allowance with these observations : "We allow the Appeal with respect to the factory workmen and send the case back to the Tribunal for fixing the wage structure including basic wages and dearness allowance and for granting adjustments in the light of the observations by us.
The new Award pur suant to this Award will come into force from the same date namely April 1, 1959".
When the references were taken up by the Tribunal on remand the parties agreed that in view of the decision of this Court certain 3 76 references stood finally disposed of namely references dated 24th December, 1959 by the Workmen in Greaves Cotton & Co. Ltd., and in Greaves Cotton & Crompton Parkinson Pvt. Ltd. and that dated 9th January 1960 by the workmen of Kenyon Greaves Pvt.
Ltd. The other three which were also held to be finally disposed of were against the Workmen of Ruston & Hornby India Pvt. Ltd. with which we are not concerned in this Appeal.
The parties however, agreed that only three references dated 8th April, 1959, 30th May 1959 and 8th June, 1959 by workmen against Greaves Cotton & Co. Ltd., Greaves Cotton & Crompton Parkinson Pvt. Ltd., and Kenyon Greaves Pvt. Ltd. survive.
During, the proceedings before the Tribunal two questions were raised (1) Whether the Supreme Court remanded the matter for consideration of the dispute in respect of certain categories of employees including those of the Supervisors; and (2) Whether it was open to the Respondents to claim fixation of service conditions on the basis of individual units.
On behalf of the employees it was contended that the dispute regarding the Foremen or Supervisors who were included in the term subordinate staff was concluded by the Judgment of the Supreme Court inasmuch as it had dismissed the Appeal in respect of Clerical and subordinate staff.
The employers on the other hand contended that the reference was in respect of the six categories of Workmen specified in the Supreme Court Judgment which included Supervisors.
Shri Athalye who was the then Judge of the Industrial Court after hearing the parties made an order on 14th July 1964, inter alia holding : (1) That the Companies were precluded from agitating that wage scales in the different factories should be fixed on the basis of individual units; and (2) that the Sawarkar Award was set aside by this Court in respect of all workmen except those who could be properly classified as office staff.
After this order the Respondents were asked to file statements regarding comparative wage scales of Supervisors, in their concerns as well as in other concerns.
These statements were filed without prejudice to their contention that the Tribunal had no jurisdiction to fix wage scale in respect of Supervisory staff.
The documents filed on behalf of the third Respondent namely Kenyon Greaves Pvt Ltd., showed that it did not employ any staff in the Supervisory grade.
Thereafter the references were heard by Shri Paralkar who had succeeded Shri Athalye as Judge, 377 Industrial Tribunal.
It was contended before him that the Foreman (Supervisors) were not workmen within the definition given in the Act and that no wage scales in respect of the Supervisors in the Respondent Companies should be fixed.
The stand taken by the Appellant was that it was not open to the Respondent Companies to raise the question whether the Supervisors were Workmen within the meaning of the Act as it did not arise on the remand orders made by this Court.
In the alternative it was contended that many Supervisory work men, concerned in the dispute were drawing a total salary below Rs. 500 'and that even if everyone of them was promoted from the category of supervisors or for the sake of argument it was held that Foremen and Supervisory staff were not workmen within the meaning of the Act, the Workmen had a right to raise a dispute regarding wage scale and dearness allowance of the Supervisory staff because they have a communist of interest with them.
The Tribunal therefore had jurisdiction to entertain the depute in respect of wage scales and dearness allowance of the Supervisory staff.
The Appellant also contended on behalf of the Workmen that the only question that was pending before the Tribunal was to fix wages for factory workmen and therefore the Tribunal had no jurisdiction to decide at that stage as to which category the workmen belonged.
The Tribunal by its Award of the 1st October 1965 held after hearing the parties that Supervisors were not workmen within the meaning of the Act and that the claim for revision of wage scale and dearness allowance payable to them was in that view rejected.
Against this Award the above Appeals were filed by Special Leave granted by this Court confined only to the point whether the decision contained in paragraph 15 and 16 of the Award was correct.
At the outset it was conceded by the parties that Civil Appeal No. 1241 of 1966 by the Workmen against the Kenyon Greaves Pvt. Ltd. did not survive because there are no persons working in the Supervisory capacities and drawing less than Rs. 500/being the two conditions requisite under Section 2 (s) (iv) of the Act to be a 'Workman the non fulfilment of which would deprive the Tribunal of its jurisdiction to determine the dispute; and therefore the appeal has to be dismissed.
Even in respect of the other two appeals the learned Advocate for the Respondent submits that there are no workman working in the Supervisory capacities and drawing less than Rs. 500/ in the 3 78 other two Undertakings in respect of which the Appeals have been filed and consequently they should also be dismissed.
We shall, however, deal with this submission later on.
Before us five contentions have been urged by the learned Advocate for the Appellant: First whether the case of Supervisors was at all remanded to the Tribunal for adjudication by the Supreme Court; Secondly whether it was open to the Respondents to agitate when the matter was remanded to the Tribunal, for the first time to challenge the jurisdiction of the Tribunal to fix wage scale and dearness allowance of the Supervisors; Thirdly whether Supervisors getting less than Rs. 500/ per month on the crucial date namely the date of reference can raise a dispute regarding wages which take them beyond Rs. 500/ ; Fourthly whether workmen can raise a dispute about non workmen, as regards terms of employment of non workmen and in what circumstances.
Fifthly whether the Tribunal on remand is right in holding that in December 1964, none of the Supervisors were drawing less than Rs. 500/ .
With respect to the first two contentions the Appellant 's learned Advocate submits that in the Special Leave Petition against the Award passed by Mr. Sawarkar neither the wage scales of Supervisors nor any question about the jurisdiction of the Tribunal was raised nor was such a contention urged before this Court in the Appeals which were partly allowed and remanded by this Court.
Even before the Industrial Tribunal, after the remand, when the Respondent Companies in compliance with its orders dated 15 1 54 submitted statements giving the names of workmen including Supervisors (Foremen) which were covered by the reference and gave their details as called for by the said Tribunal, the comments of the Appellants which were submitted on 27 2 64 were that the category of Supervisors was not covered by the order of remand, and the wage scale and dearness allowance for that category have been confirmed by this Court by its judgment dated the 14th November 63.
This was controverted by the Respondents and by further supplementary written statement dated 16 3 64, each of the Respondent Companies, it is alleged, tried to cover up and reagents the matter which had already been settled by this Court regarding uniform service conditions for the entire Greaves Cotton group of Companies on the basis that Greaves Cotton & Co., was the principal Company.
379 Even in these supplementary written statements it is alleged no question was taken up by the Respondent Companies that the Foremen were not workmen within the meaning of the Act.
The Appellant had on 24 3 64 submitted an application to the Industrial Tribunal stating that the supplementary written statements should not be taken on record since the issue in the said supplementary statements regarding uniformity in the wage scale and dearness allowance was decided by this Court.
It also urged that the issue regarding Drivers, Cleaners and apprentices and Supervisors were categories remanded by the Supreme Court for fixing their wage scale should be decided as a preliminary issue.
As we have already stated the Tribunal gave its decision on the two issues which were raised before it after this Court had remanded the matter.
On the other hand it is contended by the Respondents that it is not open to the Appellants to raise this question because the Special Leave having been confined only to the point whether the decision contained in paragraphs 15 and 16 of the Award is correct, it is open to it to urge that the Supervisors were not workmen.
It was pointed out that from Paragraph 15 and 16 of the Award it is evident that the demand for the revision of the wage scale and dearness allowance of the Supervisors even for the lowest grade on the lowest scale made them non workmen as their emoluments exceed Rs. 500/ , which decision also clearly indicates that the question of fixation of the Supervisors wage scale and dearness allowance was remanded to the Tribunal.
It is further stated that this Court had in its Judgment dated 14th November 1963 allowed the Appeal with respect to the 'factory workers ' and sent the case back top the Tribunal for fixing the wage structure for the 'factory workmen ', that it is implicit in the order of remand that the Tribunal would have jurisdiction to determine whether any employee of the factory was or was not a workman within the meaning of the Act; that if the Appellant 's contention is accepted it would virtually mean that this Court by its Judgment had conferred a jurisdiction on the Tribunal to deal with the case of non workmen which the Tribunal under the Act did not possess; and that the question whether there is community of interest between other workmen of the Respondent and Supervisors who may be non workmen is a mixed question of fact and law, which has not been raised before the Tribunal and ought not be allowed to be raised for the first time before this Court.
It is also contended that the question whether some of the workmen could raise a dispute regarding the grades of the Supervisors as there is a community of interest was not the subject matter of the decision in para 15 and 16 of the Award, and that since the wages including dearness allowance of all supervisors at the date of the Award were in excess of 380 Rs. 500/ the question of considering the claims of the Supervisors who were non workmen at the instance of supervisors workmen ,does not arise.
It is not in our view necessary to go into these several contentions except to examine the scope of the Judgment of this Court in Civil Appeals Nos. 272 280 of 1962 dated 14 11 61 by which the remand was made to the Tribunal.
The order is in the following terms : "We therefore dismiss the Appeal so far as retrospective effect and adjustments as also fixation of wages and dearness allowance with respect to clerical and subordinate staff are concerned.
We allow the appeal with respect to factory workmen and send the cases back to Tribunal for fixing the wage structure including basic wage and dearness allowance and for granting adjustments in the light of the observations made by us. ".
The Award of the Tribunal which this Court was considering in the said appeals dealt with the clerical and subordinate staff separately from the factory workmen.
It is in respect of the portion of the Award relating to Clerks and subordinate staff that the appeal was dismissed and that dealing with the factory workmen was remanded.
Factory workmen had been divided into six categories and the employees of the Respondents had been directed to be fixed with separate wages for each category.
These six categories were: (i) Unskilled.
(ii) Semi skilled I. (iii) Semi skilled II.
(iv) Skilled I. (v) Skilled II, and (vi) Skilled III.
Apart from this the Sawarkar Tribunal in para 58 said, in those references it was concerned with the factory work men of only the three Respondent Companies; that different scales of wages prevail for different classes of workmen but which categories should be placed in which class is not prescribed.
It referred to the wage scale of different classes of workmen prescribed by Shri Divatia in which apart from the above six categories, three categories of Supervisors grade I, II & III were also given.
The Tribunal, however, while retaining these six categories introduced a seventh category of higher unskilled, which as this Court observed was not justified because there cannot be degrees of want of skill among unskilled class.
Apart from this the main attack was on the wages fixed for these six categories on the ground that 381 the Tribunal completely overlooked the wages prevalent for these categories in concerns which it had considered comparable.
Court observed "but the way in which the Tribunal has dealt with the matter shows that it paid scant regard to the exemplars.
filed before it and did not care to make the comparison for factory.
workmen in the same way in which it had made comparison for clerical and subordinate staff.
In this circumstances wagescales fixed for factory workmen must be set aside and the matter remanded to the Tribunal to fix wage scales for factory workmen dividing them into six categories as at present and then fixing wage after taking into account wages prevalent in comparable concerns.
The parties will be at liberty to lead further ' evidence in this connection".
It is clear from this judgment that the subordinates and factory workmen were, treated separately and we cannot accept the contention of the learned Advocate for he Appellant that in dismissing the appeal this Court had rejected the contentions of the Respondents relating to the Supervisors who according to it were included in the category of subordinate: staff.
Earlier the Sawarkar Award had after noticing that there are 3 sub divisions in the category of Supervisors laid down the scales which were higher having regard to its desire to prescribe the same scales for the three sub divisions as those for skilled sub division 1.
It is also apparent from the statements ' filed that the Foremen or Supervisors were divided into 3 categories according to their pay scales.
The pay of the Grade I was Rs. 360 20 500, of Grade Rs. 300 15 360 and of Grade III Rs.
250 10 300.
The Appellants themselves referred to these Supervisors as Foreman.
Work men under Section 2 (s) (iv) of the Act means any person (including an apprentice) employed in any industry to do any skilled or unskilled manual supervisory or technical work, "but does not include any such person who being employed in a supervisory capacity, draws wages exceeding Rs. 500/ per mensem or exercise either by the nature of the duties attached to the office or by reasons of the powers vested in him, functions mainly of a managerial nature".
This Court in remanding the case of the factory workmen had under contemplation all those workmen who on the date of the reference were employed in a Supervisory capacity and drawing less than Rs. 500/ as these were included in six categories of workmen as classified by the Tribunal.
We do not think there is anything in the remand order to warrant the submission that the case of Supervisors was included among the category of subordinate staff or that it was not remanded.
After the remand the Tribunal was justified in holding that this Court had set aside 'the Award of the previous Tribunal in respect of all those workers who could not be properly classified as office staff in which the Foremen or Supervisors could not be Am L 1340 Sup CI/71 382 included.
It is also not the case of the Appellants that workers who were working in a Supervisory capacity were classified as ,office staff.
In our view it was open to both the parties to raise all the contentions that were open to them because on remand the wage structure of the factory workers including basic wage and their dearness allowance had to be considered afresh.
This conclusion is supported by the fact that parties were given liberty to adduce further evidence in respect thereto.
A reference to para 15 and 16 of the Award to which special leave is confined makes it clear that both parties were proceeding on the basis that the Tribunal has jurisdiction to deal with those supervisors who under the Act are workmen.
The only controversy was whether the Tribunal could fix a wage scale, for them which will ultimately give them a total wage together with basic pay and dearness allowance of over Rs. 500/ p.m. or fix scale which has an initial starting salary with dearness allowance in excess of Rs. 500/ p.m. which makes them non workmen and thus deprive it of jurisdiction to deal with the dispute.
It may be of interest to notice the arguments addressed before the Tribunal on behalf of the parties.
The contention by the Companies was that though the Supervisors may be in the category of workmen at the time of the reference the Tribunal would have no jurisdiction to revise their wages and grant to them at any stage, a total emoluments exceeding Rs. 500/as that would convert them into non workmen.
On the other band on behalf of the employees the submission was that the Companies had not raised this question in appeal before the Supreme ,Court and in any case it was 'not open to them to contend that the 'Tribunal had no jurisdiction to revise the wage scales of this class as Shri Athalye in ' his order of 14 7 64 had on a consideration of the Judgment of this Court held that the question of revision of the wages and dearness allowance of the Supervisors class was to be considered by that Tribunal.
In our view therefore, the ,dispute relating to the Supervisors wage structure and dearness allowance could, certainly on the plea of both employers and employees, be determined by the Tribunal.
The only question that could be raised and has been raised was whether the Tribunal has jurisdiction to fix wage scales to go beyond Rs. 500/ and whether as a matter of fact there were any workmen at the time of the dispute who were working in a supervisory capacity drawing a wage not exceeding Rs. 500/ .
The Tribunal noted that Shri Phadke for the Companies did not urge that the persons for whom revision was sought are engaged in managerial functions or at the time the dispute arose were all non workmen so is to dis,entitle them to raise the dispute and to exclude the jurisdiction of the Tribunal altogether.
If it were so, the Tribunal observed, the question must be deemed to have been impliedly concluded by the decision of the Supreme Court and the interpretation put 383 there were persons employed in a Supervisory capacity drawing a wage not exceeding Rs. 500/ and who as workmen within the amended definition of that expression were interested in demanding scales which take them beyond Rs. 500/ .
But it was contended by the Companies that even if the employees are entitled to raise the demand the Tribunal would have no jurisdiction to grant it in a manner so as to convert them into non workmen.
On these contentions the Tribunal held that although 'the Supervisors drawing a wage not exceeding Rs. 500/ may be entitled to raise the demand and ask for a scale which would take them beyond Rs. 500/ they would not be justified in making a claim for a scale which at the very commencement would provide them with a wage in excess of Rs. 500/ .
A claim for Rs. 300/as basic wage for the last grade of Supervisors together with a claim for dearness allowance would come to an amount in excess of Rs. 500/ and thus convert the Supervisors into non workmen even at the very commencement.
Such a claim, the Tribunal thought would obviously not be tenable because although it may be permissible on the grounds of social justice to revise the wage scale which may be justified by the circumstances in the case it will not be permissible for the Tirbunal to fix it so as to convert a workman into a non workman.
This leads us to the consideration of the third and the fourth point urged before us namely whether the Supervisors getting less than Rs. 500/ per month on the crucial date which is the date of reference can raise the dispute for wages taking them beyond Rs. 500/ and whether workmen can raise a dispute about non workmen.
In our view the Tribunal has jurisdiction to consider revision of wage scale, dearness allowance and other emoluments so long as there is a category of workmen who are employed in a supervisory capacity and drawing less than Rs. 500/ .
Even where the workman in a supervisory capacity ask for a pay structure which takes them beyoned Rs. 500 that by itself does not preclude its jurisdiction to determine what is the proper wage structure, for that class or category of workmen.
The view of the Tribunal was that though it is possible for Supervisors who are workmen on the date of the reference to demand a wage scale beyond Rs. 500/ they would not be justified in making a claim for a scale which at the very commencement would give them a wage in excess of Rs. 500/ so as to take them out of the category of workmen and make them non workmen.
The learned Advocate for the Appellant submits that merely because a claim is made by the Supervisors for an initial wage in excess of Rs. 500/it does not imply that it will be granted or merely for that reason deprive the Tribunal of its jurisdiction to pass an Award in respect of a wage which it considers to be fair and proper.
There 384 is no gain saying the fact that once a Tribunal is vested with the, jurisdiction to entertain the dispute which is validly .
referred, it does not cease to continue that jurisdiction merely because the claim made goes beyond the wage which takes workmen out of that category and make them non workmen.
What has to be seen is whether on the date of the reference there was any dispute in respect of the workmen which could be referred under the Act to the Tribunal.
In any case can workmen raise a dispute about non workmen even if many or all of them have since the reference become non working ? In All India Reserve Bank of India Employees Association vs Reserve Bank of India,(1) this Court had occasion to consider these aspects.
In that case Class 11 and Class III staff of the Reserve Bank of India through their Association and Class IV staff through their Union raised an industrial dispute which was referred 'by the Central Govt.
to the Tribunal.
One of the items referred concerned scales of pay, allowances and sundry matters connected with the conditions of service of the three classes, the most important ones being the demand of Class 11 staff claiming a scale commencing with Rs. 500/ .
The Tribunal held that the Class II staff worked in a Supervisory capacity and this demand for a minimum salary of Rs. 500/ , if conceded, would take the said staff out of the category of 'workman ' as defined in Sec.
2(s) of the Act.
Such an Award, and any Award, carrying wages beyond Rs. 500/ at any stage, was according to the Tribunal beyond its jurisdiction to make.
It also held that other workmen could not raise a dispute which would involve consideration of matters in relation to non workmen and that it would be even beyond the jurisdiction of the Central Govt.
to refer such a dispute under the Act.
The Tribunal therefore made no Award in regard to the Supervisory staff in Class IT.
This Court held that the Tribunal was not justified in holding that if at a future time an incumbent would draw wags in the time scale in excess of Rs. 500/ , the matter must be taken to be withdrawn from the jurisdiction of the Central Govt.
to make a reference in respect of him and the Tribunal to be ousted of the jurisdiction to decide the dispute, if referred Supervisory staff drawing less than Rs. 5001 per month cannot be debarred from claiming that they should draw more than Rs. 500/presently or at some future stage in their service.
They can only be deprived of the benefits, if they are non workmen at the time they seek the protection of the Act.
It was further held that in Sec. 2 (k) of the Act the word person has not been limited to 'workmen ' and must therefore receive a more general (1) ; 3 8 5 meaning.
But it does not mean any person unconnected with the disputants in relation to whom the dispute is not of the kind described.
It could not have been intended that although the dispute does not concern them in the least, workmen are entitled to fight it out on behalf of non workmen.
But if the dispute is regarding employment, non employment, terms of employment, or conditions of labour of non workmen in which workmen are themselves vitally interested the workmen may be able to raise an industrial dispute.
Workmen can for example raise a dispute that a class of employees not within the definition of 'workmen ' should be recruited by promotion from workmen.
When they do so the workmen raise a dispute about the terms of their own employment though incidentally the terms of employment of those who are not workmen is involved.
But workmen cannot take up a dispute in respect of a class of employees who are not workmen and in whose terms of employment those workmen have no direct interest of their own.
What direct interest suffices is a question of fact but it must be a real and positive interest.and not fanciful or remote.
Hidayatullah, J, as he then was, speaking for this Court concluded at page 45 thus : "It follows therefore that the National Tribunal was in error in considering the claim of class 2 employees whether at the instance of members drawing less than Rs. 500/ as wages or at the instance of those lower down in the scale of employment.
The National Tribunal was also in error in thinking that scales of wages in excess of Rs. 500 per month at any stage were not within the jurisdiction of the Tribunal or that Govt.
could not make a reference in such a contingency.
We would have been required to consider the scales applicable to those in Class 11 but for the fact that the Reserve Bank has fixed scales which are admitted to be quite generous".
The case of Workmen of Dimakuchi Tea Estate vs Management Dimakuchi Tea Estate, (q) was referred to with approval.
There the majority section R. Dass, C.J, section K. Das, J. (A. K. Sarkar J, dissenting) had held that the workmen cannot raise a dispute in respect of a non workman one Dr. K. P. Banerjee whose services were terminated by the management by paying him one month salary in lieu of notice.
It was contended that Dr. Banerjee being not a workman his case is not one of an industrial dispute under the Act and is therefore beyond the jurisdiction of the Tribunal to give any relief to him.
The matter had been referred to a Board known as 'the Tripartite (1) ; 386 Appellate Board which recommended that Dr. Banerjee should be reinstated from the date of his discharge.
Later the Govt.
of Assam referred the dispute for adjudication to a Tribunal constituted under Sec. 6 of the Act.
The Tribunal held that it had no jurisdiction to give any relief to him.
The Appeal to the Labour Appellate Tribunal of India, Calcutta was also dismissed.
Special Leave was granted, but was limited to the question whether the dispute in relation to a person who is not a workman falls within the scope of an industrial dispute under Sec.
2(k) of the Act.
The majority held that where the workmen raise a dispute as against their employer the "person regarding whom the dispute is raised must be one in whose employment, non employment, terms of employment or conditions of labour (as the case may be) the parties to the dispute have a direct or substantial interest. .
Where the workmen raise a dispute as against their employer the personregardin g whose employment, non employment, terms ofemployment or conditions of labour the dispute israisedneed not be, strictly speaking, a 'workman ' within the meaning of the Act, but must be one in whose employment, non employment, terms of employment or conditions of labour the workmen as a class have a direct or substantial interest".
Applying these principles the majority came to the conclusion that Dr. Banerjee who belonged to the Medical or Technical staff was not a workman and the Appellants had neither direct nor substantial interest in his employment or non employment and even assuming that he was a member of the same trade Union it cannot be said on the test laid down that the dispute regarding his termination of service was an industrial dispute within the meaning of Sec. 2(k) of the Act.
section K. Das, J, who delivered the judgment of the majority in the above case also spoke for the Court in Workmen vs Dahingeapara Tea Estate.(1) In the Dahingeapara case on the sale of the Tea Estate as a going concern the purchaser continued to employ the labour and some members of the staff of the vendor.
The question was whether the dispute raised by such workmen regarding the employment of the rest of the members of the old staff was an industrial dispute.
It was held that it was.
The reference was against the outgoing management as I well as against the incoming management of the Tea Estate.
It may be noticed that under the agreement of sale an option was given to the purchaser to continue in employment, the members of (1) A.I.R. 1968 S.C. 1026.
387 the staff.
it also made the vendor liable for the claims by the members of the staff not so retained in service by the purchaser.
In these circumstances it was held that as between the vendor and the discharged workmen the latter came within the definition of the workmen as they were discharged during the pendency of conciliation proceedings.
This fact however, did not make them workmen of the purchaser.
Even then they were persons in whose employment or non employment the actual workmen of the Dahingeapara Tea Estate were directly interested.
The ratio of the Western India Automobile Association vs Industrial Tribunal, Bombay,(1) as, also of the later decision in Workmen of Dimakunchi Tea Estate vs Management ( 2 ) was made applicable and the dispute was held to be clearly an in dustrial dispute within the meaning of the Act.
A reference is made to the Standard Vacuum Refining Company of India Ltd., vs Its workmen & Anr., (3) where the question relating to the dispute arising out of the demand for the abolition of the contract system of employing labour for cleaning and maintenance work at the refinery including the premises and plant belonging to it and for absorbing the workmen employed through the contractors into the regular service of the Company was considered.
The Company objected to the reference on the ground that : ( 1 ) it was incompetent inasmuch as there was no dispute between it and the Res pondents, and it was not open to them ,to raise a dispute with respect to the workmen of some other employer namely the contractor; and (2) in any case it was for the Company to decide what was the best method of carrying on its business and the Tribunal could not interfere with function of the management.
The Tribunal held that the reference was competent and that the claim was justified.
Following the Dimakuchi case this Court held that the dispute in the present case was an industrial dispute because (1) the Respondents had a community of interests with the workmen of the contractor; (2) they had also a substantial interest in the subject matter of the dispute in the sense that the class to which they belonged, namely workmen, was substantially affected thereby, and (3) the Company could give relief in the matter.
The conclusion of the Tribunal that the contract system should be abolished was held to be just in the circumstances of the case and should not be interfered with.
It would therefore appear that the consistent view of this Court is that non workmen as well as Workmen can raise a dispute in respect of matters affecting their employment, conditions of service etc., where they have a community of interests, provided they are direct and are not remote.
As stated in the (1) ; (2) A. I. R. 388 Reserve Bank of India 's case(1) "But workmen cannot take up a dispute in respect of a class of employees who are not workmen and in whose terms of employment, those workmen have no direct interest of their own".
At any rate as long as there are persons in the category of workmen in respect of whom a dispute has been referred it cannot be said that the Tribunal has no jurisdiction notwithstanding the fact that some or many of them may become non workmen during the pendency of the dispute.
In these circumstances the Tribunal in our view was wrong in holding that the dispute regarding Supervisors was not maintainable merely because a demand was made for a higher wage scale, which would take them out of the category of workmen.
The Tribunal has jurisdiction to decide these matters because on the crucial date the supervisors were workmen and merely because of the demand the Tribunal does not lose its jurisdiction to prescribe the pay scales and the dearness allowance either by reason :of the fact that the maximum will go beyond Rs. 500/ or that even the initial pay demanded will be more than Rs. 500/ .
Provided that at the time of adjudication there are some at least in the category who are workmen.
But the question is if there are none at all and all of them have become, non workmen either during the pendency or at the time of adjudication, does the dispute survive ? In other words does the dispute remain a dispute between employers and workmen within the meaning of Section 2 (k) of the Act? These questions arise out of the fifth contention urged before us by the learned Advocate for the Respondents namely whether in fact there are now any supervisors working in any of the Companies because as the learned Advocate for the Respondent contends, if, they are none and they are all non workmen, the dispute lapses and at any rate the fixation of a wage scale for non existing workmen would be an exercise in futility.
The learned Advocate for the Appellant contests this proposition on the ground that even if there are no supervisor workmen working in the Companies, the matter should be considered by the Tribunal inasmuch as any pay scale prescribed by it would have retrospective operation as from the 1st of April 59 which what this Court had directed while remanding the case back to the Tribunal in Civil Appeals Nos.
272 280 of 1962.
For this reason it is said that those workmen who have since gone out of the category of workmen ,or have retired or resigned would be entitled to the benefit of the pay structure and could recover arrears.
In the Reserve Bank case(") a similar situation had to be considered.
The reference to the National Tribunal was in 1960 and by the time the matter came to be decided all of them were getting wages in (1)[1966] 1 S.C. 25. 3 8 9 excess of Rs. 500/ per month and were non workmen.
It was held at page 46 "In view of the fact that all of them now receive at the start 'wages ' in excess of Rs. 500/ per month, there is really no issue left concerning them,, once we have held that they are working in a supervisory capacity.
" In the result the Appeal was dismissed with the observation that it would have partly succeeded but for the creation of new scales of pay for Class II employees and acceptance of some of the minor points by the Reserve Bank.
It is however, contended by the learned Advocate for the Appellant that in that case Mr. Chari had acknowledged at page 37 that the scales of pay which were awarded were as generous as the present circumstances of our country permit.
In view of this admission it is said that this Court made no order and therefore that should not be taken into consideration in deciding whether the matter should be remended to the Tribunal for fixing pay scales of the Supervisors.
The learned Advocate however ignored the observation immediately preceding the admission made by Mr. Chari.
It was observed at page 37 "but more than this the minimum total emoluments as envisaged by the definition of wages, even at the commencement of service of each and every member of Class II staff on January 1, 1962 now exceed Rs. 500/ p.m.
This of course was done with a view to withdrawing the whole class from the ambit of the reference, because it is supposed, no member of the class can now come within the definition of 'workman '.
We shall, of course, decide the question whether the resolution has that effect.
If it does, it certainly relieves us of the task of considering scales of pay for these employees for no remit is now possible as no National Tribunal is sitting.
The scales have been accepted as generous, the dispute regarding scales of pay for Class II employees under the reference, really ceases to be a live issue".
The decision, therefore, must be understood in the light of the above observations.
The reason for this conclusion is that if there are no workmen of the category with respect to whom a dispute has been referred the Tribunal cannot be called upon to prescribe a wage structure for non existing workmen, nor does it have the jurisdiction to do so.
The dispute in this sense must be deemed to have lapsed.
The question therefore to be determined in this case is whether as a matter of fact there are any workmen now working in a Supervisory capacity who are drawing more than Rs. 500/ , so that it would be futile for us to direct the Tribunal to fix scales of Day and dearness allowance in respect of a category of employees who are no longer workmen and with respect 3 90 to whom the reference can be said to have been withdrawn as in the case of the Reserve Bank of India.
In 'Support of this contention that there are in fact no supervisors at present who can be termed workmen in the two Companies the learned Advocate for the Respondents asked for permission to file an affidavit which permission we gave with liberty to the Appellant to file a counter.
Accordingly the Appellant, has filed a counter and the Respondents have submitted their rejoinders.
In paragraph 3 of the affidavit filed on behalf of the Respondents it is stated that the Second Respondent Company namely Greaves Cotton & Crompton Parkinson Pvt.
Ltd. (Crompton Greaves Ltd).
, employed 15 employees in the Supervisory cadre as shown in the statement filed in pursuance of the Tribunals order dated 15 1 64 but as on the date of the affidavit only four persons remained in the Supervisory cadre Grade 11.
There are no person employed in other Supervisory grade.
It was.also pointed out that all these 4 employees were in the Supervisory Grade II and drawing a total salary as on July 1971 exceeding Rs. 500/ a month.
In the annexure to the affidavit the reason given was that eachone of the Supervisors at the time when the statement was filedin January 1964 had ceased to be a Super visor.
Out of the15 persons, whose names were given, four resigned.
2 retired, one died two retrenched and two were, promoted as Technical Assistants.
The remaining four of them are all drawing per month a salary of Rs. 545/50 as Grade II Supervisors.
These are S/Shri Deshmukh, Gurbax Singh Kaslay and Pastakia.
In so far as Greaves Cotton & Co. Ltd., is concerned, it was urged that even on 1 1 64 as per exhibit RC. 2 the only three Supervisors who had been working with them were drawing a salary in excess of Rs. 500/ which will take them out of the category of workmen.
These are G. G. Naik, section section Kulkarni, M. D. Gupte, who were on that date drawing a total salary of Rs. 505/ ; Rs. 581/73, and Rs. 545/58 respectively.
This statement was again reiterated in the rejoinder, where it was stated that these were promoted in 1965, the latter two as Assistant Engineers and the former as Superintendent Cone & tube plant.
The counter affidavit by the Appellant sworn to by the General Secretary of the Greaves Cotton & allied Companies Union apart from containing averments which are not germanium to the matter in issue does not traverse the specific statement in respect of each one of the Super visors nor does it say that any of them were still supervisors drawing a salary of less than Rs. 500/ .
It was because of the submission of the learned Advocate on instructions that there are still some Supervisors 3 91 employed by the Respondents who are workmen within the meaning of Sec. 2 (s) of the Act, we had asked him to file a counter giving the name of the person or, persons who are still working in that capacity and their total emoluments; but we find from the counter except for a bare denial no specific averment as aforesaid has been made nor does the counter states categorically who are the persons who are now working as Supervisors and drawing less than Rs. 500/ .
With the counter were annexed two statements Annexure 'A ' & Annexure 'B ', the former showing supervisors working in Greaves Cotton & Crompton Parkinson Ltd., as on 30 5 59 with wage drawn by them on that date, the latter is the statement showing list of Supervisors working in the said Company as on 1st October '65 and the wage drawn by them for the month of September, 1965.
Merely to state that there were Supervisors on 8 4 59 the day on which the Govt.
of Maharashtra made the reference or in 1964 or 1965 or to say that even today there are Supervisors working in that Com pany or that the Industrial Tribunal went into the question and gave its finding against the Company holding that there were Departmental Foremen in the Factories of Greaves Cotton & Co. Ltd., does not advance the case any further than what it was when we permitted the Respondents to file the affidavit.
We cannot therefore accept a mere denial in respect of the crucial point whether today there are Supervisors working in the Respondent Companies who are drawing a basic wage together with dearness allowance of less than Rs. 5001/ as stated in the affidavit and again reiterated in the rejoinder.
The entire argument of the Respondents that any decision given by this Court would be otiose is based upon the existence or non existence of the said fact.
In view of the omission to state specifically in the counter the names of the persons who as of now are still working as Supervisors and drawing less than Rs. 500/ we cannot but hold that the averments made by the Respondents that there are no employees who are working at present in a supervisory capacity and who can be said to be workmen, have been substantiated.
If so, for the reasons given the issue lapses, as such these appeals will be dismissed but in the circumstances without costs.
| IN-Abs | This Court, in appeal against the award of the Industrial Tribunal in disputes between the appellants and the respondents, confirmed the wage scale and dearness allowance fixed by the Industrial Tribnual for the clerical and subordinate staff, but set aside the wage scale and dearness allowance fixed for factory workmen and remanded the matter to the Tribunal for fresh fixation.
When the matter was taken up by the Tribunal the workmen contended that the dispute regarding foremen or supervisors was, concluded by the judgment of this Court on the ground that they were included in subordinate staff.
The Tribunal, however, held that the supervisors were not workmen within the meaning of the , and hence the claim for revision of wages and dearness allowance payable to them should be rejected.
In appeal by special leave to this Court, on the questions : (1) Whether the case of supervisors was remanded to the Tribunal for adjudication; (2) whether it was open to the respondents to contend for the first time after remand that the Tribunal had no jurisdiction to fix the wage scale and dearness allowance of supervisors; (3) Whether supervisors getting less than Rs. 500/ per mensem on the date of reference could raise the dispute regarding wages which would take their 'salary beyond Rs. 500 per mensem; (4) Whether, if the supervisors were all non workmen, the appellants could raise a dispute about their terms of employment, and (5) whether in fact none of the supervisors was drawing less than ' Rs. 500 per mensem when the matter was taken up on remand and the Tribunal was, therefore, right in rejecting the appellant 's claim for fixation of the wage scale and dearness allowance of supervisors.
HELD : (1) The judgment of this Court shows that the subordinate staff and factory workmen were treated separately.
This Court in remanding the case of the factory workmen had under contemplation all those workmen, who on the date of reference, were employed in a supervisory capacity and drawing less than Rs. 500.
There is nothing in the remand order to warrant the submission that the case of supervisors was included in the category of subordinate staff, or, that it was not remanded.
[381 C D, F H] (2) It was open to both parties to raise all the contentions that were open to them, because, on remand the wage structure of the factory workers, including basic wage and dearness allowance, had to be considered afresh.
A reference to paragraphs 15 and 16 of the award, to which the special leave was confined, showed that both parties were proceeding on the basis that the Tribunal had jurisdiction to deal with those supervisors who, under the Act, were workmen.
[382 A C] (3) The Tribunal bad jurisdiction to consider revision of wages, dearness allowance and other emoluments so long as there is a category of 374 workmen who though employed in a supervisory capacity, were drawing less than Rs. 500/ .
Even if they ask for a pay structure which takes their salary beyond Rs. 500/ that by itself does not preclude the jurisdiction of the Tribunal to determine what is the proper wage structure for that class or category of workmen.
Once a Tribunal is vested with the jurisdiction to entertain the dispute it does not cease to have that jurisdiction merely because the claim made goes beyond the wages which takes workmen out of that category and makes them non workmen.
What has to be seen is whether on date of reference there was any dispute in respect of workmen which could be referred under the Act to the Tribunal.
Therefore, supervisory staff drawing less than Rs. 500/ per mensem cannot be debarred from claiming that they should draw more than Rs. 500/presently that is, at the very commencement of inquiry or at Some future stage in their service.
They can only be deprived of the benefits if they are non workmen at the time they seek the protection of the Act.
[383 F H; 384 A C G H] (4) Workmen can raise a dispute in respect of matters affecting the employment, conditions of service etc.
of workmen as well as non workmen, when they have a community of interest.
Such interest must be real and positive and not merely fanciful or remote.
But workmen cannot take up a dispute in respect of a class of employees who are not workmen and in whose terms of employment the workmen have no direct interest of their own.
, What interest suffices as direct is a question of fact; but as long as there are persons in the category of workmen in respect of whom a dispute has been referred it cannot be said that the Tribunal has no jurisdiction, notwithstanding the fact that some or many of them may become non workmen during the pendency of the dispute.
[385 A D; 387 H; 388 A B] All India Reserve Bank of India Employees Association v, Reserve Bank of India; , , Workmen of Dimakuchi Tea Estate vs Management of Dimakuchi Tea Estate, ; , Workmen vs Dahingeapara Tea Estate, A.I.R. 1968 S.C. 1026, Western India Automobile Association vs Industrial Tribunal, Bombay, and Standard Vacuum Refining Company India vs Its Workmen, ; , followed.
(5) In the present case, however, on the evidence, it must be held that when the matter was taken up on remand there were no supervisors drawing less than Rs. 500/ per mensem and hence, there were no employees who were working in a supervisory capacity who can be said to be workmen.
If there are no workmen of the category with respect to whom a dispute ,has been referred, the Tribunal cannot be called upon to prescribe a wage structure for non existing workmen nor does it have jurisdiction to do so.
The dispute with respect to them, must be deemed to have elapsed.
[388 C F; 389 G H]
|
Appeal No. 202 of 1952.
Appeal from the Judgment and Decree dated the 5th day of March, 1951 of the High Court of Judicature at Calcutta in Appeal from Original Decree No. 87 of 1949 arising out of the decree dated the 20th day of January, 1949 in Suit No. 94 of 1946 of the Court of 3rd Additional District Judge at 24 Parganas.
M.C. Setalvad, Attorney General for India, (Sukumar Ghose, with him), for the appellant.
Bankam Chandra Bannerjee and R. R. Biswas, for respondent No. 1. 1954.
December 2.
This appeal arises out of an application filed by the first respondent for probate of a will dated 28 11 1943 executed by one Bhabesh Charan Das Gupta.
The testator died on 27 10 1944 leaving him surviving two sons, Paresh Charan Das (the first respondent), Naresh Charan Das 1037 (the appellant), and a daughter, Indira (the second respondent.
The estate consisted of a sixth share in some ancestral lands at Matta in the District of Dacca, and a house No. 50, South End Park, Calcutta, built by the testator on a site purchased by him.
By his will) he directed that a legacy of Rs. 10 per mensem should be paid to his younger son, the appellant, for the period of his life; that his daughter should be entitled to a life estate in five specified rooms in the house to be enjoyed either personally by her and the members of the family, or by leasing them to others; that a legacy of Rs. 10 per mensem should be paid to one or the other of two hospitals named, and that subject to the legacies aforesaid, the first respondent should take the estate, perform the sraddha, and pay one sixth of the expenses for the worship of the deity installed in the ancestral house.
The first respondent who was the sole executor under the will, applied in due course for probate thereof.
The appellant entered caveat, and thereupon, the application was registered as a suit.
He then filed a written statement, and on that, the following issues were framed: (1)"Was the Will in question lawfully and validly executed and attested? (2)Had the testator testamentary capacity at the time of the execution of the Will? (3)Was the Will in question executed under undue influence and pressure exerted by Paresh Charan Das Gupta?" The Additional District Judge of the 24 Parganas who tried the suit held in favour of the first respondent on issues 1 and 2, but against him on issue 3, and in the result, probate was refused.
The first respondent took the matter in appeal to the High Court, and that was heard by G. N. Das and section C. Lahiri, JJ.
Before them, the appellant did not contest the correctness of the finding of the Additional District Judge that the testator had testamentary capacity when he executed the will.
The two contentions that were pressed by him were (1) that the will in question was executed by the testator 1038 under undue influence of the first respondent, and (2) that it was not validly attested, and was therefore invalid.
On both the questions, the learned Judges held in favour of the first respondent, and accordingly allowed the appeal, and directed the grant of probate.
Against this judgment, the caveator prefers this appeal, and contends that the findings of the Court below on both the points are erroneous.
The main question that arises for our decision is whether the will in question was executed under the undue influence of the first respondent.
"When once it has been proved", observed Lord Cranworth in Boyse vs Rossborough(1) "that a will has been executed with due solemnities by a person of competent understanding and apparently a free agent, the burden of proving that it was executed under undue influence is on the party who alleges it".
Vide also Craig vs Lamoureux(2).
In the present case, it is not in dispute that the testator executed the will in question, and that he had the requisite mental capacity at that time.
The burden, therefore, is on the appellant to establish that the will was the result of undue influence brought to bear on him by the first respondent.
The facts so far as they are material for this issue, may now be stated, The testator was a police officer and retired in 1927 as Deputy Superintendent of Police.
Paresh Charan, the elder son, was married in 1925, and lived all along with his parents with his wife and children.
Nirmala, the wife of the testator, died in 1929, and thereafter it was the wife of Paresh Charan that was maintaining the home.
Naresh Charan studied up to I.A., but in 1920 discontinued his studies and got into employment in the workshop of Tata & Co., at Jamshedpur on a petty salary; and the evidence is that thereafter he was practically living apart from the family.
In 1928 he married one Shantimayi, who was a widow having some children by her first husband.
She belonged to the Kayastha caste, whereas Naresh Charan belonged to the Baid caste.
The testator was strongly opposed to this (1) [1857] 6 H.L.O. 2: ; (2) 1039 intercaste marriage, and did his best to stop it but without success.
The correspondence that followed between the appellant and his father during this period clearly shows that the father felt very sore over this alliance, and wrote that it could not pain him even if his son died.
With this background, we may turn to the will.
The relevant recitals therein are as follows: "My younger son Sri Naresh Charan Das Gupta is behaving badly with me and without ray knowledge and consent be has married a girl of a different caste and she has given birth to two female children and one male child.
In these circumstances my said son Sri Naresh Charan Das Gupta and his son Sreeman Arun Gupta and the two daughters or any other son or daughter who may be born to him, will not be entitled to perform my sradh or to offer me Pindas.
For all these reasons I deprive my second son Sri Naresh Charan and his son Sreeman Arun Gupta and his two daughters and any other sons or daughters who may be born to him as well as Naresh 's wife Sreemati Santi of inheritance from me and from all my movable and immovable properties, ancestral as well as self acquired.
They shall not get any share or interest or possession in any of my aforesaid properties".
It is not disputed that these recitals accord with what the testator had expressed in the correspondence at the time of the marriage and for some years thereafter.
But it is argued that since then, more than a decade had passed before the will was executed, and that during this period the natural affection of the testator for his son had re asserted itself, that he had forgiven and forgotten the past, and that when the will was actually executed, the recitals above extracted did not correctly reflect the then mind of the testator.
We have been taken through the entire correspondence that passed between the testator and the appellant and the members of his family.
It shows that the testator was solicitous about the welfare of the appellant, and was enquiring about his health and 1040 sending him on occasions medicines; that he was affectionately disposed towards his children and was sending them presents of cloth; that latterly he had so far modified his attitude towards the wife of the appellant as to invite her and her children to Calcutta; that he himself stayed with them for some time at Jamshedpur and was giving advice to the appellant on matters connected with his employment.
It was argued that there was thus a gradual change of heart on the part of the father towards the appellant and the members of his family, that.
the recitals in the will could not be reconciled with this change of attitude, and that they must have been inspired by the first respondent.
We are unable to agree.
It is one thing for a father who feels that he has been wronged by a disobedient son to wish him well in life, and quite another thing to give him any of his properties.
In the whole of the correspondence which has been read to us, there is nothing to suggest that he wanted the appellant to share in the estate.
On the other hand, there are indications that even when the appellant was in financial difficulties, the testator considered that he was under no sort of obligation to come to his help.
Vide Exs.
5(c) and C(1).
It may be mentioned that after making the will on 28 11 1943 the testator continued to correspond with the appellant and the members of his family precisely in the same terms as before.
Vide Exs.
B(2), C(4) and A(10).
That shows that the two currents of natural affection and settlement of properties flowed in distinct channels,, and that the change in the course of the one had no effect on the direction of the other.
The testator, it is clear from the correspondence, was a man of strong will, determined and unshakable in his resolutions.
He wrote of himself in exhibit C(34) that "I am one third conservative, one third liberal and one third autocratic".
He was very solicitous about the family prestige and reputation, and felt deeply hurt when his son entered into a marriage which was viewed by his community with disfavour.
In exhibit 6(c) he wrote, "You broke our hearts for a woman who has no right to be in my house", And 1041 as late as 25 12 1941 he wrote to the appellant that if his wife and children came to live with him "they must prepare themselves to meet uncalled for taunts and unpleasant enquiries which may be made by our near and distant village relations in our society who will come to see us".
(Vide Exhibit C(37)).
There cannot, therefore, be any doubt that the testator was all along smarting under a sense of social humiliation by reason of the inter caste marriage, and that the recitals in the will were manifestations of a sore in his heart which had remained unhealed to the last.
It was also argued that the dispositions in the will were unnatural in that the appellant had been practically disinherited and his children altogether ignored.
This by itself cannot lead to any inference of undue influence on the part of the first respondent.
Having regard to the character of the testator and his feelings in the matter it is not a matter for surprise that he should have cut off the appellant with a small legacy.
It must also be mentioned that the net value of the assets as given in the probate petition is Rs. 23,865 10 9, and if the other legacies and charges are deducted, what was bequeathed to the first respondent cannot be said to be very considerable.
It also appears that at that time his salary was Rs. 60 per mensem and that he had a number of children, whereas the appellant is stated to have had a basic salary of Rs. 250 per mensem then.
The first respondent, his wife and children have all along been dependents of the testat or, whereas the appellant had lived apart from him from 1920.
And it is not unnatural for the testator so to order the distribution of his estate as to secure the continuance of the existing state of affairs.
The terms of the will, therefore, cannot be relied on as intrinsic evidence of undue influence, as contended for by the appellant.
Then there is the evidence of Indira, the daughter of the testator, which was taken on commission.
She deposed that the testator bad told her that there were troubles in the house, that the elder son had objection to stay with the younger one, "because if they live together, there will be social trouble regard 1042 ing his daughters marriage", and that he therefore wanted to make a will.
She went on to add.
that the father subsequently wanted to alter the will and sent for her repeatedly for discussions, but that she generally excused herself, because she did not like to intervene in the matter, and that on those occasions, he told her, "At present this will stand, but I want to modify it in future".
Indira also deposed that the first respondent and his wife used to tell the testator that there was no change in the conduct of the appellant, that he was extravagant in his habits and incurred debts, and that he had taken away some articles.
We do not consider that it is safe to act on this evidence.
It is clear from Exhibit I that Indira and her husband had taken sides with the appellant as against the first respondent, and wrote to him that in spite of the will the appellant "should have his share as early as possible in order to avoid further complication", though it may be noted that they insisted on their rights under the will.
Stripped of all its embellishments, the evidence of Indira, if true, comes only to this that the first respondent told his father that he could not live under the same roof with his brother, and that in view of that attitude, the testator gave no share to the appellant in the house.
We are unable to see any undue influence in this.
The first respondent was entitled to put forward his views in the matter, and so long as the ultimate decision lay with the testator and his mental capacity was unimpaired, there can be no question of undue influence.
It is elementary law that it is not every influence which is brought to bear on a testator that can be characterised as "undue".
It is open to a person to plead his case before the testator and to persuade him to make a disposition in his favour.
And if the testator retains his mental capacity, and there is no element of fraud or coercion it has often been observed that undue influence may in the last analysis be brought under one or the other of these two categories the will cannot be attacked on the ground of 1043 undue influence.
The law was thus stated by Lord Penzance in Hall vs Hall(1): "But all influences are not unlawful.
Persuasion, appeals to the affections or ties of kindred, to a sentiment of gratitude for past services, or pity for future destitution, or the like, these are all legitimate and may be fairly pressed on a testator.
On the other hand, pressure of whatever character, whether acting on the fears or the hopes, if so exerted as to overpower the volition without convincing the judgment, is a species of restraint under which no valid will can be made.
Importunity or threats, such as the testator has the courage to resist, moral command asserted and yielded to for the sake of peace and quiet, or of escaping from distress of mind or social discomfort, these, if carried to a degree in which the free play of the testator 's judgment, discretion, or wishes is overborne, will constitute undue influence, though no force is either used or threatened.
In a word, a testator may be led, but not driven; and his will must be the offspring of his own volition, and not the record of some one else 's".
Section 61 of the Indian Succession Act (Act XXXIX of 1925) enacts that, "A will or any part of a will, the making of which has been caused by fraud or coercion, or by such importunity as takes away the free agency of the testator, is void".
Illustration (vii) to the section is very instructive.
and is as follows: "A, being in such a state of health as to be capable of exercising his own judgment and volition B uses urgent intercession and persuasion with him to induce him to make a will of a certain purport.
A, in consequence of the intercession and persuasion but in the free exercise of his judgment and volition makes his will in the manner recommended by B. The will is not rendered invalid by the intercession and persuasion of B".
(1) (1868) L.R. 1 P. & D. 481 & 482.
134 1044 Even if we accept the evidence of Indira, the case would, on the facts, fall within this Illustration, It is not disputed that the testator was in full possession of his mental faculties.
There is no proof that the first respondent did or said anything which would have affected the free exercise by the testator of his volition.
On the other hand, it is proved that.
the first respondent had no act or part in the preparation, execution, or registration of the will.
It is a holograph will, and the evidence of P. Ws.
I and 2 is that it was the testator himself who made all the arrangements for its execution, and that it was actually executed at the residence of P.W. 1.
The document was presented for registration by the testator, and be kept it with himself, and it was taken Out of his cash box after his death.
He lived for nearly a year after the execution of the will, and even on the evidence of Indira, be was often thinking of it, and discussing it, but declared that it should stand.
The cumulative effect of the evidence is clearly to establish that the will represents the free volition of the testator, and that it is not the result of undue influence by the first respondent or his relations.
It should be mentioned that Indira herself sought to enforce her rights under the will shortly after the death of the testator, and that the appellant also obtained payment of legacy under the will for a period of 15 months.
No ground has been established for our differing from the High Court in its appreciation of the evidence, and we agree with its conclusion that the will is not open to question on the ground of undue influence.
It was also argued for the appellant that there was no proof that the will was duly attested as required by section 63 of the Indian Succession Act, and that it should therefore be held to be void.
I and 2 are the two attestors, and they stated in examination in chief that the testator signed the will in their presence, and that they attested his signature.
They did not add that they signed the will in the presence of the testator.
Now, the contention is that in the absence of such evidence it must be held that there was no due attestation.
Both the Courts below have 1045 held against the appellant on this contention.
The learned Judges of the High Court were of the opinion that as the execution and attestation took place at one sitting at the residence of P.W. 1, where the testator and the witnesses had assembled by appointment, they must all of them have been present until the matter was finished, and as the witnesses were not cross examined on the question of attestation, it could properly be inferred that there was due attestation.
It cannot be laid down as a matter of law that because the witnesses did not state in examination in chief that they signed the will in the presence of the testator, there was no due attestation.
It will depend on the circumstances elicited in evidence whether the attesting witnesses signed in the presence of the testator.
This is a pure question of fact depending on appreciation of evidence.
The finding of the Court below that the will was duly attested is based on a consideration of all the materials, and must be accepted.
Indeed, it is stated in the judgment of the Additional District Judge that "the fact of due execution and attestation of the will was not challenged on behalf of the caveator at the time of the hearing of the suit".
This contention of the appellant must also be rejected.
In the result, the decision of the High Court is confirmed, and this appeal is dismissed, but in the circumstances, without costs.
Appeal dismissed.
| IN-Abs | When once it has been proved that a will has been executed with due solemnities by a person of competent understanding and apparently a free agent, the burden of proving that it was executed under undue influence is on the person who alleges it.
It is well settled that it is not every influence which is brought to bear on a testator that can be characterised as "undue".
It is open to a person to plead his cause before the testator and to persuade him to make a disposition in his favour.
And if the testator 133 1036 retains his mental capacity and there is no element of fraud or coercion, the will cannot be attacked on the ground of undue influence.
All influences are not unlawful.
Persuasion, appeals to the affections or ties of mankind, to a sentiment of gratitude for past services or pity for future destitution, or the like, these are all legitimate and may be fairly pressed on a testator.
On the other hand pressure of whatever character, whether acting on the fears or the hopes, if so exerted as to overpower the volition without convincing the judgment, is a species of restraint under which no valid will can be made.
It cannot be laid down as a matter of law that because the attesting witnesses did not state in examination in chief that they signed the will in the presence of the testator, there was no due attestation as required by section 63 of the Indian Succession Act.
It is a pure question of fact depending on the appreciation of evidence and the circumstances of each case whether the attesting witnesses signed in the presence of the testator.
Boyse vs Rossborough ([1857] ; ; , Craig vs Lamoureux and Hall vs Hall ([1868] L.R. I P. & D. 481), referred to.
|
Appeals Nos. 1837 and 1838 of 1968.
369 Appeals from the judgment and order dated February 10, 1965 and July 17, 1967 of the Calcutta High Court in Income tax Reference Nos. 274 of 1961 and 114 of 1963 respectively.
D. Pal, R. K. Choudhry, N. R. Khaitan, Krishna Sen and B. P. Maheshwari, for the appellant (in both the appeals).
B. Sen, 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 Calcutta High Court arise out of Income Tax References in which the main point involved was whether the assessee company could be regarded as one in which the public are substantially interested within the meaning of the Explanation in section 23A of the Indian Income Tax Act,1922, hereinafter called the "Act".
The appeals relate to the assessment years 1952 53 and 1954 55.
The assessee is a public company incorporated under the Indian Companies Act, 1913.
Article 37 of its Articles of ' Association provided as follows "The Directors may at any time in their absolute and uncontrolled discretion and without assigning any reason decline to register any proposed transfer of shares.
" The Income Tax Officer held that the assessee was a company in which the public were not substantially interested within the meaning of the Explanation in section 23A of the Act.
Accordingly he applied the provisions of that section.
The assessee appealed to, the Appellate Assistant Commissioner.
The appeal relating to the assessment year 1952 53 was dismissed but with regard to the subsequent year it was alqowed.
The Appellate Tribunal upheld the contention that Article 37 of its Articles of Association did not operate as a bar to the free transferability of the shares and therefore it was a company in which the public were substantially interested within the meaning of the Explanation in section 23A of the Act.
Thereupon the Tribunal was moved by the Commissioner of Income tax for stating the case and referring the following question of law which was referred by it to the High Court in the case relating to the assessment year 1952 53 : "Whether on a true interpretation of Article 37 of the Articles of Association, the assessee Company can be regarded as one in which the public are substantially interested within the meaning of the third proviso to section 23A(1)".
3 7 0 A similar question was referred in the case relating to the assessment year 1954 55.
The High Court following a judgment of the same court in Commissioner of Income tax, West Bengal vs Tona Jute Co. Ltd.,(") answered the questions referred against the assessee and in favour of the Revenue.
In that case the Calcutta High Court had expressed the view that a public company whose Directors had absolute discretion to refuse to register the transfer of any share to any person whom it shall in their opinion be undesirable in the interest of the company to admit to membership and were not obliged to give any reason for refusal to register was not a company the shares of which were freely transferable to other members of the public, within the meaning of the Explanation in section 23A of the Act.
Section 23A of the Act confers power to assess companies to super tax on undistributed income in certain cases.
Sub section (9) inter alia provides that nothing contained in the section shall :apply to any company in which the public are substantially interested.
Explanation (1) which was so renumbered by section 7 of the Finance Act of 1957 to the extent it is material is as follows : "For the purposes of this section, a company shall be deemed to be a company in which the public are substantially interested." (a). . . . . (b) if it is not a private company as defined in the Indian Companies Act, 1913, (VII of 1913), and (i). . . . . . . (ii) the said shares were at any time during the previous year the subject of dealing in any recognised stock exchange in India or were freely transferable by the holder to other members of the public; and (iii). . . . .
The Calcutta High Court referred to the relevant provisions of the Indian Companies Act 1913 according to which unless the Article provided otherwise the shareholder had a free right to transfer his shares to whomsoever he liked.
But it was considered that where the Articles contained a power under which the Directors could decline to register any transfer of shares the Tight of free transfer was cut down by that Article and this affected the question of free transferability of the shares.
Moreover the (1) 371 transfer of shares was not complete until the registration of the name of the transferee and if such a registration could not be insisted on as a matter of right it could not be said that the shares were freely transferable.
The Madras High Court in East India Corporation Ltd. vs Commissioner of Income tax, Madras(1) and the Bombay High Court in Raghuvanshi Mills Ltd., vs Commissioner of Income tax, Bombay(1) took the contrary view and dissented from the opinion expressed in the Calcutta case that in the presence of an Article similar to Article 37 of the Articles of Association of the assessee the shares would not be freely transferable within the meaning of clause (ii) to Explanation 1 in section 23A (9) of the Act.
It may be mentioned that before its amendment, by the Finance Act 1955 the corresponding provision appeared in the Explanation in section 23A(1) after, the third proviso.
But instead of the word "were" the word "are" was employed.
The question, therefore, which has to be examined is whether the shares could be regarded as freely transferable to other members of the public, In our opinion the following observations in the East India Corporation case represent the correct view about the meaning of the word "transferable" : " "Transferable", ex facie, is not to be equated to "transferred".
The word imports a quality, a legal effect arising out of or inherent in the character and nature of the shares themselves.
This quality does not stand by itself, for the section says "are in fact freely transferable".
We have to give effect to each of these words, and if we did so, transferability is qualified by the fact which in the context, to out minds, means a factual tendency which is unrestricted and which ensures transferability.
In other words, we understand by the words "are in fact freely transferable" not that there should necessarily be actual transfers of shares; but a factual tendency towards free transfer of shares, subject, of course, to reasonable restrictions by holders to other members of the public." The Directors have certainly been given a discretion by Article 37 to decline to register any proposed transfer of shares but that does not mean that the shares cease to be transferable.
The said Article does not confer any uncontrolled or unrestricted discretion upon the Directors to refuse to register the transfer of shares in a given case.
In other words the Directors cannot act arbitrarily or capriciously.
It is well known that the power conferred by such an.
Article is of a fiduciary nature which has to be exercised by the (1) (2) 3 72 Directors in the best interests of the company for preventing any undesirable person becoming a member if that is likely to be prejudicial to the company.
It is a power which has to be reasonably exercised for protecting the interests of the company.
It cannot be assumed that the discretion conferred on the Directors will be abused for ulterior purposes.
The discretion which has been conferred for being exercised in the interest of the.company cannot take away the tendency of the free transferability of the shares in the absence of cogent material or other factors from which it can be inferred that the shares were not capable of being freely transferred.
Article 37 can by no stretch of reasoning be regarded by itself to be a restriction on the transfer of shares by one shareholder to another.
Free transferability of shares is a normal and common feature of limited companies.
Indeed there would hardly be any public company in the memorandum of articles of which an article similar to Article 37 will not be found.
This article appears even in the standard Articles of Association prescribed under the Companies Act itself.
The purposes, as has been noticed before, is only to give power to the Directors for declining to register the transfer of a share when the paramount interests of the company so require.
There may be cases where it can be shown that the Directors have been exercising that power very freely and have virtually eliminated the; element of free transferability.
In such cases it may be possible to hold that in fact the shares were not freely transferable.
But in the Pr sent case there is no evidence of the Directors having acted in the aforesaid manner nor is there any restriction in the other Articles of Association interfering with the free transfer of shares by one shareholder to another.
We are unable, therefore, to uphold the judgment of the Calcutta High Court that the mere existence of an article like Article 37 would affect the free trans ferability of the shares within the meaning of the Explanation.
In the result the appeals are allowed and the decision of the High Court is set aside.
The question referred in each case is answered in favour of the assessee and against the Revenue.
The assessee shall be entitled to one set of costs in this Court.
G.C. Appeal allowed.
| IN-Abs | The assessee was a public limited company.
, Under article 37 of its.
Articles of Association the Directors could at any time in their discretion and without assigning any reason decline to register any proposed transfer of shares.
The question in income tax proceedings relating to the assess ment years 1952 53 and 1954 55 was whether on a true interpretation of article 37 the assessee company could be regarded as one in which the public were substantially interested within the meaning of the third proviso to section 23A(1) of the Income tax Act, 1922.
In reference the High Court answered the question in favour of the revenue on the view that the shares of the company were not freely transferable and therefore it was not a company in which the public were substantially interested.
In the assessee 's appeal by special leave, HELD : Article 37 could not by any stretch of reasoning be regarded by itself to be a restriction on the transfer of shares by one shareholder to another.
Free transferability of shares is a normal and common feature ,of limited companies.
Indeed there would hardly be any public company in the memorandum of articles of which an article similar to article 37.
will not be found.
This article appears even in the standard Articles of Association prescribed under the Companies Act itself.
The purpose is ,only to give power to the Directors for declining to register the transfer of a share when the paramount interest of the company so require.
There may be cases where it can be shown that the Directors have been exercising the power very freely and have virtually eliminated the element of free transferability.
In such cases it may be possible to hold that in fact the shares were not freely transferable.
But in the present case there was no evidence of the Directors having acted in the aforesaid manner nor was there any restriction in the other Articles of Association interfering with the free transfer of shares by one shareholder to another.
, The High Court was therefore in error in holding that the mere existence of an article like article 37 would affect the free transferability of the shares within the meaning of the Explanation (1) to section 23A(9) of the Act.
[372 C F] East India Corporation Ltd. vs Commissioner of income tax, Mad? as, and Raghuvanshi Mills Ltd. vs Commissioner of Income tax, Bombay, , approved.
Commissioner of Income tax, West Bengal vs Tona litte Co. Ltd. 48 I.T.R. 902, disapproved.
|
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.
section V. Gupte, section J. Sarabjee, B. R. Agarwala and A. J. Rana,, for respondent No. 1.
Sharad Monohar and Urmila Sirur, for the interveners.
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 411 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, 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.
412 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 Corporation.
Before turning to the provisions of the Act and the Scheme for the determination of the issue before us, it may be necessary 413 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/71 414 rest or the Act is mostly concerned with the preparation of the Town Planning Schemes and section 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 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 section 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, 415 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 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 416 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 section 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 section
(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 the recovery of sums due to the local authority under the provisions of this Act.
" 417 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 418 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.
" 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, 419 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.
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 section (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 section 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 420 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 section
(1) of section 89 of the new Act.
Sub section
(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 vs 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) 421 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 vs 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) 422 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 : "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.
| IN-Abs | 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 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 section 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 section 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 section 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 section 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 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.
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 vs The Church Wardens of All Saints, Wigan, and Queen vs Garland, , referred to.
|
Appeals Nos.
and 1962 of 1968 and 1075 of 1971.
Appeals by certificate/special leave from the judgments and orders dated August 18, 1967 and May 7, 1970 of the Calcutta High Court in Matters Nos. 298 of 1963 and 69 of 1962.
section C. Manchanda, R. N. Sachthey, B. D. Sharma and section P. Nayar, for the appellant (in all that appeals).
B. Sen, N. R. Khaitan, B. P. Maheshwari and O. P. Khaitan, for the respondent (in all the appeals).
The Judgment of the Court was delivered by Hegde, J.
Civil Appeals Nos.
1691 1692 of 1968 are by certificate and Civil Appeal No. 1075 of 1971 is by special leave.
These appeals are brought by the Commissioner of Wealth Tax, West Bengal.
In all these appeals we are dealing with the case of the same assessee, namely Aluminum Corporation Ltd. The relevant assessment years are 1957 58, 1958 59 and 1959 60 and the material valuation dates are 31 3 1957, 31 3 1958 and 31 3 1959.
So far as the assessment of the assessee for the assessment year 1957 58 is concerned the matter had come up to this Court on an earlier occasion.
This Court remanded the case to the High Court to decide the case afresh, if necessary after reframing the first question in the light of the principles enunciated by this Court in the order of remand see Commissioner of Wealth Tax, West Bengal vs Aluminum Corporation Ltd.(1) The High Court after expressing doubts about the competence of this Court to remand the case brought to this Court under the Provisions of the Wealth 'Tax Act has answered the first question in favour of the Revenue.
So far as the second question is concerned it has answered, the same in favour of the assessee.
As against that order the Department has brought Civil Appeal No. 1075 of 1971.
The other two appeals relate to the assessment of the assessee for the assessment years 1958 59 and 1959 60.
Here, the High Court has answered the first question referred to it in favour of the assessee and did not answer the second question.
The material facts in all these three appeals are more or less similar and for deciding the questions of law arising for decision, it is sufficient if we set out the facts as set out in the Statement (1) 486 of the case submitted by the Tribunal to the High Court along with the questions of law arising for decision in respect of the ,assessment of the assessee for the assessment years 1958 59 and 1959 60.
From that Statement we get the following facts : The assessee company 's fixed assets namely, land, buildings, plant and machinery were valued at Rs. 2,19,982/ , Rs. 36,13,906/ and Rs. 93,78,868/ respectively as on 31 3 1955.
This valuation did not take into account a depreciation for the year ending 31 3 1955 in respect of buildings, plant and machinery.
A year later i.e. on 31 3 1956 the same assets were valued at Rs. 4,99,340/ , Rs. 1,08,40,840/ and Rs. 1,89,23,449/This valuation was also without taking into account depreciation for the year ending 31 3 1956 in respect of buildings, plant and machinery.
The increase in the value of these assets, after making allowance for all additions made to the assets, was due to the revaluation of the assets made by the company before 31 3 56.
The increase in value on account of revaluation was to the tune of Rs. 2,83,871/ , Rs. 72,31,204/ and Rs. 98,67,481/ in the case of land, buildings and machinery respectively.
The Directors of the company in their annual report for the year ended 31 3 1956 noted that these assets had been revalued so as to indicate a true picture of their value and that evaluators had given due consideration to depreciation which the buildings, plant and machinery had been already subjected to.
A corresponding capital reserve of an amount of Rs. 1,73,82,556/ was created against ,the increase in the value of the assets.
The increase in the, value of assets effected before 31 3 1956 was carried over to 31 3 1958 and 31 3 59, the relevant valuation dates and the capital reserve ,aforesaid continued to remain unaltered.
The company in submitting its return of wealth tax as at the relev ant valuation dates claimed before the Wealth tax Officer that its lands, buildings and machinery should be valued according to the written down value as per income tax records after allowing depreciation according to the Income tax Act.
According to the company the value of these assets should be respectively, Rs. 2,26,786/ Rs. 12,38,109/ and Rs. 11,46,979/ as at 31 3 1958 and Rs. 2,28,188/ , Rs. 13,64,198/ and Rs. 9,16,626/ as at 31 3 1959.
These written down values were determined on the basis of the original cost as it stood before the assets were revalued in 1955 56.
The Wealth tax Officer in including these assets in the net wealth of the company, however, took the value thereof to be Rs. 5,10,657/ , Rs. 1,02, 53,392/ and Rs. 1,71,24,711/ as at 31 3 1958 and Rs. 5,12,059/ , Rs. 1,02,71,383/ and Rs. 1,65,02,524/ as at 31 3 1959 as shown 'in the company 's balance sheets as at 31 3 1958 and 31 3 1959. 'The Wealth tax Officer was of the view that the valuation of the 487 assets having been made under section 7 (2) of the Wealth Tax Act, there was no need to analyse individually the value of particular assets.
He also took the view that the value of the assets after revaluation was the correct one.
He rejected the request of the company to make an allowance for the wear and tear of the assets even on the basis of the revised values for the period between the date of the revaluation of the assets and the Wealth tax valuation dates.
The Appellate Assistant Commissioner of Wealth tax disagreed with the Wealth tax Officer and allowed the assessee 's appeal holding that the value of the block assets should be taken to be their write down value as per, the income tax records and not the value shown by the assessee in its balance sheets.
The Department appealed to the Tribunal against the order of the Appellate Assistant Commissioner.
The Tribunal allowed the appeal partially.
It upheld the action of the Wealth tax Officer in determining the value of the fixed assets on the basis of the values shown in the balance sheets of the company, but it, however, held that the assessee was entitled to an allowance in respect of these assets on account of wear and tear during the period subsequent to the revaluation.
Thereafter at the instance of the assessee as well as the Commissioner, the Tribunal stated a case and submitted the following questions seeking the opinion of the High Court.
(1) Whether on the facts and in the circumstances of the case, in determining the net value of the assets of the assessee company under section 7(2) of the Wealth tax Act, the value of the company 's fixed assets as shown in its balance sheet as on the valua tion dates should have been substituted by the written down value of those assets as per the company 's income tax records ? (2) If the answer to the first question is in the negative, whether on the facts and in the circumstances of the case, for the purposes of determining the net value of the assets of the company under Section 7(2) of the Wealth tax Act an adjustment on account of normal depreciation of the fixed assets from the date of revaluation of the assets to the valuation dates was justified ? Now reverting back to the assessment of the assessee for the assessment year 1957 58, we have earlier noted the decision of the High Court.
Aggrieved by the, answer given by the High 488 Court on the second question, the Commissioner has brought Civil Appeal 1075 of 1971.
The assessee has not appealed against the decision of the High Court on the first question.
Before adverting to the merits of the contentions of the parties, we consider it necessary to observe that we are wholly unable to comprehend the attitude of the High Court while dealing with the case.
The High Court quite clearly exceeded its jurisdiction in examining the competence of this Court to remand an appeal brought to this Court under the provisions of the Wealth tax Act.
It would have done well to remind itself that it was bound by the orders of this Court and could not entertain or express any argument or views challenging their correctness.
The judicial tradition and propriety required that court not to attempt to sit on judgment over the decisions and orders of this Court.
Now turning to the second question referred to the High Court, we agree with the High Court that the valuation of the assets shown in the balance sheet is not conclusive.
Wealth tax is levied on the value of the assets of the assessee on the valuation date.
Section 7(2) of the Wealth tax Act merely requires the Wealth tax Officer to have regard to the balance sheet.
It is open to the assessee to satisfy the authorities under the Wealth tax Act that the valuation shown in the balance sheet is not correct.
But in the absence of such a proof, the Wealth Tax Officer will be justified in proceeding on the basis that the value shown in the balance sheet is correct because no one can know the value of the assets of a business more than those who are in charge of the business.
In other words, the value of the assets shown in the balance sheet can justifiably be made the primary basis of valuation for the purpose of the Wealth tax Act.
In other words it can be taken as prima facie evidence of the value of the assets.
Here again the High Court ignoring the ratio of the decision of this Court in Kesoram Industries(1) case as well as the other deci sions of this Court held that the evidence afforded by the balance sheet cannot be considered as primary evidence or prima facie evidence of the value of the assets of the business.
To say the least.
the learned Chief Justice indulged in an unnecessary mental exercise forgetting the fact that the law as interpreted by this Court is binding on all courts and Tribunals.
Turning to the facts of the assessee 's case, the revaluation of the assets was made in 1956.
That revaluation in the absence of any evidence to show that it was incorrect, undoubtedly afforded a sound basis for valuing the assessee 's assets.
But then, when the value of those assets had to be determined on the valuation dates concerned in these cases, the Wealth tax Officer should have deducted from the 1956 valuation the value of the depreciation of (6) ; 489 those assets after the date they were revalued.
Undoubtedly those assets were subject to wear and tear and there was no evidence to show that the market value of those assets had gone up after they were revalued in 1956.
Our conclusion regarding the, valuation for the year 1957 58 applies with equal force as regards the valuation for 1958 59 and 1959 60.
Following the decision of this Court in Aluminum Corporation of India Ltd. 's case(1) we answer the first question re ferred to the High Court in all these appeals in favour of the Department.
On this question we see no justification for the reservations made by the High Court in the judgment under appeal in Civil Appeal No. 1075 of 1971.
Now turning to the second question, we are of the opinion that the finding of the Tribunal on that question was essentially a finding of fact.
That finding was based on relevant evidence.
It is not vitiated in any manner.
In our opinion, the Tribunal took a correct view of the scope of section 7 (2) of the Wealth tax Act and its approach to the question was in accordance with law.
Hence our answer to the second question is in the affirmative and in favour of the assessee.
In the result, these appeals are allowed to the extent mentioned above.
In the circumstances of these cases, we direct the parties to bear their own costs both in the High Court as well as in this Court.
V.P.S. Appeals allowed.
| IN-Abs | The assessee company made a revaluation of its assets, namely, land, buildings, plant and machinery in 1956, and the increase in value was carried over to subsequent years.
For the assessment year 19 '57 58, on the questions, (1) whether in determining the net value of the assets under section 7(2) of the Wealth Tax Act the value as shown in the balance sheet should be substituted by the written down value as per the income tax records, and (2) whether, even on the basis of the value as shown in the balance sheet an adjustment on account of normal depreciation of the assets for arriving at the net value is justified, the High Court, on reference, answered the first question in favour of the assessee and did not answer the second question.
This Court, on appeal, set aside that judgment and remanded the case to the High Court.
Meanwhile, the High Court, for the assessment years 1958 59 and 1959 60, also on reference answered the first question in favour of the assessee and did not answer the second question.
After remand, with respect to the assessment year 1957 58, the High Court, answered the first question in favour of the Revenue and the second question in favour of the assessee.
In appeal to this Court, with respect to all the three assessment years, HELD : (1) (a) Wealth Tax is levied on the value of the assets of the assessee on the valuation date.
Section 7(2) of the Wealth Tax Act requires the Wealth Tax Officer to have regard to the balance sheet.
it is open to the assessee to satisfy the authorities that the valuation in the balance sheet is not correct, but, in the absence of such proof, the Wealth Tax Officer will be justified in proceeding on the basis that the value shown in the balance sheet is correct, because, no one can know the value of the assets of a business better than those who are in charge of the business.
[488 D F] Therefore, in the present case, the revaluation of the assets made in 1956, undoubtedly afforded a sound basis for valuing the assessee 's assets in the absence of any evidence showing that it was incorrect, and the answer to the first question for all the three years should be in favour of the Department.
The High Court was in error in holding that the evidence afforded by the balance sheet could not be considered as prima facie evidence of the value of the assets.
[488 F H] C.I.T. West Bengal vs Aluminum Corporation, and Kesoram Industries Case; , , followed.
(2) But the assets in the present case were subject to wear and tear and there was no evidence to show that the market value of these assets had , One up after the revaluation in 1956.
Hence, when the value of the 485 assets had to be determined on the concerned valuation dates, the Wealth Tax Officer should have deducted from the 1956 valuation the value of the depreciation of those assets after the revaluation.
Therefore, the answer to the second question for all the three years should be in favour of the assessee.
[488 H; 489 A B]
|
Civil Appeals Nos. 1910 to 1912 and 2112 of 1968, and 1102 to 1105 of 1971.
Appeals by certificate/special leave from the judgments and orders dated July 28, 1967, March 29, 1968, May 24, 1968 of the Calcutta High Court in Income tax References Nos. 170 of 1963.
40 of 1965 and 4 of 1967.
V. section Desai, N. R. Khaitan, B. P. Maheshwari and Krishna Sen. for the appellants (in all the appeals).
I B. Sen, K. section Suri, R. N. Sachthey and B. D. Sharma, for the respondent (in C.As.
1910 to 1912 of 1968, and 1102 to 1104 of 1971).
B. D. Sharma, for the respondent (in C.As.
2112 of 1968 and 1105 of 1971).
The Judgment of the Court was delivered by Grover, J.
These appeals from judgments of the Calcutta High Court in Income tax References involve a common question.
We shall refer to the facts in the batch of appeals of Jaipuria Samla Amalgamated Collieries Ltd. The assessee is a public limited company incorporated under the Indian Companies Act 1913.
It carried on the business of raising coal from coal mines and selling the same to its constituents.
It had taken on lease several coal mines from the owners of the coal bearing lands.
As lessee of the mines the assessee incurred liability for payment of (i) Road and Public Works cess under the Bengal Cess Act of 1880; (ii) Education cess levied under the Bengal (Rural) Primary Education Act, 1930.
, The amounts payable by the assessee on account of the aforesaid, cesses were claimed by it as deduction under section 10 of the Income tax Act, 1922, hereinafter referred to as the "Act", in the computation of ,.its profits.
The income tax authorities disallowed that claim relying on section 10 (4) of the Act.
The assessee went up, in appeal to the 512 Appellate Tribunal which agreed with the orders of the departmental authorities.
The questions which were submitted by the Tribunal with the statement of the case relating to the assessment years 1954 55, 1955 56 were as follows : "(1) Whether, on the facts and in the circumstances of the case, the Road, the Public Works and the Education Cesses were levied either on the profits or gains of the business or were assessed at a proportion of or otherwise on the basis of any such profits within the meaning of section 10(4) of the Income tax Act, 1922 ? (2) Whether, on the facts and in the circumstances of the case, the amounts provided for or paid by the assessee company, as Road and Public Works Cess and the Education Cess was allowable as a deduction under section 10 (2) (ix) or 10 (2) (xv) of the Indian Income tax Act, 1922, read with section 10(4) of the said Act ?" , The High Court answered the questions against the assessee.
The assessee filed appeals to this Court after obtaining a certificate of fitness but the same was found defective owing to want of any reasons or grounds in the order granting the certificate.
Instead of getting the matters remitted to the High Court for giving reasons petitions for special leave were filed before us and leave was granted.
We have heard the appeals by special leave on the printed record of the appeals by certificate.
It may be mentioned that this position obtains in all the appeals by certificate before us.
Section 10(1) of the Act provides that tax shall be payable by an assessee under the head "profits and gains of business, profession or vocation" in respect of the profits and gains of any business profession or vocation carried on by him.
Sub section (2) says that such profits or gains shall be computed after making the allowances set out therein.
Clauses (ix) and (xv) of this subsection are as follows : "(ix) any sums paid on account of land revenue, local rates or municipal taxes in respect of such part of the premises as is used for the purpose of the business, profession or vocation." "(xv) any expenditure not being an allowance of the nature described in any of the clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of such business, profession or vocation." Sub section (4) of section 10 to the extent It is material is in the following terms : 513 (4) Nothing in clause (ix) or clause (xv) of subsection (2) shall be deemed to authorise the allowance of any sum paid on account of any cess, rate or tax levied on the profits or gains of any business, profession or vocation or assessed at a proportion of or otherwise on the basis of any such profits or gains The essential question that has to be determined is whether the cesses levied under the aforesaid Bengal Acts fell within the mischief of section 10(4) of the Act.
It is common ground that these cesses are not levied on the profits or gains of any business, profession or vocation but it has been claimed on ' behalf of the Revenue and that contention was accepted throughout that the cesses are assessed on the basis of such profits or gains and therefore they would be covered by the said provision.
According to the preamble to the Bengal Cess Act 1880, the road and works cesses were levied on immovable property interalia to provide for the construction and maintenance of roads and other works of public utility.
Under section 5 all immovable property with certain exceptions was to be liable to the payment of road cess and public works cess.
Section 6 laid down that these cesses were to be assessed on the.
annual value of lands and until provision to the contrary was made by the Parliament on the annual not profits from mines, quarries, tramways, railways and other immovable property on such rates as were to be determined in the manner prescribed.
Under section 72 the Collector of the district had to serve a notice upon the owner etc.
of every mine, quarry and immovable property requiring him to lodge a return of the net annual profits of such property cal culated on the average of the annual net profits thereof for the last three years for which accounts had been made up.
Section 75 provided for a contingency where a return was not furnished within the prescribed period.
The Collector in that case or if he found that the return made, was untrue or incorrect was to proceed to ascertain and determine by such ways or means as seemed expedient the annual net profits of such property calculated as aforesaid.
If the Collector was unable to ascertain the annual net profits he could ascertain and determine the value of the property and thereupon determine 6% of such value to be the annual net profits thereon (section 76).
The scheme of the Bengal (Rural) Primary Education Act 1930 may next be referred to.
The preamble to that Act was as follows: "Whereas it is expedient to make better provision for the progressive expansion and for the management and control of primary education in rural.
areas in Bengal so as to make it available to all children and with a view to make it compulsory within ten years 514 According to section 29 all immovable property on which the road and public works cesses were assessed were to be liable to the payment of primary education cess.
The rates on which the education cess was to be levied varied according as the property ,consisted of mines and quarries or of tramways, railways and other immovable property.
As regards mines and quarries it was to be levied at the rate of three and a half piece on each rupee of annual net profits.
Now it is quite clear that the aforesaid cesses would be allowable deductions either under clause (ix) or clause (xv) of sub section
(2) of section 10 unless they fell within section 10(4).
We have already referred to the provisions of both Acts under which the cesses are levied which show that their assessment is not made at a proportion of the profits of the assessee 's business.
What has to be determined is whether the assessment of the cesses is made on the basis of any such profits.
The words "profits and gains of any business, profession or vocation" which are employed in section 10(4) can 'in the context, have reference only to profits or gains as determined under section 10 and cannot cover the net profits or gains arrived at or determined in a manner other than that provided by s.10 The whole purpose of enacting sub section
(4) of section IO appears to be to exclude from the permissible deductions under clauses (ix) and (xv) of sub section
(2) such cess, rate or tax which is levied on the profits or gains of any business, profession or vocation or is., assessed at a proportion of or on the basis of such profits or gains.
In other words sub section
(4) was meant to exclude a tax or a cess ' or rate the assessment of which would follow the determina tion or assessment of profits or gains of any business, profession or vocation in accordance with the provisions of section 10 of the Act.
The road cess and public works cess are to be assessed on the annual net profits under sections 72 to 76 of the Cess Act 1880.
The net annual profits have to be calculated on the average of the net profits for the last three years of the mine or the quarry and if the annual net profits of the property cannot be ascertained in the aforesaid manner then it is left to the Collector to determine the value of the property first in such manner as he considers expedient and determine 6 per cent on that value which would be deemed to be the annual net profits: The Cess Act of 1930 follows the same pattern so far as the ascertainment of annual net profits is concerned.
These profits arrived at according to the provisions of the two Cess Acts can by no stretch of reasoning be equated to the profits which are determined under section 10 of the Act.
It is not possible to see, therefore, how section 10(4) could be applicable at all in the present case.
Thus on the language of the provisions both of the Act and the two Cess Acts the applicability of section 10(4) cannot be attracted.
But even according to the decided cases 515 such cesses cannot fall within section 10(4).
The Privy Council in Commissioner of Income tax, Bengal vs Gurupada Dutta & Others(1) had to consider whether the rate imposed under the provisions of the Bengal Village Self Government Act 1919 on a person occupying a building and using the same for the purpose of business was an allowable deduction in computing the profits of the business under section 10 of the Act.
Their Lordships laid down the law in the following words : .
"It will be noted that, in the absence of the necessary powers and machinery, which are not provided by the Act, the estimate of the annual income from business can only proceed on a rough guess, which is in no way comparable with the ascertainment of profits and gains under the Income tax Act, an d, in the opinion of their Lordships, the inclusion of this element of business income as part of the "circumstances" of the assessee with a view to the imposition of the union rate does not fall within sub section (4) of Section 10 of the Income tax Act.
It is conceded that the union rate is not "levied on the profits or gains", which clearly implies an ascertainment of such profits and gains, and the words " assessed. . on the basis of any such profits or gains" in the later part of the sub section must also be so limited.
No such ascertainment of the profits and gains of the business can be undertaken for the purposes of the union rate.
,, The main argument for the Crown, therefore fails.
" In our judgment this decision is quite apposite and fully covers the points under consideration.
It has been followed by the Allahabad High Court in Simbholi Sugar Mills Ltd. vs Commi ssioner of Income tax, U.p. & V.p.(2) in which the question related to the deductibility of tax payable under the U.P. District Boards Act 1922 which was imposed on persons assessed according to their circumstances and property.
Similarly in Commissioner of Income tax, Delhi and Rajasthan vs Banarsi Dass & Sons(3), the Punjab High Court held that a tax imposed under the U.P. District Boards Act on circumstances and property could be legitimately claimed as an allowance and the above decision of the Privy Council was followed.
In the Income tax Act 1961, section 28 relates to the income which shall be chargeable to income tax under the head "profits and gains of business or profession '.
Section 30(b) (ii) is equivalent to cl.
(ix) of section 10(2) of the Act, Section 40 (a) (ii) corresponds to section 10 (4) of the Act.
It is significant that in spite of the decision of the Privy Council in (1) (3) (2) 516 Gurupada Dutta 's case(1) the Parliament did not make any change in the language of the provisions corresponding to section 10(4).
It can, therefore, legitimately be said that the view of the Privy Council with regard to the true scope and ambit of section 10(4) of the Act was accepted.
We are unable to concur in the reasoning or the conclusion of the Calcutta High Court in Commissioner of Income tax, West Bengal, vs West Bengal Mining Co.(2) in which it was held that the two cesses being related to profits would attract section 10(4) of the Act.
In the result Civil Appeals Nos. 1102 to 1105 of 1971 which are by special leave are allowed and the answers returned by the High Court are discharged.
The questions referred shall stand answered in favour of the assessees and against the Revenue.
The assessee shall be entitled to their costs in this Court.
Civil Appeals Nos. 1910 to 1912 of 1968 and 2112 of 1968 in which the certificates are defective and have to be revoked shall stand dismissed.
G.C. Ordered accordingly.
| IN-Abs | The appellant was a public limited company.
It carried on the business of raising coal from coal mines and selling the same.
It had taken on lease several mines from the owners of the coal bearing lands.
As lessee of the mines the appellant incurred liability for payment of (i) Road and Public Works cess under the Bengal Cess Act of 1880; (ii) Education Cess levied under the Bengal (Rural) Primary Education Act, 1930.
The amounts payable by the assessee on account of the aforesaid cesses were claimed by it as a deduction under section 10 of the Income tax Act, 1922.
The Income tax authorities disallowed that claim relying on section 10(4) of the Act.
The Tribunal and the High Court decided against the appellant.
In appeal to this Court by special leave, the question for determination was whether the cesses levied under the aforesaid Bengal Acts fell within the mischief of section 10(4) of the Act.
It was common ground that these cesses were not levied on the profits or gains of any business, profession, or vocation but it was claimed on behalf of the Revenue that the cesses were assessed on the basis of such profits and gains and therefore they would be covered by the said provision.
HELD : (i) The words 'profits and gains of any business, profession, or vocation which are employed in section 10(4) can, in the context, have reference only to profits or gains as determined under section 10 and cannot cover the net profits or gains arrived at or determined in a manner other than that provided by section 10.
The whole purpose of enacting sub section
(4) of section 10 appears to be to exclude from the permissible deduction under cis.
(ix) and (xv) of sub section
(2) such cess, rate or tax which is levied on the profits or gains of any business profession or vocation or is assessed at a proportion of or on the basis of such profits or gains.
In other words sub section
(4) was meant to exclude a tax or a cess or a rate the assessment of which would follow the determination or assessment of profits or gains of any business.
profession or vocation in accordance with section 10 of the Act.
[514 D E] (iii) The road cess and public works cess are to be assessed on the annual net profits under sections 72 and 76 of the Cess Act 1880.
The net annual profits have to be calculated on the average of the net profits for the last three years of the mine or the quarry and if the annual net profits of the property cannot be ascertained in the aforesaid manner then it is left to the Collector to determine the value of the property first in such manner as he considers expedient and determine 6 per cent on that value which would be deemed to be the annual net profits.
The Cess Act of 1930 follows the same pattern so far as the ascertainment of annual net profits is concerned.
These profits arrived at according to the provisions of the two Cess Acts can by no stretch of reasoning be equated to the profits which are determined under section 10 of the Act.
It is not possible to see, therefore, how section 10(4) could be applicable at all in the 511 present case.
Thus on the language of the provisions both of the Act and the two Cess Acts the applicability of section 10(4) cannot be attracted.
[514 F H] Commissioner of Income tax, Bengal vs Gurupada Datta , applied.
Simbholi Sugar Mill Ltd. vs Commissioner of Income tax, U.P. & Rajasthan vs Banarsi Dass & Sons, , approved.
Commissioner of Income tax, West Bengal vs West, Bengal Mining Co. , disapproved.
|
No. 205 of 1971.
Petition under article 32 of the Constitution of India for a writ in the nature of habeas corpus.
518 V. Mayakrishnan, for the petitioner.
section P. Mitra, G. section Chatterjee for Sukumar Basu, for the respondent.
The impugned order states that the District Magistrate was satisfied that it was necessary that the petitioner should be detained with a view to prevent him from acting in any manner prejudicial to the security of the State or the maintenance of public order as provided by section 3(1) of the Act.
According to the affidavit in reply of the District Magistrate, he reported under section 3 (4) of the Act to the State Government On March 3, 1971 regarding the fact of his having passed the order of detention together with the grounds of detention and all other.
particulars having a bearing on the name.
It is further stated that the.
petitioner was arrested on March 5, 1971 and was served on the same day with the order of detention together with the, grounds for passing the order of detention.
The petitioner was also informed that he is entitled to make a representation to the State Government against the order of detention and that such representation is to be addressed to the Assistant Secretary Home (Special) DEpartment, Government of West Bengal and forwarded through the Superintendent of Jail.
He was further informed that his case will be placed under section 10 of the Act before, the Advisory Board within 30 days from the date of the order of detention.
He was also informed that under section 11 of the Act, the; Advisory Board shall, if so desired by him, hear him in person and that the petitioner must intimate the said desire to be heard in the representations that he may make to the State Government.
The State Government considered the report of the District Magistrate together with other materials placed before it and approved, on March 11, 1971 as required by section 3 (4) of the Act, the order of detention passed by the District Magistrate.
On the same day, as required,by section 3(5) the State Government sent the necessary report to the Central Government.
The State Government on April 3, 1971 placed the case of the petitioner before the Advisory Board.
519 The petitioner sent two representations dated March 17, and April 19, 1971 denying the allegations made in the grounds for passing the order of detention and pleaded that he was innocent.
He has admitted in these representations that he was arrested on March 5, 1971.
In neither of these representations did the petitioner make a request that he should be provided an opportunity of being heard in person by the Advisory Board.
The State Government rejected the representations of the petitioner, but forwarded them to the Advisory Board for being considered.
The Advisory Board after considering the, materials placed before it relating to the detention of the petitioner including the represen tations made by him on March 17, 1971 and April 19, 1971, submitted its report on May 11, 1971 to the State Government stating that it is of opinion that there is sufficient cause for the detention of the petitioner.
The State Government passed an order on July 12, 1971 under section 12(1) of the Act confirming the order: of detention dated March 2, 1971 passed by the District Magistrate and directed that the petitioner 's detention shall be continued till the expiration of twelve months from the date of his detention.
The petitioner has challenged the order of detention on the ground that he has never committed any offence nor has he been involved in any illegal activities as alleged in the grounds of detention.
He has further stated that the various allegations mentioned against him are false and that he never participated in any of the incidents referred to in the grounds of detention.
The petitioner has further stated that he is innocent and that he has been illegally detained.
It Will be noted from his averments in the writ petition that except denying that the allegations are false and that he has never participated in any of those incidents referred to in the grounds of detention, he has not alleged any mala fides nor challenged the jurisdiction of the officer who, passed the order of detention or the various proceedings connected therewith.
Under section 3 (1) of the Act, *hat is required is the satisfaction of the State Government or the relevant District Magistrate, as the case may be, of the necessity to detain a person with a view to prevent him from acting in a manner prejudicial to the security of the State or the maintenance of public order.
In the order of detention dated March 2, 1971, the District Magistrate has stated that he was satisfied that with a view to prevent the petitioner from acting in any manner prejudicial to the security of the State or the maintenance of public order, it is necessary to detain the petitioner and that the order was being passed in exercise of the powers conferred on the District Magistrate by sub section (1) read with subsection (3) of section 3 of the Act.
In the grounds of detention 520 .
furnished to the petitioner on March 5, 1971 along with the order dated March 2, 1971 the following particulars have been given: "(1) That, on 26 1 71 between 11.00 and 12.31 hours, you along with your associates being armed with bombs, ballasts, pipe guns, lathis etc., assembled at Piali Railway Station and created terror among the passengers by charging bombs and showering ballasts indiscriminately and also moving from compartment to compartment of train Nos.
SC 193 UP and SC 195 UP in search of your rivals, shouting that "if I get the Rascal, I will kill them" and in doing so you caused injury to some innocent passengers and broke the glass panes of driver 's cab of SC 195 Up.
You created disturbance of the public order thereby.
(2)That, on 2 2 71 at about 17.39 hours, you along with your associates, being armed with bombs, daggers etc., attacked and assaulted the guard of train No. SC 199 Up at Champahati Railway Station and also created terror among the passengers by charging a bomb.
You created disturbance of the public order thereby.
(3) That on 9 2 71 at about 13.15 hours you and your associates charged bombs and ballasts on duty Police party at Jadavpur Railway Station as they seized 10 bags of rice weighing about 3 quintals from SC 195 Up, while you were taking the said stock to Calcutta rationing area illegally by train.
Your attack grew so violent that the Police party had to open fire upon you in self defence.
Your violent activities created serious panic in the Station area and the public order was disturbed thereby.
" In the two representations dated March 17 and April 19, 1971 made to the State Government, the petitioner after referring to the fact that he was arrested on March 5, 1971 has denied that he was involved in any of the types of violent activities referred to in the grounds for detention.
He has further stated that he is leading a very honest life doing the work of mason and that the allegations made against him are false.
As we have already mentioned, the petitioner did not ask for an opportunity of.
being heard,in person by the Advisory Board.
He has not also alleged in these representations and mala fides in passing the order of dention.
The District Magistrate who passed the order of detention has filed a counter affidavit.
The District Magistrate has stated that the petitioner is rice smuggler operating in Subarban Railway 521 trains in Southern Section of Eastern Railway and that he along with his associates armed with bombs and other deadly weapons attacked the passengers and the guard of railway trains and created terror by hurling bombs in Champahati and Piali Railway Stations.
The District Magistrate further proceeds to state that the petitioner was detained for acting in a manner prejudicial to the security of the State or the maintenance of public order in the Jadavpur area of the district of 24 Parganas for his having taken a leading and active part in violent activities.
It is further stated in the counter affidavit that the activities of the petitioner disturbed the public order and were so persistent and violent that he became a terror to the residents of the locality and the railway traveling public and that but for his detention he could not have been prevented from acting in a manner prejudicial to the security of the State ,or maintenance of public order.
It is further stated that the deponent after receiving reliable information relating to the anti social and prejudicial activities of the petitioner and after carefully considering these materials, he was fully satisfied that the petitioner was engaged and was indulging in activities which were prejudicial to the security of the State or the maintenance of public order, and that his detention was essential.
On being thus satisfied, the District Magistrate proceeds to state that he bona fide passed the order of detention on his own satisfaction, judgment and reasoning.
The counter affidavit then proceeds to state about the order of confirmation passed by the State Government and other matters resulting finally in the order passed by the Government on July 12, 1971.
It may be pointed out that in paragraph 6 of the counter affidavit it has been mentioned that the Advisory Board submitted its report on May 11, 1971 "after hearing the petitioner.
" This statement is obviously wrong because the petitioner never asked for being heard in person.
The Advisory Board also does not say that the petitioner was heard in person.
The counsel appearing for the State has expressed his regret regarding this mistaken averment made in the counter affidavit.
But that does not in any manner advance the case of the petitioner, as we will presently show.
We have already referred to the fact that the petitioner has merely denied his being associated with the incidents.
referred to in the grounds of detention.
We are satisfied from the averments made by the District Magistrate in the counter affidavit, which have not been further controverted by the petitioner by filing any rejoinder that the order of detention has been validly and properly passed.
Mr. V. Mayakrishnan, Amicus Curiae, appearing on behalf of the petitioner has urged that every one of the grounds has referred to the activities of the petitioner having resulted in disturbance of 522 public order.
But the order of detention refers to the fact that the District Magistrate was of the view that the petitioner should be detained with a view to preventing him from acting in any manner prejudicial to the security of the State or the maintenance of public order.
No ground showing as to how any activity of the petitioner is prejudicial to the security of the State justifying the order Of detention has been furnished to the petitioner.
Therefore, according to the learned counsel, the order of detention is illegal inasmuch as the petitioner has not been informed of any grounds as to how his activities are prejudicial to the security of the State.
Inasmuch as both the matters have been mentioned in the order of detention, it must be that the detaining authority has taken into account extrenuous and irrelevant matters in passing the order of detention.
In particular, according to the learned counsel, it is only the matters referred to in sub cl.
(1) of cl.
(a) of section 3 (2) of the Act that will relate to the activities adversely affecting the security of the State.
None of those matters have been mentioned in the grounds furnished to the petitioner.
Therefore, it is not clear whether the detaining authority passed the order to prevent the petitioner from acting in any manner prejudicial to the Security of the State or for maintenance of public order.
For all these, reasons, the counsel urged, the order of detention is illegal.
Mr. section P. Mitra, learned counsel appearing for the State drew our attention to the provisions contained in section 3(2) of the Act and pointed out that the various acts mentioned in the grounds of detention come within the expressions "acting in any manner prejudicial to the security of the State or the maintenance of public order." In particular he relied upon cl.
(d) of section 2 and pointed out that the petitioner has committed an offence under the , (Act No. 6 of 1908) and, therefore, his detention was legal.
We are not inclined to accept the contention of the learned counsel for the petitioner.
As already mentioned, under section 3(1) of the Act, what is required is the satisfaction of the State Government or the relevant District Magistrate, as the case may be, of the necessity to detain a person with a view to prevent him from acting in a manner prejudicial to the security of the State or the maintenance of public order.
As defined by sub section (2) of section 3, the expression "acting in any manner prejudicial to the security of the State or the maintenance of public order means : lm15 "(a)using or instigating any person by words, either spoken or written, or by signs or by visible representations or otherwise, to use, any lethal weapon (i) to promote or propagate any cause or ideology the promotion or propagation of which affects 523 or is likely to affect, adversely the security of the State or the maintenance of public order.
or (ii)to overthrow or to overawe the Government established by law in India.
Explanation In this clause, "lethal weapon" includes fire arms, explosive or corresive substances.
swords, spears, daggers, bows and arrows; or (b)committing mischief, within the meaning of section 425 of the Indian Penal Code, by fire or any explosive substance on any property of Government or any local authority or any corporation owned or controlled by Government or any University or other educational institution or on any public building, where the commission of such mischief disturbs, or is likely to disturb, public order; or (c)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.
Explanation In this clause, "object of public veneration" includes any portrait or statute of an eminent Indian, installed in a public place as a mark of respect to him or to his memory; or (d)committing, or instigating any person to commit, any offence punishable with death or imprisonment for life or imprisonment for a term extending to seven years or more or any offence under the or the , where the commission of such offence disturbs, or is likely to disturb, public order; or (e)in the case of a person referred to in clause (a) to (f) of section 110 of the Code of Criminal Procedure, 1898, committing any offence punishable with imprisonment where the commission of such offence disturbs or is likely to disturb, public order.
It will be seen that the Act itself furnishes a dictionary meaning.
for the two expressions and a perusal of cls.
(a) to (e) clearly shows that any of the matters referred to therein will be both " prejudicial to the security of the State or the maintenance of public order".
We are not inclined to accept the contention on behalf of the petitioner that it is only sub cl.
(1) of cl.
(a) of section 3(2) which 524 deals with the matters, which adversely affect the security of the ,State.
In fact that very sub clause refers to the 'matters mentioned therein as affecting the security of the State or the maintenance of public order.
Therefore, in this case the grounds of detention .cannot be held to be vague nor can the order of detention be held to be invalid on the ground that the petitioner must have been detained only to prevent him from acting in any manner prejudicial to the maintenance of public order and not to the security of the State.
In particular, under cl.
(d) of section 2, a person will be considered to be acting in a manner prejudicial to the security of the State or the maintenance of public order, if he commits any offence under the .
The various incidents mentioned in the grounds of detention may also come under cl.
(b) of sub section (2) of section 3 Section 3 of the , is as follows : "Sec. 3 : Any person who unlawfully and mali ciously causes by any explosive substance an explosion of a nature likely to endanger life or to cause serious injury to property shall, whether any injury to person or property has been actually caused or not, be punished with transportation for life or any shorter term, to which fine may be added, or with imprisonment for a term which may extend to ten years, to which fine may be added." ' The various grounds mentioned in the order of detention clearly bring the activities of the petitioner under section 3 quoted above.
The date and the place as well as the time when the incidents occurred, and also the train numbers which were affected, as well as the association of the petitioner with those incidents, have been fully given in the grounds of detention.
No doubt the names of the persons, who are stated to be his associates have not been given.
For all the above reasons, we are satisfied that the order of detention is valid.
In the result, rule nisi is discharged and this writ petition dismissed.
G.C. Petition dismissed.
| IN-Abs | The petitioner was detained under an order dated March 2, 1971 passed by the District Magistrate, 24 Pargana, West Bengal, under sub section
(i) read with sub section
(3) of section 3 of the West Bengal (Prevention of Violent Activities) Act, 1970.
The order stated that the District Magistrate was satisfied that it was necessary that the petitioner should be detained with a view to prevent him from acting in any manner pre judicial to the security of the State or the maintenance of public order as provided in section 3(1).
In the grounds of detention supplied to the petitioner three incidents of violence at railway stations in which the petitioner was alleged to have participated and used explosives were men tioned.
In his representations against being detained the petitioner did not allege any mala fides against the administration but only denied that he took part in the violent activities.
In 'support of the writ petition under article 32 of the Constitution challenging the order of its detention it was urged that while the impugned order mentioned his activities as being prejudicial to public order as well as security of the State, the instances given in the grounds of detention only mentioned activities pre judicial to public order.
The detaining authority had thus taken into account extraneous and irrelevant matters in passing the order of detention. ' According to the appellant it is only matters referred to in sub c. (i) of c1. (a) of section 3(2) of the Act which will relate to the activities adversely affecting the security of the State, and none of these matters had been mentioned in the grounds of detention furnished to the petitioner.
HELD : The contention of the petitioner that it is only sub cl.
(1) of cl.
(a) of section 3(2) which deals with matters adversely affecting the security of the State could not be accepted.
In fact that very sub clause refers to the matters herein as affectingthe security of the State or the maintenance of public order.
Thereforein this case the grounds of detention could not be held to be vague norcould the order of detention be held to be invalid on the ground thatthe petitioner must have been detained only to prevent him from actingin any manner prejudicial to the maintenance of public order and not to the security of the State.
In particular under cl.
(d) of section 2 a person will be considered to be acting in a manner prejudicial to the security of the State or the maintenance of public order, if he commits any offence under the .
The various incidents mentioned in the grounds of detention may also come under cl.
(b) of sub section '(2) of section 3.
Further the said grounds clearly bring the activities of the petitioner under section 3 of the .
[523 H 524 E] Accordingly the detention of the petitioner must be held to be valid and the petition under article 32 must be dismissed.
|
Appeal No. 1071 of 1966.
Appeal by special leave from the Award dated September 10, 1965, of the Labour Court, Jullundur in Reference No. 157 of 1959.
A. B. Sinha, and B. P. Maheshwari, for the appellant.
Hardev Singh, for respondents Nos. 2 to 24.
after the management had suspended six of its workmen on certain charges of misconduct for having refused to ,operate some machines, another worker Shri Darshan Singh, a Helper of a Blowing Machine also refused on 25 1 59 when called upon by the management to work the machine in tile absence ,of Shri Daulat Ram, Machineman and was accordingly suspended the same day.
On hearing this news the workmen went to see one of the partners of the appellant and demanded that the order of suspension passed against Shri Darshan Singh should be cancelled and he be reinstated as a Helper.
As the management was not agreeable to reinstate the Helper workman, the workers went on a lightening strike.
Since the workmen came on strike con ciliation efforts were made but in spite of the persuasion of the Labour Officer, M.W. 2, the Labour Inspector M.W. 4 and by the management, Respondents 2 to 24 along with other did not report for duty although it is stated the Appellant was willing to employ them.
Certain charge sheets were served on the working on towards the end of January to which replies were given.
Thereafter notices were sent to the Respondents 2 to 15 and 17 to 24 asking them to resume work by certain specified dates and when they did not resume work other notices were sent requiring the said Respondents to show why their names should not be struck,off and asked them to submit their reply by a certain date.
In so far as Respondent 16 is concerned a notice was served oil him ,on 4 3 59 in which it was mentioned that he was absent since 13 2 59 without any leave and that he should resume duty by 6 3 59.
He was further asked to explain by 8 3 59 why his name should not be struck off.
None of the Respondents Nos. 2 to 24 either acknowledged these notices nor sent a reply.
The management thereafter by letters dated 23 2 59, 4 3 59 and 17 3 59 informed the aforesaid Respondents that since they were no longer interested in the employment their names were struck off from the muster rolls.
It is alleged that from 25 1 59 till their names were struck off from the muster rolls, the Respondents sat outside the Mill gate and in spite of persuasion by the Labour Officer as well as by the management were genuinely desirous of their resuming work, they did not join duty and as a consequence the management was compelled to employ others in order to keep the mill going.
It is also stated that during this period those workmen who wanted to join duty were permitted to do so and their services were entertained.
It is also the case of the management that the strike fizzled out after the striking workmen failed to get rations and thereafter they had abandoned the service.
On 19 3 59 a demand notice on behalf of the workmen was served on the management as a result of which the conciliation proceedings commenced.
But even then according to the report of the Conciliation Officer while the management was willing to employ the workmen, the Respondents 493 were, not willing to resume work till the suspended workmen were also 'allowed to resume duty.
Ultimately on 26 8 59 the matter was referred to the Labour Court at Jullundur under Sec.
10 of the (hereinafter referred to as 'the Act '), to determine whether the termination of services of 31 workmen whose names were mentioned therein was justified.
It may be mentioned here that out of these 31 workmen 8 workmen had resumed their duties and were no longer interested in the proceedings.
The Labour Court after receiving the statement of claim and recording the evidence on behalf of both the management and the workmen.
passed an Award on 31 10 61 which was published in the Gazette of 8 12 61.
By this Award the claim of the workmen was rejected on the ground inter alia : (a) that they had resorted to illegal strike; (b) that the management did not in fact terminate the services of the workmen concerned in the case and never meant to take action against them for having gone on strike.
On the other hand management was always prepare to take them back and was requesting them through the Labour Inspector and the Labour Officer to end the strike and to resume duty but the workers went on insisting that the suspension orders passed on their co workmen should first be cancelled; (c) that the workmen were adamant and as such there was no alternative for the management except to terminate their services and take fresh hands who are still continuing in its service; and (d) that no evidence was produced by the workmen to prove that any of them ever requested the, management to resume duty or that the management had turned down any such request.
Against this Award of the Labour Court a Writ Petition was filed by the Respondents in the High Court of Punjab.
A Single Bench of that Court by its Judgment dated 6 12 64 held that in law the plea that the workers had abandoned the services of the Appellant could not be sustained, but on the other hand it was the management which had terminated their services.
In this view the case was remanded to the Labour Court for a fresh decision.
A Letters Patent Appeal was filed by the management against this decision but later it was dismissed as withdrawn.
On remand the Labour Court by an Award dated 10 9 65 which was published in the Gazette on 1 10 65 held that the plea of the L 1340 Sup CI/71 494 workmen that there was a lock out by the management was not substantiated, on the other hand it was they who had gone on strike; that the strike was illegal because of the proceedings pending before the Labour Court in Reference No. 150 of 1958; that the question as to whether the management had terminated the services of the concerned workmen or not was not a matter which was res integra in view of ,the judgment of the Punjab High Court in the Writ Petition referred to above; and in the alternative as the termination took place by virtue of letters dated 23 2 59, 4 3 59 and 17 3 59 without holding an enquiry, it was not valid.
In the result the Labour Court directed reinstatement of Respondents 2 to 24.
In so far as Surat Singh Respondent No. 16 was concerned, it was found that there were no standing orders in force applicable to the Appellant, as such it was not justified in dismissing him for absence without leave.
It was also held that the Respondents were not entitled to wages from 25 1 59 to 17 3 59.
They would however only be entitled to half the back wages from 18 3 59 to the date on which the Award would become enforceable and from that date till the date of their reinstatement, Respondents Nos.
2 to 24 would be given full back wages.
Against the said Award this 'A peal has been filed by Special Leave.
The short question for our consideration is whether the ter mination of employment of the Respondents in the circumstances of the case without an enquiry was justified.
There is no doubt that it has been conceded at the very outset that there being no ,standing orders applicable to the Appellant, the termination of the services of Shri Surat Singh, Respondent No. 16 is not valid and the Award pertaining to his reinstatement cannot be assailed.
In so far as the validity of the action of the management in terminating the employment of the other Respondents is concerned a great deal would depend on whether the management was able to justify its action before the Tribunal.
It would be useful to set ,out at the outset certain undisputed facts namely : (1) that the Respondents went on a strike on 25 1 59; (2) that as there was a reference pending before the Labour Court that strike would be illegal, under Chapter V of the ; (3) that both the Labour Officers as well as the management tried to persuade the workers to join duty and after the demand notice dated 19 3 59 conciliation efforts were made but they did not resume work and made it a condition of their joining duty that the suspended workmen also should be taken back; 495 (4) that the management gave workers on strike notices on different dates asking them to join duty by a date specified therein and subsequently by another letter called upon them to justify their absence failing which they were informed that their names would be struck off from the muster roll; (5) that notwithstanding those notices and the willingness of the management to take them back the Respondent gave no reply and continued the strike till they were informed by letters dated 25 2 59, 4 3 59 and 17 3 59 that their names were removed from muster roll; and (6) that no domestic enquiry was held into the misconduct of the Respondents.
On these admitted facts it is sought to be contended on behalf of the Appellant that the Management took every possible step to get the workmen back into their factory but they were adamant in continuing the strike.
In these circumstances they could do nothing else but to terminate their services and take in fresh hands in order to keep the factory going.
It may be mentioned that the management immediately after the strike served charge sheets calling upon them to show cause why proper legal action should not be taken against them.
In those charge sheets they had al leged that the Respondents had indulged in intimidation, unjustified slogan mongering and inciting the workers to remain on strike.
The workmen by their letters denied the allegations against them.
Thereafter the management seem to have dropped these charges and tried to persuade them to join work.
It would be useful to examine the correspondence of a typical case.
On 5 2 59 by exhibit A3 the management served a notice and wrote to Amar Nath son of Brijlal, as follows : "Please take notice that from the afternoon of 25 1 59 you are on strike, which is illegal due to the pendency of proceedings before the Punjab Labour Court, Amritsar in reference No. 150 of 1958.
This Strike of yours is wholly unjustified.
In spite of the various persuasive attempts by the management and the Labour Department, Amritsar, you have failed to resume work.
If you will not come to duty on 8th Feb. 59 the management would employ fresh hand in your stead as the management can ill afford to keep the work at a standstill.
You will have in that event no claim to any reinstatement or compensation.
Management is however prepared to consider you as one of the new entrants, should you be selected for appointment.
This application should reach in writing by 9th Feb. '59".
496 A copy of this letter was given to the Labour Commissioner, Ambala Cantt.
as well as Labour Inspector and Labour Officer, Amritsar.
When this Workman did not join his duty the management by exhibit A4 wrote another letter to him on 21 2 59.It said : "You were served with a registered notice on 5 2 59 that you since the afternoon of 25th Jan. '59 are on illegal and unjustified strike along with other workers You were given an opportunity to report for duty upto 8 2 59.
But uptil today you did not report yourself for duty by which it is clearly patent that you do not want to work in the factory.
Therefore show cause as to why your name be not struck off from the muster roll of the factory.
The factory management also gave you a chance that you can join on new services.
but you did not do even that, which clearly shows that your stand is totally illegal and baseless.
Factory cannot be closed in any event, thus your coming on duty was necessary.
If you will not give any satisfactory reply then your name will be struck off from the muster roll of the factory.
Your repl y should reach upto 25 2 59".
Copies of this letter were also given to the Labour Officer referred to above.
When no reply was received to this letter the management terminated the services by exhibit A7 dated 4 3 59 which is as follows: "For your continued absence since the afternoon of 25 1 59 and in spite of repeated requests to come and join duty you have failed to resume work.
You have also failed to show cause in pursuance to our letter dt.
21 2 59 as already intimated for your abandonment of service and/or illegal strike.
In view of your these illegal activities the management has struck off your name from the muster roll of the Mills w.e.f. 4 3 59".
The Respondent 's advocate while not denying these letters as above contends that the earlier letters had charged them with incitement and stay in strike and intimidation etc.
but the management gave the go by to it and have terminated the service for merely going on a peaceful strike and by subsequent letters it was made clear that the object of the management was to employ the workmen afresh and deprive them of the past benefits which had accrued to them.
He further submits that merely because workmen have gone on a strike which is a weapon for obtaining their redress, the relationship of employer and employee does not come to an end and if the workmen have behaved in a violent manner or incited or intimidated other workmen, even then the management cannot terminate their services without holding an 497 enquiry into the alleged misconduct but as no such enquiry was held the termination is illegal.
The question however would be whether before the services of the workmen, who are on strike, are terminated, is an enquiry into their misconduct obligatory and would an omission to comply with this requirement, make the order of termination illegal? It appears to us that merely because workmen go on strike it does not justify the management, in terminating their services.
In any case if allegations of misconduct have been made against them those allegations have to be enquired into by charging them with specific acts of misconduct and giving them an opportunity to defend themselves at the enquiry.
Even where a strike is illegal it does not justify the management from terminating their services merely on that ground, though if it can be shown on an enquiry that the conduct of the workmen amounted to misconduct it can do so.
While it is an accepted principle of industrial adjudication that workmen can resort to strike in order to press for their demands without snapping the relationship of employer and employee, it is equally a well accepted principle that the work of the factory cannot be paralysed and brought to a standstill by an illegal strike, in spite of legal steps being taken by the management to resolve the conflict.
The management have the right in those circumstances to carry on the work of the factory in furtherance of which it could employ other workmen and justify its action on merits in any adjudication of the dispute arising thereform.
In Express Newspapers (P) Ltd. vs Michael Mark & Anr.,(1) where certain ' employees who had indulged in ill gal strike did not join their duty in spite of notices given by the management and their places were filled up by others, applied for relief under the Payment of Wages Act but the, application was dismissed.
The workers moved the High Court under article 226 and their Writ Petitions were allowed.
This Court in Appeal held that the Standing Orders contemplated termination of employment by the employer and in those cases there could be no doubt that the Appellant had terminated the employment, ,of the Respondents by removing their names from the muster roll without giving them any notice of such removal.
It was also held that if employees absent themselves from work because of strike in enforcement of their demands, there can be no question of abandonment of employment by them and that if the strike was in fact illegal, the Appellant could take disciplinary action against the employees under the Standing Order and dismiss them.
(1) 498 This case merely illustrates what has been stated by us that even where the strike is illegal a domestic enquiry must be held.
In the case before us admittedly there were no Standing Orders applicable to the appellant.
Nonetheless a domestic enquiry should have been held in order to entitle the management to dispense with the services of its workmen on the ground of misconduct.
This view of ours is also supported by another case of this Court in India General Navigation & Railway Co. Ltd. vs Their Workmen(1) where it was held that mere taking part in an illegal strike without anything further would not necessarily justify the dismissal of all the workers taking part in the strike and that if the employer, before dismissing a workman, gives him sufficient opportunity of explaining his conduct and no question of mala fides or vicitimisation arises, it is not for the Tribunal in adjudicating the propriety of such dismissal, to look into the sufficiency or otherwise of the evidence led before the 'enquiring officer or insist on the same degree of proof as is required in a Court of Law, as if it was sitting in appeal over the decision of the employer.
, It may be mentioned that in the case of a domestic enquiry where misconduct is held to be proved the Tribunal can only interfere with that order if there is mala fides or want of good faith, there was victimisation or unfair labour practice or the management has been guilty of basic error or violation of the principles of natural justice or on the materials the finding is completely baseless or perverse.
If however the management does not hold such an enquiry or the enquiry is due to some omission or deficiency not valid it can nonetheless support its order of discharge, termination or dismissal when the matter is referred for Industrial adjudication by producing satisfactory evidence and proving misconduct.
Even in such cases the evidence which is produced to substantiate and justify the action taken against the workmen is not as stringent as that which is required in a Court of Law.
At any rate the evidence should be such as would satisfy the Tribunal that the order of termination is proper.
The Appellant before us on the evidence produced before the Tribunal seeks to justify its order removing the names of the Respondents from the muster roll.
In the Punjab National Bank Ltd. vs Its Workmen,(2) though there was no enquiry held by the management it sought to justify the action of termination of services of its employees before the Industrial Tribunal.
The employees of the Appellant Bank had commenced pen down strikes which were followed by general strike Pending arbitration of an industrial dispute between them.
On the intervention of the Govt.
the Bank reinstated all the employees (1) ; (2) ; 499 except 150 against whom it had positive objection and it is in respect of those workmen that a dispute was referred under Section 10 of the Act for adjudication.
One of the two issues that was referred to the Tribunal was whether 150 employees had been wrongly dismissed.
The Tribunal did not hear any evidence and by its final award held that the strike was illegal, the Bank, was, on that ground alone, justified in dismissing the employees.
On Appeal the Labour Appellate Tribunal held that even though the strikes were illegal under Sec.
23(b) read with 24(1) of the Act, the Bank had by entering into, the agreement with the Govt.
of India, waived its right to take penal action against its employees for joining the illegal strikes and that therefore, an enquiry should be held on additional evidence to decide the disputes on merits.
Against this interlocutory order the Bank appealed to this Court which held that while the strikes were no doubt illegal under Sec.
23 (b) of the Act, the orders of dismissal passed by the Bank were no less so under See.
33 of the Act and it dismissed the Appeal.
The Appellate Tribunal thereafter, heard the cases on merits, directed the reinstatement of 136 of the said employees, but refused to reinstate the rest whom it found guilty of issuing posters and circulars subversive of the credit of the Bank.
Both the Bank and the workers appealed to this Court.
It was held that under Sec.
33A of the Act as construed by this Court the jurisdiction of the Tribunal was not limited to an enquiry as to the contravention of Sec. 33 of the Act.
Even if such contravention was proved, the employer could still justify the impugned dismissal on merits and there was no difference in this regard between a reference under Sec.
10 of the Act and a dispute raised under Sec.
33A of the Act.
In Workmen of Motipur Sugar Factory (P) Ltd., vs Motipur Sugar Factory,(1) the workers of the Respondent started a go slow in its Sugar Factory.
Therefore the Respondent issued a general notice to those workmen and individually to each workman notifying that unless he recorded his willingness to discharge his duties faithfully and diligently so as to give a certain minimum output, he will be no longer employed and the willingness he was required to record was to be done within a certain time failing which he was notified that he would be discharged without further notice.
Respondents held no enquiry as required by the Standing Orders before dispensing with the services of the Appellant.
A general strike followed resulting in a joint application by both the parties to the Govt.
and the Govt.
referred the question to the Tribunal.
In the notice given by the Respondents it was stated that the go slow tactics was likely to injure the (1) ; 500 factory resulting in a major breakdown of the machinery.
The Tribunal came to the conclusion that there was go slow during ,the period and consequently held that the discharge of the workmen was fully justified.
It was contended before this Court that what the Tribunal had to concern itself was whether the discharge of the workmen for not giving an undertaking was justified or not and that it was no part of its duty to decide that there was go slow which would justify the order of discharge and ,that since the Respondents held no enquiry as required by the .Standing Orders it could not justify the discharge before the Tribunal.
It was pointed out in that case that the Court had consistently held that if the domestic enquiry is irregular, invalid or improper the Tribunal may give an opportunity to the employer to prove his case and in doing so the Tribunal tries the merits itself and that no distinction can be made between cases where the domestic enquiry is invalid and those where no enquiry has in fact been held.
It was observed at page 603: "Looking at the matter in this broad way and that is all that we are prepared to do, for we are examining a finding of fact of the tribunal we cannot say that its conclusion that there was go slow between November 27 and December 15 is not justified .
But as we have already indicated, the charge in the notice ,of December 15 was that the workmen had been going slow from November 27 and they were asked to give an undertaking to improve and the respondent was apparently willing to overlook the earlier lapse.
Even assuming that the demand of an undertaking was un justified, it does appear that the attitude of the workmen was that they would do no better; and in those circumstances they were discharged on December 17, 1960, on the basis of misconduct consisting of go slow between November 27 and December 16, 1960.
That misconduct has been held proved by the Tribunal and in our opinion that decision of the Tribunal cannot be said to be wrong.
In the circumstances the Tribunal was justified in coming to the conclusion that the discharge was fully justified.
" In a recent case the Hindustan General Electrical Corporation Ltd. vs Bishwanath Prasad & Anr.,(1) while considering this aspect of the matter we had held that even though no enquiry was held or there was contravention of the provisions of Sec. 33 ,of the Act, in a dispute referred under Sec.
10 the Labour Court had to adjudicate upon the dispute which was referred to it with regard to the Respondent and had to go into the question (1) Civil Appeal No. 2167 of 1966 Judgment delivered on 17 8 71, 501 as to whether he had been properly dismissed.
In other words the management can justify and substantiate its action on evidence duly placed before the Tribunal.
The learned Advocate for the Respondents however urges that even where the strike is illegal in order to justify the dismissal or the order terminating the services of workmen on the ground of misconduct the management must prove that they were guilty of some overt acts such as intimidation, incitement or violence.
We do not think that in every case the proof of such overt acts are necessary prerequisite.
In this case there is a persistent and obdurate refusal by the workmen to join duty notwithstanding the fact that the management has done everything possible to persuade them and give them opportunities to come back to work but they have without any sufficient cause refused, which in our view would constitute misconduct and justify the termination of their services.
The workmen as spoken to by the Labour Officers and also as, is evidenced by the documentary evidence to which we have referred, were unwilling to join duty till the workmen who were suspended were also taken back.
There is nothing to justify the allegation that the management wanted to terminate their services under some pretext with a view to recruit them afresh and deprive them of accrued benefits.
The notices clearly mention that the workmen would be free to join duty by a certain date and only after that date ,the management was prepared to entertain them a, new entrants if they were to apply by the date specified in the notices.
It appears to us therefore that management has proved misconduct and the stand taken by it was reasonable.
There was nothing that it could do further in view of the unjustified attitude taken by the workers by staying away from work particularly after they were given over a month 's time within which to commence work.
In the view we take the order terminating their services was not improper.
The Tribunal was not justified in directing their reinstatement and payment of wages merely on the round that no domestic enquiry was held.
The appeal is accordingly allowed except for the Award in respect of Surat Singh, which is maintained.
Having regard to the circumstances of the case there will be no order as to costs.
V.P.S. Appeal allowed.
| IN-Abs | While a reference was pending before the Labour Court the respondent workmen went on strike because some workmen were suspended.
The Labour Officer as well as the management tried to persuade the workers to rejoin duty, but the respondents, made it a condition of their joining duty that the suspended workmen should also be taken back.
The management thereafter gave the respondents notices on different dates asking them to join duty by a date specified in the notices and subsequently, by another letter, called upon them to justify their absence, failing which.
the respondents were informed, that their names would be struck off from the muster roll.
Notwithstanding those notices and the willingness of management to take them back the respondents gave no reply but continued the strike and they were informed by letters that their names were removed from the muster roll.
No domestic inquiry however, was held into the misconduct of the respondents.
The Labour Court, to which the dispute was referred directed reinstatement of the respondents.
In appeal to this Court, on the: question whether the termination of the employment of the respondents, in the circumstances of the case, without an inquiry, was justified.
HELD : (1) It is an accepted principle of industrial adjudication that workmen can resort to strike in order to press for their demands without snapping the relationship of employer and employee.
, Equally, the management have the right to carry on work, in furtherance of which, they could employ other workmen and justify their action on merits in any adjudication of the dispute arising therefrom.
[497 C E] (2) Merely because workmen go on strike, even where the strike is illegal, it does not justify the management in terminating their services without a domestic inquiry.
[497 C] (3) In the case of a domestic inquiry where misconduct is held to he proved, the industrial tribunal or labour court can only interfere with that order if there is mala fide, or want of good faith or there was victimisation or unfair labour practice or the management has been guilty of basic errors or violation of principles of natural justice or if on the materials, the finding is completely baseless or perverse.
If, however, the management does not hold an inquiry, or the inquiry is, due to some omission or defi ciency, not valid, the management can nonetheless support the order of discharge, termination or dismissal when the matter is referred for industrial adjudication by producing satisfactory evidence and proving misconduct of the concerned workmen.
The evidence to substantiate and justify the action taken against the workmen is not as stringent as that 491 which is required in a court of law, but should be such as would satisfy the tribunal that the order of termination was proper.
In such a case, there is no difference between a reference under section 10 of the Industrial Disputes Act and a dispute raised under section 33A of the Act, and, no distinction can be made between cases where the domestic inquiry is invalid and those where no inquiry has, in fact, been ,held.
That is, the management can justify and substantiate its action on evidence duty place before the Tribunal.
[498 E G; 499 E F; 500 C D; 501 A B] (4) In the present case, there were no Standing Orders applicable to the appellant company.
A domestic inquiry should have been held in order to entitle the management to dispense with the services of its workmen on the ground of misconduct.
[498 A B] (5) But the management had proved before the Labour Court that there was persistent and obdurate refusal by the workmen to join duty notwithstanding the fact that the management had done everything possible to persuade them and gave them opportunities to come back to work; and that the respondents had, without any sufficient cause refused to do.
The strike was illegal and it was not necessary for the management to prove that the respondents were guilty of overt acts of intimidation, incitement or violence.
There, is nothing to justify the allegation that the management wanted to terminate to their services under some pretext with a view to recruit them afresh and deprive them of accrued benefits.
, The notices clearly mentioned that the workmen would be free to join duty by a certain date, and it was only after that date the management was willing to entertain them only as new entrants.
Therefore, though no domestic, inquiry was held, the management had proved the misconduct of the respondents before the Labour Court and hence the termination of their services was not improper, and there was no justification for directing their reinstatement.
[501 C G] Express Newspapers (P) Ltd. vs Michael Mark & Anr., , India General Navigation & Railway Co. Ltd. vs Their Workmen; , , Punjab National Bank Ltd. vs Its Workmen ; , Workmen of Motipur Sugar Factory (P) .
Ltd. vs Motipur Sugar Factory, ; and Hindustan General Electrical Corporation Ltd. vs Bishwanath Prasad & Anr.
C.A. No. 2167/66 dt.
17 8 71, followed.
|
minal Appeal No. 100 of 1969.
572 Appeal by special leave from the judgment and order dated January 8, 1969 of the Bombay High Court in Criminal Application No. 1341 of 1968.
C. L. Sareen and J. C. Talwar, for the appellant.
P. K. Chatterjee and section P. Nayar, for the respondent.
The Judgment of the Court was delivered by Shelat, J.
The appellant and one Bakshi Singh Sunder Singh were accused No. 2 and accused No. 1 respectively in the committal proceedings before the Presidency Magistrate, 28th Court, Greater Bombay.
This appeal, by special leave, is directed against the judgment of the High Court of Bombay refusing to quash the order of committal passed by the learned Magistrate.
The facts relevant to this appeal are few and may first be stated.
On October 31, 1963, one Jivansingh Uttam Singh obtained a British passport bearing No. 183459 at Nairobi.
On the strength of that passport he was returning to India with his family.
On his way he died on board the ship.
According to the prosecution that passport came into the hands of the appellant.
Bakshi Singh desired to go to the United Kingdom, but had no passport.
The appellant agreed to arrange his journey and also for that purpose to obtain a passport for him.
The allegation was that the appellant prepared an applica tion for a visa in the name of Bakshi Singh.
It was further alleged that with a view to procure the said visa the photograph of the said deceased Jivansingh was removed from the said passport and that of Bakshi Singh substituted.
The visa having in this fashion been obtained, Bakshi Singh journeyed to the United Kingdom having on his way made some intermediate halts.
The British authorities suspected that the, passport was a forged document and repatriated Bakshi Singh to India.
On his arrival he was handed over to the Special Police, Bombay.
The Special Police carried out investigation in the course of which they recorded statements of certain witnesses including that of Tanna Singh, the younger brother of Bakshi Singh.
On completion of the investigation, the police filed a charge sheet before the learned Magistrate.
That charge sheet is not before us.
But counsel for the appellant informed us that Bakshi Singh was therein charged under secs.
419 and 471 read with sec.
468, and the appellant was charged under secs.
419/109, 468 and 471 of the Penal Code.
Counsel also.
informed us that the Magistrate did not examine any witnesses, during the committal 573 proceedings but on a perusal of the charge sheet and the documents filed before him under sec.
173 of the Code of Criminal Procedure he framed the charges and committed, by his order dated September 13, 1968, Bakshi Singh and the appellant for trial before the Sessions Court.
By that order he directed the said Bakshi Singh to stand his trial under secs.
120B, 419, 467 and 471 read with sec.
467, and the appellant under secs.
120B and 467 of the Penal Code.
The offence of criminal conspiracy charged under sec.
120B was that the said Bakshi Singh and the appellant had conspired to forge the said passport for the use of the said Bakshi Singh.
In the High Court various contentions were raised on behalf of the appellant in support of his application under sec.
561A of the Code of Criminal Procedure including that under sec.
196A (2).
That contention was that no consent as required by sec.
196A(2) having been first obtained, the Magistrate had no jurisdiction to take cognizance of the offence of conspiracy, and therefore, the committal order was without jurisdiction and had to be quashed.
In this appeal we are concerned only with that contention as the special leave ranted to the appellant has been limited to that ground alone.
Sub sec.
2 of sec.
196A, which is relevant to the present case, provides that no court shall take cognizance of the offence of criminal conspiracy punishable under sec.
120B of the Penal Code in a case ' inter alia where the object of such conspiracy is to commit any non cognizable offence.
There is no doubt that the charge, as framed by the Magistrate and for which he committed the appellant and Bakshi Singh to stand their trial before the Sessions Court, was for criminal conspiracy, the object of which was to forge the said passport, a non cognizable offence.
In respect of that offence, sec.
196A(2) would undoubtedly apply.
What that section prohibits is taking cognizance of an offence of criminal conspiracy unless consent to the initiation of proceedings against the person charged with it has been first obtained.
As provided by sec.
190 of the Code of Criminal Procedure, a Magistrate may take cognizance of an offence either (a) upon receiving a complaint, or (b) upon a police report, or (c) upon information received from a person other than a police officer or even upon his own information or suspicion that such an offence has been committed.
As has often been held taking cognizance does not involve any formal action or indeed action of any kind but occurs as soon as a Magistrate applies his mind to the suspected commission of an offence.
Cognizance, therefore, takes place at a point when a magistrate first takes judicial notice of an offence.
This is the position whether the magistrate takes 574 cognizance of an offence on a complaint or on a police report, or upon information of a person other than a police officer.
Therefore, when a magistrate takes cognizance of an offence upon a police report, prima facie he does so of the offence or offences disclosed in such report.
It is not in dispute that the charge sheet submitted by the police officer for the purpose of initiation of proceedings by the magistrate was for offences under sees.
419 and 471 read with sec.
468 against Bakshi Singh and under sees.
419/109, 471 and 468 against the appellant.
The charge sheet admittedly did not refer to or charge either of them with criminal conspiracy under sec.
120B. Prima facie it is not possible to say that at the stage when the police filed the charge sheet the Magistrate took cognizance of the offence, under sec.
120B, for, that was not the offence alleg ed in the charge sheet to have been committed by either of the two accused persons.
True it is that the Magistrate ultimately drew up charges which included the offence under sec.
120B, the object of which was to forge the passport, an offence under sec.
The Magistrate also did not consider it necessary to examine any witnesses and frame the charges on a perusal of the charge sheet submitted to him by the police, the statement of witnesses recorded by the police during their investigation and such other documents as were filed under sec.
173 of the Code of Criminal Procedure &,fore him.
The materials before him, therefore, were the same as were before the police officer who had filed the charge sheet.
But while drawing up the charges and passing his order of committal, the Magistrate considered that though the charge sheet filed before him alleged the commission of offences under secs.
419/109, 471 and 468, the proper charge on the materials before him, although they were the same as before the police officer, warranted a charge of criminal conspiracy for forging a passport.
It is quite clear, however, that the cognizance which he took was of the offences alleged in the charge sheet because it was in respect of those offences that the police had applied to him to initiate proceedings against Bakshi Singh and the appellant and not for the offence under sec.
It was at a later stage, i.e., at the time of passing the committal order that he considered that a charge under sec.
120B was the more appropriate charge and not a charge under sec.
109 of the Penal Code.
That being so, it must be held that the Magistrate took cognizance of the offence of abetment of an offence of forgery and impersonation so far as the appellant was concerned and not of the offence of criminal conspiracy, and therefore, sec.
196A(2) did not apply.
Counsel in this connection relied on certain observations made in a minority judgment of section K. Das, J., in Pramatha Nath 575 Taluqdar vs Saroj Ranjan Sarkar.
(1) The question involved there was, whether a second complaint could be entertained by a magistrate who or whose predecessor had on the same or similar allegations dismissed a previous complaint, and if so, in what circumstances should such a complaint be entertained.
Arising .
out of this question a contention was raised whether on the complaint, as it was framed, the Magistrate had the jurisdiction to, take cognizance of the offences alleged in the complaint in the, absence of a sanction under sec.
The second complaint alleged offences under secs.
467 and 471 read with sec.
109 of the Penal Code.
But in para 5 thereof, there was an allegation as to criminal conspiracy and it was on the basis of that allegation that sec.
196A(2) was sought to be involved.
It was in this connection that the learned Judge at page 315 of the report, observed : "It would not be proper to decide the, question of sanction me rely by taking into consideration the offences mentioned in the heading or the use of the expression " criminal conspiracy" in para, 5.
The proper test should ' be whether the allegations made in the petition of complaint disclosed primarily and essentially an offence or offences for which a consent in writing would be necessary to the initiation of the proceedings within the meaning of section 196A(2) of the Code of Criminal Procedure.
It is from that point of view that the petition of 'complaint must be examined.
" The learned Judge ultimately held that though the offence of criminal conspiracy was alluded to in para 5 of thesaid complaint, the offence "primarily and essentially" chargedwas abetment by conspiracy under sec.
109 of the Penal Code, and therefore.
no consent under sec.
196A(2) was required.
In Biroo Sardar vs Ariff (2) the view also taken was that itis not the, sections referred to which matter but the offence prima facie disclosed.
Following that decision, the High Court of Bombay in Ramchandra vs Emperor(3) observed that the question whether sanction is necessary or not depends not on the sections referred to in a complaint but the offence prima facie disclosed '.
by the facts alleged in it.
It is clear from the charge sheet submitted to the magistratethat the offence of criminal conspiracy was not even referred to.
The offence "primarily and essentially" alleged therein was oneof abetment of forgery under secs.
468 and 471 and of false, (1) [1962] Supp. 2 S.C.R. 297.
(2) A.I.R. 1925 Cal.
(3) A.I.R. 1939 [Bom.] 129.
576 impersonation under sec.
419 read with sec.
Assuming that the Magistrate before taking cognizance had persued the statements of witnesses recorded by the police during investigation, it was conceded by counsel, after he himself had gone through them from the record, that none of the witnesses had alleged therein either directly or indirectly of the appellant having entered into a criminal conspiracy with Bakshi Singh for forging the passport.
It cannot be disputed that the charge sheet also prima facie disclosed the offence of abetment.
That being so, it is ,impossible to sustain the argument that the Magistrate took cognizance of the offence under sec.
120B, and therefore, consent under sec.
196A(2) was required as a condition precedent or that the committal order and the proceedings for committal which be took were vitiated for want of such consent.
The appeal, therefore, fails and is dismissed.
V.P.S. Appeal dismissed.
| IN-Abs | The police filed a charge sheet against the appellant and another for various offences in connection with the fabrication of a British passport.
The offences mentioned in the charge sheet against the appellant were sections 419/109, 468 and 471, I.P.C., and against the other accused sections 419 and 471 read with section 468.
The Magistrate did not examine any witnesses, but after perusing the charge sheet and other documents filed before him under section 173, Cr.P.C., framed charges against the two accused and committed them for trial before the Sessions Court.
The charges against the accused included the offence under section 120B, I.P.C., the object of the conspiracy being, to commit the non cognizable offence of forging the passport.
The appellant filed an application in the High Court for quashing the committal order on the ground that no consent, as required by section 196A(2), Cr.
P.C., having been obtained, the Magistrate had no jurisdiction to take cognizance of the offence of conspiracy.
The High Court dismissed the application.
Dismissing the appeal to this Court, HELD : (1) Cognizance takes place when the Magistrate takes judicial notice of an offence.
Therefore, when a Magistrate takes cognizance of an offence under section 190, Cr.
P.C. upon a police report, prima facie he does so of the offences alleged in the report.
[573 H; 574 A] In the present case the charge sheet did not refer to or charge either of the accused with criminal conspiracy.
The cognizance which the Magistrate took was therefore, only, of the offences alleged in the chargesheet, and it was only at the later stage of passing the committal order that he considered that a charge under section 120B was more appropriate than that of abetment.
[574 F H] (2) Even on the basis that it is not the sections referred to in the charge sheet that matter, but the offence prima facie disclosed by the allegations, in the present case the offence 'primarily and essentially disclosed in the charge sheet and other documents was one of abetment of forgery and of the false impersonation.
[575 F H] Therefore, the Magistrate did not take cognizance of the offence under section 120B, I.P.C., and hence, consent under section 196A(2) Cr.
P.C., was not a condition precedent.
[576 B C]
|
l 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).
621 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 section 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 section 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 622 ,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 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 section 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 623 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. vs 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.
vs 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 section 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.
vs 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 section 205 of the and section 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 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) (2) (3)46 T.T.R. 640. 624 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 625 as refund under section 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 sections 12(1 A), 16(2), 18(5), 20 and 35 (9) of the Act.
Dividend is treated as income in view of section 12(1 A).
Net dividend received by the shareholder is grossed up for inclusion in the total income of the assessee under section 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./ /2 626 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.
| IN-Abs | 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 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 section 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.
vs 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 section 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.
vs Commissioner of Income tax, Bombay, , 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 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 section 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.
|
iminal Appeal No. 3 of 1971.
Appeal by special leave from the judgment and order dated October 30, 1970 of the Jammu and Kashmir High Court in Criminal Appeal No. 12 of .1969 and Criminal Reference No. 10 of 1969 628 Ram Asray Misra, Risi Ram, O. P. Rana and R. Bana, for the appellant.
D. Mukherjee and R. N. Sachthey, for the respondent.
The Judgment of the Court was delivered by Dua, J.
Only two points were argued at the bar in this appeal by special leave because if we agree with the appellant 's learned counsel on these points then the appeal must succeed ,and the appellant must be acquitted without going into the other points relating to the appellant 's guilt intended to be raised on his behalf by his counsel.
The relevant facts of the ease necessary for appreciating the two important points relating to the legality of the appellant 's conviction may briefly be stated On the morning of October 7, 1967 a football match was being played at the Srinagar Stadium between the Kashmir Uni versity and the Punjab University teams.
The Kashmir University team (hereafter called the home team) was the first to secure one goal against the Punjab University team (hereinafter called the visiting team).
The players of the home team were naturally ,cheered by the spectators, when they scored the first goal.
After ;a few minutes the visiting team equalised the score and a little later secured another goal against the home team.
This in turn brought cheers and applause for the visiting team from the spectators.
It appears that some of the more enthusiastic spectators rushed to the football ground and are said to have made some provocative gestures towards the players of the home team.
This apparently annoyed not only the players of the home team but also their sympathisers amongst the spectators and a clash between the rival sets of sympathisers of the two teams amongst the spectators followed.
As usually happens on such occasions stones were thrown at each other by the two rival groups.
These rival groups are stated to be those of Kashmir is on the one side and Punjab is on the other.
The headquarters of the P.A.C. (Police Armed Constabulary) are also stated to be located in the Stadium and some members of that force were present at the match.
The young men of the P.A.C. came to the spot and with their dandas put the people to flight.
Up to this stage there seems to be no controversy.
According to the prosecution case as stated by P. W. Abdul Gani Sheikh, on April 24, 1969 when the people bad left the Stadium the appellant, to use the words of the witness in his examination in chief. ". was seen descending the bund, in the direction of the stadium cycle shed.
The accused carried a gun in the hand.
He had a helmet on the bead.
629 Getting down the bund, the accused got near the cycle shed.
There he did something for a minute or a half.
Forthwith he opened the door of the cycle shed and came out.
The accused was facing the Militia wall.
As he turned his face that side, he fired a shot.
The shot hit the Militia wall.
I was at a distance of nearly 50 yards from the accused.
After firing the shot, the accused came on the main road which leads to the aerodrome.
A zamindar was going on it.
At the sight of the accused he stopped.
The accused fired a shot at him.
He fell along the drain adjoining the Militia wall.
Thereafter the accused turned to the right side.
There, on the other side of the road, in the direction of Hazuri Bagh Maidan, a young man in suit and boots was going there.
At the sight of the accused he too stopped.
There was exchange of some talk between him and the accused.
I did not hear what he spoke.
However, I saw that man facing the accused, with.
folded hands.
Then the accused fired a shot at him.
He fell down immediately on receiving the shot.
Then the accused again turned towards that Zamindar, at whom he had fired the first shot.
He fired another shot at him.
Thereafter, the accused turned towards a boy, aged 15 or 16 years, who was going towards Mira Kadal.
He fired a shot at him.
The boy did not fall down, may he took to his heels.
He ran in the direction of the tonga stand on the side of Mira Kadal.
Thereafter he fired again at the Young man in suit and boots, at whom he had already fired a shot.
Thereafter he fired another shot at the Zamindar.
The accused fired more shots as well after that.
In the meantime, three more men appeared there.
They were the accused 's men.
Besides.
a sardar of the K. A. P. also appeared at the spot.
They got hold of the accused and took him inside.
They were trying to snatch the rifle from the accused.
Another person held the rifle and the accused was taken inside the stadium.
I made a report of this occurrence at police station Sher Ghari, which may be at a distance of 150 yards from the place of occurrence.
I made an oral report.
I have heard the contents of the first information report.
The same are correct.
The police recorded what I stated.
I affixed my signatures to it.
It is correct.
(Note : It is marked Ext.
P/ I)" The learned Sessions Judge, Srinagar, Qazi Mirajudin, in whose court the appellant was tried for offences under sections 302 and 307, I.P.C. convicted him for both the offences imposing 630 the sentence of death under section 302 and rigorous imprisonment for five years under section 307, I.P.C. Charges under section 302 related to the death of Ghulam Mohd. Fuchey who died in the hospital on the day of the occurrence and also to the death of Aziz Teli who died two days later on October 9, 1967 at 5 50 p.m.
The charge under section 307, I.P.C; related to the injuries caused to P. W. Abdul Ghani Sheikh.
On appeal, the High Court which had before it also the sidered it necessary to examine the ballistic expert for elucidating certain points.
That Court permitted the appellant also to examine another ballistic expert Siyaram Gupta by name and also Shri Ratan Sahgal and C. L. Wasan, Commandant (U.P. P.A.C.).
,C. L. Wasan was allowed to be examined even though he had already been examined earlier as a prosecution witness.
It may also be stated here that the appellant wanted to produce some more witnesses in defence, but permission to do so was declined by the High Court and the appellant 's Counsel before us raised a grievance on this score as well.
The High Court, after considering the evidence, dismissed the appeal and confirmed the sentence of death.
An oral prayer for certificate to appeal to this Court was declined.
On behalf of the appellant it is not disputed before us that somebody did resort to firing during the disturbance in the course of the football match on October 7, 1967 and two persons were actually killed as a result thereof.
The first question raised before us in this connection is that there is no legal evidence that it was the appellant who fired the fatal and other shots in question on this occasion.
This indeed is the principal point urged.
And the second point which arises out of discussion on this point relates to the scope and effect of sections 161 and 162, Cr.
P.C. and the admissibility at the trial of the statements made by some of 'the witnesses to the police during investigation under section 161, Cr.
The High Court appears to have relied on such statements in their entirety for seeking corroboration of the statement made by the prosecution witnesses in court and ultimately for the purpose of sustaining the appellant 's conviction.
Incidentally, the manner in which the investigating agency conducted the investigation of this case also came up for serious criticism at the hands of the appellant 's counsel, it being urged that the investigation was not objective and impartial but smacked of prejudice against the appellant and was, therefore, unfair.
The investigation was however, sought to be justified by the counsel for the State.
The evidence of identification of the appellant on which the courts below placed reliance for convicting the appellant has to be with great care in order to see if such evidence is 631 legally admissible and on the facts and circumstances of this case this scrutiny must, in our opinion, include within its purview the manner in which the investigation of the alleged offences was conducted by the authorities concerned.
Before dealing with the evidence relating to identification of the appellant it may be remembered that the substantive evidence of a witness is his evidence in court but when the accused person is not previously known to the witness concerned then identification of the accused by the witness soon after the former 's arrest is of vital importance because it furnishes to the investigating agency an assurance that the investigation is proceeding on right lines in addition to furnishing corroboration of the evidence to be given by the witness later in court at the trial.
From this point of view it is a matter of great importance both for the investigating agency and for the accused and a fortiori for the proper administration of justice that such identification is held without avoidable and unreasonable delay after the arrest of the accused and that all the necessary precautions and safeguards are effectively taken so that the investigation proceeds on correct lines for punishing the real culprit.
It would, in addition, be fair to the witness concerned who was a stranger to the accused because in that event the chances of his memory fading are reduced and he is required to identify the alleged culprit at the earliest possible opportunity after the occurrence.
It is thus and thus alone that justice and fairplay can be assured both to the accused and to the prosecution.
The identification during police investigation, it may be recalled, is not substantive evidence in law and it can only be used for corroborating or contradicting evidence of the witness concerned as given in court.
The identification proceedings, therefore, must be so conducted that evidence with regard to them when given at the trial, enables the court safely to form appropriate judicial opinion about its evidentiary value for the purpose of corroborating or contradicting the statement in court of the identifying witnesess.
We may now turn to the evidence on the record.
Abdul Ghani Sheikh who claims to be the eye witness to the occurrence lodged the first information report (exhibit P 1) at 11 30 a.m. at the police station only about 200 feet away from the stadium.
In order to appreciate the value of this report and the value of the testimony of this witness in court in regard to the description of the alleged culprit we consider it proper to reproduce the whole of this report.
It says "At the Stadium a football match was being plaved.
From there the P.A.C. men chased and turned out the people.
All the people came out from the gates on 632 the East and North.
They were going back through the Hazuri Bagh Road.
I was standing near the cycleshop which is situated close to the Stadium chowk.
A P.A.C. jawan came out of the main gate.
He carried a rifle.
He fired a shot towards the road.
It went in the direction of the Militia wall.
Thereafter the P.A.C. Jawan came on the road and fired shots.
lie went towards the Militia gate and inflicted bullet injuries on three of the persons going on the Road.
Then a P.A.C. Sardar and a B.S.F. Jawan with three P.A.C. men who carried Dandas in the hands, got held of the said Jawan.
They took him inside the Stadium.
The said Jawan fired nine or ten shots recklessly, though the way farers were going on the road in a peaceful manner.
There was no crowd, nor was there any breach.
* * * In the trial court in his examination in chief he deposed that he had seen the accused coming down the bund with a gun in his hand and helmet on his head and that he fired the fatal and other shots.
The relevant portion has already been reproduced earlier in this judgment.
In cross examination he stated that apart from the first information report he did not make any statement to the police excepting that he signed the seizure memos.
He also could not remember if he had stated to the police that the accused was known to him.
He was further unable to remember if the police had asked him this question.
After the occurrence he saw the accused only in court and he was never required to identify putting on a helmetand had also grown a beard when seen in court though at thetime of the occurrence the accused had a helmet on his head.
At this stage we may appropriately point out that according to P. W. Chaudhuri Ghulam Nabi Mir, S.R.O., Maharajganj, who, on hearing reports of gun shots while he was in the police station, had come out on the road, the statement of Abdul Ghani Sheikh was actually recorded by him.
This, according to the S.H.O. was recorded near the Stadium gate at the chowk ' which means the police beat where three roads meet.
On this report witness endorsed a note to the thana for drawing up F.I.R. Chaudhri Ghulam Nabi Mir has also stated in cross examination that he recorded the statements of the pro secution witnesses during investigation under section 161, Cr.
Curiously all those statements were admitted in evidence and marked as exhibits by the trial court.
According to the concluding part of Ghulam Nabi Mir 's cross examination in court, Abdul Ghani Sheikh had at first met him near the verandah of the 633 police station and since he was leaving in the direction of the place of occurrence Abdul Ghani Sheikh followed him.
From the statements made to the police which were exhibited in evidence we find that Abdul Ghani Sheikh also made a statement on October 7, 1967 marked as exhibit D 2.
It is important to point out that, according to Abdul Ghani Sheikh, he had not made any statement to the police besides the report exhibit P 1.
From the testimony of P. W. Abdul Ghani Sheikh it is obvious that he did not give any description of the person alleged to have fired the shots in question in exhibit P 1 which was the first information given by him to the police and on which the investigation started; nor did he state in exhibit P 1 that he knew the appellant previously.
He was never made to identify the accused.
He has obviously told lies on a vital point when he says in the witness box that excepting exhibit P 1 he had made no other statement to the police.
Though the contents of those statements cannot be used for any purpose other than that laid down in section 162, Cr.
P.C. the fact of that statement having been made can certainly be relied upon for the purpose of showing how untruthful Abdul Ghani Sheikh is or at least, taking a charitable view of this contradiction on his part, how undependable his memory is.
No attempt was made on behalf of the State before us to show if this witness had identified the accused in the committing magistrates court.
We have referred to the statement of this witness under section 161, Cr. PC.
because the High Court seems to have taken into consideration not only the statement of this witness under section 161, Cr.
P.C. for seeking corroboration of his testimony in court but the statements of a large number of other witnesses during investigation have also been used for this purpose.
This is what the High Court has said in its judgment : "Lastly it was contended that although some of the eye witnesses have stated that the appellant Rameshvwar Singh was called by name at the spot by his fellow constables and saying that he would get involved, yet the name of the appellant was not mentioned in the FIR, nor was the fact that the appellant was called by name and warned by his fellow constables stated therein.
This circumstance in our opinion is not sufficient to demolish the prosecution case or cast any serious doubt thereon.
To begin with, the first informant, Abdul Ghani Sheikh, has not stated in his evidence about the fact of the accused being called by name by his fellow constables.
Furthermore, this was a matter of minute detail and since the FIR was lodged imme diately after the occurrence, it may be that this particular detail was not mentioned in the FIR by the informant.
What is more important is that all the eye 634 witnesses including the informant were examined by the police immediately after the occurrence was over and the defence has not cross examined the investigating officer on the question that the fact mentioned above was not stated by the eye witness before the Investigating Officer at that time.
Thus it should be taken for granted that this fact though not mentioned in the FIR was clearly stated by the eye witnesses in their state ments before the police soon after the FIR was lodged.
In fact the statements of the eye witnesses recorded by the police which have been marked by the court below as Exs.
D 1 to 6 clearly show that the above mentioned fact was stated before the police when they were examined soon after the FIR was lodged.
Thus the charge that said fact appears to be belated one appears to us to be groundless." The High Court was clearly in error in taking into consideration the contents of the statement recorded under section 161, Cr.
P.C. during the course of investigation for the purpose of finding corroboration of the statements made in court.
Section 162, Cr.
P.C. lays down the limited use of such statements.
It says "Statements to police not to be signed; use of statements in evidence.
in the course of an investigation under this Chapter shall, if reduced into writing, be signed by the person making it; nor shall any such statement or any record thereof, whether in a police diary or otherwise, or any part of such statement or record, be used for any purpose (save as hereinafter provided) at any inquiry or trial in respect of any offence under investigation at the time when such statement was made; Provided that when any witness is called for the prosecution in such inquiry or trial whose.
statement has been reduced into writing as aforesaid, any part of his statement, if duly proved, may be used by the accused, and with the permission of the Court, by the prosecution to contradict such witness in the manner provided by Section 145 of the and when any part of such statement is so used, any part thereof may also be used 635 in the re examination of such witness, but for the purpose only of explaining any matter referred to in his cross examination.
(2) Nothing in this section shall be deemed to apply to any statement falling within the provisions of Section 32, Clause (1) of the , or to affect the provisions of Section 27 of that Act.
" The language of this section is plain and explicit and it admits of no doubt as to its meaning.
We do not consider it necessary to refer to a large catena of decisions reported in law reports and cited in text books stating the legal position with regard to the restricted use of such statements as laid down in section 162, Cr.
P.C. prohibiting the court from using them as corroborative of the statements in court.
Once this part of the reasoning of the High Court is elimi nated all that is left is the statement of Abdul Ghani Sheikh in court and his report exhibit P 1 made to the police.
That report, it is not disputed, does not contain any description of the alleged culprit.
Had the witness known the culprit earlier, one would have reasonably expected him to so state in the report.
if, however, without knowing him earlier he had formed a distinct impression of the culprit 's looks and bearing so as to 'be able to identify him later, then also one would have expected this witness to give in the report the description of the culprit as seen by him so as to provide the investigating authorities with something tengible as guideline to start with the investigation.
His identification in court without any previous identification at a test parade and without any description in exhibit P 1 to corroborate it, is far too slender a piece of evidence to base the appellant 's conviction thereon.
So, Abdul Ghani Sheikh 's evidence seems to us to be of no value in bringing home the offence to the appellant.
In the opinion of the High Court the evidence of Abdul Ghani Sheikh and of Noor Hussain is corroborated by P.Ws.
Abdul Hamid and Noor Mohammed Sheikh.
This is what the High Court says "The evidence given by Abdul Ghani Sheikh the informant and also Noor Hussain, a resume of which has been given above is corroborated by Abdul Hamid and Noor Mad.
Sheikh PWs in all material particulars.
All these witnesses, Noor Hussain, Abdul Hamid and Noor Mohd. have stated that they know the accused before the occurrence and they had occasion to see him before.
They disclosed the name of the accused on the 636 very date of occurence when they said that they heard his three companions shouting at him "Ramesh what are you doing, don 't be mad, you will be involved." Ghulam Nabi Mir, S.I. P.W. has clearly stated that it was on the very day of occurrence that the name of Rameshwar Singh, accused, was disclosed by Abdul Hamid and by some other witnesses.
" Here again, the High Court has committed the same error in seeking corroboration from the statements said to have been made to the police by Abdul Hussain and others during investigation.
We have also to consider further the circumstance that the High Court has not adverted to the omission on the part of the investigating authorities to take steps to arrest the appellant soon after the alleged disclosure of his name to them by the said witnesses, According to Ch.
Ghulam Nabi Mr. S.H.O., the appellant 's name was disclosed on the very day of the occurrence.
There is no plausible reason discernible on the record as to why such steps were not taken if the appellant 's identity as a result of the disclosure of his name became known to the authorities the same day.
The High Court appears to us not only to have erroneously disregarded the forms of legal process but has also failed to advert to important and vital aspects, thereby causing serious prejudice to the appellant.
In view of what has just been stated prima facie grave and substantial injustice cannot but be considered to have resulted from the infirmities in the impugned judgment.
Let us now see if the evidence of Noor Hussain, Abdul Hamid and Noor Mohd. Sheikh in any way advances the case of the prosecution.
Abdul Hamid (P.W. 2) who has a cycle shop about 9 or 10 yards from the Stadium chowk claims to have gone to see the match in question.
When the P.A.C. young men are said to have turned the people out of the Stadium during the course of the trouble this witness also went out.
He claims to have watched the entire occurrence from the roof of his shop through the window panes because he was afraid of being seen in the open lest he may also, be fired at.
It is from there that he claims to have heard when the P.A.C. men addressed the appellant : "Have you turned mad ? Ramesh, have you turned mad This seems to us to be wholly unacceptable and it appears to us that these words have been introduced in the, evidence for the purpose of providing the missing link of identification of the appellant.
Noor Mohd. Sheikh is the brother of Abdul Ghani Sheikh.
He also did not know the appellant and he never saw him after the occurrence till he came to court, several months later.
Though he claims to have given the description of the culprit to the police and to have also expressed his ability to identify him, he was for reasons not disclosed on the record, never 637 made to identify the appellant at any test identification parade,, He also claims to have gone to the police station with Abdul Ghani Sheikh though the latter claims to have gone there all alone.
Now, if he had actually heard the name of the appellant being shouted by the P.A.C. men as claimed by him and had accompanied his brother to the police station then there is no reason why the name of the culprit was not disclosed to the police and not included in the report, exhibit P 1.
Noor Hussain has also stated that three young men of the appellant 's unit came to the place of occurrence after the appellant had fired 8 or 9 shots and they shouted addressing the appellant : "Ramesh what are you doing, you will 'be implicated" and according to him they continued shouting these words for some time, before they secured the appellant and took him inside.
In his cross examination he has admitted that on the day of the occurrence no police officer asked him whether he was an eye witness.
When he was approached by the police later he is stated to have told them : "The whole of the occurrence has taken place, outside the thana and you are not aware of it" Beyond this remark there was, according to him; no conversation between him and the police and indeed he asserts that no statement was taken from him on the day of the occurrence.
In fact his position is that the statement in court was the only statement he had ever made relating to the occurrence.
It is interesting to note that his statement before the police purporting to be under section 161, Cr.
P.C. is exhibited as D 6 and is dated October 7, 1967.
We are wholly unable to place any reliance on the testimony of anyone of these witnesses, who seem to us to be clearly untruthful.
Further, it appears from the evidence of C. L. Wasan (D.W. 2) who was again examined in the High Court that an informal identification parade of all the constables belonging to U.P. (P.A.C.) contingent had been held on October 7, 1967 in which the appellant was also present.
Some members of the public were also there who were asked to identify the culprit but none of them were able to do so.
, We need not dilate on this evidence as there was no formal record of any such test identification parade.
The significant fact, however, which casts serious doubt on the truth of the story of disclosure of the appellant 's name to the police on October 7, is the admitted omission by Ch.
Ghulam Nabi Mir, S.H.O. to summon the appellant for interrogation soon after the alleged discovery of his name.
No convincing or even intelligible explanation is forthcoming for interrogating the other P.A.C. men on the 8th and 9th October.
Such investigation can scarcely inspire confidence.
638 As a result of the foregoing discussion we do not consider it Possible to uphold the conclusion of the High Court on the legal evidence existing on this record.
In the absence of any, test 'identification parade and excluding from consideration the statements made under section 161, Cr.
P.C. we find no reliable material on which the appellant 's conviction can be sustained.
The High Court was in error in affirming the appellant 's conviction for the offence of murder and confirming the sentence of death.
It was equally in error in upholding his conviction and sentence under The appeal accordingly succeeds.
and allowing ,the same we acquit the appellant.
| IN-Abs | The appeallant was convicted of the offence of murder by shooting and the High Court confirmed the ' conviction and the sentence of death.
In appeal to this Court, HELD : The conviction and the sentence should be set aside.
(1)The substantive evidence of a witness is his evidence in the trial court.
But then the accused person is not previously known to a witness when the identification of the accused by the witness soon after the former 's arrest is of vital importance because it furnishes to the investigating agency an assurance that the investigation is proceeding on right lines, in addition to furnishing corroboration of his own evidence in court.
[631 A C] In the.
present case, the evidence of the witness who gave the F.I.Rshowed that he did not give any description of the person who was alleged :to have fired the shots.
Nor did he state in the F.I.R. that he knew the appellant previously.
There was no evidence to show that the witness had identified the accused in the Committing Magistrate 's Court.
Therefore, his identification in the Sessions Court of the accused without any previous identification at a test parade, and without any description in the F.L.R. to corroborate it, is far too slender a piece of evidence to support the ' appellant 's conviction.
B E; 635 D, F] (2)Some of.the witnesses had stated in their evidence that they had heard the name of the accused being called but neither this fact nor the name of the accused was mentioned in the F.I.R.
The High Court was in error in taking into consideration the contents of the statements recorded under section 161, Cr.
P '.C., of the various witnesses, during the course of .investigation, km the purpose of finding corroboration of their statements.
in court that the name of the accused was disclosed to the police.
the accused 's name was really disclosed soon after the occurrence steps would have been taken by the investigating authorities to arrest him immediately but no such action was in fact taken.
[634 D; 636 C D]
|
l Appeals Nos. 1301 of 1971 and 1981 of 1968.
Appeals by special leave from the Judgment and order dated November 15, 1956 of the Bombay High Court, Nagpur Bench in Special Civil Application No. 150 of 1963.
B. Sen, J. Ramamurthy, R. N. Sachthey and B. D. Sharma, for the appellant (in both the appeals).
A. section Bobde, G. L. Sanghi and B. R. Agarwal, for the respondent (in both the appeals).
615 The Judgment of the Court was delivered by Hegde, J.
Civil Appeal No. 1301 (NCT) of 71 is by special leave.
This appeal was filed under the following circumstances Civil Appeal No. 1981 of 1968 was brought on the strength of a certificate issued by the High Court.
That certificate, being not in accordance with law in as much as the High Court gave no reason in support of the same, the appeal filed on the strength of that certificate turned out to be not maintainable.
Hence the appellant had to move this Court for special leaveto appeal against the judgment of the High Court.
The same having been granted he has brought Civil Appeal No. 1301 of 7 1.
Hence these two appeals against the same judgment.
Now coming to the merits of the case, the Income tax Officer issued a notice to the respondent on January 5, 1962 under section 34(1) (a) of the Indian Income tax Act, 1922 seeking to reopen his assessment for the assessment year 1946 47 the relevant accounting year being the calender year 1945.
The assessee respondent challenged the validity of that notice by means of a writ petition under Article 226 of the Constitution before the High Court of Bombay.
The High Court accepted that writ petition ,and quashed the impugned notice by its order dated March 6, 1963.
On April 1, 1962 the Income tax Act, 1961 came into force.
Thereafter the Income tax Officer again issued a notice on March 26, 1963 under section 148 of the new Act in respect of the very assessment which he earlier unsuccessfully sought to reopen by means of a notice under section 34(1) (a) of the 1922 Act.
The assessee again challenged the validity of the notice issued to him by means of another writ petition, before the High Court of Bombay.
The High Court quashed that notice on the ground that the Income tax Officer was not competent to issue that notice.
It is against that decision, the present appeals have been brought to this Court.
Section 147 of the 1961 Act provides : If (a) the Income tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Income tax Officer or to disclose fully and truly all material facts necessary for his 'assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income tax Officer has 616 consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153 assess or re assess such income or re compute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereinafter in Sections 148 to 153 referred to as the relevant assessment year)".
Section 148 reads "(1) Before making the assessment, re assessment or re computation under Section 147, the Incometax Officer shall serve on the assessee 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 149 prescribes the time limit for issuing a notice under Section 148.
Sub section (i) of Section 149 says: "No notice under Section 148 shall be issued (a) in cases falling under Clause (a) of Section 147 (i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under sub clause (ii);(ii);. " Section 297 deals with repeals and savings.
Section 297 2 (d) (ii) reads thus : "Notwithstanding the repeal of the Indian Incometax Act 1922 (ii) of 1922 (hereinafter referred to as the repealed Act) (d) where in respect of any assessment year after the year ending on the 31st day of March 1940 : (i). . . . . . (ii) any income chargeable to tax had escaped assessment within the meaning of that expression in Section 147 and no proceedings under section 34 of the repealed Act in respect of any such 617 income are pending at the commencement of this Act, a notice under Section 148 may, subject to the provisions contained in Section 149 or section 150, be issued with respect to that assesment year and all the provisions of this Act shall apply accordingly".
(Emphasis supplied).
The only question for decision in these appeals is whether the proceedings initiated by the notice under section 34(1) (a) of the 1922 Act were pending at the time when the new Act came into force.
It is not denied that such proceedings were factually pending.
But what was contended by Mr. B. Sen, learned counsel for the department was that that notice being an invalid notice on the ground that that was barred by limitation, the proceedings initiated on basis of that notice should be considered as not pending in the eye of the law.
We are unable to accept this contention.
What section 297 (2) (a) (ii) requires is the factual pendency of a proceeding under section 34 of the repealed Act.
The question whether that proceeding was barred by limitation or not is irrelevant.
It is not denied that those proceedings were initiated by a competent authority.
Those proceedings were quashed for the reason that notice under section 34 of 1922 Act was issued beyond the time prescribed by law.
Hence it cannot be said that no proceeding under section 34 of the 1922 Act either factually or legally was pending at the time when the new Act came into force.
Our above conclusion receives support from the decision of this Court in Raja Kulkarni and others vs The State of Bombay(1).
Therein the question that arose for decision was whether an appeal under section 24 of the Industrial Disputes Act, 1950 can be said to have been pending if that appeal was incompetent or invalid for some reason.
This Court ruled that what was necessary was the factual pendency of the appeal and not that it should have been a valid or competent one under the provisions of the limitation Act or such other adjectival law.
The proceedings pending before a competent authority cannot be said to be not pending merely because that no relief can be granted in that proceedings because of the bar of limitation.
In Mela Ram & Sons vs Commissioner of Income Tax, Punjab( ':) it was contended before this Court that any appeal which is barred by limitation cannot be considered as an appeal properly presented under Section 30 of the Indian Income Tax Act, 1922.
This Court rejected that contention observing : (1) [1954] S.C.R. 384.
(2) 29 I.T.R. p. 607. 618 "it an appeal is not presented within that time (within the prescribed time) does that cease to be an appeal as provided under section 30(1) ? It is well established that rules of limitation pertain to the domain of adjectival law, and that they operate only to bar the remedy but not to extinguish the right.
An appeal preferred in accordance with Section 30(1) must, therefore, be an appeal in the eye of law, though having been presented beyond the period mentioned in section 30(2) it is liable to be dismissed in limine.
" We have no doubt in our mind that the proceedings initiated under Section 34(1) (a) of the 1922 Act were pending at the time 1961 Act came into force and that being so the Income tax Officer was not competent to issue any fresh notice under section 148 of the 1961 Act.
In the result Civil Appeal No. 1301 of 71 fails and the same is dismissed with costs.
Civil Appeal No. 1981 of 68 is dismissed as not being maintainable.
Parties to bear their own costs in this appeal.
K.B.N. Appeals dismissed.
| IN-Abs | The Income tax Officer issued a notice to the respondent on January 5, 1962 under section 34(1) (a) of the Indian income tax Act, 1922, seeking to reopen his assessment for the assessment year 1945 47.
The respondent challenged the validity of that notice.
The High Court quashed the impugned notice by its order dated March 6, 1963 on the ground that the notice was issued beyond the time prescribed by law.
On April 1, 1962 the Indian Income tax Act, 1961, came into 'force.
Under section 297(2) (d) (ii) of this Act if "any income chargeable to tax had escaped assessment within the meaning of that expression in section 147 and no proceedings under section 34 of the repealed Act in respect of any such income are pending at the commencement of this Act, a notice under section 148 may . be issued with respect to that assessment year.
" The Income tax Officer again issued a notice under section 148 of the New Act in respect of the assessment which he earlier unsuccessfully sought to reopen by means of notice under section 34(1) (a) of the 1922 Act.
The respondent again challenged the validity of the notice.
The High Court quashed that notice on the ground that the Income tax Officer was not competent to issue that notice.
In appeal to this Court it was contended that the notice under section 34(1) (a) being an invalid notice on the ground that it was barred by limitation the proceedings initiated on the basis of the notice should be considered as not pending when the new Act came into force.
Dismissing the appeal, HELD : What section 297(2)(d)(ii) requires is the factual pendency of a proceeding under section 34 of the repealed Act.
Whether that proceeding was barred by limitation or not is irrelevant.
The proceedings pending before a competent authority cannot be said to be not pending merely because no relief can he granted in that proceedings because of the bar of limitation.
The proceedings in the present case were initiated by a competent authority and those proceedings were quashed for the reason that the notice was issued beyond the time prescribed by law.
Hence it cannot be said that no proceedings under section 34 of the 1922 Act, either factually or legally, was pending at the time when the new Act came into force.
[617 D]
|
Appeal No. 144 of 1953.
Appeal from the Judgment and Order dated the 28th November, 1951, of the High Court of Judicature at Calcutta in Reference No. 40 of 1950.
Sukumar Mitra (section N. Mukherjee, with him) for the appellant.
C. K. Daphtary, Solicitor General of India, (G. N. Joshi, with him) for the respondent.
November 1.
The Judgment of the Court was delivered by VENKATARAMA AYYAR J.
This is an appeal from the judgment of the High Court of Calcutta on a reference under section 66(1) of the Income tax Act.
The appellant is a Company which came into existence in 1870 as an unregistered association, and in 1906 it was registered under the provisions of the Indian Companies Act.
Its business consists exclusively in granting terminable pensions or annuities dependent on human life in favour of the subscribers or their nominees.
The dispute in this appeal relates to the assessment of the profits of the Company for income tax for the periods, 1943 1944, 1944 1945, 1945 1946 and 1946 1947.
To follow the points in issue, it will be useful to refer to the statutory provisions bearing on the matter.
Section 2(11) of the , defines "life insurance business" as meaning "the business of effecting contracts of insurance upon human life" and as including "the granting of annuities upon human life.
" The business of the appellant Company would therefore be life insurance business as defined in section 2(11) of the .
Under section 10(7) of the Indian Income tax Act, the profits and gains of any business of insurance are to be computed in accordance with the Rules in the Schedule to the Act.
Rule 2 in the Schedule is as follows: " The profits and gains of life insurance business shall be taken to be either 824 (a)the gross external incomings of the preceding year from that business less the management expenses of that year, or (b)the annual average of the surplus arrived at by adjusting the surplus or deficit disclosed by the actuarial valuation for the last intervaluation period ending before the year for which the assessment is to be made ' so as to exclude from it any surplus or deficit included therein which was made in any earlier intervaluation period and any expenditure which may under section 10 of this Act be allowed for in computing the profits and gains of a business, whichever is the greater.
"Rule 5(ii) defines "gross external incomings" as including profits on the sale or the granting of annuities.
These Rules came into force in 1939.
In 1945 the assessment of the profits of the appellant Company for the years 1943 1944, 1944 1945 and 19451946 was taken up by the Income tax Officer.
Under Rule 2, what the Income tax Officer had to do was to compute the profits of the Company under the two heads (a) and (b) in that Rule and to adopt whichever was higher as assessable profits.
What he actually did however is uncertain, because the orders of assessment themselves have not been exhibited as part of the record.
From the order of the Tribunal dated 5th March, 1949, it appears that the Income tax Officer firstly determined the profits under Rule 2(b) on the basis of actuarial valuation after making certain adjustments; and secondly on the basis of the figure arrived at under Rule 2(b), he worked out the profits under Rule 2(a) by making further adjustments.
These orders were made on 14th July, 1945.
The company preferred appeals against them to the Appellate Assistant Commissioner, who held by his order dated 30th November, 1945, that the annuity business contemplated by Rule 5(ii) was "purely annuity business", that the business carried on by the Company was "an admixture between an annuity and life insurance", and that there had been no adequate investigation by the Income tax Officer of the nature of the business of the Company.
He 825 accordingly remanded the case for further enquiry and for passing fresh orders of assessment.
By the time the matters came up for further enquiry before the Income tax Officer in pursuance of the order of remand, the assessment of the profits of the Company for the year 1946 1947 had also to be made.
By order dated 23rd December, 1946, the Income tax Officer determined the assessable profits of the Company for all the four years.
He held that there was no element of insurance in the business of the Company, and that the computation should be made under Rule 2(a).
Then he proceeded to assess the profits under that Rule precisely in the manner adopted by him in his order dated 14th July, 1945.
He first took the annual adjusted surplus calculated according to the actuarial valuation under Rule 2(b) and after making certain adjustments, adopted it as the figure under Rule 2(a).
These orders were clearly erroneous.
The statement that there was no element of life insurance in the policies was rightly hold to be erroneous by the Tribunal and has not been sought to be supported.
If the annuity business of the Company was not life insurance business, then even Rule 2(a) would have no application.
The Income tax Officer was likewise in error in adopting the figures reached under Rule 2(b) as the basis for computing the profits under Rule 2(a) without an independent enquiry into the materials requisite under that Rule.
The Company took up the matter in appeal to the Appellate Assistant Commissioner, who by his order dated 26th September, 1947, held that the annuity business of the appellant was life insurance business, and that the profits should be computed under Rule 2.
He further held that in the absence of a profit and loss ,statement for the previous year, the Income tax Officer could only act on the materials furnished by the actuarial valuation as a guide for computation under Rule 2(a).
He therefore confirmed the orders of assessment.
The Company then appealed to the Tribunal.
By its order dated 5th March, 1949, the Tribunal held that the business of the Company was "in a way" insurance, 826 and that computation of the profits should be made in accordance with Rule 2, after determining the profits both under Rule 2(a) and Rule 2(b).
It took exception to the modus adopted by the Income tax Officer in ,computing the profits under Rule 2(a), and observed that he should have made independent enquiry under Rule 2(a), and determined the profits and not merely adopted the figures computed under Rule 2(b) as the basis for computing the profits under Rule 2(a).
The Tribunal accordingly remanded the matter to the Income tax Officer for further enquiry for determining the profits in terms of Rule 2(a).
Dissatisfied with this order, the respondent applied for reference under section 66(1) of the Income tax Act, and on that application, the following questions were referred to the decision of the High Court: 1.
" Whether in the facts and circumstances of the case the business of the assessee Company consisted wholly of annuity business or whether it contained some elements of ordinary life insurance business as distinct from annuity business.
Whether the Income tax Officer was justified in making an estimate for calculations under Rule 2(a) of the Schedule attached to section 10(7) of the Income tax Act.
" The reference was heard by Chakravarti and section R. Das Gupta JJ.
They held that the first question did not arise on the order of the Tribunal, but all the same expressed their opinion thereon in the following terms : " Its business is *holly a business of granting annuities on human life, and no part of its business is ordinary life insurance business.
" As we are not concerned with this matter in this appeal, there is no need to further refer to it.
On the second question, they observed that business in annuities dependent on life as contrasted with "annuities certain" would be insurance business as defined in section 2(11) of the Act, and that the profits of that business being "gross external incomings" as defined in Rule 5(ii) must be determined under Rule 2(a).
Dealing next with the objection of the appellant that there had been no proper determination of the 827 profits under Rule 2(a), they held that in the absence of profit and loss statements for the previous years and other materials the Income tax Officer had no course open to him except to adopt the figures computed under Rule 2(b) as a basis for computation under Rule 2(a).
The second question was accordingly, answered in the affirmative.
It is against this decision that the present appeal has been preferred on a certificate granted under section 66A (2).
Mr. Mitra for the appellant does not dispute the position that the business of the Company on annuity policies dependent on human life is insurance business as defined in section 2(11), and that the profits of the business should therefore be computed in accordance with Rule 2 in the Schedule to the Income tax Act.
His contention is that the Income tax Officer had failed to make the computation in accordance with Rule 2(a), and that the Tribunal was right in remanding the matter for a correct computation of the profits in accordance with that Rule.
This contention must, in our opinion, succeed.
Under Rule 2, the Income tax Officer has to determine under clause (a) what the gross external incomings of the previous year were, and deduct out of them the managing expenses for that year.
He has also to find out in terms of clause (b) the annual average surplus on the basis of actuarial valuation in the manner prescribed therein.
He has then to adopt whichever is higher as the assessable profits of the year.
Now the complaint of the appellant is that while a computation was made under clause (b) no independent computation was made under clause (a), and that therefore the profits had not been determined as required by the Rules.
It is a fact that no independent computation has been made under Rule 2(a), and therefore there has been no compliance with the Rule.
The learned Judges declined to uphold this objection on the ground that the Company did not place any materials before the Income tax Officer so as to enable him to make a determination under Rule 2(a), and that in the absence of any materials the Income tax Officer was justified in acting on the actuarial report for computing the profits even under Rule 2(a).
828 The argument of the appellant is that having regard to the stand taken by either side at the stage of investigation and to the opinion expressed by the Income tax Officer that there was no element of insurance in the annuity business of the Company, the true position under the Rules had been missed by all of them, with the result that there was no attempt made to compute the profits in terms of the provisions of Rule 2(a), that the appellant had not wilfully failed to produce any evidence, and that the observation of the learned Judges that no profit and loss statement had been produced was based on a misapprehension, as no such statement had to be prepared by an Insurance Company.
We must now turn to the statement of the case by the Tribunal to see what had really happened before the Income tax Officer, for the last word on questions of fact is with it, and that is binding on the Courts.
Neither in the statement of the case by the Tribunal, nor in its order of remand is there any finding that the requisite materials had been withheld by the appellant.
The only statement bearing on this question in the order of the Tribunal is as follows: " . the Departmental Representative admitted before us that the calculations purported to have been made under Rule 2(a) were not in accordance with the requirements of Rule 2(a), but it was explained that as the information necessary for determining income under Rule 2(a) was not available, an estimate was made and the income determined under Rule 2(b) was adopted for determining the income under Rule 2(a).
" What is referred to in this passage is only a statement of the Departmental Representative and not a finding.
On the other hand, the whole tenor of the judgment of the Tribunal is that there had been no determination of the profits under Rule 2(a) by reason of the erroneous view taken by the Income tax Officer as to the true nature of the business of the Company.
If there had been a finding by the Tribunal that the requisite materials had been called for and withheld by the appellant, the decision of the High Court would be unassailable, and, indeed, that was the only one that 829 could have been reached.
But in the absence of such a finding, we are unable to see any ground on which the order of the Tribunal could be upset in a reference under section 66(1).
When once it is found that there was no proper determination of the profits as required: under Rule 2(a) and that was indeed conceded and there was no justification for it such as the High Court thought there was, the only order that could properly be made was to remand the case for further enquiry and fresh disposal in accordance with law.
That was the order which was passed by the Tribunal, and that, in our opinion, was right.
This appeal will accordingly be allowed, and the second question referred by the Tribunal answered in the negative.
The result of this will be that the Income tax Officer will proceed to enquire into the profits of the appellant Company for the years in question in accordance with the requirements of Rule 2.
Under the circumstances, we direct that the parties do bear their respective costs both here and in the High Court.
Appeal allowed.
| IN-Abs | |
Appeals Nos.
2441 and 2442 of 1968.
Appeals by special leave from the judgment and order dated October 17, 1968 of the Bombay High Court in Arbitration Petitions Nos. 49 and 50 of 1968.
I. N. Shroff, for the appellant (in C.A. No. 2441/1968).
V. M. Tarkunde and I. N. Shroff, for the appellant (in C.As.
2442 of 1968).
section V. Gupte, B. R. Agarwala for the respondent (in both the appeals).
The Judgment of the Court was delivered to Ray, J.
These two appeals are by special leave against I the judgment dated 17 October, 1968 of the High Court at Bombay determining under section 33 of the that the umpire rightly entered upon the reference and further extending the time till 31 December, 1968 for making an award thereof by the umpire.
Two questions arise for consideration in these appeals.
First, whether there can be any valid appointment of umpire by arbitrators without obtaining consent of the appointee to be an um 697 pire.
Second, on the construction of the arbitration agreement in the present case was the operation of paragraph 4 of Schedule: I of the excluded with the result that the umpire could enter upon the reference only in the event of a difference arising between the arbitrators.
On 26 April, 1967 there was an arbitration agreement between the partnership firm of Indian Engineering Company and Keshavsinh Dwarkadas Kapadia.
Kapadia had appointed M/s. Chetan Trading Company as the sole selling agent of Kapadia 's, several products including aluminium and copper wire by an agreement dated 16 September, 1965.
Chetan Trading Company in their turn appointed Indian Engineering Company as their sole selling agent in respect of aluminium and copper wires.
Chetan Trading Company terminated their agreement with Indian Engineering Company.
Kapadia also terminated the sole selling agency with Chetan Trading Company Indian Engineering Company contended that on the termination of the sole selling agency between themselves and Chetan Trading Company Indian Engineering Company became the sole selling agent of Kapadia in terms of the agreement ' dated 16 September, 1965.
Indian Engineering Company claimed damages against Kapadia for breach of the agreement.
Kapadia claimed damages and moneys from Indian Engineering Company. 'Disputes arose between the parties.
These disputes were referred to arbitration in accordance with the agreement dated 26 April, 1967.
There was a similar arbitration agreement between Chetan Trading Company and Indian Engineering Company on 5 June, 1967 in respect of their disputes and claims against each other.
The arbitration agreement and the arbitrators were identical in both the cases.
Clauses 1, 2, 5 and 6 of the arbitration agreement which are relevant for the purposes of the present appeals are as follows: Clause (1): All the disputes and differences arising out of or in relation to the said Sole Selling Agency Agreement be and they are hereby referred to the arbitration of the said Shri H. G. Advani and Shri J. N. Gandhi.
Clause (2) That the arbitration shall be governed by them provisions of the .
Clause (5): The arbitrators shall make and publish their award within four months from the date of their entering upon the reference and they are hereby authorised to extend the said time from time to time as may be required with the previous written consent of both the parties hereto.
698 Clause (6): The said arbitrators shall before proceeding with the arbitration appoint an umpire and in the event of any difference arising between them they shall refer the 'matter to the umpire for his decision and award.
The arbitrators Messrs. Advani and Gandhi held their first meeting on 12 September, 1967.
At the said meeting before entering upon the reference the arbitrators appointed an umpire in the following terms: "Mr. Porus Mehta failing him Mr. Murzban Mistry appointed umpire".
On 11 January, 1968 the time laid down by clause (5) of the agreement for making the award expired.
On 14 January, 1968 the respondents wrote to the appellants to obtain the neces sary extension of time for making the award.
The appellants did not comply with the request and on 6 March, 1968 wrote to the arbitrators that Mr. Advani one of the arbitrators would be biased in favour of the respondents.
Thereafter, the respondents through their solicitors called upon the arbitrators to refer the matter to the umpire and also by a separate letter called upon the umpire Mr. Porus A. Mehta to enter on the reference as umpire appointed by the arbitrators.
Mr. Mehta fixed a meeting on 27 May, 1968.
The appellants raised certain objections.
The meeting was adjourned.
Another meeting was fixed on 17 June, 1968.
At the meeting held on 17th June, 1968 Mr. Mehta gave certain directions in regard to the proceedings and instructions thereof and fixed 12 July, 1968 for hearing.
The appellants by letter dated 12 July, 1968 addressed to Mr. Mehta contended that the consent of the umpire was not obtained before his appointment and therefore there was no valid appointment of the umpire.
Mr. Mehta fixed the meeting on 13 July, 1968 and decided to proceed with the arbitration and adjourned the meeting to 20 July, 1968.
The appellants obtained an adjournment on the ground that the appellants wanted to file a petition challenging the appointment of Mr. Mehta as an umpire.
Mr. Mehta adjourned the matter till 30 July, 1968.
In this context of events the appellants filed applications under section 33 of the which resulted in the order appealed against.
Three contentions which had been advanced An the High Court were repeated here.
First, that the arbitrators before pro ceeding with the reference did not obtain consent of the umpire to his appointment as umpire, and, therefore, there was no appointment of umpire.
Secondly, under clause (6) of the arbitration agreement operation of paragraph 4 of Schedule I of the 699 was excluded and the umpire could enter upon the reference only in the event of a difference arising between the arbitrators on their disagreement.
No difference arose between the arbitrators in the present case but only time for making the award expired.
Therefore, the umpire had no right to enter upon the reference.
Thirty under clause (6) of the arbitration agreement, the umpire had no right to enter upon the reference unless the arbitrators referred the matter to the umpire.
The High Court relied on the decision of the Judicial Committee in Mirza Sadik Husain vs Mussanmat Kaniz Zohra Begam and Anr.(1) (38 I.A. 181) and held that the umpire signified the consent by taking up the office and the umpire rightly entered on the reference.
The High Court held that the contingency provided for in paragraph 4 of Schedule I to the was not excluded.
The High Court however said that if the High Court was wrong in the view that paragraph 4 of Schedule I to the was not excluded, expiry of time to make an award could not be regarded as a disagreement between the arbitrators.
The third contention of the appellants was also rejected by the High Court on the ground that clause (6) of the arbitration agreement in the present case did not apply when the arbitrators did not make an award within time.
Counsel for the appellants contended that the words 'if any appointed arbitrator or umpire I neglects or refuses to get ' occurring in section 8(1) of the mean that one can refuse to act only after one has accepted the appointment.
This contention was supported by relying on the following observation in Russell on Arbitration, 18th Edition, at page 212: "Acceptance of offices: Acceptance of the office by the arbitrator appears to be necessary to perfect his appointment.
It has been so decided in the case of an umpire, and it would seem to be only reasonable that an appointment should not be considered effective until the person appointed has agreed either expressly or tacitly to exercise the function of the office".
Two decisions are cited in Russell in support of the view expressed by the author.
These decisions are: Ringland vs Lowndes (7 ) ; E.R. 749 and Tradax Export section A. vs Volkawagenwerk 3 A.G. ', (1969) 2 O.B. 599.
The decision in Tradax Export case (supra) has been affirmed by the Court of Appeal as will appear in It is important to notice the distinction between appointment and acceptance of office.
The present appeals concern the appointment of an umpire.
The questions of effectiveness or per 700 fection of appointment are by the nature of things subsequent to appointment unless the agreement or the statute provides otherwise.
Arbitrators and umpire too are often appointed by the parties.
Sometimes an umpire is appointed by arbitrator.
The constitution of the arbitral body and the manner in which the appointments are made are primarily dealt with in the arbitration agreement or else the will apply.
In some cases, the appointment of arbitrator may require special consideration.
If, for instance, two arbitrators are required to be appointed one by each party an appointment of arbitrator by a party is not complete without communication thereof to the other party.
The reason in the words of Lord Denman is this : 'Neither party can be said to have chosen an arbitrator until he lots the other party know the object of his choice" (See Thomas vs Fredricks) ( 1 847) 10 Q.B. 775).
Where each party was to appoint a valuer by 31 May, 1847 and one of the parties nominated a referee late on 31 May and sent by that night 's post a notice thereof to the defendant who received it on 1 June, it was held that the plaintiff had not nominated a referee by 31 May. (See Tew vs Harris The necessity for communication of appointment of arbitrator to the parties as also to the appointee depends often on the languae of the arbitration clause.
In the Tradax Export case, (supra) the arbitration clause was as follows : ". .
Any claim must be made in writing and claimant 's arbitrator appointed within three months ' of final discharge and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred".
This is described as the usual Centrocon arbitration clause in charterparty agreement.
It is noticeable that in the Centrocon arbitration clause the claimant is required to appoint an arbitrator within three months of final discharge of cargo or else the claim is barred.
An effective appointment of an arbitrator in such a clause is necessary to constitute arbitral authority within the stipulated time to prevent the claim from being barred.
Therefore, in such a clause not only communication to the appointee but also the acceptance of office by the appointee is essential for effective appointment of arbitrator within the meaning of the clause.
A mere nomination or appointment unknown to the appointee was held not to be an appointment far less an effective appointment of arbitrator within the meaning of that clause.
The appointment will be effective only when the appointed arbitrator accepts office and is armed with the duty and authority of an arbitrator.
Even in such a clause the stage of effective appointment will be when he has indicated his willingness to act in that matter.
701 In the Tradax Export case (supra) the charterers gave notice of appointment to the arbitrator.
Three months expired The other side contended that there was no appointment of arbit rator within the stipulated time.
The arbitrator was not set in motion.
Neither was the arbitrator clothed with the mandate of arbitration nor was the machinery of arbitration invoked by the charterers.
The appointment of an arbitrator there had to be perfected and implemented by calling upon the appointee to act.
In the Tradax Export case (supra) the Court of Appeal observed that if an application under section 27 of the English Arbitration Act, 1950 had been made, the court would have, granted relief as explained in Liberian Shipping Corporation 'Pegasus ' vs A. King & Sons Ltd. Section 27 of the English Arbit ration Act is a special provision conferring power upon the court to extend the time for commencement of arbitration proceedings where in the circumstances of the case undue hardship would otherwise be, caused.
This aspect indicates that in the Centrocon clause commencement of proceedings by effective appointment is vital and that is why relief against rigour of time clauses is granted under section 27 of the English Arbitration Act, 1950.
In the present appeals, the reference was to arbitrators and they were required to appoint an umpire.
The appointment of an umpire by two arbitrators means that the arbitrators are to coneur in appointing an umpire.
There is no particular method of appointment of an umpire prescribed by the Act.
The usual method of appointment of an umpire by the arbitrators is in writing.
Arbitrators who are required to appoint an umpire are under no obligation to obtain the approval of the choice of the personnel by the parties who appointed the arbitrators.
If any party is dissatisfied with the choice that will not affect the validity of the appointment (See Oliver vs Collings E.R. (1045).
The appointment by arbitrators of an umpire should be the act of the will and judgment the two.
Such an appointment is to be one of the choice and not of chance.
[See Re.
Cassell ; E.R. 232].
If an umpire declines the office the appointment is ineffectual.
Ile arbitrators in such a case can make another appointment of an umpire if the arbitration agreement empowers them to do SO Or the court can appoint an umpire in lieu of an appointed umpire who refuses to act.
Declining the office will be refusal to act.
It is, therefore, apparent that appointment of umpire is something different from the acceptance of office by the umpire.
The arbitrator Or umpire assumes his office when he accepts the appointment.
There is no NO authority for the proposition that consent of the appointee is required before an umpire is appointed by the arbitrators.
The observations in Russll on arbitration.
18 th Ed. 702 at page, 212 do not support that submission.
The decision in Ringland vs Lowndes supra) which is referred to in Russell had very special features.
Under the Public Health Act, 1848 a disputed claim to compensation was to be settled by arbitration.
Arbitrators were required to make an award within 21 days after the appointment or within extended time, if any.
If arbitrators neglected or refused to appoint an umpire for seven days after being requested so to do by any party the court of quarter sessions would on the application of such party appoint an umpire.
In that case arbitrators were appointed in January, 1861.
The arbitrators refused to appoint an umpire.
The plaintiff applied at the Easter sessions to appoint an umpire but failed in consequence of want of a notice of his intention to make such application.
The plaintiff thereafter gave the required notice and the second application was made at the Midsummer sessions.
One Johnson was named as umpire.
But as his consent had not been obtained no formal appointment was made.
A third application was made at the Michaelms sessions and Johnson was on 14 October appointed umpire and accepted the appointment.
The question for consideration was whether the appointment of the umpire was at the Midsummer sessions or at the Michaelmas sessions.
Under the statute the award was, to be made within three months from the umpire,s appointment.
The umpire made an award on 30 December, 1861.
If the appointment was in the Midsummer sessions the Award would be bad.
It will appear from the report (15 C.B ' (N.S.) 173 at pp.
178, 179 and 749 at pp.
752 and 759) that it was the duty.
and practice of the clerk of the peace to make an, entry of the acts and proceedings of the court from Which the orders of the court were subsequently formally drawn up and no order would in the course of practice be formally drawn up unless the assent of the umpire to act had been previously obtained.
Counsel for the board in Ringland 's case did not strongly press the objections that ' an order 'was made at the Midsummer sessions because there was no formal order of the Court in Midsummer 'sessions.
The decision in Ringland vs Lowndes (supra) went up on appeal as will, appear from; , , E.R. 207, The appeal, however was on actual decision in Tringland,s case (supra) ;is 'to whether a party who attended before, an, arbitrator under protest, cross examined adversary 's witnesses and called witnesses did not preclude himself from afterwards objecting that the arbitrator was proceeding without authority it will appear at conceded that the, appointment of Johnson as an umpire took Place the October sessions.
the special provisions of the statute, the mode.
of making an application to the court of quarter Sessions, me practice of the court in regard to drawing up of 703 orders for appointment of umpire and the specific requirement of consent of the appointee to an order for appointment of umpire are all special and peculiar features in Ringland vs Lowndes (supra) to support the view that acceptance of umpirage is necessary for the appointment of the umpire.
The decision of the Judicial Committee in Mirza Sadiq Husain vs Musammat Kaniz Zohra Begam (supra) was on the meaning of the words 'refuses to act ' occurring in section 510 of the Code of Civil Procedure, 1882.
That section conferred power on the court to appoint a new arbitrator or umpire "if the arbitrator or the umpire refuses to act".
The, Judicial Committee did not accept the construction put upon the words 'refuses to act ' by the High Courts in India that the power of the court under section 5 10 to appoint a new arbitrator in place of another arises only when that other had first consented to act and thereafter refused or became incapable.
The Judicial Committee said "it appears to their Lordships that when an.
arbitrator is nominated by parties, his refusal to act is signified as clearly by his refusal to accept nomination as by any other course he could pursue.
His refusal to act necessarily follows, for he has not performed the first action of all, namely, to take up the office by signifying his assent to his appointment Their Lordships do not enter at length,into the matter as it appears that any other construction would open the way to an easy defeat of the provisions of the statute".
Under section 8 of the Arbitration Act ,1940 if any umpire refuses to act and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators as the case may be, do not supply the vacancy any party may take recourse ' to the provisions of the statute for appointment of umpire.
The construction which the Judicial Committee put upon the words 'refuses to act ' in Mirza Sadik Husain 's case (supra) applies to the provisions contained in the .
Where the arbitrators appoint an umpire upon the condition of the umpire 's acceptance of office, the arbitrators wilt have power to reappoint an umpire if the post is refused. 'Where, again, the arbitrators appoint an umpire, without any such condition of acceptance of office, and the appointee declines the office, the, arbitrators in accordance with their powers under the arbitration agreement ea appoint an umpire again.
The court has also power to appoint in lieu of an appointed umpire who refuges to act, as stated in section 8 of the .
In all these cases the appointment of an.
umpire becomes effective by acceptance of the office.
Thereupon the power of appointment is exhausted.
If the appointed person 704 after acceptance of office refuses to act or will not act the parties have to take recourse to the court.
When the umpire assumes his office he accepts the appointment.
The acceptance may be express or implied.
Ile acceptance need not be in writing.
It may be evidenced by conduct.
It may be also by proceeding with the arbitration.
In Mirza Sadik Husain 's case (supra) both the parties by agreement appointed arbitrators to settle their respective rights.
One of the arbitrators refused to act.
The respondents in that case declined to nominate another arbitrator in their behalf .
The Judicial Committee said that this declinature was within their rights, the reason being that the arbitrator refused to accept office or to act after he had been appointed.
The arbitrators in the present case completed their appointment of umpire before entering on the reference.
Thereafter, it remained for the umpire to act or to refuse to act.
The question of acceptance of appointment of umpire arises with reference to the stage when he is called upon to act.
The does not say that appointment of umpire by arbitrators is to be made only after obtaining consent of the appointee.
The arbitrators here appointed an umpire before entering on the reference: The appointment was not conditional upon the acceptance of appointment by the umpire.
The scheme of arbitration proceedings indicates that the appointment of umpire and the acceptance of office are two separate matters arising at different stages in the proceedings.
When the umpire is called upon to proceed in terms of the, appointment he will either assent expressly or by conduct to act or he will decline to act.
The High Court was correct in holding that there was a valid appointment of the umpire and the umpire rightly entered upon the reference.
Ile umpire 's authority commenced when he entered upon the reference on being asked to proceed with the reference.
The other contention on behalf of the, appellants that para graph 4 of the First Schedule to the was excluded by clause (6) of the arbitration agreement in the: present case is unsound.
Section 3 of the provides that an arbitration agreement, unless a different intention is expressed therein, shall be deemed to include the provisions set out in the First Schedule in so far as they are applicable to the reference.
Paragraph 4 of the First Schedule provides that if the arbitrators have allowed their time to expire without making an award or have delivered to any party to the arbitration 705 agreement or to the umpire a notice in writing stating that they cannot agree, the umpire shall forthwith enter on the reference in lieu of the arbitrators.
Clause (6) of the arbitration agreement does not state that only in the event of a difference arising between the arbitrators there shall be a reference to the umpire.
There is no intention in the agreement to exclude the operation of paragraph 4 of the First Schedule to the .
In the present case the agreement provided for appointment of umpire.
The agreement also provided for making of the award by the arbitrators.
It is, therefore, apparent that the intention of the parties was that when arbitrators would allow their time to expire without making the award the umpire would enter on the reference in lieu of the arbitrators.
The High Court expressed the view that if the arbitrators allowed the time to expire that by itself would not amount to disagreement between the arbitrators.
As to what constitutes disagreement cannot be laid down in abstract or inflexible propositions.
It will depend upon the facts of the case as to whether there was a disagreement.
The High Court did not agree with the view expressed in Russel on Arbitration, 18th Ed.
at pages 205 and 208, that failure to make an award in time where the agreement prescribed time in which the arbitrators award is to be made would amount to disagreement.
In Lossifoglu vs Counmantaro [1941] 1 K.B. 396 the arbitration clause provided "in case the arbitrators so appointed disagree they shall appoints an umpire".
One of the arbitrators repeatedly endeavoured to arrange a meeting with the other, but failed to arrange such a meeting.
The arbitrator then unsuccessfully attempted to obtain consent of the latter to the appointment of umpire.
Thereafter, application was made to the court for the appointment of umpire.
Disagreement between the arbitrators may take various shapes and forms.
In the present case the arbitrators by reason of attitude of a party in correspondence addressed to the arbitrators could not agree to proceed with the matter.
Where one of the arbitrators decline to act and the other is left alone it will in a case of this type amount to disagreement between the two arbitrators.
In the Present case, there was disagreement between the arbitrators.
Time to make the award also expired.
Therefore, from both points of view the umpire had authority to inter upon the reference.
For these reasons, we are of opinion that the High Court was correct in making the order.
The appeals are dismissed.
The order of the, High Court is upheld, In view of the fact that the time granted by the High Court till 31 December, 1968 for making the award cannot apply, the umpire Porus A. Mehta is I L3Sup.
Cl/72 706 granted time for three months to make the award.
Three months will run from the date of service of this order by any party to these appeals.
The appellants will pay one set of hearing fee to the respondents.
V.P.S Appeals dismissed.
| IN-Abs | Disputes having arisen between the appellant and the respondent, they were referred to arbitration in accordance with an arbitration agreement.
The arbitrators entered upon the reference and also appointed an umpire.
After the time for making the award had expired the appellant took the stand that one of the arbitrators would be biased in favour of the respondents.
The respondents therefore called upon the arbitrators to refer the matter to the umpire and also wrote to the umpire and the umpire entered upon the reference.
Thereafter, the appellants filed applications under section 33 of the .
The High Court held that the umpire rightly entered upon the reference, and extended the time to enable the umpire to make an award.
In appeal to this Court it was contended that : (1) the appointment of the umpire was not valid because the consent of the appointee was not obtained,; and (2) under cl. 6 of the Arbitration agreement the operation of para 4 Sch.
I of the was excluded, and the umpire could enter upon the reference only in the event of a difference arising between the arbitrators and the arbitrators referred the matter to the umpire.
Dismissing the appeal, HELD : (1) There is a distinction between appointment and acceptance of an office.
The question of effectiveness or perfection is ordinarily subsequent to appointment.
The scheme of arbitration proceedings indicates that the appointment of an umpire and the acceptance of office are two separate matters arising at different stages in the proceedings.
[699 H; 700 A: 704 E] When the arbitrators are required to appoint an umpire it only means that the arbitrators are to concur in appointing the umpire.
There is no particular method of appointment of an umpire though the usual method is by writing.
Arbitrators who are required to appoint an umpire are under no obligation to obtain the approval of the choice of the person by the parties who appointed the arbitrators.
If any party is dissatisfied with the choice it will not affect the validity of the appointment; nor is the appointment conditional upon the acceptance of appointment by the umpire.
The necessity for communication of appointment to the parties as well as to the appointee depends on the language of the arbitration clause.
The does not say that the appointment of umpire by the arbitrators is to be made only after obtaining the consent of the appointee.
[700 D E; 701 D F; 704 D E] When the umpire assumes his office he accepts the appointment.
Acceptance may be express or implied.
It need not be in writing; it may be evidenced by conduct.
It may also be evidenced by proceeding with 696 the arbitration.
When the umpire is called upon to proceed in terms of the appointment he will either assent expressly or by conduct to act, or he will decline to act.
[704 A B, D, E F] Mirza Sadik Husain vs Mussamat Kaniz Zohra Begam, L.R. 38 I.A. 181, applied.
Ringland vs Lowndes, ; ; and Tradax Export S.A. vs Vokswagenwerk A.G. , explained and distinguished.
(2) (a) Paragraph 4 of the first schedule provides that if the arbitra delivered to any party to the arbitration agreement or to the umpire a notice in writing stating that they cannot agree, the umpire shall forthwith enter on the reference in lieu of the arbitrators. 'Mere is no intention in cl. 6 of the agreement to exclude the operation of this paragraph.
On the contrary the agreement shows that the intention of the parties was that when the arbitrators allowed time to expire without making the award the umpire should enter on the reference in lieu of the arbitrators.
[704 H; 705 A C] (b) In the present case, the arbitrators, by reason of the attitude of one of the parties could not agree to proceed with the matter.
Where one of the arbitrators declines to act and the other is left alone in a case of this type, it will amount to disagreement between the arbitrators.
[705 F G] (c) Failure to make an award in time where the agreement prescribed time does in.
certain circumstances, amount to disagreement.
[705 D E] Iossifoglu vs Counmantaros, and Russel on Arbitration, 18th Ed. pp. 205, 208, referred to.
|
l Appeals Nos. 1970 to 1973 of 1968.
Appeals from the judgment and order dated September 20, 1967 of the Delhi High Court in Income tax Reference Nos. 2 :and 3 of 1967.
V.C. Mahajan and H. K. Puri, for the appellant (in all the appeals) V.S. Desai, R. N. Sachthey and B. D. Sharma, for the respondent (in all the appeals).
The Judgment of the Court was delivered by Hegde, J.
In these appeals by certificate, the only question arising for decision is : "whether on the facts and in the circumstances of the case, the assessee.
continued to be the owner of the property for the purposes of computation of income under section 9 of the Income tax Act, 1922" (to be hereinafter referred to as the Act).
A Full Bench of the Delhi High Court speaking through section K. Kapur, J. answered that question in the negative.
Being dissatisfied with that decision the assesses has brought these appeals.
Now turning to the facts of the case, the concerned assess ment years are 1952 53, 1955 56 and 1956 57, the relevant accounting periods being financial years ending March 31, 1952, March 31, 1955 and March 31, 1956.
The assesses is a registered 641 firm deriving income from interest on securities, property, business and other sources.
Sometime In the year 1946 it purchased the Nedous Hotel in Lahore for a sum of Rs ' 46 lakhs.
For that purpose it raised a loan of Rs. 30 lakhs from M/s. Bharat Bank Ltd., Lahore and a loan of Rs. 18 lakhs from the Raja of Jubbal.
The loan taken from the bank was partly repaid but as regards the loan taken from the Raja, the assessee came to an agreement with the Raja under which the Raja accepted a half share in the said property in lieu of the loan advanced and also 1/3rd of the outstanding liability of the bank.
This arrangement came into effect on November 1, 1951.
After the creation of Pakistan, declared an evacuee property and consequently vested in the Custodian in the Pakistan.
In its return for the relevant assessment years, the assessee claimed losses of Rs. 1,00,723.
Rs. 1,16,599/ and Rs. 1,16,599/ respectively but showed the gross annual letting.
value from the said property at Nil.
The loss claimed was stated to be on account of interest payable to the bank.
Since the property in question has vested in the Custodian of Evacuee Property, in Pakistan, the Income tax Officer held that no income or loss from that property can be considered in the assessee 's case.
He accordingly disallowed the assessees claim in respect of the interest paid to the bank.
The Appellate Assistant Commissioner confirmed the order of the Income tax Officer.
In second appeal the Tribunal came to the conclusion that the assessee still continued to be the owner ' of the property for the purpose of computation of loss.
The Tribunal held that the interest paid is a deductable allowance under section 9(1)(iv) of the Act.
In arriving it that conclusion, the Tribunal relied on its earlier decision in the case of the assessee in respect of the assessment year 1951 52.
thereafter at the instance of the assessee, the Tribunal submitted the question set out earlier.
Ile High Court on an analysis of the various provisions of the Pakistan (Administration of Evacuee property) Ordinance, 1949 (XV of 1049) (to be hereinafter erred to as the 'Ordinance) came to the conclusion that for the purpose of section 9 of the Act, the assasee cannot be considered as .he owner of that property.
It was urged by Mr. V. C. Mahajan, learned Counsel for the assessee that the High Court erred in opining that the assessee was not the owner of the property, for the purpose of section 9 of the Act.
According to him the property vested in the Custodian only for the purpose of administration and the assessee still continued to be its owner.
He contended that the expression "owner" means the person having the ultimate right to the property.
He further contended that the so long as the assessee had a right to that 7 L3Sup.
C.I./72 property in whatever manner that right might have been hedged in or restricted, he still continued to be the owner.
On the other hand, it was contended on behalf of the Revenue that the Incometax is concerned with income, gains and profits.
Therefore for the purpose of that Act, the owner is that person who is entitled to the income.
According to the Revenue the word "owner" in section 9 refers to the legal ownership and not to any beneficial interest in the property.
For deciding the question whether the assessee was the owner of the property for the purpose of section 9 of the Act during the relevant accounting years, we have to look to the provisions of the Ordinance.
Let us first take a survey of the relevant provisions of the Ordinance and thereafter analyse the effect of those provisions.
The long title of the Ordinance says that it is an Ordinance to provide for the administration of the evacuee property in Pakistan and for certain matters incidental thereto.
The preamble says that "whereas an emergency has arisen which renders it necessary to provide for the administration of evacuee property in Pakistan and for certain matters incidental thereto".
Section 6(1) provides that all evacuee property shall vest and shall be deemed always to have vested in the Custodian with effect from the 1st day of March 1947.
Section 9 gives Dower to the Custodian to take possession of the evacuee property.
Section 11 provides that any amount due to an evacuee or payable in respect of any evacuee property, shall be paid to the Custodian by the person liable to pay the same and the payment to the Custodian discharges the debtor 's liability to the extent of the payment made.
Section 12 prescribes that the property which hag vested in or of which possession has been taken by the Custodian shall be exempt from all legal process, including seizure, distress, ejectment or sale by any officer of a Court or any other authority a;; no injunction or other order of whatever kind in respect of such property shall be granted or made by any Court or any ot" authority.
Section 14(1) permits the Rehabilitation Authority, allot evacuee property to the refugees.
Section 16(1) says the no creation or transfer of any right or interest in or encumbrane, upon any property made in any manner whatsoever on or after the first day of March, 1947 by or on behalf of an evacuee or by or on behalf of a person who has or may become an evacuee after the date of such creation or transfer, shall be effective so as to confer any right or remedy on any party thereto or on any person claiming under any such party, unless it is confirmed by the Custodian.
Section 19 empowers the Custodian to restore the evacuee property to the lawful owner subject to such conditions as he may be pleased to impose.
Section 20(1) stipulates that the Custodian may take such measures as he considers 643 necessary or expedient for the purpose of administering, preserving and managing any evacuee property which has vested in him and may for any such purpose as aforesaid, do all acts and incur all expenses necessary or incidental thereto.
Sub section
(2) of that section provides that "without Prejudice to the generality of the provisions contained in sub section
(1), the Custodian may.
(m)sell any evacuee property, notwithstanding any this contained in any law or agreement to the contrary relating thereto, Provided that the Custodian shall not under this Clause or the next succeeding clause sell any immovable evacuee property or any business or undertaking which is evacuee property, except with the previous approval of the Central Government.
" Clause (i) of that sub section empowers the Custodian to demolish or dismantle any evacuee property which in his opinion cannot be repaired, or sell the site of such property and the materials thereof.
The Custodian can recoup all the expenses incurred by him in the administration of the evacuee property from out of the receipts in his hand in respect of that property, Section 22(1) requires the Custodian to maintain separate account of the property of each evacuee of which he has taken possession and shall cause to be made therein entries of all receipts and expenditure in respect therof.
The Ordinance starts by saying that it is an Ordinance to provide for the administration of evacuee property and not management of evacuee property.
The expression "administra tion" in relation to an estate, in law means managements and settling of that estate.
It is a power to deal with the estate.
The evacuee could not take possession of his property.
He could not lease that property.
He could not sell that property without the consent of the Custodian.
He could not mortgage that property.
He could not realise the lncome of the property.
On the other hand, the Custodian could take possession of that property.
He could realise its income.
He could alienate the property and he could under certain circumstances demolish the property.
All the rights that the evacuee had in the property he left in Pakistan were exercisable by the Custodian excepting that he could not appropriate the proceeds for his own use.
The evacuee could not exercise any rights in that property except with the consent of the Custodian.
He merely had some beneficial.
interest in that property.
No doubt that residual interest in a sense is ownership.
The property having vested in the Custodian, who bad 644 all the powers of the owner, he was the legal owner or the property.
In the eye of the law, the Custodian was the owner of that property.
The position, of the Custodian was no less than that of a Trustee.
Section 9(1) says : "The tax shall be payable by an assessee under the head "Income from Property" in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner, other than such portions of such property as he may occupy for the purposes of any business, profession or vocation carried on by him the profits of which are assessable to tax subject to the following allowances namely : The question is who is the "owner" referred to in this section ? Is it the person in, whom the property vests or is it he who is entitled to some beneficial interest in the property It must be remembered that section 9 brings to tax the income from property and not the interest of a person in the property.
A property cannot be owned by two persons, each one having independent and exclusive right over it.
Hence for the purpose of section 9, the owner must be that person who can exercise the rights of the owner, not on behalf of the owner but in his own right.
For a minute, let us look at things from the practical point of view.
If the thousands of evacuees who left practically all their properties as well as business in Pakistan had been considered as the owners, of those properties and business as long as the 'Ordinance ' was in force then those unfortunate persons would have had to pay income tax on the basis of the annual letting value of their properties and on the income, gains and profits of the businesses left by them in Pakistan though they did not get a paisa out of those properties and businesses.
Fortunately no one in the past interpreted the law in the manner Mr. Mahajan wants us to interpret.
It is time that equitable considerations are irrelevant in interpreting tax laws.
But these laws, like all other laws have to be interpreted reasonably and in consonance with justice.
The question as to who is Vie owner of a house property under section 9 of the Act in circumstances similar to those before us came up for consideration before the Calcutta High Court in the matter of The Official Assignee for Bengal (Estate of Jnanendra Nath Pramanik) (1).
In that case on the adjudication of a person as insolvent under the Presidency Towns Insolvency Act, 1909, certain house property of the insolvent vested in the Official Assignee.
The question arose whether the Official Assignee (1)5.
I.T.R. 233.
645 could be taxed in respect of the income of the property under section 9.
The High Court held_ that the property did not by reason of the adjudication of the debtor cease to be a subject fit for taxation and in view of the provisions of section 17 of the Presidency Towns Insolvency Act, the Official Assignee was the, "owner" of the property and he could rightly be assessed in respect of the income from that property under section 9.
Section 17 of the, Presidency Towns Insolvency Act, reads: "On the making of an order of adjudication, the property of the insolvent wherever situate shall vest in the official assignee and shall became divisible among his creditors, and thereafter, except as directed by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable in insolvency shall, during the pendency of the insolvency proceedings, have any remedy against the property of the insolvent in respect of the debt: or shall commence any suit or other legal proceedings except with the leave of the Court and on such terms as the Court may impose : Provided that this section shall not affect the power of any secured creditor to realize or otherwise deal with his security in the same manner, as he would have been entitled to realise or deal with it if this section had not been passed.
" We may note that the powers of the Custodian are no less than that of the Official Assignee under the Presidency Towns Insolvency Act, 1909.
Delivering the judgment of the Court in the Official Assignee 's case(1), Costello, J. observed : "With regard to the first point, Mr. Page argued that although by section 17 of the Presidency Towns Insolvency Act these properties vested in the Official Assignee he did not thereby or thereupon become the owner of those properties within the meaning properly ascribable to that word for the purposes of the applicability of Section 9.
What Mr. Page really invited us to do was to restrict the meaning of the word by putting before it the qualifying adjective "beneficial".
What was argued by Mr. Page was that the Official Assignee had no legal interest in the properties themselves, they were merely vested in him for the purposes of the administration of them in the interest of the creditors of the insolvent.
I am unable to accept Mr. Page 's contention.
In this country there is no difference between "legal estate" and "equitable estate".
In this connection the case of Sir Currimbhoy Ebrahim Baro (1) 646 netcy Trust vs Commissioner of Income tax, Bombay 612 I.A. 1209) is of assistance.
At page 217 Sir Sydney Rowlatt when giving the judgment of the Privy Council made this observation: "In their Lordships" opinion the effect of the Act creating these trusts is not to give the baronet for the time being any right to any part of the interest or property specifically or any right which, even granting that the legal title is not the only thing that can ever be looked at, would make it true to say that any proportion of the interest is not 'receivable ' or any proportion of the property is not 'owned ' by the incorporated trustees.
" The learned judges of the Calcutta High Court in reaching that conclusion relied on the decision in The Commissioner of Inland Revenue vs Fleming(1).
That appeal related to a claim for repayment of income tax to which the respondent claimed to be entitled in respect of "personal allowance" introduced into the Income tax system by section 18 of the Finance Act, 1920.
The claim arose in the following circumstances : The respondent was declared insolvent in 1921.
He was then the owner of heritable properties.
His insolvency lasted till May 10, 1926.
When he received his discharge on payment of composition and was reinvested in his estate.
At that time his estate consisted of (1) Two of the original heritable properties which had not been realised by the trustee in the insolvency and (2) a balance in cash of pound 53 odd.
During the insolvency, the trustee paid income tax on the full annual value of the two properties in question.
The contention of the respondent was that the radical right to these properties was in him all that time; and that; in paying the tax, the trustee was really paying it on his behalf that is, on his income and that consequently there arose in each of the years in which the payment was made a right to deduct his "personal allowance" from the annual value 'of the properties.
The right to this abatement is said to have passed to the Respondent himself in virtue of the reinvestment in his estate which occurred upon his discharge on composition.
Rejecting this contention Lord President observed : "It is obvious that, unless during the years in question the annual value of the properties was income of the Respondent, he cannot have any claim to abatement of it for income tax purposes; and accordingly everything depends upon the soundness of the proposition that the income consisting in the annual value of (1) 14, Tax Cases 78.
647 these properties was truly income of the Respondent.
I do not see how it can possibly be so described.
It was part of the income arising from the sequestrated estates vested in the trustee for the Respondent 's creditors.
Any income that did arise from those estates was income of the trustee as such, and he (and he alone) had the right to put it into his pocket as income.
It was not income that went or could go into the pocket of the Respondent as income in any of the years in question.
How then can it be said to have reached his pocket as income on his subsequent reinvestiture.
" For determining the person liable to pay tax, the test laid down by the court was to find out the person entitled to that income.
An attempt was made by Mr. Mahajan to distinguish this case on the ground that under the corresponding English statute the liability to tax in respect of income from property is not laid on the owner of the property.
It is true that section 82 of the English Income tax Act, 1952 is worded differently.
But the principles underlying the two statutes are identical.
This is clear from the various provisions in that Act.
The conclusion reached by Costello, J. in Official Assignee 's case(1) receives support from the decision of the Privy Council in Trustees of Sir Currimbhoy Ibrahim Baronetcy Trust vs Commissioner of Income tax, Bombay(2).
The Counsel for the appellant was unable to point out to us any decision which has taken a view contrary to that taken in Official Assignee 's case(3).
The learned judges of the High Court in reaching their con clusion that the assessee was not the owner of the property in the relevant assessment years, took assistance from the decisions of English courts dealing with the question of levy of income tax on the income from enemy properties taken possession of by the Custodian during war.
In those cases the English judges have enunciated the theory of suspended ownership.
We do not think that we need call assistance from those decisions.
Mr. Mahajan contended that despite the fact that evacuee property was taken over by the Custodian and that he had been conferred with large powers to deal with it, an evacuee from Pakistan who owned that property before he migrated to India still continued to be the owner of the property.
For this contention of his he placed reliance on some of the observations of this Court in Amar Singh vs Custodian, Evacuee Property, Punjab(1).
Therein delivering judgment of the Court Jagannadhadas, J. observed (at p. 815 of the report): (1)5 I.T.R. 233.
(2)2 I. T.R. 148.
(3) [1957] S.C.R. 648 "Stopping here it will be seen that the position, in its general aspect, is that all evacuee property is vested in the Custodian.
But the evacuee has not lost his ownership in it.
The law recognised his ultimate ownership subject to certain limitations.
The evacuee may come back and obtain return of his property, as also an account of the management thereof by the Custodian.
" Those observations have to be understood in the context in which they were made.
Therein, their Lordships were considering whether the right of an evacuee in respect of the property left by him in the country from which he migrated was property right for the purpose of article 19 (1 ) (1) (f ) of the Constitution.
No one denies that an evacuee from Pakistan has a residual right in the property that he left in Pakistan.
But the real question is, can that right be considered as ownership within the meaning of section 9 of the Act.
As mentioned earlier that section seeks to bring to tax income of the property in the hands of the owner.
Hence the focus of that section is on the receipt of the income.
The word "owner" has different meanings in different contexts.
Under certain circumstances a lessee may be considered as the owner of the property leased to him.
In Stroud 's Judicial Dictionary (3rd Edn.), various meanings of the word "owner" are given. ' It is not necessary for our present purpose to examine what the word "owner" means in different contexts.
The meaning that we give to the word " owner" in section 9 must not be such as to make that provision capable of being made an instrument of oppression.
It must be in consonance with the principles underlying the Act.
Mr. Mahajan next invited our attention to the observations in Pollock on Jurisprudence (6th Edn. 1929) 178 80: "Owner ship may be described as the entirety of the powers of use and disposal allowed by law.
The owner of a thing is not necessarily the person who at a given time has the whole power of use and disposal; very often there is no such person.
We must look for the person having the residue of all such power when we have accounted for every detached and limited portion of 'it; and he will be the owner even if the immediate power of control and use is elsewhere".
It is not necessary to consider whether those observations hold good even now because of the various legislative measures enacted during the last about forty years after those observations were made.
Suffice it to say that those observations are inapplicable to the case of the "owner" under section 9 of the Act.
649 Mr. Mahajan in support of his contention next placed reliance on the decision of the Patna High Court in Raja P. C. Lal Choudhary vs Commissioner of Income tax(1).
Therein the question was whether the receiver of a property appointed by court was the owner of the property for the purpose of section 9 of the Act.
The court came to the conclusion that he was not the owner as the property did not vest in him.
In fact in the course of the judgment, the court made a distinction between a receiver and a trustee and an official assignee.
In our opinion this decision instead of supporting the case of the appellant may lend some support to the contention of the Revenue.
Reliance was next placed on the decision of the Calcutta High Court in Nawah Bahadur of Murshidabad vs Commissioner of Income tax, West Bengal(2).
The facts of that case were : Properties which belonged to the ancestors of the Nawab of Murshidabad as Rulers, were, some time after the territories had been conquered by the British, settled by the Secretary of State for India in the year 1891 on the then Nawab of Murshidabad under a deed of settlement which provided that such properties " shall henceforth and for ever be held and enjoyed by the said Nawab Bahadur and such one among his lineal male heirs as may be successively entitled to hold the said title in perpetuity,.
with and subject to the incidents, power, limitations and conditions as to the inalienability and otherwise hereinafter contained".
One of the conditions was that he was not entitled to sell or alienate the properties except with the approval of the Governor of Bengal.
The Settlement deed was confirmed by Act XV of 1891.
The question arose whet her Nawab of Murshidabad was liable to pay tax in respect of the income of those properties under section 9 of the Act.
The Court held that whatever might have been the original nature of the "State properties, after the deed of settlement and the Act of 1891, as the dual status of the Nawab as the holder of the State and as an individual ceased, it could not be said that the Nawab for the time being was not the "owner" of such properties for the purposes of section 9 of the Act and the Nawab was therefore liable to be assessed to income tax on the income of such properties.
The Court further held that the word "owner" in section 9 of the Act applies to owners of the whole income, even though they are under certain restrictions with regard to the alienation of the properties.
We are unable to see how this decision gives any support to the contentions advanced on behalf of the assessee.
After giving our careful consideration to the question of law under consideration, we have come to the conclusion that the (1) (2) 650 assessee was not the owner of Neadous Hotel during the relevant assessment years for the purpose of section 9 of the Act.
Hence these appeals fail and they are dismissed.
In the circumstances of the case we make no order as to costs in these appeals.
G.C. Appeals dismissed.
| IN-Abs | The assessee was a .,registered firm deriving income from securities, property, business and other sources.
In 1946 it purchased a hotel in 'Lahore for a sum of Rs. 46 lacs.
For that purpose it raised a loan of Rs. 30 lacs from a bank and a loan of Rs. 18 lacs from one R. The 'loan taken from the, bank was largely repaid but with R the assessee came to an agreement whereby R accepted a half share in the said property in lieu of the loan advanced and .
also 1/3rd of the outstanding liability of the bank.
This arrangement came into effect on November 1, 1951.
After the creation of Pakistan, Lahore became a part of Pakistan and the hotel in question was declared evacuee property.
As such it came to vest in the Custodian in Pakistan.
In its returns for the assessment years 1952 53, 1955 56 and 1956 57 the assessee claimed certain amounts as losses on account of interest payable to the bank but showed the gross annual letting value from the said property at Nil.
The Income tax Officer held that since the property had vested in the Custodian no income or loss from that property could be considered in the assessee 's case.
The Appellate Assistant Commissioner confirmed the order of the Income tax Officer.
The Appellate Tribunal however came to the conclusion that the assessee still continued to be the owner of the property for the purpose of the computation of loss, and the interest paid was a deductible allowance under section 9(1) (iv) of the Income tax Act, 1922.
reference the High Court on an analysis of the various provisions of the Pakistan (Administration of Evacuee Property) Ordinance.15 of.
1949 came to the conclusion that for the purpose of section 9 of the Act the assessee could not be considered as the owner of that property: 'In the assesee 's appeal to this Court it was contended that the property vested in the Custodian only for.
the purpose of administration and the assessee still continued to be its owner.
HELD : Under the Pakistan (Administration of Evacuee Property) Ordinance 1949 the evacuee could not take possession of his property.
He could not lease that property.
He could not sell the property without the consent of the custodian.
He could not mortgage that property.
He could not realise the income of the property.
All the rights that the evacuee had in the property were exercisable by the Custodian excepting that he could not appropriate the proceeds to his own use.
The evacuee had only a beneficial interest in the property.
In the eye of the law the Custodian who had all the powers of the owner was the owner of the property.
His position_ was no less than that a Trustee.
[643 F 644 A] Section 9 of the Income tax Act, 1922, brings.to tax the income from property and.
not the interest of a. person in the property.
A property cannot be owned by two persons, each one having independent and exclusive right over it.
Hence for the purpose of section 9 the owner must be 640 that person who can exercise the rights of the owner, not on behalf of the owner but in his own right.
Accordingly the assessee was not the owner of the property in question during the relevant assessment years for the purpose of section 9 of the Act.
[644 D] It is true that equitable considerations are irrelevant in interpreting tax laws.
But those laws like all other laws have to be interpreted reasonably and in consonance with justice.
If the thousands of evacuee who left practically all their properties as well as businesses in Pakistan had been considered as the owners of those properties and businesses as long as the 'ordinance ' was in force then those unfortunate persons would have had to pay income tax on the basis of the annual letting value of their properties and on the income, gains and properties of the business left by them in Pakistan though they did not get a paisa out of those properties and business.
Fortunately no one in the past interpreted the law in the manner suggested by the assessee.
[644 E G] Official Assignee for Bengal (Estate of Jnanendra Nath Pramanik), , Commissioner of Inland Revenue vs Fleming, and .Sir
Currimbhoy Ibrahim Baronetcy Trust vs C.I.T., Bombay, , applied.
Amar Singh vs Custodian, Evacuee Property, Punjab, [1957] S.C.R. 801, distinguished.
P.C. Lai Choudhary vs C.I.T., and Nawab Bahadur of Murshidabad vs C.I.T., West Bengal, 28 I.T.R. 510, considered.
|
Appeal No. 2149 of 1968.
Appeal from the judgment and order dated January 3, 1967 of the Rajasthan High Court in D. B. Wealth Tax Reference No. 6 of 1963.
section Mitra, O. P. Malhotra, R. N. Sachthey and B. D. Sharma, for the appellant.
M. C. Setalvad, H. P. Gupta and B. R. Agarwala, for the respondent.
The Judgment of the Court has delivered by Hegde, J.
This appeal by certificate arises out of the wealth tax assessment of the assessee respondent, an individual, for the year 1959 60, the corresponding valuation date being* March 708 31, 1959.
The assessee is the, wife of Maharaja of Jaipur.
On September 9, 1953, the Maharaja made a settlement at London.
Under the deed of settlement, he appointed Sir Harold Augustus Warner as the trustee of the property detailed in the deed of settlement.
The settlement is an irrevocable one and the properties mentioned in the schedule to the trust deed stood transferred to the name of the trustee.
The trust deed provides that the trustee should pay to the assessee during her life time 50 per cent of the income of the trust fund.
The question arose whether the assessee can be held to have any share in the corpus of the trust and whether the same can be brought to tax under the provisions of the Wealth Tax Act, 1957 (to be hereinafter referred to as the Act).
The Wealth tax Officer came to the conclusion that the assessee 's interest in U.K. Trust amounting to Rs. 15,75,694/ plus the income tax reserve thereon Rs. 1,75,401/have to be included in the assessee 's total wealth.
This decision was confirmed by the Appellate Assistant Commissioner in appeal.
Thereafter the assessee took up the matter in second appeal to the Income tax Appellate Tribunal.
The Tribunal for reasons set out in paragraphs 6 to 10, 12 and 13 of its order held that the assessee did not get any life interest in the corpus but it held that her interest was an interest which was an asset under the Act, but for section 2 (e) (iv) of the Act.
In other words, it held that the assessee had only a right to get annuity from out of the trust fund and as such her right is exempt from wealth tax in view of section 2 (e) (iv) of the Act.
In the view it took, the Tribunal considered that it was not necessary to ascertain the proper and correct method of valuation of the assessee 's right.
It directed that if and when its conclusion on the interpretation of the clauses were set aside, the appeal should be posted again before it for further hearing for ascertaining the correct method, of valuation.
At the instance of the Department, the Tribunal stated the case and referred the following two questions to the High Court of Rajasthan for its opinion. "(1) Whether on a proper construction of the deed of settlement the assessee has any interest in the corpus of the deed of settlement.
(2) Whether in the facts and circumstances of this case, the right of the assessee derived under the deed of settlement is exempt from wealth tax by virtue of the provisions of sec.
2 (e) (iv) of the Act.
" A Division Bench of that High Court answered the first question in the negative and the second question in the affirmative both against the Department.
The High Court held 709 1.
that the assessee was not given any interest in the corpus of the, property.
that the income that the assessee was receiving on account of the 15/30 parts of the trust fund was in the nature of an annuity, and 3.
that the terms and conditions relating to the assessee 's right to annuity preclude commutation of any portion thereof into a lump sum grant.
The only question that arises for decision in this appeal is whether the share of income to which the assessee is entitled to receive under the trust deed executed by her husband can be considered as annuity within the meaning of that expression in section 2 (e) (iv).
If it is considered as an annuity, there is no dispute that the, terms and conditions relating to the assessee 's right relating to annuity precluded commutation of any part thereof into a lump sum grant.
Therefore all that we have to see is whether the income received by the assessee was an annuity or an aliquot share in the income arising from the fund.
As seen earlier, the High Court as taken the view that the income in question was an annuity.
In arriving at that conclusion, it has referred to various decisions of the English courts as well as the courts in this country.
But in view of the two recent decisions of this Court, it is not necessary for us to examine those decisions.
In Ahmed G. H. Ariff and Ors.
vs Commissioner of Wealth tax(1) one of us (Grover, J.) speaking for the Court observed that the right of a beneficiary to receive an aliquot share of the net income of properties comprised in a wakf alal aulad created by a Muslim governed by the Hanifi school of Mohamedan law is "property" and is covered by the definition of "assets" in section 2 (e) of the Wealth Tax Act, 1957 and the capitalised, value of that right is assessable to wealth tax.
In Commissioner of Wealth Tax, Gujarat vs Arundhati Bal krishna, (2) this Court accepted as correct the distinction brought out between an annuity and an aliquot share in the income of a fund by Kindersley V. C. in Bignold vs Giles ( 3) Therein the learned judge stated the law thus : "An annuity is a right to receive de anno in annum a certain sum; that may be given for life, or for a series of years; it may be given during any particular period or in perpetuity and there is also this singularity (1) (2) (3) ; 113 Revised Reports 390.
710 about annuities, that although payable out of the personal assets, they are capable of being given for the purpose of devolution, as real estate; they may be given to a man and his heirs, and may go to the heir as real estate; so an annuity may be given to a man and the heirs of his body, that does not, it is true, constitute an estate tail, but that is by reason of the Statute De which contains only the word 'tenements ' and ' an annuity, though a hereditament is not a tenement, and an annuity so given is a base fee.
" Proceeding further the learned judge observed "But this appears to me at least clear, that if the gift of what is called an annuity is so made, that, on the face of the will itself, the testator shows his intention, to give a certain portion of the dividend of a fund, that is a very different thing; and most of the cases proceed on that footing.
The ground is, that the court construes the intention of the testator to be, not merely to? give an annuity, but to give an aliquot portion of the income arising from a certain capital fund." Applying the principles laid down in these decisions, we have now to see as to what was the nature of the right conferred on the assessee under the trust deed ? The trust deed starts by saying that "the settlor is, absolutely entitled to the investments specified in the Schedule hereto (hereinafter called "the Scheduled Property")" and that he is desirous of making an irrevocable settlement of the Scheduled Property for the benefit of his wife (the assessee) and his four sons.
One of the clauses in the deed says that "the settlor has accordingly transferred( or intends forthwith to transfer the Scheduled Property into the name of the Trustee to be held by him upon the trusts and with and subject to the powers and provisions hereinafter declared and contained concerning the same." "The Scheduled Property and any other invest ments or property which may from time to time be transferred to and accepted by the Trustee as additions, to the Scheduled Property and any other capital moneys, which may be received by the Trustee in respect of the 711 trust premises and the investments and property for the time being representing the same respectively are together called "the Trust Fund".
From this clause, it is clear that the "Trust Fund" is not a fixed sum.
It is capable of being augmented in several ways.
At the time of creation of the trust, the only assets mentioned in the schedule to the trust deed was pound 300,000 31 War Loan.
But as seen earlier this fund was capable of being augmented.
Clauses of the trust deed which are relevant for our pre sent purpose are clauses 2, 3, 4(1) and 7.
They read: Clause 2 : The Trustee shall stand possessed of the scheduled property and any other investments or property which may from time to time be transferred to and accepted by the Trustee as aforesaid UPON TRUST that the Trustee may either allow the same to remain actually invested so long as the Trustee thinks fit or may at any time or times at his discretion sell call in or convert into money the same or any part thereof and shall at his discretion (but subject to the restriction contained in clause 9 hereof) invest the moneys produced thereby and any other capital moneys which may be received by him in respect of the trust premises in the name or under the legal control of the Trustee in or upon any investments hereby authorised with power at his discretion to vary or transpose any investments for or into others of any nature hereby authorised.
" Clause 3 : The Trustee shall divide the Trust Fund into thirty equal parts and shall stand possessed of such parts and the income thereof respectively upon the trusts and, with and subject to the powers and provisions herein after declared and contained concerning the same.
Clause 4(1) : THE TRUSTEE shall stand possessed of fifteen such parts of the Trust Fund UPON TRUST to pay the income thereof to the wife during her life and after her death shall hold the said fifteen such parts of the Trust Fund and the income thereof Upon the same powers and provisions as are hereinafter declared and contained concerning the share in the Trust Fund which is hereinafter directed to be held in trust for the said 712 Maharaj Kumar Jagat Singh or as near thereto as cir cumstances will admit.
Clause 7.
NOTWITHSTANDING the trusts hereinbefore declared the Trustee if he in his absolute discretion thinks fit may at any time by writing under his hand declare that the whole or any part of the share (whether original or accruing) in the Trust Fund to the income whereof any Beneficiary shall then be entitled in possession or any property appropriated in or towards the satisfaction of such share shall thenceforth be held IN TRUST for such Beneficiary absolutely and thereupon the trusts hereinbefore declared concerning such share or the part thereof or the property to which such declaration relates shall forthwith determine and the Trustee may at any time thereafter transfer such share or the part thereof or the property to which such declaration relates to such Beneficiary absolutely." From these clauses it is clear that the intention of the Maharaja was that the assessee should get a half share in the income of the trust fund.
Neither the trust fund was fixed nor the amount payable to the assessee was fixed.
The only thing certain is that she is entitled to a 15/30 shares from out of the income of the trust fund.
That being so, it is evident that what she was entitled to was not an annuity but an aliquot share in the income of the trust fund.
Mr. Setalvad, learned Counsel for the assessee contended that during the year with which we are concerned, there was no change in the trust fund and in view of that fact and as we are considering the liability to pay wealth tax, we would be justified in holding that the amount receivable by the assessee in the year concerned was an annuity.
We see no force in this contention.
The question whether a particular income is an annuity or not does not depend on the amount received in a particular year.
What we have to see is, what exactly was the intention of the Maharaja in creating the trust.
Did he intend to give the assessee a pre determined sum every year or did he intend to give her an aliquot share in the income of a fund ? On that question, there can be only one answer and that is that he intended to give her an aliquot share in the income of the trust fund.
As income cannot be an annuity in one year and an aliquot share in another year.
It cannot change its character year after year.
From the facts found, it is clear that the assessee has a life interest in the trust fund.
713 For the reasons mentioned above, we allow this appeal, set aside the judgment of the High Court and discharge the answers given by the High Court to the questions referred to it by the Tribunal and in its place we answer those questions in favour of the Department.
The Commissioner is entitled to his costs of this appeal from the respondent, V.P.S. Appeal allowed.
| IN-Abs | The trust deed executed by the husband of the respondent assessee provided that the trustees should pay to the assessee during her life time 50 per cent of the income of the trust fund.
The settlement was irrevocable and the properties mentioned in the schedule to the trust deed stood transferred to the name of the trustees.
Under the clauses of the deed ,the trust fund was not a fixed sum but was capable of being augmented.
On the question whether the assessee was entitled only to an annuity within the meaning of that expression in section 2(e) (iv) of the Wealth Tax Act or had an interest in the corpus of the trust which could be brought to tax under the Wealth tax Act.
HELD: The intention of the husband was that the assessee should get 15130 share from out of the income of the trust fund.
Since neither the trust fund nor the amount payable to the assessee was a fixed sum, what the assessee was entitled to was not an annuity but an allquot share in the income of the trust fund.
The fact that in the particular assessment year there was no change in the trust fund was irrelevant because the question whether a particular income is an annuity or not does not depend upon the amount received in a particular year.
[712 D H] Hence the assessee had a life interest in the trust fund which could be brought to tax under the Wealth tax Act.
[713 A B] Ahmed G. H. Ariff & Ors.
vs Commissioner of Wealth tax, and Commissioner of Wealth tax, Gujarat Arundhati Balkrishna, , followed.
|
l Appeals Nos.
2350 to 2353 of 1968 and 1313 to 1316 of 1971.
727 Appeals by certificate from the judgment and order dated July 7, 1967 of the Gujarat High Court in Income tax Reference No. 22 of 1965.
section C. Manchanda, R. N. Sachthey and B. D. Sharma, for the appellant (in all the appeals).
section T. Desai and I. N. Shroff, for the respondent (in all the: appeals).
The Judgment of the Court was delivered by Hegde, J.
These are some of the appeals where the appellant unfortunately had to file two different appeals in respect of the same matter.
Civil Appeals Nos. 2350 2353 of 1968 were brought on the strength of the certificates granted by the High Court of Gujarat.
No reasons were given in support of those, certificates.
Hence those certificates must be considered as having not been properly granted.
The resulting position was that the appeals brought on the strength of those certificates became unsustainable.
To get over that difficulty, the Commissioner of Income tax, Gujarat.
invoked our jurisdiction under article 136 of the Constitution to appeal against the judgment of the High Court.
Civil Appeals Nos.
1313 1316 of 1971.
The assessee is a Private Limited Company and the concerned assessment years are 1957 58, 1959 60, 1960 61 and 1961 62.
The only question for decision in these appeals is whether the assessee company comes within the scope of section 23 A of the Indian Income tax Act, 1922 (to be hereinafter referred to as the Act) ? The assessee company was incorporated on October 11, 1941 The object clause in the memorandum of association contains the usual string of objects. 'Confining ourselves to the objects relevant for our present purpose.
we get in Clause (3) of the memorandum power "to acquire and hold shares, stocks, debentures, debenture stocks, bonds, obligations and securities issued or guaranteed by any company constituted or carrying on business in British India".
Sub cl.
(p) of that Clause empowers the company "to take part in the formation, management, supervision or control of the business or operation of any company or undertaking and for that purpose to appoint and remunerate any directors.
accountants or other experts or agents".
Clause (q) provides power to carry on all or any of the following businesses : "Agents, Chief agents or licensed agents of any company. . " We are not concerned with the other objects mentioned in the memorandum.
728 In July 1942, the assessee company promoted a company known as New India Industries Ltd. By an agreement dated July 24, 1942, the assessee company was appointed as managing agents of the said New India Industries Ltd. In 1956, the said managing agency was renewed for a period of five years in view ,of the provisions of the .
The group of persons who had floated the assessee company had earlier in the year 1940 floated a company called the Cotton Fabrics Private Ltd.
By an agreement dated April 22, 1943, the assessee company was appointed the managing agent of the said Cotton Fabrics Private Ltd.
In 1956, the said managing agency agreement was also renewed for a period of five years for the very reason referred to earlier.
We have already noted that the assessee company is a Private Company.
As such it is not a company in which the public is substantially interested.
The Income tax Officer was of the opinion that as during the company 's income from its business activity "in the dealing in or holding of investments" was very much more than that its income from its managing agencies and further as it had used a very large portion of its assets in the former activity, it must be considered as an "investment company" an expression not found in the Act.
Basing himself on that finding, he reasoned thus : Statutory percentage of profits to be declared as dividends by such a company under section 23A was 100 per cent in the first two assessment years and 90 per cent in the remaining two assessment .years.
The dividends declared by the assesssee company fell much below that percentage.
Hence it was liable under section 23A to pay super tax at the rate of 50 per cent on the undistributed balance of the total income reduced as provided in section 23A (1) accordingly.
In appeal this decision was affirmed by the Assistant Appellate Commissioner excepting in regard to certain deductions with which we are not concerned.
Aggrieved by the order of the Assistant Appellate Commis sioner, the assessee took up the matter in second appeal to the Income tax Appellate Tribunal.
The Tribunal agreed with the ,conclusions reached by the Assistant Appellate Commissioner. 'Thereafter at the instance of the assessee, the following two questions were referred to the High Court under section 66(1) of the Act.
Whether on the facts and circumstances of the case the Tribunal was justified in holding that the assessee company is an investment company for purposes of section 23A of the Income tax Act, 1922 ? 729 2.
Whether the Tribunal was justified in law in holding that while determining the undistributed balance of the total income for charging super tax under the provisions of section 23A of the Act no deduction can be allowed in respect of the expenses actually incurred by the assessee company but disallowed for the purposes of computing its assessable income ?" Before the High Court, Counsel for the assessee did not press an answer to the second question.
Hence the High Court did consider that question.
Nor are we called upon to consider at question.
The High Court reframed the first question thus "Whether on the facts and circumstances of the case the Tribunal was justified in holding that the assessee company is a company whose business consists mainly in dealing in or holding of investments within the meaning of clause (i) of the second Explanation to section 23A of the Income Tax Act, 1922 ?" The High Court answered that question in the negative and in favour of the assessee.
It is the correctness of that decision that is in issue before us.
We have now to consider whether the High Court was right in concluding that the assessee company did not come within the scope of section 23A.
In arriving at its conclusion the High Court had approached the question before it from three different angles viz (1) the objects of the company as mentioned in its memorandum of association; (2) the profits earned the company during the relevant previous years from its various activities and (3) the assets used by the company in those years for the purpose of holding the shares of the managed companies, dealing with the shares of other companies and in collection with its other business activities.
Section 23A to the extent relevant for our present purpose reads : " (1) Where the Income Tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company within the twelve months immediately following the expiry of that pre vious year are less than the statutory percentage of the total income of the company of that previous year as reduced by (a). . . . . . (b). . . . . . . (c). . . . . 730 The Income tax Officer shall, unless he is satisfied that, having regard to the losses incurred by the company, in earlier years or to the smallness of the profits made in the previous year, the payment of a dividend or a larger dividend than, that declared would be unreasonable, make an order in writing that the company shall, apart from the sum determined as payable by it on the basis of the assessment under section 23, be liable to pay super tax at the rate of fifty per cent.
In the case of a company whose business consists wholly or mainly in the dealing in or holding of investments and at the rate of thirtyseven percent, in the case of any other company on the undistributed balance of the total income of the previous year, that is to say, on the total income as reduced by the amounts, if any referred to in clause (a), clause (b) or clause (c) and the dividends actually distributed, if any. ." Explanation 2, to that section says: "For the purposes of this section, statutory percentage means: (i) in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments 100 % . " We have now to see what exactly is the meaning of the expression "in the case of a company whose business "consists wholly or mainly in the dealing in or holding of investments" in the main section 23A and the expression "in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments" in cl.
(i) of Explanation 2 to section 23A.
The Act contains many mind twisting formulaes but section 23A along with some other sections takes the place of pride amongst them.
Section 109 of the 1961 Income tax Act which has taken the place of old section 23A of the Act is more understandable and less abstruse.
But in these appeals we are left with s.23A of the Act.
Clause (i) of Explanation 2 to section 23A concerns itself with a company whose business consists "wholy or mainly in the dealing in or holding of investments".
The word "mainly" in that clause as well as in the main section 23A must necessarily take its colour from the word "wholly" preceding that word in those provisions.
In other words the company which comes within the scope of those provisions must be one whose primary business must be "in the dealing in or holding of investments".
If a company engages itself in two or more equally or nearly equally important business 731 activities, then it cannot be said that the company 's business consists "wholly or mainly" in dealing in a particular thing.
Further even in cases where a company has more than one business activity and one of its activity is more substantial than the others, unless that activity is the primary activity of the company, it cannot be said that that company is engaged in "wholly or mainly" in any one of its business activities.
Section 23A in our opinion applies only to cases where the primary activity of tile company is in 'the dealing in or holding of investments '.
We shall presently see whether on the facts found by the Tribunal, it can be said that the assessee company 's business in the relevant years consisted "of mainly in the dealing in or holding of investments" as it was not the case of the Revenue that it was wholly engaged in that business.
We next come across with another expression which is far more difficult to comprehend than the one that we were considering till now.
Section 23A speaks of the business of "holding of investments".
Here comes the enigma.
It is easier to understand when the section speaks of a company having the business of dealing in investments, though to say that the company is dealing in investments may at first sight look somewhat incongruous.
When the legislature spoke of dealings in investments, it meant dealing in shares, stocks and securities etc.
But when a person invests.
in the share of some of the companies, it is difficult to say that his business is one of investing.
In commercial circles investing is not considered as business.
An investor may feel perplexed if he is called a businessman.
This Court in Bengal and Assam Investors Ltd. vs Commis sioner of Income tax, West Bengal(1); came to the conclusion that an individual who merely invests in shares for the purpose of earning dividend, does not carry on a business and that the only way he can come under section 10 of the Act is by converting the shares acquired by him into stock in trade i.e. by carrying on the business of dealing in stocks and shares.
In that case this Court was considering whether the dividend income of the assessee company therein could be considered as business income under section 10 of the Act.
Therein this Court was not considering the scope of section 23A.
But all the same in that case this Court proceeded on the basis that no one can make a business of investing.
But then section 23A speaks of the business of "holding of investments".
We were told by the Counsel for the assessee that that expression is an incongruous one and that we should, following the decision of this Court in Bengal and Assam Investors Ltd.(1) hold that there is nothing like a business of "holding of investments".
We feel unable to accede to that contention.
We cannot say that the (1) 732 legislature did not know its own mind when it used that expression in section 23A. We must give some reasonable meaning to that expression.
No part of a provision of a statute can be just ignored by saying that the legislature enacted the same not knowing what it was saying.
We must assume that the legislature deliberately used that expression and it intended to convey some meaning thereby.
The expression " 'business" is a well known expression in income tax law.
It means as observed by this Court in Narain Swadesh Weaving Mills vs Commissioner of Excess Profits Tax (1) : " some real, substantial and systematic or organised course of activity or conduct with a set purpose".
is also the meaning given to that expression in the earlier decisions of the High Courts and the Judicial Committee.
We must, therefore, proceed on the basis that the legislature was aware of the meaning given by courts to that expression when it incorporated section 23A into the Act in 1957.
Hence we must hold that when the legislature speaks of the business of 'holding of investments ', it refers to real, substantial and systematic or organised course of activity of investment carried on by an assessee for a ,set purpose such as earning profits.
Now let us leave section 23A and proceed to examine the facts of the case to find out whether the assessee company can be held to ,,come within the scope of section 23A in the light of our interpretation of that provision.
We have earlier referred to the objects clause in the memo randum of association.
The memorandum permits the assessee company to take up the management of the other companies, to invest in the shares of the other companies, and to deal in the shares of the companies.
Therefore it cannot be said that the assessee company was incorporated primarily with the object of carrying on the business of the "dealing in or holding of investments".
The objects of the assessee company are many fold.
The object of carrying on the business of "dealing in or holding of investments" is only one of them.
Hence the memorandum of association does not assist us in deciding whether the business of the assessee company "consists of wholly or mainly in the dealing in or holding of investments.
" We shall now take up the question of the profits earned by the assessee company during the relevant previous years.
The High Court has in its judgment set out a statement showing the profits I earned by the assessee company through its various activities.
It would be convenient to set out the same now (1) 733 ASSESSMENT YEAR 1957 58 1959 60 1960.61 1961.62 Rs. Rs. Rs. Rs. 1.
Managing Agency 2,09,999 2,56,3152,41,7051,96,384 2.
Dividend on shares of managed companies 1,95,179 2,58,511 3,21,746 3,12,251 3.
Income from shares held as stock in trade (i) interest on debentures 369 342 309 312 ' (ii) Dividends 3,40,6954,68,7755,48,3255,53,999 (iii) Dealing in shares 23,86716,75528,32922,100 (iv) Share transfer fee 10 10 10 10 Total of Nos.
(i) to (iv)3,64,941 4,85,8825,76,9735,76,421 4.
Income from interest 4,5953,35815,27623,617 In order to find out the implications of this statement we have to first decide whether the assessee company can be said to be a company engaged in the business activity of "holding of investments.
" The finding of the Tribunal on this point is stated thus "We agree with the assessee that the shares in the managed companies were acquired with a view to safely hold the managing agencies, but we do not agree that for that reason only those shares cannot be taken into account for the purpose of a business of dealing in or hold ing of investments".
All the shares held by the assessee company as its investments were the shares of the two company which it was managing agent.
It invested in no other shares.
The Tribunal has found that the managed company 's shares were acquired by the assessee company for the purpose of safeguarding its managing agency business.
Therefore it is quite clear that those investments were made not in the course of any business of investment but for the purpose of securing its managing agencies.
Those investments were made for a collateral purpose viz. to have a firm grip over its managing agency business.
If we are correct in this, finding Jr we think, we are then it follows that the dividend income from shares of the managed companies cannot be taken into consideration in finding out whether the assessee company 's business "consisted wholly or mainly in the dealing in or holding of investments".
The investments made by the assessee company in the shares of the managed companies are essentially linked with its 'I managing agencies and not with the dealing of that company in shares of the other companies.
In other words those investments form part of the assessee company 's managing agency business 734 activity.
If we add the dividend income of the shares of the managed companies, to the managing agency commission, the total income from those two sources is much more than the income earned by the assessee company from its share dealings, in each one of the assessment years.
Hence viewed from the point of view of profits earned by the assessee company, it cannot be said that in the relevant previous years the assessee company 's business consisted wholly or mainly in the dealing in or holding of investments".
Now let us look at the question from the point of view of the assets employed by the assessee company.
Here again we can take assistance from the schedule given in the judgment of the High Court setting out in details the assets used by the assessee company in its several business activities.
That Schedule reads thus : SHARES OF MANAGED COMPANIES Treated by the Income Tax Department as investments not forming part of the business of dealing in shares.
New India Indus tries 6,91,084 6,96,883 6,96,883 6,96,883 2.Cotton Fabrics Ltd. (i) Ordinary shares 3,69,285 3,69,2853,69,2853,69,275 (ii) Preference shares 88,46388,46390,48390,483 Total 11,48,83211,54,63111,56,65111,56,651 Shares of other companies Treated by the Income tax Department as held for dealing in shares (stock in trade). 25,07,96930,13,51829,88,94636,07,063 Total investment as per balance sheet 36,56,80141,68,14941,45,59747,63,714" It is true that the assets used by the assessee company in its share dealing are far more than that used by it for investment in the shares of the managed company.
But then we have to bear in mind that we do not exhaust the total assets of the company by merely referring to the tangible assets used by it.
In addition, we have to take into consideration the value of the managing agencies held by the assessee company.
Looked that way, it cannot be said that the assets of the company, used in its share dealings are far more than its other assets.
At any rate on the basis of the assets used, it cannot be concluded that the assessee 's business consisted "wholly or mainly" in the dealing in investments.
735 It follows from the conclusions reached by us earlier, that our answer to the question before us must be the same as that given by the High Court.
We not only agree with the conclusions reached by the High Court but also with premises on the basis of which those conclusions were reached.
In the result Civil Appeals Nos. 1313 to 1316 of 1971 are dismissed on merits with costs one set of fees and Civil Appeals Nos.
2350 2353 of 1968 are dismissed as being not maintainable but without any order as to costs.
section C. Appeals dismissed.
| IN-Abs | The assessee is a private limited company and was the Managing Agent of two other companies.
All the shares held by the assessee company as its investments were the shares of those two companies.
The Income tax authorities held that the assessee company was an 'investment company ' within the scope of section 23A of the Act and ordered the company to pay super tax as provided under section 23A(1).
The High Court in reference held in favour of the assessee.
Dismissing the appeals, HELD : (1) In the facts and circumstances of the present case, the assessee company cannot be said to be an 'investment company ' coming within the scope of section 23A of the Act.
The meaning of the expression "in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments" both in the main section 23A and in the Explanation concerns itself with a company whose business consists "wholly or mainly in the dealing in or holding of investments".
The word "mainly" must necessarily take its colour from the word "wholly" preceding that word.
, In other words the company which comes within the scope of those provisions must be a company whose primary business is in the dealing in or holding of investments and only in such cases, section 23A applies.
And the expression 'business of holding of investments ' in the said section refers to a real, substantial and systematic or organised course of activity of investment carried on by an assesses for a set purpose such as earning profits.
[730 H, 731 D] All the shares held by the assessee company as its investments were the shares of the two companies of which it was the Managing Agent.
These investments were made for a collateral purpose viz., to have a firm grip over its Managing Agency business.
The investments made by the assessee company in the shares of the managed companies are essentially linked with its Managing Agencies and not with the dealing of that company in shares of other companies.
The company 's total income from dividend income of the shares of the managed companies and the Managing Agency commission together is much more than the income earned by the company from its share dealings.
Further the assets of the company used in its share dealings are not more that its other assets.
Therefore, it cannot be said that the assessee company 's business consisted wholly or mainly in the dealing in investments.
[7.33 F] Bengal Assam Investors Ltd. vs C.I.T., West Bengal, and Narain Swadesh.
Weaving Mills vs Commissioner of Excess Profits Tax, , referred to.
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Appeal No. 2421 of 1968.
Appeal from the judgment and order dated January 31, 1967 of the Madhya Pradesh High Court in Misc.
Civil Case No. 88 of 1966.
R. N. Sachthey and B. D. Sharma, for the appellant.
Rameshwar Nath and Swaranjit Sondhi, for the respondent.
The Judgment of the Court was delivered by Grover, J.
This is an appeal by certificate from a judgment of the Madhya Pradesh High Court in an Income tax Reference.
The Reference related to the assessment made on the assessee for the year 1962 63 for which the accounting period was the year ending March 31, 1962.
The assessee carried on business as sole, selling agent of M/s. Mohanlal Hargovindas, Jabalpur.
The assessee succeeded to this business on the death of her husband on or about February 17, 1960.
It would appear that M/s. Mohanlal Hargovindas had recovered a certain amount towards sales tax from the assessee 's husband relating to the period January 26, 787 1950 to March 31, 1951.
In an appeal filed by the said firm, however, the Assistant Commissioner of Sales Tax remitted the sum of Rs. 24,341/ so recovered by the firm by an order dated November 31, 1960.
Consequently M/s. Mohanlal Hargoving das refunded that amount to the assessee by means of a draft dated October 31, 1961.
This draft was received by the assessee on November 9, 1961 which fell in the accounting period.
The Income tax Officer sought to tax this amount under the provisions of section 41 (1) of the Income tax Act 1961, hereinafter called the 'Act '.
He did not accede to the contention of the assessee that the income, if at all, was the income of the assessee 's deceased husband and not her income.
The Appellate Assistant Commissioner dismissed the appeal filed by the assessee.
The Tribunal acceded to the contention of the assessee that since the allowance or deduction in question had been obtained by a different assessee, namely, her husband she was not liable to pay tax on that amount under section 41 (1) of the Act.
The Tribunal was moved by the Commissioner of Income tax for stating a case and referring the following question to the High Court : "Whether the sum of Rs. 24,341 was liable to tax under section 41 (1) of the Income tax Act, 1961 ?" The High Court answered the question in favour of the assessee.
Section 41(1) is in the following terms: "41 (1) Where an allowance or deduction, has been made in the assessment for an year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not".
As pointed one by the High Court under the general law if a trading liability has been allowed as a business expenditure and, if this liability is remitted in any subsequent year the amount remitted cannot be taxed as income of the year of the remission nor can the account for the year id which the liability was allowed be reopened or adjusted.
Section 41(1) was enacted to supersede this principle but this section can apply only to the a In 788 the present case if the husband of the assessee had been alive and had received the amount which had been remitted during his lifetime he would certainly have been liable to pay tax under the provisions of section 41(1).
But Kanhaiyalal having died and his widow being the assessee she cannot possibly be brought within the section.
Section 2(7) of the Act defines the word "assessee".
The definition is very general and assessee is stated to mean a person by whom income tax or super tax or any other sum of money is payable under the Act and includes every person as mentioned in clauses (a), (b) and (c).
The assessee, in the present case, does not fall within any of those clauses.
There is no specific provision in the Act under which it can be said that the assessee is a person by whom income tax is payable on the amount of Rs. 24,341/ which came to her by way of remission on account of what had transpired in the lifetime of her husband.
The Act does not contain any provision making a successor in business or the legal representative of an assessee to whom an allowance has already been granted liable to tax under section 41(1) in respect of the amount remitted and received by the successor or the legal representative.
The only provision which relates to the liability of the legal representative is section 159 of the Act.
Sub section (1) thereof provides that where a person dies his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died in the like manner and to the same extent as the deceased.
The corresponding provision in the Income tax Act 1922 was section 24B.
In Commissioner of Income tax Bombay vs Amarchand N., ' Shroff (1) it was laid down by this Court that section 24B did not authorise the levy of tax on receipts by the legal representative of a deceased person in the year of assessment succeeding the year of account being the previous year in which such person died.
The assessee had ordinarily to be a living person and could not be a dead person.
By section 24B the legal personality of the.
deceased assesses was extended for the duration of the entire previous year in the course of which he died.
The income received by him before his death and that received by his legal representative after his death but in that previous year became assessable to income tax in the relevant assessment year.
Any income received in the year subsequent to the previous year or the accounting year could not be called income received by the deceased person.
Thus the provisions of section 24B did not extend to tax liability of the estate of a deceased person beyond the previous or the accounting year in which that person Income tax, Bombay vs James Anderson(1).
Indeed the learned counselfor the Revenue did not and could not rely on the provisions of section 159 of the Act in the present case nor was any reliance (1)1.
T. R. 59.
(2) 51 789 placed on any other section in the Act apart from section 41 (1).
The, question referred is also based on that very section.
That section, in our opinion cannot possibly apply to the present case because the assessee who is now sought to be taxed is not the assessee contemplated by that section.
The assessee within section 41 (1), namely, Kanhaiyalal having died the Revenue could not take any advantage of its provisions.
The High Court rightly observed that the question whether the amount of Rs. 24,341/ was liable to tax as the personal income of the assessee did not arise in the present case in which the sole point to be decided was whether that amount was assessable in the assessee 's hands under section 41 ( 1 ) of the Act.
We, therefore, entirely concur in the view of the High Court and agree with the answer returned by it.
In the result the appeal fails and it is dismissed with costs.
K.B.N. Appeal dismissed.
| IN-Abs | The assessee who was successor in business to her deceased husband was sought to be taxed under section 41 (1) of the Income tax Act, 1961, in respect of certain amount received by her by way of remission from the sales tax recovered from her husband.
On the 'question whether the amount was assessable under section 41(1) of the Act.
HELD : Section 41(1) does not apply, because, the assessee who is sought to be taxed is not the assessee contemplated by the section.
If the husband of the assessee had been alive and had received the amount which had been remitted during his life time he would certainly have been liable to pay tax under the provisions of section 41(1).
But the husband having died the Revenue could not take any advantage of its provisions.
The Act does not contain any provision making a successor in business or the legal representative of an assessee to whom an allowance has already been granted liable to tax under section 41(1) in respect of the amount remitted and received by the successor or the legal representative.
[788 C D, 789 A B] C.I.T., Bombay City vs Amarchand N. Shroff and C.I.T Bombay vs James Anderson, , referred to.
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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.
section J. Sorabeje, M. O. Chinoy, J. R. Gagrat, and B. R. Agarwala, for the appellants.
V. section Desai and section 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 599 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, 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 600 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.
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.
601 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 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 602 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.
603 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 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 604 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 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 605 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 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.
606 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 607 that the sanction was granted by the Government.
Delayed publication of the notification would not detract from the sanction ,previously 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. section Appeal allowed.
| IN-Abs | Under section 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 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] (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 section 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]
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Appeal No. 1970 of 1969.
Appeal by special leave from the judgment and order dated January 21,1969 of the Allahabad High Court in exhibit Second Appeal No. 270 of 1963.
The appellant appeared in person.
E.C. Agrawala, A. T. M. Sampath and section R. Agarwal,, for the respondent.
The Judgment of the Court was delivered by Vaidialingam J.
The appellant in this appeal, by special leave, has argued his case in person and attacks the judgment of the Allahabad High Court dated January 21, 1969 reversing the decrees of the two Subordinate Courts.
The facts leading upto this appeal may be briefly stated : The respondent, who is the landlord, under whom the appellant is a tenant, obtained an exparte decree on March 9, 1957 in suit No. 74 of 1956 in the Court of the Additional Munsif, Kanpur.
The decree was not only for eviction, but also for payment of rent or damages and mesne profits, as well as costs.
The appellant pleaded that there was a compromise entered into between him and the respondent in and by which the manner of extinguishment of the decree was arrived at.
That compromise, according to the appellant, was entered into on July 25, 1957.
The terms of the compromise have been incorporated in ,the judgment of the Additional District Judge dated March 27, 838 1961 in Misc.
Civil Appeal No. 688 of 1960 and in other proceedings, and it is unnecessary for us to refer to them.
It is enough to note that if the amounts agreed to be paid as per its terms were paid the decree for eviction would stand extinguished retrospectively.
The plea of the appellant was that he has made the payments in accordance with the compromise and the last of such payments was on June 16, 1960.
As noted earlier, according to him, the date of the compromise was July 25, 1957.
It was his claim that when the last payment was made, the decree for eviction obtained against him on March 9, 1957 stood extinguished and that the landlord respondent has no further right to execute the decree.
The landlord had filed an application on July 19, 1960 for executing the decree in Suit No. 74 of 1956.
Prior to that, the appellant appears to have taken certain proceedings and asked for stay of execution till the disposal of some criminal case an also for adjustment of payments.
We are more particularly concerned with the application filed by the appellant on September 3, 1960, before the trial court.
That application was under Order XXI Rule 2(2) C.P.C.
In that application, the appellant, after referring to the compromise and the various payments, claimed to have been made by him under the compromise, prayed for recording an adjustment of the decree.
This application was opposed by the respondent on three grounds : (a) There has been no compromise, (b) There has been no payment, and (c) The application under Order XXI Rule 2 is barred by limitation, as it has been filed beyond 90 days from July 25, 1957.
The contentions of the landlord respondent were accepted by the trial court, which by its order dated October 8, 1960, dismissed the application filed by the appellant under Order XXI Rule 2, on the ground that the application having been filed beyond 90 days from ' July 25, 1957 was barred by limitation.
It is the view of the learned Munsif that as the case of the appellant was that the compromise was entered into on July 25, 1957, the period of limitation for filing an application for recording adjustment of the decree will start from that date.
The application filed by the appellant was dismissed on this sole ground without inves tigation into the truth of the compromise and the payments.
The appellant carried the matter before the learned Additional District Judge, Kanpur in Misc.
Civil Appeal No. 688 of 1960.
Before the learned District Judge, the appellant raised the contention that the view of the trial court that the period of limitation starts from July 25, 1957 is erroneous.
He pleaded that as the decree obtained by the landlord will get extinguished only when 839 the last payment was made, namely, on June 16, 1960, the period of limitation of 90 days for filing the application for recording adjustment of the decree will have to be computed from that date.
As the application has been filed within 90 days from June 16, 1960, the executing court has acted erroneously and illegally in rejecting his application as being barred.
The appellant had also raised contentions on facts regarding the truth of the compromise, as well as the payments claimed to have been made by him.
These contentions of the appellant, as seen from the judgment, were very strenuously contested by the respondent who pleaded that the application filed under Order XXI Rule 2 was barred, as correctly held by the executing court on the basis that the limitation starts from July 25, 1957.
The respondent pleaded that the appellant had sufficient opportunity to lead evidence both regarding the truth about the factum of compromise as well as regarding the payments claimed to have been made by him.
As this opportunity was not availed of by the appellant, the landlord pleaded that the appeal should be dismissed.
The learned District Judge by his judgment and order dated March 27, 1961, after referring to the contentions of the parties, as well as the terms of the compromise pleaded by the appellant, considered the main question as to from what date the period of limitation is 'to be computed.
The learned Judge before whom case law was cited on both sides with regard to the starting point for limitation, ultimately accepted the contention of the appellant that if he is able to establish that he has made the last payment, on June 16, 1960, the period of limitation of three months for filing an application under Order XXI Rule 2 would begin to run only from that date,, and that in that case, the application filed on September 3, 1960 will be in time.
The learned Judge categorically rejected the contention of the respondent decree holder supporting the view of the trial court that limitation has begun to run from July 25, 1957.
In fact the trial court could not have held otherwise, in view of the decision of the District Court in Misc.
Civil Appeal No. 688 of 1960.
After holding that the limitation will start only from June 16, 1960, the learned Judge, however, adverted to questions regarding the truth about the compromise as well as the payments claimed to have been made by the appellant.
But the court was faced with this difficulty, namely, that parties had not adduced evidence before the trial court as the latter had dismissed the application of the appellant on the ground that it was barred by limitation.
Therefore, the learned District Judge set aside the order of the trial court and remanded the proceedings for investigation into facts, namely, whether the compromise and the payments alleged 840 to have been made by the appellant on the basis of the com promise, particularly the payment stated to have been made on June 16, 1960 were true.
He gave a specific direction that if the payment on June 16, 1960 is found in favour of the judgment debtor the application filed by him is not barred by limitation It is significant that the respondent landlord never raised any objection to the maintainability of the appeal No. 688 of 1960.
Nor did he raise the contention that no investigation into the truth of the compromise or payments pleaded by the judgment debtor was needed as the payments claimed to have been made have not been certified and made in accordance with Order XXI Rule 1 C.P.C. as in force in Allahabad, nor on the ground that the application filed by the judgment debtor is barred by time.
No appeal was filed by the decree holder against the order of remand passed by the District Court.
After remand, both the parties adduced evidence with regard to these questions of fact before the trial court.
Even before the trial court the decree, holder did not contest its jurisdiction to investigate into facts.
In fact, he could not have raised any such contention, as the Munsif was bound by the remand order.
By judgment and order dated September 28, 1961, the learned Munsif accepted the plea of the appellant both regarding the truth of the compromise as well as the payments stated to have been made by him.
In particular, though there was a serious controversy between the parties regarding the payment stated to have been made by the appellant on June 16, 1960, the learned Munsif, on the evidence, accepted the appellant 's case and held in his favour on this point.
In view of this finding regarding payment on June 16, 1960, in favour of the judgment debtor, the period of limitation was computed by the Munsif from that date, as directed by the remand order of the District Judge, and held that the application filed by the judgment debtor was within time.
In this view, the learned Munsif ordered full adjustment and satisfaction of the decree as well as cost and further held that the decree got extin guished as pleaded by the judgment debtor.
The respondent filed an appeal before the 1st Additional Civil Judge challenging the judgment and order of the trial court dated September 28, 1961.
The learned Civil Judge by his judgment dated October 20, 1962, confirmed the findings of the trial court and dismissed the respondent 's appeal.
The respondent decree bolder filed Second Appeal No. 270 of 1963 before the High Court.
The learned Judge has not adverted to the proceedings referred to above leading up to the order of remand and the directions given in Misc.
Civil Appeal 841 No. 688 of 1960.
On the other hand, the learned Judge has proceeded on the basis as if the decision in this case was rendered for the first time by the Munsif on September 28, 1961, and by the Civil Judge on October 20, 1962.
In view of this, the. learned Judge merely noted that the two subordinate courts have concurrently accepted the case of the appellant, both on the question of compromise, as well as the payments claimed to have been made by him.
The learned Judge has also noted that the claim of the judgment debtor that he paid Rs. 235/ on June 16, 1960 has been concurrently accepted by both the courts.
After noting the above findings recorded concurrently by both the courts, the High Court does not express any disagreement with those findings.
But on the basis of those findings, the High Court considered the question whether, in the nature of the compromise pleaded by the appellant and found in his favour by the two courts, an application under Order 21 Rule 2 C.P.C. was maintainable.
In this connection the High Court referred to the provisions of Order 21 Rule 1 C.P.C. as amended and in force in Allahabad.
After quoting that rule, the High Court ' is of the view that as the appellant has not claimed to have made payments in compliance with those provisions, it was not open to him to ask for recording adjustment of the decree.
According to the High Court, his remedy, if any, is only by way of a separate suit for damages against the decree holder.
It is the further view of the High Court that this aspect has not been considered at all by the two courts and as such they committed an error in investigating the question regarding the truth or otherwise of the compromise or payments claimed to have been made in pursuance of the said compromise, particularly the payments made on June 16, 1960.
The High Court then refers to the stand taken by the decree holder that even on the basis of the compromise, the period of limitation for filing an application for recording adjust ment of the decree commences fro in July 25, 1957 as also the plea of the appellant that limitation commences from June 16, 1960, when the last payment was made, The High Court expressed the view that the agreement pleaded could amount to an adjustment of the decree only if the said agreement was in writing and had been tiled within the period allowed by the law of Limitation.
The High Court has not pursued the matter further and expressed an opinion as to what is the date from which the period of limitation is to be computed.
In the end the High Court expressed the view that the whole approach made by the two subordinate courts is erroneous, Obviously, this criticism must refer to the circumstances noted by the High Court that the payments under the, compromise. have not been claimed to have been made in the manner provided in Order 21 Rule 1 C.P.C. as in force in Allahabad.
On this reasoning the High Court reversed 842 appellant filed under Order 21 Rule 2 C.P.C.
It will be noted that even before the High Court the respondent had not taken any objection that the appeal filed by the judgment debtor namely, Misc.
Civil Appeal No. 688 of 1960 was not maintainable and that the findings recorded therein against are not binding on him: The appellant urged before us that the High Court was not justified in interfering with the concurrent findings on facts and that it committed an error in going behind the findings recorded in the Misc.
Civil Appeal No. 688 of 1960.
He further urged that the question as to from what date the period of limitation is to be computed has already been adjudicated upon in the said appeal, and that the decree holder should not have been permitted to raise over again the point concluded by the remand order.
The appellant also urged that the view of the High Court that the payments have not been made by him in accordance with Order 21 Rule 1 C.P.C. is not correct.
Mr. E. C. Agarwala, learned Counsel for the respondent decree holder has drawn our attention to Order 21 Rule 1 C.P.C. as in force in Allahabad.
He contended that even according to the appellant the payments have not been made in accordance with the said rule.
Therefore, he urged that the High Court was perfectly justified in holding that the payments which have not been made in accordance with the said rule, cannot be taken into account for recording adjustment of the decree.
In the view that we take that because of the decision in Misc.
Civil Appeal No. 688 of 1960 it is not open to the respondent to raise the objection either of limitation on or that the payments have not been made as per the said rule, we express no opinion whether the payments made directly to the decree holder under the specific terms of an agreement or a compromise cannot be pleaded in an application filed for recording satisfaction or adjustment and whether under those circumstances such payment should also be made in the manner provided in the said rule.
One aspect which strikes us and which will conclude the case against the respondent is the finding recorded by the learned District Judge on March 27, 1961 in Misc.
Civil Appeal No. 688 of 1960.
We have already referred to the nature of the findings recorded therein.
The executing court had dismissed the application filed by the appellant on the ground that it is barred by limitation as it has been filed beyond 90 days.
from July 25, 1957.
Before the District Judge parties were at issue on this aspect.
While according to the appellant, limitation starts only from 843 June 16, 1960, the respondent 's plea was that limitation commences from July 25, 1957 Various decisions were cited by both the parties before the District Court.
After a consideration of those decisions, the District Court specifically held that if the appellant is able to establish the compromise as well as the further fact that he paid the last instalment on June 16, 1960, his application is not barred by limitation as it has been filed within 90 days, namely on September 3, 1960.
Though the respondent pleaded that the appellant had an opportunity to let in evidence regarding the truth of the compromise as well as the payments claimed to have been made by him, the District Court took the view that the learned Munsif had no occasion to consider these aspects as he dismissed the application filed 'by the appellant on the sole ground of limitation.
After specifically recording the date from which period of limitation is to be computed, the learned District Judge remanded the proceedings to the trial court for investigation into the truth of the compromise as well as the. payments claimed to have been made by the appellant.
The District Munsif, after remand has elaborately gone into the matter and specifically found on fact in favour of the appellant, both regarding the truth of the compromise and the payments.
He also held that the last payment has been made on June 16, 1960, and, therefore, in view of the directions contained in the remand order, the application filed by the appellant was within time.
It is against this order of the District Munsif that the respondent filed an appeal before the District Court and a further Second Appeal before the High Court.
We have already stated that the respondent had filed on July 19, 1960 an application for executing the exparte decree.
It is in answer to that execution petition that the appellant filed objections by initiating proceedings under Order 21 Rule 2(2) C.P.C. on September 3, 1960.
Therefore, the. parties and the Courts had proceeded on the basis that the entire question related to a controversy in respect of execution, discharge or satisfaction of the decree.
Under section 47(2) C.P.C. the Court has power to treat the said proceeding as a suit.
That explains why the respondent did not raise any objection before the District Court that Misc.
Civil Appeal No. 688 of 1960 filed by the appellant was not maintainable.
We have already pointed out that before the District Court 'the respondent did not also raise any objection that no investigation regarding the truth of the compromise and the payment is necessary as the amount, even according to the appellant, has been paid contrary to Order 21 Rule 1 C.P.C. as in force in Allahabad.
In View of the circumstances pointed out above, in our opinion, the decision of the Additional District Judge in Misc.
844 Civil Appeal No. 688 of 1960 precludes the respondent from reagitating the point covered by that decision.
Mr. Agarwala pointed out that Misc.
Civil Appeal No. 688 of 1960 was not maintainable.
We are not impressed with this contention because apart from the fact that no such objection was raised before the District Court, which was dealing with the said appeal, the respondent himself has filed the appeal and the Second Appeal against the order passed by the District Munsif after remand.
It was against the original order of the District Munsif that the appeal was filed by the appellant before the District Court.
Even otherwise, as We have already pointed out, the proceed ings have been treated 'as one under section 47 C.P.C. in which the Misc.
Civil Appeal No. 688 of 1960 was perfectly competent.
Under Order 41 Rule 23, an appellant court has got power to remand the proceedings when a suit has been disposed of on a preliminary point.
We have already pointed out that the District Munsif dismissed the application filed by the appellant on the preliminary ground that it is barred by limitation.
We have already further pointed out that it must be considered to be a proceeding under section 47 as it was really in opposition to the execution proceedings filed by the respondent.
The appellate court, under those circumstances, when it disagreed with the trial court on the question of limitation was perfectly competent to remand the proceedings.
Under Order 43 Rule 1 Cl.(u) C.P.C. an appeal lies against an order remanding a case where an appeal would lie from the decree of the appellate court.
From the fact that the respondent has filed Second Appeal, which is the subject of attack before us against the decision in an appeal of the District Court in the same proceedings, it is clear that the respondent should have filed an appeal against the order of remand.
The consequence of an omission to file an appeal against the order of remand, under such circumstances, is indicated in section 105.
sub section
(2) C.P.C. which is as follows : "Sec.
105(2) Notwithstanding anything contained in sub section (1), where any party aggrieved by an order of remand made after the commencement of this Code from which an appeal lies does not appeal therefrom, he shall thereafter be precluded from disputing its correctness.
" We have already pointed out that the respondent had a right of appeal against the judgment and order passed in Misc.
Civil Appeal No. 688 of 1960.
The respondent admittedly did not file an appeal against the said order of remand.
If so, it follows 845 that the decision in Misc.
Civil Appeal No. 688 of 1960 regarding the date from which the period of limitation is to commence, namely, June 16, 1960, if payment on that date is established by the appellant binds both the parties, as that decision has become final.
It is on the basis of that decision that the trial court went into the facts and held in favour of the appellant.
Those findings have been confirmed by the District Court on October 20, 1962.
It was against the fresh decision given by the District Munsif on September 28, 1961 and confirmed by the District Court on December 20, 1962 that the present Second Appeal was filed before the High Court by the respondent.
The High Court when dealing with the matter should have given due effect to the decision given in the order of remand in Misc.
Civil Appeal No. 688 of 1960 and should have held that the respondent is precluded from raising either the plea of limitation or that it was not open to the appellant to rely upon the payments hot made in accordance with Order 21 Rule 1 C.P.C. as in.
force in Allahabad.
The High Court has committed a very serious error in law in not adverting to the remand order as well as to the various other circumstances We have already pointed out that the High Court has not differed from the concurrent findings recorded on facts in favour of the appellant.
The interference by the High Court with the decision of the two subordinate courts is erroneous in law.
In the result, the decree and judgment of the High Court dated January 21, 1969 in Second Appeal No. 270 of 1963 are set aside and this appeal is allowed.
There will be no order as to costs.
V.P.S. Appeal allowed.
| IN-Abs | The respondent, who was the landlord under whom the appellant was a tenant, obtained a decree for eviction and damages against the appellant.
The respondent filed an execution application on July 19, 1960.
In answer to it the appellant flied objections by initiating proceedings under O. 21, r. 2(2) C.P.C. on September 3, 1960.
In that application, the appellant alleged that there was a compromise between the parties on July 25, 1957 that in pursuance of the compromise he made various payments and that the last of the payments was made on June 16, 1960, and prayed for recording an adjustment of the decree.
The trial court, however, held that as the compromise was entered into on July 25, 1957 the period of limitation for filing the application would start from that date, and since the application was filed beyond 90 days from that date, it was barred by limitation.
The trial court dismissed the application on that sole ground, without investigating into the truth of the compromise or the payments.
On appeal, the appellate court accepted the contention of the appellant that if he was able to establish that be bad made the last payment on June 16, 1960 the period of limitation of three months for filing an application under O. 21, r. 2 would begin to run only from that date and that his application would be in time.
The appellate court therefore set aside the order of the trial court and remanded the proceedings for investigation into facts, namely, whether the compromise and the payments alleged to have been made by the appellant on the basis of the compromise and particularly the payment said to have been made on June 16, 1960, were true.
After remand, the trial court accepted the plea of the appellant regarding the truth of the compromise as well as the payments said to have been made by him, including the payment of June 16, 1960, held that the application filed was within time, and ordered 'full adjustment and satisfaction of the decree.
On appeal, the findings of the trial court were confirmed and the anneal was dismissed, in second appeal, the High Court accepted the findings on the questions of compromise and payments but held that as the appellant had not claimed to have made the payments in compliance with O. 21, r. 1, C.P.C., as amended and in force in Allahabad, it was not open to the appellant to ask for recording adjustment of the decree, and dismissed the application of the appellant filed under O. 21, r. 2.
Allowing the appeal to this Court, HELD: In view of the decision of the appellate court when remanding the matter, it was not open to the respondent to raise the objection ,either of limitation or that the payments had not been made as per O. 21, T. 1, C.P.C. The parties and the courts had proceeded an the basis that 837 the entire question related to a controversy in respect of execution, discharge or satisfaction of the decree.
Under section 47(2) C.P.C., the Court has power to treat the said proceeding as a suit.
Under O. 41, r. 23, an appellant court has power to remand a proceeding when a suit has been disposed of on a preliminary point; and under O. 43, r. 1 (u) C.P.C. an appeal lies against an order remanding the case where an appeal would lie against the decree of the appellate court.
The respondent should have filed an appeal against the order of the remand, and the consequence of his omission to file such an appeal is that under section 105(2), C.P.C., the decision of the appellate court, while remanding the matter, regarding the date from which the period of limitation is to commence, namely June 16, 1960, if payment on that date was established by the appellant, was final and binding on the parties.
The High Court when dealing with the matter should have given due effect to the decision given in the order of remand and should have held that the respondent was precluded from raising either the plea of limitation or that it was not open to the appellant to rely upon the payments not made in accordance with O. 21, r. 1, C.P.C., as in force in Allahabad.
The High Court had not differed on the concurrent findings recorded on facts in favour of the appellant and therefore, interference with the decision of the two subordinate courts was erroneous in law.
[843 F G. 844 C H; 845 A E]
|
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.
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 section 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 section 9(3) of the .
The sales tax concerned in the present case was that leviable under the .
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.
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, 830 1964, the Commissioner of Sales Tax initiated proceedings under section 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 section 12(1) of that Act and not section 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 section 52 of the 1959 Act, the governing provision in the matter of revising the assessment was section 12(1) of the Madhya Bharat Act.
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 section 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 831 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 section 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 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 832 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 vs Hanuman Prasad(1) and The Swastik Oil Mills Ltd. vs H. B. Munshi, Dy.
Commissioner of Sales Tax, Bombay, (2) the Commissioner was incompetent to revise the order because of section 12(1) of the Madhya Bharat Act read with section 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 section 11A(1) of the Central Provinces and Berar Sales Tax Act, 1947, as contended by the assessee or under section 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 section 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, 833 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 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 section 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 section 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.
834 (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 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 31 835 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 section 52 of the M.P. Sales Act of 1959, the proviso to section 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 section 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 section 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 section 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 section 12(1) of the Madhya Bharat Act and section 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 section 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. 835 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 section 52 of the M.P. Sales Act of 1959, the proviso to section 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 section 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 section 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 section 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 section 12(1) of the Madhya Bharat Act and section 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 section 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 .
| IN-Abs | 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 section 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 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 section 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 section 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 section 52 of the Madhya Pradesh Act, the governing provision was section 12(1) of the Madhya Bharat Act.
Dismissing the appeal to this Court, HELD:(1) The proviso to section 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 section 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 section 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 vs Hanuman Prasad 19 S.T.C. 87 and Swastik Oil Mills Ltd. vs 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 section 12(1) of the Madhya Bharat Act and section 39(2) of ' the Madhya Pradesh Act.
Therefore, the Revenue cannot call in aid the second part of the proviso.
[835 E H] 829
|
Appeal No. 2293 of 1968.
Appeal by special leave from the judgment and order dated (October 9, 1967 of the Kerala High Court in Income tax Reference No. 64 of 1966.
O.P. Malhotra, R. N. Sachthey and B. D. Sharma, for the appellant.
S.T. Desai, A. K. Verma and J. B. Dadachanji, 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 Kerala High Court in a reference made under section 26 (1 ) of the Gift Tax Act, 1958, hereinafter referred to as the "Act", relating to the assessment year 1964 65.
The assessee was the sole 819 proprietor of the business run under the name and style of Travancore Timbers and Products at Kottayam.
He converted the proprietary business into a partnership business by means of a deed of partnership dated August 1, 1963.
The partnership consisted of the assessee and his two daughters.
The capital of the partnership was to be Rs. 4,00,000/ .
The assessee contributed Rs. 3,50,000/and each of his two daughters, one of whom was married and the other unmarried, contributed Rs. 25,000/ .
The contribution of the capital by the daughters was effected by transfer of Rs 25,000/from the assessee 's account to the account of each of the daughters.
All the assets of the proprietary business were transferred to the partnership.
In these assets the assessee and his daughters were entitled to shares in proportion to their share capital.
In other words the assessee was entitled to a 7/8 share and each of his daughters to 1/16 share.
The profits and losses of the partnership, business, however, were to be divided in equal shares between all the three partners.
The assessee was the managing partner of the firm.
The assessee filed a return of gift tax for the assessment year 1964 65 in respect of the gift of Rs. 50,000/ in favour of his daughters representing the share capital contributed by his daughters.
The Gift Tax Officer, however, took the view that in addition to the gift of the aforesaid amount the assessee had gifted 1/3rd portion of the goodwill of his proprietary business to each of his daughters.
On the basis of the profits of the earlier years the Gift Tax Officer determined the value of the goodwill at Rs. 1,61,865/ and the value of the 2/3rd share of the goodwill gifted to the daughters at Rs. 1,07,910/ which was added to the amount of Rs. 50,000/ and the gift tax was assessed accordingly.
The assessee preferred an appeal to the Appellate Assistant Commissioner of Gift Tax which was dismissed.
The Appellate Tribunal on appeal held (i) the goodwill constituted an exiting immovable property at the time of the admission of the assessee 's daughters into the business; (ii) the gift was exempt under section 5 (i) (xiv) of the Act as the assessee was actually carrying on the business when he admitted his two daughters into it, the main intention of the assessee being to ensure continuity of the business and to prevent its extinction on his death.
Such a purpose amounted to business expediency and therefore all the conditions of section 5 (1) (xiv) were satisfied; (iii) the goodwill was a capital asset and the assessee 's daughters had only 1/8 share in the assets of the business.
The gift or the goodwill were, therefore, only of 1/8 share.
The following questions of law were referred by the Tribunal at the instance of the Commissioner of Gift Tax : (i) "Whether on the facts and in the circumstances of the case, the goodwill of the assessee 's business is an existing property within the meaning of section 2 (xii) of the Gift tax A ct ? 820 (ii)Whether on the facts and in the circumstances of the case, the assessee gifted only a 1/8th share in the goodwill of the business to his two daughters or whether he gifted a 2/3rd share ? (iii)Whether on the facts and in the circumstances of the case, the gift was exempt from assessment under section 5 (1) (xiv) of the Gift tax Act ?" The High Court answered all the questions in favour of the assessee and against the Revenue.
It is essential to look at the deed of partnership closely because certain clauses which, have a material bearing do not appear to have received the attention either of the Appellate Tribunal or the High Court.
It was recited, inter alia, that the assessee was desirous of introducing into the business of Travancore Timbers and Products his major daughters and also his minor children as and when they attained majority.
It was next stated that upon the treaty for the introduction of the said partners into the business for the par ' and for the partnership it was agreed that the first partner (assessee) would gift a sum of Rs. 25,000/ to each of his two major daughters.
The property of the business was next described.
It was stated to consist of the land and buildings, plant, fixtures.
and machinery, book debts, benefits of existing contracts etc.
and stock in trade and other movable chattels and effects.
The assessee as beneficial owner conveyed and assigned unto the partners including himself all these properties including the good Will of the marks and all rights and privileges belonging thereto.
Each of the partners covenanted that he or she will duly pay discharge or perform all the debts and liabilities, contracts and engagements of the individual business of the assessee subsisting in the shares and proportions in which they respectively became entitled under the business.
It was expressly stated in the first schedule which contained the terms, conditions and stipulations that the partnership was to be at will.
Clause (2) in the schedule is of particular importance.
According to clause 2 (a) if the partners or partner who, for the first time, represented or possesses the major part in the value of the capital of the business desired to continue the business with additional partners they, he or she would be at liberty to do so on giving 6 months ' previous notice to the other partner or partners paying to the partners or partner not desiring to continue the value of their his or her shares or share and interest in the business, property and the goodwill and giving a bond of "indemnity" with regard to the mode of ascertaining such value and the payment thereof and the amount of the penalty of such bond and otherwise as if the partnership had under these presents been stipulated to continue after the 31st day of March 821 1964 and such other partners or partner had happened to die immediately after the last mentioned day.
It was further provided that if the 31st day of March 1964 passed without the then partners or partner who possessed the major part in the value of the capital having given the aforesaid notice then the partners or partner who, for the first time, represented or possessed a minor part in value not being less than two equal third parts of the capital would be at liberty to continue the business by giving six calendar months ' previous notice of their, his or her desire to do so and paying to the partners or partner not desiring to continue the value of their, his or her shares or share and interest for the time being of the business and the property and goodwill thereof etc.
If the partnership was to continue under either of the eventualities mentioned.
before every partner for the time being who desired to continue would have the right to do so.
Clause 7 laid down that the parties shall be entitled to the capital and property of the partnership for the time being in the following shares : "The said first partner Ghee Varghese shall be entitled to 7/8th share thereof and each.
of second and third partners to 1/ 16th part thereof".
Clause 8 (a), and Clause 9 are reproduced below : 8 (a) "The capital of the partnership shalt be the sum of Rs. 4,00,000/ (Rupees Four lakhs only) being the value ascertained as aforesaid of the property of the said late business taken over by the said parties hereto and of such further capital as shall be hereafter contributed by the partners and all such further capital shall whether the same shall be contributed out of the profits or otherwise be contributed by the partners for the time being in the shares in which they are for the time being entitled to the existing capital of the partnership." 9."The net profits or losses of the partnership shall subject to the provisions of these presents belong to the partners for the time being in equal shares.
" Under clause 10 the assessee was to be the managing partner of the firm.
He alone had the power to sign the cheques on account of the partnership in the, name of the firm.
He had the power to borrow from Banks and other private parties for the purpose of the business and to execute bands, documents agreements and other activities as might be necessary.
There were other provisions also which showed that it was the assessee who retained substantially the control of the running of the business in his own hands.
Clause 17 provided that whenever any of the partners died during the continuance of the partnership then the partnership would not be dissolved between the surviving partners and elaborate provisions were made with regard to what would pass to 822 the, representatives of such deceased partner from out of the properties and assets of the partnership as also its profits.
The partnership deed also contained what were called special provisions as to the share of the first partner.
Clause 18 provided that the assessee who was the first partner could nominate either one or all of the his minor children to be a partner or partners on their attaining majority.
Such nomination or appointment could be made by a will or codicil.
It is somewhat surprising that the Gift Tax Officer picked up the assets of the business of the assessee, namely, the goodwill for treating that as a gift apart from the amount of Rs. 50,000/ which had admittedly been gifted to the daughters.
It was mentioned in the assessment order that as the assessee had failed to disclose the gift relating to the same action under section 17(1) (c) was being taken.
Before the Appellate Assistant Commissioner it was contended inter alia, that the value of the goodwill should not be included as a part of the gift.
Alternatively it was contended that the value had been calculated correctly.
This was apart from the other contentions which were raised claiming exemption under section 5 (1 ) (xiv) of the Act.
Without examining the contentions that the value of the goodwill should not be included as a part of the gift the Appellate Assistant Commissioner examined the other contentions and agreed with the view taken by the Gift Tax Officer.
The way the Tribunal examined the question relating to the goodwill was by treating it as an asset which had been gifted by the assessee to his two daughters.
This is what the Tribunal observed : "By admitting his two daughters, as partners of the business, the assessee also admitted them to the benefit arising out of the goodwill of the business".
Now it is quite clear that according to the deed of partnership and even otherwise on admitted facts goodwill was a part of the properties and assets of the business which the assessee was running under the style of Travancore Timber & Products at Kottayam.
All these were valued at Rs. 4,00,000/ .
The entire property of the assessee 's proprietary business was transferred to the new partnership.
According to clause 7 in the schedule to the partnership deed the parties were to be entitled to the capital 'and property of the partnership in the following shares : Assessee 7/8th share.
each daughter 1/16 share 823 These shares were proportionate 'to the capital with which the partnership was stated to have been started.
out of Rs. 4,00,000/the, assessee was deemed to have contributed Rs. 3,50,000 and each of the daughters Rs. 25,000/ .
The goodwill, as stated earlier, was a part of the assets which had been transferred to the partnership.
Under section 14 of the Indian Partnership Act 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 and includes also goodwill of the business.
The departmental authorities, in the present case, never treated all the assets and property of the assessee which were transferred to the partnership pertaining to his proprietary business as a gift nor has any suggestion been made before us on behalf of the Revenue that the property and assets valued at Rs. 4,00,000/ were the subject, matter of gift.
All that the departmental authorities did and.
that position continued throughout was that they picked up one of the assets of the assessee 's proprietary business, namely, its goodwill and regarded that as the subject of gift having 'been made to the daughters, who were the other partners of the firm which came into existence by virtue of the deed of partnership.
This approach is wholly incomprehensible and no attempt has been made before us to justify it.
In our opinion the second question which was referred by the Tribunal should have been framed as follows "Whether on the facts and in the circumstances any gift tax was payable on the goodwill of the assessee 's business.
If the answer be in the affirmative how much share in the goodwill was liable to such tax" ? We reframe the question in the above terms.
It is quite obvious that the answer to the first part of the question has to be in the negative and therefore there is no necessity of answering ,he second part of the question.
Question No. 1 also does not arise and need not be 'answered.
We may next deal with the third question.
Section 5 of the Act gives the exemption in respect of certain gifts.
Sub clause (xiv)of sub section
(1) is as follows 5 (1) "Gift tax shall not be charged under this Act in respect of gifts made by any person (xiv)in the course of carrying on a business, profession or vocation, to the extent to which the gift is proved to the satisfaction of the Gift Tax Officer to have been made bona fide for the purpose of such business, profession or vocation".
824 The critical words are "in the course of" and "for the purpose".
Therefore the gift should be proved to have been made not only "in the course of carrying on the business, profession or vocation" but also bona fide for the purpose of such business, profession or vocation.
The words "in the course of" were considered by this Court in State of Travancore Cochin & Others vs Shanmugha Vilas Cashew Nut Factory & Others(1) in connection with the language employed in article 286 of the Constitution.
It was pointed out that the word "course" etymologically denotes movement from one point to another and the expression "in the course of" not only implies a period of time during which the movement is in progress but also postulates a connected relation.
There clause 1(b) of the Article was under consideration and what was exempted under the clause was the sale or purchase of the goods taking place in the course of the import of the goods into or export of the goods out of the territory of India.
The only assistance which can be derived in the present case is the emphasis on there being connected relation between the activities for which these words are used.
Thus the expression "in the course of carrying on of business etc." means that the gift should have some relationship with the carrying on of the business.
If a donor makes a gift only while he is running the business that may not be sufficient to bring the gift within the first part of clause (xiv) of section 5(1) of the Act.
it must further be established, to bring the gift within that provi sion, that there was some integral connection or relation between the making of the gift and the carrying on of the business.
Under clause (xiv) of section 5 (1) the second requirement is that the gift should have been made bona fide for the purpose of such business etc.
According to the meaning of the word ' purpose" in Webster 's New International Dictionary, it is that which one sets before himself as an object to be attained; the end or aim to be kept in view in any plan, measure, exertion or operation; design intention.
Therefore on the plain meaning of the word "purpose" as employed in clause (xiv) the object, plan or design must have connection or relationship with the business.
To put it differently the object in making the gift or the design or intention behind it should be related to the business.
Some assistance may be derived from the language used in section 19 (2) (xv) of the Income tax Act 1922.
According to that provision any expenditure laid out or expended wholly and exclusively for the purpose of business, profession or vocation is a permissible deduction in the computation of profits.
In B W. Noble Ltd. vs Mitchell(2) a sum had been paid to a retiring Director in very peculiar circumstances.
The object of making the payment was that of preserving the status and reputation of the company which the Directors felt would be (2) ; (1) ; 825 imperilled either by the other Director remaining in the business or by a dismissal of him against his will involving proceedings by way of action in which the good name of the company might suffer.
Sargant L.J. was of the view that preservation of the status and dividend earning power of the company was well within the ordinary purpose of the trade, profession or vocation of the company.
Indeed the English courts have refrained from adopting any dogmatic or set line for discovering the meaning of the expression "for the purpose of" when used in connection with trade or business because it is essentially a matter which depends on the various sets of circumstances and facts of a particular case for determining whether certain expenditure has been incurred for the purpose of the trade or business : (See Morgan vs Tate & Lyle, Ltd.(1).
According to a recent decision of this court in Civil Appeals Nos. 1351 1353, 1897 & 1241 of 1968 (The Commissioner of Income tax, West Bengal vs Birla Cotton Spinning & Weaving Mill,,; Ltd. etc.
(2) the expression "for the purpose of the business" is essentially wider than the expression "for the purpose of earning profits".
It covers not only the running of the business or its administration but also measures for the preservation of the business, protection of its assets and property.
It may legitimately comprehend many other acts incidental to the carrying on of the business.
Another test that has often 'been taken into consideration is whether the expenditure was necessitated or justified by commercial expediency.
The High Court, in the present case, relied on Commissioner of Gift Tax, Kerala vs Dr. George Kuruvilla (3) .
There the assessee was a doctor by profession at the time of the gift which lie made in favour of his son who also joined his father 's profession.
The Kerala High Court took the view that the gift had been made in the course of carrying on of the business, profession a or vocation within the meaning of section 5 ( 1 ) (xiv) of the Act and also for the purpose of such business, profession or vocation.
That decision was reversed by This court in Commissioner of Gift Tax vs Di .
George Kuruvilla (4) It has been observed that section 5 ( 1 ) (xiv) of the Act does not indicate that a gift made by a person carrying on any business is exempt from tax nor does it provide that a gift is exempt from tax merely because the property is used for the purpose for which it was used by the donor.
Without deciding whether the test of "commercial expediency" was strictly appropriate to the claim for exemption under the aforesaid provision this court held that there was, no evidence to prove that the gift to the donee in that case was "in the course of carrying on the business" of the donor and "for the purpose of the business".
(1) , 378.
(2) Decided on 17 8 1971.
(3) (4) 826 We are satisfied that in the present case also it has not been established that the requirements of section 5 (1) (xiv) of the Act were satisfied.
The assessee was certainly carrying on his business at the point of time when he admitted his two daughters into the firm.
But from that fact alone it did not follow that the gift had been made in the course of the assessee 's business nor could it be held that the gift was made for the purpose of carrying on the assessee 's business.
The Tribunal came to the conclusion that the partnership did provide for the continuance of the partnership business in spite of the death of the partner and that the main intention of the assessee was to ensure the continuity of the business and to prevent its extinction on his death.
A true and correct reading of the deed of partnership indicates that the partners could go cut from the partnership in terms of clause 2 of the schedule in the deed of partnership.
Moreover the partnership was expressly stated to be at will.
The real intention of the assessee apparently was to take his daughters into the firm with the object of conferring benefit on them for the natural reason that the father wanted to, look to the advancement of his daughters.
It was further provided in the deed that even the minor children would, in due course, be admitted to partnership.
Clause 8 of the schedule already referred to laid down that the assessee could nominate either one or all of his minor children to be partner or partners on their attaining majority and such nomination or appointment could be made even by a will or codicil.
The assessee retained complete control over the running of the partnership business and it can hardly be said that he needed any help from his daughters particularly when there is no evidence that he was in a weak state of health, his age being below 50 years.
Moreover there is nothing to show that the daughters had any specialised knowledge or business experience so as to be able to assist in the development or management of the business.
We are wholly unable in these circumstances to accept that the present case is different from Dr. George Kuruvilla 's(1).
in our judgment there was no cogent material to come to the conclusive that the gift of Rs. 25,000/ to each of the daughters by the assessee was "in the course of carrying on the business" of the assesese and was "for the purpose of the business".
It may be recalled that the assessee had himself made a return in the matter of assessment of Gift tax payable tinder the Act in respect of the amount of Rs. 50,000/ which had been gifted by him to his two daughters.
The answer to question No. 3, consequently, would be in favour of the Revenue and against the assessee so far as that amount is concerned.
For the reasons given above the answers returned by the High Court are discharged and in their place the question shall stand 827 answered in accordance with this judgment in the following manner : Question No. 1 : does not arise.
Question No. 2 as reframed : The first part is answered in the negative and in favour of the assessee.
The second part does not arise.
Question No. 3 : The answer is in favour of the Revenue and against the assessee so far as the gift of Rs. 50,000/ is concerned.
The appeal shall stand disposed of accordingly.
In the circumstances of the case we make (no order as to costs.
G. C. Appeal dismissed.
| IN-Abs | The assessee was the sole proprietor of a business in timber and timber products.
He converted the proprietary business into a partnership business by means of a deed of partnership dated August 1, 1963.
The partnership consisted of the assessee and his two daughters.
The capital of the partnership was to be Rs. 4,00 000.
The assessee contributed Rs. 3,50,000 and each of his two daughters, one married and the other unmarried contributed Rs. 25,000.
The contribution of the capital by the daughters was effected by transfer of Rs. 25,000 from the assessee 's account to the account of each of the daughters.
All the assets of the proprietary business were transferred to the partnership.
In these assets the assessee and his daughters were entitled to shares in the proportion of their share capital i.e. the assessee was entitled to a 7/8 share and each of his daughters to 1/16 share.
The profits and losses of the partnership business were to be divided in equal shares between all the three partners.
The assessee was the managing partner of the firm.
The assessee filed a return of gift tax for the assessment year 1964 65 in respect of the gift of Rs. 50,000 in favour of his daughters representing the share capital contributed by his daughters.
The Gift Tax Officer however took the view that in addition to the gift of the aforesaid amount the assessee had gifted 1/3rd portion of the goodwill of his proprietary business to each of his daughters.
Accordingly he added a sum equal to 2/3rd of the goodwill as estimated by him to the gift of Rs. 50,000 admitted by the assessee.
The Appellate Assistant Commissioner dismissed the assessee 's appeal.
The Appellate Tribunal held that only 1/8 of the goodwill was gifted to each of the daughters but the gift was exempt under section 5 (1) (xiv) of the Gift Tax Act.
The High Court in reference held in favour of the assessee.
In appeal by special leave, HELD : The goodwill was a part of the assets which had been transferred to the partnership.
Under section 14 of the Partnership Act, subject to the 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 and includes also the goodwill of the business.
The departmental authorities in the present case never treated as all the assets and property of the assessee which were transferred to the partnership pertaining to his pro prietary business as a gift nor was it suggested that the property and assets valued at Rs. 4,00,000 were the subject matter of the gift.
The departmental authorities only picked up one of the assets of the assessee 's L3Sup.
C.I./72 818 proprietary business namely its goodwill and regarded that as the subject of gift having been made to the daughters.
There was no justification, for this approach.
Accordingly no gift tax was payable by the assessee on the goodwill of the assessee 's business.
[823A D] (ii)To be exempt under section 5(1)(xiv) a gift should be proved to have been made not only in the course of carrying & the business, profession or vocation but also for the purpose of such business, profession or vocation.
The expression 'in the course of carrying on of business etc. ' means that the gift should have some relationship with the carrying on of the business.
If a donor makes a gift only while he is running the business that may not be sufficient to bring the gift within the first part of el.
(xiv) of section 5(1) of the Act.
It must further be established to bring the gift within that provision, that there was some integral connec tion or relation between the making of the gift and the carrying on of the business.
The meaning of the word 'purpose ' is that which one sets before himself as an object to be obtained; the end or aim to be kept in view in any plan, measures, exertion or operation, design, intention.
Therefore on the plain meaning of the word 'purpose ' as employed in el.
(xiv) the Object, plan or design must have connection or relationship with the business.
[824 A G] In the present case, considering the terms of the partnership dead there was no cogent material to come to the conclusion that the gift of Rs. 25,000 to each of the daughters by the assessee was in the course of carrying on the business of the assessee and was for the purpose of the business.
The real object of the assessee was to benefit the daughters for the natural reason that the father wanted to look to the advancement of his daughters.
Accordingly the assessee who had himself shown the amount of Rs. 50,000 in his return of gift tax could not claim exemption for that amount under section 5 (7) (xiv).
[826 C G] State of Travancore Cochin & Ors.
vs Chanmugha Vilas Cashew Nut Factory & Ors. ; , B. W. Noble Ltd. vs Mitchell ; , Morgan vs Tate & Lyle Ltd. 35 T.C. 367, 378, C.I.T., West Bengal T. Birla Cotton Spinning & Weaving Mills Ltd. dt.
17 8 71 and Commissioner of Gift Tax vs Dr. Grorge Kuruvilla, , applied.
Commissioner of Gift Tax, Kerala vs Dr. George Kuruvilla, , referred to.
|
Appeal No. 563 of 1967.
Appeal from the judgment and order dated September 15, 16, 19, 1966 of the Bombay High Court in Civil Reference No. 8 of 1964.
G.B. Pai, Bhuvanesh Kumari and O. C. Mathur, for the appellants.
L. M. Singhvi, Ram Panjawani and section P. Nayar, for the respondent.
The Judgment of the Court was delivered by P.Jaganmohan Reddy, J.
In exercise of the powers under Sec.
96(1)(b)of the (hereinafter referred to as 'the Act ') relating to "the procedure to be followed in proceedings before such Courts and the execution of orders made by such Courts", the Government of Bombay made the following Rule; "17.
Limitation: (1) Every application to the Court shall be brought within twelve months from the date on which the cause of action arose or as the case may be the claim became due : Provided that the Court may entertain an application after the said period of twelve months if it is satisfied that the applicant had sufficient reasons for not making the application within the said period.
870 (2)Subject as aforesaid the provisions of and III of the Indian Limitation Act, 1908 (IX of (1908), shall so far as may be appli ed to very such application", The vires of this Rule was challenged by the Employees State Insurance Corporation (hereinafter referred to as 'the Corporation) when it filed an application on 7th October 1963 against the Appellant in the Employees Insurance Court (hereinafter referred to as the Insurance Court ') claiming payment of the contributions due from it for the period 1st September 1957 to 31st July 1963.
In those proceedings the Appellant had 'taken the plea that the application was barred under Rule 17 as it was not presented within twelve months from the date when the cause of action arose or as the case may be when the amount became due.
As the plea raised before ' it was important the Insurance Court made a reference under Section 81 of the Act on the following question for the decision of the High Court of Bombay : (1)Whether rule 17 of the Employees ' State Insurance Rule is ultra vires the rule making power of the State Government under Sec.
96(1) of the ? (2)If yes, what, if any, limitation applies to appli cationsfiled by the Corporation to the Employees ' In surance Court ? The High Court of Bombay having considered the several cases and the contentions and submissions mad .
before it held that the clear and unambiguous terms of section 96 (1) (b) exclude the grant of the power to any State Government to make a rule prescribing a period of limitation on claims ennumerated in Sec.75(2).
It was lb further of the view that where two interpretations of the terms of Sec.
96(1) (b) were possible that interpretation should be accepted which excludes the grant of such a power, because it appeared to it clear from the scheme of the Act and the provisos thereof that the legislature did not intend to confer such power on the State Governments.
It therefore answered the first question in affirmative namely that Rule 17 is ultra vires the rule making power of the State Government under See.
96(1) (b) of the Act.
On the second question it held that an application filed in a Court before 1 1 1964 for relief under Sec.
75 of the Act was not subject to any period of limitation, but an application filed on or after 1 1 64, would, however, be covered by article 137 of the Limitation Act of 1963 which provides a limitation of 3 years from the date when the right to apply accrues.
This appeal has been filed against that decision by certificate under article 1 3 3 (1) (c) of the Constitution.
871 This question has been the subject matter of the decisions in Employees State Insurance Corporation vs Madhya Pradesh Government & Ors.
(1) M/s Solar Works, Madras vs Employees State Insurance cc Corporation, Madras & Anr.(2) M/s. A. K. Brothers vs Employees ' State Insurance Corporation, ( 3 ) United India Timber Works, Yamunanagar & Anr.
vs Employees State Insurance Corporation, Amritsar, ( 4 ) Roshan Industries Pvt.
Ltd. Yamunagar vs Employees ' State Insurance Corporation(3), E.S.L.C. Hyderabad vs A. P. State Electricity Board, Hyderabad (6) .
All the High Courts in these cases except that of Allahabad held that the rule is ultra vires the powers conferred on the State Government under Sec.
9 6 ( 1 ) (b) inasmuch as it is not empowered to make rules prescribing periods of limitation for applications to be filed before the Court, though in Madhya Pradesh case it was also said that "Even if it be taken that clause (b) of Sec.
96(1), as it is worded, is wide enough to cover a rule of limitation, that cannot authorize the Government to frame a rule regulating limitation for the recovery of contributions. . . because according to it the validity of the rule does not necessarily depend on the ascertainment of "whether it confers rights or merely regulates procedure, but by determining whether it is in conformity with the powers conferred by the statute and whether it is consistent with the provisions of the statute".
These decisions also held that the scheme of the Act was such that the Legislature did not and could not have intended to confer any power upon the State Government to make rules prescribing a period of limitation for application under Sec.
75(2).
The question which directly confronts us is whether the power to prescribe periods of limitation for initiating proceedings before the Court is a part of, and is included, in the power to prescribe "the procedure to be followed in proceedings before such Courts".
The answer to this question would involve the determination of the further question whether the law relating to limitation is pro cedural or substantive or partly procedural and partly substantive.
If it is procedural law does it make any difference whether it relates to the time of filing application for initiation of proceedings before the Court or whether it relates to interlocutory applications or other statements filed before it after the initiation of such pro ceedings,.
The contention on behalf of the Appellant is that the law relating to limitation is merely procedural, as such it makes (1) AIR 1964 (Vol.
51) Madhya Pradesh 75.
(2) AIR 1964 (Vol.
51) Madras 376.
(3) AIR 1965 (Vol.
52) Allahabad 410.
(4) AIR 1967 (Vol. 54) Punjab 166 (FB).
(5) AIR 1968 (Vol.
55) Punjab 56 (SB).
(6) 1970 Labour & Industrial cases 921.
872 no difference whether it relates to the time of filing an application or it deals with the time for filing interlocutory applications or other statements.
There is also it is submitted no indication in the scheme of the Act that it is otherwise or that there is any impediment for the Government to prescribe under the rule making authority the period of limitation for applications under Sec.
75 (2).
Before we consider the scheme of the Act it may be necessary to examine the scope and ambit of the terms 'procedure ' as used in Sec. 96(1)(b).
The topic of procedure has been the subject of academic de bate and scrutiny as well as of judicial decisions over a long period but in spite of it, it has defied the formulation of a logical test or definition which enables us, to determine and demarcate the bounds where procedural law ends and substantive law begins, or in other words it hardly facilitates us in distinguishing in a given case whether the subject of controversy concerns procedural law or substantive law.
The reason for this appears to be obvious, because substantive law deals with right and is fundamental while procedure is concerned with legal process involving actions and remedies, which Salmond defines "as that branch of law which governs the process of litigation", or to put it in another way, substantive law is that which we enforce while procedure deals with rules by which we enforce it.
We are tempted in this regard to cite a picturesque aphorism of Therman Arnold when he says "Substantive law is canonised procedure.
Procedure is unfrocked substantive law(1)".
The manner of this approach may be open to the criticism of having over simplified the distinction, but nonetheless this will ,enable us to grasp the essential requisites of each of the concepts which at any rate "has been found to be a workable concept to point out the real and valid difference between the rules in which stability is of prime importance and those in which flexibility is a more important value (2 ) ".
Keeping these basic assumptions in view it will be appropriate to examine whether the topic of limitation belongs to the Branch of procedural law or is outside it.
if it is a part of the procedure whether the entire topic is covered by it or only a part of it and if so what part of it and the tests for ascertaining them.
The law of limitation appertains to remedies because the rule is that claims in respect of rights cannot be entertained if not commenced within the time prescribed by the statute in respect of that right.
Apart from Legislative action prescribing the time, there is no period of limitation recognised under the general law and therefore any time fixed by the statute is neces (1) XLV Harvard Law Journal 617 & 645.
(2) American Juris prudence Vol.
51 (Second Edn.) 605.
873 sarily to be arbitrary.
A, statute prescribing limitation however does not confer a right of action nor speaking generally does it confer on a person a right to relief which has been barred by eflux of time prescribed by the law.
The necessity for enacting periods of limitation is to ensure that actions are commenced within a particular period, firstly to assure the availability of evidence documentary as well as oral to enable the defendant to contest the claim against him; secondly to give effect to the principle that law does not assist a person who is inactive and sleeps over his lights by allowing them when challenged or disputed to remain dormant, without asserting them in a court of law.
The, principle which forms the basis of this rule is expressed in the maxim vigilantibus, non dormientibus, jura subveniunt (the laws give help to those who are watchful and not to those who sleep).
Therefore the, object of the statutes of limitations is to compel a person to exercise his right to action within a reasonable time as also to dis courage and suppress stale, fake or fraudulent claims.
While this is so there are two aspects of the statutes of limitation the one concerns the extinguishment of the right if a claim or action is not commenced with a particular time and the other merely bars the claim without affecting the right which either remains merely as a moral obligation or can be availed of to furnish the consideration for a fresh enforceable obligation.
Where a statute prescribing the limitation extinguishes the right, it affects substantive rights while that which purely pertains to the commencement of action without touching the right is said to be procedural.
According to Salmond the law of procedure is that branch of the law of actions which governs the process of litigation, both Civil and Criminal.
"All the residue" he says "is substantive law, and relates not to the process of litigation but to its purposes and sub , ject matter".
It may be stated that much water has flown under the bridges since the original English theory justifying a statute of limitation on the ground that a debt long overdue was pre sumed to have been paid and discharged or that such statutes are merely procedural.
Historically there was a period when substantive law was inextricably intermixed with procedure; at a later period procedural law seems to have reigned supreme when forms of action ruled.
In the words of Maine "So great is the ascendancy of the Law of Actions in the infancy of Courts of Justice, that substantive law has at first the look of being gradually secreted in the interstices of procedure()".
Even after the forms of action were abolished Maitland in his Equity was still able to say "The forms of action we have buried but they still rule us from their graves", to which Salmond added "In their life they were powers of evil and even in death they have not wholly ceased from troubling(2)".
Oliver Wendal Holmes had however observed in "The (1) Maine, Early Law and Custom 389.
(2) 874 Common Law", "wherever we trace a leading doctrine of sub stantive law far enough back, we are likely to find some forgotten circumstance of procedure at its source".
It does not therefore appear that the statement that substantive law determ.nes rights and procedural law deals with remedies is wholly valid, for neither the entire law of remedies belongs to procedure nor are rights merely confined to substantive law, because as already noticed rights are hidden even "in the interstices of procedure".
There is therefore no clear cut division between the two.
A large number of decisions have been referred before us both English and Indian some of antiquity in support of the proposition that the law prescribing the time within which an action can be commenced is purely procedural and therefore when a statute empowers the Govt.
to make rules in respect of procedure it confers upon it also the rights to prescribe limitation.
To this end have been cited the cases of Manoel Francisco Lopez & Ors.
vs Lieut.
Godolnhon James Burslem(l), and Ruckmaboye vs Lulloobhoy Mottichund(2).
An examination of these cases would.
show that what was being considered was whether the law of limitation was part of the lex fori which foreigners and persons not domiciled in the country have to follow if they have to have recourse to actions in that country.
In the latter case the Privy Council observed at page 265 "The arguments in support of the plea are founded upon the legal character of a law of limitation or prescription, and it is insisted, and the Committee are of opinion, correctly insisted, that such legal character of 'the law of prescription has been so much considered and di cussed among writers upon jurisprudence, and has been so often the subject of legal decision in the courts of law of this and other countries, that it is no longer subject to doubt and uncertainty.
In truth, it has become almost an axiom in jurisprudence, that is law of prescription, or law of limitation, which is meant by that denomination, is a law relating to procedure having reference only to the lex fori".
These observations as well as those in the earlier case must be understood in the light of the principles governing conflict of laws.
What was in fact being examined was whether they are part of the procedural law in the sense that the Municipal laws will be applicable on the question of limitation for the commencement of actions because if limitation was purely a question of substantive law that would be governed by the law of the country of the (2) (1849 54)_(V_Moore Indian Appeals 234).
875 domicile of the person who is having recourse to the Courts of the other country.
In other words the substantive rights of the parties to an action are governed by a foreign law while all matters pertaining to procedure are governed exclusively by the lex fori.
The cases cited at the Bar, of the various High Courts in this country show that they were construing the rules prescribing limitation in respect of proceedings in Court i.e. proceedings afterthe institution of the suit or filing of the Appeal.
In Sennimalai Goundan vs Palani Goundan & 4nr.(1), the question was.
whether &,,a High Court by framing a rule under Sec.
122 Civil Procedure Code could make Section 5 of the Limitation Act applicable to applications under sub rule (2) of Rule 13 of Order IX.
While holding that it could, Coutts Trotter, J as he then was made this pertinent observation : "Whatever may be the case of the statute prescribing say 3 years for an action to be brought I am quite clear that the Articles in the Act limiting applications of this nature which are almost entirely interlocutory deal clearly with matters of procedure. .
This was also the view of the Full Bench in Krishnamachariar vs Srirangammal & Ors.(2), which was followed by the Bombay High Court in Bandredas vs Thakurdev ( 3 ).
It was contended in Velu Pillai vs Sevuga Perumal Pillai(4), that rule 41 (A) (2) of the Appellate side Rules of the Madras High Court providing for the presentation of a petition to the High Court within 90 days from the date of the order passed in an execution proceedings was ultra vires, because the High Courts were not entitled by rules to regulate or enlarge the periods in the Limitation Act in respect of the proceedings to which the Limitation, Act apply 'This contention was negatived on the ground that such a powerwas inherent in Sec.
122 of the Civil Procedure Code.
The argument of the petitioner that he had a vested right to go up in revision at any time and that the decision of the Full Bench in Krishnamachariar vs Srirangammal & Ors.
(2 ) does not affect his right, was rejected on the ground that Sec.
122 Civil Procedure Code empowers the High Courts to make rules regu lating their own procedure and the procedure of the subordinate Courts subject to their superintendence.
There were earlier decisions of the Allahabad High Court and Lahore High Court as also a decision of the Bombay High Court rendered under Sec.
602 of the old Civil Procedure Code 1.
AIR 1917 Madras 957.
(2) ILR 47 Madras 824.
(3) ILR 53 Bombay 453.
(4) AIR 1958 Madras 392.
876 referred to by Krishnan, J., in his referring order in Krishnamachariar 's case which took the view that the High Court has riot the power by rule under Sec.
122 or the corresponding Sec.
602 of the old Civil Procedure Code to make rules for altering the period of limitation prescribed by the Indian Limitation Act see Narsingh Sahai vs Sheo Prasad(l), and Chunilal Jethabhai vs Dahvabhai Amulakh(2).
Again a similar question arose as to whether clause 27 of the Letters Patent of the Lahore High Court (there are similar clauses in the Letters Patent of the other High Courts) could validly empower the making of rule 4 prescribing a period for filing an appeal under Clause 10 of the Letters Patent.
Clause 27 of the Letters Patent empowered the High Court from time to time to make rules and orders for regulating the practice of the Court etc.
This Court in Union of India vs Ram Kanwar & Ors.
( 3 ) , approved the view of a Full Bench of the Punjab High Court in Punjab Cooperative Bank Ltd. vs Official Liquidators Punjab Cotton Press Company Ltd. (in liquidation) (4), where it was held that rule 4 is a special law within the meaning of Sec. 29 (2) of the Limitation Act.
Subba Rao, J., as he then was said at page 320 "Rule 4 is made by the High Court in exercise of the legislative power conferred upon the said High 'Court under cl. 27 of the Letters Patent.
As the said rule is a law made in respect of special cases covered by it, it would certainly be a special law within the meaning of section 29(2) of the Limitation Act".
In that case no question was raised as to whether rule 4 was dealing with a procedural matter or dealt with a substantive right.
These cases are of little assistance and if at all they lay down the principle that interlocutory proceedings before the Court do not deal with substantive rights and are concerned with mere procedure and can be dealt with by rules made under the powers conferred on the High Court to regulate the procedure.
It is therefore apparent that whether the fulfilment of a particular formality as a condition of enforceability of a particular right is procedural or substantive has not been, as we had already noticed free from difficulty.
What appears to be a self evident principle will not become so evident when we begin to devise tests for distinguishing procedural rule from substantive law.
It appears to us that there is a difference between the manner in which the jurisprudential lawyers consider the question and the %way in which the Judges view the matter.
The present tendency (1) All. 1 (FB).
(2) , Bom.
14 (FB).
877 is that where a question of limitation arises, the distinction between so called substantive and procedural statutes of limitation may not prove to be a determining factor but what has to be considered is whether the statute extinguishes merely the remedy or extinguishes the substantive right as well as the remedy.
Instead of generalising on a principal the safest course would IV to ' examine each case on its own facts and circumstances and determine for instance whether it affects substantive rights and extinguishes% them or whether it merely concerns a procedural rule only dealing with remedies or whether the intendment to prescribe limitation is discernible from the scheme of the Act or is inconsistent with the rule making power etc, Apart from the implications inherent in the term procedure appearing in Sec. 96(1)(b) the power to prescribe by rules any matter falling within the ambit of the term must be the "Procedure to be followed in proceedings be fore such Court".
The word 'in ', emphasised by us, furnishes a clue to the controversy that the procedure must be in relation to proceedings in Court after it has taken decision of the matter, which obviously it takes when moved by an application presented before it.
If such be the meaning the application by which the Court is asked to adjudicate on a matter covered by Sec.
75(2) is outside the scope of the rule making power conferred on the Government.
In the East & West Steamship Company, George Town, Madras vs section K. Ramalingam Chettiar(1), one of the questions that was considered by this Court was whether the clause that provides for a suit to be brought within one year after the delivery of the goods or the date when the goods should have been delivered, only prescribes a rule of limitation or does it also provide for the extinction of the right to compensation after certain period of time.
It was observed by Das Gupta, J, at page 836 : "The distinction between the extinction of a right and the extinction of a remedy for the enforcement of that right, though fine, is of great importance.
The legislature could not but have been conscious of this distinction when using the words "discharged from all liability" in an article purporting to prescribe rights and immunities of the shipowners.
The words are apt to express an intention of total extinction of the liability and should, specially in view of the international character of the legislation, be construed in that sense.
878 It is hardly necessary to add that once the liability is extinguished under this clause, there is no scope of any acknowledgement of liability thereafter".
What we have to consider is, apart from the question that the Government on the terms of Sec.
96(1) (b) is not em powered to fix periods of limitation for filing applications under Sec. 75 (2) to move the Court, whether on an examination of the Scheme of the Act, rule 17 affects substantive rights by extinguishing the claim of the Corporation to enforce the liability for contributions payable by the Appellant.
An examination of the purpose and intendment of the Act and the scheme which it effectuates, leaves no doubt that it was enacted for the benefit of the employees and their dependents, in case of sickness, maternity and 'employment injury ', as also to make provision for certain other matters.
40 makes the employer liable in the first instance to pay the contributions of the employer as well as the employee to the Corporation subject to the recovery from the employee of the.
amount he is liable to contribute.
This liability on the employer is categorial and mandatory.
He is further required under Sec. 44 to submit to the Corporation returns as specified therein.
Chapter V com prised of Sections 46 to 73, deals with the benefits which includes among others, sickness and disablement benefit of the employee, his eligibility for receiving payments and.
the compensation payable to his dependents.
If the employee fails or neglects to pay the contributions as required, the Corporation has the right to recover from him under Sec.
68, the amounts specified in that Section as an arrear of land revenue.
94 provides that the contributions due to a corporation are deemed to be included in the debts under the Insolvency Acts and the Company 's Act, and are given priority over other debts in the distribution of the pro perty of the insolvent or in the distribution of the assets of a Company in liquidation.
Chapter VI deals with adjudication of disputes and claims, of which Sec.
74 provi des for he Constitution of the Insurance Court; Sec.
74 specifies the matters to be decided by that Court; Sec. 76 and Sec.
77 deal with the institution and commencement of proceedings and Sec.
78 with the powers of the Insurance Court.
80 deals with the non admissibility of the claim, if not made within twelve months after the claim is due while Sec.
82(3) prescribes the period within which an appeal should be filed against the order of the Insurance Court.
These provisions in our view unmistakably indicate that the whole scheme is dependent upon the contributions made by the employer not only with respect to the amounts payable by him but also in respect of those payable by the employee.
No limitation has been fixed for the recovery of these amounts 879 by the Corporation from the employer; on the other hand Sec.
68 empowers the Corporation to resort to coercive process.
If any such steps are proposed to be taken by the Corporation and the employer is aggrieved he has a right to file and apply to the Insurance Court and have his claim adjudicated by it in the same way as the Corporation can prefer a claim in a case where the liability to pay is disputed.
75 (2) (d) clearly envisages this course when it provides that "the claim against a principal employer under Sec.
68" shall be decided by the Employees Insurance Court.
It may be useful to read Sec.
68 and 75 (2) (d) which are given below Sec.
68 (1)If any principal employer fails or neglects to pay any contribution which under this Act he is liable to pay in respect of any employee and by reason thereof such person becomes disentitled to any benefit or entitled to a benefit on a lower scale, the Corporation should have been paid by the principal employer, pay to the person the benefit at the rate to which he would have been paid by the principal employer, pay to the person the benefit at the rate to which he would have been entitled if the failure or neglect had not occurred and the Corporation shall be entitled to recover from the principal employer either (i) the difference between the amount of benefit which is paid by the Corporation to the said person and the amount of the benefit which would have been payable on the basis of the contributions which were in fact paid by the employer; or (ii) twice the amount of the contribution which the employer failed or neglected to pay; whichever is greater.
(2)The amount recoverable under this Section may be recovered as if it were on arrear of land revenue.
Sec.75 (2) The following claim shall be decided by the Employees ' Insurance Court, namely (d)Claim against a principal employer under Section 68; It is contended by the learned Advocates for the Appellant that Sec.
68 is a crucial provision as it indicates that the right of the Corporation to enforce its claim for payment has been preserved 880 subject to tile provision that the omission or neglect by the principal employer to make contribution deprives the employee of any benefit either totally or 'at a reduced scale.
It is only in these circumstances he submits that the Corporation can recover the amount by coercive process but in any other case the Corporation 's claim to recover by an application to the Insurance Court can be made subject to a period of limitation by a rule made under Sec. 96(1)(b).
We are unable to appreciate the logic of this submission because the benefit of an employee can be negatived or partially admitted for instance either by reason of the employer not showing him in the return as an employee of his or showing him as drawing a lesser wage than what he is entitled to or as it may happen mostly, when he fails to make the payments even according to the returns made by him.
In all these cases the employee 's benefits will be affected because the basis of the scheme of conferring benefit on the employee is the contribution of both the employer and the employee.
It is clear therefore that the right of the Corporation to recover these amounts by coercive process is not restricted by any limitation nor could the Government by recourse to the rule making power prescribe a period in the teeth of Sec.
What Sec.
75(2) is empowering is not necessarily the recovery of the amounts due to the Corporation from the employer by recourse to the Insurance Court but also the settlement of the dispute of a claim by the Corporation against the principal employer which implies that the principal employer also can, where he disputes the claim made and action is proposed to be taken against him by the Corporation under See.
68 to recover the amounts said to be due from him.
While this is so there is also no impediment for the Corporation itself to apply to the Insurance Court to determine a dispute against an employer where it is satisfied that such a dispute exists.
In either case neither Sec.
69 nor Sec. 75 (2) (d) prescribes a period of limitation.
It may also be mentioned that Sec. 77 which deals with the commencement of the proceedings, does not provide for any limitation for filing an application to the Insurance Court even though it provides under sub sec.
(2) of that Section that every such application shall be in such form and shall contain such particulars and shall be accompanied by.such fee, if any, that may be prescribed by rules made by the State Government in consultation with the Corporation.
This was probably an appropriate provision in which the legislature if it had intended to prescribe a time for such applications could have provided.
Be that as it may in our view the omission to provide a period of limitation in any of these provisions while providing for a limitation of a claim by an employee for the payment of any benefit under the regulations, shows clearly that the legis lature did not intend to fetter the claim under Sec.
75(2)(d).
It appears to us that where the legislature clearly intends to pro 881 vide specifically the period of limitation in respect of claims arising thereunder it cannot be considered to have left such matters in respect of claims under some similar provisions to be provided for by the rules to be made by the Government under its delegated powers to prescribe the procedure to be.
followed in proceedings before such Court.
What is sought to be conferred is the power to make rules for regulating the procedure before the Insurance Court after an application has been filed and when it is seized of the matter.
That apart the nature of the rule bars the claim itself and extinguishes the right which is not within the pale of procedure.
Rule 17 is of such a nature and is similar in terms to Sec. 80.
There is no gain saying the fact that if an employee does not file an application before the Insurance Court within 12 months after the claim has become due or he is unable to satisfy the Insurance Court that there was a reasonable excuse for him in not doing so, his right to receive payment of any benefit conferred by the Act is lost.
Such a provision affects substantive rights and must therefore be dealt with by the legislature itself and is not to be inferred from the rule making power conferred for regulating the procedure unless that is specifically provided for.
It was pointed out that in the Constitution also where the Supreme Court was authorised with the approval of the President to make rules for regulating generally the practice and procedure of the Court, a specific power was given to it by article 145 (1) (b) to prescribe limitation for entertaining appeals before it.
It is therefore apparent that the legislature does not part with the power to prescribe limitation which it jealously retains to itself unless it intends to do so in clear and unambiguous terms or by necessary intendment.
The view taken by the Madhya Pradesh, Madras, Punjab and Andhra Pradesh High Courts in the cases already referred to are in consonance with the view we have taken.
In the decision of the Punjab High Court, Dua, J, as he then was expressed the view of the Full Bench with which Palshaw C. J., and Mahajan J, agreed.
After examining the provisions of the Act he observed at page 170 171 "At this stage, I consider it appropriate to point out, what is fairly well recognised, that what is necessarily or clearly implied in a statute is an effectual as that, which is expressed because it often speaks as plainly by necessary inference as in any other manner.
The purposes and aims of an Act as discernible from its statutory scheme are accordingly important guideposts in discovering the true legislative intent.
One who considers only the letter, of an enactment, goes but, skin deep into its true meaning; to be able to fathom the real statutory intent it is always helpful to inquire into the object intended to be accomplished.
882 Considering the entire scheme of the Act before us, it is quite clear that fixation of any period of limitation for the Corporation to realise the contributions from the employer may tend seriously to obstruct the effective working and enforcement of the scheme of insurance".
It may be of interest to notice that Palshaw C. J. had earlier taken a different view in Chanan Singh vs Regional Director, Employees State Insurance Corporation(1), but said that he, had no hesitation in agreeing with Dua J 's view because he realised that his earlier view was based on an over simplification.
In the latest case the Andhra Pradesh High Court also following the earlier decision of Madhya Pradesh, Madras and Punjab held that the State Government had exceeded its powers to frame Rule 17 as no such power to prescribe limitation under the provisions ,of Sec. 96 (1 ) (b) or under Sec.
78 (2) can be said to have been delegated to the State Government.
We, however, find that Sec.
78(2) does not delegate any power to the Government to make rules but only requires the Insurance Court to follow "such pro cedure as may be prescribed by rules made by the State Government" which rules can only be made under Sec.
96 of the Act.
In the view we have taken it is unnecessary to examine the question whether legislative practice also leads to the same conclusion though in the Madras and the Punjab decisions that was also one of the grounds given in support of their respective conclusions.
The contrary view expressed by a Bench of the Allahabad High Court is in our opinion not good law.
We may before parting with this case point out that the legislature since chosen to specifically prescribe 3 years as limitation period by addition of sub sec.
(1A) to Sec. 77 while deleting Sec. 80.
See 77(1A) provides that "Every such application shall be made within a period of three years from the date on which the cause of action arose".
By this amendment the claim under clause (d), as well as, the one under clause (f) of sub section (2) of Section 75 which provides for the adjudication of a claim by the Insurance Court for the recovery of any benefit admissible under the Act for which a separate limitation was fixed under Sec. 80, is now to be made within 3 years from the date of the accrual of the cause of action.
amendment also confirms the view taken by this Court that the power under Section 96 (1) (b) does not empower the Government to prescribe by rules a period of limitation for claims under Sec. 75.
In the result this appeal is dismissed with costs.
K.B.N. Appeal dismissed.
| IN-Abs | In exercise of the power conferred by section 96(1)(b) of the , to "Prescribe by rule the procedure to be followed in proceedings" before the Insurance Court, the State Government made r. 17 prescribing a period of limitation of twelve months for every application to the Court.
The Employees ' State Insurance Corporation filed an application before the Court claiming payment of the contribution due from the appellant.
The appellant took the plea that the application was barred as it was not presented within the period prescribed.
The High Court, on a reference, held that section 96(1) (b) did not grant power to Government to make a rule prescribing a period of limitation on claims enumerated in section 75(2) and, therefore, r. 17 was ultra vires the rule making power under section 96(1).
On the question whether the power to prescribe a period of limitation 'for initiating proceedings before the court is a part of, and is included in, the power to prescribe "the procedure to be followed in proceedings" before such courts, HELD : The power under section 96(1) (b) does not empower the government to prescribe by rule a period of limitation for claims under section 75.
(i) The law of limitation to remedies because, the rule is that claims in respect of rights cannot be entertained if not commenced within the time prescribed by the statute in respect of that right.
The object of the statutes of limitation is to compel a person to exercise his right to take action within a reasonable time, as also, to discourage and suppress stale, fake and, fraudulent claims.
While this is so, there are two aspects of the statutes of limitation, the one concerns the extinguishment of the right if a claim or action is not commenced within a particular time; the other merely bars the claim without affecting the right which either remains merely a moral obligation or can be availed of to furnish the consideration for fresh enforceable obligation.
Where a statute prescribing limitation extinguishes the right it affects substantive rights, while, that which purely pertains to the commencement of action without touching the right is procedural.
The statement that substantive law determines rights and procedural law deals with remedies is not wholly valid, for, neither the entire law of remedies belongs to procedure, because, rights are hidden even in the "interstices of procedure".
There is, therefore, no clear cut division between the two.
[872 G, 873 C E, 874 B] (ii)There is difference between the manner in which jurisprudential lawyersconsider the question and the way in which judges view the matter.
Where a question of limitation arises, the present tendency is towards the view that statutes of limitation may not prove to be a deter mining factor.
But, what has to be considered is whether the statute 868 extinguishes merely the remedy, or extinguishes the substantive right as well as the remedy.
The safest course would be to examine each case on its own facts and circumstances and determine, for in stance, whether it affects substantive 'rights and extinguishes them, whether it merely concerns a procedural rule only dealing with remedies, whether the intendment to Prescribe limitation is discernible in the scheme of the Act, or whether it is inconsistent with the rule making power.
, [876 H] (iii) Apart from the implications inherent in the term "Procedure" appearing in section 96(1) the word in furnishes a clue, to the controversy, that the procedure must be in relation to the proceedings in court after it has taken seisin of the matter.
Therefore, the application by which the court is asked to adjudicate a matter covered by section 75(2) is outside the scope of the rule making power.
[877 D] (iv)The provisions of the Act clearly indicate that the whole scheme is dependent upon the contributions made by the employer not only in respect of the amounts payable by him but also in respect of those payable by the employee.
No limitation has been fixed for the recovery of these amounts by the Corporation from the employer; on the other hand section 68 empowers the Corporation to resort to coercive process.
If any such steps are proposed to be taken by the Corporation and the employee is aggrieved he has a right to file and apply to the Insurance Court and have his claim adjudicated by it in the same way as the Corporation can prefer a claim in a case where the liability to pay is disputed.
Section 75(2) (d) clearly envisages this course when it provides that the claim against a principal employer under section 68 shall be decided by the Insurance Court.
The fact that neither section 75(2) (d) nor section 68, nor section 77 which deals with the commencement of the proceedings, prescribe any period of limitation, while a period of limitation is provided in the case of a claim by an employee for the payment of any benefit under the regulations, clearly shows that the legislatures did not intend to fetter the claim under section 75 (2) (d).
Where the legislature clearly intends to provide specifically the period of limitation in 'respect of claims arising thereunder, it cannot be considered to have left such matters in respect of claim under some similar provisions to be provided for by the rules to be made by, government under its delegated powers to prescribe the procedure to be followed in proceedings before such court.
[878 H 879 C, 880 F] (v)Nor does section 78(2) delegate any power to the government to make rules.
The section only requires the Insurance Court to follow "such procedure as may be prescribed by rules made by the State Government".
And these rules can only be made under section 96 of the Act.
[882 D] (vi)Further, the nature of the rule bars the claim itself and extinguishes the right which is not in the pale of procedure.
A provision by which an employee loses his right to 'receive payment of any benefit conferred 'by the Act, if he does not file an application within 12 months after the claim has become due, affects substantive rights, and must, therefore.
be dealt with by the legislature itself and is not to be inferred from the rule making power conferred for regulating the procedure unless that is specifically provided for.
The legislature does not part with the power to prescribe limitation which it jealously retains to itself unless it intends to do so in clear and unambiguous terms or by necessary intendment.
[881 B F] Employees ' State insurance Corporation V. Madhya Pradesh Government & Ors., A.I.R. 1964 (51) M.P. 75, M/s. Solar Works, Madras vs Employees ' State Insurance Corporation, Madras A.I.R. 1964 (51) Mad.
869 376, United India Timber Works, Yamunagar & Anr.
vs Employees ' State Insurance Corporation, Amritsar A.I.R. 1967 (54) Punjab, 166 (FB) and E.S.L.C. Hyderabad vs A.P. State Electricity Board, Hyderabad, 1970 Labour & Industrial cases 921, approved.
View contra in M/s. A. K. Brothers vs Employees ' State Insurance Corporation, A.I.R. 1965 (52) All. 410, disapproved.
Roshan Industries Pvt. Ltd., Yamunagar vs Employees ' State Insurance Corporation, Manoel Francisco Lonez A Ors.
vs Lieut.
Godoluhin James Burslem, (1843) IV M.I.A. 300, Ruckmaboye vs Lulloobhoy Mottichund, (1849 54) V M.I.A. 234, Sennimalai Goundan vs Palani Gonndan & Anr.
A.I.R. 1917 Madras 957, Krishna mzchariar vs Srirangammal & Ors., I.L.R. 47 Madras 824, Bendredas vs Thakurdev, I.L.R. , Velu Pillai vs Sevuga Perumal Pillai, A.I.R. 1958 Madras 392, Narsingh Sahai vs Sheo Prasad, All 1(FB), Chunilal Jethabhai vs Dhyabhai Amulakh, Bom. 14(FB).
Union of India vs Ram Kanwar & Ors. ; , Punjab Cooperative Bank Ltd. vs Official Liquidators Punjab Cotton Press Company Ltd. (in Liquidation), A.I.R. 1941 Lah.
57 (FB), and East & West Steamship Company, George Town, Madras vs section K. Ramalingam Chettiar, , referred to.
|
XXXVII of 1950.
Application under article 32 of the Constitution of India for a writ of certiorari and prohibition.
The facts are set out in the judgment.
B. Banerji for the petitioner.
M.C. Setalvad, Attorney General for India (Gyan Chand, with him) for the opposite party.
522 1950.
May 26.
The following judgments were delivered: KANIA C.J. This is an application for a writ of 'certiorari and prohibition under article 32 of the Constitution of India.
The petitioner who is the President of the All India Hindu Mahasabha since December, 1949, was served with an order of externment dated the gist of March, 1950, that night.
By that order he is directed by the District Magis trate, Delhi, not to remain in the Delhi District, and immediately to remove himself from the Delhi District and not to return to the District.
The order was to continue in force for three months.
By another order of the Madhya Bharat Government he was directed to reside in Nagpur.
That order has been recently cancelled.
The petitioner disputes the validity of the first order on the ground that the East Punjab Public Safety Act, 1949, under which the order was made, is an infringement of his fundamental right given under article 19 (1) (d) of the Constitution of India.
He further contends that the grounds of the order served on him are vague, insufficient and incomplete.
According to him the object of the externment order passed by the District Magistrate, Delhi, was to suppress political opposition to the policy of the Government in respect of Pakistan and the Muslim League.
It is alleged that because the petitioner and the Hindu Mahasabha are against the Government policy of appeasement this order is served on him.
It is therefore mala fide and illegal.
In support of his contention about the invalidity of the East Punjab Public Safety Act and its provisions as regards externment, counsel for the petitioner relied on the recent unreported judgments of the Patna High Court in Miscellaneous Judicial Case No. 29 of 1950, Brij nandan vs The State of Bihar, and of the High Court of Bombay in Criminal Application No. 114 of 1950, re Jai singhbhai Ishwarlal Modi.
It is necessary first to ascertain the true meaning of article 19 (1) (d) read with clause (5) of the same article.
There is no doubt that by the order of extern 523 ment the right of the petitioner to freedom of movement throughout the territory of India is abridged.
The only question is whether the limits of permissible legislation under clause (5) are exceeded.
That clause provides as follows: "19.
(5) Nothing in subclauses (d), (e) and (f) of the said clause shall affect the operation of any exist ing law in so far as it imposes, or prevent the State from making any law imposing, reasonable restrictions on the exercise of any of the rights conferred by the said sub clauses either in the interests of the general public or for the protection of the interests of any Scheduled Tribe.
" It is clear that the clause permits imposition of reasonable restrictions on the exercise of the right conferred by sub clause (d)in the interests of the general public.
The rest of the provision of clause (5) is not material and neither side relies on it.
Two interpretations of the clause are put before the Court.
It is argued that grammatically understood the only question before the Court is whether the impugned legislation imposes reasonable restrictions on the exercise of the right.
To put it in other words, the only justiciable issue to be decided by the Court is whether the restrictions imposed by the legislation on the exercise of the right are reasonable.
If those restrictions on the exercise of the right are reasonable, the Court has not to consider whether the law imposing the restrictions is rea sonable.
The other interpretation is that while the Consti tution permits a law laying down reasonable restrictions on the exercise of the rights mentioned in sub clause 19 (1) (d), the reasonableness has to be of the law also.
It is submitted that in deciding whether the restrictions, on the exercise of the right are reasonable, the Court has to decide not only on the extent and nature of the restric tions on the exercise of the right but also as to whether the conditions under which the right is restricted are reasonable.
The majority judgments of the Patna and the Bombay High Courts, although the impugned Acts of the State Legislatures before them were materially different on cer tain important points, have given clause (5) of article 19 the latter meaning.
524 In my opinion, clause (5) must be given its full mean ing.
The question which the Court has to consider is wheth er the restrictions put by the impugned legislation on the exercise of the right are reasonable or not.
The question whether the provisions of the Act provide reasonable safe guards against the abuse of the power given to the executive authority tO administer the law is not relevant for the true interpretation of the 'clause.
The Court, on either inter pretation, will be entitled to consider whether the re strictions on the right to move throughout India, i.e,, both as regards the territory and the duration, are reasonable or not.
The law providing reasonable restrictions on the exercise of the right conferred by article 19 may contain substantive provisions as well as procedural provisions.
While the reasonableness of the restrictions has to be considered with regard to the exercise of the right, it does not necessarily exclude from the consideration of the Court the question of reasonableness of the procedural part of the law.
It is obvious that if the law prescribes five years externment or ten years externment, the question whether such period of externment is reasonable, being the substan tive part, is necessarily for the consideration of the Court under clause (5).
Similarly, if the law provides the proce dure under which the exercise of the right may be restrict ed, the same is also for the consideration of the Court, as it has to determine if the exercise of the right has been reasonably restricted.
I do not think by this interpretation the scope and ambit of the word "reasonable" as applied to restrictions on the exercise of the right, is in any way unjustifiably enlarged.
it seems that the narrow construc tion sought to be put on the expression, to restrict the Court 's power to consider only the substantive law on the point, is not correct.
In my opinion this aspect of the construction of article 19 (5) has escaped the minority judgment in the two matters mentioned above.
I am not con cerned with the conclusions of the two Courts about the invalidity of the provisions of the Acts they were asked to consider.
To the extent they help in the interpretation of article 19 (5) only they are helpful.
525 The next question is whether the impugned Act contains reasonable restrictions on the exercise of the right given under article 19 (1)(d)or (e).
It was argued on behalf of the petitioner that under section 4 the power to make the order of externment was given to the Provincial Government or the District Magistrate, whose satisfaction was final.
That decision was not open to review by the Court.
On that ground it was contended that there was an unreasonable restriction on the exercise of the citizen 's right.
In my opinion, this argument is unsound.
This is not legislative delegation.
The desirability of passing an individual order of externment against a citizen has to be left to an offi cer.
In the Act such a provision cannot be made.
The satisfaction of the officer thus does not impose an unrea sonable restriction on the exercise of the citizen 's right.
So far as the Bombay High Court is concerned Chagla C.J. appears to have decided this point against the contention of the petitioner.
It was next urged that under section 4 (3) the order made by the District Magistrate shall not, unless the Pro vincial Government by special order otherwise direct, remain in force for more than three months.
It was argued that the period of three months itself was unreasonable as the ex ternee had no remedy during that time.
It was contended that when the Provincial Government directed the renewal of the order no limit of time was prescribed by the legislature for the duration of the order.
The order therefore can be in operation for an indefinite period.
This was argued to be an unreasonable restriction on the exercise of a citi zen 's right.
In this connection it may be pointed out that in respect of preventive detention, which is a more severe restriction on the right of the citizen, the Constitution itself under article 22 (4) to (7) permits preventive deten tion for three months without any remedy.
The period of three months therefore prima facie does not appear unreason able.
Under the proviso to section 4 (5) the Provincial Government is not permitted to direct the exclusion or removal from the Province of a person ordinarily residing in the Province, and similarly 526 the District Magistrate is not permitted to order the exclu sion or removal of a person ordinarily resident in his district from that district.
This is a great safeguard provided under the East Punjab Public Safety Act.
The further extension of the externment order beyond three months may be for an indefinite period, but in that connec tion the fact that the whole Act is to remain in force only up to the 14th August, 1951, cannot be overlooked.
More over, this whole argument is based on the assumption that the Provincial Government when making the order will not perform its duty and may abuse the provisions of the sec tion.
In my opinion, it is improper to start with such an assumption and decide the legality of an Act on that basis.
Abuse of the power given by a law sometimes occurs; but the validity of the law cannot be contested because of such an apprehension.
In my opinion, therefore, this contention of the petitioner cannot be accepted.
was next argued that there is no provision in the Act for furnishing grounds of externment to the citizen.
Section 4 (6) provides that when an externment order has been made its grounds may be communicated to the externee by the authority making the order and in any case when the order is to be enforced for more than three months he shall have a right of making a representation which shall be referred to the advisory tribunal constituted under section 3 (4).
While the word "may" ordinarily conveys the idea of a discretion and not compulsion, reading it with the last part of the clause it seems that when an externment order has to be enforced for more than three months an absolute right is given to the cxternee to make a representation.
He cannot make a representation unless he has been furnished grounds for the order.
In no other part of the Act a right to obtain the grouuds for the order in such a case is given to him.
Therefore, that right has to be read as given under the first part of section 4 (6).
That can be done only by reading the word "may" for that purpose as having the mean ing of "shall" If the word "may" has to be so read for that purpose, it appears to be against the well recognised canons of construction to 527 read the same "may" as having a different meaning when the order is to be in force for less than three months.
I do not think in putting the meaning of "shall" on "may" in the clause, I am unduly straining the language used in the clause.
So read this argument must fail.
It was next argued that there is no provision in the Act showing what the advisory board has to do when it receives a representation.
A reference to the advisory board neces sarily implies a consideration of the case by such board.
The absence of an express statement to that effect in the impugned Act does not invalidate the Act.
It was finally contended on behalf of the petitioner that the grounds for the externment order supplied to him are vague, insufficient and incomplete.
The grounds are stated as follows : "Your activities generally and particularly since the recent trouble in East and West Bengal have been of a communal nature tending to excite hatred between communities and whereas in the present composition of the population of Delhi and the recent communal disturbances of Delhi feelings are roused between the majority and minority communities, your presence and activities in Delhi are likely to prove prejudicial to the maintenance of law and order, it is considered necessary to order you to leave Delhi.
" These grounds cannot be described as vague, insufficient or incomplete.
It is expressly stated that the activities of the petitioner, who is the President of the Hindu Maha sabha, since the recent disturbances between two communities in the East and West Bengal have particularly been of a communal nature which excites hatred between the communi ties.
It is further stated that having regard to the recent disturbance in Delhi, the population of which is composed of both these communities, the excitement of such,hatred is likely to be dangerous to the peace and maintenance of law and order.
Apart from being vague, I think that these grounds are specific and if honestly be lieved can support the order.
The argument that the order 528 was served to stifle opposition to the Government policy of appeasement has little bearing because the District Magis trate of Delhi is not concerned with the policy of the Government of appeasement or otherwise.
The order is made because the activities of the petitioner are likely to prove prejudicial to the maintenance of law and order and the grounds specified have a direct bearing on that conclusion of the District Magistrate.
I therefore think that this contention of the petitioner must be rejected.
The result is that the petition fails and is dismissed.
FAZL ALI J.
I agree.
PATANJALI SASTRI J.
I agree that this application must fail.
As I share the views expressed by my Lord in.the judgment just delivered by him on the reasonableness of the restrictions imposed by the impugned legislation whichever construction of article 19 (5) of the Constitution is adopt ed, I consider it unnecessary to express any opinion on the true scope of the judicial review permitted under that article, and I hold myself free to deal with that point when it becomes necessary to do so.
MAHAJAN J. I concur in the judgment which my brother Mukh erjea is delivering and for the reasons given by him I allow the petition and quash the order of externment.
MUKHERJEA J. This is an application under article 32 of the Constitution, praying for quashing of an externment order made by the District Magistrate of Delhi, against the petitioner Dr. N.B. Khare, on 31st March, 1950, by which the latter was directed to remove himself immediately from the Delhi District and not to return to that District so long as the order remained in force.
The order is for three months at present.
Complaint was also made in the petition in respect of another and a subsequent order passed by the Government of Madhya Bharat which was served on the peti tioner on his way to Nagpur and which 529 directed him to reside within the limits of the Nagpur Municipality and not to leave that area without the permis sion of the District Magistrate of that place.
This order of the Government of Madhya Bharat, we are told, has since been withdrawn and we are not concerned with that order or the Act under which it was passed in the present proceeding.
The substantial contention raised on behalf of the petitioner is that the particular provision of the East Punjab Public Safety Act, 1949, under which the District Magistrate of Delhi purported to make the externment order, became void and ceased to be operative after the new Consti tution came into force, by reason of these provisions being inconsistent with the fundamental rights guaranteed under article 19 (1) (d) of the Constitution read with clause (5) of the same article.
The argument is that any order passed under such void legislative provisions must necessarily be void and of no effect in law.
In order to appreciate the merits of this contention, it may be convenient to advert to the material provisions of the East Punjab Public Safety Act which are alleged to have become void as well as to the articles of the Constitution, upon which reliance has been placed by the learned counsel for the petitioner.
The East Punjab Public Safety Act came into force on 29th March, 1949, and its object, as stated in the preamble, is to provide for special measures to ensure public safety and maintenance of public order.
Section 4 (1) of the Act provides: "The Provincial Government or the District Magistrate, if satisfied with respect to any particular person that with a view to preventing him from acting in any manner prejudi cial to the public safety or the maintenance of public order it is necessary so to do, may, by order in writing, give anyone or more of the following directions, namely that such person . . . . . . . . . (c) shall remove himself from, and shall not return to, any area that may be specified in the order." , 530 Sub section (3) of the section lays down that "An order under sub section (1) made by the District Magistrate shall not, unless the Provincial Government by special order otherwise directs, remain in force for more than three months from the making thereof." The contention of the petitioner is that the restrictive provisions mentioned above, under which a person could be removed from a particular area or prohibited from returning to it are inconsistent with the fundamental right guaranteed by article 19 (1) (d) of the Constitution under which all citizens shall have the right "to move freely throughout the territory of India.
" This right indeed is not absolute and the extent to which it could be curtailed by legislation is laid down in clause.(5)of article 19 which runs as follows: "Nothing in sub clauses (d), (e) and (f) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, reasonable restrictions on the exercise of any of the rights conferred by the said sub clauses either in the interests of the general public or for the protection of the interests of any Scheduled Tribe." Thus the primary question which requires consideration is, whether the impugned legislation which apparently seems to be in conflict with the fundamental right enunciated in article 19 (1) (d) of the Consitution is protected by clause (5) of the article, under which a law would be valid if it imposes reasonable restrictions on the exercise of the right in the interests of the general public.
It is not disputed that the question of reasonableness is a justiciable matter which has to be determined by the Court.
If the Courts 'hold the restrictions imposed by the law to be reasonable, the petitioner would certainly have no remedy.
If, on the other hand, they are held to be unreasonable, article 13 (1)of the Constitution imposes a duty upon the Court to pronounce the law to be invalid to the extent that it is inconsistent with the fundamental rights guaranteed under Part III of the Constitution.
531 It has been urged, though somewhat faintly, by the learned Attorney General that the right of free movement throughout the Indian territory as enunciated in article 19 (1) (d) of the Constitution contemplates nothing else but absence of inter State restrictions, which might prevent citizens of the Indian Union from moving from one State to another.
A law which does not impose barriers of this kind, it is said, cannot be inconsistent with the fundamental right secured by this clause.
Such a restricted interpreta tion is, in my opinion, not at all warranted by the language of the sub clause.
What article 19 (1) (d) of the Constitu tion guarantees is the free right of all citizens to go wherever they like in the Indian territory without any kind of restriction whatsoever.
They can move not merely from one State to another but from one place to another within the same State and what the Constitution lays stress upon is that the entire Indian territory is one unit so far as the citizens are concerned.
Clause (c) of section 4 (1) of the East Punjab Public Safety Act, 1949, authorises the Provin cial Government or the District Magistrate to direct any person to remove himself from any area and prohibit him from entering the same.
On the face of it such provision repre sents an interference with the.
fundamental right guaran teed by article 19 (1) (d) of the Constitution.
The contro versy, therefore, narrows down to this, whether the impugned legislation is saved by reason of its being within the permissible limits prescribed by clause (5) of article 19.
With regard to clause (5), the learned AttorneyGeneral points out at the outset that the word "reasonable" occur ring in the clause qualifies "restrictions" and not "law '".
It is argued that in applying the clause, all that we have to see is whether the restrictions that are imposed upon the exercise of the right by law are reasonable or not and we have not to enquire into the reasonableness or otherwise of the law itself.
The reasonableness of the restrictions can be judged, ' according to the learned Attorney General, from the nature of the restrictions themselves and not from the manner in which or the authorities by which they are 532 imposed.
The question whether the operation of the law produces hardship in individual cases is also a matter which is quite irrelevant to our enquiry.
I do agree that in clause (5) the adjective 'reasonable ' is predicated of the restrictions that are imposed by law and not of the law itself; but that does not mean that in deciding the reasonableness or otherwise of the restric tions, we have to confine ourselves to an examination of the restrictions in the abstract with reference merely to their duration or territorial extent, and that it is beyond our province to look up to the circumstances under which or the manner in which the restrictions have been imposed.
It is not possible to formulate an effective test which would enable us to pronounce any particular restriction to be reasonable or unreasonable per se.
All the attendant cir cumstances must be taken into consideration and one cannot dissociate the actual contents of the restrictions from the manner of their imposition or the mode of putting them into practice.
The question of reasonableness of the restric tions imposed by a law may arise as much from the substan tive part of the law as from its procedural portion.
Thus, although I agree with the learned Attorney General that the word "reasonable" in clause (5) of article 19 goes with "restrictions" and not with "law," I cannot accept his suggestion as regards the proper way of determining the reasonableness of the restrictions which a legislation might impose upon the exercise of the right of free movement.
Coming now to the provisions of the impugned Act, Mr. Baner jee 's main contention is that section 4 (1) (c)of the East Punjab Public Safety Act, which provides for passing of orders removing a person from a particular area, on the satisfaction of the Provincial Government or the District Magistrate, cannot be a reasonable piece of legislation inasmuch as the only pre requisite for imposition of the restrictions is the personal satisfaction of certain indi viduals or authorities, the propriety or reasonableness of which cannot be tested by the application of any external rule or standard.
It is said that any law which places the liberty 533 of a subject at the mercy of an executive officer, however high placed he might be and whose action cannot be reviewed by a judicial tribunal, is an arbitrary and not a reasonable exercise of legislative powers.
The contention requires careful examination.
It is not disputed that under clause (5) of article 19, the reasonableness of a challenged legislation has to be determined by a Court and the Court decides such matters by applying some objective standard which is said to be the standard of an average prudent man.
Judged by such standard which is sometimes described as an external yard stick, the vesting of authority in particular officers to take prompt action under emergent circumstances, entirely on their own responsibility or personal satisfaction, is not necessarily unreasonable.
One has to take into account the whole scheme of the legislation and the circumstances under which the restrictive orders could be made.
The object of the East Punjab Public Safety Act is to pro vide for special measures to ensure public safety and maintenance of public order.
Under section 4 (1) (c) of the Act, the Provincial Govern ment or the District Magistrate may make an order directing the removal of a certain person from a particular area, if they are satisfied that such order is necessary to prevent such person from acting in any way prejudicial to public safety or maintenance of public order.
Preventive orders by their very nature cannot be made after any judicial enquiry or trial.
If emergent steps have got to be taken to prevent apprehended acts which are likely to jeopardise the inter ests or safety of the public, somebody must be given the power of taking the initial steps on his own responsibility; and no reasonable objection could be taken if the authority, who is given the power, is also entrusted with the responsi bility of maintaining order and public peace in any particu lar district or province.
The preventive provisions of the Criminal Procedure Code are based on similar principle.
In my opinion, therefore, the provision of section 4 (1) (c) of the East Punjab Public Safety Act cannot be pronounced to be unreasonable, simply because the order could be passed by the Provincial Government 534 or the District Magistrate on their own personal satisfac tion and not on materials which satisfy certain objective tests.
But though certain authorities can be invested with powers to make the initial orders on their own satisfaction in cases of this description, the position would certainly be different if the order thus made is allowed to continue for any indefinite period of time without giving the ag grieved person an opportunity to say what he has got to say against the order.
I have already set out the provisions of sub section (3) of section 4 which deals with duration of the orders made under the various clauses of sub section (1).
It will be seen from this sub section that there is absolutely no limit as to the period of time during which an externment order would remain in force if the order is made by the Provincial Government.
The Provincial Government has been given unlimited authority in this respect and they can keep the order in force as long as they chose to do so.
As regards orders made by a District Magistrate, the period indeed has been fixed at three months, but even here the Provincial Government is competent to extend it to any length of time by means of a special order.
The law does not fix any maximum period beyond which the order cannot continue; and the fact that the Act itself would expire in August, 1951, is, in my opinion, not a relevant matter for consideration in this connection at all.
I have no hesi tation in holding that the provision of sub section (3) of section 4 is manifestly unreasonable and cannot be supported on any just ground.
One could understand that the exigen cies of circumstances might justify the vesting of plenary powers on certain authorities which could pass orders on their ' own personal satisfaction temporarily and for a short period of time; but if these orders are to continue indefi nitely, it is only fair that an opportunity should be given to the person against whom such order is made to say what he has to say in answer to the allegations made against him.
There may not be an investigation by a regular Court but it is necessary that the aggrieved person should be given a fair hearing and that by an 535 impartial tribunal.
The provision of the impugned Act which has bearing on this point is contained in sub section (6) of section 4 and it runs as follows: "When an order has been made in respect of any person under any of the clauses under section 4, sub section (1), or sub section (2) the grounds of it may be communicated to him by the authority making the order and in any case, when the order is to be in force for more than three months, he shall have a right of making a representation which shall be referred to the Advisory Tribunal, constituted under section 3, sub section (4).
" It will be noted that the first part of the subsection makes it entirely optional with the authorities to communi cate the grounds, upon which the order is made, to the person affected by it.
The grounds need not be communicated at all if the authorities so desire.
As regards the right of representation the latter part of the sub section seems to imply that when the order is to remain in force for more than three months, the right of representation should be given to the aggrieved person and the representation shall be referred for consideration to the advisory tribunal constituted under section 3, sub section (4), of the Act.
The right, however, is purely illusory as would appear from the fact that even in cases where the order is to be opera tive for more than three months, there is no obligation on the part of the authorities to communicate to the person the grounds upon which the order was made.
The aggrieved person consequently may not at all be apprised of the allegations made against him and it will be impossible for him to make any adequate or proper representation, if he is not told on what grounds the order was passed.
In my opinion, this is an equally unreasonable provision and neither sub section (3) nor sub section (6) of section 4 of the Act can be said to have imposed restrictions which are reasonable in the inter ests of the general public.
My conclusion, therefore, is that under article 13 (1) of the Indian Constitution, these provisions of the Act became void and inoperative after the Constitution came into 536 force, and consequently the order made by the District Magistrate in the present case cannot stand.
I would, therefore, allow the application and quash the externment order that has been passed against the petition er.
Petition dismissed.
Agent for the petitioner: Ganpat Rai.
Agent for the opposite party: P.A. Mehta.
| IN-Abs | Section 4, sub section
(1) (c), of the East Punjab Public Safety Act of 1949 which was passed on the 29th March, 1949, and was to be in force until the 14th August, 1951, provided that "The Provincial Government or the District Magistrate, if satisfied with respect to any particular person that with view to preventing him from acting in any manner prejudicial to the public safety or the maintenance of public order it is necessary to do so, may, by order in writing, give a direction that such person shall remove himself from, and shall not return to, any area that may be specified in the order.
" Sub section (3) of section 4 provided that "an order under sub section
(1) made by the District Magistrate shall not, unless the Provincial Goverment by special order otherwise directs, remain in force for more than three months from the making thereof," and sub section
(6) laid down that "when an order has been made in respect of any person under any of the clauses under section 4, sub section
(1) or sub section
(9.), the grounds of it may be communicated to him by the authority making the order, and in any case when the order is to be in force for more then three months, he shall have a right of making a representation which shall be referred to the Advisory Tribunal constituted under section 3, sub section
" The petitioner, against whom an order under (1) (c) of the Act was passed applied to the Court under article 39, of the Constitution for a writ of certiorari contending that the order was illegal inasmuch as the provisions of the above mentioned Act under which the order was made infringed the fundamental right to move freely throughout the territo ry of India which was guaranteed by article 19 (1) (d) of the Constitution and were accordingly void under article 13 (1) of the Constitution: Held, per KANIA C.J., FAZL ALl and PATANJALI SASTRI, J3.
(MAHAJAN and MUKHERJEA, JJ.
dissenting) (i) that there was nothing unreasonable in the provision contained in sub section
(1) (c) empowering the Provincial Government or the Dis trict Magistrate to make an externment order, and making their satisfaction as to the necessity of making such an order final, or in the provisions contained in sub section
(3) of section 4 that an order of a District Magistrate may remain in force for three months and that the Provincial Government may make an order, or keep alive an order made by a District Magistrate, for a period exceeding three months without fixing any time limit; (ii) with regard to sub section
(6), the word "may" in the expression "may communicate" must, in the context, be read as meaning "shall" and under the sub sec tion it is obligatory on the authority making an order to communicate the grounds to the externee;.(iii) the restric tions imposed by the above mentioned provisions of the Act upon the fundamental right guaranteed by article (19) (1) (d) were not, therefore, unreasonable restrictions within the meaning 01 article 19 (5) and the provisions of the Act were not void under article 13 (1), and the order of externment was not illegal.
Per MUKHERJEA J. (MAHAJAN J. concurring) Though certain authorities can be invested with power to make 521 initial orders on their own satisfaction in cases of this description, and section 4 (1) (c) of the East punjab Public Safety Act cannot be pronounced to be unreasonable simply because an order I could be passed by the Provincial Gov ernment or the District Magistrate on their own personal satisfaction and not on materials, which satisfy certain objective tests, yet, the position would be different if the order thus made is allowed to continue for any indefinite period of time without giving the aggrieved person an oppor tunity to say what he has got to say against the order; and inasmuch as sub section
(3) of section 4 prescribes no limit to the period of time during which an externment order would remain in force if it is made by the Provincial Government, and the Provincial Government is also given power to keep an order made by a District Magistrate in force for an indefinite period, the provisions of sub section
(3) are manifestly unrea sonable.
The provisions of sub section
(6)of section 4 are also unreasonable as they make it entirely optional with the authorities to communicate to the person affected, the grounds upon which the order is made.
Neither sub section
(3) nor sub section
(6) of section 4 can, therefore, be said to have imposed restrictions which are reasonable in the interests of the general public within the meaning of article 19 (5) and these provisions of the Act were consequently void and inoperative under article 13 (1)of the Constitution, and the externment order was illegal.
Held also, per KANIA C.J., FAZL ALI, MAHAJAN and MUKH ERJEA JJ.
Whether the restrictions imposed by a legislative enactment upon the fundamental right guaranteed by article 19 (1) (d) are reasonable within the meaning of article 19 (5) of the Constitution would depend as much on the procedural portion of the law as the substantive part of it] and in considering whether such restrictions are reasonable the Court is not therefore bound to confine itself to an exami nation of the reasonableness of the restrictions in the abstract with reference to their duration and territorial extent.
The Court can also consider the reasonableness of the procedural part of the law and the circumstances under which, and the manner in which, the restrictions have been imposed.
[PATANJALI SASLUP, I J. did not express any opin ion on this point.]
|
Appeal (Criminal Appeal No. 3 of 1950) from a judgment of the High Court of Judica ture at Patna dismissing a petition to revise an order of the Sessions Judge, Patna, convicting the appellant for an offence under section 186, Indian Penal Code: The facts of the ease appear in the judgment.
N.C. Chatterjee (Rameshwar Nath, with him) for the appellant.
S.K. Mitra (K. Dayal, with him) for the respondent.
S.M. Sikri for the Intervener.
305 1951.
March 5.
The judgment of the Court was delivered by PATANJALI SASTRI J.
This is an appeal from a judgment of the High Court of Judicature at Patna dismissing a revi sion petition against the conviction of the appellant for an offence under section 186 of the Indian Penal Code.
The appellant was at all material times the General Manager of the Jagdishpur Zamindary Company (hereinafter referred to as the company) who were the lessees of a sugar factory referred to in these proceedings as the Bhita Sugar Factory.
He was prosecuted for obstructing the then District Magistrate and the Special Officer incharge of Rationing, Patna, in the discharge of their official functions when they went to the factory on 6th December, 1947, to remove 5,000 maunds of sugar which had been seized out of the stock held by the company pursuant to an order of the Government of Bihar dated 5th December, 1047.
The case for the prose cution was as follows: The company had deliberately failed to comply with the orders for supply of sugar issued from time to time under the provisions of the Sugar and Sugar Products Control Order, 1047, by officers of the Government duly authorised in that behalf.
and, in consequence, the Government made the following order on 5th December, 1947 : "In exercise of the powers conferred on the Central Government by cl.
(1) of sub section (2) of section 3 of the Essential Supplies (Temporary Powers) Act, 1946, which have been delegated to the Provincial Government in relation to foodstuffs in the notification of the Government of India, Department of Food, No. PY 603 (2) 1 dated 21st October, 1946, the Governor of Bihar is pleased : (1) to authorise the District Magistrate, Patna, and/or the Special Officer in charge of Rationing, Patna, to search the stock of sugar held by Messrs. Jagdishpur Zamind ary Company, Bhita, in the District of Patna, which is about to commit a contravention of 306 the order of the Chief Controller of Prices and Supplies, Bihar, made under cl. 7 (1) (ii) of the Sugar and Sugar Products Control Order, 1947, and issued in order No. 1613 P.C.R. dated 27th September, 1947, in so far as the said order relates to the said Company, and (2) to direct that 5,000 maunds of sugar held in stock by the said Company shall be seized.
By order of the Governor of Bihar Sd.
T.P. SINGH, Secretary to Government.
" On the 6th December, 1947, when the officers named went to the factory to carry cut the aforesaid order, they were told by the appellant that he would do everything possible to obstruct the removal of the sugar, and accordingly it was found that the sugar godowns had been locked and the road leading to them blocked by heaps of coal, firewood and tins placed across, so as to make vehicular traffic impos sible.
A railway siding leading to the godowns had also been rendered unserviceable by the removal of some of the rails and fishplates.
As a result of such obstruction, the officers had to seek the aid of armed police to break open the locks, repair the railway line and clear the road block before the sugar could be removed from the factory.
The appellant 's main defence was that on a proper con struction of section 3 of the Essential Supplies (Temporary Powers) Act, 1946, hereinafter referred to as the Act) it was not competent for the Government to pass the order of 5th December, 1947, which was consequently illegal and void, and that obstruction to the execution of that order could not constitute an offence under section 186 of the Indian Penal Code.
The contention was rejected and the appellant was convicted and sentenced to simple imprisonment for a term of three weeks.
On appeal, the Sessions Judge, Patna, confirmed the conviction and sentence, agreeing with the findings of the trial court, and a Revision Petition preferred by the appel lant was rejected by the High Court, 307 which, however, granted a certificate under article 134 (1) (c) of the Constitution that the case was a fit one for appeal to this court as it involved a point of "sufficient public importance" as to the interpretation of section 3 of the Act.
Section 3, so far as it is material here, runs as follows : "3.
(1) The Central Government, so far as it appears to it to be necessary or expedient for maintaining or increas ing supplies of any essential commodity, or for securing their equitable distribution and availability at fair prices, may, by notified order, provide for regulating or prohibiting the production, supply and distribution thereof, and trade and commerce therein.
(2) Without prejudice to the generality of the powers conferred by sub section (1), an order made thereunder may provide (j) for any incidental and supplementary matters, in cluding in particular the entering, and search of premises, vehicles, vessels and aircraft, the seizure by a person authorised to make such search of any articles in respect of which such person has reason to believe that a contravention of the order has been, is being, or is about to be commit ted, the grant or issue of licences, permits or other docu ments, and the charging of fees therefor.
" It was contended that an order under sub section (1) should be in the nature of a rule or regulation of general application, like the Sugar and Sugar Products Control Order, 1947, issued by the Central Government on 4th August, 1947, as the sub section confers on the Central Government only the power to "provide for regulating or prohibiting" the production, supply, distribution, etc., of essential commodities, and does not authorise the making of ad hoc or special orders with respect to any particular person or thing.
We see no reason to place such a restricted con struction on the scope of the power conferred on the Central Government.
The term "notified order" which is defined as meaning "an 40 308 order notified in the official Gazette" is wide enough to cover special as well as general orders relating to the matters specified in section 3.
The power to provide for regulating or prohibiting production, distribution and supply conferred on an executive body may well include the power to regulate or prohibit by issuing directions to a particular producer or dealer or by requiring any specific act to be done or forborne in regard to production, etc., and the provisions of section 4 lend support to that view.
The Central Government is empowered under the latter section to delegate its power to make orders under section 3, sub ject to conditions to be specified, to any officer or subor dinate authority either of the Central or a Provincial Government.
It would be strange, if, as contended for the appellant, a subordinate officer in charge, say, of a small area, should, by delegation, exercise powers of a legisla tive character in relation to the matters specified in section 3, but should not have the power of issuing special orders concerning specific individuals or things.
We do not think that such a situation could have been contemplated.
The power delegated under section 4 must, in our opinion, include the power of issuing directions to any producer or dealer in relation to production, etc., of any specified essential commodity.
If so, the delegating authority itself must possess such power under section 3.
For instance, section 7 of the Sugar and Sugar Products Control Order, 1947, made by the Central Government empowers the" Control ler" "to issue directions to any producer or dealer to supply sugar or sugar products" to specified areas, persons or organisations.
This delegation is expressed to be made "in exercise of the powers conferred by sections 3 and 4" of the Act, but unless the Central Government itself had the power of issuing such directions under section 3, it could not delegate that power to the Controller under section 4.
This view is reinforced by the language of section 15, which contemplates orders under section 3 being made against a particular person, for it speaks of "an order made under section 3 which prohibits him (that 309 is, the person prosecuted for its contravention) from doing any act or being in possession of a thing without lawful authority etc.
" The restricted construction of section 3 contended for by the appellant 's counsel would render the scheme of the Act largely unworkable, and we have no hesita tion in rejecting it.
Even so, it was argued, an order for seizure could be made only subject to the conditions and limitations speci fied in clause (j) of sub section (2) of section 3, that is to say, only where the person authorised in that behalf "has reason to believe that a contravention of the order [an order made under sub section (1)] has been, is being, or is about to be committed ".
In the present case, the order of 5th December, 1947, directing the seizure of 5,000 maunds of the company 's sugar, in the execution of which the appellant has been found to have obstructed the officers of the Pro vincial Government, recited that the company was "about to commit a contravention of the order of the Chief Controller of Prices and Supplies, Bihar, made under cl. 7.
(1) (ii) of the Sugar and Sugar Products Control Order, 1947, and issued in order No. 1613 P.C.R. dated 27th September, 1947, in so far as the said order relates to the said company".
The latter 'order, while it directed the company, among others, "to supply sugar at the prices fixed to the approved dealers of certain Districts", left it to the District or Sub divi sional Officer to fix quotas for the approved dealers of his District or Sub division from the District or Sub divisional allotment and to inform the company when and where the supplies are to be made.
It has been found by the courts below that the total quantity of sugar which the order required to be supplied was varied from time to time, and no quotas to approved dealers were ever fixed nor information sent to the company as to when and where supplies were to be made.
The order of the 27th September, 1947, having thus remained inchoate and incomplete and so incapable of being carried out or contravened till the 5th December, 1947, it was submitted that no seizure and removal could be lawfully ordered on the basis of an anticipated contravention 310 of such an order, and that the officers concerned in the illegal and unauthorised removal of the sugar were not acting in the discharge of their public functions.
Reference was made in this connection to the decisions of the Calcutta High Court in Lilla Singh vs Queen Empress(1) and Queen Empress vs Jogendra Nath Mukerjee(2) where it was held that the public function in the discharge of which a public servant was obstructed must be a legal or legitimately authorised function, in order that the obstruction might constitute an offence under section 186 of the Indian Penal Code.
On the other hand, counsel for the respondent main tained that for an offence under that section it was not necessary that the act which was obstructed must be duly authorised and otherwise lawful if it was being done or was sought to be done by a public servant honestly and in good faith believing that it was part of his public functions, and reliance was placed in support of this view on the decisions of the Madras High Court in Queen Empress vs Poomalai Udayan(3), Public Prosecutor vs Madava Bhonjo Santos(4) and Peer Masthan Rowther vs Emperor(5).
We think it is unnecessary for the purpose of this appeal to pro nounce on the true scope of section 186 of the Indian Penal Code as we are of opinion that the appellant 's argument must fail on another ground.
It is manifest that sub section (2) of section 3 confers no further or other powers on the Central Government than what are conferred under sub section (1), for it is "an order made thereunder" that may provide for one or the other of the matters specifically enumerated in sub section (2) which are only illustrative, as such enumeration is "without prejudice to the generality of the powers conferred by sub section (1)" Seizure of an article being thus shown to fall within the purview of sub section (1), it must be competent for the Central Government or its delegate, the Provincial Government, to make an order for seizure under (1) I.L.R. 22.
(4) (2) I.L.R. (5) (3) I.L.R. 311 that sub section apart from and irrespective of the antici pated contravention of any other order as contemplated in clause (j) of sub section (2).
The order ' of 5th December, 1947, must, therefore, be held to be a valid order, notwith standing its reference to the order of the 27th September, 1947, as being about to be contravened.
If the latter order was incomplete and inoperative and consequently there could be no question of its contravention, as contended for the appellant, the reference to it in the order dated the 5th December, 1947, would be an immaterial redundancy and could not affect the validity of the latter order.
The seizure of the company 's sugar must, therefore, be regarded as duly authorised and lawful, and the appellant by ob structing its removal, committed an offence under section 186 of the Indian Penal Code even on the stricter construc tion placed on that provision by the Calcutta High Court.
The view we have expressed above receives support from the decision of the Privy Council in Sibnath Banerjee 's case(1).
Section 2(1) of the Defence of India Act, 1939, as amended by section 2 of the Defence of India (Amendment) Act, 1940, empowered the Central Government to make rules for securing the defence of British India, the public safe ty, the maintenance of public order, etc., and sub section (2) enacted "without prejudice to the generality of the powers conferred by sub section (1), the rules may provide for all or any of the following matters . ".
Among such matters was the detention of any person "reasona bly suspected" of having acted etc.
in a manner prejudicial to the public safety etc.
[clause (x)].
Rule 26 of the Rules made under the section, however, authorised the Gov ernment to detain a person "if it is satisfied" that it was necessary to detain him with a view to prevent him from acting prejudicially. ' . .The
Federal Court held (2) that this rule was ultra vires as it Went beyond the scope of clause (x) in that it left it to the satisfaction of the Government to decide whether or not it was necessary to detain a (1) ; 72 I. A.241, 248.
(2) 312 person, The decision was reversed and Lord Thankerton, delivering the judgment of the Board, observed: "In the opinion of their Lordships, the function of subsection(2) is merely an illustrative one; the rule making power is con ferred by sub section (1), and "the rules" which are re ferred to in the opening sentence of subsection (2) are the rules which are authorised by, and made under, sub section (1); the provisions of sub section (2) are not restrictive of sub section(1), as, indeed is expressly stated by the words "without prejudice to the generality of the powers conferred by sub section (1)".
"There can be no doubt as the learned Judge himself appears to have thought that the general language of sub section (1) amply justifies the terms of rule 26, and avoids any of the criticisms which the learned Judge expressed in relation to subsection (2)".
This accords with our view of the effect of subsections (1) and (2) of section 3 of the Act.
The appeal is dismissed.
The appellant 's bail bond is cancelled and he is ordered to surrender.
Appeal dismissed.
Agent for respondent and Intervener: P.A. Mehta.
| IN-Abs | Section 3 of the Essential Supplies (Temporary Powers) Act, 1946, provided as follows: (1) The Central Government, so far as it appears to it to be necessary or expedient for maintaining or increasing supplies of an essential commodity, or for securing their equitable distribution and availability at fair prices, may by notified order, provide for regulating or prohibiting the production, supply and distribution thereof, and trade and commerce therein.
Without prejudice to the generality of the powers conferred by sub section
(1) an order made thereunder may provide . (j) for any incidental and supplementary matters.
including in particular the entering, and search of premises, vehicles, vessels and aircraft, the seizure by a person authorised to make such search of any articles in respect of which such person has reason to believe that a contravention has been, is being, or is about to be commit ted. " In exercise of the powers conferred on the Central Government by cl.
(j) of sub section
(2) of section (3) of the above said Act, which had been delegated to the Provincial Govern ment in relation to food stuffs, the Governor of Bihar made an order authorising the District Magistrate, Patna, and the Special Officer in charge of rationing, Patna, to search the stock of sugar held by a company of which the appellant was the General Manager and directing the seizure of 5,000 maunds of sugar held in stock by the said company, on the ground that the company was about to commit a contravention of an order of the Chief Controller of Prices and Supplies made under the Sugar and Sugar Products Control 304 Order, 1947.
The appellant obstructed the officers who went to search and seize the goods and was convicted under section 186, Indian Penal Code.
Held, (i) the power "to provide for regulating or prohib iting production, supply and distribution" conferred by the Act on the Central Government included the power to regu late or prohibit by issuing directions to a particular producer or dealer or by requiring any specific act to be done or foreborne in regard to production etc., and the order of the Governor was not therefore invalid on the ground that it was not a rule or regulation of general application but an order concerning a particular company alone; (ii) sub section (2) of section 3 conferred no further or other powers than what were conferred by sub section
(1) and the enumeration of certain matters in sub section
(2) was merely illustrative, as such enumeration was "without prejudice to the generality of the powers conferred by sub section
(1) "; (iii) seizure of an article being within the purview of sub section
(1) of section 3 it was therefore competent to the Cen tral Government, and its delegate the Provincial Government, to make an order for seizure under sub section
(1) apart from and irrespective of the anticipated contravention of any other order as contemplated in el.
(j) of sub section (2); (iv) even assuming that the order of the Chief Control ler of Prices under the Sugar Control Order was incomplete and inoperative and there could be no question of its con travention, the reference to that order in the order made by the Governor would be a mere redundancy and would not affect the validity of the latter order, and the appellant was rightly convicted under section 186, Penal Code.
Quaere: Whether for an offence under section 186, Penal Code, it is necessary that the act which was obstructed must be duly authorised and otherwise lawful.
King Emperor vs Sibnath Banerjee applied.
|
Appeal No. 61 of 1953.
Appeal from the Judgment and Decree dated the 16th day of May, 1952 of the High Court of Judicature at Calcutta in Appeal from Original Decree No. 124 of 1951 arising out of the decree dated the 25th day of May, 1951 of the High Court of Calcutta in its Ordinary Original Civil Jurisdiction in Suit No. 3614 of 1950.
M. C. Setalvad, Attorney General for India, (P. Mandaland section P. Varma, with him), for the appellant.
N. C. Chatterjee, (A. N. Sinha and P. C. Dutta, with him), for the respondent.
December 3.
The Judgment of the Court was delivered by BHAGWATI J.
This appeal with certificate from the High Court of Judicature at Calcutta arises out of the suit filed on the original side of the High Court by the appellant against the respondent to recover a sum of Rs. 1,25,962 2 0 with interest and costs, 1073 The appellant entered into three contracts, two dated the 8th August 1949 and the third dated the 17th August 1949 with the respondent agreeing to purchase 1,80,000 bags of 'B ' twills at the price of Rs. 134/4/ per 100 bags, 1,80,000 bags at the rate of Rs. 135/4/ per 100 bags and 90,000 bags at the rate of Rs. 138/ per 100 bags respectively for October, November and December 1949 deliveries in equal monthly instalments on terms and conditions contained in the relative contract forms of the Indian Jute Mills Association.
In September 1949 the respondent expressed its inability to deliver the goods under the said contracts and requested the appellant to settle the same by selling back the goods under the said contracts to the respondent at the price of Rs. 161 8 0 per 100 bags.
Three settlement contracts were accordingly entered into between the parties on the 28th September 1949 whereby the appellant agreed to sell the goods under the original contracts to the respondent at the rate of Rs. 161 8 0 per 100 bags on the terms and conditions contained in the relative contract forms of the Indian Jute Mills Association.
The appellant duly submitted to the respondent his bills for the amounts due at the foot of the said contracts aggregating to Rs. 1,15,650 which the respondent accepted but failed and neglected to pay in spite of repeated demands of the appellant.
The appellant therefore filed the suit for recovery of the said sum with interest and costs.
The respondent filed its written statement contesting the appellant 's claim on the main around that the three settlement contracts above mentioned were illegal and prohibited by the West Bengal Jute Goods Future Ordinance, 1949.
The respondent contended that it never dealt in the sale and/or purchase of jute goods involving actual delivery of possession thereof, nor did it possess or have control over any godown and other means or equipments necessary for the storage and supply of jute goods and that therefore the said settlement contracts were void and not binding upon it and that the appellant was not entitled to any relief as prayed.
The Trial Court negatived the contention of the respon 1074 dent and decreed the appellant 's claim.
The learned Judges of the Appeal Court however came to the conclusion that the said settlement contracts were contracts relating to the purchase of jute goods made on a forward basis by the respondent not being a person who habitually dealt in the sale or purchase of jute goods involving the actual delivery of possession thereof and were therefore void and unenforceable.
The only right which the appellant had against the respondent was to have the said original contracts settled on the basis of the last closing rate in a notified market which was Rs. 146/14/ per 100 bags.
No such claim was however made by the appellant.
A further contention which was raised by the respondent, viz. that the Ordinance was ultra vires was negatived by the Court.
But in view of its finding on the main issue the Appeal Court dismissed the appellant 's suit with costs.
The relevant provisions of the West Bengal Jute Goods Future Ordinance, 1949 were as under: Section 2.
In this Ordinance, unless there is anything repugnant in the subject or context: (1) 'Contract relating to jute goods futures ' means a contract relating to the sale or purchase of jute goods made on a forward basis (a)providing for the payment or receipt, as the case may be, of margin in such manner and on such dates as may be specified in the contract, or (b) by or with any person not being a person who, (i)habitually deals in the sale or purchase of jute goods involving the actual delivery of possession thereof, or (ii)possesses, or has control over, a godown and other means and equipments necessary for the storage and supply of jute goods:. . . . . . 3.(1) The Provincial Government may, from time to time, if it so thinks fit, by notification in the Official Gazette prohibit the making of contracts, relating to jute goods futures and may, by like notification, withdraw such prohibition . . . . . . . 1075 (2)When the making of contracts relating to jute goods futures is prohibited by a notification under sub section (I), (a)no person shall make any such contract or pay or receive any margin except, in the case of any such contract made prior to the date of the notification, to the extent to which the payment or receipt, as the case may be, of margin is allowable on the basis of the last closing rate in a notified market:. . . (c)notwithstanding anything contained in any other law for the time being in force, (i)every such contract made, and every claim in respect of margin, in contravention of the provisions of clause (a), shall be void and unenforceable, and (ii) every such contract made prior to the date of publication of the notification shall be varied and settled on the basis of the last closing rate in a notified market.
Explanation In this sub section, (a)"last closing rate" means the rate fixed by the Directors of a notified market to be the closing rate of such market immediately preceding the date of publication of the notification under sub section (1) prohibiting the making of contracts relating to jute goods futures: and (b)"notified market" means a jute goods futures market recognised by the Provincial Government by notification in the Official Gazette.
The Ordinance came into force on.
the 22nd September 1949.
In pursuance of the power conferred under section 3(1) of the Ordinance the Government of West Bengal issued a notification, being notification No. 4665 Com.
dated the 23rd September 1949 prohibiting the making of contracts relating to jute goods futures on and from the date of publication of the notification in the Official Gazette and by another notification No. 4666 Com.
of the same date recognised certain jute goods futures markets for the purpose of Para.
(b) of the Explanation to section 3(2) as notified markets.
These notifications were published in the 138 1076 Calcutta Gazette on the same day, the 23rd September 1949.
The relevant terms and conditions of the standard form of the Indian Jute Mills Association contracts may be conveniently set out here: (1)Buyers to give 7 Clear Working days ' notice to place goods alongside. . . . . . . . (3)Payment to be made in cash in exchange for Delivery Orders on Sellers, or for Railway Receipts, or for Dock 's Receipts or for Mate 's Receipts (which Dock 's Receipt or Mate 's Receipts are to be handed by a Ship 's or Dock 's officers to the Sellers ' representatives).
(4)The Buyers hereby acknowledge, that so long as such Railway Receipts or Mate 's or Dock 's Receipts (whether in Sellers ' or Buyers ' names) are in the possession of the Sellers, the lien of the sellers, as unpaid vendors, subsists both on such Railway Receipts Dock 's or Mate 's Receipts and the goods they represent until payment is made in full.
There were other terms and conditions appertaining to the delivery of goods under the contracts including inspection by the buyers, insurance, tender, etc.
The settlement contracts were also practically in the same form except that in the body of the contracts it was mentioned that the particular contract represented settlement of an original contract which had been already entered into between the parties and that the buyers in the settlement contract would pay to the sellers the difference at the particular rate on due date.
In respect of the goods deliverable under the contracts the mills would, in the case of goods sent by them alongside the vessel in accordance with the shippers ' instructions in that behalf, obtain the mate 's receipts in respect of the same and such mate 's receipts would be delivered by the mills to their immediate buyers who in their turn would pass them on to their respective buyers in the chain of contracts resting with the ultimate shipper.
If the mills held the goods in their godown they would issue 1077 delivery orders on the due date, which delivery orders would be dealt with in the same manner as the mate 's receipts aforesaid.
Both these sets of documents would represent the goods and would be passed on from seller to buyer against payment of cash.
As a matter of fact on the evidence the learned Trial Judge held that in the Calcutta jute trade mills ' delivery orders are ordinarily issued by the mills against cash payment and pass from hand to hand by endorse ment and are used in the ordinary course of business authorising the endorsee to receive the goods which they represent and that they are dealt with in the market as representing the goods.
The Appeal Court accepted this position and further found that in the instant case "the mills who held the goods sold them to A, A to B, B to the defendant to the plaintiff to C and C to the shipper.
This is what is known as a chain contract.
It is admitted by the plaintiff, that the mills give the delivery order to A. A endorses it to B, B to the defendant, defendant to the plaintiff and so on".
The question that falls to be determined on these facts and circumstances is whether the settlement contracts mentioned above could be called contracts between the appellant and the respondent involving the actual delivery of possession of the goods.
It was common ground that the contracts did not provide for the payment or receipt of margin.
It was also common ground that the respondent did not possess or have control over a godown and other means and equipments necessary for the storage and supply of jute goods.
The only point at issue was whether the respondent was a person who habitually dealt in the sale or purchase of jute goods involving the actual delivery of possession thereof and the contention which was vehemently urged on behalf of the respondent in the Courts below was that the transactions were purely speculative, that mere delivery orders passed between the parties, which delivery orders did not represent the goods and the transfer thereof did not involve as between the intermediate parties actual delivery of possession of the goods but 1078 differences in rates were only paid or received by the parties.
The appellant on the other hand contended that the delivery orders represented the goods, that each successive buyer paid to his immediate seller the full price of the goods represented by the delivery order in cash before the relative delivery order was endorsed in his favour and thus obtained not only the title to the goods but actual delivery of possession thereof and that in any event when the goods were delivered alongside the vessel or actual delivery was taken by the ultimate buyer there was the giving and taking of actual delivery of possession of the goods all along the chain at the same moment.
The Trial Court accepted the contention of the appellant that the delivery orders are dealt with in the market as representing the goods and that they pass from hand to hand by endorsement being received by the successive buyers against cash payment land are used in the ordinary course of business authorising the endorsee to receive the goods which they represent.
The learned Trial Judge further observed: "Now visualize the long chain of contracts in which the defendant 's contract is one of the connecting links.
The defendant buys from its immediate seller and sells to its immediate buyer.
As seller it is liable to give and as buyer it is entitled to take delivery.
As seller it receives and as buyer it shipping instructions.
Similar shipping instruction is given by each link until it reaches the mills.
The mills deliver the goods alongside the steamer.
Such delivery is in implement of the contract betweenthe mills and their immediate buyer.
But eo instanti it is also in implement of each of the chain contracts including the contract between the defendant and its immediate buyer and the contract between the defendant and its immediate seller.
Not only does the mill give and its immediate buyer take actual delivery but eo instanti each middleman gives and takes actual delivery.
Simultaneously the defendant takes actual delivery of possession of the jute goods from its immediate seller and gives actual delivery of possession 1079 of jute goods to its immediate buyer.
Prima facie at the moment of the delivery alongside the steamer there is appropriation and the passing of the property in the goods and the giving and taking of actual delivery of possession thereof all along the chain at the same moment".
The learned Trial Judge then referred to the following observations of Lord Wright in Nippon Yusen Kaisha vs Ramjiban(1) in regard to the standard form of the Indian Jute Mills Association contract: "This is a form under which the entire export business in gunnies in Calcutta is conducted. .
In the present case the sale being free alongside, the property prima facie passes when the goods are appropriated by delivery alongside in implement of the contracts," and added: "The sale and purchases of the defendant where there is actual shipment and delivery of possession of the goods alongside the vessel involves actual delivery of possession of the jute goods.
The delivery of the goods alongside the vessel is physical delivery of the goods and necessarily changes the actual custody of the goods.
It is said that there is no actual physical delivery of the goods by the defendant himself.
The Legislature, however, does not say that the dealer must himself give actual delivery of the goods.
I cannot read in the statute words which are not there and say that the dealer must himself give delivery of the goods in order to come within the definition in sub section 2 (1) (b) (i) of the Ordinance.
The Legislature simply insists that the sales and purchases of the dealer involve actual delivery of possession of the jute goods.
I do not see why the sales and purchases do not involve actual delivery if such actual delivery is given not by the dealer but by a third party in performance of and in relation to the sales and purchases of the dealer.
Even the buyer and the seller of jute goods over the counter rarely takes and gives manual delivery of the goods.
Very often such manual delivery is given and taken not by the buyer and (1) [1938] L. R. 65 1.
A. 263.
1080 seller but by their respective servants and agents.
I do not see why instead of the buyers ' and sellers ' employees and servants giving and taking delivery of the goods somebody else on their behalf gives and takes delivery; such delivery is not actual delivery of possession of the goods".
The learned Judges of the Appeal Court however did not accept this view and misdirected themselves both in regard to the facts and the position in law.
They took it that none of the parties in the chain contracts paid the actual price of the goods except the shipper who took delivery of the goods from the mills against payment.
They wrongly assumed that A endorsed the delivery order over to B and took the difference, B in his turn endorsed the delivery order to the defendant and took the difference and so on and concluded that nobody was concerned to pay the actual price or take delivery of the goods except the shipper who took the goods and paid the price to the mills.
This assumption was absolutely unwarranted, the evidence on record being that each of the successive buyers paid to his immediate seller the full price of the goods represented by the delivery order in cash against the endorsement of the relative delivery order in his favour by the seller.
The learned Judges of the Appeal Court also laid unwarranted emphasis on the words "actual delivery of possession" and contrasted actual delivery with symbolical or constructive delivery and held that only actual delivery of possession meaning thereby physical or manual delivery was within the intendment of the Ordinance.
Delivery has been defined in section 2(2) of the Indian as meaning voluntary transfer of possession from one person to another and if nothing more was said delivery would not only include actual delivery but also symbolic or constructive delivery within the meaning of the term.
The use of the word "actual" in section 2 (1) (b) (i) of the Ordinance was considered by the Appeal Court as indicative of the intention of the Government to include within the scope of the exemption only cases of actual delivery of possession as 1081 contrasted with symbolical or constructive delivery.
This construction in our opinion is too narrow.
Even if regard be had to the mischief which was sought to be averted by the promulgation of the Ordinance, the Government intended to prevent persons who dealt in differences only and never intended to take delivery under any circumstances, from entering into the market.
Provided a person habitually dealt in the sale or purchase of jute goods involving delivery of the goods, he was not to be included in the ban.
This could be the only intendment of the Ordinance, because otherwise having regard to the ordinary course of business in jute goods would become absolutely impossible.
The manufacturer of jute goods does not come normally into direct contact with the shipper.
It is only through a chain of contracting parties that the shipper obtains the goods from the manufacturer and if only actual delivery of possession as contrasted with symbolical or constructive delivery were contemplated it would be impossible to carry on the business.
If the narrow construction which was put by the Appeal Court on the expression "actual delivery of possession" was accepted it would involve each one of the intermediate parties actually taking physical or manual delivery of the goods from their sellers and again in their turn giving physical or manual delivery of the goods which they had thus obtained to their immediate buyers.
Such an eventuality could never have been contemplated by the Government and the only reasonable interpretation of the expression "actual delivery of possession" can be that actual delivery as contrasted with mere dealings in differences was within the intendment of the Ordinance and such actual delivery of possession included within its scope symbolical as well as constructive delivery of possession.
Once this conclusion is reached it is easy to visualise the course of events.
The mate 's receipts or the delivery orders as the case may be, represented the goods.
The sellers banded over these documents to the buyers against cash payment, and the buyers obtained these documents in token of delivery of 1082 possession of the goods.
They in turn passed these documents from hand to hand until they rested with the ultimate buyer who took physical or manual delivery of possession of those goods.
The constructive delivery of possession which was obtained by the intermediate parties was thus translated into a physical or manual delivery of possession in the ultimate analysis eliminating the unnecessary process of each of the intermediate parties taking and in his turn giving actual delivery of possession of the goods in the narrow sense of physical or manual delivery thereof.
It is necessary to remember in this connection that the words used in section 2(1) (b) (i) are "involving the actual delivery of possession thereof".
The word "involving" in the context means resulting in and this condition would be satisfied if the chain contracts as entered into in the market resulted in actual delivery of possession of goods in the ultimate analysis.
The Appeal Court was therefore clearly in error when it put a narrow construction on the expression "actual delivery of possession" and held that the transactions were purely speculative and the parties in no event.
contemplated actual delivery of possession of the goods.
The learned Trial Judge was in our opinion correct in his appreciation of the whole position on facts as well as in law and in negativing the contention of the respondent.
In view of this conclusion it is unnecessary to consider the argument which was submitted before us based upon the definition of "documents of title" in section 2(4) and the provisions of section 30, proviso to section 36(3) and the proviso to section 53(1) of the Indian that all the documents of title enumerated in section 2(4) were assimilated to a bill of lading and a mere transfer of the documents of title in favour of a buyer was tantamount to a transfer of possession of the goods represented thereby.
The contention that the Ordinance was ultra vires was not seriously pressed before us.
We may however add that the Appeal Court rightly held that the 1083 Ordinance came within Head 27 of List 2 of the Seventh Schedule of the Government of India Act: "Trade and commerce within the Province; markets and fair; money lending and money lenders", and that the Provincial Legislature was competent to legislate on that topic.
The result therefore is that the appeal will be allowed, the decision of the Appeal Court will be reversed and the decree passed by the Trial Court in favour of the Appellant will be restored with costs throughout.
Appeal allowed.
| IN-Abs | Delivery has been defined in section 2 (2) of Indian , as meaning voluntary transfer of Possession from one per 1072 son to another and it includes not only actual delivery but also symbolical or constructive delivery within the meaning of the term.
The expression "actual delivery of possession" in section 2(1)(b)(i) of the West Bengal Jute Goods Future Ordinance, 1949 means actual delivery as contrasted with mere dealings in differences within the intendment of the Ordinance and such actual delivery of possession included within its scope symbolical as well as constructive delivery of possession.
The word "involving" in the expression "involving the actual delivery of possession thereof" in section 2(1)(b)(i) of the Ordinance means in the context resulting in and this condition would be satisfied if the chain contracts in the present case, as entered into in the market resulted in actual delivery of possession of goods in the ultimate analysis.
The Ordinance came within Head 27 of List 2 of the Seventh Schedule of the Government of India Act, 1935: "Trade and commerce within the Province; markets and fair; money lending and money lenders" and the Provincial Legislature was competent to legislate on that topic.
Nippon Yussen Kaisha vs Ramjiban ([1938] L.R. 65 I.A. 263), referred to.
|
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 972 granted by the Calcutta 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 973 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 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 974 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 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 975 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 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 976 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 vs 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.
| IN-Abs | The appellant, a limited company, was managing agent of 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.
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 section 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 section 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 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 section 4 of the Act.
Clause (a) of sub section '(1) of section 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., and C.I.T., Bombay City I vs M/s. Shoorji Vallabhdas & Co., 46 I.T.R. 144, applied.
(ii) 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 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 section 10 (2) (xv)[976 F G]
|
Appeal No. 1397 of 1969.
Appeal from the judgment and order dated January 1, 1968 of theKerala High Court in O. P. No. 2413 of 1965.
V.A.Seyid Muhammad and A. G. Pudissery, for the appellant.
alias A. R. Somanatha Iyer and P. Kesava Pillai for the respondent.
The Judgment of the Court was delivered by Hegde J.
One K. C. Sreemanavikraman alias Eattan Raja was the Zamorin of Calicut.
He was a Sthanamdar.
In respect of the sthanam property, he was liable to pay agricultural income tax under the Kerala Agricultural Income tax Act, 1950 (in brief the Act) for the period from November 1, 1956 to March 31, 1958.
Sreemanavikraman Raja died on May 2, 1958.
Thereafter on May 12, 1958, Sthanam Properties (As sumption of Temporary Management and Control) and Hindu Succession (Amendment Act of 1958 came into force.
After the death of Sreemanavikraman Raja, the sthanam property was taken possession of by Kunhammaman Raja claiming to be the succeeding sthanamdar.
In respect of the assessment due for the, period November 1, 1956 to March 31, 1958, Kunhammaman Raja was assessed to tax as the successor sthanamdar.
The said Kunhammaman Raja died on December 23, 1960 without making any payment.
Thereafter the next senior most member in the Zamorin family, P. C. Cheria Kunjunni Raja took possession of the sthanam property.
He also died soon after.
During the life time of P. C. Cheria Kunjunni Raja, the Agricultural Income tax Officer imposed a penalty of Rs. 5,000/ for non payment of the tax referred to earlier.
P. C. Cheria Kunjunni Raja paid a sum of Rs. 20,100/out of the tax and penalty due, as coercive proceedings were threatened to be taken against him.
On the death of P. C. Cheria Kunjunni Raja, the next senior most member in the Zamorin family was K. C. Cheria Kunjunni Raja.
When the 936 Agricultural income tax Officer attempted to collect the tax imposed under the assessment order mentioned earlier from K. C. Cheria Kunjunni Raja, he filed a petition before that officer representing that he had nothing to do with the sthanam property and the sthanam property stood divided under section 7(3) of the on the death of Sreemanavikraman on May 2, 1958.
The had come into force on June 18, 1956.
After the receipt of that representation, the Agricultural Income tax Officer passed an order on March 25, 1963 stating that as the successors of the Zamorin who died on 2 5 1958 had designated themselves as Zamorin Rajas, they have the liability to pay the arrears due to the Government.
He directed K. C. Cheria Kunjunni Raja to pay the tax and penalty imposed.
Aggrieved by that order K. C. Cheria Kunjunni Raja filed a writ petition in the Kerala High Court challenging the validity of the threatened proceedings against him.
The High Court quashed the demand notices issued by the Agricultural Income tax Officer to K. C. Cheria Kunjunni Raja.
It held that the assessment having been made on Kunhammaman Raja, his share alone was liable to be proceeded against.
It further held that the liability ' to pay that tax and penalty was that of the personal heirs of Kunhammaman Raja and that only to the extent, they had come into possession of the assets of the said Raja.
Thereafter the Inspecting Assistant Commissioner, Kozhikode ordered that as the entire sthanam property had devolved on the 693 members, all those persons were liable to pay the arrears of the tax and penalty.
This order was made without notice to the parties.
Meanwhile in the partition suit in the Zamorin 's family, the court appointed two joint receivers.
The receivers objected to the order of the Assistant Commissioner demanding the arrears of tax referred to earlier from them.
They represented to him that the estate in their hands is not liable to pay the arrears of tax and penalty demanded.
But those representations were not accepted by the authorities.
They threatened to proceed against the assets in the hands of the receivers.
At that stage, the receivers filed the writ petition from which this appeal arises.
Therein they challenged the right of the Agricultural Income tax Officer to collect the arrears of tax and penalty from out of the properties in their hands.
The question before the High Court was whether the tax due from Manavikraman Raja was realisable from the assets in the hands of the receivers.
The writ petition was heard by a full bench of three judges.
By a majority, the High Court came to the conclusion that the only persons who were liable to pay the tax in question were the personal heirs 937 of Sreemanavikraman Raja who had received the income.
The Court held that in view of section 7(3) of the , the sthanam property stood divided at the time of the death of Sreemanavikraman Raja into 693 shares, out of which 692 shares went to members of the Tarwad of the deceased and one share to his Personal heirs wife and children.
It opined that the tax due from Manavikraman Raja could have been levied and collected only from his personal heirs as they alone were liable to pay that tax.
As a result of that conclusion, it quashed the impugned demand.
Section 7 of the provides for the devo lution of interest in the property of a tarwad, tavazhi, kutumba, kavaru, or illom.
Section 7(3) provides : "Notwithstanding anything contained in sub section
(1) when a sthanamdar dies after the commencement of this Act, the sthanam property held by him shall devolve upon the members of the family to which the sthanamdar belonged and the heirs of the sthanamdar as if the sthanam property had been divided per capita immediately before the death of the sthanamdar among himself and all the members of his family then living and the shares falling to the members of his family a the heirs of the sthanamdar shall be held by them as their separate property." "Explanation For the purposes of this sub section the family of a sthanamdar shall include every branch of that family, whether divided or undivided, the male members of which would have been entitled by any custom or usage to succeed to the position of sthanamdar if this Act had not been passed.
" We have considered the scope of this section in Civil Appeal No. 1137 of 1969.
Hence it is sufficient for our present purpose to state that in view of section 7(3) of the , it must be held that on the death of Sreemanavikaraman Raja, each of the members of his tarwad took a per capita share in the sthanam property as co owners and not as his heirs.
His personal heirs took the share which the deceased was deemed to have got as his share when he was taking his last breath.
Section 7(3) of the embodies a fiction.
The purpose of that fiction was to gradually abolish the sthanams and to provide for the devolution of the sthanam properties on the members of sthani 's tarwad except as regards one per capita share which the personal heirs of the sthanamdar are to inherit as the heirs of the sthanamdar.
938 The nature of a sthanam was considered by this Court in K. K. Kochuni and ors.
vs The State of Madras and ors.
(1) Therein this Court observed that according to the custom, Sthanam means a position of dignity and respect and for maintaining that position, properties were attached to that office and the same was held by the "stani".
Stani is solely entitled to the income of that property during his life time.
The senior most member of a tarwad usually became the sthanamdar of the sthanam attached to that tarwad.
On his succession to stanom.
he stood separated from the rest of the family.
He solely became entitled to the stanom property but he gave up his right in the tarwad property.
All the same he and the members of his tarwad had the same right of succession to the properties of each other as if his severance from the family had been the result not of his succession to the stanom, but a voluntary division between him and the rest of the family.
Whatever might have been the customary law, section 7(3) of the Hindu Succession Act the validity of which was not in issue before us by a fiction deems that the sthanam property stood divided amongst the stani and the members of his tarwad, a split second before his death.
From the language of the section.
it is clear that the members of the tarwad took the property as co owners and not as the heirs of the deceased stani.
This fiction was created for the purpose of providing for the devolution of the sthanam properties.
The Act 28 of 1958 came into force only on May 12, 1958.
Therefore that Act cannot have any effect on the sthanam with which we are concerned in this case because that stanom stood destroyed on May 2, 1958.
Hence we need not refer to the provisions of that Act.
The income of the sthanam property during November 1, 1956 to March 31, 1958 was the exclusive property of Sreemana vikaraman Raja.
He was alone entitled to that income.
Therefore he alone was liable to pay the tax.
Under the Agricultural ,Income tax Act, no charge is created on property in respect of the arrears of agricultural income tax.
That being so, the liability to pay the arrears of tax due from the deceased stani fell on his personal heirs and that only to the extent they received any of his assets.
This position is clear from section 24(1) of the Act which provides that "when a person dies, his executor, administrator or other legal representative shall be liable to pay out of the estate of the deceased person to the extent to which the estate is capable of meeting the charge, the agricultural income tax assessed as payable by such person or any agriculture income tax which would have been payable by him under this Act, if be had not died".
(1) 939 The assessment made on Kunjunni Raja in his capacity as the successor sthanamdar was an invalid assessment.
Legally he, never became the sthanamdar.
There was no sthanam after the, death of Manavikraman Raja.
With the death of Manavikraman Raja the sthanam came to an end.
The only persons who could have represented the estate of Sreemanavikraman Raja were his personal heirs.
They were not made parties to the assessment.
No notice of the assessment proceedings was given to them.
Kanjunni Raja was not one of his legal representatives.
Even if it is considered that the sthanam properties had devolved on the members of the tarwad by succession.
Kanjunni Raja alone could not have represented the entire body of successors numbering 692.
There was no question of any bona fide enquiry by the assessing authority.
It was clearly a case of misunderstanding the legal position.
Further, it does not appear that Kunjunni Raja was assessed as the legal representative of the deceased stani.
He appears to have been assessed as the successor stani liable to pay the debts due from the estate.
Hence the assessment was not made in accordance with law, see Income tax Officer, Kozhikode vs Mrs. Susheela Sadananda and anr.(1).
In this view of the matter it is not necessary for us to consider the other provisions of the Act providing for the assessment and collection of the tax due from a deceased person.
In the result this appeal fails and the same is dismissed with costs.
V.P.S. Appeal dismissed.
| IN-Abs | Section 7(3) of the , by a fiction deems that the Sthanam property stands divided amongst the sthani and the :members of his tarwad, a split second before the death of the sthani.
The members of the tarwad took the property as co owners and not as heirs ,of the deceased sthani.
The purpose of the fiction was to gradually abolish the sthanams and to provide for the devolution of the sthanam properties on the members of sthani 's tarwad except as regards one per capita share which the personal heirs of the sthani are to inherit as the heirs of the sthani.
On May 2, 1958, the Zamorin of Calicut died.
In respect of the agricultural income tax under the Kerala Agricultural Income tax Act, 1950, which he was liable to pay for the period November 1, 1956 to March 31, 1958, the person who took possession of the sthanam property claiming to be the succeeding sthani was assessed to tax as the sursthani After his death, the Agricultural Income tax Officer attempted to collect the tax from the successive senior most members of the Zamorin 's family.
The validity of the assessment was challenged and the High Court held that the liability to pay the tax and penalty imposed was only that of the personal heirs of the person who took possession of the properties immediately after the death of the Zamorin, and that, only to the extent of the assets of that person which had come into their possession.
Thereafter, it was ordered by the Department that, as the entire Sthanam property bad devolved on the 693 members of the tarwad all those persons were liable to pay the tax and penalty, but the order was made without notice to the parties.
When the authorities threatened to proceed against the properties in the hands of the Receivers, who were appointed in the par tition suit in the Zamorin 's family, the Receivers filed a writ petition challenging the right of the Agricultural Income tax Officer to collect the arrears of tax and penalty from out of the properties in their hands.
The High Court quashed the demand holding that the only persons who were liable to pay the tax were the personal heirs of the Zamorin as it was they who had received the income.
Dismissing the appeal to this Court, HELD:Under the law relating to sthanams the sthani was alone entitled to the income of the sthanam properties.
Therefore the income of the sthanam property in the present case, during November 1, 1956 to March 31, 1958 was the exclusive property of the Zamorin who has the sthani.
Hence, he alone was liable to pay the tax.
Under the Agricultural Income tax Act, no charge is created on property in respect of the arrears of agricultural income tax.
Under section 24(1) of the Act the liability to pay 935 the arrears of tax due from the deceased sthani fell on his personal heirs and that, only to the extent they received any of his assets.
The assessment made of the person who took possession of the properties after the Zamorin 's death as the successor sthani was an invalid assessment, because, legally he never became the sthani.
On the death of the Zamorin the sthanam came to an end and the only persons who could have represented the estate of the Zamorin were his personal heirs who, however, were not made parties to the assessment.
[938 F H; 939 A B] Income tax Officer, Kozhikode vs Mrs. Susheela Sadananda, , K. K. Kochuni vs State of Madras, and M. K. B. Menon vs Asstt.
Controller of Estate Duty, C.A. No. 1137/1969 dt. 5 10 1971, referred to.
|
l 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.
section 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).
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 952 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 section 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 sections
(1) and (4) of section 15 of the Act and were not saved by section 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 section 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 section 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 section 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 953 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 section 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 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 section 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 954 even though the disputed contracts were not validly entered into in accordance with the provisions of section 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 section 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 section 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 section 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 section
(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 section 15(4) so far as the transactions in question were concerned.
According to section 20(e) any person who enters into any contract in contravention of the provisions of section 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 section 23 of 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 section 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 vs 955 Bharat Handicrafts (P) Ltd. (1) It was laid down that the prohibition imposed by section 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 section 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 (section, 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 section 10(1).
The other was the set off which can be allowed within the relevant parts of section 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) ; 956 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 section 10 (2) (xv) of the Act of 1922.
One of such cases, is a decision of the Punjab High Court in Raj Woollen Industries vs 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 section 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 section 10(1).
Following observations may be referred to : .lm15 "Profits had to be ascertained according to the accepted principles of commercial accountancy and if section 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 vs 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 section 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 section 10(1).
It is undoubtedly true that profits and gains which are liable to be taxed under (1) (2) 957 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 section 10(1) although it did not fall within section 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 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 section 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 vs 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 section 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 vs 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 section 1 0 ( 1 ) of the Act of (1)34 I.T.R. 10.
(3) (2) 958 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. 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 section 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 959 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 section 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 section 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 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 section 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 section 24(1).
If, however, the business was the same then the loss would be liable to be taken 960 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 section 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.
| IN-Abs | 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, 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 section 15(4) of the Forward Contracts (Regulation) Act.
The assessee claimed that the loss was allowable under section 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 section 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 section 10(1) of the Income tax Act but was entitled to do so under section 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 section 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 section 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 section 10 and section 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 vs Bharat Handicrafts ; , followed.
951 (2)Under Explanation 2 of section 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 section 15(4) of the Forward Contracts (Regulation) Act.
The High Court was therefore in error in considering that set off could be allowed under section 24(1) of the Income tax Act.
[959 D F] (3)While section 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 section 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 vs C.I.T., Simla, , Chandrika Prasad Ram Swarup vs C.I.T., U.P. & C.P., 7 I.T.R. 269, Badridas Daga vs Commissioner of Income tax, 34 I.T.R. 10, Haji Aziz & Abdul Shakhor Bros vs C.I.T., Bombay City, and Allen vs Fraquharson Bros. , referred to.
|
Appeal No. 266 of 1969.
Appeal by special leave from the judgment and order dated August 16, 1967 of the Kerala High Court in Income tax Referred Case No. 44 of 1966.
C. K. Viswanatha Iyer and K. Jayaram, for the appellant.
V. A. Seyid Muhammad and A. G. Pudissery, for the respon dent.
The Judgment of the Court was delivered by Hegde, J.
The appellant, Venugopala Varma Rajah is the present Rajah of the Vengunad Swaroopan in Palghat District, Kerala State.
He is the Karnavan of his Tarwad.
He will be hereinafter referred to as the assessee.
The predecessor of the appellant, as the then Kamavan of the family, submitted the return for the assessment year 1959 60 under the Kerala Agricultural Income tax Act (which will hereinafter be referred to as the Act) showing a gross income of Rs. 1,21,912/ and a net income of Rs. 84,065/60 P.
That 'represented the income from the properties held by him under the family Karar dated May 29, 1909.
Agricultural Income tax Officer overruling the objection of the assessee included in the income returned, the income of the properties which had been put in possession of the junior members of the family under the aforementioned Karar of 1909.
The net income so computed was Rs. 2,32,957/ and a tax of Rs. 1,30,672/35 P. was imposed.
In appeal the Appellate Authority excluded from the taxable income the income of the properties allotted to the "Rani Group" but sustained the addition of the income of the properties allotted for the enjoyment of the male members.
Aggrieved by the order of the Appellate Authority, the assessee took up the matter in second appeal to the Appellate Tribunal of the Agricultural Income tax.
The Tribunal rejected the contention of the assessee and dismissed the appeal.
Thereafter at the instance of the assessee, it stated a case under section 60(1) of the Act and submitted to the High Court for its opinion three questions of law namely L119SupCI/72 1002 "(1) Whether the findings of the Tribunal that the family karar of 1909 does not constitute a diversion of family income to the various allottees thereunder is correct ? (2) Whether the findings of the Tribunal that the provisions of sub section (1) of sec.
9 of the Act are applicable only to cases of diversion of income and not otherwise is correct ? (3) Whether the findings of the Tribunal that the provisions of sub sec.
(1) of sec.
9 of the Act are not applicable to the facts of this case are correct ? Questions Nos. 2 and 3, in our opinion, do not bring out the import of sec.
9 (1) correctly but it is not necessary to go into that aspect as our decision covers the real point in issue.
The Reference originally came up for hearing before a Division Bench but as the questions arising for decision were considered to be of importance, the same was referred to a Fun Bench of three judges.
The High Court by its judgment dated August 16, 1967 answered Question Nos. 1 and 2 against the assessee.
It did not answer the third question as it was of the view that answer to that question was unnecessary in view of its findings on Questions Nos. 1 and 2.
Thereafter this appeal was brought by certificate.
The assessee in this case is the H.U.F. of which the appellant was the Kamavan at the relevant time.
The question for decision is whether the income of the properties put in possession of the male members under the Karar of 1909 continues to be the, income of the family.
At present we are not concerned with the income of the properties put in possession of the "Rani Group" in view of the decision of the Appellate Authority which had not began appealed against.
If the income in dispute continues to be the income of the family then the revenue is justified in bringing the same to tax under the provisions of the Act.
On the other hand if that income has ceased to be the income of the family, then the same cannot be brought to tax in the hands of the assessee.
Therefore, the sole question is whether that income is the income of the family ? Section 9 of the Act provides "9(1) In computing the total agricultural income of an assessee all agricultural income arising to any person by virtue of a settlement or disposition, whether revocable or not, and whether effected before or after 1003 the commencement of this Act, from asset remaining the property of the settlor or disponer shall be deemed to be the agricultural income of the settlor or disponer and all agricultural income arising to any person by virtue of a revocable transfer of asset shall be deemed to be the agricultural income of the transferor Provided that for the purpose of this sub section a settlement, disposition or transfer shall be deemed to be revocable if it contains any provision for the transfer directly or indirectly of the agricultural income or asset to the settlor, disponer or transferor or in any way gives the settlor, disponer or transferor a right to reassume power directly or indirectly over the agricultural income or assets : Provided further that the expression settlement, disposition shall, for the purposes of the sub section include any disposition trust, covenant, agreement or.
arrangement and the expression "settlor or disponer" in relation to a settlement or disposition shall include any person by whom the settlement or disposition was made Provided also that this sub section shall not apply to any agricultural income arising to any person by virtue of a settlement or dispo sition which is not revocable for a period exceeding six years or during the life time of the person and from which agricultural income the settlor or disponer derives no direct or indirect benefit but that the settlor shall be liable to be, assessed on the said agricultural income as and when the power to revoke arises to him.
" A Hindu Undivided Family is a person within the, meaning of s.2(m) of the Act.
We shall now proceed to examine the nature of the Karar entered into in 1909.
The family of the assessee appears to have been one of the premier land holding families in Malabar.
It appears to have had agricultural properties in various places.
To the Karar in question all the then living members ( 12 in number) of the family were parties.
The properties mentioned in 'A ' Sch.
to the Karar were set apart for the maintenance, education and other expenses of the female and male members residing in Kalari Kovilagom which is otherwise known as "Rani Group".
Under the Karar, Karnavan of the Tarwad was to perform the marriage ceremonies of the female members of the Tarwad in accordance with the prevailing conditions and to meet 1004 the expenses thereof.
All other expenses of female, and male members residing in Kalari are to be met from the income of the 'A ' Sch. properties.
The members residing in the Kalari have no right to alienate or encumber the properties allotted to them and all government revenue due in respect of those properties should be paid by them.
Party No. 2, the second senior most member in the family was to be given 7,000 paras of paddy annually for his maintenance and for this purpose paddy lands yielding 3,500 paras of paddy shown in 'B ' Sch. were made over to his possession and Party No. 1, Karnavan of the Tarwad was directed to give to Party No. 2 from Malayalam era 1085 onwards 3,500 paras of paddy.
Further the Karnavan was directed that he should redeem "Karukakode Challa Nilam" and make over the same to Party No. 2, but after making over the same to Party No. 2, be was not to pay 3,500 paras of paddy referred to earlier.
" C" Sch. properties yielding an income of 4,750 paras of paddy were allotted for the enjoyment of Party No. 3.
He was required to maintain himself from out of their income.
Properties shown in 'D ' Sch. were set apart for the mainte nance of Party No. 4.
The land revenue of B, C and D Sch.
properties was required to be paid by the Karnavan of the tarwad.
On the death of Party No. 2 or on his becoming Karnavan of the family, Party No. 3 was to take over the properties allotted for the maintenance of Party No. 2 and Party No. 4 was to take over the properties for the maintenance of Party No. 3.
The Karar prohibited the persons who were in possession of the properties allotted for their enjoyment from alienating or encumbering those properties, and if in contravention of those terms, they alienated any of those properties, the Karnavan was entitled to resume the properties treating the alienation as void.
Clause 18 of the Karar prohibited the parties in possession of the properties from cutting and selling the kuzhikoors or dismantling the buildings in the properties in their possession.
Clause 19 of the Karar prohibited the parties from enhancing the munpattom amounts due to the tenant.
Clause 6 of the Karar provided that all the male members living in the Kalari, on completing the age of 21 should leave the Kalari and thereafter the Kamavan should make arrangements for their maintenance.
Karar does not stipulate what arrangement he should make for their maintenance.
Therefore it follows that he may maintain them either in the Tarwad house or give them maintenance allowance either in the shape of paddy or cash.
It may also be noted that the Karar does not provide as to what would happen if the number of members in the Tarwad substantially increases.
One other thing that has got to 1005 be noted is that the Karar is silent as to what would happen to the properties shown in Schs.
B, C and D after Parties Nos. 2, 3 and 4 die, all of whom, we were told have died.
Hence Kamavan can take possession of them on behalf of the family after their death.
On an examination of the various clauses in the Karar, it is obvious that the joint status of the parties was not disrupted.
The arrangement made in the Karar was only an arrangement for providing maintenance.
No party was given any absolute right in any portion of the family properties.
The properties mentioned in the Karar continued to be the properties of the family.
The arrangement made under the Karar cannot even be considered as a permanent arrangement.
The properties were not divided on the basis of Thavazies.
The liability to maintain the male members, aged more than 21 years excepting Parties Nos. 2, 3 and 4 continued to be that of the Karnavan.
The Karar also does not provide for devolution of the properties allotted to Parties 2 to 4.
Hence those properties must necessarily go back to the possession of the Karnavan after those Members die.
We have earlier seen that the responsibility of performing the marriage ceremonies of the female members continued to be that of the Karnavan.
He is also responsible for the payment of land revenue in respect of the family properties excepting properties included in Sch.
(A) to the Karar.
Under these circumstances, it is not possible to hold that Karar in question embodied an irrevocable settlement.
In the very nature of things, the arrangement made under that Karar must be held to be one which is revocable if there is any substantial change in the circumstances of the family.
For our present purpose it is sufficient if we hold that the properties allotted for the enjoyment of the various members of the family under the Karar continued to be the properties of the family.
In view of section 9(1) of the Act in computing the total agricultural income of the H.U.F., all agricultural income arising from the assets remaining the property of the family should be deemed to be the agricultural income of the family.
We have earlier come to the conclusion that the agrrangement made under the Karar is revocable if there is substantial change in the circumstances of the family.
That arrangement confers benefit on the family inasmuch as it is absolved of the responsibility to maintain its members which, otherwise is its responsibility.
Section 9 (1) of the Act is similar to section 16 (1) (c) of the Indian Income tax Act, 1922.
The latter section has come up for consideration by courts.
The courts have laid down the test that if 1006 the income in dispute is considered as having been applied to discharge an obligation of the assessee, the same is liable to be included in the assessable income of the assessee but if on the other hand the same had been diverted by an overriding charge, then it is not liable to be included in the assessable income of the assessee as it ceased to be his income.
If we apply this test to the facts of the present case, it is clear that the income in dispute continued to be the income of the family.
It was merely applied to discharge an obligation of the family namely the obligation to maintain the junior members of the family.
At first sight some of the decided cases on the subject appear to speak in conflicting voices.
But on a careful examination, it is possible to find out the dividing line.
The earliest decision on the subject is that of the Judicial Committee in Raja Bejoy Singh Dudhuria vs Commissioner of Income tax, Bengal(1).
The, assessee therein succeeded to the family ancestral estate on the death of his father.
Subsequently his step mother brought a suit for maintenance against him in which a consent decree was made directing the assessee to make a monthly payment of a fixed sum to his step mother and declaring that the maintenance was a charge on the ancestral estate in the hands of the assessee.
While computing his income, the assessee claimed that the amounts paid by him to the step mother under the decree should be excluded.
That contention was not accepted by the authorities under the Act as well as by the High Court but the Judicial Committee reversing their decision came to the conclusion that though assessee 's liability under the decree did not fall within any of the exemptions or allowances conceded in sections 7 to 12 of the Indian Income tax Act, yet the sums paid by the assessee to his stepmother were not "income" of the assessed at all; the decree of the court by charging the appellant 's whole resources with a specific payment to his step mother had to that extent diverted his income from him and had directed it to his step mother; to that extent what he received for her was not his income; it was not a case of the application by the appellant of part of his income in a particular way; it was rather the allocation of a sum out of his revenue before it became income in his hands.
This decision at the first sight appears to lend support to the assessee 's contention but in understanding the ratio of the decision, we must bear in mind the fact that in that case the Advocate General had abandoned before the High Court the contention that the assessee and his stepmother were members of undivided family and accepted the Position that the appellant was liable to be assessed as an individual and in no other manner.
In view of this concession, the payment that had to be made to the step mother of the assessee became a (1) 1007 charge on tile estate even before that estate devolved on him.
Therefore what the assessee got was the income of the property minus what he had to pay to his step mother.
The above conclusion of ours receives support from a later decision of the Judicial Committee in P. C. Mullick and anr.
(Executors) vs Commissioner of Income tax, Bengal(1).
Therein a testator had by his will appointed the appellants his executors and had directed them to pay Rs. 10,000/ out of the income of his property on the occasion of his addya sradh for expenses in connection therewith to the person who was entitled to perform the sradh.
He had also directed them to pay out of the income of his property the costs of taking out probate of his will.
During the year of account the executors had paid Rs. 5,537/ for expenses in connection with the addya sradh and a sum of Rs. 1,25,000/ for probate duty.
The question arose whether those payments were deductible in computing the chargeable income.
The Judicial Committee held affirming the judgment of the Calcutta High Court, that the payments made for the sradh expenses and the costs of probate could not be excluded in computing the chargeable income.
Those were payments made out of the income of the estate coming to the hands of the appellants as executors and in pursuance of obligation imposed by the testator.
Their Lordships were of opinion that it was not a case in which a portion of the income was by an overriding title diverted from the person who would otherwise have received it as in Bejoy Singh Dudhuria 's (2) case, but a case in which the executors having received the whole income apply a portion of it in a particular way.
From this judgment of the Judicial Committee, it is dear that the true test is that if the income in question is an income of the assessee, the application of the same being not relevant for determining its assessability, it is assessable in his hands but if it is not his income then it cannot form part of his assessable income.
The scope of section 16 (1) (c) of the Indian Income tax Act, 1922 came up for consideration by this Court in Commissioner of Income tax, Bombay City vs Sitaldas Tirathdas (3) .
Therein the assessee Sitaldas Tirathdas of Bombay had many sources of income, chief among them being property, stocks and shares, bank deposits and share in a firm known as M/s. Sitaldas Tirathdas.
He followed the financial year as his accounting year.
For the assessment years 1953 54 and 1954 55, his total income was respectively computed at Rs. 30,375/ and Rs. 55,160/ .
This computation was not disputed by him but he sought to deduct Rs. 1350/ in the first assessment year and a sum of Rs. 18,000/ (1) (3) (2) 1008 in the second assessment year on the ground that under a decree, he was required to pay these sums as maintenance to his wife and his children.
In support of his claim, he relied on the decision of the Judicial Committee in Bejoy Singh Dudhuria 's case (supra).
This Court rejected that contention observing (at pp.
374 and 375 of the Report) "In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income.
Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact.
There is a difference between an amount which a person is obliged to apply out of his income and amount which by the nature of the obligation cannot be said to be a part of the income of the assessee.
Where by the obligation income is diverted before it reaches the assessee, it is deductible, but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow.
It is the first kind of payment which can truly be excused and not the second.
The second payment is merely an obligation to pay another a portion of one 's own income, which has been received and is since applied.
The first is the case in which the income never reaches the assessee who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable.
" Counsel for the assessee tried to lay stress on the observation of this Court that the income should reach the hands of the assessee before it can be considered as his income.
According to him in the case before us, the income in dispute never reached the hands of the assessee.
We are unable to accept this contention as correct.
The income is the income of the family.
It reached the hands of the family as soon as it reached the hands of any of the members of the family who were entitled to receive it on behalf of the family.
The members of the family received that income on behalf of the family and applied the same in discharge of an obligation of the family.
When this Court spoke of the income reaching the hands of the assessee, it did not refer to any physical act.
It was dealing with a legal concept a receipt in law.
Viewed that way, it is quite clear that the income with which we are concerned in this case was received by the family.
One other decision on the point in issue which we would like to refer is the decision of the Bombay High Court in Commis (1) 1009 sioner of Income tax, Bombay vs Makanji Lalji(1), wherein Beaumont C.J., speaking for the court held that in computing the income of the H.U.F. for purposes of income tax, moneys paid to the widow of a deceased coparcener of the family as maintenance and residence allowance cannot be deducted, even though the amount of such allowance has been fixed by a decree of the Court and has be en made a charge on properties belonging to the family.
It is not necessary to refer to cases which deal with the diversion of the income of the assessee.
The test to be applied for finding out whether there is diversion of income or not is set, out by this Court in Commissioner of Income Tax, Bombay City, V. Ratilal Nathalal(1).
For the reasons mentioned above this appeal fails and the same is dismissed with costs.
V.P.S. Appeal dismissed.
| IN-Abs | The assessee was a Hindu undivided family of which the appellant was the Kamavan.
It possessed agricultural properties.
There was a family settlement among all the members of the family then living.
The settlement allotted some properties to some of the male members but did not provide for their devolution.
Also the joint status of the members was not disrupted and the properties allotted for the enjoyment of the various members of the family continued to be the properties of the family.
The liability to maintain the other male members and the responsibility of performing the marriages of the female members continued to be that of the Karnavan.
He was also responsible for the payment of land revenue in respect of the family properties excepting some items.
On the question whether the income of the properties put in possession of the male members under the settlement continued to be the income of the family and therefore liable to tax under the Kerala Agricultural Income tax Act, 1950, the department, Tribunal and the High Court on reference, held against the assessee.
Dismissing the appeal to this Court, HELD : Section 9(1) of the Act is similar to section 16(1) (c) of the Income tax Act, 1922.
Under the latter section the test is that if the income in dispute is considered as having been applied to discharge an obligation of the assessee, the same is liable to be included in the assessable income of the assessee, but if on the other hand the same bad been diverted by an overriding charge then it is not liable to be so included as it ceases to be the assessee 's income.
[1006 A B) In the present case, the arrangement only provided for maintenance and did not give any absolute right in any portion of the family properties to any one.
It thus conferred benefit on the family inasmuch as it was absolved of the responsibility of maintaining its members.
[106 5 G H] Further, it was not even a permanent arrangement and was revocable if there was any substantial change in the circumstances of the family.
The properties would 'go back to the possession of the Karnavan on the death of the member to whom the property was allotted.
[1005 C, D, E] The members of the family received the income of the various properties allotted to them on behalf of the family, and applied the same in discharge of an obligation of the family.
Therefore, the income reached the hands of the family as soon as it reached the hands of any of its members.
[1008 F H] 1001 Hence, under section 9(1) of the Act, the income should be deemed to be that of the assessee.
[1005 F G] Raja Bejoy Singh Dudhuria vs C.I.T., Bengal, and Mullick vs C.I.T. Bengal, , explained and applied.
C.I.T., Bombay City vs Sitaldas Tirathdas, , followed.
C.I.T., Bombay vs Makanji Lalji, and C.I.T., Bombay City vs Ratilal Nathalal, 25 l.
T.R. 426, referred to.
|
Appeal No. 542 of 1967.
Appeal from the judgment and decree dated January 24, 1964, of the Kerala High Court in Appeal Suit No. 368 of 1959.
Manual T. Paikeday, S.K. Sabharwal and Ganpat Rai, for the appellant.
A. R. Somanatha Iyer and M. R. K. Pillai, for the respondent.
The Judgment of the Court was delivered by Sikri, C.J.
By judgment dated May 26, 1970, this Court (Sikri J., as he then was, and Ray J.) allowed Civil Appeal No. 542 of 1967, set aside the judgment of the High Court and passed a decree in favour of the appellant after modifying the decree passed by the Trial Court.
The respondent subsequently filed Review Petition No. 35 of 1970 for review on the ground that they had failed to 978 bring to the notice of the Court the provisions of Travancore Regulation IX of 1094 and the fact that the loans were.
granted under the above Regulation.
We allowed review on February 1, 1971.
This judgment is, however, in continuation of our earlier judgment dated May 26, 1970, The only new point which needs discussion is the effect of the provisions of Travancore Regulation IX of 1094 on our conclusion on the fourth point in that judgment.
We had inter alia held that the "fourth point raised by the learned counsel for the plaintiff is fatal for the respondent.
" We observed that "the bonds do not give power to the Government to sell the properties other than mentioned in the bond.
The properties mentioned in plaint A schedule items 2 to 5, B Schedule items 1 and 3 to 8, and C schedule items were not given as security under the bond and the Government had no authority to sell them.
It is conceded on behalf of the respondent that all the properties were sold in one lot.
This, in our opinion ' vitiates that the sale of all the properties was void.
" The fourth point raised before us was that "the Government had no authority to attach and sell plaint A schedule items 2 to 5 and B schedule items 1 and 3 to 8 and C schedule items, which were not given as security under the bonds; and if the Government had no authority then the sale of all the properties is void.
" We had while dealing with the third ground also observed that "no other regulation has been brought to our notice which makes dues under this bond to be recoverable as arrears of public or land revenue.
" It now transpires that Regulation IX of 1094 Travancore Land Improvement & Agricultural Loans Regulation provides for recovery of land improvement loans from the borrower as if they were arrears of land revenue due by him.
Section 7 of the above Regulation provides "7.
(1) Subject to such Rules as may be made under Section 10, all loans granted under this Regulation, all interests (if any) chargeable thereon and costs (if any) incurred in making the same shall, when they become due, be recoverable in any of the following modes : (a) from the borrower as if they were arrears of land revenue due by him; (b) from his surety (if any as if they were arrears of land revenue due by him; (c) except as regards the loans referred to in Section 4, out of the land for the benefit of which 979 the loan has been granted as if they were arrears of land revenue due in respect of that land; (d) out of the property comprised in the collateral security according to the procedure for the realisation of land revenue by sale of immovable property other than the land on which the revenue is due : Provided that no proceeding in respect of any land under Clause (c) shall affect any interest in that land which existed before the date of the order granting the loan, other than the interest of the borrower, and of mortgagees of, or persons having cha rges on, that interest, and, where the loan is granted under Section 3 with the consent of another person, the interest of that person, and of mortgagees of, or persons having charges on, that interest.
(2) When any sum due on account of any such interests or costs is paid by a surety or an owner of property comprised in any collateral security, or recovered from a surety or out of any such property, such sum shall on the application of the surety or the owner of such property, be recovered on his behalf from the borrower or out of the land for the benefit of which the loan has been granted, in manner provided in this Section.
" From these provisions it is quite clear that the loans granted under the Regulation, interest and charges, etc. can be recovered in any or all of the four modes described in the section.
They can be recovered from the borrower under clause (a); they can be recovered from recovered from a surety under clause (b); the, land for the benefit of which the loan had been granted can be proceeded. against under clause (c) ; and under clause (d) property comprised in the collateral security can be proceeded against.
The fact that the properties which had been sold were not mentioned in the bond as collateral security or were not expressly hypothecated does not make any difference because the Travancore Revenue Recovery Act 1 of 1068 provides under section 5 that "when Public Revenue due on land may be in arrear, such arrear, together with interest, if any, and costs of process.
may be recovered by the sale of the defaulter 's movable or immovable property or both, in the manner hereinafter provided.
" The learned counsel for the appellant contends that neither the Travancore Revenue Recovery Act 1 of 1068 nor the Land improvement and Agricultural Loans Regulation IX of 1094, and 980 the rules made thereunder, confer any power or jurisdiction on the State Government or its officers to sell through the machinery of the Revenue Recovery Act any other property of the borrower than what he has specifically given by his bond as security for the loan.
It is further contended that the borrower does not incur any personal liability.
unless he has specifically so covenanted in the bond and hence the sale of all the 12 out of the 13 items of land sold one item alone having been a security property under the loan agreement was unauthorised, illegal and void.
We are unable to agree with this contention.
It is not necessary for the borrower to specifically so convenant in his bond that he would be personally liable because section 7 (1 ) (a) of Regulation IX of 1094 makes the borrower personally liable.
This is also made clear by sub section
Under sub section (2), if a surety pays the loan he can request that the money be recovered from the borrower on his behalf.
The learned counsel relied on the decision in Ulahannan Quseph vs Koohitti Kochukiimari(1) where reference was made to an earlier judgment in the Dewan of Travancore vs Eravi Narayanan(2) in which it was held that "though under section 59 of the Revenue Recovery Regulation, moneys due to Government under written agreements and all sums declared by other Regulations to be realisable as arrears of public revenue may be recovered under this Regulation, that section only makes the machinery or procedure prescribed in the Regulation applicable to such cases, and it would not follow that the incidents of a Revenue sale held under section 39 would also attach to sales held under the authority conferred by the provisions of section 59.
" The Court held that the property in the case remained subject to the plaintiff 's prior charge.
We are unable to appreciate how this case assists us on the question whether there is any personal liability of the appellant or not.
The learned counsel also due our attention to Birendra Nath Raha vs Mir Mahabubar Rahaman (3).
In this case it was held that according to the provisions of the Bengal Land Revenue Sales Act, 1868, the properties in question could not be sold because they were neither an estate nor a tenure within section 5 of the Act.
No such question arises in this case but it may be mentioned that at page 336 the Court interprated cl.
(a) of section 7 of the Land Improvement Loans Act to mean that it imposed a personal liability on the borrower.
(1) , 54.
(2) 29 Travancore Law Reports 37.
(3) A.I.R. 1947 Cal.
981 There is, however, authority against the contentions of the appellant.
The Madras High Court observed in Gonjalada Bhojarajappa vs Korlahalli Halappa(1) as follows : "It is clear from section 5, Revenue Recovery Act, that for the recovery of a loan advanced under the Agriculturists Loans Act it is open to the Collector to sell any part of the immovable property belonging to the defaulter, and the remedy is not confined to that particular property in respect of which or for whose improvement the loan had been taken.
" It may be noted that Section 5 of the , provides : "Every loan made in accordance with such rul es, all interest (if any) chargeable thereon, and costs (if any) incurred in making or recovering the same, shall, when they become due, be recoverable from the person to whom the loan was made, or from any person who has become surety for the repayment thereo f, as if they were arrears of land revenue or costs incurred in recovering the same due by the persons to whom the loan was made or by his surety." In interpreting this section, the Madras High Court, in the above mentioned case clearly held that it was open to the Collector to sell any part of the immovable property belonging to the defaulter, and the remedy was not confined to that particular property in respect of which or for whose improvement the loan had been taken.
We may also mention that in Lakshman Venkatesh Naik vs Secretary of State(2), while dealing with section 7 of the , which is in terms similar to sec.
7 of Travancore Regulation IX of 1094, it was observed that "it was therefore open to the Collector to adopt all or any of the four different methods which the Section provides for the recovery of the taqavi arrears.
" In the result the appeal is dismissed.
The parties will bear their own costs throughout.
Our order dated February 1, 1971 awarding Rs. 1,500 to the appellant as thrown away costs shall however, stand.
K.B.N. Appeal dismissed.
(1) A.I.R. 1946 Mad. 226.
(2) A.I.R. (1939) Bom.
| IN-Abs | The loans granted under the Travancore Land Improvement and Agricultural Loans Regulation IX of 1094 together with interest and charges etc.
can be recovered from the borrowers under cl.
(a) of section 7(1) of the Regulation, as arrears of land revenue due by him or in any of the other modes prescribed by cls.
(b), (c) and (d) of the section.
The fact that the properties which had been sold were not mentioned in the bond as collateral security or were not expressly hypothecated does not make any difference, because, Travancore Revenue Recovery Act 1 of 1068 (M.E.) provides under section 5 "when public revenue due on loan may be in arrear, such arrear, together with interest if any and cost and process may be recovered by the sale of the defaulter 's movable or immovable property or both in the manner hereinafter provided." Further, it is not necessary for the borrower to specifically so covenant in his bond that he would be personally liable, because, section 7(1) (a) of the Regulation makes the borrower personally liable.
This is also made clear by sub section
(2) under which if a surety pays the loan he can request that the money be recovered from the borrower on his behalf.
[979 F] Ulahannan Quseph vs Koohitti Kochukumari, 23 Tr.
L. J. 1051, 54 and Birendra Nath Raha vs Mir Mahabubar Rahaman, A.I.R. 1947 Cal.
332, held inapplicable, Gonjalada Bhojarajappa vs Korlahalli Halappa, A.I.R. 1946 Mad. 226, Lakshman Venkatesh Naik vs Secretary of State A.I.R. 1939 Bom.
183 Hand Birendra Nath Raha vs Mir Mahabubar Rahman, A.I.R. 1947 Cal.
332, referred to.
|
Appeal No. 194 of 1967.
Appeal from the judgment and order dated April 27, 1964 of the Madhya Pradesh High Court in Misc.
(First Appeal No.60 of 1960.
section N. Anand and Kailash Mehta, for the appellant.
section section Khanduja and K. C. Dua, for respondent No. 1.
The Judgment of the Court was delivered by Khanna, J.
This is an appeal on a certificate of fitness granted by the Madhya Pradesh High Court against the judgment of that Court whereby that Court in appeal set aside the order of the Additional District Judge, Jabalpur, dismissed the objections against an award and directed that the award be made a rule of the Court.
Naraindas, appellant is the brother of Vallabhdas and Durga prasad, respondents 1 and 2 and son of Smt.
Sukhrani, respondent No. 3.
There were, some arbitration proceedings in 1932 between the appellant and respondents 1 to 3 on one side and Pannalal and Smt.
Dulari Bahu on the other side.
Those proceedings related to partition of property and a claim for maintenance allowance by Dulari Bahu.
An award was given in those proceedings and was made a rule of the Court on 13 12 1933.
According to the award, Dulari Bahu was to get a maintenance allowance of Rs. 12/ per mensem from the appellant and his brothers .
A charge was created of the maintenance allowance on the house which fell as a result of partition to the 30 share of the appellant and respondents 1 to 3.
It was also provided that if the appellant and his brothers failed to pay the monthly allowance, Dulari Bahu would, be entitled to get the house sold.
Out of the sale proceeds, Rs. 3,000/ were to be deposited in a bank on the condition that the, amount of interest would be paid to Dulari Bahu but she would not be entitled to draw the principal amount.
On Dulari Bahu 's death, Rs. 2,000/ out of Rs. 3,000/ would be paid to the appellant and his brothers and Rs. 1,000/ to Pannalal.
The amount of maintenance payable to Dulari Bahu was increased to Rs. 30/ per mensem in a suit brought by her and decided on 8 10 1949.
As the appellant and his brothers did not pay the maintenance allowance to Dulari Bahu, she, in execution of her claim for maintenance allowance, got their houses situated at Jabalpur sold by Court auction.
The houses were purchased for Rs. 22,000/ by Sitaram and Laxminarain, respondents 4 and 5.
After obtaining the sale certificate, respondents 4 and 5 took proceedings for obtaining possession of the houses but they were resisted by respondent No. 1.
The appellant and his brothers further claimed that they had deposited some amount with respondents 4 and 5.
The appellant and his brothers and mother on one side and respondents 4 and 5 on the other side thereupon appointed four arbitrators, as per agreement dated 8th April, 1955.
According to the agreement, respondents 4 and 5 would have no claim in the houses purchased by them in Court auction and the arbitrators would make award in respect of the amounts to be paid by either of the parties as well as regarding the maintenance allowance payable to Durga Bahu and Sukhrani Bahu.
The arbitrators thereafter gave their award dated 20th October, 1956 wherein they made provision for the amounts payable to different parties.
Regarding the amount of maintenance allowance payable to Dulari Bahu, the award provided that Rs. 3,000/ out of the sale proceeds would be withdrawn from the Court and be deposited with Durgaprasad, respondent.
Durgaprasad was made liable to pay the amount of Rs. 30/ per mensem as maintenance allowance to Dulari Bahu.
The award further provided 'that out of the amount of Rs. 3,000/ , Rs. 1,000/ would be paid, to Pannalal and Rs. 2,000/ to Durgaprasad on the death of Dulari Bahu.
Dulari Bahu was also given a right of residence in a room and maintenance allowance of Rs. 30/ payable to her was made, a charge on the house allotted to Durgaprasad.
After the award had been put in Court, objections were filed against the award.
Learned Additional District Judge set aside the award on the ground that the award affected the, rights of 31 Dulari Bahu and she had not been made a party to the arbitration agreement.
The reference to arbitration as well as the award, according to the Additional District Judge did not amount to an adjustment and were,, therefore, invalid.
It was also held that the award was in excess of the arbitration agreement.
Some other grounds were also given but we are not concerned with them.
On appeal, the High Court reversed the decision of the Additional District Judge and held that there was no infirmity in the arbitration proceedings or the award.
In the result, the award was made a rule of the Court.
Mr. Anand, on behalf of the appellant, has argued that Dulari Bahu was an interested party in the dispute relating to arbitration and as she did not join the arbitration agreement, the reference to arbitration and the subsequent award should be held to be invalid.
There is, in our opinion, no force in this contention.
The dispute which was referred to the arbitrators related to the houses in question which had been sold in Court auction.
The, interest of Dulari Bahu pertained only to the recovery of her maintenance allowance.
According to the earlier award which Dulari Bahu sought to enforce, she was to get the maintenance allowance from an amount of Rs. 3,000/ which was to be kept in deposit.
The rights of Dulari Bahu in this respect remained in tact and were in no way affected by the award dated 20th October, 1956.
The maintenance allowance payable to her was also kept as a charge over the immovable property.
The fact that Dulari Bahu did not sign the arbitration agreement as such would not vitiate the arbitration proceedings.
The present is not a case wherein the arbitration proceedings are sought to be assailed by Dulari Bahu.
On the contrary, it is the admitted case of the parties that Dulari Bahu did not raise any objection to the arbitration proceedings or the subsequent award on the ground that her rights had been prejudicially affected.
This apart, we find that Dulari Bahu, according to the learned counsel, died about three years ago.
In the circumstances, it would be purely academic to dilate upon the question as to whether the rights of Dulari Bahu were prejudicially affected by the award in question.
It is next argued by Mr. Anand that as the reference to arbitrators was made out of Court and as all the parties to the arbitration agreement did not sign the award in token of their acceptance, the same could not be made a rule of the Court.
There is no substance, in our opinion, in the above contention.
It is always open to parties to refer a dispute to arbitration without the intervention of the Court.
In case, a suit is pending in respect of the subject matter of the dispute, there can be no valid reference during the pendency of the suit, to arbitration without 32 the order of the Court.
The underlying reason for that is to avoid conflict of jurisdiction by both the Court and the arbitrator dealing concurrently with the same dispute.
An award given or a reference during the pendency of a suit relating to dispute which is the subject matter of reference without obtaining the order of the Court cannot be enforced.
The only exception to this rule is provided by the proviso to section 47 of the (Act 10 of 1940) according to which "an arbitration award otherwise obtained may with the consent of all the parties interested be taken into consideration as a compromise or adjustment of a suit by any Court before which the suit is pending".
In such an event, the award is enforced as a compromise or adjsutment of the suit because all the interested parties give their consent to the award.
Where,, however, as in the present case, no suit is pending with respect to the subject matter of dispute and the parties choose to refer a dispute to arbitrators, it is not essential that the parties should signify their consent to the award before the same can be enforced.
Any other view would run counter to the entire scheme and object of arbitration for the settlement of disputes according to which, agreement and consent are imperative only at the stage of referring the dispute to arbitrators but not at the stage of the award.
The decision of Bachawat, J. (as he then was) in Jugaldas Demodar Modi & Co. vs Pursottam Umedbhai & Co.(1) relied upon by the appel lant has no bearing as the said case dealt with an arbitration reference during the pendency of a suit.
We are also not impressed by the contention raised on behalf of the appellant that because there had been earlier litigation about the house allotted to the appellant and his brothers, the same could not be, the subject matter of arbitration dispute.
A dispute is referred to arbitration because the parties agreed to such a reference and the mere fact that the property which is the subject matter of dispute was also the subject matter of an earlier litigation, cannot prevent the parties to refer the dispute about that property to arbitration.
What is referred to arbitrators in such a case is the fresh dispute and although the finding of the Court in the previous litigation may have a bearing on the dispute referred to the arbitrators, it would not stand in the way of reference of the fresh dispute to the arbitrators.
It is not the case of the appellant before us that the precise dispute which was the subject matter of the award dated 20th October, 1956 had been adjudicated upon earlier in a civil Court.
The appeal consequently fails and is dismissed with costs.
G.C. Appeal dismissed.
| IN-Abs | By an arbitration award given in 1933 D was given a maintenance allowance enforceable against property allotted to the appellant and his brothers and mother.
Since the allowance was not paid D secured a decree for the sale of houses belonging to the appellant and his brothers.
The property was purchased by respondents 4 and 5 who after obtaining sale certificate from the court sought to obtain possession of the same.
On, 8th April 1955 the appellant his brothers and mother entered into an arbitration agreement with respondents 4 and 5.
According to, the agreement respondents 4 and 5 gave up their claim to the houses purchased by them in court auction and the arbitrators were to make award in respect of the amounts to be paid by either of the parties as well as the maintenance allowance payable to D and to the appellant 's mother.
The arbitrators by their award dated 20th October 1956 made provision for the amounts payable to different parties.
The also made on for the payment of allowance to D as well as for her residence.
provision the award had been put in court objections were filed against it.
The Additional District Judge, set aside the award inter alia on the ground that the award affected the rights of D and she had not been made a party to the agreement.
The High Court reversed the judgment of the Additional District Judge.
In appeal by certificate the appellant contended; (i) that the award was invalid because D was an interested party in the dispute relating to arbitration and she had not joined the arbitration agreement; (ii) that the reference to arbitrators was made out of court and as all the parties to the arbitration agreement did not sign the award in token of their acceptance, the same could not be made a rule of court; (iii) that because there had been earlier litigation about the house allotted to the appellant and his brothers, the same could not be the subject matter of arbitration dispute, HELD : (i) The rights of D remained intact and were in no way affected by the award dated 20th October 1956.
The maintenance allowance payable to her was also kept as a charge over the immovable property.
The fact that D did not sign the arbitration agreement as such would not vitiate the arbitration proceedings. 'She did not raise any objection to the arbitration proceedings or the subsequent award.
Ac cording to counsel she died three years ago.
In the circumstances the question whether her rights were prejudicially affected by the award was purely academic [31 E] (ii) An award given on a reference during the pendency of a suit relating to a dispute which is the subject matter of reference without obtaining the order of the Court cannot be enforced.
The underlying reason for the same is to avoid conflict of jurisdiction.
However according to section 47 of the , an arbitration award otherwise obtained may with the consent of all the parties interested be taken into consideration 29 as a compromise or adjustment of a suit by any court before which the suit is pending. ' In such an event, the Award is enforced as a compromise or adjustment of the suit because all the interested parties give their consent to the award.
When however, as in the present case, no suit is pending with respect to the subject matter of dispute and the parties choose to refer a dispute to the arbitrators, it is not essential that the parties should signify their consent to the award before the same can be enforced.
Agreement and consent are imperative only at the stage of referring the dispute to arbitrators but not at the stage of the award.
[31H 32D].
Jagaldas Damodar Modi & Co. vs Pursottam Umedbhai & Co., A.I.R. 1953 690, held in applicable.
(iii) A dispute is referred to arbitration because the parties agree to such a reference and the mere fact that the property which is the subject matter of dispute was also the subject matter of earlier litigation, cannot prevent the parties to refer the dispute about that property to arbitration.
What is.
referred to arbitrators in such a case is the fresh dispute and although the finding of the Court in the previous litigation may have a bearing on the dispute referred to the arbitrators, it would not stand in the way of reference of the fresh dispute to the arbitrators.
[32 F]
|
roviso will take in more than one residential house, if the assessee is able to establish that all the houses are occupied by him for purposes of his own residence.
[15A B] & CIVIL APPELLATE, JURISDICTION: Civil Appeals Nos. 1488 to 1491 of 1969.
Appeals from the judgment and order dated August 1, 1968 of the Punjab and Haryana High Court in Income tax reference No. 20 of 1964.
K. C. Puri, section K. Mehta and K. L. Mehta, for the appellant (in all the appeals).
B. Sen, P. L. Juneja and R. N. Sachthey, for the respondent (in all the appeals).
The Judgment of the Court was delivered by Vaidialingam, J.
These four appeals, on certificate, are directed by the assessee against the judgment and order dated August 1, 1968 of the High Court of Punjab and Haryana at Chandigarh in Income tax Reference No. 20 of 1964.
Two questions of law were referred bY the Income tax Appellate Tribunal, Delhi Bench 'C ' to the high Court.
, Both 3 the questions were answered in favour of the Revenue and against the assessee.
The appellant assessee was the Ruler of Faridkot and he was assessed in the status of an individual for the assessment years 1957 58 to 1960 61, corresponding to the accounting years being the period ending 12 4 1957, 12 4 1958, 12 4 1959 and 12 4 1960 respectively.
The assessee had executed a registered trust deed dated April 1, 1955 marked Annexure "A" whereunder he had transferred the United Kingdom Government 's Securities of the face value of pound 1,80,000 to the Grindlays Bank, London, as trustee, to be held in trust in accordance with the terms and conditions set out therein.
As there is no dispute that these Government securities were transferred to the Bank and also regarding the provisions contained therein for distribution of the income accruing from the securities, it is not necessary for us to set out the various clauses in the trust deed.
By clause (2) the trustee was directed to divide the trust property into two equal parts.
By clause (3) the trustee, after meeting all outstanding and contingent liabilities, was required to pay the balance income to all or any of the children of the Settlor other than his eldest son, living at the respective dates of payment in equal shares.
Similarly, under clause (4) the trustee after meeting all outstanding and contingent liabilities, was directed to pay the balance income to the eldest son of the Settlor Tikka Harmohinder Singh of Faridkot, during his life.
Clauses 3(b) and 4(c) provided that at the termination of the period of distribution, the Bank shall stand possessed of the capital and income of both parts upon trust for the person who, at the date of such termination, shall be the successor of the Settlor according to the Rule of Primogeniture applicable to the dynasty of the Settlor absolutely.
Clause (5) defined the period of distribution to be the life of the Settlor and the children of the Settlor living at the date thereof and the lives and life of the survivors and survivor of them and the period of 21 years after the death of such survivor.
The assessee owned a house known as Faridkot House situated at Lytton Road, New Delhi, during the assessment year 1960 61.
During the same period, the assessee also owned a second property known as Faridkot House, situated in Diplomatic Enclave, New Delhi.
Rajkumari Maheepinder Kaur, minor daughter of the assessee received from the trustee as per the provisions of the trust deed dated April 1, 1955, Rs. 15,570/ , Rs. 15,570/ .
Rs. 12,446/ and Rs. 10,310/ during the relevant accounting years, corresponding to the assessment years 1957 58 to 1960 61.
In the assessment of the assessee as an individual during the ' said 4 assessment years, the Income tax Officer District 'A ' Ward, Bhatinda, notwithstanding the objections raised by the assessee, included the amounts received by the minor daughter in the total assessable income of the appellant for each of the assessment years under section 16 (3) (b) of the Indian Income tax Act, 1922 (hereinafter to be referred to as the Act).
The order of assessment for the assessment year 1957 58 was passed on April 27, 1959 and for the other three assessment years on March 23, 1961.
On appeal by the assessee, the Appellate Assistant Commis sioner of Income tax, Rohtak Range, confirmed the orders of the Income tax Officer.
The order of the Appellate Assistant Commissioner for the assessment year 1957 58 is dated July 25, 1961 and for the remaining years, the orders were passed on November 4, 1961.
The Appellate Assistant Commissioner accepted the contention of the appellant that section 16(1)(c) of the Act has no application, but agreed with the view of the Income tax Officer that the income received by the minor daughter is to be included in the total taxable income of the assessee under section 16(3) (b).
The assessee carried the matter in further appeal before the Income tax Appellate Tribunal, Delhi Bench 'C ', in Income tax Appeals Nos.
6075, and 8423 8425, all of 1961 62, regarding the assessment years 1957 58 to 1960 61 respectively.
The Appellate Tribunal agreed with the view of the lncome tax Officer and the Appellate Assistant Commissioner that the inclusion of the minor daughter 's income under section 16(3)(b) was correct.
The order of the Appellate Tribunal for all the assessment years is dated August 7, 1962, though a separate order has been passed in respect of the assessment year 1960 61.
From the narration of the above facts, it will be seen that the Income tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal have all held that the income received by the minor daughter of the assessee under the trust deed has to be included under section 16(3) (b) of the Act in 'the total taxable income of the assessee for each of the assessment years.
We have earlier referred to the fact that the appellant owned two houses in New Delhi, both known as Faridkot House, one at Lytton Road and the other in Diplomatic Enrlave, during the accounting year ending April 12, 1960.
The assessee claimed reduction of the annual letting value in respect of both these houses on the ground that they were, used as his residence.
This claim regarding the houses arises only in the assessment year 1960 61, The Income tax Officer allowed the reduction in the, annual letting value only in respect of one house at Lytton Road.
5 There is no discussion in the order as to, why the claim for the second house at Diplomatic Enclave was rejected.
The Appellate Assistant Commissioner held that as deduction has already been given by the Income tax Officer in respect of the Faridkot House in Lytton Road, the assessee is not entitled to a further allowance in respect of the house at Diplomatic Enclave.
It is the further view of the Appellate Assistant Commissioner that under section 9 (2) of the Act, the assessee is not entitled to a further allowance in respect of the second house and that both the houses occupied for residential purposes have to be treated as one unit.
On this ground he rejected the claim of the assessee regarding the allowance in respect of the Faridkot House in Diplomatic Enclave.
The Appellate Tribunal, when dealing with 'the appeal relating to the assessment year 1960 61 dealt with this claim of the assessee a little more elaborately.
After a reference to the provisions of section 9 (2) of the Act, the Appellate Tribunal held that there is nothing in the said provision which entitles the assessee to claim benefit in respect of more residential houses than one.
But the Appellate Tribunal was prepared to accept the position that the second proviso to section 9(2) indicates that the property referred to in the first proviso may consist of more than one residential houses, but that by itself does not lead to the conclusion that the benefit under the first proviso can be claimed in respect of more than one property.
In this view, the Appellate Tribunal also agreed with the rejection, by the two officers, of the claim made by the appellant in respect of the house situated in Diplomatic Enclave.
The assessee filed four applications before the Appellate Tribunal praying to refer to the High Court, with a statement of case, two questions of law one relating to the inclusion in the four assessment years of the income received by the minor daughter in the total income of the assessee; and the other relating to the rejection by the Revenue, of the assessee 's claim for allowance for the assessment year 1960 61 in respect of the Faridkot House in Diplomatic Enclave.
The Income tax Appellate Tribunal ' accordingly, referred, for the opinion of the High Court the following two questions of law : "(1) Whether on the facts and in the circums tances of the case, the amounts of Rs. 15,570, 15,570, 12,446 and 10,310 received by the assessee 's minor daughter Rajkumari Maheepinder Kaur in the assessment years 1957 58, 1958 59, 1959 60 and 1960 61 under the terms of the Trust Deed dated the 1st April, 1955 have been rightly included in the hands of the assessee under Section 16 (3) (b) of the Indian Income tax Act, 1922 ? 6 (2) Whether on the facts and in the circums tances of the case the assessee is entitled to the reduction of the annual letting value of the Faridkot House in Diplomatic Enclave New Delhi, by Rs. 1,800/ under the first proviso to Section 9(2) of the Income tax Act, 1922 notwithstanding the fact that the annual letting value of the Faridkot House situated at Lytton Road, New Delhi, is already reduced by Rs. 1,800/ ?" The High Court, by its judgment and order under attack, has answered the first question in the affirmative and the second in the negative.
The answers in respect of both the questions given by the High Court are against the assessee.
Before the High Court, the appellant appears to have urged that section 16 (1 ) (c) of the Act is the only provision that could apply in the present case of settlement and that, as such, the amounts received by the minor daughter of the assessee under the trust deed could not be added to the income of the assessee under section 16 (3) (b) of the Act.
The High Court rejected this contention of the assessee.
The assessee further contended before the High Court that section 16 (3) (b)will apply only if assets had been transferred for the benefit of the wife or minor child and that as the wife or minor child was not entitled to the corpus of the trust property, that provision does not apply.
This contention was also rejected by the High Court.
The further contention of the assessee was that to attract section 1 6 ( 3 ) (b) the transfer should be one exclusively for the benefit of the wife or minor child and that the said provision will have no application when the benefit that is sought to be conferred, takes in as in the case of the present trust deed other persons like the major children.
This contention again was rejected by the High Court.
The last contention on this aspect that was urged appears to have been that, in any event, under section 16 (3) (b) what could be included is only so much of the income of any person or association of persons to whom the property had been transferred for the benefit of the wife or the minor child and not the income received by the minor child.
This contention again was not accepted by the High Court.
The High Court ultimately held that the amounts received by the minor daughter of the assessee under the trust deed have been rightly included under section 16 (3) (b) of the Act in the total assessable income of the appellant in all the four assessment years.
Regarding the deduction claimed during the assessment year 1960 61 in respect of the house situated at Diplomatic Enclave, the High Court is of the view that the assessee can claim such a benefit by way of allowance under section 9 (2) only in respect of one house.
Such allowance having been given by the Revenue in 7 respect of the residential house at Lytton Road, New Delhi, it is the view of the High Court that the appellant 's claim with regard to the house at Diplomatic Enclave has been rightly rejected by the Revenue.
Before we refer to the contentions of the counsel for the assessee and the Revenue, it is necessary to refer to the relevant provisions of the Act in respect of the two points arising for consideration, one relating to the amounts received by the minor daughter and the other relating to an allowance in respect of a second residential house.
Though the relevant provision in respect of the 1st aspect is only clause (b) of section 16(3), it is desirable to quote all the provisions of section 16(3) which run as follows : section 16.
(3) 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) from the membership of the wife in a firm of which her husband is a partner; (ii) from the admission of the minor to the benefits of partnership in 'a firm of which such individual is a partner; (iii) from assets transferred directly or in directly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart; or (iv) from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise than for adequate consideration; and (b) so much of the income, of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor child or both.
" 8 The relevant provisions bearing on the claim in respect of the house in Diplomatic Enclave, are the to provisos in section 9(2).
Section 9(2) with the relevant two provisos is as follows "9(2) For the purposes of this section, the annual value of any property shall be deemed to be the sum for which the property might reasonably be excepted to, let from year to year.
Provided that, where the property is in the occupation of the owner for the purposes of his own residence, the annual value thereof shall first be determined in the same manner as if the property had been let to a tenant and the amount so determined shall be reduced by one half of it or eighteen hundred rupees, whichever is less, so however that where the sum so reduced exceeds ten per cent of the total income of the owner the annual value of the property shall be deemed to be ten per cent of such total income.
Provided further that where the property referred to in the preceding proviso consists of one residential house only and it cannot actually be occupied by the owner by reason of the fact that owing to his employment, business, profession or vocation carried on at any other.
place, he has to reside at that other place in a building not belonging to him and the residential house is not actually let and no other benefit therefrom is derived by the owner, the income of such property under this section shall, if the property was not occupied during the whole of the previous year be taken to be nil and if it was occupied for a part of the previous year be computed proportionately, so however that the income in respect of such property shall in no case be a loss.
" We will first deal with the point covered by question No. 1 regarding the inclusion in the relevant assessment years in the taxable income of the appellant, the amounts received by his minor daughter under the trust deed dated April 1, 1955.
Though several contentions have been raised before the High Court and the Appellate Tribunal, Mr. K. C. Puri, learned counsel for the appellant, has raised before us only two contentions, namely, (1) the assets of pound 1,80,000 covered by the trust deed not having been transferred to the wife or minor daughter in question, but to the Grindlays Bank, as trustee, section 16(3) (b) of the Act has no application; and (2) even if section 16(3) (b) of the Act applies, what is to be included in computing the total income of the assessee is not the income that has been received by the minor 9 daughter under the trust deed, but only so much of the income of any person or association of persons (in this case the trustee) to whom the assets have been transferred for the benefit of the wife or the minor child.
The counsel referred to the decisions of this Court in Commissioner of Income tax, Bombay vs Manilal Dhanji(1); Commissioner of Income tax, Gujarat vs Keshavlal Lallubhai Patel(2) and Commissioner of Income. tax, West Bengal III vs Prem Bhai Parekh and others(3) and urged that section 16(3) of the Act created an artificial income and had to be construed strictly.
That is, according to the learned counsel, the wordings of section 16 (3) (b) have to be construed strictly and literally.
On the basis of such a strict and literal construction, the counsel urged that the two propositions urged by him earlier are ample borne out by section 16(3) (b).
It is no doubt true that the above decisions lay down the proposition that section 16 (3) of the Act creates an artificial income and it must receive a strict construction.
We may also point out that the first decision, referred to above dealt with a case under section 16(3) (b) and has specifically laid down the proposition that the said provision creates an artificial liability to tax and must be strictly construed.
But in construing section 16(3)(b) the Courts cannot ignore the clear and unambiguous expressions contained therein and all those expressions must receive a proper interpretation.
Taking the first contention of Mr. Puri, according to him the corpus of the property covered by the trust (in this case the Government Securities) should have been transferred for the benefit of the wife or the minor child.
The minor daughter, in this case, was not entitled to the corpus of the trust property, namely, the securities.
We understood Mr. Puri to urge that section 16 (3) (b) of the Act will apply only to those cases where ultimately the corpus of the trust property is also transferred to the wife or the minor child, as the case may be.
We have no hesitation in rejecting this contention of Mr. Puri.
The provisions of section 16(3)(b) are very clear and the only requirement, so far as this aspect is concerned, is that the assets must be transferred to any person or association of persons and that transfer of assets must be for the benefit of the wife or the minor child or both.
In this connection it is pertinent to note the wordings of section 16 (3) (b)(iii) and section 16 (3) (a) (iv).
The former provision clearly refers to assets transferred directly or indirectly to the wife by the husband and the latter provision refers to assets transferred directly or indirectly to the minor child not being a married daughter.
But in cl.
(b) of section 16(3) the transfer of assets is not to the wife or the minor child or both but to (1) (2) (3) 2 L256Sup CI/72 10 any person or association of persons.
Therefore, it is clear that when the legislature intended to provide for a direct transfer of assets either to the wife or to the minor child, it has used the expressions as are found in section 16(3) (a) (iii) and section 16(3) (a) (iv).
The different phraseology used in cl.
(b) of section 16(3) makes it clear that the transfer of assets need not be to the wife or the minor child.
Nor does the said clause require that the corpus of the property, so transferred to any person or association of persons, should ultimately vest in the wife or the minor child.
Mr. Puri quite frankly admitted that there is no decision to support his contention.
On the other hand, we find that there is a decision of the Bombay High Court in Commissioner of Income tax, Bombay vs Sir Mahomed Yusuf Ismail(1) which is against the contention advanced by Mr. Puri.
In that decision one of the questions that arose for consideration was whether the income received by the wife of the assessee under a deed of wakf can be included in the assessment of the husband under section 16(3) (b).
The assessee therein had executed a deed of wakf.
Under the terms of the said deed, the assessee 's wife was to get 21% of the income accruing from the property which was the subject of the wakf deed.
It was contended that as no part of the assets or the corpus had been transferred to the wife, the income received by the latter cannot be included in the taxable income of her husband, the assessee.
A Division Bench of the Bombay High Court rejected this contention and held that as assets had been transferred, under the wakf deed, to the trustees and as the transfer was beneficial to the wife and that as she had, got 21 % of the income from the properties, section 16 (3) (b) of the Act was properly applied by the Revenue.
We are in agreement with this decision of the Bombay High Court and as such the first contention of Mr. Puri will have to be rejected.
Coming to the second contention, according to Mr. Puri under section 16 (3) (b) of the Act, only so much of the income of the person or association of persons to whom the property has been transferred for the benefit of the wife or the minor child and not the income received by the minor that can be included in the taxable income of the assessee.
According to the counsel, what has been done by the Revenue is to include in the assessment Of the appellant 's the income received by the minor daughter in the relevant accounting years.
That procedure is opposed to section 16 (3) (b) of the Act.
Here again, the contention of the learned counsel cannot be accepted.
If this contention is accepted, the position will be that the Revenue might have included the whole of the income arising from the assets transferred to the Grindlays Bank and not merely that portion of the income which has been received by the minor daughter.
Such a construction (1) 11 in totally opposed to the clear provisions of the scheme of section 16 (3) and in particular the clear wording of cl.
(b) of section 16(3) of the Act.
From a plain reading of section 16(3) (b) it is clear that what is to be included, in computing the total income of the assessee, is that part of the income of the trust which is received for the benefit in this case of the minor daughter.
It is the share income which has accrued to or has been received by the minor daughter under the trust deed, in the relevant accounting year, that has to be included in the total income of her father, the assessee.
The expression "so much of the income" occurring in this clause also makes it clear that the said provision relates to the share income of the minor daughter, in this case, and not that of the Grindlays Bank, the trustee.
Section 16 sub section
(3) of the Act provides specifically for assets transferred to the wife or the minor child.
The income from assets transferred to the wife is still to be included in the total income of the husband, if the assets have been transferred directly or indirectly to the wife by the husband other wise than ,for adequate consideration [vide sub section (3) (a) (iii)].
Again so much of the income of any person or association of persons, as arises from assets transferred, otherwise than for adequate con sideration, to the person or association, by the husband, for the benefit of his wife has to be included in the husband 's taxable income.
, [vide sub section (3) (b)].
The same sub section (3) of section 16 of the Act provides for the income, from the assets transferred by a father to his minor child, to be included in the total income of the father, if the assets have been transferred, directly or indirectly to the minor child, not being a married daughter, otherwise than for adequate consideration [vide sub section (3) (a)] (iv) 1.
Again, so much of the income of any person or association of persons, as arises from assets transferred, otherwise than for adequate consideration, to the person or association by the father, for the benefit of his minor child has to be included in the father 's taxable income.
[vide sub section (3) (b)].
The above is the scheme of section 1 6 (3) of the Act.
It must also be noted that under section 16(3) (a) sub clauses (iii) and (iv) and also clause (b) of sub section 3, the transfer contemplated thereunder should have been "otherwise than for adequate consideration.
" The words "adequate consideration" denote consideration, other than mere love and affection.
There is no controversy, in the case before us, that the transfer, by way of trust, is one "otherwise than for adequate consideration.
" It is true that when assets are transferred to the trustees, as in the case before us, there was income in the hands of the trustees and the latter were liable to pay tax thereon.
That, however, is not the question before us.
The question before us is whether the income, representing the share 12 of the minor daughter, which has accrued in the, hands of the trustee, or was received by the said minor could be included in the total income of the appellant under cl.
(b) of sub section
(3) of section 1 6.
For a proper appreciation of cl.
(b) of section 16(3), in our opinion, that clause must be read in the context of the scheme of s.16; and the two clauses (a) and (b) of sub section (3) of section 16, must be read together.
So read, the reasonable interpretation to be placed on cl.
(b) appears to be that the scheme of the section requires that an assessee can only be taxed, on the income, from a trust fund created for the benefit of his wife or minor child or both, provided that in the year of account, the wife or the minor child, or both, have derived some benefit under the trust deed.
That is, the wife or the minor child, either has received the income or the income has accrued to them or they have a beneficial interest, in the income in the relevant year of account.
From this it follows, that if no income accrues or benefit is derived and there is no income at all, so far as the minor child, in the case before us, is concerned, then it is not consistent with the scheme of section 16, that the income or the benefit which is nonexistent, so far as the minor child is concerned, is to be included in the income of his or her father.
In the case before us, there is no controversy that the minor daughter has received the income in all the relevant accounting years.
Mr. B. Sen, learned counsel for the Revenue, has drawn our attention to the two decisions of this Court, wherein it has been held that section 16 (3) (b) of the Act applies, to cases of trust, like the one before, us, and that under such circumstances, what is to be included in the total income of the assessee is the share of the income that has accrued to or has been received by the assessee 's wife or minor child, or both.
The first decision is Tulsidas Kilachand and others vs Commissioner of Income tax, Bombay City I(1).
In this case A, the husband, had created a trust in respect of certain shares owned by him in two companies.
Under the said trust the wife of A was to receive the income.
A sum of Rs. 30,404/ was received by the wife, as dividend income, in respect of the shares, regarding which a trust had been created.
This amount was added to the taxable income of the husband under section 16 (3) (b).
This Court held that as the transfer of the shares by way of trust, had been effected and as there was a provision for payment of the income accruing from the shares to the wife, and as the latter had received the dividend income, during the relevant accounting year, that amount had been rightly included by the Revenue in the taxable income of the husband.
(1) 13 This Court further held that such a case falls squarely within the special rules concerning the wife and the minor child as laid down in section 16 (3) (b) of the Act.
The second decision referred to by Mr. Sen is Commissioner 'Of Income tax, Bombay vs Manilal Dhanji(1).
In that decision the assessee had created a trust in 1953 in respect of a, sum of Rs. 25,000/ and the trustees had also been nominated for the purpose of administration of the trust.
Under the trust deed, it was provided that the interest accruing on the, trust amount of Rs. 25,000/ was to be accumulated and added to the corpus Of the trust and that a minor daughter of the assessee was to receive the income from the corpus increased by addition of interest, every year, on her attaining the age of 18 years.
It was further provided that after attaining the age of 18 years, the daughter was to receive the income during her life time; and after her death the corpus was to go to certain other persons.
The daughter, in that case, was to attain the age of 18 years only on February 1, 1959.
In the accounting year 1953 54, a sum of Rs. 410/ was received as interest income on the trust fund and it was added by the trustees, in accordance with the provisions of the trust deed, to the corpus.
The Income tax Authorities.
however, included this interest income of Rs. 410/ in the total income of the father, the assessee under section 16 (3) (b) of the Act.
The High Court held that on a true construction of cl.
(b) of section 16(3) of the Act, as no benefit has accrued to the minor daughter in the year of account, the sum of Rs. 410/ could not be included in the total income of the assessee.
This Court agreed with the view of the High Court.
It is clear from the above two decisions that when a trust is created, though the income is, in the hands of the trustees, the underlying principle of cl.
(b) of section 16(3) is that so much of the income as represents the shares of the wife or the minor child, as the case may be, is to be included in computing the total income of the husband or the father.
This is consistent with the ,scheme of section 16 and in particular sub section (3) thereof, which is intended to foil an individual 's attempt to avoid or reduce the extent of tax, by transferring his assets to his wife or minor child.
From the above discussion it follows, that the second contention ,of Mr. Puri cannot also be accepted.
Now coming to the second question, referred to the High Court, which relates to the reduction claimed by the assessee of the annual letting value of Faridkot House in Diplomatic Enclave, New Delhi, we have already pointed out that the said claim has been rejected by the Revenue, as well as by the High (1) 14 Court.
It is admitted by the Revenue as well as the assessee that the claim of the appellant in this regard in respect of the residential house in Lytton Road, New Delhi, has been allowed by the Revenue.
The question regarding the house in Diplomatic Enclave arises only for the assessment year 1960 61.
The Income tax Officer has not given any reason for rejecting the claim of the assessee.
The Appellate Assistant Commissioner has held that as the appellant has been granted the usual allowance in respect of Faridkot House in Lytton Road, he is not entitled to any further allowance in respect of another house.
In fact the officer has said that both the houses have to be treated as one unit for purposes of computing the annual letting value.
But there is one finding, in the order of the Appellate Assistant Commissioner, which is to be noted, namely, that the houses in Lytton Road and Diplomatic Enclave are used and occupied by the assessee for residential purposes.
The Income tax Appellate Tribunal has not differed from the finding of the Appellate Assistant Commissioner that both the houses are used and occupied for residential purposes by the assessee.
But the Appellate Tribunal has also ' taken the view that the assessee is entitled to the necessary allowance only in respect of one residential house, under the first proviso to section 9(2) and that the second proviso thereto does not help the assessee.
According to the Appellate Tribunal, the second proviso to section 9 (2) of the Act will take in cases where the property, in the occupation of an assessee for purposes of residence, consists of more than one residential house, but so situated as to form one property.
The Appellate Tribunal has given an illustration of a palace or a bungalow with various out houses.
In such a case, according to the Appellate Tribunal, all the buildings situated in one compound are to be treated 'Collectively, as one property, for the purpose of the first proviso.
In this view, the Appellate Tribunal also rejected the claim of the assessee in respect of the house in Diplomatic Enclave.
The High Court has very summarily rejected the claim of the appellant in this regard.
After referring to the contention of the assessee that the second proviso to section 9 (2) clearly indicates that the first proviso contemplates an assessee having more than one residential houses, it has held that the said contention cannot be accepted.
Mr. K. C. Puri, learned counsel for 'the appellant has urged that the finding of the Appellate Assistant Commissioner that the two houses in Lytton Road and Diplomatic Enclave are used for residential purposes by the assessee, has not been departed from by either the Appellate Tribunal or the High Court.
On this basis, Mr. Puri urged that a reading of the first and second provisos, 15 to section 9 (2) of the Act clearly shows that the allowance, to an assessee, is not confined only to one residential house, as held by the Revenue and the High Court.
A reading of the second proviso to sub section (2) clearly, in our opinion, indicates that the first proviso will take in more than one residential houses, if the assessee is able to establish that all the houses are occupied by him for purposes of his own residence.
So far as this is concerned, we have already pointed out that the finding is in favour of the assessee.
Mr. B. Sen, learned counsel for the Revenue, found conside rable difficulty in supporting the order of the High Court, answering question No. 2 in the negative and against the appellant.
But he attempted to argue that the question, whether the assessee is actually occupying the house in Diplomatic Enclave also for, purposes of his own residence, has not been investigated.
We are not inclined to accept this contention of Mr. Sen.
We have already referred to the finding of the Appellate, Assistant Commissioner to the effect that both the houses one in Lytton Road and the other in Diplomatic Enclave are used and occupied by the appellant for purposes of his own residence.
This finding has not been disturbed either by the Appellate Tribunal or by the High Court.
If so, on a proper construction of the first proviso to sub section (2) read with its second proviso clearly supports the contention of Mr. Puri that the view of the Revenue and 'the High Court that the assessee can claim allowance only for one residential house, is erroneous.
To conclude, we are in agreement with the view of the High Court when it answered the question No. 1 in the affirmative and against the assessee.
But we answer the question No. 2 in the affirmative in favour of the assessee.
Our answer to question No. 2 will be substituted, in the place of that given by the High Court.
The judgment and order of the High Court are modified to the extent indicated above, and the appeals are, allowed in part.
The parties will bear their own costs.
G.C. Appeals partly.
allowed.
| IN-Abs | The appellant created a trust in 1955 by transferring certain securities held by him to a bank as trustee.
One of the beneficiaries of the trust was the appellant 's minor daughter M.
The income accruing to M under the trust during the previous years relevant to the assessment years 1957 58, 1958 59, 1959 60 and 1960 61 was included in the assessments made on the appellant as an individual for those years by applying the provisions of section 16(3)(b) of the Indian Income Tax Act 1922.
In the assessment for the year 1960 61 the Income tax Officer had also to deal with the appellant 's claim for the allowance under section 9(2) off the said Act in respect of two separate houses owned by the appellant and maintained by him for residential purposes in New Delhi.
The Income tax Officer allowed the claim only in respect of one of the houses.
The appellant 's appeals.
before the authorities under the Act failed.
The High Court decided the questions referred to it against the appellant.
In appeals before this Court on certificate the contentions of the appellant which fell for consideration were : (i) (a) that section 16(3) (b) must be strictly construed; (b) that the assets covered by the trust deed not having been transferred to the wife or minor daughter but to a bank as trustee, section 16(3) (b) of the Act had no application; (c) even if section 16(3) (b) of the Act applied, what was to be included in computing the total income of the appellant was not the in come that had been received by the minor daughter under the trust deed but only so much of the income of the trustee as arose from the assets transferred to the trustee for the benefit of the minor child; (ii) that a reading of the first and second provisos to section 9(2) of the Act clearly showed that the allowance to an assessee is not confined only to one residential house HELD : (i) (a) it is true that section 16(3) (b) creates an artificial liability and must therefore be strictly construed.
But in construing section 16(3)(b) Courts cannot ignore the clear and unambiguous expressions contained therein and all those expressions must receive a proper interpretation.[9 C D] C.I.T. Bombay vs Manual Dhanji, , C.I.T.,.
Gujarat vs Keshavlal Lallubhai Patel, and; C.I.T., West Bengal II vs Prem Bhai Parekh (b) The contention that section 16(3) (b) applies only to those cases where ultimately the corpus of the trust property is also transferred to the wife or the minor child, must be rejected.
The provisions of section 16(3)(b) are very clear, and, the only requirement so far as this aspect is concerned is that the assets Must be transferred.
to, any person or association of persons and that transfer of assets must be for the benefit of the wife or the 2 minor child or both.
In this connection it is pertinent to note the wordings of section 16(3) (a) (iii) and section 16(3) (a) (iv).
The former provision clearly refers to assets transferred directly or indirectly to the wife by the husband and the latter provision refers to assets transferred directly or indirectly to the minor child not being a married daughter.
But in cl.
(b) of section 16(3) the transfer of assets is not to the wife or the minor child or both but to any person or association of persons.
Therefore it is clear that when the legislature intended to provide for a direct transfer of assets either to the wife or to the minor child, it has used the expressions as are found in section 16(3) (a) (iii) and section 16(3) (a) (iv).
The different phraseology used in cl.
(b) of section 16(3) makes it clear that the transfer of assets need not be to the wife or the minor child.
Nor does the said clause require that the corpus of the property so transferred to any person or association of persons should ultimately vest in the wife or the minor child [9G 1OB] C.I.T. Bombay vs Sir Mahomed Yusuf Ismail, [1944] 12 I.T.R. 8 approved.
(c) From a plain reading of section 16(3) (b) it is clear that what is to be included in computing the total income of the assessee is that part of the income of the trust which is received for the benefit in this case of the minor daughter.
It is the share income which has accrued to or has been received by the minor daughter under the trust deed in the relevant accounting year, that has to be included in the total income of the father, the assessee.
The expression "so much of the income" occurring in this clause also makes it clear that the said provision relates to the share income of the minor daughter, in this case, and not that of the trustee bank.
[11 B C] Tulsidas Kilachand and ors.
vs C.I.T. Bombay City 1, and C.I.T. Bombay vs Manilal Dhanji, applied.
(ii)A reading of the second proviso to sub section (2) of section
|
Appeals Nos. 1689 and 1690 of 1968.
Appeals from the judgment and order dated January 19, 1967 of the Madras High Court in Writ Petitions Nos.
1030 and 1031 of 1963.
T A. Ramachandran, for the appellant (in both the appeals).
section C. Manchanda, R. N. Sachthey, B. D. Sharma and section P. Nayar, for the respondents (in both the appeals).
The Judgment of the Court was delivered by Hegde, J.
These appeals by certificate arise from the decision of the High Court of Madras in Writ Petitions Nos.
1030 and 1031 of 1963.
Therein the petitioner Invoked the extraordinary jurisdiction of the High Court under Article 226 of the Constitution to quash the orders of the Respondents wherein he was not granted the abatement he sought to obtain in the assessment years 1959 60 and 1960 61 The High Court came to the conclusion hat the appellant is not entitled to any in ore abatement than that was given by the authorities under the 'Assessment for Relief or for Avoidance of double Taxation in India and Ceylon ' which will be hereinafter referred to S the "agreement".
It accordingly dismissed the Writ Petitions but gave a certificate under article 133(1)(c) of the Constitution of India certifying that this is a fit case )r appeal to this Court.
The appellant is a resident in this country.
But he carrying on business in Ceylon.
During the assessment car 1959 60 he earned a gross income of Rs. 39,473/ id in the assessment year 1 '960 61 he earned a gross income of Rs. 39,047/ .
He had only a house in India hose annual rental value was Rs. 38,/ .
The entire assessable income of his was that what he earned in Ceylon.
in his income in Ceylon, he was taxed in a sum of Rs. 919/ for the assessment year 1959 60 and in a sum of section 6,036/ for the assessment year 1960 61.
For the ,.me income, in India, under the Indian Jaw his tax was computed for the assessment year 1959 60 at Rs. 10,282 62P id for the assessment year 1960 61 at Rs. 9,521 35P 90 The tax payable by him in Ceylon was given as abatement and he was called upon to pay only the balance.
The tax payable by him in Ceylon as a non resident would have been Rs. 9,889/ in the assessment year 1959 60 and Rs. 9,983/ in the assessment year 1960 61.
But in view of section 45(2) of the Ceylon Income Tax ordinance 1932 and also in view of the 'Agreement ' he was taxed as if he was a resident in Ceylon.
Two questions arising for decision are whether he was not liable to be taxed at all in India and if he was liable to be taxed in India, what should have been the proper abatement given to him.
Mr. Ramachandran appearing for the assessee contended firstly that in view of the 'Agreement ' entered into between India and Ceylon as provided in section 49C of the Indian Income Tax Act, 1922 he was not liable to be taxed in India at all.
In the alternative, he contended ' that while determining the tax payable by him in this country, the department should have deducted the entire tax that he would have had to pay had been taxed as a non resident.
For this contention also he relies on the terms of the agreement entered into between India and Ceylon.
He does not dispute the fact but for the agreement the assessee would have been liable to pay in this country a tax of Rs. 10,282 62 p. in the assessment year 1959 60 and Rs. 9,521 35p.
in the assessment year 1960 61.
In order to consider the correctness of the contention,, advanced by Mr. Ramachandran, we will now turn to the relevant provisions of the 'Agreement '.
That 'Agreement ' was notified in Modification SRO 456 dt.
the 6th February, 1957.
The portion of the notification which is relevant for our present purposes is contained in Article 3 and column 8 of the Schedule to that agreement.
Article 3 reads "Each country shall make assessment in the ordinary way under its own laws; and where either country under the operation of its laws charges any income from the sources or categories of transactions specified in column 1 of the Schedule to this Agreement (hereinafter referred to as the Schedule) in 91 excess of the amount calculated according to the percentages specified in column II and III thereof, that country shall allow an abatement equal to the lower of the amounts of tax attributable to such excess in either country." SCHEDULE Sources of income or nature of Percentage of income Remarks transaction from which income is which each country derived is entitled to charge under the Agreement.
I II III IV 8.
Any income derived from a source 100 per cent Nil by ,or category of transactions not men by the country the other.
tioned in any of the foregoing items in which of the Schedule.
the income actually ac crues or arises.
The first portion of article 3 says that "each country shall make an assessment in the ordinary way under its own laws." This means to begin with both India and Ceylon were required to assess the assessee in accordance with law prevailing in each of these countries.
Thus far it is plain.
From this it is clear that first contention advanced on behalf of the assessee has no basis.
Hence it must fail.
Now we come to the second part of that article to the extent necessary for determining the second contention.
It reads : " and where either country under the opera tion of its laws charges any income from the sources or categories of transactions specified in column 1 of the schedule to this Agreement . in excess of the amount calculated according to the percentages specified in columns 11 and III thereof, that country shall allow an abatement equal to the lower of the amounts of tax attributable to such excess in either country.
" The language employed in this part of the article 'is quite confusing.
That part of the article has to be read with the 92 schedule.
On a proper reading of that provision alongwith the schedule, which means in the present case, item 8 of the schedule, it appears to us that what it says is From out of the amount ascertained under the first part of the Article deduct the tax payable by the assessee in the other country in respect of the whole or any portion of the amount brought to tax under the first part of article.
The word 'attributable ' in that Article merely means 'payable Applying the principle mentioned above to the facts of the present case, the following result is reached.
The tax payable under the Indian law as seen earlier was Rs. 10,282.62p.
in the assessment year 1959 60.
The tax payable under the Ceylonese law in that year was Rs. 5,919/ .
That has to be deducted from the tax computed under the Indian law.
The balance alone is leviable.
Similarly in the assessment year 1960 61 the tax computed under the Indian law is Rs. 9,521 35 p. and the tax levied under the Ceylonese is being Rs. 6,036/ .
In levying tax in this country the tax payable in Ceylon has to be deducted.
It was urged by Mr. Ramchandran that what we have to take into consideration is not the actual tax levied in Ceylon but the tax leviable in Ceylon on a non resident.
He says that the deduction given under section 45 (2) of the Ordinance promulgated in Ceylon is only an allowance.
Hence the same does not form part of the actual taxation.
We are unable to accede to that contention.
In considering what taxes are attributable to the tax laws of a particular country, one has to take into consideration all the provisions of the statutes levying tax.
In other words for determining the tax due from an assessee, we have not merely to look to the charging section but also to the provisions providing exemptions and 'allowances.
If so read, it is quite clear that the amount of tax attributable to the Ceylonese law is that which was ultimately levied on the assessee.
The agreement that was entered into between India and Pakistan is similar in terms with the agreement, with which we are concerned in these appeals, except that in article 4 therein which corresponds to article 3 in the agreement before us in the place of the word 'attributable ' the word 'payable ' is used.
But this change does not make any difference in substance.
Interpreting that 93 agreement this Court in, Ramesh R. Saraiva vs Commissioner of India Tax, Bombay City 11 held that article IV of the Indo Pakistan Agreement for the avoidance of Double Taxation clearly shows that each Dominion can make an assessment in the ordinary way regardless of the Agreement.
The restriction which is imposed on each Dominion under the Agreement is not on the power of assessment but on the liberty to retain the tax assessed.
Nor does the Schedule to the Agreement limit the power of each Dominion to assess, in the normal way all the income that is liable to taxation under its laws.
The Schedule has been appended only for the purpose of calculating the abatement to be allowed by each Dominion.
The ratio of this decision, in our opinion, governs the facts of this case.
We also do not see any reason for treating the appellant in a manner different from other assessees, who are resident in this country.
In the result these appeals fail and the same are dismissed.
No costs.
V.P.S. Appeals dismissed.
| IN-Abs | The appellant was a resident in India and was carrying on business in Ceylon.
His entire assessable income for the years 1959 60 and 1960 61 was what he earned in Ceylon.
He was liable to be assessed :as a non resident, but, in view of section 45(2) of the Ceylon Income tax Ordinance, 1932, and of the Agreement for 'Assessment for Relief or for Avoidance of Double Taxation in India and Ceylon ' as provided in section 49A of the Indian Income tax Act, 1922, he was taxed as if he was a resident in Ceylon and assessed to pay a smaller sum as tax.
The Income tax authorities in India computed the tax under the Indian law :and gave as abatement, the tax payable by him in Ceylon as per the Agreement, and called upon him to pay the balance.
On the questions: (1) whether he was not liable to be taxed at all in India, and (2) if he was liable to be taxed in India, what should have been the proper abatement, the High Court confirmed the order of the Income tax authorities.
In appeal to this Court, HELD: (1) Article 3 of the Agreement begins with the words 'Each ,country shall make an assessment in the ordinary way under its own laws. ' Therefore, the appellant was liable to be taxed in India.
[91E F] (2) The Article read with item 8 of the Schedule to the Agreement shows that from out of the amount ascertained under the first part of the Article the tax payable by the assessee in the other country in respect of the whole or part of the amount brought to tax under the first part of the Article, should be deducted.
The word 'attributable ' in the Article means 'payable '.
In considering what taxes are attributable to the tax laws of a particular country, one has to take into consideration all the provisions of the statutes levying tax, that is, for determining the tax ,due from an assessee, one has not merely to look to the charging section, but also to the provisions providing exemptions and allowances.
So read, the amount of tax attributable to the Ceylonese law is that which ,was ultimately actually levied on the assessee and not the leviable in Ceylon on a non resident.
[92B G] Ramesh B. Saraiya vs C.I.T. Bombay applied. 89
|
Appeals Nos. 34 and 35 of 1969.
Appeals by special leave from the judgment and order dated August 5, 1968 of the Punjab and Haryana High Court in Income tax Reference No. 40 of 1964.
K. C. Puri, K. L. Mehta, section K. Mehta and section section Hussain, for the appellant (in both the appeals).
B. Sen, P. L. Juneja, Badri Das Sharma for R. N. Sachthey, for the respondent (in both the appeals).
The Judgment of the Court was delivered by P. Jaganmohan Reddy, J.
These two Appeals are by Special Leave against the Judgment Of the Punjab & Haryana High Court answering the Reference under Section 66(1) of the Indian Income tax Act 1922 (hereinafter referred to as 'the Act ') against the assessee the Appellant.
The Appellant who was admittedly a Ruler of the erstwhile Faridkot State challenged the assessments made against him for the years 1946 47 and 1947 48 with respect to which the accounting years were Vikram year 2002 and.2003 corresponding to the period 13th April 1945 to 12th April 1946, and 13th April 1946 to 12th April 1947 respectively.
The; assessment in each of these years was made under Sec.
34 read with Sec. 23 of the Act, as the assessee 's income from dividends and interest and capital gains earned by the assessee during the relevant accounting year in what was then British India had not been brought to tax.
The assessee objected to these proceedings and contended before the Income tax Officer that he 'being a Ruler of the Faridkot State was immune from taxation on every source of income.
He could not therefore, by virtue of his sovereignty be treated as an assessee for any purpose under the Act.
It was also contended that the notices under Sec. 34 were time barred.
The Income tax Officer however, rejected these objections and held that though under the 18 International Law the Rulers of Indian States were sovereigns and immune from Municipal Laws of other countries, there was no exemption at far as the personal incomes of the Rulers are concerned from being taxed under the Act.
In that view he held that notices under Sec.
34 were valid and accordingly made an assessment.
The Appeal to the Appellate Assistant Commissioner was without success, though similar contentions were raised before him with particular reference to the privileges which the Rulers enjoyed under International Law both in respect of Civil and Criminal matters.
The assessee appealed against this order to the Income tax Appellate Tribunal where, however,, there was a divergence of view between the two Members and therefore the matter was referred to the President of the Tribunal.
After considering the decisions in regard to the exemption of the sovereign from all Civil and Criminal Laws of another State, the Judicial Member held that no assessment could be made on the assessee under the Act as he was the Ruler of a sovereign State during the assessment years under consideration.
In this view he did not express any opinion on the question of the legality of the proceedings under Sec.
34 of the Act.
The Accountant Member however, after considering the various provisions in the Act whereby exemption was granted to the Rulers in regard to certain types of income and the various decisions held that the assessee was liable to assessment in respect of his personal income arising or accruing to him from British India from his private properties.
He also held that the proceedings under Sec.
34 of the Act were perfectly legal and valid.
In view of the difference of opinion,, the matter was referred to the President of the Tribunal under Sec. 5A(7) of the Act on the following question "Whether on the facts and in the circumstances of the case the assessee was immune from tax under the Indian Income tax Act on his private income viz., dividends and interest income as also the Capital Gains earned in British India.
" The President of the Tribunal held in favour of the assessee by relying on a decision of the Andhra Pradesh High Court in the case of H. E. H. Mir Osman Ali Khan Bahadur Nizam & Raj permukh of Hyderabad vs Commissioner of Income Tax(1), where it was stated thus : "Indisputably, a sovereign ruler enjoys immunity from taxation under International Law and it is only in cases where this rule is superseded by express words that this should be denied to him.
If a legislature wants to depart from these principles and bring such (1) Case No. 35 of 1959.
19 ruler to tax, there must be clear indication in the enactment itself.
In the absence of such express words, the statute must be interpreted in conformity With International Law.
Simply because the Municipal Law did ' not provide for such an exemption, the principles of International Law should not be regarded as having been superseded".
In the aforesaid view the Andhra Pradesh High Court had held that notwithstanding the fact that His Exalted Highness the Nizam had lost the character of a sovereign ruler after 26 10 1950, he is still immune from taxation in respect of the income derived by him prior to that date.
Following this decision the President held that the assessee was immune from taxation under the Act on his private income.
In view of this decision on an application by the Revenue under Sec.
66(1) of the Act the following question was referred to the High Court : "Whether on the facts and circumstances of the case, the assessee was not liable to tax under the Indian; Income tax Act, 1922, in respect of his personal income accruing or arising to him in British India in the two assessment years 1946 47 and 1947 48." The High Court relying upon the decision of this, court in Commissioner of Income tax, Andhra Pradesh vs H. E. H. Mir Osman Ali Bahadur(1), which reversed the decision of the Andhra Pradesh High Court referred to and relied upon by the President of the Tribunal held against the assessee.
It is contended before us that the facts and circumstances in the Nizam 's case are totally different and the decision of this Court is clearly distinguishable.
The learned Advocate contends that in that case the assessments related to the assessment years 1950 51 and 1951 52, the corresponding accounting year for which was the, period between 1st April 1949 and 31st March 1950, and 1st April 1950 and 31st March 1951 respectively, which years being after the inauguration of the Constitution on 26th January 1950, clearly make the Act which was made applicable from 1st April 1950 to all the Part B States, applicable to the assessee.
But it is submitted that in the case before us there could be no ques tion of Act being made applicable to Faridkot State as the assessment years and the accounting years are prior to the inauguration of the Constitution and the application of the Act.
The learned Advocate cited a large number of decisions in support of his contention that the Native States in India had International.
(1) 20 personality and their Rulers had 'immunity similar to those that were accorded to any other Head of a State under International Law.
It was also argued that though these princely States in India may have been 'protected States; it was not necessary for the recognition of the privileges and immunities of the Rulers of such States to possess all the attributes of sovereignty and complete independence in support of which the decisions of Mighall ,vs Sultan of Jahore(1), Duff Development Co. Ltd. vs Govt.
of Kelantan & Anr.(2), Stathem vs Stathem & H. H. the Gaekwad of Baroda(3), were referred to.
It was therefore contended that in this country also the position was the same as that recognised by the Common Law of England for which proposition, decisions were referred to from Punjab Recorder onwards.
A reference was also made to several cases pertaining more specifically to the immunity enjoyed by the Rulers from payment of Income tax on the basis of their status under International Law.
These are : The Patiala State Bank vs Commissioner of Income tax, Bombay(4), Rani Amrit Kunwar vs Commissioner of Income tax, C.P. & U.P.(5), The Accountant General, Baroda State vs Commissioner of Income tax, Bombay City(6), A. H. Wadia, as Agent of the Gwalior Durbar vs Commissioner of Income Tax, Bombay (7), and Maharaja Bikram Kishore of Tripura vs Province of Assam (8).
On behalf of the Revenue reliance is placed on Commissioner of Income tax Andhra Pradesh vs H. E. H. Mir Osman Ali Bahadur(9), to sustain the Judgment under appeal and it is conceded that if this decision was not applicable to the facts and circumstances of this case, the position as contended by the assessee would be that the Indian Rulers prior to the Constitution were granted immunity from taxation, and in any case this was so in respect of the income from the property of the State as, distinct from the private or personal property of the Ruler though there were observations in some of the cases that it was difficult 'to distinguish public or private property owned by a ruler.
At this stage we think it necessary to advert to one argument .adduced on behalf of the assessee namely that the Income tax authorities particularly the Income tax Officer, had accepted the International status of the assessee and the immunity from .taxation of income from public property, but only rejected the claim for such immunity in respect of income from private or Personal property.
It is therefore contended that the status of (1) [1894] I. Q. B. 149.
(3) (1912) Probate 92.
(5) XIV ITR 561.
(7) XVII ITR 63.
(9) 59 I.T.R. (2) (4) XI ITR 617.
(6) XVI ITR 78.
(8) XVII ITR 220.
(9) 59 I.T.R.666 21 the assessee as an international personality is not in issue before.us s, what is in issue is whether his income from private property is exempt from taxation.
We do not think this contention has, validity, because the High Court has specifically While rejecting, the second contention addressed on behalf of the assessee ruled;, that the status of the assessee as a ruler of the Indian State could. ' not be equated with that of a sovereign in international law.
Even the reference to the High Court does not limit or circumscribe the matter for consideration as contended for but on the, other hand enables us to deal with the question whether as an, erstwhile ruling prince the assessee can at all be entitled to the. immunity from taxation.
In considering the question referred to by the Tribunal it,, may be useful to examine briefly the basis and extent of the privilege and immunity enjoyed by Head of State in International Law, particularly having regard to the lengthy arguments.
addressed before us.
In International Law the Head of a State,.
represent* the State as such and not as an individual representing his own rights.
In that capacity he enjoys certain extra, territorial privileges in other States which are friendly and in peace, known as the receiving States, with the State he represents.
These are, ceremonial honours for himself, the Members of his, family and his retinue; special protection to his person, and ' exemption from Criminal jurisdiction; the grant of extra terri toriality, on the basis that one sovereign does not have any powerover the other, such as immunity from filing of suits against him except where he is himself a plaintiff and from.
other civil processes; exemption from taxation rating and other fiscal enactments and the invilobility of immovable property in which he of, the representatives of the State accorded diplomatic immunity.
reside etc.
Some of these privileges and immunities are political and are generally the subject of executive and administrative instructions such as ceremonial honours, Police protection.
exemption from customs in accessability of their residences to officers of Justice, Police or Revenue officials unless consented to by them.
There are yet others in relation to the applicability of the Municipal Laws, the immunity from which are either recognised by the Common Law and which Courts will not enforce as.
in England or are dealt with by those laws themselves by affording the necessary exemption.
There are yet others which may be regulated by Treaties or international covenants.
Whatever may be the various aspects of the immunity and privileges enjoyed by the Heads of the State under the Laws of the Country where questions relating to them arise, what we are concerned with at the very thresh hold of this argument dealing with the immunity is whether the rulers of the erstwhile native States as.
22 they were called enjoyed the same or similar privileges as those ,of the Heads of States recognised as Members of the family of nations ln International Law.
It is clear from the very nature of the native States in 'India that they were subject to the sovereignty and protection of British Crown.
While their relations with the Crown were governed by treaties, though initially on terms of equality, as time went by and the British Crown in India ,became paramount, the relationship between it and the Rulers ,became unequal with the result that these treaties became subject to the reservation that they could be disregarded where the interests of the British Empire or those of the subjects of the native States were involved.
When the Nizam claimed equality with the British Crown, the then Viceroy Lord Reading informed him on 27th March 1926 that "The sovereignty of the British Crown is supreme in India and therefore no Ruler of an Indian State can justifiably claim to negotiate with the British Government on an equal.
footing".
After giving a few illustrations to negative the claim of the Nizam, the Viceroy proceeded to observe "other illustrations could be added no less inconsistent than the foregoing with the suggestion that the Government of your Exhalted Highness and the British Government stand on a plane of equality . (1).
This paramountcy was described by Shah, J, as he then was, as "brazen faced autocracy" in H. H. Maharajadhiraj Madhav Rao Jivaji Rao Bahadur of Gwalior etc.
vs Union of India (2).
What then becomes of the claim of these States or their rulers to recognition.
as International personality.
The answer to this specific question is furnished even towards the end of the 19th Century.
The status of these native States as International personalities was negatived.
in the Notification of the Government published in Gazette of India Part 1, dated 21st August, 1891 at page 485, which was a resolution containing a proclamation regarding the trial of accused persons in Manipur and the regrant ,of the Manipur State.
In this regard the following passage at page 488 is of interest : "The principles of the International law have no bearing upon the relations between the Government of India as representing the Queen Empress on the one hand, and the Native States under the suzerainty of Her Majesty on the other.
The paramount supremacy of the former presupposes and implies the subordination of the latter.
In the exercise of their high prerogative, the Government of India have, in Manipur as in other protected States, the unquestioned right to remove by (1) Vide Appendix I of the White Paper on Indian States.
(2) ; 161. 23 .lm15 administrative order any person whose presence in the State, may seem objectionable.
They also have the right to summon a Darbar through their political representative for the purpose of declaring their decision upon matters connected with the expulsion of the ex Maharaja. through their Officers." After stating that any one resisting the decision and not complying with orders will be liable to arrest, the declaration went on to say "In the opinion of the Governor General in Council any armed and violent resistance to such arrest was an act of rebellion, and can no more be justified by a plea of self defence than could resistance to a police officer armed with a Magistrate 's warrant in British India.
" In the recent case of this Court in H. H. Maharajadhiraja Madhav Rao Jivaji Rao Scindia Bahadur of Gwalior(1), referred to above the majority expressed the view that "the States had no International personality".
Nonetheless the status of these rulers in England was recognised as being on par with other Rulers in the matter of personal immunity from being sued in their Courts.
In so far as British India was concerned these were governed partly by Acts of the Legislatures particularly the provisions contained in Civil Procedure Codes and by Notifications of the executive under taxation laws as well as by executive or administrative instructions relating to their privileges.
It is therefore apparent that in so far as this country is concerned the immunity from legal proceedings which is recognised in the common law has been the subject matter of legislation under which the ruling princes of India, notwithstanding that they were not recognised as International personalities, were however accorded this immunity.
433 of the Code of Civil Procedure of 1882 and subsequently Sections 84 to 87 of the Civil Procedure Code of 1908 deal with these matters.
Gajendragadkar, C.J., in Mirza Ali Akbar Kashani vs United Arab Republic & Anr.(2), cited with approval the observations of Strachey, J, in Chandulal Khushalji vs Awed Bim Umar Sultan Nawaz Jung Bahadur(3), as correctly representing the result of the provisions of Sec.
433 as much as of those contained in Sec.
86(1).
It may be mentioned that Strachey, J, after pointing out that in India before the enactment of Sec.
433 of the Code, the privilege of independent sovereign princes stood on exactly the same footing as in England, observed (1) ; 161.
(2) ; (3) at 371 372. 24 .lm15 "No doubt the question of privilege now depends on the construction of Sec. 433, and I am alive to the danger of pressing too far an analogy between a rule of international law and a specific enactment of the Legislature.
" It is apparent from a perusal of Sec. 86 of the Civil Procedure Code that there is no absolute prohibition against a Ruler of a foreign State being sued in India.
A Ruler can be sued with the consent of the Central Government certified in writing by a Secretary to that Government.
It is also provided that such consent should not be given unless it appears to the Central Government that the Ruler has instituted a suit in the Court against the person desiring to sue him or by himself or another, trades within the local limits of the jurisdiction of the Court, or, is in posses sion of immovable property situate within those limits and is to be sued with reference, to such property or for money charged thereon, or has expressly or impliedly waived the privilege accorded to him by this Section.
In view of these provisions the several cases cited by the learned Advocate for the assessee which deal with immunity from suits against ruling princes under the English law have no application.
In so far as the question whether there exists a rule of international law exempting a State, or the property which it owns, from taxation by a foreign State, is concerned, there seems to be no uniform practice followed by the various States.
It is however suggested that immunity from taxation "appears as a logical accompaniment of the principle of immunity of foreign State owned property from judicial process" and on this basis it is sought to be contended that even personal, private property of the Head of a State is exempt.
It is unnecessary for us to examine this position because even if there was such an immunity the Rulers of an Indian State could only avail of it, if they are recognised as international personalities which, as we have seen, they are not.
Any exemptions which they may be given, must, in our view be under the relevant taxing Acts.
The learned Advocate for the Assessee however points out that if the Rulers of Indian State were not exempted from tax apart from the statute, there was no need to make a provision in Sec. 3 of the Bengal Agricultural Income tax Act IV of 1944, specifically making every Ruler of an Indian State liable to Agricultural Income tax.
On the other hand it would appear to us that this provision would itself militate against the assumption of immunity from taxation of the property of the Rulers and at any rate the legislature may have been acting ex abundanti cautale.
It may however be noticed that in so far as the Income tax Act is 25 concerned exemption of the Income of the Ruters derived from Central Government securities was specifically given under Sec.
60 of the Act which implies that the Rulers were not exempt from other provisions of law.
This position also finds support from a case cited by the learned Author on the "Immunity from taxation on foreign owned Property" in the Americal Journal of International Law XLI at page 239, where the Suppreme Court of Ceylon in the Suprintendent of the Government Soap Factory, Bangalore vs Commissioner of Income tax, held that the profits ade in Ceylon by the Mysore Government Soap Factory could be taxed by Ceylon without violation of international law.
The Ceylon Court held that the State of Mysore had no position in international law and could not,invoke any immunity arising by virtue of international law ' In any case so far as, immunity from taxation of the income from personal property of the Rulers of the Native States is concerned this is now concluded by a decision of this Court in the Commissioner of Income Tax, Andhra Pradesh ',v.
H.E.H. Mir Osman Ali Bahadur(1).
In that case the question directly arose as to whether the Ruler of the Hyderabad State prior to 26th January '50 could claim immunity from taxation under international law, namely whether the assessee enjoyed immunity from taxation under the Act in respect of income which accrued or arose to him, and which was received by him upto 26th January 1950.
The learned Advocate for, the revenue had contended that under the International law, a foreign sovereing was not immune from taxation in respect of his private properties situated in the Taxing State; even if there was such an immunity under the international law, the assessee being under the suzerainty or ,he paramountcy of the British Crown, had never enjoyed the status of a sovereign as understood in the international law and, therefore, was not governed by that law; and that in any event, as on January 26, 1950, the date when he became liable to tax, he was no longer a sovereign and therefore he could not claim exemption under the international law.
Respondent 's Advocate claimed that the assessee was not liable to Income tax on the ground that under the Act, income tax was charged on the assessee 's income received during the accounting year and that as during the accounting year the assessee was a ruling chief, he was exempt from taxation under the international law.
He argued that under the international law, as understood by English Courts, a foreign sovereign was exempt from taxation, that the said interpretation of the law had become the common law of England and that the said common law was the law of India before the Constitution and it continued to have force thereafter reason of Article 372.
(1) 256SupCI/72 26 We have noticed these contentions to show that there is no validity in the submission of the learned Advocate for the assessee, that that question did not directly arise in that case because the Nizam was being assessed in respect of assessment year 1950 1951 and 1951 52, when he was not a ruling prince.
This Court specifically dealt with this matter as can be seen from the observations of Subba Rao J, as he then was at page 670 "International ' law vis a vis the liability of a sovereign to taxation in respect of his private property is in a process of evolution '.
It has not yet become cry stallized." After referring to Halsbury 's Laws of England, 3rd Edition, Volume 20, page, 589 and Oppenheim 's International Law, 8th Edition, Volume 1, page 759 and the Article on immunity from taxation of foreign State owned property in the American Journal of International Law, to which we have already adverted,.
observed "that the question is not free from difficulty and that it requires serious consideration when it directly arises for decision.
Assuming for the purposes of these, appeals that a foreign sovereign who has acquired an international personality has such an immunity from taxation, he proceeded to examine the question whether His Exalted Highness the Nizam had ever acquired international personality.
After examining the position he concluded at page 675 : ".
that Hyderabad State did not acquire international personality under the international law and So its Ruler could not rely upon international.
law for claiming immunity front taxation of his personal properties".
We are not here concerned with the alternative argument in that case, that the Act having applied to the State of Hyderabad , after the inauguration of the Constitution on `6h January '50, the charge as well as the manner of computation of income did not depend on the pre existing law but only upon the provisions of the Act because in these appeals that question does not arise.
in view of this legal position we do not propose to burden this Judgment with any detailed examination.
of the several decisions of the High Courts which were prior to the decision of this Court cited by the learned Advocate in support of the proposition that the ruling chief of an Indian State has the same immunity from taxation as enjoyed by other foreign sovereigns.
Two of 'those cases arose under the where different considerations were applicable (The Patiala State Bank vs C.I.T., Bombay(1), A. H. Wadia, as Agent of the Gwalior Durbar vs C.I.T., Bombay (2).
At any rate in one other case i.e. in Maharaja Bikram Kishore of Tripura vs Province of Assam(3), a distinction was sought to be drawn (1) XI I.T.R. 617.
(2) XVII I.T.R.63.
(3) XVIT I.T.R. 220.
27 between the property of the State and the private property of the ruler.
In that case the question whether the income derived from Chakla Roshanabad Estate was liable to tax under Assam Agricultural Income tax Act, by assessment upon the State of Tripura or by assessment on the ruler of Tripura.
It was held that the Chakla Roshanabad was the State property and not personal property of the then ruling Raja who held it in his capacity as a Ruler.
No doubt in the other two cases refunds were not given for tax deducted at source on the assumption that, the Rulers were not assessees.
In the view we have taken the answer of the High Court to the reference was clearly right and the appeals are accordingly dismissed with costs one set.
S.N. Appeals dismissed.
| IN-Abs | The appellant who was the ruler of an erstwhile princely state, challenged the assessments made against him for the assessment years 1946 47 and 1947 48 in respect of his personal income earned in British India, on the ground that he being a Ruler was immune from taxation on every source of income.
On the question whether the appellant could claim immunity from tax under the Indian Income tax Act, 1922 in respect of the income earned in British India, HELD: The appellant was not entitled to any immunity and, therefore was liable to tax.
(a) In International law the head of a State representing the State as such enjoys certain extra territorial privileges in other States.
Some of these privileges and immunities are political and are generally the subject of executive and administrative instructions.
There are others in relation to the applicability of the municipal laws, the immunity from which are either recognised by the common law and which courts will not enforce, as in England, or are dealt with by those laws themselves by affording the necessary exemption; yet others are regulated by treaties and international conventions.
Whatever might be the various aspects of the privileges and immunities enjoyed by the Heads of State, the rulers of the erstwhile princely states did not enjoy the same or similar privileges as those of the Heads of States recognised as members of the family of Nations in international law.
From the very nature of these princely states it was clear that they were subject to the sovereignty and protection of the British Crown.
While their relations with the Crown were governed by treaties, though initially on terms of equality, when the British Crown in India became paramount, the re lationship between it and the rulers became unequal with the result that these treaties became subject to the reservation that they could be disregarded where the interests of the British Empire or those of the subjects of the princely states were involved.
The status of these States as inter national personalities was negatived by the British Government even towards the end of the 19th century and it had been maintained that the principles of International law had no bearing upon the relations between the Government of India as representing the Queen Empress on the one hand and the native states under the suzerainty of Her Majesty on the other.
Again, though the status of these rulers in England was recognised as being on par with other rulers in the matter of personal immunity from legal proceedings in so far as British India was concerned, these were the subject matter of legislation under which the ruling princes in India, notwithstanding that they were not recognised as international personalities, were accorded this immunity.
Therefore, any exemption the Rulers could claim had to be under the relevant taxing acts.
There is no such exemption under the Income tax Act.
Besides, the fact that the income of the 17 rulers derived from Central Government securities was specifically exempted by section 60 implied that the rulers were not exempted from other provisions of law.
The provisions in certain statutes specifically making every Ruler of an Indian State liable to tax only militate against the assumption of immunity from taxation of the property of the Rulers at any rates provisions might have been ex abundant ceutela.
[21D 22B, 24G].
H. H. Maharajadhiraja 'Madhav Rao Jivaji Rao Rahadur of Gwalior etc.
vs Union of India; , , referred to.
(b) Further it is now concluded by a decision of this Court in Commissioner of Income tax, Andhra Pradesh vs H. E. H. Mir Osman Ali Bahadur; , that the ruler of a princely state did not acquire international personality and so could not rely upon International law for claiming immunity from taxation of his personal properties.
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