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N: Criminal Appeal No. 116 of 1971.
Appeal by special leave from the Judgement and order dated the 27th November, 1970 of the Delhi High Court in Crl.
Appeal No. 35 of 197().
Uma Datta, for the appellant.
Govind Das and R. N. Sachthey, for the respondent.
The Judgment of the Court was delivered by SARKARIA, J.
This appeal by special leave is directed against a judgment of the High Court of Delhi upholding the conviction of the appellant under section 5(2) read with section 5(1) (d) of the Prevention of Corruption Act and section 161, Penal Code, recorded by the Special Judge, Delhi.
The facts of the prosecution case are as follows: The complainant, section K. Jain, manufactures rubber motor parts in his factory at Shahdara.
On his application, the Delhi Electric Supply Undertaking at Gandhinagar sanctioned a power connection for his factory. 'l` 'he complainant deposited the estimate of expenses under the 9 L839 Sup.
CI/75 350 terms of the sanction.
In spite of it, for a period of four months, no A steps were taken by the employees of the Undertaking to instal the poles and give the connection.
section P. Gupta, an Inspector of the Undertaking approached the complainant and solicited a bribe of Rs. 125/ in consideration of giving the connection.
lt was settled that Rs. 25/ would be paid on June 2(), 1968 and the balance of Rs. 100/ after the electric connection.
The complainant had no intention to pay the bribe.
Consequently, he contacted section K. Katoch, Deputy Superintendent of the Anti Corruption Police on June 20, 1968 at about 1 p.m. and apprised the latter about the demand of the bribe by Inspector Gupta.
The Deputy Superintendent recorded the complainant 's statement, exhibit P.W. l/A.
He then co opted Daya Nand Dua (PW2) and Bharat Prakash Khurana (PW 3), two clerks from the office of the Deputy Commissioner, and formulated a scheme for entrapping Gupta. 'the Police party reached the factory of the complainant at about 3.05 p.m.
The complainant and the Panch witnesses went inside while the Police officers waited outside.
The complainant received a message from Gupta through a Lineman that instead(l of the 20th, he would be coming on the following, day, that the installation of poles at the site had commenced and the complainant would be required to pay more amount.
The complainant conveyed this information to D.S.P. Katoch.
On June 21, 1968, at about 10.15 a.m., Gupta came to the factory, along with his gang of labourers and started the installation work.
Gupta informed the complainant that he would return to the factory either personally or send somebody else to collect the amount of Rs. 100/ at about 2 p.m.
The complainant passed on this information also, to the D.S.P. Thereafter the D.S.P. along with the aforesaid witnesses and others came to the complainant at about 11.30 a.m. and settled the details of the trap.
The complainant produced one currency note of the denomination of Rs. 100/ .
The D.S.P. noted its No. and.returned it to the complainant with the direction that he should pay it to Gupta.
Gupta however did not turn up at 2 p.m.
Instead, the appellant, a permanent labourer working under Gupta, came to the factory and told the complainant that he had been sent by Inspector Gupta and that the money be given to him.
The complainant said that the appellant should send Gupta to receive the money.
The appellant reiterated that he had been deputed by Gupta to collect the money and the same be given to him.
Thereupon the complainant handed over the currency Note of Rs. 100/ (exhibit P l) to the appellant in the immediate presence of P.Ws. 2 and 3.
The appellant put the note in the pocket of his pants.
On receiving the agreed signal, the D.S.P. and his companions rushed in and recovered the currency note (exhibit P l) from the person of the appellant.
The D.S.P. then sent a report to the Police Station on the basis of which a case was registered.
The appellant was arrested.
Subsequently, on 22 6 1968, Gupta was also arrested.
After obtaining the necessary sanction, the appellant and Gupta both were sent up for trial before the Special Judge, Delhi who acquitted Gupta but convicted the appellant and sentenced him to one year 's rigorous imprisonment.
Examined under section 342, Cr.
P.C. the appellant admitted that at the material time he was a permanent labourer (Mazdoor) of the D.E.S.U. 351 working in Shahdara Zone.
He gave this account of the circumstances in which he had received the currency note (exhibit Pl) from the complainant: "At about 12 30, I had come down from the first floor of my office and was going to my house to take my meal in the Hotel.
I was called by Gupta.
He was standing near the boundary wall.
He inquired from mc as to where I was going.
l told him that l was going to take my food.
He directed me that after taking my food I should visit the complainant s factory where the labour was working and told me to ask Jain to pay the money which Guptaji had demanded.
I did not know what sort of money it was and for what purpose it was to be paid by section K. Jain and to be taken by Gupta.
accused.
One Mitter Sell was also present at that time when this talk took place between me and Gupta accused.
I accordingly, after taking my food went to the complainant s factory and checked the work of the labour and then went to the complainant and asked him to pay me the money which had been demanded by Guptaji.
Complainant told me to send Guptaji but I told him that he had asked me to bring the money.
He therefore paid me a, currency note of Rs. 100/ without disclosing anything that this was bribe money to be paid to Gupta co accused.
" He further admitted that soon after the collection of this amount from the complainant, the D.S.P. came there with his party and recovered the same currency note from his possession.
He added that he was only a labourer and was not in a position to show any favour, whatever, to the complainant.
He did not know that the note was bribe money.
He claimed to be all innocent carrier.
In defence, he examined Mitter Sen (DW 1) who corroborated the appellant 's version as to how Gupta had instructed the appellant to collect and bring the money from the complainant.
Two charges, one under section 5(1) (d) read with section 5(2) of the Prevention of Corruption Act and the other under section 161, Penal Code were framed against the appellant.
The charges were in the alternative and it was stated therein that the money was obtained by him either for him self or for Gupta, or for both.
The courts below have convicted the appellant mainly on the ground that proof of receipt of Rs. 100/ (currency note) by the appellant from the complainant raises a presumption under section 4(1) of the Prevention of Corruption Act against him and the appellant has not been able to rebut that presumption.
Section 4(1) of the Prevention of Corruption Act reads: "Wherein any trial of an offence punishable under section 161 or section 165 of the Indian PenaI Code (or of an offence referred to in clause (a) or clause (b) of sub section (1) of section 5 of this Act punishable under sub section
(2) thereof, it is proved that an accused person has accepted or obtained, or 352 has agreed to accept or attempt to obtain, for himself or for A any other person, any gratification (other than legal remuneration or any valuable thing from any person, it shall be presumed unless the contrary is proved that he accepted or obtained, or agreed to accept or attempted to obtain, that gratification or that valuable thing, as the case may be, as a motive or reward such as is mentioned in the said section 161 or, as the case may be, without consideration or for a consideration which he knows to be inadequate.
" From a reading of the above provision it is clear that its operation, in terms, is confined to any trial of an offence punishable under section 161 or section 165, Penal Code or under clause (a) or (b) of section 5(1) read with sub section (2) of that section of the Act.
If at such a trial, the prosecution proves that the accused has accepted or obtained gratification other than legal remuneration, the court has to presume the existence of the further fact in support of the prosecution case, viz., that the gratification was accepted or obtained by the accused as a motive or reward such as mentioned in section 161, Penal Code.
The presumption however, is not absolute.
It is rebuttable.
The accused can prove the contrary.
The quantum and the nature of proof required to displace this presumption may vary according to the circumstances of each case.
Such proof may partake the shape of defence evidence led by the accused, or it may consist of circumstances appearing in the prosecution evidence itself, as a result of cross examination or otherwise.
But the degree and the character of the burden of proof which section 4(1) casts on an accused person to rebut the presumption raised thereunder, cannot be equated with the degree and character of proof which under section 101, Evidence Act rests on the prosecution.
While the mere plausibility of an explanation given by the accused in his examination under section 342, Cr.
P.C. may not be enough, the burden on him to negate the presumption may stand discharged, if the effect of the material brought on the record, in its totality, renders the existence of the fact presumed, improbable.
In other words, the accused may rebut the presumption by showing a mere preponderence of probability in his favour; it is not necessary for him lo establish his case beyond a reasonable doubt see Mahesh Prasad Gupta vs State of Rajasthan(1).
Another aspect of the matter which has to be borne in mind is that the sole purpose of the presumption under section 4(1) is to relieve the prosecution of the burden of proving a fact which is an essential ingredient of the offences under section S (1) (2) of the Prevention of Corruption Act and section 161, Penal Code.
The presumption therefore can be used in furtherance of the prosecution case and not in derogation of it.
If the story set up by the prosecution inherently militates against or is inconsistent with the fact presumed, the presumption will be rendered sterile from its very inception, if out of judicial courtesy it cannot be rejected out of hand as still born.
Let us now consider the facts of the present case in the light of the principles enunciated above.
The testimony of its star witness, section K. (1) A. I. R. 353 Jain (P.W. 1) is that it was Inspector Gupta who had demanded that money as a motive or reward tor expediting the installation of the power connection and that the money was handed over to the appellant only for transmission to Gupta in pursuance of the latter 's instructions given to the complainant earlier in the morning.
It is not the case of the complainant that the appellant had ever demanded any bribe from the complainant, or that the appellant was present on any occasion on which Gupta had demanded the bribe.
Nor has it been shown by the prosecution that the appellant was in any way officially concerned with the installation of the poles or the giving of the electric connection.
At the material time according to the appellant he was working as a mere labourer or Mazdoor in the first floor of the D.E.S.U. Office at Shahdara.
This fact is not controverted by the prosecution.
Of course, it is in evidence that on coming to the factory of the complainant at about 2 P.M., the appellant first went to see the labour working at the installation site and then went to the complainant to receive the money saving that he has been sent by Gupta to fetch it.
Mr. Gobind Das, the learned Counsel for the State contends that this conduct of the appellant in checking the labour, showed that he was not an innocent carrier of the money for Gupta but knew that it was being obtained as a bribe in connection with the installation of the power connection.
In any case, maintains the Counsel the appellant was guilty of abetment of an offence under sec, 161 Penal Code and section 5 of the Act.
We are unable to accede to this contention.
In our opinion, this Act of the appellant was a neutral circumstance.
It was not indicative of a guilty mind.
The appellant explained that he had checked the labour working at site because he had been asked to do so by Inspector Gupta.
This conduct of the appellant, therefore, was no ground to hold that he had received the G.C. Note of Rs. 100/ with the requisite mens rea.
Evidently in collecting this currency note from the complainant he was Acting only as an innocent tool of Gupta.
He was a mere labourer.
Even in that humble position, he was not a member of the gang working at the installation site in the factory of the complainant.
He was not concerned ill his official capacity with the installation work or the giving of power connection.
Being an unconcerned menial, he was incapable of showing any favour or rendering any service to the complainant in connection with his official duties.
One of the essential ingredients of the offence under section 161, I.P.C. with which the appellant stands charged is, that the gratification must have been received by the accused as "a motive or reward" for committing an act or omission in connection with his official functions.
lt must be shown that there was an understanding that the bribe was given in consideration to some official act or conduct.
It is true that in law the incapacity of the government servant to show any favour or render any service in connection with his official duties does not necessarily take the case out of the mischief of these penal provisions.
Nevertheless, it is an important factor bearing on the question as to whether the accused had received the gratification as a motive or reward for doing or for hearing to do any official act or for showing any favour or disfavour in the exercise of his official functions.
This question as to whether the government servant receiving the money 354 had the requisite incriminatory motive is one of fact.
Could it be reasonably said in the circumstances of the instant case that the money was handed over to the appellant or received by him as a motive or reward such as mentioned in section 161, Penal Code ? It is nobody 's case that while collecting the sum of Rs, 100/ , the appellant made any representation, claim or promise, whatever, that he would either himself or through Gupta get an official act done for the complainant.
Indeed, a prudent businessman like Jain would never pay such a substantial amount as a bribe to a mere Class IV servant in consideration of any promise of favour or service held out by the latter.
Such a tall claim or promise to do favour or service by a menial would be manifestly quixotic.
It would not pass muster.
Indeed the complainant did not hand over the money till he after repeated enquiry, was convinced that the appellant was asking for money not for himself but for Gupta and had been sent by the latter to collect an(l fetch it from the complainant.
The conduct attributed by P.W. 1 to the appellant was not incompatible with the role of an innocent carrier.
Thus, paradoxical as it may seem, the very story propounded by the complainant (P.W. 1) negates the presumption, nipping it as it were in the bud.
Be that as it may this statutory presumption being antithetical to the prosecution story, could not be availed of by the prosecution.
This being the position, the appellant could not be held guilty of the charge with the aid of section 4(1) of the Act.
Nor can the appellant be held guilty of abetting the alleged attempt made by Gupta to obtain the illegal gratification.
Intention to aid The commission of the crime, is the gist of the offence of abetment by aid.
Such intention, on the part of the appellant was lacking in this case.
Moreover, Gupta, the principal, has been acquitted and exonerated of committing the offending act, the commission of which is alleged to have been aided by the small fry, the appellant.
The charge under section S (1) (d) of the Act also cannot be sustained for the reason that in the peculiar circumstances or the case, it could not be reasonably said that the appellant had obtained the currency note by using some corrupt or illegal means or otherwise abusing his official position as a public servant.
This point was canvassed on behalf of the appellant before the High Court but was negatived by it in these terms: "In this case the appellant had told the complainant that he had been sent by Inspector Gupta and that he should pay the money.
It has been held by the Special Judge while acquitting Inspector Gupta that he was not the person who had sent the appellant to collect any money from the complainant.
Before contacting the complainant the appellant had checked the labour which was working in the factory for installation of the lines for electricity.
All this showed that he represented himself to the complainant as a person connected with the Department concerned.
He also used corrupt means to ask the money on behalf of Inspector Gupta and thus this ingredient was satisfied.
" We find ourselves unable to agree with this reasoning.
We have already noticed above that this was not the case of the prosecution? as 355 put in evidence, that the appellant had demanded the money on his own account by any express or implied representation to get any favour or service done to the complainant.
Rather, the positive case set up by the prosecution in evidence was that the money was demanded by Gupta and was received by the appellant on his behalf pursuant to the instructions of Gupta given to the complainant earlier.
Therefore, if the prosecution has failed to prove that the money had not been paid to the appellant pursuant to any demand of bribe made by Gupta, the court cannot make out a new case for the prosecution to hold that the amount had been received by the appellant on his own or for some person other.
than Gupta.
We have already held that the appellant was a mere labourer who was not concerned with the installation work at the site or with the giving of the power connection to the complainant.
In view of the categorical position taken by the prosecution in evidence, it does not now lie in their month to may that the appellant must have received the money for himself or for some other person; much less can it be said that the appellant has abused his official position or has used any illegal means in acting as an innocent carrier for Gupta.
Thus, the essential ingredient of the offence under section 5(1) (d) was lacking in this case.
We are therefore of the opinion that on the facts of this case, the prosecution had failed to bring home the charges to the appellant beyond a reasonable doubt.
Accordingly we allow this appeal, set aside the conviction of the appellant and acquit him of the charges levelled against him.
V.P.S. Appeal allowed.
| IN-Abs | An inspector of the Delhi Electric Supply Undertaking demanded a bribe for giving the complainant a power connection for his factory.
Information having been given to the anti corruption police a trap was set.
The inspector did not turn up at the appointed time to receive the money, but the appellant, a permanent labourer working under him, came to the complainant 's factory, told him that he had been sent by the Inspector, and that the money should be given to him. 'The complainant, at first, insisted that the inspector himself should come but later gave him the money.
The money was recovered from the appellant and the inspector and the appellant were charged with offences under the Prevention of Corruption Act.
The trial court acquitted the inspector but convicted the appellant under section S(2) read with section 5(1)(d) of the Act, and under section 161 I.P.C., with the aid of the presumption under section 4(1) of the Act.
The conviction was confirmed by the High Court.
Allowing the appeal to this Court, ^ HELD : ( I ) The question whether a government servant receiving money had the requisite incriminatory motive is one of fact.
[353H, 354A] (2) one of the essential ingredients of the offence under section 161, I.P.C., is that the gratification must have been received by the accused as a motive or reward for committing an act or omission in connection with his official functions.
Even if the government servant was incapable of showing any favour or rendering any service in connection with his official duties, he may be guilty; but, the existence of an understanding that the bribe was given in consideration of some official act or conduct is an important factor bearing on the question as to whether the accused had received the gratification as a motive or reward as mentioned in section 161, I.P.C. [353GH] (3 ) The appellant being a mere labourer was incapable of showing any favour or rendering any service to the complainant in connection with his official duties.
It had not been shown by the prosecution that he was in any way officially concerned with the installation of poles or the giving of electric connection; nor was it shown that the appellant made any representation, claim or promise, that he would either himself or through his inspector get an official act done for the complainant.
Or that the appellant had demanded bribe from the complainant.
[353A C, F] In the absence of any such circumstances the conduct of the appellant was not incompatible with the role of an innocent carrier of money without the requisite mens rea.
[353E] (4) The charge under section 5(1)(d) also is unsustainable because, it could not be reasonably said that the appellant obtained the money by using corrupt or illegal means or otherwise abusing his official position, as a public servant (5) Section 4(1) of the Prevention of Corruption Act Provides that in the trial of an offence punishable under section 161 or 165, I.P.C., or under cls.
(a) or (b) of 5 5(1) read with sub section
5(2) of the Act, if the prosecution proves that the accused had accepted or obtained a gratification other than legal remuneration the court has to presume that the gratification was accepted or obtained by the accused as a motive or reward as mentioned in section 161, I.P.C. [351 H, 52B] 349 (6) (a) The presumption, however, is not absolute and is rebuttable.
The quantum and nature of proof required to displace the presumption, varies according to the circumstances of each case.
Such proof may partake of the shape of defence evidence adduced by the accused or, it may consist of circumstances appearing in the prosecution evidence itself as a result of cross examination or otherwise.
While the mere explanation given by the accused in his examination under section 342, Cr. P.C., may not b enough the burden on him to negate the presumption may stand discharged, if the effect of the material brought on record, in its totality renders the existence of the fact to be presumed improbable.
The accused may, therefore, rebut the presumption by showing a more preponderance of probability in his favour and it is not necessary for him to establish his case beyond reasonable doubt.
[352 CF]] Mahesh Prasad Gupta vs State of Rajasthan, ; followed. (b) Further, the sole purpose of the presumption under section 4(1) is to relieve the prosecution of the burden of proving a fact which is an essential ingredient of the offence under section 5(1) and (2) of the Act and section 161, I.P.C. The presumption, therefore, can be used only in furtherance of the prosecution case and not in derogation of it.
[352F G] (c) In the present case.
the statutory presumption being antithetical to the prosecution story, namely, that it was the inspector who demanded the bribe for showing a favour and that the payment was intended for him, could not be availed of by the Prosecution against the appellant.
[354 CD] (7) Nor can the appellant be held guilty of abetting the alleged attempt made by the inspector to obtain illegal gratification.
Intention to aid the conn mission of the crime is the gist of the offence of abetment, and such intention on the part of the appellant is lacking in this case.
It has not been shown that the appellant was present any occasion when the inspector demanded the bribe.
[354 D G] (8) Moreover, the principal accused had been acquitted.
The prosecution having failed to prove that the money had been paid to the appellant pursuant to the demand for a bribe by the inspector, the court cannot make out a new cause for the prosecution and hold that the amount had been.
received by the appellant on his own or for some person other than the inspector.
[355 B, D]
|
Civil Appeal No. 1716 of 1969.
Appeal by special leave from the award dated the 31st March, 1969 of the Labour Court, Kolhapur, Maharashtra in Reference (IDA) No. f 1968.
B. Sen and I. N. Shroff, for the appellant.
R. K. Garg, section C. Agarwal and V. J. Francis, for the respondent.
The Judgment of the Court was delivered by GOSWAMI, J.
The important question which has been pinpointed hl this appeal by special leave is whether when a domestic inquiry held by an employer is found by the labour court as violative of the principles of natural justice there is any duty cast upon that court to give an opportunity to the employer to adduce evidence afresh before it and whether to do so would vitiate its award.
362 In the present case the workman concerned was charged under the standing orders of the company for soliciting or collecting from the employees contributions for some purpose (allegedly purchase of microphone and loud speaker arrangements) within the factory premises.
The workman denied the charge of soliciting or collecting contribution within the factory premises (for purchase of microphone and loudspeaker) but added that for this purpose I collect the said contribution outside the gate of the Company and this being so, such erroneous information supplied to you by someone should not be considered acceptable".
After holding the domestic inquiry in which some witnesses were examined by the employer and cross examined by the workman and questioning the workman at the outset as well as at the end of the inquiry, the Enquiry Officer Submitted very brief report to the Works Manager (hereinafter the Manager) holding that the charges were established.
He did not give any detailed reasons for preferring the evidence of the six witnesses examined on behalf of the employer in the inquiry to the version of the workman.
The Manager after perusal of the report of the Enquiry officer passed the order of dismissal without adverting to the evidence in the inquiry.
This was particularly necessary since the Enquiry Officer had not given his reasons for his finding.
Another incident occurred during the inquiry before the Manager.
The workman after answering the first question of the Manager.
when another question was put, abruptly left the inquiry without paying any heed to the orders of the Manager and to persuasion of other officer resent asking him to wait.
The dismissal order was passed the same afternoon.
In this appeal we will proceed on the assumption that the domestic inquiry was rightly found by the labour court to be defective.
The labour court is aware of the legal position that it was competent in this case to take evidence of the parties and come to its own conclusion on the merits of the case and to decide whether the order of dismissal was justified or not to enable it to consider about the relief, if any, to he awarded to the workman.
The labour court, however, observed in its award that in the instant case no evidence regarding merits is led by the opponent before this Court.
It is open to the Labour Court to hold an enquiry itself.
But the opponent has chosen not to lead any evidence regarding the merits of the alleged misconduct.
The natural result of vitiating the enquiry would therefore be to set aside the order of dismissal and to direct the reinstatement in service of the dismissed employee with all back wages".
The question posed at the commencement of our judgment is thus highlighted by the aforesaid observations of the labour court and we are required to consider whether after the labour court comes to a decision about the inquiry being defective it has any duty to announce its decision in that behalf to enable the employer an opportunity to adduce evidence before it to justify the order on the charge levelled against a workman.
363 There is, however. no doubt that when the employer chooses to do so the workman will have his opportunity to rebut such evidence.
There is also no doubt, whatsoever, that if the employer declines to avail of such an opportunity, it will be open to the labour court to make an appropriate award and the employer will thereafter be able to make no grievance on that score.
In dealing with a case of dismissal of an industrial employee, this Court has time and again adverted to various principles and it is not necessary to recount all those decisions.
It will be sufficient to concentrate our attention only on a few of the decisions so far as material for our purpose and which are also rightly referred to at the bar.
The first case arising out of an award that has a material Bearing on the question is that of Workmen of Motipur Sugar Factory (Private) Limited vs Motipur Sugar Factory(1) which is a decision of four learned Judges.
Inter alia, the question that arose in that appeal was as to whether, since the management held no inquiry as required by the standing orders, it could not justify the discharge before the Tribunal.
In Motipur Sugar Factory 's case (supra), the Court observed at page 597 of the report as follows : "If it is held that in cases where the employer dismisses his employee without holding an enquiry, the dismissal must he set aside by the industrial tribunal only on that ground, it would inevitably mean that the employer will immediately proceed to hold the enquiry and pass an order dismissing the employee once again.
In that case, another industrial dispute would arise and the employer would be entitled to rely.
upon the enquiry which he had held in the meantime.
This course would mean delay and on the second occasion it will entitle the employer to claim the benefit of the domestic enquiry given.
On the other hand, if in such cases the employer is given an opportunity to justify the impugned dismissal on the merits of his case being considered by the tribunal for itself and that clearly would be to the benefit of the employee.
That is why this Court has 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.
This view is consistent with the approach which industrial adjudication generally adopts with a view to do justice between the parties without relying too much on technical considerations and with the object of avoiding delay in the disposal of industrial disputes".
The consequence that can ensue from a contrary view, as noticed by the, Court in Motipur Sugar Factory 's case (supra), will appear from what took place in the Management of Northern Railway.
Cooperative Society Ltd. vs Industrial Tribunal, Rajasthan, Jaipur and Anr.(2) where pursuant to the award after reinstating the employee the management (1) ; (2) ; 364 drew a fresh proceeding and passed a fresh order of removal and the A said order was again the subject matter of another reference to the industrial tribunal.
The pertinent question that arises for consideration is whether it is the duty of the tribunal to make known its decision to the parties on this jurisdictional aspect of the case so that the employer can avail of the opportunity to justify the dismissal based on the charge.
In Management of Ritz Theatre (P) Ltd. vs Its workmen (1), this Court was required to deal with rather ingenious argument.
It was contended in that case by the workmen, in support of the tribunal 's decision, that since the management at the very commencement of the trial before the Tribunal adduced evidence with regard to the merits of the case it should be held that it had given up its claim to the propriety or validity of the domestic enquiry.
While repelling this argument this court made some significant observations: "In enquiries of this kind, the first question which the Tribunal has to consider is whether a proper enquiry has been held or not.
Logically, it is only where the Tribunal is satisfied that a proper enquiry has not been held or that the enquiry having been held properly the finding recorded at such an enquiry are perverse, that the Tribunal derives jurisdiction to deal with the merits of the dispute.
Ir the view taken by Tribunal was held to be correct, it would lead to this anamoly that the employer would be precluded from justifying the dismissal of his employee by leading additional evidence unless he takes the risk of inviting the Tribunal to deal with the merits for itself, because as soon as he asks for permission to lead additional evidence, it would follow that he gives up his stand based on the holding of the domestic enquiry.
Other wise, it may have to be held that in all such cases no evidence should be led on the merits unless the issue about the enquiry is tried as a preliminary issue.
If the finding on that preliminary issue is in favour of the employer, then, no additional evidence need be cited by the employer; if the finding on the said issue is against hm, permission will have to be given to the employer to cite additional evidence".
Although this Court in Ritz Theatre 's case (supra) observed that such a procedure may be "elaborate and somewhat cumbersome" it was not held to be illegal nor had if been rejected out of hand In State Bank of India vs R. K. Jain & ors.(2), this Court had to deal with a similar question.
The contention on behalf of the management in that case was that "Even assuming that the domestic inquiry conducted by the Bank was in any manner vitiated, the Industrial Tribunal (1) [1963] 3 S.C.R.461, 469 470. (2) [1972] I S.C.R. 755,766,777.
365 erred in law in not giving an opportunity to the management to adduce evidence before it to establish the validity of the order of discharge".
In dealing with the above contention this Court observed as follows: "If the management defend its action solely on the basis that the domestic inquiry held by it is proper and valid and if Tribunal holds against the management on that point, the management will fail.
It is essentially a matter for the management to decide about the stand that it proposes to take before the Tribunal.
It may be emphasised, that it is the right of the management to sustain its order by adducing also .
independent evidence before the Tribunal.
It is a right given to the management and it is for the management to avail it self of the said opportunity".
On the facts of that case this Court held that the management, having made it clear to the Tribunal that it was resting its case solely on the domestic enquiry, had no right to make a grievance that it should have been given an opportunity to adduce evidence on facts before the Tribunal in justification of its order.
This Court further observed in that case that "no such opportunity was asked for by the appellant nor even availed of".
This Court in that case took into account management 's consistent stand throughout before Tribunal as also that it made no grievance on the score of non availability of opportunity to adduce evidence even in the special leave petition.
The claim of the Bank in that case was rejected on the peculiar facts found by this Court.
Referring to the State Bank 's case (supra) in Delhi Cloth & General Mills Co. vs Ludh Budh Singh(l), this Court observed that "the grievance of the management before this Court that the Tribunal should have given such an opportunity Suo moto was not accepted in the circumstances of that case".
There was a further observation in the Delhi Cloth & General Mills ' case (supra) to the following effect: "It may be pointed out that the Delhi and Madhya Pradesh High Courts had held that it is the duty of the Tribunal to decide, in the first instance, the propriety of the domestic enquiry held by the management and if it records, a finding against the management, it should suo moto provide an opportunity to the management to adduce additional evidence though the management had made no such request.
This view was held to be erroneous by this Court, in State Bank of India vs R. K. Jain & others" (supra).
(1) ; ,54 56 10 839Sup.
CI/75 366 We may now refer to the propositions (4), (5) and (6) in the A Delhi Cloth and General Mills ' case (supra): (4) "When a domestic enquiry has been held by the management and the management relies on the same, it is open to the latter to request the Tribunal to try the validity of r the domestic enquiry as a preliminary issue and also ask for an opportunity to adduce evidence before the Tribunal, if the finding on the preliminary issue is against the management.
However elaborate and cumbersome the procedure may be, under such circumstances, it is open to the Tribunal to deal, in the first instance, as a preliminary issue the validity of the s domestic enquiry.
If its finding on the preliminary issue is in favour of the management, then no additional evidence need be cited by the management But, if the finding on the preliminary issue is against the management, the Tribunal will have to give the employer an opportunity to cite additional evidence and also give a similar opportunity to the employee to lead evidence contra, as the request to adduce evidence had been made by the management to the Tribunal during the course of the proceedings and before the trial has come to an end . " (5) "The management has got a right to attempt to sustain its order by adducing independent evidence before the Tribunal.
But the management should avail itself of the .
said opportunity by making a suitable request to the Tribunal before the proceedings are closed.
If no such opportunity has been availed of, or asked for by the management, before the proceedings are closed, the employer can make no grievance that the Tribunal did not provide such an opportunity.
The Tribunal will have before it only the enquiry proceedings and it has to decide whether the proceedings have been held properly and the findings recorded therein are also proper".
(6) "If the employer relies only on the domestic enquiry and does not simultaneously lead additional evidence or ask for an opportunity during pendency of the proceedings to adduce such evidence, the duty of the Tribunal is only to consider the validity of the domestic enquiry as well as the finding recorded therein and decide the matter.
If the Tribunal decodes that the domestic enquiry has not been held properly, it is not its function to invite suo moto the employer to adduce evidence before it to justify the action taken by it".
In the Delhi Cloth and General Mills ' case (supra) dealing with the case of the management 's application to adduce evidence after close of arguments, although on the same day after the Court reserved judgment, this Court observed as follows: "The appellant did not ask for an opportunity to adduce evidence when the proceeding were pending nor did it avail itself of the right given to it in law to adduce evidence before he Tribunal during the pendency of the proceedings".
367 In Workmen of Messrs Firestone Tyre & Rubber Company of India (P) Ltd. vs Management & Others, (1) this Court stated the law laid down by this Court as on December 15, 1971.
For our purpose we will extract from that decision only propositions 4, 6, 7 and 8: (4) "Even if no enquiry has been held by an employer or if the enquiry held by him is found to be defective, the, Tribunal in order to satisfy itself about the legality and validity of the order, has to give an opportunity to the employer and employee to adduce evidence before it.
It is open to the employer to adduce evidence for the first time justifying his action".
(6) "The Tribunal gets jurisdiction to consider the evidence placed before it for the first time in justification of the action taken only, if no enquiry has been held or after the enquiry conducted by an employer is found to be defective".
(7) "It has never been recognised that the Tribunal should straightway, without anything more, direct reinstatement of a dismissed or discharged employee, once it is found that no domestic enquiry has been held or the said enquiry is found to be defective".
(8) "An employer, who wants to avail himself of the opportunity of adducing evidence for the first time before the Tribunal to justify his action, should ask for it at the appropriate stage.
If such an opportunity is asked for, the Tribunal has no power to refuse.
The giving of an opportunity to an employer to adduce evidence for the first time before the Tribunal is in the interest of both the management and the employee and to enable the Tribunal itself to be satisfied about the alleged misconduct".
We are particularly concerned with proposition ( 8 ) .
What is the appropriate stage was specifically adverted to in the Delhi Cloth & General Mills ' case (supra) which we are now required to seriously consider whether this conclusion is correct and ensures justice to all concerned in an industrial adjudicating.
Propositions (4), (6) and (7) set out above are well recognised.
It is, however, fair and in accordance with the principles of natural justice for the labour court to withhold its decision on a jurisdictional point at the appropriate stage and visit a party with evil consequences of a default on its part in not asking the court to give an opportunity to adduce additional evidence at the commencement of the proceedings or at any rate, in advance of the pronouncement of the order in that behalf ? Tn our considered opinion it will be most unnatural and unpractical to expect a party to take a definite stand when a decision of a jurisdictional fact has first to be reached by the labour court prior embarking upon an enquiry to decide the dispute on its merits.
The reference involves determination of the larger issue of discharge or (1) ; , 605 607.
368 dismissal and not merely whether a correct procedure had been followed by the management before passing the order of dismissal.
Besides, even if the order of dismissal is set aside on the ground of defect of enquiry.
a second enquiry after reinstatement is not ruled out nor in all probability a second reference.
Where will this lead to ? This is neither going to achieve the paramount object of the Act namely industrial peace, since the award in that case will not lead to a settlement of the dispute.
The dispute, being eclipsed, pro tempore, as a result of such an award, will.
be revived and industrial peace will again be ruptured.
Again another object of expeditious disposal of an industrial dispute (sec section 15) will be clearly defeated resulting in duplication of proceedings.
This position has to be avoided in the interest of labour as well as of the employer and in furtherance of the ultimate aim of the Act to foster industrial peace.
We are, therefore, clearly of opinion that when a case of dismissal or discharge of an employee is referred for industrial adjudication the labour court should first decide as a preliminary issue whether the domestic enquiry has violated the principles of natural justice.
When there is no domestic enquiry or defective enquiry is admitted by the employer, there will be no difficulty.
But when the matter is in controversy between the parties that question must be decided as a preliminary issue.
On that decision being pronounced it will be for the management to decide whether it will adduce any evidence before the labour court.
If it chooses not to adduce any evidence, it will not be thereafter permissible in any proceeding to raise the issue.
We should also make it clear that there will be no justification for any party to stall the final adjudication of the dispute by the labour court by questioning its decision with regard to the preliminary issue when the matter, if worthy, can be agitated even after the final award.
It will be also legitimate for the High Court to refuse to intervene at this stage.
We are making these observations in our anxiety that there is no undue delay in industrial adjudication.
In the present case, however, besides the long delay that has already taken place, since the law laid down by this Court was not very clear at the time of the award in casting a duty upon the labour court to decide the preliminary issue and also in view of the submission of the appellant that it is prepared to pay the entire salary of the workman upto date it will meet the interest of justice if the order of reinstatement is converted to one of compensation in terms of his entire salary from the date of dismissal to the date of this decision except for what has already been paid to him instead of remitting the.
matter to the labour court for disposal in the light of this judgment by setting aside the award.
In the result the appeal is dismissed with the above modification of the relief There will be, however, no order as to cost.
P.B.R. Appeal dismissed.
| IN-Abs | On the question, whether when a domestic inquiry held by an employer was found by the labour court as violative of the principles of natural justice there Was any duty cast upon that court to give an opportunity to the employer to adduce evidence afresh before it and whether failure to do so would vitiate its ^ HELD: When a case of dismissal or discharge of an employee is referred for industrial adjudication the labour court should first decide as a preliminary issue whether the domestic enquiry has violated the principles of natural justice.
When there was no domestic enquiry or defective enquiry is admitted by the employer, there will be no difficulty.
But when the matter is in controversy between the parties that question must be decided as a preliminary issue.
On that decision being pronounced it will be for the management to decide wether it will adduce any evidence before the labour court.
If it chooses not to adduce any evidence, it will not be thereafter permissible in any proceeding to raise the issue.
Three will be no justification for any party to stall the final adjudication of the dispute by the labour court by questioning it, decision with regard to the preliminary issue when the matter, if worthy, can be agitated even after the final award.
It will be legitimate for the High Court to refuse to intervene at this stage.
[368C E] Workmen of Motipur Sugar Factory (private) Limited vs Motipur Sugar Factory ; Management of Northern Railway Cooperative Society Ltd. vs industrial Tribunal Rajasthan, Jaipur and Anr. ; ; Management of Ritz Theatre (P) Ltd. vs Its workmen ; State Bank of India vs R. K. Jain & OrS. , 777; Delhi Cloth & General Mills Co. vs Ludh Budh Singh and Workmen of Messrs Firestone Tyre & Rubber Company of lndia (P) Ltd. vs Management & Others, , referred to.
|
ivil Appeals Nos.
1700 & 1827 and 1021 of 1973.
Appeals by special leave from the judgment and orders dated the 17 7 1972, S 6 1972 and 8 8 1972 of the Mysore High Court in W.P.S NOS.
1921/1969/,2869/1967 & 3815/69 respectively.
L. N. Sinha, Solicitor General of India, M. Veerappa, Altaf Ahmad, for the appellants (in Civil Appeal No. 1700/73).
A. K. Sen, K. N. Bhat, for respondents (1 6 & 8 10) M. Veerappa & Altaf Ahmad, for the appellant.
K. N. Bhat, for respondents 1 7 M. Veerappa, for the appellants.
R. B. Datar, Jayashree Wad and Rajen Yashpaul, for the respondent.
1700 & 1827 of 1973 MATHEW J. We take up for consideration Civil Appeal No. 1827 f 1973.
The respondents are the owners of the lands in question.
371 They were sought to be acquired for the Regional Engineering College at the instance of the Education department of the State of Mysore.
In a notification under section 4 of the Land Acquisition Act (hereinafter called the Act) dated 5 1 1960 and published in the Mysore Gazette dated 5 5 1960, it was stated that in view of the urgency of the cases, the provisions of section SA of the Act shall not apply to the case.
The respondents challenged the notification in a writ petition (No. 768 of 1960).
When the writ petition came up for final disposal, a memo was produced on behalf of the State Government and the Court, On the basis of the Memo, dismissed the writ petition.
The memo was to this effect: '`The respondent agrees to modify the impugned notification issued under Section 4(1) read with Section 17 of the Land Acquisition Act and to give an opportunity to the petitioner of being heard under Section 5 A of the Act.
Hence the relief sought for by the petitioner becomes unnecessary.
" The Special Land Acquisition officer, Mangalore, issued notices to the respondents stating that the respondents will be given opportunity to file Objections under section 5A of the Act pursuant to the order in Writ Petition No. 768 of 1960.
The respondents filed their objections and, after an inquiry, the Land Acquisition officer sent his report to the Government.
The Government considered the report and over ruled the objections.
This was followed by a notification under section 6 of the Act.
The respondents challenged the above notification as well as the notification under section 4 by a writ petition in the High Court.
The respondents attacked the validity of the notification on the ground that the Education Department at whose instance the land was sought to be acquired was not given notice as required under rule 3(b) of the Madras Land Acquisition Rules as in force in the Madras area of the State of Mysore at the time of inquiry under section 5A and that since the requirement of notice as enjoined by rule 3(b) was mandatory, the failure to comply with that requirement rendered the notifications under sections 4 and 6 of the Act invalid.
The High Court by its order upheld the contention of the respondents and quashed the notifications issued under section 4 and section 6 of the Act.
It is against this order that the appeal has been filed by special leave by the State of Karnataka and the Special Land Acquisition officer, Mangalore.
The only point which arises for consideration is whether the pro visions of rule 3(b) were mandatory and therefore the failure to issue the notice to the department concerned as enjoined by the rule was fatal to the validity of the notifications under sections 4 and 6 of the Act.
The reasons which impelled the High Court to come to that conclusion were, if the Department to which a notice is issued files any reply by way of answer to the objections, the objector will know what the Department has stated by way of reply and, at the stage 372 Of hearing of objections, he (the objector) may adduce evidence or A address arguments to meet what has been stated in such reply, and that the objectors will have an opportunity of urging before the Government that the reasons given by the Department in the reply to the objections should not be accepted.
Rule 3 reads: "R. 3 Hearing of objection: (a) If a statement of 13 objections (is?) filed after the due date or by a person who is not interested in the land it shall be summarily rejected.
(b) If any objections are received from a person interested in the land and within the time prescribed in sub section ( 1) of s 5A, the Collector shall fix a date for hearing the objections and give notice thereof to the objector as well as to the department or company requiring the land, where such department is not the Revenue Department; Copies of the objections shall also be forwarded to such department or company.
The department or company may file on or before the date fixed by the collector a statement by way of answer to the objections and may also depute a representative to attend the enquiry.
" l) The learned Solicitor General, appearing on behalf of the appellants submitted that rule 3(b) is inconsistent with section 5A(2) or tilt: reason that section 5A(2) itself provides for making further inquiry which the Collector thinks necessary after considering the objections filed by the owner or the person interested in the land and to read rule 3(b) as casting a mandatory duty upon him to give notice of the objection to the department requiring the land and to consider the answer to the objection, if any, filed by the Department would be contrary to the section.
The argument was that when sub section (2) of section 5A provides for further inquiry in the discretion of the Collector a rule making it mandatory that the Deputy Commissioner (the Collector) should give notice of the objection to the department concerned and consider its answer to the objection would be to convert a discretionary power into a mandatory duty and is therefore ultra vires 1 the section.
We do not think that the contention is right.
What the material provision of s 5A(2) says is that "the Collector shall give the objector .
an opportunity of being heard either in person or by pleader and shall after hearing all such objections and after making such further enquiry if any as he thinks necessary".
This does not mean that a rule cannot be framed by the rule making authority for the guidance of the Deputy Commissioner (the Collector) which would enable the Department concerned to place its view point before him when considering the objection under section 5A.
The proceedings of the Collector are quasi judicial and it is only proper that he should be apprise of the attitude of the department requiring the land in the light of the objections filed.
If the department requiring the land thinks, in the light of the objection, that the land sought to be acquired is not necessary for the purpose for which it was required to be acquired or that more suitable land is available in the vicinity, it is only fair that 373 the Deputy Commissioner (Collector) is informed about it.
The answer of the department to the objection filed by the objector, even if adverse to the objector, would, at any rate, enable the Collector to bring a more informed and rational approach to the controversy before him.
The Collector has to send his recommendation to government on the basis of his finding together with the record of the proceedings for the ultimate decision by the Government.
IT would be helpful to the Government in making the decision to have before it the answer to the objection by the department in order to appreciate the rival view points.
We do not think that rule 3(b) was ultra vires.
the section.
We also think that the government when it framed the rule had in mind that the Deputy Commissioner (Collector) should follow it while functioning under section 5A(2) and so the requirement of the rule was mandatory.
In determining the question whether a provision is mandatory or directory, one must look into the subject matter and consider the importance of the provision disregarded and the relation of that provision to the general object intended to be secured.
No doubt, all laws are mandatory in the sense they impose the duty to obey on those who come within its purview.
But it does not follow that every departure from it shall taint the proceedings with a fatal blemish.
The determination of the question whether a provision is mandatory or directory would, in the ultimate analysis, depend upon the intent of the law maker.
And that has to he gathered not only from the phraseology of the provision but also by considering its nature, its design and the consequences which would follow from construing it in one way or the other.
We see no reason why the rule should receive a permissible interpretation instead of a pre emptory construction.
As we said, the rule was enacted for the purpose of enabling the Deputy Commissioner (Land Acquisition Collector) to have all the relevant materials before him for coming to a conclusion to be incorporated in the report to be sent to the Government in order to enable the Government to make the proper decision.
In Lonappan vs
Sub Collector of Palghat(1) the Kerala High Court took the view that the requirement of the rule regarding the giving of notice to the department concerned was mandatory.
The view of the Madras High Court in K. V. Krishna Iyer vs The State of Madras(2)is also much the same.
We think that the High Court was right in its conclusion that the requirement of the rule was mandatory.
We quash the proceedings of the Collector (Special Land Acquisition officer, 2nd appellant) under section SA(2) as also the decision of the Government on the basis of the report of the Collector under the sub section.
The result is that the notification under section 6 has to be quashed and we do so.
But We sec no reason to quash the notification under section 4.
We direct the Collector (2nd appellant) to proceed with the inquiry on the basis of the objection already filed under section 5A after (1) A.I.R. 1959 Kerala 343.
(2) (1967) 2 Madras law Journal 422.
374 giving notice to the department concerned viz., the Education Department and after allowing it an opportunity to file an answer to the objection.
We dismiss the appeal subject to the modification indicated.
No costs.
The facts and circumstances in Civil Appeal No. 1700 of 1973 are similar to those in Civil Appeal No. 1827 of 1973, the only difference being that the rule which falls to be considered is rule 5(2) framed by the Government of Mysore under section 55 of the Act.
That rule is similar to rule 3(b) of the Madras rule.
For the reasons given in the judgment in Civil Appeal No. 1827 of 1973, dismiss Civil Appeal No. 1700 of 1973 also with the modification indicated therein and without any order as to costs.
Civil Appeal No. 1021 of 1973 The facts in this appeal are similar to those in the two Civil Appeals referred to above and the decision there will govern the decision here.
But counsel for the respondent in this appeal said that the notification under section 4 should be quashed in respect of properties involved in this appeal for the reasons that public notice had not been given as required in section 4 of the Act, that the report under section 5A was not sent to the Government within the prescribed period, that the High Court failed to pass upon these questions and that the case must therefore be remitted to the High Court.
The notification under section 4 was published on 13 4.1967.
Objections were filed by the respondent under section 5A of the Act.
The Deputy I I Commissioner submitted his report to the Government.
The Government over ruled the objections.
The notification under section 6 was published in the gazette on 19 10 1968.
The Writ Petition challenging the validity of the notification was filed some time in July or August, 1969.
We do not think that the respondent was entitled to challenge the validity of the notification under section 4 of the Act as the Writ Petition challenging the notification was filed after an unreasonable lapse of time.
If public notice as required by section 4 of the Act was not given and that would per se vitiate the notification under section 4, the ' appellant should have challenged its validity within a reasonable time of the publication of the notification.
The respondent knew of the notification and filed objection under section 5 of the Act.
In these circumstances we see no reason to accept the submission of counsel.
We also see no substance in the argument of the counsel that the report drawn up under section SA(2) was not sent to the Government within the time prescribed and therefore the proceedings were invalid.
We have directed a fresh inquiry by the Deputy Commissioner (Collector) under section SA and therefore, the Deputy Commissioner will in any event have to send a fresh report to the Government.
In this view we do not think that there is any ground for remitting the case to the High Court, simply because the High Court failed to , consider these points.
The appeal is dismissed with the modification; indicated in the two appeals referred to above.
No costs.
P.H.P. Appeals dismissed.
| IN-Abs | The respondents are the owners of the land in question.
the land was sought to be acquired for an Engineering College at the instance of the Education Department of the State of Mysore.
Section 4 notification was issued in the year 1960.
After an enquiry into the objections filed under section 5A the land Acquisition officer sent his report to the Government.
Government over ruled the objection and issued a notification under section 6.
The Education Department at whose instance the land was sought to be acquired was not given notice as required by rule (b) of Madras Land Acquisition rules.
The respondents field a Writ Petition in the High Court challenging the validity or both the notifications on the ground that the Education Department was not consulted.
The High Court upheld the contention of ' the respondents and quashed the notifications issued under sections 4 and 6 of the Act on the ground that if the Department concerned filed any reply pursuant to the notice issued the objector would know what the Department has stated by way of reply and at the stage of hearing of objection.
tile objector might adduce evidence or address arguments to meet what is stated in such reply.
The objector.
could further urge before the Government that the reasons given by the department in reply to the objections should not be accepted: On appeal by Special Leave it was contended by the appellant.
Rule 3 (b) is inconsistent With section 5A (2) for the reasons that sub section (2) of section 5A provides for further enquiry in the discretion of the Collector and rule 3(b) if treated as mandatory would be to convert the discretionary power into a mandatory duty and is therefore, ultra vires the section.
The provisions of rule 3(b) were not mandatory and that therefore, failure to issue the notice to the department concerned was not fatal to the validity of the notification.
^ HELD: 1.
Section 5A requires the Collector to make a report after hearing the objections.
It does not mean that a rule cannot be framed which would enable the department concerned to place its view point before the Collector when considering the objection under section 5A.
The proceeding of the Collector are quasi judicial and it is only proper that he should be apprised of the attitude of the department requiring the land in the light of the objections filed.
It would be helpful to the Government in making the decision to have before it the answer to the objection by the department in order to appreciate the riv view point.
Rule 3(b) is not Ultra vires Section SA.
[372F H 373 A C] 2.
In determining the question whether a provision is mandatory or directory one must look into the subject matter.
and consider the importance of the provision disregarded and the relation of.
that provision to the general object intended to be secured.
One has to consider the nature the design and the consequence which will follow from construing a provision in one way or the other.
Rule 3(b) was enacted for the purpose of enabling the Collector to have all the 370 relevant materials before him for coming to a conclusion to be incorporated A in the report to be sent to the Government in order to enable the Government to make proper decision.
The High Court was right in holding that the provision WAS mandatory.
[373C F] The notification under Section 6 was quashed but the notification under section 4 was upheld.
[373 G] CIVIL APPEAL No. 1021 or 1973 The respondents raised further contention in the above appeal to the effect that notification under section 4 should be quashed since the public notice as required by section 4 is not given and the report under section 5A was not sent to the Government within the prescribed period.
HELD: The notification under section 4 was published on 13 4 1967.
Objections were filed by the respondent under section 5A of the Act.
The notification under section 6 was published in October 1968.
The Writ Petition was filed in July 1969.
The respondent was not entitled to challenge the validity of the notification under section 4 of the Act as Writ Petition challenging the notification was filed after an unreasonable lapse of time.
The respondent should have challenged the validity of the notification under section 4 within a reasonable time of ' the publication of the notification.
The respondent knew of the notification and file(l objections under section 5A of the Act.
There is no substance in the argument that the report under section 5A was not sent to the Government within the prescribed period.
In any event since a fresh enquiry is directed under section 5A the Collector will in any event have to send a fresh report to the Government.
[374D G]
|
Civil Appeal No. 1308 of 1973.
From the order dated the 30th June, 1973 of the Central Government, Ministry of Law, Justice and Company Affairs, Department of Company Affairs.
section V. Gupte and Vinoo Bhagat, for the appellant.
P. P. Rao and section P. Nayar, for respondent.
Shri Narain, for interveners.
The Judgment of A. N, Ray, C.J., and K. K. Mathew, J. was delivered by Mathew, J. V. R. Krishna Iyer, J. and section Murtaza Fazal Ali, J. gave separate Opinions.
MATHEW, J.
This appeal is from an order dated 30 6 1973 passed by the Government of India dismissing an application filed by the appellant on 5 5 1972 under section 23(4) of the (hereinafter referred to as the 'Act ') for acquiring 100 per cent share capital of Shahjahanpur Sugar Private Ltd. The appellant is a public limited company and is a subsidiary of United Breweries Ltd. and other companies interconnected with it.
The appellant 's undertaking consists of a sugar factory and a distillery for manufacture of liquor at Rosa, Shahjahanpur and another distillery at Asansol The appellant 's sugar factory at Rosa had been facing difficulties for some years on account of inadequate supply of sugarcane and to ensure regular and adequate supply of sugarcane, the appellant proposed to float a company with a share capital of Rs. 50 lakhs for the purpose of taking over the sugar unit of the appellant and for working it as an undertaking of the company to he formed.
The proposal was that the appellant would be entitled to an allotment of 100 per cent shares in the new company and a further sum of Rs. 15 ,77,093/ as consideration for transfer of the sugar unit.
According to the appellant, its object in getting 100 per cent shares in the new company was to offer the shares to cane growers later on.
11 L839 Sup CI/75 382 The appellant wrote a letter to the Secretary of the Company Law A Board on 15 10 1971 stating that since the new company would be a subsidiary of the appellant, the approval of the Company Law Board under section 372 of the Companies Act would not be necessary, in view of the provisions of clause (d) of sub section 14 of the said section.
The Central Government in the Ministry of Industry and Company Affairs .
3, replied by a letter dated November 1, 1971, that the provisions of f section 372(2) of the Companies Act would be applicable to the acquisition of the shares by the appellant in the company proposed to be formed.
The appellant, therefore, applied for permission under section 372 of the Companies Act to acquire the 100 per cent shares of the new company upon its incorporation.
The appellant was also told by the Central Government in its letter dated 5 1 1972 that sections 22 and 23 of the Act would prima facie be attracted and that the appellant should file a separate application under the relevant section.
The appellant had already intimated the Central Government, Department of Company Affairs on 17 11 1971 that the provisions of sections 21, 22 and 23 of the Act would not apply to its proposal to acquire the shares of the company proposed to be formed for taking over the sugar unit of the appellant.
However, the appellant filed an application dated 5 5 1972 purporting to be under section 23 (4) of the Act.
The new company proposed to be set up by the appellant was incorporated on June 15, 1973 under the name of Shahjahanpur Sugar Private Limited.
By order dated July 2, 1973, the Central Government, in the Department of Company Affairs rejected the appellant 's application under section 372(4) of the Companies Act for investing Rs. 50 lakhs in the equity shares of the capital of Shahjahanpur Sugar Private Limited.
By another order dated 30 6 1973, the Central Government, in the Department of Company Affairs also rejected the appellant 's application under section 23(4) of the Act.
As already stated, this appeal is against the latter order, Under section 55 of the Act.
The point for consideration in this appeal lies in a narrow compass viz., whether section 23(4) was attracted to the facts of the case.
To decide the question it is necessary to refer to certain provisions of the Act.
The object of the Act as is clear from the preamble is that the operation of the economic system should not result in the concentration of economic power to the common detriment, for prohibition of monopolistic and restrictive trade practices and for matters connected therewith or incidental thereto.
"Undertaking" is defined under section 2(v): "undertaking" means an undertaking which is engaged in the production, supply, distribution or control of goods of any description or the provision of service of any kind".
Chapter IlI is concerned with concentration of economic power and section 20 occurring in Part A of that chapter states that this part shall apply to an undertaking if the total value of (i) its own assets, or 383 (ii) its own assets together with the assets of its inter connected undertaking is not less than twenty crores of rupees; and, to a dominant undertaking (i) where it is a single undertaking, the value of its assets, or (ii) where it consists of more than one undertaking, the sum total of the value of the assets of all the inter connected undertakings constituting the dominating undertaking, is not less than one crore of rupees.
Section 21 deals with expansion of undertakings.
It provides that where an undertaking to which this Part applies proposes to substantially expand its activities by the issue of fresh capital or by the installation of new machinery or other equipment or in any other manner, it shall, before taking any action to give effect to the proposal for such expansion, give to the Central Government notice of its intention to make such expansion stating therein the scheme of finance with regard to the proposed expansion, whether it is connected with any other under taking Of undertakings and, if so, giving particulars relating to all the inter connected undertakings and such other information as may be prescribed.
Section 22 provides for the establishment of new undertakings.
It says that no person or authority, other than government, shall, after the commencement of this Act, establish any new under taking which, when established would become an inter connected undertaking of an undertaking to which clause (a) of section 20 applies, except under, and in accordance with the previous permission of the Central Government.
Sub section (2) of that section provides for an application for that purpose to the Central Government.
Section 23 provides: "23.
Merger, amalgamation and take over (1) Not withstanding anything contained in any other law for the time being in force, (a) no scheme of merger or amalgamation of an under taking to which this Part applies with any other undertaking, (b) no scheme of merger or amalgamation of two or more undertakings which would have the effect of bringing into existence an undertaking to which clause (a) or clause (b) of section 20 would apply.
shall be sanctioned by any Court or be recognised for any purpose or be given effect to unless the scheme for such merger or amalgamation has been approved by the Central Government under this Act.
(2) If any undertaking to which this Part applies frames a scheme of merger of amalgamation with any other under taking or a scheme of merger or amalgamation is proposed 384 between two or more undertakings, and, if as a result of such merger or amalgamation, an undertaking would come into existence to which clause (a) or clause (b) of section 20 would apply, it shall, before taking any action to give effect to the proposed scheme, make an application to the Central Government in the prescribed form with a copy of the scheme annexed thereto, for the approval of the scheme.
(3) Nothing in sub section (1) of sub section (2) shall apply to the scheme of merger or amalgamation of such interconnected undertakings as are not dominant undertakings and as produce the same goods.
(4) If an undertaking to which this Part applies proposes to acquire by purchase, take over or otherwise the whole or part of an undertaking which will or may result either (a) in the creation of an undertaking to which this Part would apply; or (b) in the undertaking becoming an inter connected undertaking of an undertaking to which this Part applies, it shall, before giving any effect to its proposals, make an application in writing to the Central Government in the prescribed form of its intention to make such acquisition, stating therein information regarding its inter connection with other undertakings the scheme of finance with regard to the proposed acquisition and such other information as may be prescribed.
(5) No proposal referred to in sub section (4) which has been approved by the Central Government and no scheme of finance with regard to such proposal shall be modified except with the previous approval of the Central Government.
(6) on receipt of an application under sub section (2) or sub section (4), the Central Government may, if it thinks fit, refer the matter to the Commission for an inquiry and the Commission may, after such hearing as it thinks fit, report to the Central Government its opinion thereon.
(7) on receipt of the Commission 's report the Central Government may pass such orders as it may think fit.
(8) Notwithstanding anything contained in any other law for the time being in force, no proposal to acquire by purchase, take over or otherwise of an undertaking to which this part applies shall be given effect to unless tho Central Government has made an order according its approval to the proposal.
(9) Nothing in sub section (4) shall apply to the acqusition.
by undertaking which is not a dominant under 385 taking, of another undertaking which is not also a dominant undertaking, if both such undertakings produce the same goods: Provided that nothing in this sub section shall apply, if, as a result of such acquisition, an undertaking comes into existence to which clause (a) or clause (b) of section 20 would apply.
Section 28 states that the Central Government before according approval in the exercise of its powers under Part A or Part of Chapter III shall take into account all matters which appear in the particular circumstances to be relevant and enjoins that regard shall be had to the need consistently with the general economic position of the country to achieve the production, supply and distribution, by most efficient and economical means, of goods of such types and qualities and several other considerations specified therein.
The submission of the counsel for the appellant was that in order that an enterprise may become an 'undertaking ' within the definition of the word 'undertaking ' in section 2(v) of the Act, it is necessary that the enterprise must be engaged in production, supply, distribution or control of goods of any description or the provision of service of any kind and that when the appellant proposed to form the new company for taking over the sugar unit of the appellant in consideration of 100 per cent shares in the new company, that company had not acquired the sugar unit of the appellant nor was it engaged in the production, supply, distribution or control of goods, etc.
as an enterprise of Shahjahanpur Sugar Private Limited and so there was no proposal to acquire by purchased take over or otherwise of the whole or part of any undertaking within the meaning of section 23(4).
According to counsel, it is only when an 'undertaking ' to which Part III applied proposes to acquire by purchase, take over or otherwise, the whole or part of an undertaking which would result in the creation of an undertaking to which that Part applies that section 23 (4) would be attracted.
In other words, the argument was that as the proposal was only for acquirising 100 per cent shares in Shahjahanpur Sugar Private Limited, the proposal was not to acquire the whole or any part of an undertaking since neither Shahjahanpur Sugar Private Limited had become the owner of the sugar unit of the appellant as there was only a proposal to transfer it to it, nor was that unit engaged in production, supply.
distribution or control of goods as an enterprise owned by Shahjahanpur Sugar Private Limited.
The further submission was that in any event the proposal to acquire 100 per cent shares in Shahjahanpur Sugar Private Limited by the appellant would not involve a proposal to acquire an undertaking to be owned or even owned by Shahjahanpur Sugar Private Limited, as the acquisition of 100 per cent shares would only vest in the appellant, the right to control and manage the affairs of Shahjahanpur Sugar Private Limited.
Section 2 of the Act makes it clear that the definitions ,given in that section will be attracted only if the context so requires.
The word 386 undertaking ' is a coat of many colours, as it has been used in different A sections of the Act to convey different ideas.
In some of the sections, the word has been used to denote the enterprise itself while in many other sections it has been used to denote the person who owns it.
the definition of the word 'undertaking ' in section 2(v) of the Act would indicate that 'undertaking ' means an enterprise which is engaged in production, sale or control of goods, etc.
We think that the question to be asked and answered in this case in terms of section 23 (4) is: Did the appellant make a proposal to acquire any undertaking of Shahjahanpur Sugar Private Limited by purchase, take over or otherwise? To answer this question, it is necessary to see whether the sugar unit which was proposed to be transferred to Shahjahanpur Sugar Private Limited had been engaged in the production of goods, etc., as an enterprise of that company; It is clear that on the date of the proposal the sugar unit of the appellant had not become an undertaking of Shahjahanpur Sugar Private Limited as it had not been engaged in the production of goods, etc., as an enterprise owned by that company.
It is only possible to visualize two possibilities when the proposal was made: either the sugar unit remained an undertaking of the appellant, although it was proposed to be transferred to Shahjahanpur Sugar Private Limited or that the sugar unit became an enterprise of Shahjahanpur Sugar Private Limited.
If the sugar unit remained part of the undertaking of the appellant when the proposed was made to take the 100 per cent shares, the proposal cannot be one to acquire an undertaking, as ex hypothesi the undertaking had not been transferred to Shahjahanpur Sugar Private Limited.
But, if the proposal to take 100 per cent shares involved an acquisition in future by the appellant of the sugar unit after it has been transferred to the new company, there was no proposal to acquire by transfer, take over or otherwise of an 'undertaking ' as the sugar unit was not at the time of the proposal engaged in production of goods, etc.
as an enterprise of Shahjahanpur Sugar Private Limited.
An enterprise can be characterized as an undertaking,, within the definition of the term only when it is engaged in the production supply, distribution or control of goods of any description or the provision of service of any kind.
In The Union of India v Tata Engineering and Locomotive Co. Ltd.(1), the Court held that a mere capacity or a mere intention by an undertaking to carry on an activity as referred to in clause (v) of section 2 of the Act in future alone without its being so done in the present, i.e., at the material date, or some time in the past i.e., before the material date, cannot mean that the undertaking is engaged in an activity as contemplated in section 2(v) of the Act.
No doubt, a temporary cessation of the activity will not detract an enterprise from its character as an undertaking, if the animus to resume the activity as soon as possible is there.
If a factory has had to close Down its operations on account of a strike, lock out, shortage of raw materials, shortage of power, or even want of finance, it cannot be said (1) [19721 Bombay Law Reporter 1. 387 that it is not engaged in the production of goods, if the intention of the owner is to resume its activities.
The view taken in In re Canara Bank Ltd. (l) is much the same.
There the Court followed the decision of the Bombay High Court referred to above and said that until a concern goes into the actual production, it cannot be said to be an 'Undertaking '.
The sugar unit of the appellant was no doubt engaged in production of goods, etc., when the proposal was made and was, therefore, an undertaking; but it was only an undertaking of the appellant as the sugar unit had not been transferred and had not become an enterprise of Shahjahanpur Sugar Private Limited.
The sugar unit did not become an undertaking of Shahjahanpur Sugar Private Limited as it was not and could not be engaged in the production of goods, etc., on its behalf before it was transferred to it.
Sub section (4) of section 23 is confined to the case of a proposal to acquire an undertaking by purchase, take over or otherwise but, to become an undertaking, it must presently be engaged in the production of goods, etc.
The more fact that the Memorandum of Association of Shahjahanpur Sugar Private Limited contained an object clause which provided for production of sugar would not necessarily mean that the company would go into production and thus become the owner of an undertaking as defined in section 2(v) of the Act.
Take for instance the case of an individual or a firm.
Does he or it become an 'undertaking ' merely because he or it entertains an object to produce goods unless he or it is actually engaged in production of goods, etc.? Certainly not.
If that is so in case of an individual or a firm, we see no reason why a different standard should be applied in the case of a company merely because the object or one of the objects of the company is to produce goods, etc.
, if it is not actually engaged in production of goods.
Reference was made to Stroud 's Judicial Dictionary, 4th edition, Vol. 1, p. 909 where it is stated that the phrase "engaged in any business" is apt to include employment at a salary as well as embarking on a business or in partnership.
We do not think that even if the phrase 'engaged in business` conveys the idea of embarking on it, Shahjahanpur Sugar Private Limited had embarked on the business of production of sugar merely because its memorandum of association provided that the object of the company was to produce sugar.
It is therefore difficult to imagine how when the proposal was made there was an enterprise engaged in the production or sugar and owned by Shahjahanpur Sugar Private Limited which could be acquired.
To put the matter in a nutshell: The sugar unit.
Of the appellant was an undertaking of the appellant.
Even if the proposal to acquire 100 per cent shares in Shahjahanpur Sugar Private Limited is considered to be a proposal to acquire either Shahjahanpur Sugar Private Limited or its sugar unit, since neither Shahjahanpur Sugar Private Limited nor its sugar unit as an enterprise owned by it had gone into production of goods, the proposal did not involve the acquisition if an undertaking.
Until the object in the memorandum of association (1) A. 1.
R. 388 Of Shahajahanpur Sugar Private Limited was realized by the sugar A unit going into production on behalf of the new company, it cannot be said that either Shahjahanpur Sugar Private Limited or the sugar unit transferred to it was an 'undertaking '.
An entity which is not engaged in actual production of goods or supply of services is of no economic significance and has to be excluded from the purview of the Act.
Hence, what may be done by an individual, firm or company in future has no ppresent economic significance. 'therefore, even if it be assumed that acquisition of 100 per cent shares could result in the acquisition of the new company or of an undertaking, the appellant was not acquiring an 'undertaking ' as defined in the Act as the new company would not be engaged in production of goods etc.
at the the of the acquisition of the shares by the appellant and section 23 (4) of the Act would not be attracted.
We also think that by the proposal to acquire the 100 per cent shares in Shahjahanpur Sugar Private Limited or by the actual acquisition of the shares, the appellant acquired only the control and the right to manage the company.
The word 'undertaking ' in the latter part of section 23(4) denotes an enterprise which is considered as an entity engaged in the production of goods, etc.
By setting 100 per cent shares in Shahjahanpur Sugar Private Limited, the appellant never acquired that undertaking owned by the new company by purchase take over or otherwise.
The undertaking remained the undertaking of` Shahjahanpur Sugar Private Limited.
In other words, the purchase of 100 per cent shares in Shahjahanpur Sugar Private Limited cannot be equated to the purchase of the undertaking owned by Shahjahanpur Sugar Private Limited.
What section 23(4) requires is the acquisition by purchase, take over or otherwise of an undertaking.
As we said, by getting the 100 per cent shares in Shahjahanpur Sugar Private Limited, the appellant only acquired the control and the right of management of Shahjahanpur Sugar Private Limited; but that will not amount to a purchase of the undertaking owned by that company It is well settled that a company has separate legal personality apart from its shareholders and it is only the company as a juristic person that could own the, undertaking.
Beyond obtaining control and the right of management of Shahjahanpur Sugar Private Limited, the purchase of 100 per cent shares had not the effect of an acquisition of the undertaking owned by it.
No doubt, on a dissolution of the company, the shareholders would be entitled to a distributive share of the assets of the company.
But it does not follow that while the company is a going concern, the shareholders are the owners of its assets including any undertaking.
It is the company as a separate entity which alone can own the undertaking and the purchase by the appellant of 100 per cent shares did not make it the owner of the undertaking.
We are aware that we are dealing with an economic legislation calculated to give effect to the Directive Principles of State Policy set out in clauses (b) and (c) of Article 39 of the Constitution and that the purpose of the legislation should be kept in mind in interpreting its provisions; but we are not prepared to assume that the legislature has, by a sidewind, swept away the well established fundamental legal concepts of the law of corporation in making the legislation.
We do not pause 389 to consider whether the circumstances which the Central Government took into account in passing the order were germane in the light of the provisions of section 28 of the Act as we hold that section 23 (4) has no application at all to the facts of the case.
No arguments were addressed at the bar as to whether the facts of the case would attract the provisions of section 22.
We, therefore, think it not proper to express any definite opinion about the applicability of that section and we refrain from doing so.
If, however, the facts of the case attract the provisions of section 22, it goes without saying that the appellant will have to apply and obtain the approval as visualized in that section.
We allow the appeal but make no order as to costs.
KRISHNA IYER, J.
I have had the advantage of perusing the judgment of my learned brother, Mathew J. but, while concurring in the conclusion, desire to append a separate opinion since the strands of my reasoning differ.
Mathew, J. 's judgment presents the necessary facts in the simplest form, sets out the scheme and the object of the (for short, the Act) whose construction falls for decision, but perhaps tends to petrify the pivotal concepts of 'undertaking ' defined in section 2(v) and acquisition in the context of Part A of Chapter III of the Act, if I may say so with respect.
Perhaps we are hearing the first case in this Court under this 'economic ' legislation, although three rulings from two High Courts, having some bearing on the controversy before us, were cited at the bar Shri Gupte, appearing for the appellant, posed the issue in a neatly simplistic way when he assailed the order of the Central Government under section 23(4) of the Act on the score that, absent acquisition of an 'undertaking ' in terms of section 2(v), the order was devoid of jurisdiction.
This provision deals with concentration of economic power whose inhibition is one of the paramount purposes of the statute.
Section 23 falls within Chapter III, Part A, of the Act.
Section 20 states that that Part shall apply only to certain types of undertakings.
Admittedly, the appellant is a big, plural undertaking falling within this Part and proposes to make over the sugar unit (which is one of the enterprises of this large multi production concern) to a new company to be floated.
This latter company is to have 100% of its shares owned by the appellant and, what is more, by a process of inflated valuation of the assets of the sugar unit the appellant will also appear to be advancing a loan of several lakhs of rupees to it.
According to the respondent (the Union of India) and the State of U. P., this new scheme is dubious in many ways and more sinister than seems on the surface.
We need not go into the details except to state that if the facts urged by counsel for the respondent were true, it is a high risk to the community to approve of the proposed scheme from the point of view of the purposes of the Act and the Directive Principle enshrined in article 39(c) of the Constitution.
390 It is unfortunate that in cases where the economic object and A impact of special types or legislation call for judicial interpretation, the necessity for a detailed statement of the background facts and supportive data, apart from some sort of a Brandeis brief illuminating the social purpose of the statute, is not being fully realised by the State.
In the present appeal materials were read out from the files which disturbed me but no comprehensive affidavit marshalling the social and economic facts relevant to the case and the statute was filed.
(At least copies of the Monopolies Inquiry Commission 's Report, extracts from the draft Bill, Notes on Clauses and the objects and Reasons of the Act were made available while arguments started).
Even so, the Court should hesitate to upset the Central Government 's order without a strong case of glaring error on the merits and clear excess or absence of jurisdiction being made out by the appellant.
Shri Gupte, has, however, by passed the controversial area of facts by a line of legal reasoning which is attractive but specious.
He contents that section 23(4) cannot apply save where the dominant undertaking (in this case, the appellant) proposed to acquire 'the whole or part of an undertaking which will or may result either in the creation of a undertaking to which Part A will apply or in the undertaking becoming an inter connected undertaking of an undertaking to which Part A applies '.
Therefore, runs the argument, what is sought to be acquired must be an undertaking.
In the present case the sugar unit is already an asset of the appellant 's concern and what is proposed is nothing more than to float a new company whose shares will be acquired in toto by the appellant.
Only when that company goes into production it becomes an 'undertaking ' and only then can s 23(4) possibly cover the case, the reason being that an 'undertaking ', by definition in section 2(v). 'means an undertaking which is engaged in the production.
Of goods. '.
The accent placed by counsel is upon 'is engaged in the production '.
He submits that the new company does not become an 'undertaking ' until is 'engaged in the production of goods '.
What is not in esse but only in posse is not an undertaking.
So much so the application of section 23(4) is premature and the Central Government 's order is illegal.
Moreover, no acquisition of the new company is contemplated, the owning of 100% shares thereof not being in law an acquisition of the undertaking as such by the appellant.
I concede there is force in this argument.
The crucial submissions of counsel for the appellant, however, stand exposed to the criticism made by Shri P. P. Rao for the respondent that they turn more or less on a play of words in the definition of undertaking ill section 2(v) and legal ingenuity about acquisition thereof.
Is there substance in these contentions or are they legal subterfuges to escape from the statutory meshes ? The law is not 'a brooding omnipotence in the sky ' but a pragmatic instrument of social order.
It is an operational art controlling economic life, and interpretative effort must be imbued with the statutory purpose No doubt, grammar is a good guide to meaning but a bad 391 master to dictate.
Notwithstanding the traditional view that grammatical construction is the golden rule, Justice Frankfurter used words of practical wisdom when he observed:(1) "There is no surer way to misread a document than to read it literally".
Indeed, this case really turns on the Court 's choice of the correct canon of construction as between two alternatives.
Is an 'undertaking ' an economic enterprise which is actually producing goods ? Here we over stress the 'in praesenti ' aspect and thereby undermine the legislative object.
On the contrary, is an 'undertaking ' used in its economic sense and in its wider connotation of embracing not merely factories which have been commissioned but projects which are embryonic and designed to go into production immediately formal legal personality is acquired and statutory approval under the Act secured ? In the present case there is already a sugar unit which is working and this mill is being transferred as the asset of the new company.
The new company, immediately it is registered and the Central Governments approval under section 23(4) obtained, will go on stream since the mill 's wheels will continue to turn regardless of the legal metempsychosis of ownership.
In such a case it would be abandoning commonsense and economic realty to treat the proposed undertaking as anything less than an 'undertaking ' (as defined in the Act) because it is only in immediate prospect.
For certain purposes, even a child in the womb is regarded as in existence by the law and I cannot bring myself to an understanding of the definition which will clearly defeat the anti concentration of economic power objective of the legislation.
Moreover, 'to undertake ' is to set about; to attempt to take upon oneself solemnly or expressly; to enter upon; to endeavour to perform (see Black 's Law Dictionary).
If what the appellant intends to acquire or establish is as undertaking in fact and therefore in law, the transformation device and the refuge in grammar cannot help him, the expression being capable of taking in not merely what is, but what is about to be.
An 'undertaking ' is defined as an undertaking. which itself discloses the difficulty felt by the draftsmen in delineating the precise content.
Obviously, a dynamic economic concept cannot be imprisoned into ineffectualness by a static strict construction. 'Is engaged in production ', in the context, takes in not merely projects which have been completed and gone into production but also blueprint stages, preparatory moves and like ante production points.
It is descriptive of the series of steps culminating in production.
You are engaged in an undertaking for production of certain goods when you seriously set about the job of getting everything essential to enable production.
Economists, administrators and industrialists understand the expression in that sense and oftentimes projects in immediate prospect are legitimately set down as undertakings engaged in the particular line.
Not the tense used but the integration of the steps is what is decisive.
What will materialise as a productive enterprise in futuro can be regarded currently as an undertaking, in the industrial sense.
It is not distant astrology but imminent futurology, and the phrases 392 of the statute are amenable to service of the purposes of the law, liberally understood.
Likewise, acquisition of an undertaking is to be viewed not in a narrow sense but as a broad business operation.
Surely, the new company is an undertaking which, by the vesting of 100% of its share holding in the appellant, is going to belong to the latter.
It is either acquiring or establishing the new adventure.
That is the plain truth and law must accord with it.
After all, a broadened, sophisticated and spectral sense must be given to these words of economic connotation without being hide bound by lexicography or legalism.
Of course, any infant in law knows that holding shares is not acquiring the company with its distinctive personality.
But any adult in corporate economics knows that controlling the operations of an industrial unit is to acquire or establish it for all economic purposes depending on whether that one is new or pre existing.
The word 'undertaking ' takes in also enterprises attempted (See Webster 's Dictionary on 'undertaking ', the meaning having received judicial approval in AIR 1960 Bom.
22 at p. 24, paragraph 4).
This Court in Gymkhana Club(1) has accepted the meaning, given in Webster.
Similarly, 'engaged in ' takes within its wings 'embarking on ' (Vide: Stroud 's Judicial Dictionary, 4th Edn.
Vol. 2, p. 909).
If the language used in a statute can be construed widely so as to salvage the remedial intendment, the Court must adopt it.
Of course, if the language of the statute does not admit of the construction sought, wishful thinking is no substitute and then, not the Court but the Legislature is to blame for enacting a damp squib statute.
In my view, minor definitional disability, divorced from the realities of industrial economics, if stressed as the sole touchstone, is sure to prove disastrous when we handle special types of legislation like the one in this case.
I admit that viewed from one standpoint the logic of Shri Gupte is flawless, but it also makes the law lifeless, since the appellant is thereby enabled neatly to nullify the whole object of Chapter III which is to inhibit concentration of economic power.
To repeat for emphasis, when two interpretations are feasible, that which advances the remedy and suppresses the evil, as the legislature envisioned, must find favour with the Court.
Are there two interpretations possible ? There are, as I have tried to show and I opt for that which gives the law its claws.
I am alive to and have kept within the limitations of judicial options indicated by Cardozo in a different context: "The Judge, even when he is free, is still not wholly free.
He is not to innovate at pleasure.
He is not a knight errant roaming at will in pursuit of his own ideal of beauty or of goodness.
He is to draw his inspiration from consecrated principles.
He is not to yield to spasmodic sentiment, to vague and unregulated benevolence.
He is to exercise a discretion informed by tradition, methodized by 393 analogy, disciplined by system, and subordinated to 'the primordial necessity of order in the social life '.
Wide enough in all conscience is the field of discretion that remains." (Benjamin Cardozo 's 'The Nature of the Judicial Process ' Yale University Press (1921).
While judicial review, at least on processual issues, is the hallmark of fair dealing with rights of persons in a Republic, there are expanding areas of economic and technological codes where the adjudicator has to trend warily and pause circumspectly, especially because the expertise needed to unlock the statute is ordinarily unavailable to the judicial process and the subject matter is too sensitive and fundamental for the uninstructed in the special field to handle with confidence.
The Constitution, in its essay in building up a just society, interdicting concentration of economic power to the detriment of the community, has mandated the State to direct its policy towards securing that end.
Monopolistic hold on the nation 's economy takes many forms and to checkmate these manoeuvres, the administration has to be astute enough.
Pursuant to this policy and need for flexible action, the Act was enacted.
A variety of considerations (set out in section 28) amenable to subtle administrative perception and expert handling but falling beyond the formalised processes unaided by research and study that the Court is prone to adopt, may have to be examined before reaching a right decision to allow or disallow seemingly innocuous but really or potentially anti social moves of dominant undertakings.
It is well known that backdoor techniques, and corporate conspiracies in the economic sense but with innocent legal veneer, have been used by oligopolistic organisations and mere juridical verbalism cannot give the Court the clue unless there is insightful understanding of the subject which, in specialised fields like industrial economics, is beyond the normal ken or investigation of the Court or the area of traditional jurisprudence.
I must however emphasize that Court supervision and correction, within well recognised limits, is not an expendable item since the rule of law is our way of constitutional life.
In our jural order, 'the ethos of adjudication ' on independent court scrutiny is too quintessential to be jettisoned without peril to those founding values of liberty, equality and justice, even though Judges considering complex and technical legislations, may often leave the Executive and other specialised bodies as the 'untouchable ' Controllerate.
There is power for the Court to interfere, but it will be exercised only when strong circumstances exist, or other basic guidelines for control come into play.
Even so, this function, so vital to cry a halt when executive powers exceed their bounds or are obliquely, oppressively or illegally used, has meaningful dimensions and creative directions when disputes dealing with intricate economic legislation fall for consideration.
The absence of research or assessor assistance with special skill, knowledge and experience in fields unfamiliar for jurists is a handicap which demands attention for the sake of competent justice being administered by superior Courts.
After all, law must grow with life, if it is to do justice to Development, especially in developing countries.
394 Here we come upon one of the basic deficiencies of our law studies which do not yet take within their sweep, apart from jurisprudence, economics, politics and sociology.
These are distinct enough at the core but shade off into each other.
As Roscoe Pound observed: "All the social sciences must be co workers, and emphatically all must be co workers with jurisprudence".
Georges Gurvitch supplemented the statement by observing: "A little law leads away from sociology but much law leads back to it".
The desiderata are neither novel nor detractory but a recognition of the new status of Law vis a vis Development in the context of the Court 's high function of keeping the Executive and allied instrumentalities wisely within the leading strings and formidable grip of the law.
Anthony Dickey, in a University of London Public Lecture in Laws, advocates the need for making judicial review of administrative action more of a reality than it is as present and adverts to the court having to possess 'adequate background training ' and 'first class research assistance '.
In another article,(1) the same author explains the permissibility in English Courts of the practice of seeking assessor assistance where specialist knowledge and expert advice are called for in complex case situations.
These observations are made by me to clear the ground for approaching an 'economic ' lis of a complex nature in a socio legal way and not in the traditional litigative style.
So viewed, what does an 'undertaking ' mean in section 23(4) of the Act ? Surely, 'definitions in the Act are a sort of statutory dictionary to be departed from when the context strongly suggests it.
The central problem on which Shri Gupte, appearing for the appellant, staked his whole case largely is as to whether an undertaking covers only a going concern, a running industry and not one in the offing or process of unfolding.
The decisions of the High Courts cited before us do not convince me.
On the other hand, the reasoning based on the present tense is faulty as already elaborated.
If this Court accepts the legalistic connotation of 'undertaking ' a disingenuous crop of new companies with ulterior designs may well be floated taking the cue a consequence which this Court should thwart because thereby the law will be condemned to a pathetic futility.
But in the view I take, may be section 22 though not section 23(4) is possibly attracted.
I have already indicated my view on this issue.
In the instant case, the move is to delink the sugar unit and re incarnate it as the Shahjahanpur Sugar (P) Ltd. We have two provisions which come up for consideration in this expansionist and acquisitive situation.
Section 22 reads: "22(1) No person or authority, other than Government, shall, after the commencement of this Act, establish any new undertaking which, when established, would become an interconnected undertaking of an undertaking to which clause (a) of section 20 applies, except under, and in accordance with, the previous permission of the Central Government.
395 (2) Any person or authority intending to establish a new undertaking referred to in sub section (1) shall, before taking any action for the establishment of such undertaking, make an application to the Central Government in the prescribed form for that Government 's approval to the proposal of establishing any undertaking and shall set out in such application information with regard to the inter connection, if any, of the new undertaking (which is intended to be established) with every other undertaking, the scheme of finance for the establishment of the new undertaking and such other information as may be prescribed.
(emphasis, mine) x x x x Section 23 (4) runs: "If an undertaking to which this Part applies proposes to acquire by purchase, take over or otherwise the whole or part of an undertaking which will or may result either (a) in the creation of an undertaking to which this Part would apply; or (b) in the undertaking becoming an inter connected undertaking of an undertaking to which this Part applies, it shall, before giving any effect to its proposals, make an application in writing to the Central Government in the prescribed form of its intention to make such acquisition, stating therein information regarding its interconnection with other undertakings, the scheme of finance with regard to the proposed acquisition and other information as may be prescribed." (emphasis, mine) The sections when placed in juxtaposition, suggest that the appellant 's operation is to establish a new undertaking (out of its old sugar unit, though) which, in view of the share holding, will inevitably become an inter connected undertaking of Carew & Co. (the original undertaking, i.e., the appellant).
Not so much to acquire an existing undertaking as to establish, by a concealed expansionist objective, a new undertaking with sugar manufacture is the core of the operation.
Therefore, it is not section 23(4) that magnetizes the appellant 's proposal but, prima facie, Sec. 22.
The special provision must exclude the general and, in this view, the acquisition of an existing undertaking stands repelled.
The scheme of the Act deals both with establishing a new undertaking and acquiring (by contrast) an existing undertaking.
So I agree with my learned brother Mathew J. that the order under section 23 (4) is beyond its pale but add that this looks like a case for the application of section 22.
If the appellant intends to go ahead with the new adventure, he is trying to establish, he may, prima facie have to apply for and get the previous permission of the Central Government under section 22.
I am not pursuing this aspect of the application of Sec. 22 as that will be decided, if found necessary, after fuller investigation from the angle of that provision.
396 The problem of interpretation of statutes raised in this case is far too important for me to ignore the manner in which jurists have been viewing the question in Anglo Saxon jurisprudence.
I therefore extract relevant excerpts from Harry Bloom who wrote on this topic in the Modern Law Review, p. 197, Vol. 33, March 1970: "The Law Commission (of England) and the Scottish Law Commission have dealt with one aspect of this problem, but on the whole they have prudently steered clear of wider issues.
Their White Paper is a trenchant essay on the short comings of the present techniques & rules of interpretation, and a mild rebuke of judges who are still too faithful to the Literal Rule.
Its main burden, however is to make the case for the use of extraneous documentary aids to interpretation, and it does so, I should think, in a way that puts the answer to this long debated question beyond doubt.
Among the recommendations (summed up in draft clauses at the end of the Report) are that courts when interpreting statutes, should be allowed to consider the following: (a) all indications provided by the Act as printed by authority including punctuation and side notes, and the short title of the Act; (b) any relevant report of a Royal Commission, Committee or other body which has been presented or made to or laid before Parliament or either House before the time when the Act was passed; (c) any relevant treaty or other international agreement which is referred to in the Act or of which copies had been presented to Parliament by command of Her Majesty before that time, whether or not the United Kingdom were bound by it at that time; (d) any other document bearing upon the subject matter of the legislation which had been presented to Parliament by command of Her Majesty before that time; (e) any document (whether falling within the foregoing paragraphs or not) which is declared by the Act to be a relevant document for the purpose of this section.
" x x x x "In time, however, somebody will have to tackle the basic question how long can we sustain the fiction that when the legislature prescribes for a problem, the court, when confronted with a difficult statute, merely uses the techniques of construction to wring an innate meaning out of the words? One cannot, these days, approach the problem of statutory interpretation in isolation from the legislative process.
And I do not think the proposal to allow the court to consult parliamentary documents meets this objection.
As long as the fiction persist that the courts merely 'interpret ' statutes, Parliament will continue to put out legislation of ever increasing 397 detail and complexity in the belief that it must provide a complete set of answers.
This is a self defeating ambition.
Where does one look for the intention of the legislature in today 's monster Acts, with their flotillas of statutory instruments and schedules, the plethora of boards, tribunals and committees, with delegated powers, which they set up, the myriad of subjects they deal with, their confusing cross references to other statutes, and their often opaque and tortured language that defies translation into intelligible ideas?" x x x x x "What exactly are the respective roles of Parliament and the courts as regards legislation ? Since it is a fiction that the courts merely seek out the legislative intent, there must be a margin in which they would or 'creatively ' interpret legislation.
The courts are 'finishers, refiners and polishers of legislation which comes to them in a state requiring varying degrees of further processing, ' said Donaldson J. in Corocraft Ltd. vs Pan American Airways, Inc., , 732) and indeed it is no secret that courts constantly give their own shape to enactments.
" x x x x x "How do the present rules help, when a statute passed ad hoc, to deal with a situation clearly envisaged by the legislature, is then applied to a whole new state of affairs that were never originally contemplated ?" To conclude on the point with which I began, 'undertaking ' is an expression of flexible sementics and variable connotation, used in this very statute in different senses and defined in legal dictionaries widely enough.
In sum, what the appellant proposed to the Central Government was to establish a new undertaking, if we throw aside legal camouflages built around a verb and pierce the corporate veil.
Therefore, while jurisdiction in the respondent to apply section 23(4) of the Act is absent, the appellant may caught within the spider 's web of section 22 I do not express myself finally.
The appeal must now succeed, but the legal drama may still have its fifth Act for the appellant I cannot be futuristic as the full facts will first be examined by Government for that purpose in case he chooses to apply.
For these reasons I allow the appeal but, in the circumstances, make no order as to costs.
FAZAL ALI, J.
I agree with my brother Mathew, J., that section 23 of the Monopolies and Restrictive Trade Practices Act, 1969 hereafter to be referred to as 'the Act ' has absolutely no application to the facts and circumstances of the present case.
In this view of the matter the impugned order of the Central Government must, therefore, be quashed.
Section 23 of the Act would apply only if the undertaking sought to be acquired is in actual and physical existence and has gone into actual production.
The scheme which is the subject matter of this case is merely a proposal and unless the undertaking is in existence and doing business it will not fall within the meaning of section 2(v) of the Act which defines an "undertaking".
398 I, however, entirely agree with my brother Krishna Iyer, J., that on the facts disclosed in the appeal the Scheme propounded by the appellant may prima facie fall within the four corners of section 22 of the Act.
The resolution passed by the appellant for setting up a new Company may be extracted thus: "RESOLVED that the Board of Directors be and is hereby authorised to form a separate Company to be called "SHAHJAHANPUR SUGAR (PRIVATE) LIMITED", as a wholly owned subsidiary of this Company, to ultimately take over and operate the Sugar Factory undertaking of this Company at Rosa (Uttar Pradesh) as a going concern.
FURTHER RESOLVED that the transfer of the assets of the Sugar Factory undertaking to the newly formed subsidiary, viz. "SHAHJAHANPUR SUGAR (PRIVATE) LIMITED", be made on the basis of the valuation of the respective assets made by Messrs. LEES & DHAWAN, Chartered Surveyors on May 29, 1970.
" This resolution unmistakably reveals the following essential features: (1) that the appellant intended to establish a new Company and this proposal was approved by virtue of the resolution quoted above; (2) that the new Company was to be floated by transferring 100 per cent shares from the Sugar Unit of the Company so that the appellant could retain effective control over the new Company; (3) that the new Company after being established was to be known as "SHAHJAHANPUR SUGAR (PRIVATE) LIMITED"; and (4) that after the establishment of the new Company the appellant would become the owner of the new Company as well as Carew Company Ltd. and thus the proposed new Company would be an inter connected undertaking of the appellant.
These facts, therefore, may attract the essential ingredients of section 22 of the Act and, if so, the appellant cannot be allowed to float a new Company without complying with the statutory requirements of section 22 of the Act in which case fuller facts may have to be investigated for that purpose.
The object of the Act in my opinion appears to be to prevent concentration of wealth in the hands of a few and to curb monopolistic tendencies or expansionist industrial endeavours.
This objective is sought to be achieved by placing three tier curb on industrial activities to which the Act applies, namely: (1) By providing that if it is proposed to substantially expand the activities of a Company by issue of fresh capi 399 tal or by installation of new machinery, then notice to the Central Government and its approval must be taken under section 21 of the Act.
(2) In the case of establishment of a new Company by insisting on the previous permission of the Central Government under section 22 of the Act.
(3) In the case of acquisition of an existing Company by another Company by requiring the sanction of the Central Government to be taken by such Company under section 23 of the Act.
The present case, in my opinion, may fall within the second category mentioned above.
V.M.K. Appeal allowed.
| IN-Abs | Section 2(v) of the defines an "undertaking" as an undertaking which is engaged in the production, supply, distribution or control of goods of any description or the provision of service of any kind.
Section 22 provides for the establishment of new under takings.
It says that no person or authority, other than government, shall, after the commencement of this Act.
establish any new undertaking which, when established would become an inter connected undertaking of an undertaking to which clause (a) of section 20 apples, except under, and in accordance with the previous permission of the Central Government, Sub section (2) of the section provides for an application for that purpose to the Central Government.
Section 23(4) lays down that if an undertaking to which Part A of Ch.
Ill applies proposes to acquire by purchase, take over or otherwise the whole or part of an undertaking which will or may result either (a) in the creation of an undertaking to which Part A would apply; or (b) in the undertaking becoming an inter connected undertaking of an undertaking to which Part A applies, it shall, before giving any effect to its proposals, make an application in writing to the Central Government in the prescribed form of its intention to make such acquisition.
stating therein information regarding its inter connection with other undertakings the scheme of finance with regard to the proposed acquisition and such other information as may be prescribed.
The appellant is a public limited company and is a subsidiary of United Breweries Ltd. and other companies interconnected with it.
The appellant 's undertaking consists of a sugar factory and a distillery for manufacture of liquor at Rosa, Shahjahanpnr and another distillery at Asansol.
The appellant 's sugar factory at Rosa had been facing difficulties for some years on account of inadequate supply of sugarcane and to ensure regular and adequate supply of sugarcane, the appellant proposed to float a company with a share capital of` Rs. 50 lakhs for the purpose of taking over the sugar unit of the appellant and for working it as an undertaking of the company to be formed.
The proposal was that the appellant would be entitled to an allotment of 100 percent shares in the new company and a further sum of Rs. 15,77,093/ as consideration for transfer of the sugar unit.
The appellant applied to the respondent for permission under section 372 of the Companies Act to acquire the 100 per cent shares of the new company upon its incorporation.
The appellant was told by the Central Government in its letter dated 5 1 1972 that sections 22 and 23 of the , would prima facie be attracted and that the appellant should file a separate application Under the relevant section.
The appellant filed an application dated 5 5 1972 purporting to be under section 23(4) of The Act.
The new company proposed to be set up by the appellant was incorporated on June, 15.
1973 under the name of Shahjahanpur Sugar Private Limited.
By order dated July 2, 1973.
the Central Government, in the Department of Company Affairs rejected the appellant 's application under section 372(4) of the Companies Act for investing Rs.50 lakhs in the equity share of the Capital of Shahjahanpur Sugar Private Limited.
By another order dated 30 6 1973, the central Government.
in the Department of company Affairs also rejected the appellant 's application under section 23(4) of the Act.
This appeal is against the order dated 30 6 1973 under section SS of the Act.
It was contended for the appellant that.
(i) in order that an enterprise may became an 'undertaking ' within the definition of the word 'undertaking ' in section 2(v) of the Act it is necessary that the enterprise must he engaged in produc 380 tion, supply, distribution or control of goods of any description or the provision Or service of any kind and that when the appellant proposed to form the new company for taking over the sugar unit of the appellant in consideration of 100 per cent shares in the new company, that company had not acquired the sugar unit of the appellant nor was it engaged in the production, supply, distribution or control of goods, etc.
as an enterprise of Shahjahanpur Sugar Privato Limited and so There was no proposal to acquire by purchase, take over or otherwise of the whole or part of any undertaking within the the meaning of section 23(4).
and (ii) in any event the proposal to acquire 100 per cent shares in Shahjahanpur Sugar Private Limited by the appellant would not involve a proposal to acquire an undertaking to be owned or even owned by Shahjahanpur Sugar Private Limited, as the acquisition of 100 per cent shares would only vest in the appellant, the right to control and manage the affairs of Shahjahanpur Sugar Private Limited.
Accepting the contentions and allowing the appeal, ^ HELD: (Per Ray C.J. and Mathew 1.) (i) The Sugar unit of the appellant was no doubt engaged in production of goods.
, when the proposal was made and was, therefore an undertaking but it was only an undertaking of the appellant.
as the sugar unit had not been transferred and had not become an enterprise of Shahjahanpur Sugar Private Limited.
The sugar unit did not become an undertaking of Shahjahanpur Sugar Private Limited ac it was not and could not be engaged in the production of goods, etc., on its behalf before it was transferred to it.
Sub section (4) of section 23 is confined to the case of a proposal to acquire an undertaking by purchase, take over or otherwise but, to become an undertaking, it must presently be engaged in the production of goods, etc.
The mere fact that the Memorandum of Association of Shahjahanpur Sugar Private Limited contained an object clause which provided for production of sugar would not necessarily mean that the company would go into production and thus become the owner of an undertaking as defined in s.2(v) of the Act.
Even if the phrase 'engaged in business ' in the definition conveys thc idea of ' embarking on it, it is not correct to say that Shahjahanpur Sugar Private Limited had embarked on the business of production of sugar merely because its memorandum of association provided that the object of the company was to produce sugar.
[387B C, E F] The Union of India vs Tata Engineering and Locomotive Co. Ltd., [1972] 74 Bombay Law Reporter, 1 and In re Canara Bank Ltd., A.I.R. referred to.
(ii) It is well settled that a company has seperate legal personality apart from its shareholders and it is only the company as a juristic person that could 1 own the undertaking.
Beyond obtaining control and the right of management of Shahjahanpur Sugar Private Limited, the purchase of 100 per cent shares had not the effect of an acquisition of the undertaking owned by it.
[388F G Per Krishna Iyer.
J. (concurring) (1) An `undertaking is defined as an undertaking. which itself disclosed the difficulty felt by the draftsmen in delineating the precise content.
Obviously, a dynamic economic concept cannot be , imprisoned into ineffectualness by a static strict construction.
`Is engaged in production ', in the context takes in not merely projects which have been completed and ,one into production but also blue prints.
It is descriptive of the series of ' steps culminating in production.
One is engaged in an undertaking of production of certain goods when he seriously set about the job of getting every thing essential lo enable production.
Economists, administrators and industrialists understand the expression in that sense and often times projects in immediate prospect are legitimately set down as undertakings engaged In the particular line.
Not the tense used but the integration of the steps is what is decisive.
What will materialse as a productive enterprise in futureo can be regarded currently as as undertaing, in the industrial sense.
[391F H] Massachusetts B & Insurance Co. vs U.S. ; , 138, and Gymkhana Club, [1968] 1 S.C.R. 742 referred to.
381 (2) Sections 22 and 23 (4), when placed in juxtaposition suggest that the appellant 's operation is to establish a new undertaking (out of its old sugar unit, though) which, in view of the share holding, will inevitably become an inter connected undertaking of Carew & Co. (the original undertaking, i.e. the appellant).
Not so much to acquire an existing undertaking as to establish, by a concealed expansionist objective, a new undertaking with sugar manufacture is the core of the operation.
Therefore, it is not section 23(4) that magnetizes the appellant 's proposal but, prima facie, Sec. 22.
[395EF] Per Fazal Ali, J. (Concurring) The object of the Act appears to be to pre vent concentration of wealth in the hands of a few and to curb monopolistic tendencies or expansionist industrial endeavours.
This objective is sought to be achieved by placing three tier curb on industrial activities to which the Act applies, namely: (1) By providing that if it is proposed to substantially expand the activities of a Company by issue of fresh capital or.
by installation of new machinery, then notice to the Central Government and its approval must be taken under section 21 of the Act.
(2) In the case of establishment of a new Company by insisting on the previous permission of the Central Government under section 22 of the Act.
(3) In the case of acquisition of an existing Company by another Company by requiring the sanction of the Central Government to be taken by such Company under section 23 of the Act.
The present case may fall within the second category.
[1398 H, 399AB]
|
Civil Appeal No. 1611 of 1971.
Appeal by special leave from the Judgment and order dated 29 70 of the Judicial Commissioner 's Court Tripura, Agartala in Civil Misc.
1st Appeal No. 4 of 1964.
section V. Gupte, D. N. Mukherjee and G. section Chatterjee, for the appellant.
P. K. Chatterjee and Rathin Das, for the respondent.
The Judgment of the Court was delivered by CHANDRACHUD, J.
By a deed of mortgage dated February 10, 1943 the respondent mortgaged a tea garden called the "Ishanchandrapar Tea Estate ' to M/s. Das Bank Ltd. On January 19, 1950 the Bank instituted Mortgage Suit No. 2/1950 against 'the respondent on the original Side of the Tripura High Court, for recovering the amount due under the mortgage.
On reorganisation of the Judicial Administration in Tripura, the suit was transferred to the court of the District Judge, Agartala.
On January 20, 1950 the Bank applied for the appointment of a Receiver.
On the District.
Judge directing that the Bank should nominate a Receiver in terms of clause 12 of the mortgage deed, first the Secretary of the Bank and later another employee called Adhir Ranjan Dutta was appointed as the Receiver subject to his furnishing security in the sum of Rs. 50,000.
The Receiver took possession of the estate on 22nd January but since the security was not furnished, the court directed on an application of the respondent that the Receiver should furnish the requisite security within the time allowed to him.
On February 26 1950 the tea garden was damaged by a fire which destroyed over 3,000 tea saplings.
On 28th February, the respondent moved an application asking for damages from the Receiver 358 on the ground that the fire had occurred Due to his negligence.
The respondent also renewed his request that the Receiver be asked to furnish security.
On August 26, 1950 the appellant M/s. Howrah Insurance Co. Ltd. executed a surety bond in the sum of Rs. 50,000 in favour of Shri R. M. Goswami, District Judge, Agartala, his successors successors in office and assigns.
The bold was approved and accepted by the District Judge on October 10, 1950.
By virtue of the powers conferred by the Tripura (Courts) order of 1950 which came into, force on December 31, 1950 the District Judge transferred the mortgage suit to the court of the Subordinate Judge, Agartala.
The transferee court was created under the order of 1 950.
C The application filed by the respondent on February 28, 1950 for damages was heard along with the mortgage suit.
The learned Subordinate Judge decreed the suit on May 31, 1956, but he also allowed the respondent 's application for damages to the extent of Rs. 32,525.
He directed that the Receiver should pay the amount within two months, failing which the amount should be recovered from the security of Rs. 50,000.
Civil Miscellaneous First Appeal No. 22 of 1956 filed by the Receiver against that order was dismissed for default by the Judicial commissioner, Tripura on December 18, 1959.
But, he allowed the respondent 's cross objections and enhanced the damages to Rs. 4],525.
On October 4, 1961 respondent filed in the court of the Subordinate Judge, Execution Petition No. 39 of 1961 against the Receiver and the appellant praying that execution do issue, against the appellant as directed by the Court.
The appellant filed this objections to that petition but the learned Judge rejected the objections and directed that the damages awarded to the respondent be recovered from the appellant.
The appellant filed an appeal against that order but it was dismissed by the learned Judicial Commissioner on June 29. 1970.
This appeal by special leave is directed against that judgment.
Learned counsel appearing on behalf of the appellant has raised two contentions (l) The Subordinate Judge who tried the suit is incompetent to enforce the surety bond executed by the appellant as he is neither the successor nor the successor in office nor the assign of the District Judge; and (2) Under the terms of the bond, the appellant is not answerable for the loss caused to the tea garden by fire.
Both of these contentions turn on the terms of the surety bond and it is therefore necessary to have a look at that bond.
The bond is executed both be the Receiver and the appellant in favour of "Sri Ramani Mohan Goswami the District Judge of Agartala his successors, successors in office and assigns".
By the bond, the executants bound themselves jointly and severally in the whole of the amount of Rs. 50,000 up to the District Judge.
Agartala, his successors, 359 successors in office and assigns.
The bond, though executed on August 26, 1950, relates back to January 22, 1950 being the date when the Receiver took possession of the property.
It is urged that the bond can be enforced only by or at the instance af the District Judge, Agartala, or his successors, successors in office of assigns and the Subordinate Judge, Agartala not being either of these, it is incompetent for him to enforce the bond.
We see no substances in this contention.
The Subordinate Judge of Agartala may not be the successors in office of the District Judge because "successor in office" would mean successor of the District Judge in the post or office of the District Judge.
But the Subordinate Judge, Agartala is, for the purposes of the present proceedings, a successor of the District Judge who was seized of the suit and who transferred it to the Subordinate Judge under the Tripura (Courts) order of 1950.
The surety bond was executed in and for the purposes of the particular proceedings which were pending before the District Judge, in order that the bond should be enforceable at the instance of the presiding officer of the court.
"Successor", therefore, must in the context mean the court which for the time being is seized of the proceedings.
Under section 150 of the Code of Civil Procedure, save as otherwise provided, where the business of any Court is transferred to any other Court, the transferee Court has the same powers and is entitled to perform the same duties as those respectively conferred and imposed by the Code upon the transferor Court.
The surety bond was a part of the proceedings pending before the District Judge and on the transfer of the Suit the entire proceedings, including the bond.
stood validly transferred to the Court of the Subordinate Judge.
Thus, by virtue of section 150, the Subordinate Judge was entitled to exercise the same powers in the matter of the enforcement of the bond as the District Judge himself.
Section 145(c) of the Code of Civil Procedure provides, to the extent material, that where any person has become liable as a surety for the fulfilment of any condition imposed on any person under an order of the Court in any suit or in any proceeding J consequent thereon, the decree or order may be executed against the surety to the extent to which he has rendered himself personally liable, in the manner provided for the execution of decrees.
By the surety bond, the appellant rendered itself liable as a surety for the fulfilment of the conditions imposed on the Receiver under the orders passed by the court.
Therefore, the order for the recovery of damages obtained by the respondent against the Receiver can be executed against the appellant to the extent to which it rendered itself personally liable under the terms of the bond.
There is no substance in the second contention either.
Under the bond, the appellant rendered itself liable "in respect of any loss or.
damage occasioned by any act or default of the Receiver in relation to his duties as such Receiver as aforesaid".
The fire having been caused due to the Receiver 's negligence in the performance of his duties the appellant is liable to make good the loss caused to the tea garden by the 360 fire.
Learned counsel for the appellant however urged that the appointment of the Receiver was limited to the stock in trade, machinery and movables in the tea garden and to the factory premises and since the Receiver owed no obligation in relation to the tea garden, the appellant would not be liable for the loss caused thereto by the fire.
Reliance is placed in support of this argument on the words "as aforesaid" which qualify the words "in relation to his duties".
The surety bond has, undoubtedly, to be construed strictly but it is impossible to accept the contention that the Receiver owed no duty or obligation in respect of the tea garden.
He was put in possession of the tea garden in his capacity as a Receiver and indeed parties had made contentions from time to time as to whether the tea garden was managed by the Receiver economically and efficiently.
The surety bond would therefore cover the loss occasioned to the tea garden due to the Receiver 's default.
It is significant that though the bond was executed six months after the tea garden was damaged by the fire it was given retrospective operation with effect from January 22, 1950 being the date on which the Receiver had taken possession of the mortgaged property including the tea garden.
For these reasons we confirm the judgment of the learned Judicial Commissioner and dismiss this appeal with costs.
V.M.K. Appeal dismissed.
| IN-Abs | Messers Das Bank Ltd. instituted a mortgage suit against the responded on January 19, 1950 in respect of the tea garden mortgaged with them in 1943.
On reorganisation of the Judicial Administration in 'Tripura, the suit was transferred from the Tripura High Court to the court of the District Judge, Agartala.
On the application by the Bank for appointment of a receiver, an employee of the Bank was appointed as the receiver subject to his furnishing security in the sum of Rs. 50,000.
The Receiver took possession of the estate on 22nd January, on February 26, 1 950 the tea garden was damaged by a tire which destroyed over 3,000 tea saplings.
The respondent moved an application asking for damages from the Receiver on the ground that the fire had occured due to his negligence.
He also renewed his request that the receiver be asked to furnish security.
On August 26, 1950, the appellant M/s. Howrah Insurance Co. executed a surety bond in the sum of Rs. 50,000 in favour of Shri R. M. Goswami, District Judge, Agartala, his successors, successors in office and assigns.
The bond was approved and accepted by the District judge on October 10, 1950.
The bond was executed both by the Receiver and the appellant in favour of "Sri Ramani Mohan Goswami the District Judge of Agartala, his successors, successors in office and assigns.
" By the bond, the executants bound themselves jointly and severalty in the whole of the amount of Rs. 50,000 up to the District Judge Agartala, his successors, successors in office and assigns.
The bond, though executed on August 26, 1950, related back to January 22, 1950 being the date when the Receiver took possession of the property.
By virtue of the powers conferred by the Tripura (Courts) order of 1950 which came into force on December 31, 1950 the District Judge transferred the mortgage slit to the court of the Subordinate Judge.
Agartala.
The transferee court was created under the order of 1950.
The Subordinate Judge decreed the suit and also allowed the respondent 's application for damages to the extent of Rs. 32,525.
The appeal filed by the Receiver was dismissed for default by the Judicial Commissioner, 'Tripura, but he allowed the respondent 's cross objections and enhanced the damages to Rs. 41,525.
On the Execution Petition filed by the respondent, the Subordinate Judge directed that the damages awarded to the respondent be recovered from the appellant The appeal filed by the appellant against that order a, dismissed by the Judicial Commissioner and this appeal has been preferred on the basis of the special leave "ranted by this Court.
It was contended for the appellant that (l) 'The Subordinate Judge who tried the suit was incompetent to enforce the surety bond executed by the appellant as he was neither the successor nor the successor in office nor the assign of The District Judge; and (2) Under the terms of the bond, the appellant was not answerable for the loss caused to the tea garden by fire.
Rejecting the contentions and dismissing the appeal, HELD: ( I ) (i) Th Subordinate Judge of Agartala may not be the successor in office of the District Judge because "successor in office" would mean successor of the District Judge in the post or office of the District Judge.
But the Subordinate Judge, Agartala is, for the purposes of the present proceedings, a 357 successor of the District Judge who was seized of the suit and who transferred it to the Subordinate Judge under the Tripura (Courts) order of 1950.
The surety bond was executed in and for the purposes of the particular proceedings which were Pending before the District Judge, in order that the bond should be enforceable at the instance of the presiding other of the court.
"Successor", therefore, must in the context mean the court which for the time being is seized of the proceedings.
[359B C] (ii) By virtue of section 1 SO C.P.C., the Subordinate Judge was entitled to exercise the same powers in the matter of the enforcement of the bond as the District Judge himself.
[359D E] (iii) As laid down by section 145(c) of tho C.P.C., by the surety bond, the appellant rendered itself liable as a surety for the fulfilment of the conditions imposed on the Receiver under the orders passed by the Court, Therefore, the order for the recovery of damages obtained by respondent against the Receiver can be executed against the appellant to the extent to which it rendered itself personally liable under the terms of the bond.
[359 FG]] (2) 'The Receiver Was put in possession of the tea garden in his capacity as a Receiver and parties had made contentions from time to time as to whether the tea garden was managed by the Receiver economically and efficiently The surety bond which was given retrospective operation with effect from the date on which the Receiver had taken Possession of the mortgaged property including the tea garden, would therefore cover the loss occasioned to the tea garden due to the Receiver 's default.
[360B C]
|
ivil Appeal NOS.
574 575 of 1974.
From the judgment and decree dated the 19th April, 1973 of the Gujarat High Court in Civil Revision Application Nos.
1193 & 1194 of .1967.
P. H. Parekh and Manju Jaitley" for the appellant.
I. N. Shroff, for respondent.
The Judgment of the Court was delivered by CHANDRACHUD, J.
The appellants in these two appeals are monthly tenants of the respondent, the Mahila Sahakari Udyog Mandir.
The respondent filed suits against the appellants for possession of the premises let out to them, on the ground of arrears of rent and on the ground that the premises were reasonably and bona fide required by the respondent for its own purposes.
On both counts the trial court held against the respondent and dismissed the suits.
The decree of the trial court was confirmed in appeal by the learned Assistant Judge, Surat but the High Court of Gujarat allowed the respondent 's revision application and decreed the suits.
On March 11, 1974 the High Court granted to the appellants a certificate to appeal to this Court under the amended Article 133(1) of the Constitution.
The Bombay Rents, Hotel and Lodging House Rates Control Act, LVII of 1947, is in force in Gujarat with certain modifications.
Section 12(1) of the Act provides that a landlord shall ' not be entitled to the recovery of possession of any premises so long as the tenant pays, or is ready and willing to pay, the amount of the standard rent and permit ted increases, if any, and observes and performs the other conditions of the tenancy, in so far as they are consistent with the provisions of the Act.
Section 13 of the Act sets out the various grounds on which a landlord may recover possession of the premises let out to the tenant.
Sub section (1) clause (1) of that section Provides: "13.
(1) Notwithstanding anything contained in this Act but subject to the provisions of section 15, a landlord shall be entitled to recover possession of any premises if the Court is satisfied * * * * * * 413 "(g) that the premises are reasonably and bona fide required by the landlord for occupation by himself or by any person for whose benefit the premises are held or where the landlord is a trustee of a public charitable trust that the premises are required for occupation for the purposes of the trust;" Section 15(1) provides that notwithstanding anything contained in any Law, but subject to any contract to the contrary, it shall not be lawful after the coming into operation of the Act for any tenant to sub let the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein.
Section 15(2) legalises sub leases, assignments and transfers effected in favour of persons as have entered into possession and have continued in possession on the date of the commencement of the ordinance of 1959.
The trial court and the First Appellate Court found that the respondent required the premises for the purpose of its business but they dismissed the suits on the ground that ill view of the provisions of section 25 of the Act.
the requirement could not be said to be reason able and bona fide.
The High Court accepted the finding of the courts below that the penalises were required by the respondent for the purpose of its business but it differed from them on the question of the applicability of section 25.
The High Court has taken the view that section 13(1)(g) is not subject to section 25 and therefore the question whether the requirement of the landlord is reasonable and bona fide has to be decided apart from the provisions of section 25.
The correctness of this view is challenged by the tenants in these appeals.
The scheme of the Act is that ordinarily the landlord shall not be entitled to evict a tenant so long as the latter pays or is ready and will Judg to pay the standard rent and permitted increases and so long as he observes and performs the other conditions of the tenancy, in so far as they are consistent with the provisions of the Act.
This rule is enunciated in section 12(1).
Section 13 of the Act is in the nature of an exception to section 12.
It enumerates the grounds on which not withstanding the injunction contained in section 12, a landlord may obtain possession of the premises Act out to the tenant.
Under section 13(1) (g), the landlord can obtain possession only if he satisfies the court that the premises are required by him "reasonably and bona fide".
If the issue as regards the reasonableness of the landlord 's requirement is to be decided without reference to the provision contained ill section 25 the respondent would be entitled to succeed because all the three courts have found that the respondent requires the premises genuinely for occupation by itself for the purpose of its business and that the requirement, apart from section 25. is reasonable and bona fide.
The short question for consideration in these appeals is whether the reasonableness of the landlord 's requirement can be judged in the light of the provision contained in section 25 or whether, as held by the High Court, section 25 is to be kept out of way in judging that question.
By section 25, a landlord cannot use nor can be permit to be used for a non residential purpose any premises which on that date when the Act came into force were used for a residential purpose.
Under sub 414 section (2) of section 25, a landlord who contravenes the provisions of sub section (1) is punishable with imprisonment for a ter which may extend to three months or with fine or with both.
In the instant case, the premises were admittedly used for a residential purpose on February 13, 1948 being the date on which the Act came into operation.
It is plain from the language of section 25(1), that the respondent cannot convert the user of the premises from a residential to a non residential purpose.
If it did so, it would be liable to be, prosecuted and punished under section 25(2).
The respondent sought possession of the premises let out to the appellants and three other tenants on the ground that it wanted one room for its office, two rooms for running a fair price grain shop, two rooms for conducting a provision stores, two rooms for preparing pickles, cleaning spices and for keeping the finished products for sale, two rooms for establishing a godown and some more space for conducting a tailoring and sewing class.
The respondent succeeded in proving its requirement but its very success in establishing that it required the premises for a non residential purpose is its failure to establishing the ingredients of section 13(1) (g) of the Act.
Under that provision, it is not sufficient for a landlord to establish that the premises are required by him but it has to be show further that the requirement is reasonable and bona fide.
The requirement of the respondent in the instant case cannot ever be called reasonable, if the very stable under which it seeks relief contains an injunction that it shall not use residential premises for a non residential purpose.
Not only does the statute contain an injunction against the user of residential premises for a non residential purpose, but it makes it penal for a landlord to use for a non residential purpose any premises which were use for a residential purpose on that date when the Act came into force.
In the light of section 25(1), granting a decree to the respondent for possession of the residential premises on the ground that it requires those premises for a non residential purpose is to pave the way for its prosecution and punishment under section 25(2).
In fact, such a decree would be self defeating because whereas the decree shall have been passed on the ground that the respondent requires the premises for a non residential purpose, it will not be able to use those premises for the purpose for which the decree was granted, save on pain of prosecution.
Learned counsel for the respondent places great reliance on the non obstante clause of section 13 (1) and argues that legislature , having considered the question whether section 13 should be made subject to any other law or to any other Provision of the Act came to the conclusion that it should be made subject to the provisions of section 15 only and therefore it would be wrong to subject the provisions contained in section 13(1) to section 25.
The High Court also approached the problem before it by saying that the material question for consideration was whether section 13(1) can be made subject to section 25.
This auction was answered by the High Court by saving that since the legislature did not subject the right conferred on the landlord by section 13(1) to any other provision save the one contained in sec 415 tion 15, section 25 cannot be permitted to override section 13(1).
This approach, in our opinion, is misconceived.
The true question for consideration is not wether as between section 13(1) and section 25(1) one overrides the other and indeed, in view of the wording of the non obstante clause of section 13 (1), the pervasions of that section must have priority over the rest of the Act, except for what is contained in section 15.
But conceding to section 13(1) its rightful precedence and granting that it stands supreme except for section 15, according to its own terms the court has to be satisfied that the requirement of the land lord is reasonable A requirement which runs in the teeth of section 25 and which, if established, may throw the landlord open to the risk of a prosecution cannot be called reasonable.
Therefore, if the respondent shall have failed, it is not because section 25 overrides section 13 (1) hut because of its failure to prove the reasonableness of its requirement.
Whether the requirement of the landlord is reasonable or not is to be judged from all the facts and circumstances of the case and a highly relevant circumstance bearing on the reasonableness of the land lord 's requirement is that the purpose for which the possession is sought is a purpose for which the premises cannot be used save on pain of penal consequence.
Courts ought not to construe a statute in a manner which will encourage the breach of any of its provisions and, most certainly, a decree ought not to be passed which, if honored, will attract penal consequences.
To pass a decree in favour of the respondent on the grounds accepted by the High Court is to invite the respondent to commit a breach of the statutory injunction contained in section 25 (1) .
In short, therefore, though the evidence led by the respondent is sufficient to prove that it requires the suit premises for the purpose of its Business, no decree for possession can be passed in its favour as its requirement cannot be said to he reasonable.
The requirement runs across a statutory prohibition and is therefore not reasonable.
The view taken by the Bombay High Court in Civil Revisionary Application No. 2172 of 1957 decided on September 3, 1959 and in Laxmi Cooperative Bank Ltd. vs Mohan Govind Diwanji(1), as also the view taken by a learned Single Judge of the Gujarat High Court in Civil Revision Application No. 896 of 1963 decided on March 7, 1967, is in our opinion correct.
The learned Judges of the Gujarat High Court were in error in the instant case in departing from that view.
For these reasons we allow the appeals, set aside the judgement of the High Court and direct that the suits filed by the respondent against the appellants shall stand dismissed.
Respondent shall pay to the appellants the costs of these appeals.
One set of hearing for only.
P.B.R. Appeals allowed.
| IN-Abs | Section 13 of the Bombay Rents, Hotel and Lodging House Rates Control.
Act, 1 VII of 1947 (which was the Act in force in Gujarat) enumerates the grounds on which a landlord may obtain possession of the premises let out to a tenant.
Clause (g) of that section provides that the landlord can obtain possession only if he satisfies the Court that the premises are reasonably and bona fide required for occupation by himself.
Section 25 provides that a landlord cannot use nor can he permit to be used for a non residential purpose any premises which, on the date when the Act came into force, were used for a residential purpose.
Sub section (2) of this Section makes contravention of the provisions of sub s.(1) punishable with imprisonment.
On the date on which the Act came into operation, the premises in dispute belonging to the respondent were used for residential purposes.
The respondent sought possession on the ground that it wanted them for its office for running a fair price shop, for establishing a godown, for conducting a tailoring and sewing class and such other purposes.
The trial cannot and the first appellate court found that the respondent needed the premises for its business: but dismissed the suits on the ground that in view of the provisions of section 25 of the Act The requirement could not be said to be reasonable and bona fide.
The High Court, while accepting that the premises were required by the respondent for its business, took the view that since the legislature dill not subject the right conferred on the landlord by s.13(1) to any other provision save the one contained in s 15 s.25 cannot be permitted to override s.13(1).
Allowing the appeal, ^ HELD: Though the respondent required the premises for the purposes of its business, no decree for possession could be passed in its favour as its requirement could not be said to be reasonable.
The requirement runs across the statutory prohibition and is, therefore, not reasonable.
[415 E] (1) Under s.13(1)(g) it is not sufficient for a landlord to establish that the premises was e required by him but it has to be shown further that the requirement is reasonable and bona fide.
The requirement of the respondent in the instant case could not be called reasonable if the very statute under which it seeks relief contains an injunction that it shall not use residential premises for a non residential purpose.
Not only does the statute contain an injunction against the user of residential premises for a non residential purpose but it makes it penal For a landlord to use for a non residential purpose any premises which were used for a residential purpose on the date when the Act came into force.
[414C E] (2) (a) The approach of the High Court is misconceived.
The true question for consideration is not whether as between s.13(1) and s.25(1), one over rides the other, and indeed.
in view of the wording of the non obstane clause of section 13 (1), the provisions of that section must have priority over the rest of the Act except for what is contained in s.15.
But conceding to s.13(1) its rightful precedence and granting that it stands supreme except for s.15,.
according to its own terms the Court has to be satisfied that the requirement of the landlord is reasonable.
[415A B] (b) If the respondent fails it is not because s.25 overrides s.13(1) but because of its failure to prove the reasonableness of its requirement whether the requirement of the landlord ms reasonable or not ms to be judged from all the facts and circumstances of the case and a truly relevant circumstance 412 bearing on the reasonableness of the landlord 's requirement is that the purpose A for which the possession was sought was a purpose for which the premises could not be used save on pain of ' penal consequences.
[415 CD] (3) Courts sought not to construe a statute in a manner which will encourage the breach of any of its provisions and a decree ought not to be passed which, is ' honored, will attract penal consequences.
To pass a decree in favour of the respondent on the grounds accepted by the High Court is to invite the respondent to commit a breach of the statutory injunction contained in s.25(1).[415 D] Laxmi Co perative Bank Ltd. vs Mohan Govind Diwanji, 74 B.L.R 186, approved.
|
civil Appeal No. 767 of 1973.
From the Judgment and order date the 9th March, 1973 of the Rajasthan High Court at Jodhpur in Election Petition No. 10 of 1972.
D. P. Singh, Subhagmal Jain and R. K. Jain, for the Appellant.
A. K Sen, Yogeshwar Prasad, section K. Bagga, Mrs. section Bagga and Miss Yash Bagga, for the Respondent The Judgement of the Court was delivered by KHANNA, J. This is an appeal by Shiv Charan Singh against the judgment of the Rajasthan High Court whereby election petition filed by the appellant to question the election of Brijendra Pal respondent from the Karauli constituency to the Rajasthan Assembly was dismiss cd.
The appellant and the respondent were the main candidates in the election to the Rajasthan Legislative Assembly from the Karauli constituency.
The result of the election was declared on March 12, 1972 and the respondent was declared elected.
The appellant challenged the election of the respondent on the ground that the respondent and his election agent Jagdish Pal published and got published statements of fact in relation to the personal character and conduct of the appellant which were false and which they believed to be false or did not believe to be true and which statements were reasonably calculated to prejudice the prospects of the appellant 's election.
The second ground on which the election of the respondent was assailed was that the respondent and his election agent deliberately failed to maintain regular and correct account of expresses incurred by them in connection with the election and that they incurred or authorised expenditure in contraction of section 77 of the Representation of the People Act, 1951.
As regards the first ground, it was stated that the respondent and his election agent got published news item exhibit I in "Kronch",a Hindi 418 weekly dated February 25, 1972 published and printed in Jaipur Radhey Shyam Sharma was the editor of that weekly.
The aforesaid news item was stated to contain false defamatory statements of fact in relation to the personal character and conduct of the appellant.
It was added that the respondent and his election agent and Radhey Shyam Sharma believed those statements, which were calculated to prejudice the prospects of the appellant 's election, to be false and did not believe them to be true.
Radhey Shyam Sharma was also stated to have addressed an election meeting of the respondent on February 27, 1972 at Chogan in Karauli city and read out news item exhibit 1.
Copies of the aforesaid issue of Kronch were also stated to have been distributed in that meeting in the presence of the respondent and his election agent.
According further to the appellant, Radhey Shyam Sharma got published pamphlet exhibit 2 printed at the instance of and with the consent of the respondent and his election agent.
This pamphlet was also as objectionable as news item exhibit 1.
The pamphlet was stated to have been distributed by the respondent, his election agent and Radhey Shyam Sharma at an election meeting at Bhudara on March 2, 1972.
Radhey Shyam Sharma was further alleged to have published another issue exhibit 3 of Kronch containing defamatory statements of fact against the appellant.
These statements were also stated to be objectionable in the same manner as those contained in news item exhibit 1.
As regards the election expresses, it was stated.
the respondent had not shown the expanses actually incurred by him in the matter of hiring of vehicles, purchase of petrol, arrangement of a procession and employment and entertainment of his workers.
The respondent, it was claimed had incurred an expense to the extent of at least Rs. 35,000 over and above the amount shown by him in the return of election expenses.
The petition was resisted by the respondent and he denied the various allegations made by the appellant.
According to the respondent, Radhey Shyam Sharma was hostile to the appellant and had as long ago as October 15, 1970 bitterly criticised the activities of the appellant in an issue of Kronch.
The respondent denied that he had anything to do with the publication by Radhey Shyam Sharma of the different issues of Kronch and pamphlet .
It was also denied that the issues of Kronch or the pamphlet in question were distributed in the meetings of the respondent.
The allegation that the issues of Kronch and the pamphlet in question contained statements of fact which were false and which the respondent believed to be false or did not believe to be true and that those statements were calculated to prejudice the prospect of the appellant 's election was likewise denied.
According to the respondent, the allegations contained in the impugned issues of Kronch and the pamphlet had earlier been made m some other papers and on the floor of the Rajasthan Legislative Assembly.
They had also been made by one Babulal Sharma, Convenor of Yuvak Congress Mandal, Karauli.
As regards the election expenses, the respondent stated that he had maintained a proper and correct statement of account and had not incurred any expenditure over and above the amount of Rs. 8,665.69 shown in his return.
419 in the election petition ? "1.
Did the respondent and his election agent Mr. Jagdish Pal publish the statement of fact in relation to the personal character or conduct of the petitioner as alleged in paragraphs 14? 16, 18, 19 and 20 of the petition ? 2.
Was Mr. Radhey Shyam Sharma engaged by the respondent to carry on his propaganda and was he in charge of the respondent 's publicity and did he publish the news item in 'Kronch ' and read them out and the petition ? distribute the news items and the pamphlet as stated 3.
(a) Were the statements referred to in issue No. 1 false, and did the respondent or his election agent or Mr. Radhey Shyam Sharma believe them to be false.
Or did not believe them to be true? (b) Were those statements reasonably calculated to prejudice the prospects of the petitioner 's election ? 4.
Have the respondent and his election agent deliberately failed to maintain a regular and correct return of the expenses incurred by them in connection with the election of the respondent ? 5.
Have the respondent and his election agent incurred or authorised expenditure in contravention of section 77 of the Representation of the People Act, 1951, as alleged in the election petition ?" issues (1) and (2) were decided against the appellant.
The view of the findings on issue Nos. 1 and 2, issue No. 3 was held not to arise.
All the same the High Court was into the matter and held that neither the respondent or his 'election agent nor Radhey Shyam Sharma had reason to believe the impugned statements published in Kronch and the pamphlet in question to be false and not to be true.
Issues (4) and (5) too were decided against the appellant.
In the result the election petition was dismissed At the hearing of the appeal Mr. D. P. Singh on behalf of the appellant has assailed the findings of the High Court on the different issues.
As regards the election expenses, it has been conceded by Mr. Singh that even if they were not maintained in the prescribed manner, that fact would not constitute a corrupt practice.
According however to the learned counsel, that fact taken with other evidence might justify a conclusion that the respondent had suppressed some items of expenditure.
So far as this question is concerned, we find that the High Court has considered the evidence brought on record 420 and has held on appraisement of that evidence that there was no cogent material to show that the respondent had incurred any expenditure over and above what had been shown in his return.
After having been taken through the material on record, we find no cogent ground whatsoever to interfere with the appraisement of the evidence by the High Court.
Reference was made to the expenses for the purchase of petrol.
According to return exhibit 6 filed by the respondent, he spent Rs. 3,253.27 on petrol.
The correctness of that above figure is vouchsafed by the statement of accounts filed by Karauli Auto Stores The petrol pump which supplied petrol for the respondent belonged to that concern.
Although the said concern was a family concern of the respondent, nothing has been brought to our notice as to why the statement of account filed by that concern be not accepted.
During the pendency of the trial on application filed by the appellants the High Court directed that the account books maintained by the respondent as well as the account books, cash book and the credit and cash vouchers of Karauli Auto Stores might be shown to the appellant 's counsel.
In spite of that order the appellant or his counsel could not examine those account books and documents.
Nothing was consequently brought on record to question the correctness of the entries in the account books.
It has also been urged that the appellant engaged certain vehicles is for a number of days but the expenses incurred on that account were not correctly shown.
As against that, the case of the respondent is that only those vehicles were hired by him which were shown in the documents filed by him.
According further to him, the number of days for which those vehicles were hired was also correctly shown.
The appellant produced oral evidence of a couple of witnesses in support of the stand taken by him.
The High Court declined to accept that evidence.
After hearing the learned counsel for the appellant, we are not inclined to take a contrary view.
The evidence adduced by the appellant was not only not supported by any documents it ran counter to the documents which were produced by the respondent and some of which had been signed by the witnesses produced by the appellant It is well established that in an election appeal this Court should not interfere with a finding of fact recorded by the High Court based upon the appraisement of evidence unless such finding is vitiated by some glaring infirmity.
No such infirmity has been brought to our notice.
Mr. Singh has then submitted that the daily hiring charges of a truck was about Rs. 100 but the respondent in his return showed the daily hiring charge for the truck to be Rs. 35.
The case of the respondent in that respect is that the was charged Rs. 35 as daily hiring charges because he prevented the requisitioning of those trucks by making a representation that they were needed for his election campaign.
Evidence was also produced in support of the above stand of the respondent.
The High Court found the above explanation of the respondent to be plausible.
Nothing cogent has been brought to our notice as to why we should take a contrary view.
The fact that there are suspicious 421 features in the respondent 's case about his election expenses would not justify interference with the finding of the High Court because suspicion cannot take the place of proof.
Coming to the question of the impugned issues of Kronch and pamphlet exhibit 2, we find that there is no cogent evidence on the record to show that Radhey Shyam Sharma published those issues and the pamphlet at the instance of or with the consent of the respondent or his election agent.
It is indeed evident from the issue of Kronch dated October 15, 1970 that Radhey Shyam Sharma was hostile to the appellant and had been criticising him since 1970, about 14 months before the election.
There is, therefore, nothing to rule out the possibility, as stated by the respondent, that Radhey Shyam Sharma published the impugned issues and pamphlet at his own and without the consent of the respondent or his election agent.
The allegation that the impugned issues of Kronch and the pamphlet were distributed in the election meetings of the respondent remains unsubstantiated.
The appellant got produced reports exhibit 15 and 16 of the two election meetings of the respondent held on February 27, 1972 and March 2, 1972.
According to these reports, Radhey Shyam journalist addressed those meetings and asked those present to vote for the respondent.
There is no mention in these reports of Radhey Shyam having said anything against the appellant.
There is also no reference to the distribution of any pamphlets or issues of Kronch in those meetings.
Our attention has been invited by the learned counsel for the appellant to the statement of Nurul Hasan constable (PW 4), according to whom some documents were distributed in a meeting held on March 2, 1972.
The witness added that he did not know as to what were the contents of those documents because he saw the whole thing from a distance.
The evidence of Nurul Hasan, in our opinion, is too slender a basis for recording a finding that the impugned pamphlet and issues of Kronch were distributed in the meeting of the respondent.
It is in the evidence of Sub Inspector Bhopal Ram (PW 18) that if any newspaper is distributed in an election meeting and a copy of it becomes easily available to the constable present in that meeting, he sends it along with his report.
The witness also produced some pamphlets which were distributed in an election meeting against the respondent.
If as is the case of the appellant, the impugned issues of Kronch and pamphlet in question were widely distributed in the election meetings of the respondent, it is not clear as to why the policeman on duty in those meetings could not secure even one copy of those issues or pamphlets.
The fact that no such copy was sent with any of the police reports shows that the allegation of the appellant in this respect is not well founded.
422 In view of our finding that it is not proved that Radhey Shyam got published the impugned issues of Kronch and pamphlet at the instance of or with the consent of the respondent or his Section agent and in view of our further finding that it is not proved that the copies of the impugned issues of Kronch or pamphlet were distributed in the election meetings of the respondent, we need not go into the question as to whether the finding of the High Court on issue No. 4 is correct or not.
We consequently neither affirm nor disaffirm the finding of fact or law under this issue.
The appeal fails and is dismissed but in the circumstances without costs.
V.M.K. Appeal dismissed.
| IN-Abs | Representation of the People Act, 1951, s.77 Election expenses Failure of successful candidate to maintain account in prescribed manner, if constitutes corrupt practice.
The appellant and the respondent were the main candidates in the election lo the Rajasthan Legislative Assembly from the Karauli constituency.
The result of the election was declared on March 12, 1972 and the respondent was declared elected.
The appellant challenged the election of the respondent on the ground that the respondent and his election agent Jagdish Pal published and got published statements of fact in relation to the personal character and conduct of the appellant which were false and which they believed to be false or did not believe to be true and which statements were reasonably calculated to prejudice the prospects of the appellant 's election.
The second ground on which the election of ' the respondent was assailed was that the respondent and his election agent deliberately failed to maintain regular and correct account I : of expenses incurred by them in connection with the election and that they incurred or authorised expenditure in contravention of s.77 of the Representation of the People Act, 1951.
The petition was resisted by the respondent and he denied the various allegations made by the appellant.
Five issues were framed on the basis of the pleadings before the High Court Issues (1) and (2) were decided against the appellant.
These issues related to the first ground.
The view of the findings on these issues, issue (3) was held not to arise.
Issues (4) and (5) relating to expenses were also decided against the appellant.
As a result, the election petition was dismissed.
This appeal has been preferred by the appellant against the judgment of the High Court dismissing his election petition.
Dismissing the appeal, ^ HELD: (i) It is well established that in an election appeal Supreme Court should not interfere with a finding of fact recorded by the High Court based upon the appraisement of evidence unless such finding is vitiated by some glaring infirmity.
[420F] F (ii) Even if the account of election expenses was not maintained in the prescribed manner, that fact would not constitute a corrupt practice.
[419G] (iii) The High Court has considered the evidence brought on record and has held on appraisement of that evidence that there was no cogent material to show that the respondent had incurred any expenditure over and above what had been shown in his return.
No cogent ground whatsoever has been made out lo interfere with the appraisement of the evidence by the High Court.
[419H 420 A] G (iv) The correctness of the figure of Rs. 3,523.27 as expenses incurred for the purchase of petrol is vouchsafed by the statement of account filed by Karauli Auto Stores a family concern of the respondent.
Nothing has been shown as to why the statement of account field by that concern cannot be accepted.
During the pendency of the trial on application filed by the appellant.
the High Court directed that the account books maintained by the respondent as well as the cash book and the credit and cash vouchers of Karauli Auto Stores might be shown to the appellant 's counsel.
In spite of that order the appellant or his counsel did not examine those account books and documents.
Nothing was consequently brought on record to question the correctness of the entries in the account books.
[420B C] 417 (V) The High Court declined to accept the oral evidence adduced by the appellant in support of his plea that the account does not correctly show the expenses regarding certain number of vehicles engaged by him.
The evidence adduced by the appellant was not only not supported by any documents, it ran counter to the documents which were produced by the respondent and some of which had been signed by the witnesses produced by the appellant.
[420EF] (vi) The plea of the respondent that he was charged only Rs. 35/ as daily hiring charge for the truck because he presented the requiring of those trucks by making a representation that they were needed for his election compaign, has been accepted by the High Court as plausible.
There is nothing cogent made out as to why a contrary view should be taken.
[420H] (vii) So far as the impugned issues of Hindi daily Kronch and pamphlet Ex.2 are concerned, there is no cogent evidence to show on the record that Radhey Shyam Sharma published those issues and the pamphlet at the instance of or with the consent of the respondent or his election agent.
It is indeed evident from the use of Kronch dated October 15, 1970 that Radhey Shyam Sharma was hostile to the appellant and had been criticising him since 1970 about 14 months before the election.
There is, therefore, nothing to rule out the possibility that Radhey Shyam Sharma published the impugned issues and pamphlet at his own and without the consent of the responaent or his election agent.
[421AB]
|
Civil Appeal No. 116 of 1953.
Appeal from the Judgment and Order dated the 23rd day of August 1951 of the High Court of Judicature at Calcutta in Appeal No. 112 of 1950 arising out of the order dated the 24th day of March 1950 of the Registrar of Trade Marks in the matter of Registered Trade Mark No. 3815.
C. K. Daphtary, Solicitor General for India (K. section Shavakasha and R. H. Dhebar, with him) for the appellant.
section C. Isaacs, (P. K. Ghosh, with him) for the res pondents.
April 15.
The Judgment of the Court was delivered by DAS J.
This is an appeal from the judgment and order pronounced on the 23rd August 1951 by a Division Bench of the High Court at Calcutta in Appeal No. 112 of 1950 reversing the decision of the Registrar of Trade Marks dated the 24th March, 1950 whereby he had rectified the register by inserting a disclaimer of the word "Shree" forming part of the respondent company 's registered trade mark No. 3815.
The material facts are as follows: In the year 1897 one Durga Charan Rakhit (since deceased) adopted as his trade mark in respect of the ghee produced and marketed by him a device which, with some slight modification not materially altering its essential 255 features, was, on the application of the respondent company, registered as its trade mark No. 3815.
That mark was and is a device consisting of the word "Shree" written on the top in bold Bengali character, having below it an ornamental figure with the word "Shree" written in the centre in small Deva Nagri character, the word "TRADE" written in English in an inclined manner on the left hand side of the ornamental figure and the word "MARK" written in English in an inclined manner on the right hand side of the ornamental figure and the words "Shree Durga Charan Rakhit" written at the bottom in Bengali characters.
The ornamental figure referred to above consists of a triangle over which is another inverted triangle and in the centre the word "Shree ', in small Deva Nagri character as mentioned above, the whole of the said ornamental figure being enclosed in a circle outside which are twelve ornamental petals.
In the affidavit affirmed by Malli Nath Rakhit, a director of the respondent company and filed in these proceedings, this mark has throughout been referred to as "the said mark SREE".
The said Durga Charan Rakhit having subsequently been adjudged insolvent all his properties including the goodwill of his ghee business and the said mark vested in the Official Assignee of Calcutta.
On the 15th January 1915 the goodwill of the said business including the said mark was sold by the Official Assignee by public auction and one Hem Dev Konch, a minor, was declared as the highest bidder and purchaser.
A notice of the said sale was advertised in the Calcutta Exchange Gazette on the 25th January 1915 by an attorney acting on behalf of the purchaser.
On the 27th January 1915 the said sale was confirmed by a Deed of assignment executed by the Official Assignee.
On the 22nd August 1917 Haripriya Konch, the father and natural guardian of the minor purchaser, acting as such and on behalf of the minor, conveyed to one Ashok Chandra Rakhit, son of the said Durga Charan Rakhit, the goodwill of the business including the right, title and interest in the said mark and the said Ashok Chandra Rakhit carried on the said business 256 and marketed ghee tinder the said mark.
On the 15th September 1926 the said Ashok Chandra Rakhit caused the fact of his ownership of the said mark to be advertised in the Calcutta Exchange Gazette and on the 22nd December 1926 caused to be registered with the Registrar of Assurances of Calcutta a declaration of his ownership of the said mark.
In 1932 the respondent company was incorporated as a private limited company under the Indian Companies Act, 1913 and the said Ashok Chandra Rakhit assigned the goodwill of his said business and his right, title and interest in the said mark to the respondent company.
In 1933 the respondent company 's said mark was registered in the Trade Mark Registry at Hong Kong under the provisions of, the Hong Kong Trade Marks Ordinance, 1909 and the fact of such registration was published in the Straits Settlements Government Gazette.
In 1934 two persons, Rajendra Prasad and Dilliram, were, on complaint, made on behalf of the respondent company, convicted by the Chief Presidency Magistrate of Calcutta under section 486, Indian Penal Code, for infringing the said mark and such conviction was upheld by the Calcutta High Court.
In 1935 one Chiranjilal Sharma was, on like complaint, convicted by the Chief Presidency Magistrate for infringement of the said mark.
The volume of the respondent company 's business in ghee done under the said mark is said to be considerable, the annual turn over varying from Rs. 10,00,000/ to Rs. 15,00,000/ , and the annual cost of advertisement being anything between Rs. 10,000/ and Rs. 39,000/ .
It is also said that the ghee marketed by the respondent company and its predecessors is well known by the said mark and is always asked for under the name "Shree".
The Indian having been brought into force in 1942 the respondent company on the 21st August 1942 filed an application for the registration of its said mark under the Act.
By his letter dated the 29th November 1943 the Registrar proposed that there should be a disclaimer of the word "shree" The respondent company by its 257 agents ' letter dated the 15th February 1944 intimated to the Registrar that, it could not agree to the proposal as "the trade mark Shree is very important in the device" and "the ghee is commonly designated by the trade mark Shree".
The respondent company also submitted an affidavit affirmed by one Bidyut Bikash Rakshit, a director of the respondent com pany, in support of its objection.
The Registrar not having then pressed his proposal for disclaimer the respondent company 's said mark was duly registered as trade mark No. 3815.
It appears that subsequently the Registrar found that the word "Shree" was used by Hindus as an auspicious symbol and placed even on letter heads and that consequently it was not adapted to distinguish within the meaning of the Act.
In course of time, therefore, a practice became established in the Registry whereby the word "Shree" was either refused registration as a trade mark or a disclaimer was enforced if it were made a part of a trade mark.
So inflexible bad been this practice that barring this particular trade mark No. 3815 there was no other trade mark containing the word "Shree" which had been registered without a disclaimer of the word "Shree".
Naturally this circumstance was bound to be regarded as an invidious discrimination and, indeed, pointed reference is said to have been made to it and it was suggested that the Registry should deal impartially and uniformly with all applications in matters relating to practice.
This aspect of the matter having 'been pressed upon the Registrar he took steps under section 46(4) of the and on the 8th March 1947 issued a notice calling upon the respondent company to show cause why the register should not be rectified by entering a dis claimer of the exclusive right in regard to the word "Shree".
The respondent company showed cause by filing an affidavit affirmed by Malli Nath Rakhit to which reference has been made.
After hearing learned counsel for the respondent company the Registrar came to the conclusion that the word "Shree" was 33 258 not adapted to distinguish and, for reasons stated in his judgment delivered on the 24th March 1950, directed rectification of the register by inserting a disclaimer of the word "Shree" in the following terms: "Registration of this Trade Mark shall give no right to the exclusive use of the word 'Shree" '.
Feeling aggrieved by the aforesaid decision the respondent company preferred an appeal to the High Court at Calcutta under section 76 of the Act.
The High Court also took the view that "Shree" was a word which had numerous meanings and that it would be impossible for any trader to contend that he had an exclusive right to the use of 'Such a word.
But the High Court went on to hold that there was no ground whatsoever for the order made by the Registrar as the respondent company had never claimed that it had any right to the exclusive use of the word "Shree".
In the result, the High Court allowed the appeal and set aside the order of the Registrar rectifying the register.
Being of the opinion that the point involved was a novel one in this country and was of importance and would affect the attitude of the Registrar in future cases, the High Court certified that it was a fit case for appeal to this Court under Article 133(1)(c) of the Constitution.
Hence the present appeal by the Registrar.
The order of rectification of the register by inserting a disclaimer was made by the Registrar under section 13 read with section 46(4) of the .
Section 13 runs as follows: "13.
Registration subject to disclaimer: If a trade mark contains (a)any part not separately registered as a trade mark in the name of the proprietor, or for the separate registration of which no application has been made, or (b)any matter common to the trade, or otherwise of a non distinctive character, the tribunal, in deciding whether the trade mark shall be entered or shall remain on the register, may require, as a condition of its being on the register, that 259 the proprietor shall either disclaim any right to the exclusive use of such part or of all or any portion of such matter, as the case may be, to the exclusive use of which the tribunal holds him not to be entitled, or make such other disclaimer as the tribunal may consider necessary for the purpose of defining the rights of the proprietor under the registration: Provided that no disclaimer shall affect any rights of the proprietor of a trade mark except such as arise out of the registration of the trade mark in respect of which the disclaimer is made".
At the outset it will be noticed that the power of the tribunal to require a disclaimer is conditioned and made dependent upon the existence of one of two things which are set out in clauses (a) and (b) and which have been called the jurisdictional facts.
It is only on the establishment of one of the two jurisdictional facts that the Registrar 's jurisdiction regarding imposition of a disclaimer arises.
Before, however, he may exercise his discretion he must find and hold that there are parts or matters included in the trade mark to the exclusive use of which the proprietor is not entitled and it is only after this finding is arrived at that the Registrar becomes entitled to exercise his discretion.
In course of the argument it was at one time contended that upon the establishment of the requisite jurisdictional fact and upon the finding that the proprietor was not entitled to the exclusive use of any particular part or matter contained in the trade mark the Registrar became entitled, without anything more, to require a disclaimer of that part or matter.
This extreme position, however, was not maintained in the end and it was conceded, as indeed it had to be, that the exercise of the power conferred on the Registrar by this section always remained a matter of discretion to be exercised, not capriciously or arbitrarily but, according to sound principles laid down for the exercise of all judicial discretion.
(See the observations of Lord Halsbury, L. C., in Sharp vs Wakefield(1).
As the law of Trade Marks adopted in our Act merely reproduces the English Law with (1) at p. 179.
260 only slight modifications, a reference to the judicial decisions on the corresponding section of the English Act is apposite and must be helpful.
Section 15 of the English Act of 1905 which later on was reproduced in section 14 of the English Act of 1938 and which corresponds to our section 13, was considered by the High Court in .
England in In re Albert Baker Co. 's Application and In re Aerated Bread Company 's Application(1) which is commonly called the A.B.C. case.
In that case Eve, J. found on the evidence that Albert Baker Company were widely known as "A.B.C." or "A.B. & Co." but that the letters "A.B.C." did not exclusively indicate their goods and that those letters being common to the trade they were not entitled to the exclusive use of those letters.
Nevertheless the learned Judge did not hold that that finding alone concluded the matter.
Said the learned Judge: "The first observation which it occurs to me to make is that the object of the Legislature was to relieve traders from the necessity of disclaiming, and I think it follows from this that the condition is one for the imposition of which some good reason ought to be established rather than one which ought to be imposed, unless some good reason to the contrary is made out.
This conclusion is, I think, forti fied by the frame of the section, which is in an enabling form empowering the tribunal to impose the conditions power which, I conclude, the tribunal would only exercise for good cause shewn".
It follows from what has been stated above that the existence of one of the two jurisdictional facts referred to in clauses (a) and (b) of section 13 and the finding that the trade mark contains parts or matters to the exclusive use of which the proprietor is not entitled does not conclude the matter and it must further be established that some good reason exists for the imposition of a disclaimer and the tribunal will only exercise the discretionary power for good cause shown.
(1) ; , 261 The second thing to be borne in mind, if the provisions of section 13 are to be properly understood and carried into effect, is that the section confides a discretionary power in the "tribunal" which, by virtue of section 2(n), means the Registrar or, as the case may be, the Court before which the proceeding concerned is pending.
An application for the rectification of the register may, under sub sections (1) and (2) of section 46, be made either to the Registrar or the High Court and sub section (4) of that section, under which the present proceedings were initiated by the Registrar, authorises both the High Court and the Registrar to take proceedings suo motu.
In view of the fact that discretion is given also to the High Court under section 13 a question may be raised as to whether the observations made by P. O. Lawrence, J. in In the matter of an application by the Diamond T. Motor Car Co.(1) namely, that in dealing with an appeal from the Registrar 's decision under section 8 (2) of the English Act of 1919 the High Court is not fettered by reason of the Registrar on the hearing before him having exercised his discretion, apply to our High Court hearing appeals under section 76 of our Act from decisions of the Registrar given under section 13 of our Act and whether in that situation our High Court may exercise its own discretion just as it could if the proceedings had initially been taken before it.
Assuming, but without deciding, that they do apply, it must, nevertheless, be remembered, adapt ing the language of Lord Macnaghten in Eno vs Dunn(1) that it is the Registrar "to whom in the first instance is committed the discretionary power".
If that authority has exercised his discretion in good faith and not in violation of any law such exercise of discretion should not be interfered with by the High Court merely on the ground that, in the opinion of the High Court, it could have been exercised differently or even that the High Court would have exercised it differently, had the matter been brought before it in the first instance.
The proper approach in (1) at p. 879.
(2) L.R. [1890]15 A.C. 252 at p. 263: at p. 318, 262 such a case is for the High Court to consider, as said by Lord Dunedin in In the matter of an application by F. Reddaway & Co. Ltd.(1), "whether the Registrar had really gone so wrong as to make it necessary to interfere with his discretion".
The third thing to note is that the avowed purpose of the section is not to confer any direct benefit on the rival traders or the general public but to define the rights of the proprietor under the registration.
The registration of a trade mark confers substantial advantages on its proprietor as will appear from the sections grouped together in Chapter IV under the beading "Effect of Registration".
It is, however, a notorious fact that there is a tendency on the part of some proprietors to get the operation of their trade marks expanded beyond their legitimate bounds.
An illustration of an attempt of this kind is to be found in In re Smokeless Powder Co. 's Trade Mark(1).
Temptation has even led some proprietors to make an exaggerated claim to the exclusive use of parts or matters contained in their trade marks in spite of the fact that they had expressly disclaimed the exclusive use of those parts or matters.
Reference may be made to Greers Ltd. vs Pearman and Corder Ltd.(1) commonly called the "Banquet" case.
The real purpose of requiring a disclaimer is to define the rights of the proprietor under the registration so as to minimise, even if it cannot wholly eliminate, the possibility of extravagant and unauthorised claims being made on the score of registration of the trade marks.
The last feature of the section is its proviso.
That proviso preserves intact any right which the proprietor may otherwise under any other law have in relation to the mark or any part thereof.
The disclaimer is only for the purposes of the Act.
It does not affect the rights of the proprietor except such as arise out of registration.
That is to say, the special advantages which the Act gives to the proprietor by reason of the registration of his trade mark do not extend to the (1) at p. 36.
(2) ; (3) , 263 parts or matters which he disclaims.
In short, the disclaimed parts or matters are not within the protection of the statute.
That circumstance, however, does not mean that the proprietor 's rights, if any, with respect to those parts or matters would not be protected otherwise than under the Act.
If the proprietor has acquired any right by long user of those parts or matters in connection with goods manufac tured or sold by him or otherwise in relation to his trade, he may, on proof of the necessary facts, prevent an infringement of his rights by a passing off action or a prosecution under the Indian Penal Code.
Disclaimer does not affect those rights in any way.
Keeping, then, in view the meaning and scope of section 13 of our and its underlying purpose as discussed above we proceed to consider whether in the circumstances of the present case the Registrar had exercised his discretion properly in inserting in the register a disclaimer of the word "Shree".
It has not been disputed that the respondent company 's registered trade mark No. 3815 is a distinctive device properly registrable under section 6 of the Act.
It is also a fact that it contains, as its prominent part, the word "Shree" which is not sepa rately registered as a trade mark in the name of the respondent company and, indeed, no application had been made by it for the separate registration of that word.
There can, therefore, be no doubt as to the existence of the jurisdictional fact referred to in clause (a) of that section.
Further, the Registrar found as a fact, for reasons stated by him, that the word "Shree" was not adapted to distinguish, which means that it did not pass the test for registrability laid down in section 6 and in particular in sub section (3) thereof.
The High Court also unequivocally took the view that "Shree" is a word which had numerous meanings and that it would be impossible for any trader to contend that he had an exclusive right to the use of such a word.
It, therefore, follows that the respondent company 's trade mark was concurrently held to have contained matters of a non distinctive character and consequently the second juris 264 dictional fact was also present in this case.
It, never theless, appeared to the High Court that there was no ground whatsoever for the order made by the Registrar.
The High Court read the decision of the Registrar as proceeding only on what was described as an inflexible practice established in the Registry whereby the word "Shree" was either refused registration as a trade mark or a disclaimer was enforced if it was a part of a trade mark and in this view the case appeared to the High Court to be indistinguishable from the case of In re Cadbury Brothers ' Application(1).
That case was decided under section 9 of the English Act of 1905.
Clause (5) of section 9 was then expressed in language which is somewhat different from clause (5) of section 6 of our Act.
Under section 9(5) of the English Act of 1905 a name, signature or word or words otherwise than such as fell within the description in the preceding paragraphs I to 4 could not, except by the order of the Board of Trade or by the Court, be deemed a distinctive mark. 'Tudor ' being a surname did not fall within clause (4) of that English Act and, therefore, the Registrar had no power to register it as a distinctive mark under clause (5).
Such being the position, the then Registrar of Trade Marks in England adopted a practice that wherever a mark contained 2a name which did not come within clause (4) and which he had no power to register under clause (5), there must be a disclaimer of that word without going into any investigation as to its distinctiveness.
The Registrar in that case declined to register the mark only because it contained a name which could not be registered alone by him under section 9(5), without deciding whether that word was a matter of a distinctive or non distinctive character, in pursuance of the inflexible practice that be had adopted, namely, of refusing registration in the absence of a disclaimer.
This decision of the Registrar was overruled by Sargant, J. The learned Judge, on the materials before him, came to the conclusion that the word 'Tudor ' was not common to the trade (1) ; 265 and that the word as it had been used by the applicants in relation to chocolates was not a matter of non distinctive character and that it had denoted their goods.
Consequently, the jurisdiction to impose a disclaimer did not arise under clause (b) of section 15 of the English Act of 1905.
The jurisdiction, if at all, could, therefore, arise only under clause (a), namely, that the trade mark contained parts not separately registered by the proprietor as trade marks.
Having come to the conclusion that the word 'Tudor ' was a matter of distinctive character as it denoted the goods of the applicant 's manufacture, the Court might have disposed of the case on the short ground that, on that finding, the applicant was entitled to the exclusive use of that name in connection with chocolates and like goods and, therefore, no question of requiring a disclaimer could, in that situation, arise at all.
Treating the matter, however, as still one of discretion, the learned Judge had to take into account the commercial case made on behalf of the applicants, namely, that they would, by disclaiming any right to the exclusive use of the word 'Tudor ', practically be inviting the public to disregard such common law rights as they had acquired to the use of the name 'Tudor ' and held that to impose a disclaimer of that word, in spite of the finding as to its distinctiveness in relation to the goods of the applicants, would be to drive the applicants to take innumerable passing off actions.
The facts of that case appears to us to be clearly distinguishable from those of the case now before us.
Here the concurrent finding of the Registrar and the High Court is that the word "Shree" is not adapted to distinguish and is not a word to the exclusive use of which any trader may claim the right.
In the face of this finding the consideration of the possibility that a disclaimer may drive the respondent company to a crop of passing off actions was not so relevant or urgent as it was in the Tudor case.
In view of the finding in the present case the respondent company could well be left, as it was in fact left, to protect its 34 266 rights by other proceedings, e.g) passing off actions or prosecutions which, by reason of the proviso, were open to be taken by it, if the necessary facts to support such proceedings which were not before the Registrar could be satisfactorily established.
Further, it is not quite correct to say that the Registrar, like his English counterpart, had based his decision entirely on what has been called his invariable practice.
It is no doubt true that the Registrar did, in this case, lay considerable stress on that aspect of the matter and may even be said to have somewhat over emphasized the practice of his Registry but it is not correct to say that his decision was entirely founded on that practice alone.
The materials before the Registrar, appearing on the affidavit filed on behalf of the respondent company, clearly indicated that the respondent company was claiming a proprietary right to the name "Shree".
Indeed, it called its mark as "the said mark Shree" throughout the affidavit and claimed that the said mark "Shree" was well known in the market and that its ghee was asked for and sold under the said mark "Shree".
The two prosecutions launched by it and the other facts men tioned in the main affidavit and the two supporting affidavits of two retail dealers and summarised at the beginning of this judgment clearly indicate that it was claiming the right to the exclusive use of the word "Shree" and, indeed, in its agents ' letter of the 15th February 1944 objecting to any disclaimer of that word, it was referred to "as trade mark Shree" and it was said to be "very important in the devise".
In other words, they put forward the claim that "Shree" itself was also its trade, mark, apart from the device as a whole and that it was an important feature of its device.
It is, therefore, not at all surprising that learned counsel appearing for the respondent company before the Registrar, when asked as to how his client could possibly be affected by disclaiming the word "Shree", said frankly that it was far easier to be successful in an infringement action than in a passing off action.
This clearly indicated that the respondent company did not want any other 267 merchant to use the word "Shree" in his trade mark in respect of ghee and that the respondent company thought that the registration of its trade mark with the word "Shree" contained in it would, per se, give it a right also to that word and that its intention was to launch infringement actions under the Act against any other trader who might happen to use the word "Shree" either alone or as part of his trade mark in respect of ghee.
Further, the Registrar ' may well have thought that the fact that all other traders who had got their trade marks containing the word "Shree" registered had had to submit to a disclaimer of the word "Shree" whereas the respondent company had got its trade mark containing the word "Shree" registered without a disclaimer was calculated to cause embarrassment to other traders and might conceivably encourage the respondent company to contend that the registration of its trade mark by itself and without further evidence gave it a proprietary right to the exclusive use of the word "Shree".
The res pondent company may also find some encouragement from the observations of Lord Radcliffe in De Cordova and others vs Vick Chemical Coy.(1) namely, that if a word forming part of a mark has come in trade to be used to identify the goods of the owner of the mark, it is an infringement of the mark itself to use that word as the mark or part of the mark of another trader, for confusion is likely to result.
These considerations may reasonably have led the Registrar to require a disclaimer.
None of these considerations arose or were adverted to in the Tudor case and this circumstance quite clearly distinguishes the present case from that case.
It is true that where a distinctive label is registered as a whole, such registration cannot possibly give any exclusive statutory right to the proprietor of the trade mark to the use of any particular word or name contained therein apart from the mark as a whole.
As said by Lord Esher in Pinto vs Badman(2): "The truth is that the label does not consist of (1) at p. 106.
(2) at p. 191.
268 each particular part of it, but consists of the combination of them all".
Observations to the same effect will be found also in In re Appollinaris Company 's Trade Marks(1), In re Smokeless Powder Co. (supra), In re Clement and Cie(1) and In re Albert Baker & Company (supra) and finally in the Tudor case referred to above which was decided by Sargant, J.
This circumstance, however, does not necessarily mean that in such a case disclaimer will always be unnecessary.
It is significant that one of the facts which give rise to the jurisdiction of the tribunal to impose disclaimer is that the trade mark contains parts which are not separately registered.
It is, therefore, clear that the section itself contemplates that there may be a disclaimer in respect of parts contained in a trade mark registered as a whole although the registration of the mark as a whole does not confer any statutory right with respect to that part.
As we have already stated the possibility of the proprietor attempting to expand the operation of his trade mark cannot be ignored or overlooked.
It is a thing which must be taken into consideration by the tribunal be it the Registrar or the Court in deciding upon the way it should exercise the discretionary power conferred on it.
Reference has been made by the High Court to the observations of Eve, J. in the A.B.C. case referred to above and the question has been posed as to whether any good cause had been shown for the necessity of disclaimer in this case.
The High Court answers the question immediately by saying that it did not think that any cause had been shown beyond the desirability of having a uniform practice.
This, as we have already stated, is not quite correct, for apart from the practice the Registrar did advert to the other important consideration, namely, that on the evidence before him and the statement of counsel it was quite clear that the reason for resisting the disclaimer in this particular case was that the company thought, erroneously no doubt but (1) (2) 269 quite seriously, that the registration of the trade mark as a whole would, in the circumstances of this case, give it a right to the exclusive use of the word "Shree" as if separately and by itself it was also its registered trade mark and that it would be easier for it to be successful in an infringement action than in a passing off action.
It was precisely the possibility of such an extravagant and untenable claim that called for a disclaimer for the purpose of defining the rights of the respondent company under the registration.
This aspect of the matter does not appear to have been pressed before or adverted to by the High Court.
Considering all the circumstances discussed above, we are not of opinion that the Registrar had gone so wrong as to have made it necessary for the High Court to interfere with his discretion.
If it were to be regarded as a matter of exercise of discretion by the High Court as to whether a disclaimer should be imposed or not, it is quite clear that the attention of the High Court was not drawn to an important consideration, namely, the strong possibility of the respondent company claiming a statutory right to the word "Shree" by virtue of the registration of its trade mark and subject others to infringement actions only on the strength of the registration and without proof of facts which it would have otherwise to establish in order to succeed in a passing off action or a prosecution under the Indian Penal Code and, therefore, the High Court cannot be said to have properly exercised its discretion.
The result, therefore, is that this appeal must be allowed and the respondent company must pay the appellant 's costs in this Court and in the High Court.
| IN-Abs | The exercise of the power conferred on the Registrar by section 13 of the is always a matter of discretion to be exercised, not capriciously or arbitrarily but, according to sound principles laid down for the exercise of all judicial discretion.
The existence of the two jurisdictional facts referred to in clauses (a) and (b) of section 13 and the finding that the trade mark contains parts or matters to the exclusive use of which the proprietor is not entitled does not conclude the matter and it must further be established that some good ground exists for the imposition of a disclaimer and the tribunal will exercise the discretionary power for good cause shown, 253.
For the proper understanding and carrying into effect the provisions of section 13 it is necessary to bear in mind that the section confides a discretionary power in the 'tribunal ' which by virtue of section 2(n) means the Registrar or, as the case may be, the Court before which the proceeding concerned is pending.
Assuming but not deciding that in dealing with an appeal under section 76 of the Act from the decisions of the Registrar under section 13 of the Act the High Court is not fettered by reason of the Registrar, on the hearing before him, having exercised his discretion and the High Court may exercise its own discretion, just as it could if the proceedings had been taken initially before it, it must be remembered that it is the Registrar to whom in the first instance is committed the discretionary power.
If that authority has exercised his discretion in good faith and not in violation of any law such exercise of discretion should not be interfered with by the High Court merely on the ground that, in the opinion of the High Court it could have been exercised differently or even that the High Court would have exercised it differently, bad the matter been brought before it in the first instance.
The proper approach in such a case is for the High Court to consider whether the Registrar has really gone so wrong as to make it necessary to interfere with his discretion.
The real purpose of requiring a disclaimer is to define the rights of the proprietor under registration so as to minimise, even if it cannot wholly eliminate, the possibility of extravagant and unauthorised claims being made on the score of registration of the trade marks.
The proviso to section 13 preserves intact any right which the pro . prietor may otherwise under any other law have in relation to the mark or any part thereof.
The disclaimer is only for the purposes of the Act.
It does not affect the rights of the proprietor except such as arise out of registration.
That is to say, the special advantages which the Act gives to the proprietor by reason of the regis tration of his trade mark do not extend to the parts or matters which he disclaims.
Held, that considering all the circumstances of the present case the Registrar had not gone so wrong as to make it necessary for the High Court to interfere with his discretion.
If it were to be regarded as a matter of exercise of discretion by the High Court as to whether a disclaimer should be imposed or not, it is quite clear that the attention of the High Court was not drawn to an important consideration, namely, the strong possibility of the respondent company claiming a statutory right to the word 'Shree ' by virtue of the registration of its trade mark and subject others to infringement actions only on the strength of the registration and without proof of facts which it would have otherwise to establish in order to succeed in a passing off action or a prosecution under the Indian Penal Code and, therefore, the High Court cannot be said to have properly exercised its discretion, 254 Sharp vs Wakefield (L.R. 1891 A.C .
173), Albert Baker Co.s Application and Aerated Bread Company s Application In re ; , In the matter of an application by the Diamond T. Motor Car Co. ([1921] at 379), Eno vs Dun?& ; , In the matter of an application by F. Reddaway & Co. Ltd. ([1926] 44 R.P.C,. 27), Smokeless Powder Co. 's Trade In re ; , Greers Ltd. vs Pearman and Gorder Ltd. ([1922] , Cadbury Brothers ' Application In re ; , De Cordova and others vs Vick Chemical Coy.
([1951] , Pinto vs Badman , Apollinaris Company 's Trade Marks and Clement & Cie In re (L . R. , referred to.
|
Civil Appeals Nos. 247 and 248 1975.
Appeals by special leave from the Judgment and order dated the 29th May, 1974 of the Kerala High Court in original Petition No. 5463 of 1971.
Krishnamoorthy Iyer and N. Sudhakaran, fol the appellant (in appeal No. 247/75 and respondent No. 2 in C.A. No. 248/75).
T. C. Raghavan and P. K. Pillai, for respondent no.1 (in both the appeals).
K. T. Harindranath (in C.A. No. 248/75) and K. R. Nambiyar.
(for respondent No, 2 in C.A. No. 247 and the appellant in C.A. No. 248/75).
376 The Judgment of the Court was delivered by `CHANDRACHUD, J.
This appeal by special leaves arises out of the judgment of the High Court of Kerala in Writ Petition No. 5463 of 1971.
That petition was filed by the The respondent A. Satyavan against the State of Kerala, the Director of the department of Museums and Zoos, Trivandrum and the appellant Smt.
V. A. Subhadra.
The main relief sought by the Ist respondent was that the order passed by 1 the State of Kerala on March ]8, 1971 appointing the appellant as an Upper Division Clerk in the Department of Museums and Zoos be quashed.
The appellant was appointed as a Lower Division Clerk ill the Department of Museums and Zoos, Trivandrum in 1949.
She was confirmed in that post in 1950.
The Ist respondent was appointed as a Lower Division Clerk in The same Department in 1955 and was confirmed ill 1963.
On April 9, 1962 the appellant, on her own request department transfer to the Department of Agriculture.
her rank was an inter departmental transfer.
Though on transfer the appellant became the junior most employee in the Department of Agriculture, her rank and lien were maintained in the Department of Museums and Zoos.
In course of time vacancy arose in the post of the Upper Division Clerk in the Department of Museums and zoos.
One M. section Pillai was the senior most Lower Division Clerk in that Department but when The post of promotion was offered to him he declined it on the ground of ill health.
The appellant was next in order of seniority amongst the Lower Division Clerks ill the Department of Museums and Zoos and since her rank and lien in that Department were maintained, she was offered the post of the Upper Division Clerk.
She conveyed her inability to accept that post for the time being and thereupon the 1st respondent, who was next in order of seniority, was appointed provisionally as an Upper Division Clerk.
His appointment was made without prejudice to the claims of the seniors in the Department of Museums and Zoos.
on the retirement of M. section Pillai, a permanent vacancy in the post of the Upper Division Clerk arose in the Department of Museums and Zoos.
On July 6, 1970 the appellant, who was working in the Department of Agriculture, conveyed her willingness to accept that post.
By an order dated March 18, 1971 she was appointed as an Upper Division Clerk and later on May 3, 1971 she was further promoted as a Senior Superintendent.
Both of these appointments as also the order by which his representation was rejected by the Government, were challenged in the Writ Petition by the 1st respondent.
The High Court of Kerala allowed the writ petition holding that under the relevant rules, the appellant was not entitled to be re transferred to her parent department and without a valid order of re transfer she could not be appointed as an Upper Division Clerk in that Department.
The High Court therefore quashed the order dated March 18. ;1 1971 by which the appellant was appointed as an Upper Division Clerk and the orders consequent upon it.
377 There are two things in favour of the appellant and they must first be mentioned.
The order dated April 9, 1962 passed by the Director of Museums and Zoos by which the appellant was transferred to the Department of Agriculture expressly mentions that her lien and rank will be maintained in the Department of Museums and zoos.
It is therefore plain that if and when the appellant rejoined the Department of Museums and Zoos in conformity with the rules and regulations, she would occupy the rank which she would have occupied but for her transfer to the Department of Agriculture.
Secondly, the order dated April 4, 1968 passed by the Director of Museums and Zoos by which the 1st respondent was appointed as an Upper Division Clerk in the Department of Museums and Zoos mentions expressly that he was appointed in the higher post for the time being only and that the appointment was made without prejudice to the claims of his seniors.
In the Department of Museums and Zoos the appellant was senior to the 1st respondent and therefore her claim of seniority would not be affected by the appointment of the 1st respondent as an Upper Division In spite of this position, the appellant 's appointment as an Upper Division Clerk in the Department of Museums and Zoos is invalid because such an appointment could be made only if, in the first place, the appellant was entitled under the relevant rules to return to her parent .
department.
It was common ground that the appellant 's right to re turn to the Department of Museums and Zoos was governed by the notification issued by the Government of Kerala on January 2, 1961.
Paragraph 2 of that notification reads thus: : A permanent person need not be required to relinquish his permanency.
He may be permitted to retain his permanent lien in the old post until he is confirms in the new unit or department, but he can come back to the old unit or department only if and when there is no vacancy for him to continue in the new unit, or if for any reason his pay in the substantive post in the parent department becomes higher than the pay of the new post held by him.
" It is clear from this provision that a person can return to his parent department ill one of the two contingencies only.
He can return if There is no vacancy for him to continue ill the new unit to which he is transferred.
Admittedly, there was a vacancy available to the appellant in the Department of Agriculture in which she could have continued and therefore this clause has no application.
The second contingency in which a person can return to his parent Department is if his pay in the substantive post in the parent department becomes higher than his pay in the post held by him in the department to which he is transferred.
The question which arises for consideration is whether by reason of this clause, The appellant was entitled to go back to her old unit.
If she would validly go back, there is no doubt that it was open to the Government to appoint her to the post of an Upper Division Clerk.
The High Court, in our opinion, was right in taking the view that "pay ill the substantive post in the parent department" means the pay 378 attached to the post substantively held by the employee on the date of transfer to another department.
since the substantive post held by the appellant on the date of her transfer to the Department of Agriculture was that of a Lower Division Clerk, what must be considered is whether the pay which the appellant would have drawn in that post, had she continued in her parent department, had for any reason become higher than the pay drawn by her in the post held by her in the Department of ' Agriculture.
It is undisputed that the pay which the appellant would have drawn as an Upper Division Clerk in her parent department on March 18, 1971 was not higher than the pay which she was drawing in the Department of Agriculture.
Since under Paragraph 2, an employee can come back to his old unit or department, "only if and when either of the two conditions is satisfied, the appellant was not entitled to return to her parent department.
Unless she could validly revert to her old unit, she could not be appointed to a post higher than the one substantively held by her in that unit on the date of her transfer.
It is urged on behalf of the appellant that the pay which she would draw in the post of an Upper Division Clerk in tile parent department after her re transfer to that department, would be higher than the pay which she was drawing In the post which she was holding in the Department of Agriculture and therefore she would be entitled to re 1) turn to her parent department under the second of the two condition mentioned above.
It is impossible to accept this contention.
The substantive post held by the appellant, apart from the impugned order of promotion, was that of a Lower Division Clerk in the Department of Museums and Zoos.
The comparison therefore has to be between the pay of that post and the pay of the post which the appellant was holding in the department to which she was transferred.
The order dated March 18, 1961 by which the appellant was appointed as an Upper Division Clerk in the Department of Museums and Zoos is therefore illegal and was rightly quashed by the High Court. 'the order dated May 3, 1971 further promoting the appellant as a Senior Superintendent must fall with that order.
The appeal is accordingly dismissed.
F Civil Appeal No. 248 of 1975: , This appeal is filed by the state of Kerala against the same judgment of the High Court which gave rise to the appeal just disposed of by us.
In accordance with the view taken by us in C.A. No. 247 of 1975, this appeal must be dismissed.
While admitting these two appeals, this Court had directed that the Government of Kerala shall pay the costs of the 1st respondent, A. Satyavan, in any event.
Accordingly, the Government of Kerala shall pay the costs of the 1st respondent.
Costs shall be in one set only.
P.B.R. Appeal dismissed.
| IN-Abs | The appellant who was a Lower Division Clerk in a department of the State Government had gone on transfer to another department on her own request.
Under a notification issued by the State Government.
a person could revert to his parent department (i) only if and when there is no vacancy for him to continue in the new unit or (ii) if for any reason his pay in the substantive post in the parent department becomes higher than the pay of the new post held by him.
The appellant was offered a temporary post of U.D.C. in the parent department but she declined.
The first respondent was therefore promoted to the post.
When a permanent vacancy of Upper Division Clerk occurred in the parent department the appellant was appointed to the post and was later promoted to higher post.
In a petition under article 226 of the Constitution filed by respondent No. 1 the High Court quashed the order of the appellant 's appointment and her promotion to the higher post.
Dismissing the appeal to this Court.
^ HELD: The order by which the appellant was appointed as an Upper Division Clerk in the parent department was illegal and was rightly quashed by the High Court.
The order promoting the appellant must fall with that order.
[378F] (I ) Since under paragraph of the notification an employee can come back to his old unit or department "only if and when" either of the two conditions is satisfied.
the appellant was not entitled to return to her parent department.
Unless she could validly revert to her old unit she could not be appointed to a roost higher than the one substantively held by her in that unit on the date of her transfer.
[378B C] (2) Pay in the substantive post in the parent department means the pay attached to the Post substantively held by an employee on the date of transfer to another department.
The pay which the appellant would have drawn as an Upper Division Clerk in her parent department on the date of her appointment was not higher.
than the pay which she was drawing in the new unit.
The substantive post held by the appellant apart from the impugned order of promotion was that of a Lower Division Clerk.
The comparison therefore has to be between the pay of that post and the pay of the post which the appellant was holding in the department to which she was transferred.
[377 H, 378E]
|
N: Criminal Appeal No. 158 of 1972.
Appeal by special leave from the Judgment and order dated the 12th November, 1971 of the Gujarat High Court at Ahmedabad in Criminal Appeal No. 219 of 1970.
H.S. Patel, S.S. Khanduja and Lalita Kohli, for the appellant.
section K. Zauri, Amaresh Kumar and M. V. Goswami, for the respondents 1 2.
H. R. Khanna and M. N. Shroff, for respondent No. 3.
The Judgment of the Court was delivered by CHANDRACHUD, J.
This is an appeal by special leave from the judgment of the Gujarat High Court convicting the appellant under section 36 read with section 8 of the Gujarat Agricultural Produce Markets Act, 20 of 1964 (referred to herein as "the Act"), and sentencing him to pay a fine of Rs. 10/ .
The judgment of conviction was recorded by the High Court in an appeal from an order of acquittal passed by the learned Judicial Magistrate, First Class, Godhra.
An Inspector of Godhra Agricultural Produce Market Committee filed a complaint against the appellant charging him with having purchased a certain quantity of ginger in January and February, 1969 without obtaining a licence as required by the Act.
The learned Magistrate accepted the factum of purchase but he acquitted the appellant on the ground that the relevant notification in regard to the inclusion of ginger was not shown to have been promulgated and published as required by the Act.
The case was tried by the learned Magistrate by the application of procedure appointed for summary trials.
That circumstance together with the token sentence of fine imposed by the High Court gives to the case a petty appearance.
But occasionally, matters apparently petty seem on closer thought to contain points of importance though, regretfully, such importance comes to be realized by stages as the matter travels slowly from one court to another.
As before the Magistrate so in the High Court, the matter failed to receive due attention: a fundamental premise on which the judgment of the High Court is based contains an assumption contrary to the record.
Evidently, the attention of the High Court was not drawn either to the error of that assumption or to some of the more important aspects of the case which the parties have now perceived.
It is necessary, in order to understand the controversy, to notice some of the relevant statutory provisions.
In the erstwhile composite State of Bombay there was in operation an Act called the Bombay Agricultural Produce Markets Act, 22 of 1939.
On the bifurcation of that State on May 1, 1960 the new State of Gujarat was formed.
The Bombay Act of 1939 was extended by 454 an appropriate order to the State of Gujarat by the Government of that State.
That Act remained in operation in Gujarat till September 1, 1964 on which date the Gujarat Agricultural Produce Markets Act, 20 of 1964, came into force.
The Act was passed "to consolidate and amend the law relating to the regulation of buying and selling of agricultural produce and the establishment of markets for agricultural produce in the State of Gujarat".
Section 4 of the Act empowers the State Government to appoint an officer to be the Director of Agricultural Marketing and Rural Finance.
Sections 5, 6(1) and 6(5) of the Act read thus: "5.
Declaration of intention of regulating purchase and sale of agricultural produce in specified area. (1) The Director may, by notification in the Official Gazette, declare his intention of regulating the purchase and sale of such agricultural produce and in such area, as may be specified therein.
Such notification shall also be published in Gujarati in a newspaper having circulation in the area and in such other manner as may be prescribed.
(2) Such notification shall state that any objection or suggestion received by the Director within the period specified in the notification which shall not be less than one month from the date of the publication of the notification, shall be considered by the Director.
(3) The Director shall also send a copy of the notification to each of the local authorities functioning in the area specified in the notification with a request to submit its objections and suggestions if any, in writing to the Director within the period specified in the notification.
Declaration of market areas. (1) After the expiry of the period specified in the notification issued under section 5 (hereinafter referred to in this section as 'the said notification '), and after considering the objections and suggestions received before its expiry and holding such inquiry as may be necessary, the Director may, by notification in the Official Gazette, declare the area specified in the said notification or any portion thereof to be a market area for the purposes of this Act in respect of all or any of the kinds of agricultural produce specified in the said notification.
A notification under this section shall also be published in Gujarati in a newspaper having circulation in the said area and in such other manner, as may be prescribed.
(5) After declaring in the manner specified in section 5 his intention of so doing, and following the procedure there in, the Director may, at any time by notification in the Official Gazette.
exclude any area from a market area specified in a notification issued under sub section (1), or include any area therein and exclude from or add to the kinds of agricultural produce so specified any kind of agricultural produce.
" 455 By section 8, no person can operate in the market area or any part thereof except under and in accordance with the conditions of a licence granted under the Act.
Section 36 of the Act provides, to the extent material, that whoever without holding a licence uses any place in a market area for the purchase or sale of any agricultural produce and thereby contravenes section 8 shall on conviction be punished with the sentence mentioned therein.
Rule 3 of the Gujarat Agricultural Produce Markets Rules, 1965 provides that a notification under section 5 (1) or section 6(1) shall also be published by affixing a copy thereof at some conspicuous place in the office of each of the local authorities functioning in the area specified in the notification.
The simple question, though important, is whether the notification issued under section 6(5) of the Act, covering additional varieties of agricultural produce like ginger and onion, must not only be published in the official gazette but must also be published in Gujarati in a newspaper.
The concluding sentence of section 6(1) says that a notification under "this section" "shall also be published in Gujarati in a newspaper" having circulation in the particular area.
The argument of the appellant is twofold: Firstly, that "this section" means this subsection so that the procedure in regard to publication which is laid down in subsection (1) of section 6 must be restricted to notifications issued under that subsection and cannot be extended to those issued under subsection (5) of section 6; and secondly, assuming that the words "this section" are wide enough to cover every sub section of section 6 the word "shall" ought to be read as "may".
First, as to the meaning of the provision contained in section 6 (1) of the Act.
It means what it says.
That is the normal rule of construction of statutes, a rule not certainly absolute and unqualified, but the conditions which bring into play the exceptions to that rule do not exist here.
Far from it; because, the scheme of the Act and the purpose of the particular provision in section 6(1) underline the need to give to the provision its plain, natural meaning.
It is not reasonable to assume in the legislature an ignorance of the distinction between a "section" of the statute and the "subsections" of that section.
Therefore, the requirement laid down by section 6(1) that a notification under "this section" shall also be published in Gujarati in a newspaper would govern any and every notification issued under any part of section 6, that is to say, under any of the sub sections of section 6.
If this requirement was to govern notifications issued under sub section (1) of section 6 only.
the legislature would have said so.
But the little complexity that there is in this matter arises out of a known phenomenon, judicially noticed but otherwise disputed, that sometimes the legislature does not say what it means.
That has given rise to a series of technical rules of interpretation devised or designed to unravel the mind of the law makers.
If the words used in a statute are ambiguous, it is said, consider the object of the statute, have regard to the purpose for which the particular provision is put on the statute book 456 and then decide what interpretation best carries out that object and purpose.
The words of the concluding portion of section 6(1) are plain and unambiguous rendering superfluous the aid of artificial guide lines to interpretation.
But the matter does not rest there.
The appellant has made an alternative argument that the requirement regarding the publication in Gujarati in a newspaper is directory and not mandatory, despite the use of the word "shall".
That word, according to the appellant, really means "may".
Maxwell, Crawford and Craies abound in illustrations where the words "shall" and "may" are treated as interchangeable, "Shall be liable to pay interest" does not mean "must be made liable to pay interest", and "may not drive on the wrong side of the road" must mean "shall not drive on the wrong side of the road".
But the problem which the use of the language of command poses is: Does the legislature intend that its command shall at all events be performed ? Or is it enough to comply with the command in substance ? In other words, the question is : is the provision mandatory or directory ? Plainly, "shall" must normally be construed to mean "shall" and not "may", for the distinction between the two is fundamental.
Granting the application of mind, there is little or no chance that one who intends to leave a lee way will use the language of command in the performance of an act.
But since, even lesser directions are occasionally clothed in words of authority, it becomes necessary to delve deeper and ascertain the true meaning lying behind mere words.
Crawford on 'Statutory Construction ' (Ed. 1940, article 261, p. 516) sets out the following passage from an American case approvingly: "The question as to whether a statute is mandatory or directory depends upon the intent of the legislature and not upon the language in which the intent is clothed.
The meaning and intention of the legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the consequences which would follow from construing it the one way or the other.
" Thus, the governing factor is the meaning and intent of the legislature, which should be gathered not merely from the words used by the legislature but from a variety of other circumstances and considerations.
In other words, the use of the word 'shall ' or 'may ' is not conclusive on the question whether the particular requirement of law is mandatory or directory.
But the circumstance that the legislature has used a language of compulsive force is always of great relevance and in the absence of anything contrary in the context indicating that a permissive interpretation is permissible, the statute ought to be construed as pre emptory.
One of the fundamental rules of interpretation is that if the words of a statute are themselves precise and unambiguous, no more is necessary than to expound those words in their natural and ordinary sense, the words themselves in such case best declaring the intention of the legislature(1).
Section 6(1) of the Act provides in terms, plain and precise that a notification issued under the section "shall also" be published in Gujarati in a newspaper.
The word 'also ' provides an 457 important clue to the intention of the legislature because having provided that the notification shall be published in the Official Gazette, section 6(1) goes on to say that the notification shall also be published in Gujarati in a newspaper.
The additional mode of publication prescribed by law must, in the absence of anything to the contrary appearing from the context of the provision or its object, be assumed to have a meaning and a purpose.
In Khub Chand vs State of Rajasthan, it was observed that "the term 'shall ' in its ordinary significance is mandatory and the court shall ordinarily give that interpretation to that term unless such an interpretation leads to some absurd or inconvenient consequence or be at variance with the intent of the Legislature, to be collected from other parts of the Act.
The construction of the said expression depends on the provisions of a particular Act, the setting in which the expression appears, the object for which the direction is given, the consequences that would flow from the infringement of the direction and such other considerations".
The same principle was expressed thus in Haridwar Singh vs Begum Sumbrui.
"Several tests have been propounded in decided cases for determining the question whether a provision in a statute, or a rule is mandatory or directory.
No universal rule can be laid down on this matter.
In each case one must look to the subject matter and consider the importance of the provision disregarded and the relation of that provision to the general object intended to be secured.
" Recently in the Presidential Election Case(3), the learned Chief Justice speaking on behalf of a seven Judge Bench observed: "In determining the question whether a provision is mandatory or directory, the subject matter, the importance of the provision, the relation of that provision to the general object intended to be secured by the Act will decide whether the provision is directory or mandatory.
It is the duty of the courts to get at the real intention of the legislature by carefully attending to the whole scope of the provision to be construed. 'The Key to the opening of every law is the reason and spirit of the law, it is the animus imponentis, the intention of the law maker expressed in the law itself, taken as a whole '.
" The scheme of the Act is like this: Under section 5(1) the Director of Marketing and Rural Finance may by a notification in the Official Gazette declare his intention of regulating purchase and sale of agricultural produce in the specified area.
Such notification is also required to be published in Gujarati in a newspaper having circulation in the particular area.
By the notification, the Director under section 5(2) has to invite objections and suggestions and the notification has to be stated that any such objections or suggestions received by the Director within the specified period, which shall not be less than one month from the date of the publication of the notification, shall be considered by the Director.
After the expiry of the aforesaid period the Director, under section 6(1), has the power to declare an area as the market area in respect of the particular kinds of agricultural produce.
This power is not absolute because by the terms of section 6(1) it can only be exercised after considering the objections and suggestions received by the Director within the stipulated period.
The notification under section 6(1) is also required to be published in Gujarati in a newspaper.
The 458 power conferred by section 5(1) or 6(1) is not exhausted by the issuance of the initial notification covering a particular area or relating to a particular agricultural produce.
An area initially included in the market area may later be excluded, a new area may be added and likewise an agricultural produce included in the notification may be excluded or a new variety of agricultural produce may be added.
This is a salutary power because experience gained by working the Act may show the necessity for amending the notification issued under section 6(1).
This power is conferred by section 6(5).
By section 6(5), if the Director intends to add or exclude an area or an agricultural produce, he is to declare his intention of doing so in the manner specified in section 5 and after following the procedure prescribed therein.
Thus, an amendment to the section 6(1) notification in regard to matters described therein is equated with a fresh declaration of intention in regard to those matters, rendering it obligatory to follow afresh the whole of the procedure prescribed by section 5.
That is to say, if the Director intends to add or exclude an area or an agricultural produce, he must declare his intention by notification in the Official Gazette and such notification must also be published in Gujarati in a newspaper.
Secondly, the Director must invite objections or suggestions by such notification and the notification must state that any objections or suggestions received within the stipulated time shall be considered by him.
The Director must also comply with the requirement of sub section (5) of section 3 by sending a copy of the notification to each of the local authorities functioning in the particular area with a request that they may submit their objections and suggestions within the specified period.
After the expiry of the period aforesaid and after considering the objections or suggestions received within that period, the Director may declare that the particular area or agricultural produce be added or excluded to or from the previous notification.
This declaration has to be by a notification in the Official Gazette and the notification has to be published in Gujarati in a newspaper having circulation in the particular area.
The last of these obligations arises out of the mandate contained in the concluding sentence of section 6(1).
The object of these requirements is quite clear.
The fresh notification can be issued only after considering the objections and suggestions which the Director receives within the specified time.
In fact, the initial notification has to state expressly that the Director shall consider the objections and suggestions received by him within the stated period.
Publication of the notification in the Official Gazette was evidently thought by the legislature not an adequate means of communicating the Director 's intention to those who would be vitally affected by the proposed declaration and who would therefore be interested in offering their objections and suggestions.
It is a matter of common knowledge that publication in a newspaper attracts greater public attention than publication in the Official Gazette.
That is why the legislature has taken care to direct that the notification shall also be published in Gujarati in a newspaper.
A violation of this requirement is likely to affect valuable rights of traders and agriculturists because in the absence of proper and adequate publicity, their right of trade and business shall have been hampered without affording to them an opportunity to offer objections and suggestions, an opportunity which the statute clearly deems so 459 desirable.
By section 6(2), once an area is declared to be a market area, no place in the said area can be used for the purchase or sale of any agricultural produce specified in the notification except in accordance with the provisions of the Act.
By section 8 no person can operate in the market area or any part thereof except under and in accordance with the conditions of a licence granted under the Act.
A violation of these provisions attracts penal consequences under section 36 of the Act.
It is therefore vital from the point of view of the citizens ' right to carry on trade or business, no less than for the consideration that violation of the Act leads to penal consequences, that the notification must receive due publicity.
As the statute itself has devised an adequate means of such publicity, there is no reason to permit a departure from that mode.
There is something in the very nature of the duty imposed by sections 5 and 6, something in the very object for which that duty is cast, that the duty must be performed.
"Some Rules", as said in Thakur Pratap Singh vs Sri Krishna, "are vital and go to the root of the matter: they cannot be broken".
The words of the statute here must therefore be followed punctiliously.
The legislative history of the Act reinforces this conclusion.
As stated before, the Bombay Agricultural Produce Markets Act, 1939 was in force in Gujarat till September 1, 1964 on which date the present Act replaced it.
Section 3(1) of the Bombay Act corresponding to section 5(1) of the Act provided that the notification `may ' also be published in the regional languages of the area.
Section 4(1) of the Bombay Act which corresponds to section 6(1) of the Act provided that "A notification under this section may also be published in the regional languages of the area in a newspaper circulated in the said area".
Section 4(4) of the Bombay Act corresponding to section 6(5) of the Act provided that exclusion or inclusion of an area of an agricultural produce may be made by the Commissioner by notification in the Official Gazette, "subject to the provisions of section 3".
Section 4(4) did not provide in terms as section 6(5) does, that the procedure prescribed in regard to the original notification shall be followed if an area or an agricultural produce is to be excluded or included.
The Gujarat legislature, having before it the model of the Bombay Act, made a conscious departure from it by providing for the publication of the notification in a newspaper and by substituting the word `shall ' for the word `may '.
These are significant modifications in the statute which was in force in Gujarat for over 4 years from the date of reorganisation till September 1, 1964.
These modifications bespeak the mind of the legislature that what was optional must be made obligatory.
We are therefore of the opinion that the notification issued under section 6(5) of the Act, like that under section 6(1), must also be published in Gujarati in a newspaper having circulation in the particular area.
This requirement is mandatory and must be fulfilled.
Admittedly the notification (exhibit 10) issued under section 6(5) on February 16, 1968 was not published in a newspaper at all, much less in Gujarati, Accordingly, the inclusion of new varieties of agricultural produce in that notification lacks legal validity and no prosecution can be founded upon its breach.
460 Rule 3 of the Gujarat Agricultural Produce Markets Rules, 1965 relates specifically and exclusively to notifications "issued under subsection (1) of section 5 or under sub section (1) of section 6.
" As we are concerned with a notification issued under sub section (5) of section 6, we need not go into the question whether Rule 3 is complied with.
We may however indicate that the authorities concerned must comply with Rule 3 also in regard to notifications issued under sections 5(1) and 6(1) of the Act.
After all, the rule is calculated to cause no inconvenience to the authorities charged with the duty of administering the Act.
It only requires publication by affixing a copy of the notification at some conspicuous place in the office of each of the local authorities functioning in the area specified in the notification.
The prosecution was conducted before the learned Magistrate in an indifferent manner.
That is not surprising because the beneficent purpose of summary trials is almost always defeated by a summary approach.
Bhailalbhai Chaturbhai Patel, an Inspector in the Godhra Agricultural Produce Market Committee, who was a material witness for proving the offence, said in his evidence that he did not know whether or not the notifications were published in any newspaper or on the notice board of the Godhra Municipality.
The learned Magistrate acquitted the appellant holding that the prosecution had failed to prove beyond a reasonable doubt that the notifications were published and promulgated as required by law.
In appeal, the High Court of Gujarat began the operative part of its judgment with a wrong assumption that exhibit 9 dated April 19, 1962 was a "notification constituting the Godhra Market area." In fact exhibit 9 was issued under section 4 A(3) of the Bombay Act as amended by Gujarat Act XXXI of 1961 declaring certain areas as "market proper" within the Godhra Market area.
The High Court was really concerned with the notification, exhibit 10, dated February 16, 1968 which was issued under section 6(5) of the Act and by which new varieties of agricultural produce like onion, ginger, sunhemp and jowar were added to the old list.
The High Court set aside the acquittal by following the judgment dated February 12, 1971 rendered by A. D. Desai, J. in Cr.
Appeal 695 of 1969.
That judgment has no application because it arose out of the Bombay Act and the question before Desai, J. was whether section 4(1) of the Bombay Act was mandatory or directory.
That section, as noticed earlier, provided that the notification "may" also be published in the regional language of the area in a newspaper circulated in that area.
The High Court, in the instant case, was concerned with section 6(5) of the Act which has made a conscious departure from the Bombay Act in important respect.
The High Court did not even refer to the provisions of the Act and it is doubtful whether those provisions were at all brought to its notice.
Everyone concerned assumed that the matter was concluded by the earlier judgment of Desai, J.
For these reasons we set aside the judgment of the High Court and restore that of the learned Judicial Magistrate, First Class, Godhra.
Fine, if paid, shall be refunded to the appellant.
P.H.P. Appeal allowed.
| IN-Abs | The appellant was prosecuted for having purchased a certain quantity of ginger without obtaining a licence as required by the Gujarat Agricultural Produce Markets Act.
The trial court accepted the factum of purchase but it acquitted the appellant on the ground that the relevant notification in regard to the inclusion of ginger was not shown to have been promulgated and published as required by the Act.
On appeal, the High Court reversed the acquittal and sentenced the appellant to a fine of Rs. 10/ .
The High Court proceeded on the assumption that the notifications were property made.
In the erstwhile composite State of Bombay there was in operation The Bombay Agricultural Produce Markets Act of 1939.
On the bifurcation of the State in 1960 the said 1939 Act was extended by an appropriate order to the State of Gujarat.
That Act remained in operation in Gujarat till the year 1964 in which year the present Act came into force.
Section 5 of the Act requires the Director to notify in the Official Gazette his intention to regulate the purchase and sale of agricultural produce.
The section also requires the publication in Gujarati in a newspaper having circulation in the area.
The section further requires that the objections should be invited from the public.
Section 6(1) provides that after the expiry of the period for making objections and after considering the objections and suggestions received and after holding necessary inquiry, the Director may, by notification in the Official Gazette, declare the area specified in the said notification to be a market area in respect of the agricultural produce to be specified in the notification.
Sub section (1) of section 6 further requires that the notification under the said section shall be published in Gujarati in a newspaper having circulation in the said area.
Sub section (5) of section 6 provides that the Director may, at any time by notification in the official gazette, exclude any area from a market area specified in a notification issued under sub section
(1) or include any area therein and exclude from or add to the kinds of agricultural produce so specified.
The sale or purchase of the agricultural produce concerned without a licence is made an offence by section 36 of the Act.
On appeal by special leave, the appellant contended that the notification under section 6(5) of the Act, covering additional varieties of agricultural produce, must not only be published in the Official gazette but must also be published in Gujarati in a newspaper.
The respondent contended that (1) the procedure in regard to the publication which is laid down in sub section
(1) of section 6 must be restricted to notifications issued under that sub section and cannot be extended to those issued under sub section (5) of section 6; (2) Assuming that the words "this section" are wide enough to cover every sub section of section 6.
the word 'shall ' ought to be read as 'may '.
^ HELD: (1) Section 6(1) means what it says.
That is the normal rule of construction of statutes, a rule not certainly absolute and unqualified, but the conditions which bring into play the exceptions to that rule did not exist.
It is not reasonable to assume in the legislature an ignorance of the distinction between a "section" of the statute and the "sub section" of that section.
The requirement 452 laid down by section 6(1) that a notification under "this section" shall also be published in Gujarati in a newspaper would govern any and every notification issued under any par of section 6, that is to say, under any of the sub sections of section 6.
[455E G] (2) Sometimes the legislature does not say what it means.
That has given rise to a series of technical rules of interpretation devised or designed to unraval the mind of the law makers.
The words of the concluding portion of section 6(1) are plain and unambiguous rendering superfluous the aid of artificial guide lines to interpretation.
[455H 456A] (3) "Shall" must normally be construed to mean "shall" and not "may", for the distinction between the two is fundamental.
The use of the word "shall" or "may" is not conclusive on the question whether the particular requirement of law is mandatory or directory.
In each case one must look to the subject matter and consider the importance of the provision disregarded and the relation of that provision to the general object intended to be secured.
It is the duty of courts to get at the real intention of the legislature by carefully attending to the whole scope of the provision to be construed.
The amendment to section 6(1) notification in regard to matters described therein is equated with a fresh declaration of intention in regard to those matters, rendering it obligatory to follow afresh the whole of the procedure prescribed by section 5.
The object of these requirements is quite clear.
The fresh notification can be issued only after considering the objections and suggestions which the Director receives within the specified time.
In fact, the initial notification has to state expressly that the Director shall consider the objections and suggestions received by him within the stated period.
The publication of the notification in the Official Gazette was evidently thought by the legislature not an adequate means of communicating the Director 's intention to those who would be vitally affected by the proposed declaration and who would therefore be interested in offering their objections and suggestions.
It is a matter of common knowledge that publication in a newspaper attracts greater public attention than publication in the official gazette.
That is why the legislature has taken care to direct that the notification shall also be published in Gujarati in a newspaper.
A violation of this requirement is likely to affect valuable rights of traders and agriculturists because in the absence of proper and adequate publicity their right of trade and business shall have been hampered without affording to them an opportunity to offer objections and suggestions.
Once an area is declared to be a market area.
no place in the said area can be used for the purchase or sale of any agricultural produce specified in the notification without the necessary licence.
A violation of the said provisions attracts penal consequences under section 36.
It is.
therefore, vital from the point of view of the citizens ' right to carry on trade or business, no less than for the consideration that violation of the Act leads to penal consequences, that the notification must receive due publicity.
There is something in the very nature of the duty imposed by sections 5 and 6.
something in the very object for which the duty is cast.
that the duty must be performed.
[456C, 458B, F H, 459A B] (4) The legislative history of the Act reinforces this conclusion.
In the Bombay Act, which was made applicable to Gujarat till 1964, it was not necessary to publish in the newspaper notifications corresponding to section 6(5) notifications under the new Act.
The Gujarat Legislature, having before it the model of the Bombay Act.
made a conscious departure from it by providing for the publication of the notification in a newspaper and by substituting the word 'shall ' for the word 'may '.
[459D F] (5) A notification under section 6 must be published in Gujarati in a newspaper.
This requirement is mandatory and must be fulfilled.
Admittedly, the notification in question was not published in a newspaper at all, much less in Gujarati.
Accordingly, the inclusion of new varieties of agricultural produce in that notification lacks legal validity and no prosecution can be founded upon its breach.
[459E H] (6) The High Court took into consideration a wrong notification.
Reliance on the earlier judgment of Gujarat High Court on the construction of the Bombay Act was also wrong since the language there was wholly different.
[460E G] 453
|
Civil Appeal No. 1157 of 1974.
Appeal by special leave from the judgment and order dated the 20th June, 1973 of the Andhra Pradesh High Court in Writ Appeal No. 411 of 1973.
F.S. Nariman and P. P. Rao, for the appellant.
A. Subba Rao, for respondents Nos.
1 10, 12 31, 33 and 36.
The Judgment of the Court was delivered by CHANDRACHUD, J.
The Andhra Pradesh Municipalities Act.
VI of 1965, (hereinafter called "the Act") came into force on April 2, 1965.
Section 3(1)(a) of the Act empowers the State Government to constitute a local area as a municipality.
Section 3(1)(b) empowers the Government, by notification in the Gazette "to declare its intention to include within a municipality any local area in the vicinity thereof and defined in such notification".
Section 3(1)(c) confers power on the Government to exclude from a municipality any local area comprised therein and defined in such notification.
Under section 3(2), any resident of a local area or taxpayer of a municipality, in respect of which a notification under section 3(1) is published, may, if he desires to object to anything therein contained, submit his objection in writing to the Government within six weeks from the 546 publication of the notification and the Government is under an obligation to take all such objections into consideration.
Under section 3(3) after the expiry of the aforesaid period o six weeks and on considering the objections, the Government may by notification in the Gazette declare to be a municipality or include in or exclude from a municipality, the local area or any portion thereof.
By section 3(4), the provisions of the Act come into force in or cease to apply to and municipality or part thereof, as the case may be, on the date of publication of notification under sub section (3) if such date is the first day of April, or in any other case, on the first day of April immediately succeeding the 'date of publication of such notification.
Respondents 1 to 36 are residents of two villages called Ramakrishnapuram and Sriharipuram.
Prior to the year 1966, the area comprised in these villages was not included within the municipal limits of the Visakhapatnam Municipality.
Most of these respondents own properties situated within the limits of the two villages but they were not assessed to property tax under the Andhra Pradesh (Andhra Area) District Municipalities Act 1920 which was in force until the introduction of the Act.
They used to pay taxes to the village Panchayat.
In exercise of the powers conferred by the corresponding provision of the District Municipalities Act, 1920, namely section 4(1)(c), the Government of Andhra Pradesh declared its intention to include within the limits of Visakhapatnam Municipality the local area comprised in the villages of Ramakrishnapuram and Sriharipuram.
The district Municipalities Act, 1920 was repealed by section 391(1) of the Act which, as stated earlier, came into force on April 2, 1965.
On March 24, 1966 the Government of Andhra Pradesh acting in the exercise or powers conferred by section 3(3) of the Act issued a notification including within the limits of the Visakhapatnam Municipality the area comprised in the villages of Ramakrishnapuram and Sriharipuram with effect from April 1, 1966.
on March 24, 1970 and June 10, 1970 the Municipal Council declared its intention to levy property tax in the areas newly included within the municipal limits.
After considering the objections, the Council passed a resolution on August 28, 1970 confirming the levy of property tax on buildings and lands situated within the municipal limits, with effect from October 1, 1970.
However, the municipality issued notices to respondents 1 to 36 demanding property tax from them not from October 1, 1970 but from April 1, 1966, that is to say, with effect from the date when the villages of Ramakrishnapuram and Sriharipuram were included within the municipal limits.
These notices would appear to have been issued on the supposition that taxes leviable under the District Municipalities Act, 1920 could be levied under clause 12, Schedule IX of the Act, unless the Government directed otherwise.
On January 24, 1971 respondents 1 to 36 filed writ petition 442 of 1971 in the High Court of Andhra Pradesh against the State of 547 Andhra Pradesh and the Visakhapatnam Municipality asking for a declaration that the levy of property tax on their properties for the period prior to October 1, 1970 was illegal.
The writ petition was dismissed by a learned Single Judge on the view that it was competent to the municipality, under the District Municipalities Act 1920, to levy property tax on properties situated in the newly included areas from April 1, 1966 to October 1, 1970.
Respondents 1 to 36 filed writ appeal 411 of 1972 against the decision on the Single Judge, which was allowed by a Division Bench of the High Court by its judgment dated June 13, 1972.
lt held that the provisions contained in clause 12 of Schedule IX had no application and that it was incompetent to the municipality to impose the property tax on the newly included areas without following the procedure prescribed by sections 81 and 83 of the Act.
The correctness of that view is challenged by the Visakhapatnam Municipality in this appeal by special leave.
The State of Andhra Pradesh is respondent No. 37 to the appeal.
The circumstance that whereas the preliminary notification declaring the intention of the State Government to include new areas within the municipal limits was issued under the District Municipalities Act 1920, the final notification confirming that intention was issued under the Act presents no difficulty.
In so far as relevant, Schedule IX clause 13 of the Act, read with clause 1, provides that any action taken under the District Municipalities Act, 1920 by any authority before the commencement of the Act shall, unless inconsistent with the Act be deemed to have been taken by the authority competent to take such action under the Act.
The preliminary notification, though issued under section 4(1) (c) of the 1920 Act must therefore be deemed to have been issued under section 3(1)(b) of the Act.
The inclusion of the villages of Ramakrishnapuram and Sriharipuram within the limits of the Visakhapatnam Municipality is accordingly in order.
The true question for our consideration is whether the property tax which could lawfully be levied under the District Municipalities Act, 1920 can be levied, after the repeal of that Act, on properties situated in the areas included within the municipal limits after the constitution of the municipality.
Section 391(1) of the Act expressly appeals the District Municipalities Act, 1920 from which it must follow that ordinarily, no action can be taken under the Act of 1920 after April 1,1966 when the repeal became effective on the coming into force of the Act.
But counsel for the appellant municipality contends that clause 12 of Schedule IX of the Act keeps the repealed enactments alive for tax purposes and therefore the municipality has authority to impose the property tax under the Act of 1920, notwithstanding its repeal by the Act.
Schedule IX appears under the title "Transitional Provisions" and clause 12 thereof reads thus: 548 "12.
Continuance of existing taxes, etc.
Any tax, cess or fee which was being lawfully levied by or on behalf of any council at the commencement of this Act and which may be lawfully levied under this Act, shall, notwithstanding any change in the method or manner of assessment or levy of such tax, cess or fee, continue to be levied by or on behalf of the council for the year in which this Act is brought into .
force, and unless the Government by general or special order otherwise direct, for subsequent years also.
" This provision cannot justify the imposition of tax under the repealed Act of 1920 on properties situated in the newly included areas.
In the first place, as the very title of Schedule IX shows, the provisions contained in the Schedule are of a transitional nature.
They are intended to apply during the period of transition following upon the repeal of old municipal laws and the introduction of the new law.
Some time must necessarily elapse before a municipality can act under the new law but taxes have all the same to the imposed and collected during the interregnum.
The object of clause 12 of Schedule IX is to authorise the levy of taxes which, on the commencement of the Act, were levied under the repealed laws.
The material date for this purpose is the date of the commencement of the Act, namely April 1, 1966 and the legality of the exercise of the power conferred by clause 12 is to be judged in reference to that date.
In other words, if any tax, cess or fee was being lawfully levied by or on behalf of any council on April 1, 1966 and if it can be lawfully levied under the Act, it can continue to be levied notwithstanding any change in the method or manner of assessment or levy of such tax, cess or fee.
On April 1, 1966 no tax at all was being levied by or on behalf of any council on properties situated in Ramakrishnapuram and Sriharipuram and therefore the appellant municipality had no occasion or power to direct that the property tax may "continue to be levied" on those properties.
"Continuance of existing taxes", after the commencement of the Act being the theme of clause 12 and since the property tax was not levied by or on behalf of any council at the commencement of the Act on the properties situated in the two villages, clause 12 has no application.
Imposition of certain kinds of taxes is an obligatory function of municipal councils, under the Act.
Section 81(1)(a) provides that every council shall, by resolution, levy a property tax, a profession tax, a tax on carriages and carts and a tax on animals.
under.
section 81(2) a resolution of a council determining to levy tax shall specify the rate at which and the date from which the tax shall be levied.
The first proviso to this sub section requires that "before passing a resolution imposing a tax for the first time" or increasing the rate of an existing tax, the council shall publish a notice in the prescribed manner declaring the requisite intention The council has further to invite objections and it is under an obligation to consider the objections received within the stipulated time.
By section 83, when a council determines, subject to the provisions of section 81, to levy any tax for the first time or at a new rate, the Secretary shall forthwith publish a 549 notification in the prescribed manner specifying the rate at which, the date from which and the period of levy, it any, for which, such tax shall be levied.
Section 83 is thus expressly subject to section 81 and under the latter provision no tax can be imposed "for the first time" unless the procedure prescribed therein is followed.
Since the procedure prescribed by the first proviso to section 81(2) was not followed in regard to the period prior to October 1, 1970 the levy of property tax on the properties of respondents 1 to 36 for that period is without the authority of law and consequently illegal.
It was urged on behalf of The appellant that the first proviso to section 81(2) would apply only when a tax was imposed for the first time ' and since appellant was levying properly tax long before its imposition on the properties of respondents 1 to 36, it was unnecessary to follow the procedure prescribed by the proviso.
It is not possible to accept this submission.
The Municipality might have been levying property tax since long on properties situated within its limits but until April 1, 1966 the villages of Rarmakrishnapuram and Shriharipuram were outside those limits.
Qua the areas newly included within the municipal limits, the tax was being imposed for the first time and therefore it was incumbent on the Municipality to follow the procedure prescribed by the first proviso to section 81(2).
Residents and taxpayers of those areas, like respondents 1 to 36, never had an opportunity to object to the imposition of the tax and that valuable opportunity cannot be denied to them.
It is obligatory upon the Municipality not only to invite objections to the proposed tax but also to consider the objections received by it within the specified period.
Such period has to be reasonable, not being less than one month.
The policy of the law is to afford to those likely to be affected by the imposition of the tax a reasonable opportunity to object to the proposed levy.
According to the appellant, the residents of Ramakrishnapuram and Sriharipuram had an opportunity to object to the imposition of the tax when the State Government issued a notification under section 3(1)(b) of the Act declaring its intention to include the two villages within the limits of the municipality.
It is not possible to accept this submission either.
When the State Government issues a notification under any of the clauses of section 3(1), any resident of the local area concerned or any tax payer of the municipality can "object to anything therein contained" meaning thereby, anything contained in the notification.
A notification issued under section 3 (1) (b) contains only the declaration of the Government 's intention "to include within a municipality any local area in the vicinity thereof and defined in such notification".
The right of objection would therefore be limited to the question whether a particular area should, as proposed, be included within the municipal limits.
It would be premature at that stage to offer objections to the imposition of any tax because it is only after the final Notification is issued under section 3(3) that the question would at all arise as regards the imposition of a tax on the newly included areas.
A notification under section 3(3) has to be followed by a 550 resolution under section 81(1) if the municipality wants to impose a tax, and for the resolution to be effective, the procedure prescribed by the first proviso to section 81(2) has to be followed.
The appellant municipality short circuited this mandatory procedure and thereby deprived respondents 1 to 36 of the valuable right of objecting to the imposition of the tax.
Finally, relying on section 3(4) of the Act, learned counsel for the appellant contended that the inclusion of the two villages within the municipal area attracts of its own force every provision of the Act with effect from the date on which the final notification is published by the Government under section 3(3).
This argument is said to find support in a decision of this Court in Atlas Cycle Industries Ltd. vs State of Haryana & Anr.(1).
Far from supporting the argument, we consider that the decision shows how a provision like the one contained in Section 3(4) cannot have the effect contended for by the "appellant in the Atlas Cycle case, section 5(4) of the Punjab Municipality Act.
1911 provided that when any local area was included in a municipality, "this Act and. . . all rules, bye laws, orders, directions and powers made, issued or conferred under this Act and in force throughout the whole municipality at the time, shall apply to such areas".
The industrial area within which the factory of the Atlas Cycle was situated was by a notification included within the municipality of Sonepat.
The municipality thereafter purported to impose octroi duty on the goods manufactured, by the company without following the procedure corresponding to that prescribed by sections 81 and 83 of the Act.
It was held by this Court that since section 5(4) of the Punjab Act did not, significantly, refer to notifications and since section 62(10) of the Punjab Act spoke of "notification" for the imposition of taxes, it was not competent to the municipality to levy and collect octroi from the company on the strength merely of the provision contained in section 5(4) of the Punjab Act.
Tn the instant case, what section 3(4) provides is that once a notification including any area within a municipality is published under section 3(3), "The provisions of this Act shall come into force into . . any municipality or part thereof. .on the date of publication of the notification under sub section (3), if such date is the first day of April, or in any other case, on the first day of April immediately succeeding the date of publication of such notification".
by section 3(4), once a notification is issued under section 3(3), all the provisions of the Act come into force.
That means that sections 81 and 83, which are a part of the act, would also apply to the entire Municipal area.
It would then be obligatory for the municipality to follow the procedure prescribed in these sections.
Taxes can be imposed under the Act only by passing appropriate resolutions under section 81.
Section 3(4) does not provide that on the inclusion of a new area within a municipality, the resolutions passed by the municipal council before such inclusion will automatically apply to the new area.
Plainly, such could not be the intention of the legislature in (1) ; 551 view of the importance which it has attached to the right of the citizens to object to the imposition of a proposed tax.
Though, therefore, by reason of section 3(4) the provisions of the Act would apply to the new areas included within a municipality, it is not competent to the municipality to take resourse to the resolution passed for imposing tax on the old areas for the purpose of levying taxes on new areas.
The procedure prescribed by section 81 and 83 must be followed if a tax is proposed to be levied on the new areas.
For these reasons we confirm the judgment rendered by the Division Bench of the High Court and dismiss this appeal with costs.
V.P.S. Appeal dismissed.
| IN-Abs | Under section 4(1)(c) of the District Municipalities Act, 1920, the State Government declared its intention to include within the limits of the appellant municipality the local areas comprised in two villages. 'The 1920 Act was repealed by the Andhra Pradesh Municipalities Act, 1965 which came into force on April 2, 1965.
Section 3(1)(b) of the 1965 Act corresponds to section 4(1)(c) of the repealed Act.
Under s.3(3), the Government may include within a municipality a local area after considering any objections submitted by the residents of the local are: Under section 3(4) the provisions of the 1965 Act come into force in that area on the first April, if that is the date of the notification under sub section
(3) and in any other cases the first day of April immediately succeeding.
The State Government, in exercise of its power under section 3(3) of the 1965 Act, issued the notification in March 1966 including within the limits of the appellant municipality the areas comprised in the two villages with effect from April 1, 1966.
In 1971, the Municipal Council after considering objections, passed a resolution for levying property tax on land and buildings in the two villages with effect from October 1, 1970, but, The municipality issued notices to the respondents, who were residents of those two villages, demanding the property tax from them from April 1, 1966 the date of inclusion of the villages.
The respondents thereupon challenged the levy and the High Court upheld the challenge.
In appeal to this Court, it was contended that the appellant municipality was entitled to demand the tax even from April 1, 1966, under cl. 12 of Schedule 9 of the 1965 Act.
This clause provided that any tax which was being lawfully levied by the municipal council at the commencement of the 1965 Act and which may be lawfully levied under that Act shall continue to be levied by the council unless the Government by general or special order directs otherwise.
Dismissing the appeal to this Court, ^ HELD :(1) The inclusion of the two villages within the limits of the appellant municipality is in order, because, under cl. 13 of Schedule 9 of the 1965 Act the notification issued under section 4(1) of the 1920 Act must be deemed to have been issued under section 3 (1) of the 1965 Act.
[547 D F] (2) However, clause 12 of Schedule 9 cannot justify the imposition of the tax under the repealed Act of 1920, from April 1, 1966, on property situate in the newly included areas.
[548 B C] (a) The clause is of a transitional nature and its object is to authorise the levy of taxes which, at the commencement of the 1965 Act were levied under the repealed law.
That is, in the present case, if any tax etc. was being lawfully levied by the appellant on April 1, 1966, (which was the date of commencement of the Act in the two villages) and if it can be lawfully levied under the 1965 Act, it can continue to be levied.
But on April 1, 1966, no tax at all.
was being levied by or on behalf of the appellant on the property situate in the two villages included within the municipality on that date.
Therefore, the appellant had no occasion or power to direct that a property tax may continue to be levied on those properties, and hence cl.
12 has no application.
[548 C E] (b) It cannot be urged that because the appellant was levying property tax on property situate within its limits (other than the 2 villages) the property tax was not being levied for the first time.
Qua the two villages newly 545 included in the municipal limits, the tax was being imposed for the first time, and therefore, it was incumbent upon the municipality to follow the procedure prescribed by the first proviso to section 81(2), because, the residents of these areas had no opportunity to object lo the imposition of tax or for the municipality to invite objections and consider them.
[549 C E] (3) The first proviso to section 81 requires that before passing a resolution imposing a tax for the first time the council shall publish a notice, invite objections and consider the objections received within the stipulated time.
Since the procedure was not followed in regard to the period prior to October 1, 1970 the levy of property tax on the properties of the respondents for that period is without authority of law and consequently illegal.
By section 83 when a council determines to levy any tax for the first time or at a new rate the Secretary shall forthwith publish a notification in the prescribed manner specifying the rate and the date from which the tax shall be levied.
Section 83 is expressly subject to section 81 and under the latter provision no tax can be imposed for the first time unless the procedure prescribed therein is followed [548G 549 B] (4) When the State Government issued the notification declaring its intention to include the two villages within the limits of the municipality the residents had an opportunity to object, not to the imposition of the tax but only to "any thing contained therein", meaning anything contained in the notification, that is to the inclusion within the municipality.
The question of imposition of a tax within the included areas, arises only after the final notification under section 3(3) followed by a resolution under section 81 (1) .
[547F 550 B] (5) It could not also be contended that mere inclusion of two villages with in the municipal area automatically attracts the tax.
On the contrary, what section . (4) provides is that once a notification including any area within a municipality is published under section 3(3), the provisions of the Act, that is, sections 81 and 83, shall come into force in that area from the first day of April, and hence, the procedure prescribed therein will have to be followed.[550 F H] Atlas Cycle Industries Ltd. vs State of Haryana & Anr. ; , explained.
|
ivil Appeal No. 2130 and 2131 of 1970.
From the Judgment and order dated the 12th February, 1970 of the Mysore High Court in I.T.R.C. Nos. 5 and 6 of 1968.
N. A. Palkhivala, and Vineet Kumar, for the appellant.
G. section Sharma and section P. Nayar for the respondent.
N. A. Palkhivala, section T. Desai, A. G. Meneses, Mrs. A. K. Verma, P. N. Monga, J. B. Dadachani for the Intervener Tribunal Trust Chandigarh.
V. section Desai and J. Ramanlurthi for Intervener Saurashtra Trust, Bombay.
The Judgment of H. R. Khanna and A. C. Gupta, JJ. was delivered by Khanna, J. M. H. Beg, J. gave a separate opinion.
KHANNA, J.
The detailed facts of this case have been given in the judgment of our learned brother Beg J. and need not be repeated.
The question of law which was referred to the High Court and which has been answered in the negative against the assessee appellant is as follows: "Whether on the facts and in the circumstances of the case, the income, of the Lok Shikshana Trust was entitled to exemption under section 11 of the Income tax Act, 1961, read with section 2(15) of the same Act, for the assessment year 1962 63 ?" "Charitable purpose" was defined in section 4(3) of the Indian Income tax Act, 1922 was as under: "In this sub section 'charitable purpose ' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility.
" The definition of "charitable purpose" as given in section 2(15) of the Income tax Act, 1961 (hereinafter referred to as the Act) with which we are concerned reads as under: "(15) 'Charitable purpose ' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit.
" It would appear from the above that in the definition of "charitable purpose" as given in the Act the words "not involving the carrying on of any activity for profit" have been added at the end of the definition as given in the Act of 1922.
We shall see as to what is the effect of the above addition 466 In order to see as to whether the appellant trust is for a charitable purpose, we may first go into the question as to what is the object of the appellant trust.
According to Mr. Palkhivala, learned counsel for the appellant, the object of the appellant trust is education, while the stand of Mr. Sharma on behalf of the revenue is that not education but the last mentioned category in section 2(15), viz., the advancement of any other object of general public utility, is the object of tile appellant trust.
The reason for the above divergence in the stands of Mr. Palkhivala and Mr. Sharma is that according to Mr. Palkhivala, the concluding words of the definition in section 2(15) of the Act "not involving the carrying on of any activity for profit" do not qualify the first three categories of relief of the poor, education, or medical relief but qualify only the fourth category of "advancement of any other object of general public utility".
Once the object of the appellant trust is held to be education, the word trust would, according to Mr. Palkhivala, be held to be for a public purpose as defined in section 2(15) of the Act.
In such an event, it would be immaterial whether the object of the trust involves or does not involve the carrying on of any activity for profit.
As against that? Mr. Sharma has controverted the submission that the concluding words of the definition, viz., "not involving the carrying on of any activity for profit" qualify only the fourth category of "advancement of any other object of general public utility '.
According to Mr. Sharma, the concluding words qualify the first three categories of relief of the poor, education and medical relief also.
In any case, submits Mr. Sharma, the object of the appellant trust falls in the fourth category of the definition, namely. "any other object of general public utility.
" It is, in my opinion, not necessary to express opinion in this case on the question as to whether the words "not involving the carrying on of any activity for profit" qualify the fourth object, viz., the advancement of any other object of general public utility, or whether they also qualify the other three objects of relief of the poor, education and medical relief, because we are of the view that the object of the appellant trust was not education but any other object of general public utility.
Clauses 2, 6, 10, 14, 16 and 18 of the trust deed of the appellant read as under.: "2.
The object of the Trust shall be to educate the people of India in general and of Karnatak in particular by (a) establishing, conducting and helping directly or indirectly institutions calculated to educate the people by spread of knowledge on all matters of general interest and welfare: (b) founding and running reading rooms and libraries and keeping and conducting printing houses and publishing or aiding the publication of books, booklets, leaf lets, pamphlets, magazines etc.
, in Kannada and other languages, all these activities being started, conducted and carried on with the object of educating the peop]e: 467 (c) supplying the Kannada speaking people with an organ or organs of educated public opinion and conducting journals in Kannada and other language for the dissemination of useful news and information and for the ventilation of public opinion on matters of general public utility; and (d) helping directly or indirectly societies and institutions which have all or any of the aforesaid objects in view.
The original Trustee shall have power and authority to spend and utilise the money and the property of the Trust for any of the purposes of this Trust in such manner as to him may appear proper.
The original Trustee shall be entitled to operate all the Banking accounts of the Trust.
The original Trustee shall have full power to take over on such terms as he may deem fit such concern or concerns or undertakings as, in his opinion, are congenial or conducive to any of the purposes of the Trust.
The original Trustee shall be entitled to appoint a Manager or Managers of institutions of the Trust, Editor or Editors and other subordinates for the purposes of carrying out the printing and publication of any newspaper or newspapers, weeklies, monthlies magazines, books or other publications, and shall have power from time to time to delegate To any one or more persons by Power of Attorney or otherwise any one or more of the following powers.
(a) To open one or more banking accounts, to operate the same and to deposit and withdraw moneys from the same; (b) To give receipts or discharges for money or property Received by them or any one of them in the course of business carried on by the Trust; (c) To buy or sell paper, ink, machines, books and materials required for the purposes of the business of the Trust: (d) To enter into contracts with agents, dealers and others in the course of the business of the Trust; (e) To employ or remove subordinates and workers necessary for the work; (f) and generally to do all things necessary and expedient in carrying out the business entrusted to him or Them.
The original Trustee or Trustees shall not take any remuneration for discharging his or their duties as a Trustee or Trustees provided that this provision shall not preclude a 468 Trustee or Trustees from being paid out of the Trust fund such remuneration as may be deemed proper for carrying out any work and duty in connection with the conduct or management of institutions of the Trust, or with the business of printing, publishing or other activities carried on by the Trust.
A Trustee shall be entitled to be paid an expenses that may be incurred by him in connection with his duties as a Trustee including travelling and other expenses.
The original Trustee or other Trustees shall not be responsible for any loss occasioned to the Trust in respect of any business or dealings carried on behalf of the Trust unless the same is due to his own fraud or misappropriation or breach of trust and every trustee shall be indemnified by and out of the funds and moneys of the Trust against any loss or damage which the Trustee might suffer in regard to any act, deed, or omission of his in the performance of his duties as a Trustee, including any fines or penalities imposed under the Factory Act or any Labour Legislation or Press Act or any other similar enactment.
" The income tax officer sent a communication to the trust on April 27, 1963 to the effect that since the only activity of the trust was printing, publication and sale of newspaper, weekly and monthly journal, the trust carried on an activity for profit and was not entitled to exemption.
In reply to that notice the Sole Trustee stated that the above mentioned activities of the trust were covered by clause (c) of the objects clause of the trust deed.
It was added that the above object did not involve the carrying on of any activity for profit.
In a further communication dated June 26, 1964 the Sole Trustee wrote: "The Trust has four objects in its objects clause one of which is to supply the Kannada speaking people with an organ or organs of educated public opinion etc.
(clause 2(c) of Trust Deed).
Under this clause we conduct the publication of newspapers.
This has not been agreed upon by your honour as a Charitable purpose and we have accordingly preferred appeals for relief.
The main object of the Trust is education and this may be achieved by conducting and helping educational institutions having the similar objects as of our l`rust.
These are all charitable objects.
In case the Trust has a surplus income it cannot be spent on any object other than the objects of the Trust.
For the present we have been educating the Kannada speaking people through newspapers and journals and we shall be taking up the other ways and means of education as noted in our trust deed as and when it is possible for Trust.
We have no option at all except to spend our income on the objects of our Trust which are all charitable without any doubt or ambiguity.
" We have set out above the relevant clauses of the trust deed and the material part of the communications sent by the Sole Trustee.
It would 469 appear therefrom that though a number of objects, including the setting up of educational institutions, were mentioned in the trust deed` as the objects of the trust, supplying the Kannada speaking people with an organ of educated public Opinion was also one of those objects.
The communication sent by the Sole Trustee to the income tax officer shows that the trust at present is carrying out only the last mentioned object of the trust, namely, supplying the Kannada speaking people with an organ or organs of educated public opinion.
The concentration so far of the activities of the trust only on that object is in pursuance of clause 6 of the trust deed, according to which original trustee shall have power and authority to spend and utilise the money and the property of the trust for any of the purposes of the trust in such manner as to him may appear proper.
The sense in which the word "education" has been used in section 2(15) is the systematic instruction, schooling or training given to the young in preparation for the work of life.
It also connotes the whole course of scholastic instruction which a person has received.
The word "education" has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education.
According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge.
Like wise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge.
Again, when you grow up and have dealings with other people, some of whom are not straight you learn by experience and thus add to your knowledge of the ways of the world.
If you are not careful, your wallet is liable to be stolen or you are liable to be cheated by some unscrupulous person.
The thief who removes your wallet and the swindler who cheats you teach you a lesson and in the process make you wiser though poorer.
If you visit a night club, your get acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life.
All this in a way is education in the great school of life.
But that is not the sense in which the word "education" is used in clause (15) of section 2.
What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by formal schooling.
The question as to whether a trust the object of which is to supply the people with an organ of educated public opinion should be considered to be one for education or for any other object of public utility was considered by the Judicial Committee in the case of In re The Trustees of the 'Tribune '.
In that case a person who owned a press and a newspaper created by his will by which his property in the stock and goodwill of the press and newspaper was made to vest permanently in a committee of certain members.
It was the duty of the said committee of trustees under the will "to maintain the said press and news paper in an efficient condition, and to keep up the liberal policy of the said newspaper, devoting the surplus income of the said press and newspaper after defraying all current expenses in improving the said newspaper and placing it on a footing of permanency".
It was also 470 provided by an arrangement made subsequently that in case the paper ceased to function or for any other reason the surplus of the income could not be applied to the object mentioned above, the same should be applied for the maintenance of a college which had been established out our the funds of another trust created by the same testator.
There was surplus income in the hands of the trustees after defraying the expenses of the press and the newspaper.
Question arose as to whether that income was liable to be assessed in the hands of the trustees.
The Judicial Committee held that the object of the settlor was to supply the province of the Punjab with an organ of educated public opinion and this was prima facie an object of general public utility.
Their Lordships unequivocally expressed the view that they were not prepared to hold that the property referred to in the various paragraphs of the will was held for the purpose of "education" in the sense that word was used in section 4 of the Indian Income tax Act of 1922.
The above decision of the Judicial Committee applies directly to the present case and in view of this decision, we would hold that the object of the appellant trust was "the advancement of any other object of general public utility".
It has been pointed out in the earlier part of the judgment that in the definition of charitable purpose as given in section 2(15) of the Act the words "not involving the carrying on of any activity for profit '? have been added at the end of the definition as it was given in section 4(3) of the Indian Income tax Act, 1922.
The position as it existed under the Act of 1922 was that once the purpose of the trust was relief of the poor, education medical relief or the advancement of any other object of general public utility.
the trust was considered to be for a charitable purpose.
As a result of the addition of the words "not involving the carrying on of any activity for profit" at the end of the definition in section 2(15) of the Act even if the purpose of the trust is "advancement of any other object of general public utility", it would not be considered to be "charitable purpose" unless it is shown that the above purpose does not involve the carrying on of any activity for profit.
The result thus of the change in the definition is that in order to bring a case within the fourth category of charitable purpose, it would be necessary to show that (1) the purpose of the trust is advancement of any other object of general public utility, and (2) the above purpose docs not involve the carrying on of any activity for profit.
Both the above conditions must be fulfilled b. fore the purpose of the trust can be held to be charitable purpose.
It is not necessary for the decision of this case, as already mentioned above, to go into the question as to whether the words "not involving the carrying on of any activity for profit" also qualify the first three categories of charitable purpose, namely relief of the poor, education and medical relief.
Question then arises as to whether the purpose of the appellant trust can be considered to be one not involving the carrying on of any activity for profit.
So far as this question is concerned, we find that the appellant trust started with a sum of Rs. 4.308, 10 As.
9 Pies.
The schedule attached to the trust deed dated April 10, 1947 shows that the assets of the trust consisted of printing machines, accessories, motor cars, building, stocks of paper and other miscellaneous things.
The total value of 471 the assets was Rs. 2,97658, out of which the value of the building sites and the buildings was Rs. 47,500.
As against that, the liabilities of the trust amounted to Rs. 1,24,086.
The net value of the assets of the trust rose in 1947 to a figure of Rs. 1,73,571, 14 As.
4 Pies.
For the assessment year 1962 63, which is the year under appeal, the total receipts of the trust were of the amount of Rs. 22,55,077.
The main sources of the receipts were sales of newspapers and magazines through agents, receipts on account of advertisements, receipts for job printing bills be sides some other minor items.
"As against the receipts, the major items of expenditure were the purchase of newsprint, paper, printing types,.
printing and other material, the salaries and allowances of the staff, remuneration to news agencies and railway freight.
There can, there fore, be no doubt that the trust has been carrying on the business of publishing newspaper and weekly and monthly magazines.
The profits from the aforesaid business would also apparently account for the manifold increase in the value of the assets of the trust.
The emphasis on business activity of the trust is also manifest from clauses 6, 10, 14, 16 and 18 of the trust deed reproduced above.
The fact that the appellant trust is engaged in the business of printing and publication of newspaper and journals and the further fact that the aforesaid activity yields or is one likely to yield profit and there are no restrictions on the appellant trust earning profits in the course of its business would go to show that the purpose of the appellant trust does not satisfy the requirement that it should be one "not involving the carrying on of any activity for profit".
It is true that there are some business activities like mutual insurance and co operative stores of which profit making is not an essential ingredient, but that is so because of a self imposed and innate restriction on making profit in the carrying on of that particular type of business.
Ordinarily profit motive is a normal incidence of business activity and if the activity of a trust consists of carrying on of a business and there are no restrictions on its making profit.
the court would he well justified in assuming in the absence of some indication to the contrary that the object of the trust involves the carrying on of an activity for profit.
The expression "business", as observed by Shah J. speaking for the Court in the case of State of Gujarat vs M/s. Raipur.
Mfg. Co., though extensively used in taxing statutes, is word of indefinite import.
In taxing statutes, it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit.
To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure.
Whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive.
By the use of the expression "profit motive" it is not intended that profit must in fact be earned.
Nor does the expression cover a mere desire to make some monetary gain out o transaction or even a series of transactions.
It predicates a motive which pervades the whole series of transactions effected by the person in 472 the course of his activity.
In the case of Commissioner of Income tax vs Lahore Electric Supply Co. Ltd. Sarkar J. speaking for the majority observed that business as contemplated by section 10 if the Indian Income tax Act, 1922, is an activity capable of producing a profit which can be taxed.
In the case of the appellant trust the activity of the trust, as already observed earlier, has in fact been yielding profits and that apparently accounts for the increase in the value of its assets.
We are not impressed by the submission of the learned counsel for the appellant that profit under section 2(15) of the Act means private profit.
The word used in the definition given in the above provision is profit and not private profit and it would not be permissible to read in the above definition the word "private" as qualifying profit even though such word is not there.
There is also no apparent justification or cogent reason for placing such a construction on the word "profit".
The words "general public utility" contained in the definition of charitable purpose are very wide.
These words, as held by the Judicial Committee in the case of All India Spinners ' Association vs Commissioner of Income tax, exclude objects of private gain.
It is also difficult to subscribe to the view that the newly added words "not involving the carrying on of any activity for profit" merely qualify and affirm what was the position as it obtained under the definition given in the Act of 1922.
If the legislature intended that the concept of charitable purpose should be the same under the Act of 1961 as it was in the Act of 1922, there was no necessity for it to add the new words in the definition.
The earlier definition did not involve any ambiguity and the position in law was clear and admitted of no doubt after the pronouncement of the Judicial Committee in the cases of Tribune and All India Spinners ' Association (supra).
If despite that fact, the legislature added new words in the definition of charitable purpose, it would be contrary to all rules of construction to ignore the impact of the newly added words and to so construe the definition as if the newly added words were either not there or were intended to be otiose and redundant.
The appeals fail and are dismissed but in the circumstances without costs.
BEG, J. The. question, answered in the negative in this case by the Mysore High Court, which is now before us after certification of the case under Section 261 of the Income tax Act, 1961 (hereinafter referred to as 'the Act '), was framed by the Income tax Tribunal as follows: "Whether on the facts and in the circumstances of the case, the income of the Loka Shikshana Trust was entitled to exemption under Sec.
11 of the Income tax Act, 1961 read with Sec.
2(15) of the same Act, for the assessment year 1962 63".
The appellant is a sole trustee of the "Loka Shikshana Trust", holding properties mentioned in a schedule attached to a deed of trust executed on 19 2 1962 by himself purporting to re declare a trust of 15 7 1935.
The total assets of the earlier trust of 1935, known as the 473 "National Literature Publications Trust", consisted of a sum of Rs. 4308.10.9 only.
It appears that, under the provisions of the earlier trust, the trustee had carried on a lucrative business of printing, under the name of "Karnatak Prakashana Mandal", at Belgaum, and, thereafter, it was shifted to Hubli where he started publishing a daily newspaper called "Samyukta Karnatak".
The printing business must have been lucrative because investments of profits from it, together with some possible "donations", expanded the assets of the redeclared trust of 1962 so much that the schedule attached to the trust deed of 1962 shows their value to be Rs. 2,97,658/ .
After deducting the total liabilities of the trust, shown as Rs. 1,24,086.10 annas, the net value of the assets is given as Rs. 1,73,571.14.4.
Even if the obvious inference from statements found in the trust deed of 1962? which is part of the statement of the case, showing the assets of the trust of 1953 as well as of the re declared trust of 196, that the trustee was carrying on a fairly lucrative business, the profits of which had been utilised for building up its assets, could possibly be ignored, we find, from the statement of the accounts submitted by the appellant trustee himself to the Income tax Department for the assessment year 1962 63, with which we are concerned, that the trust had mad.
quite considerable profits from various activities carried on as a part of its ordinary and regular business.
Here, a gross income of Rs. 22,55,077.46 nP is shown.
This included Rs. 12,31,954.54 from sales of newspapers and magazines through agents, Rs. 7,29,249.27 from advertisements and notices alone, Rs. 1,27,422.53 as payments of "job printing bills".
The sales of its newspapers and journals through retailers brought in Rs. 66,010.68 np.
The subscribers of newspapers and journals contributed Rs. 51,7803.74.
"Profits" from sales of other publications are shown as Rs. 5040.05 np.
Income from "sundry receipts" is given as Rs. 2964.57 np. "profits from the sale of a van and machinery are shown as Rs. 4829.83.
Some other income is shown as Rs. 2337.95 Interest on investments is shown as Rs. 1762.71.
A glance at items of expenditure shows that nothing was spent for which a deduction could not be claimed by any private concern carrying on a profitable business.
These, items of expense consisted of money spent on repairs, of buildings, payments of taxes, purchases of newsprint and other kinds of paper, ink, photographic materials, blocks, binding, stitching and packing materials, payments of salaries, wages and allowances to the staff.
After deducting the total expenditure of Rs. 4,92,246.81 from the gross income, the net income for the year is shown as Rs. 30,376.80 np.
for which exemption from Income tax is claimed by the appellant on the ground that it is protected from taxation by Section 11 read with Section 2(15) of the Act.
The trust deed of 1962, which, as already stated, is a part of the statement of the case, gives the past history of the trust, in the course of a fairly long preamble.
It contains the following passage giving some idea of the activities, of the trust, the composition of its present assets as well as of utilisation of its income since 1935: "AND WHEREAS in furtherance of the objects contain ed in the said deed of Trust dated 15th July, 1935, I took 474 over on 17 7 1935 a concern called the Karnatak Prakashana Mandal, Belgaum, and conducted a printing Press for some time at Belgaum, and? thereafter, at Hubli, and printed and published a daily paper "Samyukta Karnatak", and a weekly paper called "Weekly Samyukta Karnatak", which was later called "Karmaveer", and also published certain books, pamphlet, and other literature, as a result whereof the property of the trust increased from time to time, and the said property is today comprised of printing presses, buildings, land and other property which is set out in the schedule hereunder written".
The trust deed also contains a reference to what necessitated a redeclaration of the trust.
An amended meaning of "charitable purpose", given in Section 2(15) of the Act of 1961, must have given rise to some doubts in the minds of the maker of the trust about the taxability of the income of the trust which was exempted from payment of income tax in the past.
He said: "And whereas doubts have arisen regarding the legal validity of the Trust declared in the aforesaid Deed of Trust dated 15th July 1935.
AND whereas it became necessary to take steps to remove the said doubts and to prevent similar doubts arising in future, I, Ranganath Ramachandra Diwakar Who has been the only Trustee of the National Literature Publication Trust declared as aforesaid, have obtained legal opinion in the matter of the said Trust and I am desirous, with a view to carrying out public purposes of a charitable nature of re declaring the Trusts in accordance with the legal opinion obtained by me as aforesaid, on which I hold and shall continue to hold the original Trust amount of Rs. 4,308:10.9, and all contributions, additions, accumulations, and acquisitions to the same which are now comprised in the Schedule hereunder written and all the properties, funds, assets, and any conversions or reconversions thereof and the investment in which the same may from time to time be held".
The objects of the trust are set out as follows: "2.
The object of the Trust shall be to educate the people of India in general and of Karnatak in particular by, (a) establishing, conducting and helping directly or in directly institutions calculated to educate the people by spread of knowledge on all matters of general interest and welfare; (b) founding and running reading rooms and libraries and keeping and conducting printing houses and publishing or aiding the publication of books, booklets, leaflets, pamphlets, magazines ets.
in Kannada and other languages all these activities being started, conducted, and carried on with the object of educating the people: 475 (c) supplying the Kannada speaking people with an organ or organs of educated public opinion and conducting journals in Kannada and other languages for the dissemination of useful news and information and for the ventilation of public opinion on matters of general public utility; and (d) helping directly or indirectly societies and institutions which have all or any of the aforesaid objects in view".
In addition to the power which the sole trustee had to collect donations and subscriptions for the trust.
he had all the powers which the sole manager of a business may have in order to carry it on profitably.
He had the power of transferring trust properties and funds if he thought "it expedient in the interest of the objects of the Trust, to transfer the assests and liabilities of this Trust to any other Charitable Trust or institution conducted by such Trust which in the opinion of the original Trustee or the Board of Trustee has objects similar to the objects of this Trust and is capable of carrying out the objects and purposes of this Trust either fully or partially" (Paragraph 17 of the Trust deed).
Although, the "original trustee" was not "to take any remuneration" for discharging his duties as a trustee, yet, he was not precluded "from being paid out of the Trust fund such remuneration as may be deemed propellor carrying out any work and duty in connection with the conduct or management of institutions of the Trust, or with the business of printing, publishing or other activities carried on by the Trust".
He was to be paid expenses incurred in travelling or otherwise in connection with his duties as a trustee (paragraph 16 of the Trust deed).
The "original trustee" could invest trust monies and profits "in any investment authorised by law for the investment of Trust funds or in shares, or securities or debentures of Limited Companies in India or outside" (para 4 of the Trust deed).
He had the "power to mortgage, sell, transfer and give on lease or to otherwise deal with the Trust property or any portion thereof for the purpose of the Trust and to borrow monies or raise loans for the purpose of the Trust whenever he may deem it necessary to do so" (para 8 of the Trust deed).
Furthermore, the Trustee had the "power and authority to spend and utilise the money and the property of the Trust for any of the purposes of this Trust in such manner as to him may appear proper".
lt appears to us that, with this profit making background of the trust, its loosely stated objects the wide powers of the sole trustee, and the apparently profitable mode of conducting business, just like any commercial concern, disclosed not only by the terms of the trust but by the statement of total expenditure and income by the trustee it is very difficult to see what educational or other charitable purpose the trust was serving unless the dissemination of information and expression of opinions through the publications of the trust was in itself treated as the really educational and charitable purpose.
The principal arguments advanced on behalf of the appellant trustee are: firstly paragraph 2(c) of the Trust deed only enables the trustee 476 to supply the Kannada speaking people with organs or means for express educated public opinion as a mode of serving the real and expressly mentioned purpose of "education" which must control and determine the true nature of the activities of the trust so that profit making, as an incidental consequence of these activities, was quite immaterial; and, secondly, even if the activities of the trust did not fall within the separate category of, "education" as such, in which case profit yielding became quite irrelevant, but fell under the more general or the 4th and last category of purposes of general public utility specified in Section 2(15) of the Act, the mere fact that the conduct of the printing business was profitable sometimes or even constantly wag not enough to make it an activity carried on "for profit".
The first contention rests on the assumption that an express mention of a dominant though general purpose of "education" will enable the Courts to supervise the execution of such a trust as one intended solely for educational purposes.
The second submission, accepted by.
the Income tax Tribunal but rejected by the High Court, implies that the profit making motive must be specifically and expressly made the object of an activity which is of obvious utility to the public before excerption from taxation can be denied to such an activity.
In other words, the added qualification or condition imposed upon a work of "general public utility", before it could pass the test of a charitable purpose, made no difference to the law.
According to learned Counsel for the appellant, the amendment was meant to make explicit what was previously only implicit in the law as it stood.
The argument thus is that the amendment only clarified without actually changing the law on the subject.
The last paragraph of clause (3) of Section 4 of the Indian Income tax Act of 1922 (hereinafter referred to as 'the Act of 1922 ') laid down: " 'charitable purpose ' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility, but nothing contained, in clause (i) or clause (ii) shall operate to exempt from the provisions of this Act that part of the income from property held under a trust or other legal obligation for private religious purposes which does not enure for the benefit of the public".
It will be noticed that the provision set out above did not really define a "charitable purpose" but purports only to indicate a concept of charity which would include the four categories of objects mentioned there.
The four fold classification of charitable purposes has a history in English law.
A statute of Elizabeth I which "was not directed so much to the definition of charity as to the correction of abuses which had grown up in the administration of trusts of a charitable nature" (See: Tudor on "Charities" six End.
p. 2) had a preamble containing; an illustrative list of charitable objects which was never treated as haustive.
It, however, became the practice of Courts "to refer to the preamble as a sort of index or chart in order to determine whether or not a given purpose was charitable".
Thus, a purpose was considered, in the eye of law, to be charitable only if it came within the letter or the spirit and inendment of the preamble of the statute of Elizabeth.
477 To give a semblance of order to the rather confusing mass of case law which had accumulated on the subject, attempts were made to ; classify purposes which had obtained recognition by Courts as charitable.
Lard Macnaghten, in Income Tax Commissioners vs Pemsel adopted a four fold classification of charitable purposes which had been first put .
forward in the course of an argument by Sir Samuel Romilly in Morice vs Bishop of Durham.
These were (1) Relief of poverty, (2) advancement of education; (3) advancement of religion; (4) other purposes beneficial to the community not falling under any of the pre ceding heads The last or the residuary category seemed very wide and general.
Properly speaking, such a wide category would be interpreted, if it were found in a statute, ejusdem generis with the previous three categories, which were less wide and more specific.
The framers of our Act of 1922 must have been attracted by this classification which they adopted with some modifications, "Medical relief" was apparently sub stituted for "advancement of religion".
In All India Spinners ' Association vs Commissioner of Income tax, Bombay(3), Lord Wright, while considering the meaning of Sec 4(3) of the 1922 Act, observed (at P. 486) "The Act of 43 Elizabeth (1601) contained in a preamble a list of charitable objects which fell within the Act, and this was taken as a sort of chart or scheme which the Courts adopted as a groundwork for developing the law, in doing so they made liberal use of analogies so that the modern English law can only be ascertained by considering a mass of particular decisions often difficult to reconcile.
It is true that Section 4(3) of the Act has largely been influenced by Lord Macnaghten 's definition of charity in Pemsel vs Commissioners for Special Purposes of Income tax ; at p. 583, but that definition has no statutory authority and is not precisely followed in the most material particular; the words of the section are 'for the advancement of any other object of general public utility ', whereas Lord Macnaghten 's words were 'other purposes beneficial to the community '.
The difference in language, particularly the inclusion in the Indian Act of the word 'public ' is of importance.
" The trend of judicial pronouncements was to construe the words "general public utility", in Section 4(3) of the Act of 1922, very widely.
The only serious limitation put on the character of a "general public utility" seems to have been that it clearly excluded the object of private profit making.
Thus, in the All India Spinners ' Association case (supra), the Privy Council, while holding that the "primary object" of the Association appeared to be "the relief of the poor", said (at p. 488): 478 "That would be enough prima facie to satisfy the statute.
But there is good ground for holding that the purposes of the Association included the advancement of other purposes of general public utility.
These last are very wide words.
Their exact scope may require on other occasion very careful consideration.
They were applied in the Tribune Press case (1939) 66 I.A. 241; 7 I.T.R. (415) without any very precise definition to the production of the newspaper in question under the conditions fixed by the testator 's will.
The Board stated (at p. 256) that: 'the object of the paper might be described as the object of supplying the province with an organ of educated public opinion '.
and that it should prima facie be held to be an object of general public utility.
These words, their Lordship this would exclude the object of private gain, such as an under taking for commercial profit though all the same it would subserve general public utility.
But private profit was eliminated in this case".
In Commissioner of Income Tax, Madras vs Andhra Chamber of Commerce, this Court interpreting Section 4(3) of the 1922, Act, held (at p. 732): "The expression 'object of general public utility ' in section 4(3) would prima facie include all objects which promote the welfare of the general public".
Decision of some cases seems to have revolved round the question whether the body of beneficiaries was large enough to constitute the purpose one of "public utility".
Some of the decisions on income for which exemption was claimed on the ground that it was meant for a charitable purpose falling within the wide residuary class perhaps travelled even beyond the "bursting point" to which, according to Lord Russell of Killowen, English Courts had stretched the concept of charity [See: In re Grove Grady].
At any rate, the reason which induced our Government to make an amendment by Section 2(15) of the Act of 1961 was thus stated by the Finance Minister Shri Morarji Desai, in the course of his speech in Parliament explaining the proposed amendment (see: Lok Sabha Debate dated 18 8 1961)(3): "The other objective of the Select Committee, limiting the exemption only to trusts and institutions whose object is a genuine charitable purpose has been achieved by amending the definition in clause 2(15).
The definition of 'charitable ' purpose in that clause is at present so widely worded that 479 it can be taken advantage of even by commercial concerns which, while ostensibly serving a public purpose, get fully paid for the benefits provided by them, namely, the news paper industry which while running its concern on commercial lines can claim that by circulating newspapers it was improving the general knowledge of the public.
In order to prevent the misuse of this defamation in such cases, the Select Committee felt that the words 'not involving the carrying on of any activity for profit ' should be added lo the definition".
(p. 3074).
Mr. Palkhivala objected strongly to any reference to the speech of the Finance Minister, who proposed the amendment, for the purpose of finding cut the object of the amendment.
He contended that speeches made by Members of Parliament in the course of debates on pro visions enacted were not to be looked at for interpreting the language of the enactment to which we should confine ourselves.
He relied on the well known dictum of Rowlatt J., in Cape Brandy Syndicate vs I.R.C., when that learned Judge said: "In a taxing Act one has to look at what is clearly said . one can only look fairly at the language used".
It was contended that, as the meaning of words used in Section 2(15) was very clear we need go no further.
l am not able to accept this over simplification of the problem before us.
To say that the concept of a charitable purpose, either before or after the amendment we are considering, was at all clear or free from considerable ambiguity and difficulty would be to ignore the plethora of not always consistent case law which one can find on the subject and to minimize the difficulties of Courts.
"Charitable purpose" has never been at all clearly defined or exhaustively illustrated.
We have, therefore, to discover the mischief aimed at by the amendment.
It is true that it is dangerous and may be misleading to gather the meaning of the words used in an enactment merely from what was said by any speaker in the course of a debate in Parliament on the subject.
Such a speech cannot be used to defeat or detract from a meaning which clearly emerges from a consideration of the enacting words actually used.
But, in the case before us, the real meaning and purpose of the words used cannot be understood at all satisfactorily without referring to the past history of legislation on the subject and the speech of the mover of the amendment who was, undoubtedly, in the best position to explain what defect in the law the amendment had sought to remove.
It was not just the speech of any member in Parliament.
It was the considered statement of the Finance Minister who was proposing the amendment for a particular reason which he clearly indicated.
If the reason given by him only elucidates what is also deducible from the words used in the amend cd provision, we do not sec why we should refuse to take it into 480 consideration as an aid to a correct interpretation.
It harmonises with and clarifies the real intent of the words used.
Must we, in such circumstances, ignore it ? We find that Section 57, sub s (4) of the Evidence Act not only enables but enjoins Courts to take judicial notice of the course of proceedings in Parliament assuming, of course, that it is relevant.
It is true that the correctness of what is stated on a question of fact, in the course of Parliamentary proceedings, can only be proved by somebody who had direct knowledge of the fact stated.
There is, however, a distinction between the fact that a particular statement giving the purpose of an enactment was made in Parliament, of which judicial notice can be taken as part of the proceedings, and the truth of a disputable matter of fact stated in the course of proceedings, which has to be proved aliunde, that is to say, apart from the fact that a statement about it was made in the course of proceedings in Parliament (See: Rt.
Hon 'ble Jerald Lord Strickland vs Carmeld Mifud Bonnici, The Englishman Ltd. vs Lajpat Rai.
In the case before us, a reference was made merely to the fact that a certain reason was given by the Finance Minister, who proposed an amendment, for making the amendment.
What we can take judicial notice of is the fact that such a statement of the reason was given in the course of such a speech.
The question whether the object stated was properly expressed by the language of Section 2(15) of the Act is a matter which we have to decide for ourselves as a question of law.
Interpretation of a statutory provision is always a question of law on which the reasons stated by the mover of the amendment can only be used as an aid in interpretation if we think, as I do in the instant case, that it helps us considerably in understanding the meaning of the amended law.
We find no bar against such a use of the speech.
In Anandji Haridas & Co. Pvt. Ltd. vs Engineering Mazdoor Sangh & Anr., a Division Bench of this Court observed (at p. 949) "As a general principle of interpretation, where the words of a statute are plain, precise, and unambiguous, the intention of the Legislature is to be gathered from the language of the statute itself and no external evidence such as Parliamentary Debates, Reports of the Committees of the Legislature or even the statement made by the Minister on the introduction of a measure or by the framers of the Act is ad missible to construe those words.
It is only where a statute is not exhaustive or where its language is ambiguous, uncertain, clouded or susceptible or more than one meaning or shades of meaning, that external evidence as to the evils, if any, which the statute was intended to remedy, or of the circumstances which led to the passing of the statute may 481 be looked into for the purpose of ascertaining the object which the Legislature had in view in using the words in question".
The Finance Minister 's speech tells us that the Government was accepting the recommendations of the Select Committee to which the Bill which became the Act of 1961 had been referred.
One of the recommendations was: "The Committee is of the opinion that the advancement of an object of general public utility which involves the carrying on of any activity for profit should not come within the ambit of a charitable purpose".
[See Gazette of India Extraordinary Part II, Section 2, p. 677(4)].
In Commissioner of Income tax, Gujarat vs Vadilal Lallubhai, this Court, following its earlier decision in Commissioner of Income tax vs Sadora Devi did not consider it at all inappropriate to refer to a Select Committee 's Report for finding out the reason behind an ambiguous provision so as to be able to apply the Mischief Rule.
It is too late in the day for Mr. Palkhivala to object to the adoption of such a course in an attempt to apply the Mischief Rule to find out the reason behind an amendment of the law.
The case on which Mr. Palkhivala, the learned Counsel for the appellant, relies most strongly for support to his client 's case on merits is: In Re the 'Tribune '(3), where the Privy Council, allowing an appeal from a Full Bench decision of the Lahore High Court, held that the income a Trust, the object of which was described as "supplying the province with an organ of an educated public opinion", was entitled to exemption on the ground that it was a trust for a purpose of "General public utility" and not just for propagating any political views.
It was also held there that such a trust would not fall within the category of Trusts for education in the sense in which that term appears in Section 4 of the Act of 1922.
The Privy Council, after observing that the Chief Justice and Addison, J., of the Lahore High Court, had laid some stress on the fact "that the Tribune newspaper charges its readers and advertisers at ordinary commercial rates for the advantages which it affords", said (at p. 422): "As against this the evidence or finding do not disclose that any profit was made by the newspaper or press before 1918 and it is at least certain that neither was founded for private profit whether to the testator or any other person.
By the terms of the trust it is not to be carried on for profit to any individual.
It cannot, in their 482 Lordships ' opinion, be regarded as an element necessarily present in any purpose of general public utility, that it should provide something for nothing or for less than it costs or for less than the ordinary price.
An elemosynary element is not essential even in the strict English view of charitable uses (Commissioners vs University College of North Wales , 414)".
It seems clear to us that the amended provisions, Section 2(15) in the Act of 1961, was directed at a change of law as it was declared by the Privy Council in the Tribune case (supra).
The amended provision reads as follows: "section 2(15) 'charitable purpose ' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit;" It is apparent that, even now, charitable purpose has not been defined.
The four fold classification, which was there in the Act of 1922, is there even in the amended provision, but the last or general category of objects of "general public utility" is now qualified by the need to show that it did not involve profit making.
The question before us, therefore is: What is the meaning or purpose of introducing the limitation" not involving the carrying on of any activity for profit" ? The contention of Mr. Palkhivala is that it merely indicates that, as was held in the Tribune case (supra) and other cases, the purpose must not be private profit making or, in other words, the benefit must be to an object of "general public utility".
This involves reading of the word "private" before "profit" which is quite unjustifiable.
Furthermore, if that was the sole purpose of the amendment, we think that the amendment was not necessary at all.
It had been declared repeatedly by the Courts even before the amendment that activities motivated by private profit making fell outside the concept of charity altogether.
We think that it is more reasonable to infer that the words used clearly imposed a new qualification on public utilities entitled to exemption.
It was obvious that, unless such a limitation was introduced, the fourth and last category would become too wide to prevent its abuse.
Wide words so used could have been limited in scope by judicial interpretations ejusdem generis so as to confine the last category to objects similar to those in the previous categories and also subject to a dominant concept of charity which must govern all the four categories.
But, the declaration of law by the Privy Council, in the Tribune case (supra), had barred this method of limiting an obviously wide category of profitable activities of general public utility found entitled to exemption.
Hence, the only other way of cutting down the wide sweep of objects of "general public utility" entitled to exemption was by legislation.
This, therefore, was the method Parliament adopted as is clear from the speech of the Finance Minister who introduced the amendment in Parliament.
483 The word "involve" does not, it seems to me, necessitate the bringing out of the profit motive of an activity expressly in the deed of trust as was suggested by the learned Counsel for the appellant.
The dictionary meaning of the word 'involve ' is: "to entangle; to include; to contain; to imply" (see; The Shorter Oxford English Dictionary III Edn.
p. 1042).
All profit making, even as a mere by product, would have been covered by the word "involving", which is of wide import, if this word had stood alone and by itself without further qualifications by the context.
The use of the words "for profit", however, shows that the involvement of profit making should be of such a degree or to such an extent as to enable us to infer it to be the real object.
As a rule, if the terms of the trust permit its operation "for profit", they become prima facie evidence of a purpose falling outside charity.
They would indicate the object of profit making unless and until it is shown that terms of the trust compel the trustee to utilise the profits of business also for charity.
This means that the test introduced by the amendment is: Does the purpose of a trust restrict spending the income of a profitable activity exclusively or primarily upon what is "charity" in law ? If the profits must necessarily feed a charitable purpose, under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust.
The test now is, more clearly than in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on "charity".
If that obligation is there, the income becomes entitled to exemption.
That, in our opinion, is the most reliable test.
The difficult question, however, still remains: what is the meaning of "charitable purpose" which is only indicated but not defined by Section 2(15) of the Act ? It seems to me that a common concept or element of "charity" is shared by each of the four different categories of charity.
It is true that charity does not necessarily exclude carrying on an activity which yields profit, provided that profit has to be used up for what is recognised as charity.
The very concept of charity denotes altruistic thought and action.
Its object must necessarily be to benefit others rather than one 's self.
Its essence is selflessness.
In a truly charitable activity any possible benefit to the person who does the charitable act is merely incidental or even accidental and immaterial.
The action which flows from charitable thinking is not directed towards benefitting one 's self.
It is always directed at benefitting others.
It is this direction of thought and effort and not the result of what is done, in terms of financially measurable gain, which determines that it is charitable.
This direction must be evident and obligatory upon the trustee from the terms of a deed of trust before it can be held to be really charitable.
We think that this governing idea of charity must qualify purpose of every category enumerated in Section 2(15) of the Act of 1961.
We think that the words introduced by the Act of 1961 to qualify the last and widest category of objects of public utility were really intended to bring out what has to be the dominant characteristic of 484 each and every category of charity.
They were intended to bring the last and most general category in line with the nature of activities considered truly charitable and mentioned in the earlier categories.
Coming now to the deed of trust before us, we find that the word "education" is mentioned by the maker of the trust in a rather ceremonial or ritualistic fashion as a label for what he considers to be charitable object.
The third set of objects, in clause 2 of the deed does not appear to be stated there merely as a means of serving the general purpose of "education" separable from these objects in clause (c).
On the other hand, there are strong grounds for believing, in the light of other provisions and profit making activities and background of the trust, that the object of education was mentioned in the deed only as a convenient cloak to conceal and serve the real and dominant purpose of clause 2(c) which was to run a profitable newspaper and publishing business without paying the tax on it.
Just as mere making of profit as a consequence or incident of altruistic activity is not decisive of the real purpose or object of the activity, so also the carrying on of a business for profit does not cease to be so merely because losses are actually incurred in certain years or because those who carry it on call it "education".
It would be difficult to find any commercial activity which makes profits always or which expressly gives out that its existence depends upon profit making although, in practice, and, ultimately, its continuance may depend on profit making.
A newly started business may, initially, have to run at a loss; but, at a later stage, it may earn magnificent profits.
Therefore, test of the real character or purpose of an activity cannot be whether its continuance is made to depend upon profits resulting from it or not.
Such a test would be artificial and specious.
I do not think that the qualification introduced by Section 2(15) of the Act of 1961 was intended to compel Courts to look for the conditions on which continuance of activities of public utility is made to depend.
If profit making results from them and these profits can be utilised for non charitable purposes the trust which makes this possible would not be exempt from paying income tax.
In the trust deed before us, as we have already indicated, the trustee had not only wide powers of utilisation of trust funds for purposes of the trust but could divert its assets as well as any of the funds of the Trust to other institutions whose objects are "similar to the objects" of the trust and of "carrying out the objects and purposes of this trust either fully or partially".
The whole deed appears to me to be cleverly drafted so as to make the purpose of clause 2(c) resemble the one which was held to be protected from income tax in the Tribune case (supra).
Indeed the very language used by the Privy Council in the Tribune case (supra), for describing the objects of the Trust in that case, seems to have been kept in view by the draftsman of the trust deed before us.
And, we find that the power of diverting the assets and income of the Trust although couched in language which seems designed to counsel their real effect is decisive on the question whether the trust is either wholly or predominantly for a charitable purpose or not.
The trustees is given the power of deciding what 485 purpose is allowed to or like an object covered by the trust and how it is to be served by a diversion of trust properties and funds.
If the trustee is given the power to determine the proportion of such diversion, as he is given here, the trust could not be said to be wholly charitable.
He could divert as much as to make the charitable part or aspect, if any, purely illusory.
Indeed, this was the law even before the qualifying words introduced by the 1961 Act.
[See: East India Industries (Madras) Pvt. Ltd. vs Commissioner of Income tax, Madras(1), Commissioner of Income tax, Madras vs Andhra Chamber of Commerce(2), Md. Ibrahim Riza vs Commissioner of Income tax, Nagpur(3)].
Such a "trust" would be of doubtful validity, but I refrain from further comment or any pronouncement upon the validity of such a trust as that was neither a question referred to the High Court in this case nor argued anywhere.
The amendment of the 1961 Act considered by us compels closer scrutiny of deeds of ostensibly charitable trusts with a view to discovering their real purposes by analysing the effects of their terms and what they permit.
It narrows the scope of exemption from income tax granted at least under the last and widest category of charitable trusts mentioned in Section 2(15) of the Act as was held in Commissioner of Income tax, West Bengal II vs Indian Chamber of Commerce(4).
We are in agreement with the view expressed in the Tribune case (supra) to the extent that we think that a trust such as the one considered there does not, just like the trust before us, fall within the category of education, as such, mentioned in the statutory elucidation of charity, which was repeated in the 1961 Act, with an added qualification of the last and widest category.
Although the term "education", as used in Section 2(15) of the Act, seems wider and more comprehensive than education through educational institutions, such as Universities, whose income is given an exemption from income tax separately under Section 10(22), provided the educational institution concerned does not exist "for purposes of profit", yet, it seems to me that the educational effects of a newspaper or publishing business are only indirect, problematical, and quite incidental so that, without imposing any condition or qualification upon the nature of information to be disseminated or material to be published, the mere publication of news or views cannot be said to serve a purely or even a predominantly educational purpose in its ordinary and usual sense.
The purposes with which we are concerned no doubt parade under the guise or caption of "education".
They are found stated in clause 2(c) of the deed.
This clause speaks of a supply of "organs of educated public opinion" to Kanada speaking people and of a presumed need for "useful" information and "ventilation" of views on "matters of public utility".
It is left to the Trustee to decide which class of people is "educated" so as to be permitted to voice its views through these organs.
He is also to decide what is "useful" and what is harmful and what is a matter of "general public utility".
If, as it seems to 486 us to be the position here, the Trustee is the sole judge of how these presumed needs are to be satisfied, he could certainly cater for them in a manner which could be considered debased or offensive by people of good taste with a proper sense of values.
I do not mean to cast the slightest reflection on the manner in which the appellant trustee conducts his business or on the quality or value of materials found in his newspapers or other publications.
We have no evidence and no finding on these aspects of the case before us.
All I would like to point out here is that the trust leaves it entirely to the sweet will of the sole trustee to decide all questions relating to policy or the way in which the needs mentioned in clause 2(c) are to be met.
Provision for their satisfaction could be made in a manner which could be very lucrative.
This is the most relevant consideration in ascertaining the purpose of the trust from the point of view of profit making.
Judging from the facts set out in the trust deed itself, the sole trustee had managed to make the satisfaction of the needs mentioned above a highly profitable business.
The deed puts no condition upon the conduct of the newspaper and publishing business from which we could infer that it was to be on "no profit and no loss" basis.
I mention this as the learned Counsel for the appellant repeatedly asserted that this was the really basic purpose and principle for the conduct of the business of the trust before us.
This assertion seems to be based on nothing more substantial than that the trust deed itself does not expressly make profit making the object of the trust.
But, as I have already indicated, the absence of such a condition from the trust deed could not determine its true character.
That character is determined for more certainly and convincingly by the absence of terms which could eliminate or prevent profit making from becoming the real or dominant purpose of the trust.
It is what the provisions of the trust make possible or permit coupled with what had been actually done as without any illegality in the way of profit making, in the case before us, under the cover of the provisions of the deed, which enable us to decipher the meaning and determine the predominantly profit making character of the trust.
For the reasons given above, I think that judgment of the Mysore High Court must be and is affirmed, but, in the circumstances of the case, the parties will bear their own costs.
V.M.K. Appeals dismissed.
| IN-Abs | Section 2(15) of the Income tax Act provides that 'charitable purpose ' includes relief of the poor, education medical relief.
and the advancement of any other object of general public utility.
The appellant is a sole trustee of the "Loka Shikshana Trust", holding properties mentioned in a schedule attached to a deed of trust executed on 19 2 1962 by himself purporting to re declare a trust of 15 7 1935.
The total assets of the earlier trust of 1935 consisted of a sum of Rs. 4308.109 only.
Under the provisions the earlier trust of the trustee had carried on a lucrative business of printing at Belgaum, and, thereafter, he started publishing a daily newspaper.
The value of the redeclared trust of 1962 stood at Rs. 2,97,658/ .
Clause 2 of the trust deed provided that the object of the Trust shall be to educate the people of India in general and of Karnatak in particular by (a) establishing conducting and helping directly or indirectly institutions calculated to educate the people by spread of knowledge on all matters of general interest and welfare; (b) founding and running reading rooms and libraries and keeping and conducting printing houses and publishing or aiding the publication of books, booklets, leaflets, pamphlets, magazines etc,, in Kannada and other languages, all these activities being started, conducted and carried on with the object of educating the people; (c) supplying the Kannada speaking people with an organ or organs of educated public opinion and conducting journals in Kannada and other language for the dissemination of useful news and information and for the ventilation of public opinion on matters of general public utility; and (d) helping directly or indirectly societies and institutions which have all or any of the aforesaid objects in view.
The Income tax officer sent a communication to the trust on April 27, 1963 to the effect that, since the only activity of the trust was printing, publication, and sale of newspaper.
weekly and monthly journal, the trust carried on an activity for profit.
The claim of the sole trustee was rejected, and, having been unsuccessful through out the appellant has preferred this appeal after certification of the case under section 261 of the Income tax Act, 1961.
Dismissing the appeal, ^ HELD: (Per H. R. Khanna and A. C. Gupta, JJ.) (1) It is not correct to say that the word "profit" in section 2(15) of the Act means private profit.
The word used in the definition provision is profit and not private profit and it would not be permissible to read in the definition the word 462 "private" as qualifying profit even though such word is not there.
There is also no apparent justification or cogent reason for placing much a construction on the word "profit".
[472B] The words "general public utility" contained in the definition of charitable purpose are very wide.
These words exclude objects of private gain [472C] All India Spinners ' Association vs Commissioner of Income tax, , relied on.
It is also not correct to say that the newly added words "not involving the carrying on of any activity for profit" merely qualify and affirm what was the position as it obtained under the definition in the Act of 1922.
If the legislature intended that the concept of charitable purpose should be the same under the Act of 1961 as it was in the Act of 1922, there was no necessity for it to add the new words in the definition.
The earlier definition did not involve any ambiguity.
and the position in law was clear and admitted of no doubt after the pronoumcement of the Judicial Committee in the Tribune case and in the case of All India Spinners ' Association.
If despite that fact, the legislature added new words in the definition of charitable purpose, it would be contrary to all rules of construction to ignore the impact or the newly added words and to so construe the definition as it the newly added words were either not there or were intended to be otiose and redundant.
[47CC E] (ii) The sense in which the word "education" has been used in section 2(15) is the systematic instruction, schooling, or training given to the young in preparation for the work of life.
It also connotes the whole course of scholastic instruction which a person has received.
The word "education" has, not been used in that wide and extended sense according to which every acquisition of further knowledge constitutes education.
According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge.
Likewise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge.
Again, when your grow up and have dealings with other people, some of whom are not straight, you learn by experience and thus add to your knowledge of the ways of the world.
If you are not careful, your wallet is liable to be stolen or you are liable to be cheated by some unscrupulous is liable to be stolen or you are liable to be cheated by some unscrupulous person.
The thief who removes your wallet and the swindler who cheats you teach you a lesson and in the process make you wiser though poorer.
If you visit a night club, you get acquainted wit and add to your knowledge about some to the not much revealed realities and mysteries of life.
All this in a way is education in the great school of life.
But, that is not the sense in which the word "education" is used in clause (15) of section 2.
What education connotes in that clause is the process of training and developing the knowledge, skill mind, and character of students by formal schooling.
[469C F] (iii) The fact that the appellant trust is engaged in the business of printing and publication of newspaper and journals and the further fact that the afore said activity vields or is one likely to yield profit and there are no restrictions on the appellant trust earning profits in the course of its business would go to show that the purpose of the appellant trust does not satisfy the requirement that it should be one "not involving the carrying on of any activity for profit." [471C D] In re The Trustees of the 'Tribune , State of Gujarat vs M/s Raipur Mfg. Co., [1967] 1 S.C.R. 618, and Commissioner of Income tax vs Lahore Electric Supply Co. Ltd., , referred to.
(i) It has been declared repeatedly by the Courts, even before the addition of the words "not involving the carrying on of any activity for profit" to the definition of "charitab1e purpose".
that activities motivated by private profit making fell outside the concept of charity altogether.
It is more reasonable to infer that the words used clearly imposed a new qualification on public utilities entitled to exemption.
It was obvious that, unless such a limitation was introduced, the fourth and last category would become too wide to prevent 463 its abuse.
Wide words so used could have been limited in Scope by judicial interpretations ejusdem generis so as to confine the last category to objects similar to those in the previous categories and also subject to a dominant concept of charity which must govern all the four categories.
But, the declaration of law by the Privy Council, in the Tribune case had barred this method of limiting an obviously wide category of profitable activities of general public utility found entitled to exemption.
Hence, the only other way of cutting down the wide sweep of objects of "general public utility" entitled to exemption was by legislation.
This, therefore, was the method Parliament adopted as is clear from the speech of the Finance Minister who introduced the amendment in Parliament.
[482F H] Income Tax Commissioners vs Pemsel, ; , 583; Morice vs Bishop of Durham, ; All India Spinners ' Association vs Commissioner of Income Tax, Bombay, 1944(12) ITR 482, 486; commissioner of Income Tax, Madras vs Andhra Chamber of Commerce, 1965(55) I.T.R. 722, 732; In re Grove Gredy , 582; Cape Brandy Syndicate vs I.R.C. , 71; Rt.
Hon 'ble Jerald Lord Strickland vs Carmelo Mifud Bonnici, A.I.R. 1935 P.C. 34; The Englishman Ltd. vs Engineering Mazdoor Sang & Anr., A.I.R. 1975 S.C. p. 946 @ 949; Commissioner of Income tax Gujarat vs Vadilal Lallubhai, 1972 (86) I.T.R. p. 2; Commissioner of Income tax vs Sadora Devi, 1957 (32) I.T.R. 615 @ 627 [1958] 1 I.S.C. 1 and In re the Tribune, , referred to.
(ii) If the profits must necessarily feed a charitable purpose, under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust.
The test is the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on "charity".
If that obligation is there, the income becomes entitled to exemption.
That is the most reliable test.
The governing idea of charity must qualify purpose of every category enumerated in section 2(15) of the Act of 1961.
[483 C D] (iii) Although the term 'education ', as used in section 2(15) of the Act, seems wider and more comprehensive than education through educational institutions, such as Universities, whose income is given an exemption from income tax separately under section 10(22) of the Act, provided the educational institution concerned does not exist "for purposes of profit", yet the educational effects of a newspaper or publishing business are only indirect, problematical and quite incidental so that, without imposing any condition or qualification upon the nature of information to be disseminated or material to be published, the mere publication of news or views cannot be said to serve a purely or even predeminantly educational purpose in its ordinary and usual sense.
Judging from the facts set out in the trust deed itself, the sole trustee had managed to make the satisfaction of the needs mentioned in clause 2(c) a highly profitable business.
The deed puts no condition upon the conduct of the newspaper and publishing business from which one could infer that is was to be on "no profit and no loss" basis.
The High Court was right in coming to the conclusion that the appellant is not entitled to claim exemption from income tax.
[485 E G, 486 D] East India Industries (Madras) Pvt. Ltd. vs Commissioner of Income tax Madras, ; Commissioner of Income tax, Madras vs Andhra Chamber of Commerce, ; Md. Ibrahim Riza vs Commissioner of Income tax, Nagpur, (1930) L.R. I.A. 260 and Commissioner of Income tax, West Bengla II vs Indian Chamber of Commerce, ARGUMENTS For the appellant (1) The objects clause of the Trust is so worded as to make it clear that the whole and sole object of the Trust is education of the people of India 464 in general and of Karnatak in particular by the four means or modes set out h in that clause.
Those four means or modes are not separate objects of the Trust but are merely the instrumentalities prescribed by the Settlor for achieving the specified object of education.
Even assuming for the purpose of argument that sub clauses (a) to (d) of clause 4 of the Trust Deed are separate and distinct objects of the Trust, clause (c) which covers a newspaper or a journal is itself an object falling within the category of "education".
(2) The words added in the 1961 Act "not involving the carrying on of any activity for profit" go only with the last head viz "any other object of general public utility" and not with the first three heads.
This is put beyond doubt by the comma which appears after each of the first three heads, there being no comma after the fourth head.
(3) The present case falls within the second head of "charitable purpose", viz. education.
The ruling of the Privy Council in the Tribune case does not apply to the facts of the present case.
(4) Assuming that the case does not fall within the category of "education" it falls within the last head "any other object of general public utility, and the qualifying words "not involving the carrying on of any activity for profit" are satisfied.
First the word "profit" means private gain, and the qualifying words merely say expressly what was implicit in the 1922 Act at 423, and at 488).
Even assuming the word "profit" covers profit for the Trust, involving no private gain, the qualifying words are still satisfied.
They require that the object of the Trust should not involve, i.e. entail that the trustees should carry on the activity for profit.
No such condition about making profit is imposed by the trust deed.
That profit may result from the activities of the Trust in a particular year is wholly irrelevant.
Profit making is not the motive of the Trust.
(5) Provisions of section ll of the Act clearly reveal that it is implicit in the very scheme of the Act that a business undertaking can be held in trust for an object of general public utility.
For the respondent (i) The decision of the Privy Council in the Tribune case squarely applies to the facts of the present case; (ii) For ascertaining that true meaning of the expression "not involving the carrying on of an activity for profit" it was not only permissible but only proper for the Courts to refer to parliamentary debates and other proceedings of the legislature.
(iii) Where a business undertaking is held as property of the Trust and income resulting therefrom is wholly applied for charitable purposes such as education, medical relief of the poor, or for any other object of general public utility but with which object the production or income is not linked it would be still exempt.
But if that income is utilised only for the purposes of advancing the very object from the advancement of which it is derived it would cease to be exempt.
The means and processes adopted by the Trustee for the advancement of the object were such as rendered the object itself as non charitable.
(iv) The expression "activity for profit" was much wider in cope than merely a business activity.
The legislature had intentionally used the expression "activity" instead of business because in some cases the income produced from the activity may not be legally assessable under the provisions of the Income tax Act, 1961 under the head "Income, profits and gains of business" (Section 28).
The expression 'activity for profit" in the context meant activity for profit making; (v) Since the advancement of education was being achieved by means involving the carrying on of an activity for profit, the Trust would still be denied exemption.
In other words, the qualifying words added to the definition at the end did not govern merely the last category of charity i.e. the object of general public utility but equally governed the earlier three well known categories namely medical relief, relief of the poor, and education.
The effect of the qualifying words "not involving the carrying on an activity for profit" was to deny exemption to trusts which carried on a profit making activity for advancing the object of general public utility.
|
ivil Appeal No. 591 of 1974.
Appeal by Special Leave from the Judgment and order dated the 15th February, 1974 of the Gujarat High Court in Civil Revision Appln.
No. 326/71.
P. H. Parekh and Manju Jaitley, for the appellant.
section section Khanduja and R. N. Bhalgoha, for respondents 2 4.
The Judgment of the Court was delivered by RAY, C.J.
This appeal is by special leave from the judgment dated 15 February, 1974 of the Gujarat High Court dismissing the revision petition filed by the appellant.
536 The appellant filed a Revision Petition in the High Court against the judgment and decree passed by the District Judge dismissing his appeal against the decree for eviction of the appellant from the suit premises.
The respondent filed the suit against the appellant for possession of the premises on the ground that the appellant had sublet a portion of the premises.
Section 13(1) (e) of the Bombay Rents, & Hotel and Lodging House r Rates Control Act, 1947 which is the relevant section for the purpose of this appeal runs as follows : "13(1)(e) That the tenant has, since the coming into operation o this Act, unlawfully sublet, or after the date of Cr commencement of the Bombay Rents, Hotel and Lodging House Rates Control (Amendment) Act, 1973, unlawfully given on licence, the whole or part of the premises or assigned or transferred in any other manner his interest therein".
The appellant took on lease on 1 January, 1960 the premises, namely, first floor consisting of four rooms at a rent of Rs. 50/ per month.
The respondent alleged that the appellant sublet a portion thereof, namely, two rooms, in the month of August, 1965.
The respondent on 1 April, 1967 gave a notice to the appellant terminating the tenancy.
The appellant denied that there was any unlawful subletting of two rooms to respondent No. 5 Jitendra Shankerji Desai.
The appellant further alleged that the respondent No. 5 Desai vacated the suit premises on 14 April, 1967.
At the trial the issues were whether the appellant unlawfully sublet two rooms to respondent Desai.
The Trial Court held that the appellant sublet the suit premises to respondent No. section The Trial Court gave the plaintiff respondent a decree for possession of the suit premises.
The appellant preferred an appeal.
The appeal was dismissed.
The appellant, thereafter, filed a revision petition in the High Court.
In the High Court the contentions were these.
The expression "the tenant has sublet" in section 13(1)(e) of the above mentioned Act means that the subletting must continue at the date of the suit for passing the decree.
The notice was given on 1 April, 1967.
The respondent No. 5 vacated the premises in suit on 14 April, 1967.
When the suit was filed the sub tenant was not in occupation of the premises.
Therefore, the plaintiff respondent was not entitled to a decree.
The High Court relied on a Bench Decision of that High Court Maganlal Narandas Thakkar & Anr.
vs Arjan Bhanii Kanbi(1) (1) 1969 G.L.R. Vol.
10 p. 837.
537 where it was held that the words "has sublet" in section 13(1) (e) of the Saurashtra Rent Control Act mean that a subletting has take place and as a result of that subletting the impediment in the way of the landlord to recover possession has been removed.
The provisions contained in section 13(1)(e) of the Saurashtra Rent Control Act are r similar to the provisions contained in the Bombay Act; 1947.
The High Court also held that the wards 'has sublet ' do not include any element of the sub tenancy being in existence at the date when the suit is filed.
The appellant relied on a decision on this Court in Goppal vs Thakurji Shriji Shriji Dwarkadheeshji & Anr support of the proposition that the words "has sublet" means that the subletting is to subsist at the date of the suit.
This Court in Goppulal 's case (supra) considered section 13(1) of the Rajasthan Premises (Control of Rent and Eviction) Act, 1950.
Section 13(1) (e) of the Rajasthan Act provides that no decree evicting the tenant shall be passed unless the Court is satisfied "(e) that the tenant has assigned, sublet or otherwise parted with the possession of the whole or part of the premises, without the permission of the landlord".
The High Court in Goppulal 's case (supra) held that two.
shops were sublet after October 15, 1947 when the Jaipur Rent Control order, 1947 came into force.
Subletting was a ground for ejectment under paragraph 8 (1) (b) (ii) of the Jaipur Rent Control order, 1947.
The High Court held that the tenant 's liability for eviction on this ground continued after the promulgation of the Rajasthan Premises (Control of Rent and Eviction) Act, 1950.
This Court said that the High Court was in error that there was one "integrated tenancy" for six shops.
The facts found were that four shops were let out in 1944 and two shops were let out after 1945.
This Court found that the High Court was in error in holding that two shops were sublet after 15 October, 1947.
This Court held that the plaintiffs in Goppulal 's case (supra) did not establish that the subletting was after 15 October, 1947 and on the Date of the subletting in 1944, no Rent Control Legislation was in force.
lt is in that context that it is said that the words "has sublet" contemplate a completed event connected in some way with the present time".
This Court said that the words "has sublet" take within their sweep any subletting which was made in the past and has continued upto the present time".
What is meant by these observations is that the vice of subletting which fell within the mischief of the Act continues to be a mischief within the Act.
In Goppulal 's case (supra) there was no subletting in 1947 to violate the 1947 Jaipur Rent Control order and therefore there could not be any subletting which could continue upto the 1950 Rajasthan Act.
On the date of the subletting in 1944, this Court found in Goppulal 's case (supra) that there was no Rent Control Legislation in (1) ; 4 L925SupCI/75 538 force This Court did not consider the question as to whether subletting to be within the mischief of the relevant statute was to subsist at the date of the suit.
This Court held that section 13(1)(e) of the Rajasthan Act would include any subletting which though made in the past would continue at the point of the time when the Act came into force.
The appellant repeated the same contentions which had been advanced before the High Court.
The provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 indicate that a tenant is disentitled to any protection under the Act if he is within the mischief of the provisions of section 13(1)(e), namely, t that he has sublet.
The language is that if the tenant has sublet, the protection ceases.
To accede to the contention of the appellant would mean that a tenant would not be within the mischief of unlawful subletting if after the landlord gives a notice terminating the tenancy on the ground of unlawful subletting the sub tenant vacates.
The landlord will not be able to get any relief against the tenant in spite of unlawful subletting.
In that way the tenant can foil the attempt of landlord to obtain possession of the premises on the ground of subletting every time by getting the sub tenant to vacate the premises.
The tenant 's liability to eviction arises once the fact of unlawful subletting is proved.
At the date of the notice, if it is proved that there was unlawful subletting, the tenant is liable to be evicted.
The High Court rightly rejected the revision petition.
The appeal is dismissed with costs. ] P.H.P. Appeal dismissed.
| IN-Abs | The respondent landlord filled a suit for eviction against the appellant tenant on the ground that the appellant had sublet a portion of the premises.
The trial court and the First Appellate Court came to the conclusion that on the date when the notice terminating the tenancy was served on the appellant, he did, in fact, sublet a portion of the suit premises.
The courts, however, came to the conclusion that on the date when the respondent instituted the eviction suit the sub letting had ceased.
The trial court and the lower appellate court granted a decree of eviction in favour of the respondent.
A revision filed by the appellant before the High Court also failed.
Section 13(1)(e) of the Bombay Rents Act makes a ground of eviction, "that the tenant has, since the coming into operation of ' this Act, unlawfully sublet. " On appeal by special leave, it was contended by the appellant that the expression "has sublet" pre supposes that subletting must continue till the date of the institution of the suit.
Dismissing the appeal.
^ HELD: (1) The tenant is disentitled to any protection under the Bombay Rent Act if he is within the mischief of the provisions of section 13(1)(e).
To accede to the contention of the appellant would mean that a tenant would not be within the mischief of unlawful subletting if after the landlord gives a notice terminating the tenancy on the ground of unlawful subletting the sub tenant vacates.
The landlord will not be able to get any relief against the tenant in spite of unlawful subletting.
In that way the tenant can foil the attempt of landlord to obtain possession of the Premises on the ground of subletting every time by getting the sub tenant to vacate the premises.
[538 D] (2) The tenant 's liability to eviction arises when the fact of unlawful subletting is proved.
At the date of the notice if it is proved that there was unlawful subletting, the tenant is liable to be evicted.
[538 D] Maganlal Narandas Thakkar & Anr.
vs Arjun BhanjiKanbi [969]G.L.R. Vol.
10 p. 627 Goppulal vs Thakurji Shriji Shriji Dwarkadheeshji & Anr.
; , distinguished.
|
Civil Appeal No. 2040 of 1974.
Appeal by special leave from the Judgment and order dated the 13th June, 1974 of the Andhra Pradesh High Court in W.P. No. 2145 of 1972.
Niren De, Attorney General of India and P. P. Rao, for the appellant.
r A. Subba Rao for the respondent.
The Judgment of the Court was delivered by RAY, C.J.
This appeal is by special leave from the judgment dated 13 June, 19?4 of the Andhra Pradesh High Court quashing an order of dismissal.
The principal question canvassed by the Attorney General is that the High Court should not have interfered with the findings of the Tribunal.
The State Government in the year 1964 received certain complaints alleging misconduct against the respondent.
The Director of Anti Corruption Bureau was asked to inquire and make a report.
The Government in the light of advice tendered by the Vigilance Commission referred the matter to the Tribunal constituted under Andhra Pradesh Civil Services (Disciplinary Proceedings Tribunal) Act, 1960.
Three charges were framed against the respondent.
Broadly stated the charges were that the respondent claimed false travelling allowance on certain days in the months of January, April and September, 1964.
The respondent denied the charges and submitted a written statement on 4 November, 1968.
The Tribunal made inquiries and on 9 December, 1968 recommended dismissal of the respondent from the service.
The Government thereafter gave a notice to the respondent on 22 February, 1969 to show cause why the penalty of dismissal from service should not be imposed on him.
On 20 March, 1969 the respondent submitted his written explanation.
The Government after considering the explanation of the respondent, by an order dated 24 May, 1969 dismissed the respondent from service.
523 The respondent challenged the order of dismissal in the Andhra Pradesh High Court.
The High Court by judgment dated 27 July, 1970 set aside the order of dismissal on the ground that the recommendations of the tribunal were not communicated to the respondent alongwith the notice regarding the proposed punishment of dismissal.
The High Court observed that it was open to the punishing authority to issue a fresh show cause notice regarding the proposed punishment after communicating the enquiry report and the recommendations of the Tribunal The Government thereafter complied with the directions of the High Court.
The Government cancelled the order of dismissal dated 24 May, 1969.
The Government, however, ordered that the respondent shall be deemed to have been under suspension from service from 21 May, 1969 until further orders.
The order of suspension was challenged by the respondent and set aside by the Andhra Pradesh High Court on 22 March, 1970.
The Government then issued fresh notices dated 16 September, 1970 and 25 September, 1970 to the resplendent and communicated the report of the Tribunal and the recommendations of the Tribunal and the Vigilance Commission regarding the proposed penalty.
The respondent submitted his explanation on 6 and 23 October, 1970.
The Government considered the same.
The Commerce Department thereafter by an order dated S May, 1972 dismissed the respondent from service.
The charges against the respondent were that he made three false claims for travelling allowance for three journeys.
The first journey was on 3 January, 1969 from Rajahmundry to Hyderabad The second journey was on 19 April, 1964 from Rajamundry to Hyderabad and Hyderabad to Rajahmundry on 24 April, 1964.
The third journey was from Rajahmundry to Guntur on 13 September, 1964 and Guntur to Rajahmundry on 16 September, ]964.
The respondent in his written statement filed before the Tribunal denied the charges and maintained that he travelled by first class on the days mentioned in the claim for travelling allowance.
He stated that he travelled by first class from Rajahmundry to Hyderabad on 3 January, 1964 in accordance with his tour programme and claimed the travelling allowance.
He also said that he travelled by first class from Rajahmundry to Hyderabad on 19 April, 1964 and from Hyderabad to Rajahmundry on 24 April, 1964 and claimed travelling allowance.
In Exhibit P 45 which was his signed statement dated 8 January, 1967, he stated that on 3 January, 1964 he went with his Joint Director from Vijayorgram from Rajahmundry in a car.
In that statement he said that he went from Hyderabad to Waltair on 7 January, 1964 and he claimed travelling allowance from Vijayawada to Hyderabad.
In Exhibit P 45 he said that on 19 April, 1964 he travelled from Rajahmundry to Vijayawada by first class and he went to Hyderabad by first class on 19 April, 1964.
In Exhibit P 45 he said that he did not 524 travel on 24 April, 1964 from Hyderabad to Rajahmundry because.
A there was no accommodation.
He waited at Hyderabad.
On 28 April, 1964 he got reservation and travelled to Rajahmundry.
The Tribunal on enquiry found the respondent guilty of charges 1 and 2.
In the Enquiry Report dated 9 December, 1968, the Tribunal recommended dismissal of the respondent.
The respondent in the High Court challenged the order of dismissal.
The High Court set aside the order of dismissal on the grounds that the prosecution did not adduce every material and essential evidence to make out the charges and that the conclusion reached by the Tribunal was not based on evidence.
The High Court held that Exhibit P 45 was not admissible in evidence according to the Evidence Act and it was not safe to rely on such a statement as a matter of prudence.
The High Court said that corruption or misconduct under rule 2(b) of the Andhra Pradesh Civil Service (Disciplinary Proceedings Tribunal) Rules, has the same meaning as criminal misconduct in the discharge of official duties in section 5(1) of the Prevention of Corruption Act, 1947.
The High Court in that background discussed the evidence and findings of the Tribunal as to whether the prosecution placed evidence in respect of the ingredients of the charge under section 5(1)(d) of the Prevention of Corruption Act, 1947 The High Court referred to these features in regard to the finding of the Tribunal.
Four years elapsed between the journeys forming subject matter of the charge and the framing of the charge.
The respondent in his evidence said that he secured accommodation through the Conductor incharge of the first class compartment after the arrival of the train.
It was possible that the respondent might have converted his ticket to first class one once he found that first class accommodation was available on the train even though he had purchased a ticket of lower denomination.
The conductor 's chart is the only basis for showing whether a particular person travelled by first class by a particular train and not by a copy of the reservation chart kept at the starting station.
Though the prosecution produced evidence to show that the respondent did not purchase or reserve first class accommodation in advance, the prosecution failed to produce the Conductor 's charts relating to the trains in question.
According to the High Court "The prosecution utterly failed to adduce any evidence to exclude these possibilities".
The High Court said that it was doubtful whether Exhibit P 45 was admissible in evidence.
It was said to be taken during the course of investigation.
The High Court said that even if the statement is accepted, it only shows that the respondent did not actually travel on the days mentioned in the tour programme according to which travelling allowance was paid.
The respondent made the statement marked Exhibit P 45 on 8 January, 1967.
The charge sheet was framed on 17 November, 525 1967.
The respondent filed the written statement on 2 August, 1968.
He filed an additional written statement on 4 November, 1968.
It is apparent that the charge sheets were framed after investigation.
It transpired on evidence before the Tribunal that one first class ticket bearing No.03834 was collected at Hyderabad on 4 January" 1964.
The further evidence about ticket No. 03834 was that it was issued to one P. Ramachandra Raju who travelled from Rajahmundry to Hyderabad on the night of 3 January, 1964.
The further evidence before the Tribunal was that one first class ticket bearing No. 04049 for the journey from Rajahmundry to Hyderabad was sold to one A. section Murty for the journey an 19 April, 1964.
The Tribunal examined the respondent.
The respondent was given full opportunity to deal with Exhibit P 45.
The High Court was not correct in holding that the domestic enquiry before the Tribunal was the same as prosecution in a criminal case.
The High Court was also in error in holding that Conductor 's chart would show whether the respondent travelled or not.
The High Court accepted the explanation that Conductor 's charts were burnt and, therefore, they could not be produced.
Further, Conductor 'section chart could not show the name of the persons paying the money.
There was positive evidence before the Tribunal of tickets being purchased by persons other than respondent on 3 January, 1964 and 19 April, 1964.
These features figured prominently before the Tribunal.
The High Court all throughout treated the enquiry before the Tribunal as a criminal prosecution.
The scope of Article 226 in dealing with departmental inquiries has come up before this Court.
Two propositions were laid down by this Court in State of Andhra Pradesh vs section Sree Rama Rao(1).
First, there is no warrant for the view that in considering whether a public officer is guilty of misconduct charged against him,.
the rule followed in criminal trials that an offence is not established unless proved by evidence beyond reasonable doubt to the satisfaction of the Court must be applied.
If that rule be not applied by a domestic Tribunal o Inquiry the High Court in a petition under Article 226 of the Constitution is not competent to declare the order of the authorities holding a departmental inquiry invalid.
The High Court is not a Court of Appeal under Article 226 over the decision of the authorities holding a departmental enquiry against a public servant.
The Court is concern ed to determine whether the enquiry is held by an authority competent in that behalf and according to the procedure prescribed in that behalf, and whether the rules of natural justice are not violated.
Second, where there is some evidence which the authorities entrusted with the duty to hold the enquiry has accepted and which evidence may reason ably support the conclusion that the delinquent officer is guilty of the charge, it is not the function of the High Court to review the evidence (1) 526 and to arrive at an independent finding on the evidence.
The High A Court may interfere where the departmental authorities have held the proceedings against the delinquent in a manner inconsistent with the rules of natural justice or in violation of the statutory rules prescribing the mode of enquiry or where the authorities have disabled themselves from reaching a fair decision by some considerations extraneous to the evidence and the merits of the case or by allowing themselves to be influenced by irrelevant considerations or where the conclusion on the very face of it is so wholly arbitrary and capricious that no reasonable person could ever have arrived at that conclusion.
The departmental authorities are, if the enquiry is otherwise properly held, the sole judges of facts and if there is some legal evidence on which their findings can be based, the adequacy or reliability of that evidence is not a matter which can be permitted to be canvassed before the High Court in a proceeding for a writ under Article 226.
Again, this Court in Railway Board, representing the Union of India, New Delhi & Anr vs Niranjan Singh(1) said that the High Court does not interfere with the conclusion of the disciplinary authority unless the finding is not supported by any evidence or it can be said that no reasonable person could have reached such a finding.
In Niranjan Singh 's case (supra) this Court held that the High Court exceeded its powers in interfering with the findings of the disciplinary authority on the charge that the respondent was instrumental in compelling the shut down of an air compressor at about 8.15 a.m.
On 31 May, 1956.
This Court said that the Enquiry Committee felt that the evidence of two persons that the respondent led a group of strikers and compelled them to close down their compressor could not be accepted at its face value.
The General Manager did not agree with the Enquiry Committee on that point.
The General Manager accepted the evidence.
This Court said that it was open to the General Manager to do so and he was not bound by the conclusion reached by the Committee.
This Court held that the conclusion reached by the disciplinary authority should prevail and the High Court should not have interfered with the conclusion.
The jurisdiction to issue a writ of certiorari under Article 226 is a supervisory jurisdiction.
The Court exercises it not as an Appellate Court.
The findings of fact reached by an inferior court or Tribunal as a result of the.
appreciation of evidence are not reopened or questioned in writ proceedings.
An error of law which is apparent on the face of the record can be corrected by a writ, but not an error of facts however grave it may appear to be.
In regard to a finding of fact recorded by a Tribunal, a writ can be issued if it is shown that in recording the said finding, the Tribunal had erroneously refused to admit admissible and material evidence, or had erroneously admitted inadmissible evidence which has influenced the impugned finding.
Again if a finding of fact is based on no evidence, that would be regarded as an error of law which can be corrected by a writ of certiorary.
A finding of fact recorded by the Tribunal cannot be chal (1) ; 527 lenged on the ground that the relevant and material evidence adduced before the Tribunal is insufficient or inadequate to sustain a finding.
The adequacy or sufficiency of evidence led on a point and the inference of fact to be drawn from the said finding are within the exclusive jurisdiction of the Tribunal.
See Syed Yakoob vs K. section Radhakrishnan & ors(1).
The High Court in the present case assessed the entire evidence and came to its own conclusion.
The High Court was not justified to do so.
Apart from the aspect that the High Court does not correct a finding of fact on the ground that the evidence is not sufficient or adequate, the evidence in the present case which was considered by the Tribunal cannot be scanned by the High Court to justify the conclusion that there is no evidence which would justify the finding of the Tribunal that the respondent did not make the journey.
The Tribunal gave reasons for its conclusions.
It is not possible for the High Court to say that no reasonable person could have arrived at these conclusions.
The High Court reviewed the evidence, re assessed the evidence and then rejected the evidence as no evidence.
That is precisely what the High Court in exercising jurisdiction to issue a writ of certiorari should not do.
The respondent raised another contention that the State did not give the respondent a document described as 'B ' Report and Investigation Report of the Anti Corruption Bureau.
The ground advanced by the respondent in the petition before the High Court was that 'B ' Report and Investigation Report to which the reference is made by the Tribunal in its report and which are relied on to support the charges, were not made available to the respondent.
The High Court did not express any opinion on this question because the High Court set aside the dismissal in the ground that there was no evidence for the Tribunal to come to that conclusion.
The State in the affidavit filed in the High Court in answer to the respondent 's petition said that 'B ' Report and Investigation Report are secret reports which are intended for the reference of the Tribunal of Disciplinary Proceedings and the Government and, therefore, these reports are not supplied, to the officers.
We need not express any opinion on that answer of the State in the affidavit.
The respondent in answer to the affidavit of the State said that the Tribunal used the 'B ' Report and the Investigation Report against the respondent and did not supply copies.
It is because the respondent alleged in the writ petition that the Tribunal relied on 'B ' Report and Investigation Report, we looked into the Inquiry Report of the Tribunal to find out whether that was a correct statement.
We find that there is a reference to 'B ' Report by the Tribunal only because the respondent challenged the genuineness and authenticity of Exhibit P 45.
The respondent 's case was that if he made a statement like Exhibit P 45, the Investigating Officer would have sent it along with his report.
The Inquiry Officer says that the Investigating officer recorded the statement of the respondent.
The Tribunal has not relied on 'B ' Report or Investigation Report.
The (1) ; 528 respondent never demanded 'B ' Report and Investigation Report.
The A respondent was interested before the Tribunal to displace Exhibit P 45 by doubting its genuineness.
The Tribunal found that Exhibit P 45 was genuine and was a statement made and signed by the respondent in the presence of the Investigating Officer.
It does not appear that the Tribunal based its finding only on Exhibit P 45.
For these reasons we are of opinion that the High Court was wrong in setting aside the dismissal order by reviewing and re assessing the evidence.
The appeal is accepted.
The judgment of the High Court is set aside.
Parties will pay and bear their own costs.
V.P.S Appeal allowed.
| IN-Abs | (1) The jurisdiction of the High Court to issue a writ of certiorari under article 226 is a supervisory jurisdiction, and not as an appellate court.
The findings of fact reached by an inferior court or tribunal as result of the appreciation of evidence are not reopened or questioned in these proceedings.
An error of law which is apparent on the face of record can be corrected but not an error of fact, however grave it may be.
In regard to a finding of fact recorded by a tribunal a writ can be issued if it is shown that the tribunal had erroneously refuged to admit admissible and material evidence or had erroneously admitted inadmissible evidence which has influenced the impugned finding.
Again, if a finding of fact is based on the evidence, that would be regarded as an error of law which can be corrected be a writ of ' certiorari, but if there is some evidence which may reasonably support the conclusion, its adequacy or sufficiency and the inference of ' fact drawn, are within the exclusive jurisdiction of the tribunal.
The Court is concerned to determine whether the inquiry is held by an authority competent in that behalf, and according to the procedure prescribed in that behalf, and whether the rules of natural justice are not violated.
Therefore, in departmental enquires relating to the guilt of delinquent officers, the High Court may interfere only where the departmental authorities have held tax proceedings against the delinquent officer in a manner inconsistent with the rules of natural justice or in violation of the statutory rules prescribing the mode of inquiry or where the authorities have disabled themselves from reaching a fair decision by some considerations extraneous to the evidence and the merits of the case, or by allowing themselves to be influenced by irrelevant considerations or where the conclusion, on the very face of it, is so wholly arbitrary and capricious that no reasonable person could ever have arrived at that conclusion.
[525 E 527B] State of Andhra Pradesh vs section Sree Rama Rao ; Railway Board, representing the Union of India New Delhi & Anr.
vs Niranjan Singh ; and Syed Yakoob vs K. section Radhakrishnan & Ors.
[1964] 5 S.C.R. 64, referred to.
(2) There is no warrant for the view that in considering whether a public officer is guilty of misconduct charged against him the rule followed in criminal trials, namely, that an offence is not established unless proved beyond reason able doubt, must be applied.
[525F G] In the present case, charges that the respondent fraudulently claimed travelling allowance were inquired into by the Disciplinary Proceedings Tribunal.
The Tribunal found him guilty and recommended dismissal.
The Government accept ed the recommendation and dismissed the respondent.
In a writ petition challenging the order of dismissal, the High Court equated the charge of mis conduct to a charge under s.5(1)(d) of the Prevention of Corruption Act, 1947 discussed the evidence and findings of the Tribunal on that basis and held that the prosecution did not adduce material and essential evidence namely; the conductor 's chart which would show whether the respondent travelled on a particular day, that a statement made by the respondent during investigation was not admissible in evidence, that it was not safe to rely on it and set aside the order of dismissal.
Allowing the appeal to this Court.
^ HELD .
(a) The High Court was not correct in holding that the domestic inquiry before the Tribunal was the same as prosecution is a criminal case.
[525C D] 3 L925SupCI/75 522 (b) The respondent was given full opportunity to explain the statement A made by him during investigation.
Further, the Tribunal did not base its findings only on that statement.
It had given its reasons for its conclusion and it is not possible for the High Court to say that no reasonable person could have arrived at that conclusion.
The High Court had accepted the explanation that the conductors ' charts were destroyed and therefore could not be Produced.
Moreover, the conductor 's chart would not show the names of the persons paying the money.
The High Court reviewed and re assessed the evidence and then rejected evidence as no evidence, and this is precisely what the High Court, in exercising jurisdiction under Art 226, should not do.
[525SC; 527B D] (c) The respondent 's contention that the Tribunal relied upon certain reports which were not available to the respondent is not correct.
A reference to the inquiry report of the Tribunal shows that the Tribunal had not relied upon those documents for finding the respondent guilty.
[527G 528B]
|
Appeal No. 1527 of 1974.
Appeal by Special Leave from the Judgment & Order dated the 14th December, 1973 of the Delhi High Court in Civil Writ No. 1678 of 1967.
F. section Nariman, Addl.
Gen. of India, D. N. Mukherjee and R. N. Sahthey, for the Appellants.
N. A. Palkhiala, Ravinder Narain, J. B. Dadachanji, O. C. Mathur, K. J. John and K. R. Jhaveri, for the Respondent.
419 The Judgment of the, Court was delivered by Goswami, J.
This appeal is by special leave from the judgment of the Delhi High Court in a writ application there under article, 226 of the Constitution.
The respondent manufactures various other items hot rolled finished steel products in rectangular cross section of thickness varying between 1.7 mm and 6.55 mm and width varying between 16.2 mm and 311.2 mm and rolled in coils which it supplies to the, Indian Tube Company Limited at Jamshedpur for making tubes and also to others.
This article is subjected to Central Excise Duty under the (hereinafter called the Act).
The dispute between the respondent and the appellants is that while the former describes the said manufactured product as strip the appellants classify it as skelp.
This difference in classifying the product differently results in fiscal misfortune to the respondent since skelp is subjected to a higher Central Excise Duty than strip.
It may be stated that during the period from April 24, 1962 to February 28, 1964, the respondent described its product as skelp and it was subjected then to a lower rate of,duty From February 19, 1964, the respondent claimed that the aforesaid product be classified as strip since there.
had been a levy of higher duty for skelp.
The Assistant Collector, Central Excise, Jamshedpur, who is the primary taxing authority, the Collector of Central Excise, Patna, in appeal, and the Central Government in revision rejected the contention of the respondent by successive orders, each authority upon its own test of the definition of the product as skelp.
That led to the successful writ application of the respondent in the High Court resulting in this appeal.
In the forefront of his argument the learned Additional Solicitor General for the appellants relying upon two decisions of this Court, namely, The Collector of Customs, Madras vs K. Ganga Setty(1) and V. V. Iyer of Bombay vs Jasjit Singh, Collector of Customs and Another,(2) submitted that "it is primarily for the taxing authorities to determine the heads or entry under which any particular commodity fell; but that if in doing so, these authorities adopted a construction which no reasonable person could adopt i.e., if the construction was preverse then it was a case in which the Court was competent to interfere.
In other worlds, if there were two constructions which an entry could reasonably bear, and, one of them which was in favour of Revenue was adopted, the Court has no jurisdiction to interfere merely because the other interpretation favourable to the subject appeals to the Court as the better one to adopt '.
On the other hand with equal emphasis Mr. Palkhivala for the respondent submitted that an assessment without the application of an identifiable test is nothing but perverse and arbitrary.
He submits that in the present case there was no identifiable test before the taxing authorities by which the (1) ; (2) 420 product of the, respondent could be held to be skelp and not strip subjecting the respondent to a heavier duty.
According to the learned counsel there is no difference.
between sklep and strip, the two items being interchangeable.
It may be, noted for our purpose that under section 3 of the Act Central excise Duties are leviable on all excisable goods which are produced or manufactured in India at the rates set out in the First Schedule.
Item No. 26AA in that Schedule relates to iron and steel products and mentions in sub item (iii) therein flats, skelp and strips showing the rate of duty in the third column.
Under rule 8 of the Central Excise Rules, 1944, made under section 37 of the Act, the Central Government may from time to time by notification in the official gazette exempt, subject to such conditions as may be specified in the notification, any excisable goods from whole or any part of the duty leviable on such goods.
In exercise of the power under this rule the Central Government has made such exemptions in the rates of duty as have made it higher on skelp than on strip.
Before we proceed further we may notice how the various Excise authorities dealt with the matter at different.stages.
The first order is that of the Assistant Collector of Central Excise, Jamshedpur, which was on June 17, 1964.
According to him "skelp is the name used in reference to a plate of wrought iron or steel used for making pipe or tubing by rolling the skelp into shape and lap welding or brevetting ,edges together and strip is a term used to describe a flat rolled product of smaller cross section than sheet or bar." He accordingly adopted the definition given in Marymen 's Dictionary of Metallurgy.
The order of the Collector of Central Excise in appeal made on October 24/29, 1964, shows that the authority noted the definition of strip as follows : "Hot or cold rolled finished steel product in rectangular cross section of thickness below 5 mm and of width below 800 mm and supplied, in straight length".
This definition is substantially in.
conformity with the one given by the Indian Standards Institution (ISI).
The appellate authority held that "since the products have not satisfied the above specifications, they have been correctly, classified as 'skelp ' by.
the Assistant Collec tor.
Then comes the order in revision of the Central Government of August 18, 1967.
Inter alia it was held that "the product does have bevel edge, .; peculiar to skelp and not found in strips.
Under the circumstances, there is no doubt whatever that the product in question is correctly classified as skelp".
From the above three orders it is clear that the authorities were not at all certain about a uniform definition of 'skelp ' distinguishing it from 'strip.
Extensive arguments were advanced at the bar with regard to the definitions of there two words.
We may, therefore, look 421 at the various definitions to which our attention has been drawn.
Since the appellants largely upon the definitions given by the Indian Standards Institution, "an expert body", we will first note these definitions.
The ISI 's definitions of strip and skelp as given in IS 1956 1962 (amended upto July 1968) are as follows Upto 1965 the ISI gave, no description of strip.
It had defined skelp in 1962 as follows: Skelp.
"Hot rolled narrow strip with rolled (square, slightly round or beveled) edge.
Strip .
A hot or cold rolled flat product, rolled in rectangular cross section of thickness 10 mm and below and supplied with mill, trimmed or sheared edge.
(a) Narrow strip strip (other than hoop) of width below 600 mm and supplied in straight length or in coil form.
(b) Wide Strip Strip of width 600 mm above and supplied in coil form only.
" Upto 1965 the ISI gave no description of strip.
It had defined skelp in 1962 as follows "Hot rolled.
strip with square or slightly beveled edges, used for making welded tubes".
In 1968 the ISI 's definition of skelp stands as follows "Hot rolled narrow strip with rolled (square, slightly round or beveled edge.
,, Strip was defined by the ISI for the first time in 1965 as follows: "Coiled Strip A hot or cold rolled flat product, rolled in rectangular cross section and supplied in coil form.
Strip A hot or cold rolled flat product, rolled in rectangular cross section thickness below 5 mm and of width below 600mm and supplied in straight lengths".
The ISI 's definition of strip given in 1968 is as follows "A hot or cold rolled flat product, rolled in rectangular cross section of thickness 10 mm and below and supplied with mill, trimmed or sheared edges.
(a) Narrow strip Strip (other than hoop) of width below 600 mm and supplied in straight length or in coil form.
(b) Wide strip Strip of width 600 mm and above and supplied in coil form only".
Annexure 'J ' submitted by the respondent along 'with its rejoinder affidavit in the High Court at page 101 of the record, gives various 422 definitions of skelp taken.
from various dictionaries and treatises such as Hornor J. G. Dictionary of Terms, page 323, year 1952; Brandt D.J.C. Manufacture of Iron & Steel, pages 318 and 319, year 1953; Henderson J.C. Metallurgical Dictionary, page 192, year 1953; Backert A.O.L. A.B.C. of Iron & Steel, page 1912, year 1925 5th edition; Chamber 's Technical Dictionary, year 1967.
Similarly definition of strip is also given from these Dictionaries and books.
It is also pointed out that there is no category of skelp mentioned in Brussels Nomenclature.
British Standards 2094, Part 4; 1954, defines skelp as follows : "Hot rolled strip with square or slightly bevelled edges used for making welded tubes".
Chamber 's Technical Dictionary Revised Edition (Reprinted 1954) defines skelp as follows "Skelp (P. 775) Mild steel strip from which tubes are made by drawing through a bell at welding temperature, to produce lap welded or butt welded tubes".
We may not add to the list but are satisfied that there are a large number of definitions out of which one can be picked up to satisfy the definition of skelp according to some authority and another definition to fit in with the concept of strip according to another authority Since the duties on strip and skelp are not the same, it is absolutely necessary to define the word skelp so that there can be no doubt or confusion in the mind of either of the taxing authority or of the tax payer with regard to the tax liability qua skelp as opposed to strip.
Since, however.
there is no statutory definition of this controversial item different tests have naturally been resorted to by the different authorities and the same variation is discernible even in the affidavits of the appellants submitted before the High Court.
The short question, therefore, that arises for consideration is whether in the above background the High Court was right in interfering with the orders under article 226 of the Constitution.
It is not for the High Court nor for this Court to come to a conclusion on facts as to whether the product can truly come under the description of skelp.
That undoubtedly would require some evidence be taken at the level of the taxing authority provided, however, there is an identifiable, uniform and determinate test by which skelp can be properly distinguished from strip.
In the mass of documents filed before us and the extensive arguments addressed at the bar with regard to the definitions 'culled from various dictionaries, handbooks and authorities, we are not at all surprised that the three authorities came to the same conclusion by depending upon their own chosen tests.
A particular type, of strip may according to certain definitions.
be skelp and according to others not Skelp.
however, cannot be permitted in a fiscal legislation which by all standards should adopt a clear definition of an excisable item which is incapable of giving rise to a confounding contro 423 versy as in this case unless the, matter is beyond doubt in view of the popular meaning, or meaning ascribed to the term in commercial parlance.
In absence of any clear criterion to determine what is skelp.
and not strip, no useful purpose would be served by even remanding, the matter to the Excise authorities for a decision after taking necessary evidence.
It is only when a taxing law provides for a clear and unequivocal test for determination as to whether a particular product would fall under strip of skelp it may be possible for the authorities.
to address itself to the evidence submitted by the parties in order to come to a decision on the basis of the test.
This is, however, not possible in this ' case in view of the fact that there is no identifiable standard.
The best way is to define the product for the purpose of excise duty in approximate terms demarcating clearly the distinction between.
the two terms.
The absence of any identifiable standard would, therefore, naturally give rise, to the scope for arbitrary assessment at the hands of different authorities.
Whether this has happened in this case, as. ' complained by the respondent citing the instance of the Hindustan Steel Company, Rourkela, it is not necessary for us to pursue in this,, appeal.
We are, therefore, unable to hold that the High Court has.
gone wrong in granting the reliefs prayed for.
The appellants strenuously emphasized upon the test relied upon in the Revisional order as to skelp having bevelled edges which, according to them, is peculiar to skelp and not to strip.
But this does not bear scrutiny as on the counter affidavit of the Union of India in the High Court at page 57 of this record it shows that "as regards tested Hot rolled Strips the edges are never looked into, they can be bevelled, square or have Mill edge" (emphasis added).
This is an admission of the appellants that strips may also have bevelled edges.
The two decisions relied upon by the appellants do not come to their aid in this case since there is no identifiable standard or test to determine clearly which product can be skelp and not strip.
In Ganga Setty 's case (supra) the controversy arose with regard to whether "feed oats" fell within item 42 (fodder) or within item 32 (grain) of parti cular circular.
Dealing with the matter this Court observed as follows: ". any particular species of grain cannot be excluded merely because it is capable of being used as cattle or horse feeds.
The decision of the Customs authorities, therefore, this Court held could not be characterized as Perverse or mala fide calling for interference.
Similarly following Ganga Setty 's case (supra) in Jasjit Singh 's case (supra) the conclusion and findings of the Customs authorities were accepted a reasonable.
In both the above cases there were definite tests by which the particular article could be held to fall under one item and not under the other and the construction of the authorities 424 with regard to the scope of the particular entries was, therefore, held to be reasonable and not calling for interference by the court.
The ,question that arises in the instant case is of a completely different nature as pointed out above there being no identifiable test reasonably capable ,of distinguishing skelp from strip.
In the result the appeal fails and is dismissed with costs.
P.H.P. Appeal dismissed.
| IN-Abs | The respondent manufactures hot rolled finished steel products in rectangular cross section, of thickness varying between 16.2 mm and 311.2 mm in coils (hereinafter a referred to as the Product) product as Strip whereas the appellant classifies it as a skelp.
to higher excise duty than Strip.
The Assistant Collector the product as Skelp.
On appeal to the Collector of and rolled The respondent describes the Sklip is subject Central Excise treated Central Excise, he confirmed it and in revision the Central Government also approved.
The respondent filed a Writ Petition in the High Court.
The High Court accepted the contention of the respondent.
On appeal by Special Leave the appellant contended before this Court : (i) That it is primarily for the Taxing Authorities to determine the head or nature under which any particular commodity fell.
(ii) The Court can interfere with the decision only if it is perverse.
if there were two constructions possible and if the Taxing Authority accepts one of them the Court cannot interfere.
The respondent submitted '.
(i) Assessment without application of an identifiable test is perverse and arbitrary.
(ii) In the present case.
there was no iden tifiable test before the Taxing Authorities.
There is no difference between Skelp and Strip.
Dismissing the appeal, Held : There are large number of definitions out of which one can be picked up to satisfy the definition of Skelp according to some.
authority and another definition to fit in with the concept of strip according to another authority.
Since there is no statutory definition for Skelp and Strip, different tests have been resorted to by the different authorities.
The question arises whether the High Court was right in interfering with the orders under article 226 of the: Constitution.
It is not for this Court to come to the conclusion on facts.
The absence of any identifiable standard naturally gives rise to the scope for arbitrary assessment at the hands of different authorities.
It is not possible to hold that: the High Court has gone wrong in granting the reliefs prayed for.
[422D F; 423C]
|
Civil Appeal No. 1109 of 1973.
Appeal by Special Leave from the Judgment and order dated the 10th March., 197 ' ' of the Punjab and Haryana High Court in L.P.A. No. 714 of 1970 and Civil Appeals Nos.
1411 1314, 872, 873, 1369 and 1582 of 1974.
F. section Nariman (In C.As.
1109 and 1582), Harbans Singh (in C.A. No. 1109/73) and O. P. Sharma, (In all the appeals), for the appellants.
Hardyal Hardy, section K. Mehta and M. Qamarrudin, for respondents No. 1 & 8.
V. C. Mahajan, Urmila Sirur, section C. Agarwala and V. J. Francis, for respondents Nos.
2 5, 9 12 and 15 21 (in C.A. No. 1109/73).
Urmila Sirur, for respondents 2 7, 12, 13, 15 18, 20 22 26, 27 30, 32 36, 38, 41, 44 46, 50 57 & 59 62 (In C.A. Nos. 1411 1412/ 74) and for all the respondents in (In C.A. No. 1414/74) Except Respondent No. 113 and respondents Nos.
1. 3 16 and 18 23 (In C.A. No. 1369/74).
F. V. C. Mahajan and Urmila Sirur, for respondents Nos.
(All respondents in C.A. No. 872/74), and respondents Nos. 1, 2, 4 54, 5681, 83 and 85, (In C.A. No. 873/74) and respondents Nos. 1 214 (In C.A. No. 1582/74).
Balak Ram, for respondent No. 245 (In C.A. No. 1582/74).
G The Judgment of the Court was delivered by RAY, C.J.
These appeals are by special leave from the judgment dated 10 March, 1972 of the Punjab and Haryana High Court.
The respondents were teachers in the former State of Pepsu.
On 1 November, 1956 the former State of Pepsu merged in the State of Punjab.
These teachers claim the revised scale of pay as well as the posts of Masters.
Their claims are based on these grounds.
First they have taken the Degrees in Bachelor of Teaching or its equivalent.
Second, the letter dated 23 July, 1957 which became effective from 531 1 May, 1957 entitles them to the revised grade if they took the Degrees in Bachelor of Teaching or its equivalent.
Third, the letter dated 7 November, 1958 entitles the respondents to the posts of Masters to the extent of 25 per cent of the vacancies.
The letter dated 23 July, 1957 is addressed by the Secretary to the Punjab Government.
The letter is on the subject: "Revision of Scales of pay of low paid Government servants".
The letter states that after carefully considering the recommendations made by Pay Revision Committee it has been decided that the existing scales of pay of certain categories of posts should, with effect from 1 May, 1957, be revised as shown therein.
It is, thereafter stated that it has been decided that all teachers according to their qualifications should placed in the following two broad categories: Category 'A ' B.A./B.Sc./B.Com./B.Sc.
(Agriculture) and B.T./ Diploma in Physical Education/Diploma in Senior Basic Training.
Category 'B ' consists of four groups.
The first group consists of Matriculates with Basic Training (including Junior Teachers).
The second group consists of Junior School Teachers (including Assistant Mistresses with B.A./Inter Matric Plus J.A.V. Training).
Groups III and IV are also mentioned which are not relevant for the purposes of these appeals.
Thereafter the crucial portions in the letter are these.
For category 'A ' the scale of pay is Rs. 110 8 19/10 250 with a higher start for M.A. Or M.Sc.
as at present.
The existing per centage of posts fixed by Government for the scales of Rs. 110 8 190/ 10 250 and Rs. 250 10 300 should remain unchanged at 85 per cent and 15 per cent respectively.
It may be stated here that the scale of pay of Head Masters being item (1) in Appendix is Rs. 250 10 350.
The scale of pay of Masters, Science Masters, Agriculture Masters, Clerical and (Commercial Master and Assistant District Inspector of Schools is Rs. 250 10 300.
The scale of pay of Second Master, Masters, Physical Training Masters Assistant District Inspector of Schools.
Agriculture Masters, Clerical and Commercial Masters and Science Masters being item (2) is Rs. 110 8 190 10 250 with a start of Rs. 126/ to M.A./M.Sc./M.III/B T. and Rs. 150/ to M.A./ M.Sc./M.Ed.(11)/B.T. and Rs. 150/ to M.A./M.Sc./M.Ed.
(11)/B.T '.
The second letter on which the respondents relied is.
dated 7 November 1958.
This letter is from the Deputy Director (Schools) to the Inspector of Schools.
The subject is: Promotion of the so called unadjusted B.A. B.T./B.Ed., teachers to the posts of Master on Rs. 110/250 grade It is stated there that it has been decided that 25 Per cent posts of B.T./B.Ed.
Masters in Rs. 110 250 grade should be filled by promotion from amongst the teachers working in the lower grade who have passed the B.A. B.T./B.Ed.
Examinations.
The selection is to be made on the basis of seniority cum merit.
532 Two of the relevant rules in Punjab Educational Service Class III A school Cadre Rules, 1955 which were in force with effect from 23 May, 1957 are numbered 7 and 10.
Rule 7 speaks of the method of recruitment.
The methods of recruitment are: (a) by direct appointment, or (b) by transfer of an official from other Services or posts of Government in the Education Department of any Government in India, or (c) by promotion from lower grades in the service.
The manner of appointment shall be strictly by selection etcetera as mentioned there.
Rule 10 states that "members of the service will be entitled to such scales of pay as may be authorised by the Government from time to time.
The scales of pay in force are specified in Appendix 'A ' against each post".
Appendix 'A ' is an appendix to the Rules.
This Appendix mentions Masters as item No. 2.
The scale of pay given in item No. 2 for the posts of Masters, who are ordinary graduates with 'degree of Bachelor of Teaching or equivalent thereof is Rs. 110 8 190/10 250 whereas for M.As.
and M.Scs.
with the degree of Bachelor of Teaching or Masters of Teaching or their equivalent, the start of the grade is higher as already mentioned.
The letter dated 23 July, 1957 revised the scales of pay with effect from 1 May, 1957.
These appeals concern teachers who are in category 'A '.
The revised scale given to teachers in category 'A ' is Rs. 110 8 190/10 250.
Any teacher who would satisfy the test mentioned in category 'A ' would be entitled to the scale of pay.
Counsel on behalf of the State contended that there was not to be a mass increase of all teachers to that grade of pay but the letter dated 23 July, 1957 meant that a teacher who passed Bachelor of Teaching examination would be entitled to be appointed a Master and on being so appointed would be entitled to the scale of pay.
With regard to the letter dated 7 November 1958 which stated that 25 per cent posts of B.T./B.Ed.
Masters in Rs. 110 250 grade should be filled by promotion from amongst the teachers who were in lower grade, counsel for the State contended that teachers who were qualified by possessing B.T. B.Ed.
degrees would be entitled to get 25 per cent of the posts provided the respective posts according to their subject combination were vacant.
Rule 10 entitles the teachers to such scales of pay as may be authorised by the Government from time to time.
The letter dated 23 July, 1957 shows that teachers who possess the degree of Bachelor of Teaching or its equivalent on 1 May 1957 will be entitled to scales of pay mentioned therein.
Those who will pass the examination of Bachelor of Teaching thereafter will be entitled to their revised scale of pay with effect from the date they pass the examination.
The contention of the State that there was not to be a mass increase of scale of pay is unsound.
Teachers who possessed degrees became entitled to scales of pay according to category 'A '.
The High Court rightly referred to the letter of the Secretary of the Department dated 24 September, 1957 that teachers holding B.A., 533 B.T./B.A., B.Ed.
qualifications would hence forth be placed in category 'A '.
The High Court rightly came to the conclusion that the scale of pay of Rs. 110 250 would be effective either from the date when the teachers would pass the examination of Bachelor of Teaching or its equivalent or 1 May, 1957, whichever is later.
The High Court, however, gave the teachers the scales of salary confined to a period of 3 years and 2 months counting back from the date of the presentation of the writ petition.
In other words, the High Court did not allow the teachers any claim prior to 1967.
The letter dated 7 November, 1958 was necessary because in spite of the revised grade of Rs. 110 250 having been granted to Bachelor in Teaching or equivalent thereof, they were not being appointed by process of promotion to the posts of Masters.
The letter stated that "selection is to be made on the basis of seniority cum merit, due regard being paid to good reputation regarding character, popularity among students and parents and capacity to maintain discipline".
The respondents claimed that according to the letter those of them who were Bachelor in Teaching or Bachelor in Education were entitled to be appointed to the posts of Masters.
The teachers could not claim vacancies by promotion exceeding 25 per cent.
Their claim for appointment by promotion had to take into consideration not merely their seniority but also their merit.
This percentage of 25 as fixed by the letter is covered by Rule 7(ii) and the principle of selection for appointment is covered by Rule 7 clause (iii).
Therefore, the earlier letter dated July 23, 1957 fixed the scale of pay on the basis of academic qualifications.
The subsequent letter dated 7 November, 1958 recognised the right of promotion to the posts of Masters to the extent of 25 per cent.
The High Court said that the contention of the State that the teachers could not be considered for promotion unless they satisfied the condition of subject combination namely, that if they were ordinary graduates with training qualifications, they must have studied two out of the four subjects, namely, History Geography, Economics and political Science is not supported by the letter dated 7 November, 1958.
The High Court rightly said that the letter does not speak of any limitation of subject combination for promotion.
Some of the teachers were from time to time promoted to the posts of Masters but never continuously beyond a period of six: months.
After completion of six months, there was a break to avoid continuity in service for the posts of Masters beyond six months.
The State contended that the teachers could not be considered for promotion unless the Board were satisfied that the teachers if ordinary graduate with training qualifications`must have also studied two out of four subjects of History, Geography, Economics and Political Science.
The teachers on the other hand contended that once the State Government had taken a decision as embodied in the letter dated 7 November, 1958 the policy of not allowing the teachers to continue beyond six months on 534 temporary basis was nullifying the letter and spirit of the decision of the letter dated 7 November, 1958.
The teachers also contended that the promotion of teachers to Masters is completely independent of any consideration like the combination of subjects.
The High Court rightly held that letter dated 7 November, 1958 was subject only to two limitations.
One was that teachers could not claim more than one fourth of the vacancies of the posts of Masters and the other was that the claim by way of promotion would be considered by the appointing authority on the basis of seniority cum merit.
The High Court rightly held that the letter dated 7 November, 1958 was not subject to the condition of subjects combination being fulfilled.
There are three categories of teachers Science Masters, Mathematics Masters and Social Studies Masters.
No condition of combination of subjects can be read into the letter of 7 November, 1958.
The second conclusion of the High Court is correct that the teachers were to be treated as serving in that scale of pay continuously and not on six months basis.
The third conclusion which the High Court arrived is correct that the teachers were to be considered for appointment to the posts of Masters to the extent of 25 per cent quota as recognised for their category of teachers on the basis of seniority cum merit without being subjected to the condition of subject combination.
The judgment of the High Court is affirmed.
The appeals are dismissed.
The respondents will be entitled to one set of costs.
P.B.R. Appeals dismissed .
| IN-Abs | Promotion from lower grades in the service to a higher grade is one on the methods of recruitment under r. 7 of the Punjab Educational Service Class III School Cadre Rules, 1955 Rule 10 of the rules states that members of the service would be entitled to such scales as may be authorised by the government from time to time.
The State Government issued letter dated 23rd July, 1957 on the subject of revision of scales of low paid government servants in which it was stated that the then existing scales of pay of certain categories of posts should, with effect from 1 May, 1957, be revised as shown therein.
In that letter teachers according to their qualifications were placed in categories A and B, and the respective scales o pay to which they were entitled were mentioned.
The letter dated 7 November, 1958 issued by the Deputy Director (Schools) to the Inspector of Schools stated that 25% of the posts of B.T./B.Ed.
masters should be filled by promotion from amongst teachers working in the lower grade who have passed the above examinations and that the selection was to be made on the basis of seniority cum merit.
The respondents who were teachers were promoted from time to time as masters but were never allowed continuously beyond six months to avoid continuity in service and were not given the revised scales.
They claimed the revised scales of pay as well as the posts of masters on the ground that they had taken the degrees in Bachelor of Teaching or its equivalent, that the letter dated 23 July, 1957 which became effective from 1 May, 1957 entitled them to the revised grade if they took the degree of Bachelor of Teaching or its equivalent and that the letter of 7 November 1958 entitled them to the posts of masters to the extent of 25% on the vacancies.
The High Court allowed their prayers.
In appeal to this Court it was con tended by the State that (1) there was not to be a mass increase of pay of all teachers to that grade of pay but what the letter dated 23 July, 1957 meant was that a teacher who passed B.T. examination would be entitled to be appointed a master and on being so appointed would be entitled to the scale of pay.
and (ii) that according to the letter of 7 November 1958 teachers who were qualified by possessing B.T./B.Ed.
degrees would be entitled to get 25% of the posts provided the respective posts, according to their subject combination, were vacant.
Dismissing the appeals, ^ HELD: The letter dated 23 July, 1957 fixed the scale of pay on the basis of academic qualifications while the letter dated 7 November 1958 recognised the right of promotion to the posts of masters to the extent of 25%.
[533E] 1.(a) Rule 10 entitles the teachers to such scales of pay as may be authorised by the Government from time to time.
Letter dated 23 July,.
1957 showed that teachers who possessed the degree of B.T. Or its equivalent on 1 May, 1957 would be entitled to scales of pay mentioned therein.
Those who will pass the examination of ' B.T. thereafter would be entitled to their revised scale of pay with effect from the date they passed the examination.
[532G] (b) The contention of the State that there was not to be a mass increase of scales of pay is unsound.
Teachers who possessed degrees became entitled to the scales of pay according to category A. [532H] 530 (c) The High Court rightly came to the conclusion that the scale of pay would be effective either from the date when the teachers would pass the examination of B.T. Or its equivalent or I May, 1957, whichever is later.
[533B] (2) The High Court rightly held that the letter dated 7 November, 1958 was subject only to two limitations namely (1) that teachers could not claim more than one fourth of the vacancies of posts of masters, and (ii) the claim by way of promotion would be considered by the appointing authority on the basis of seniority cum merit.
No condition of combination of subjects could be read into the letter of 7 November 1958.
The High Court was also correct in holding that the teachers were to be treated as serving in that scale of pay continuously and not on six months basis, and that the teachers were to be considered for appointment to the posts of masters to the extent of 25% quota as recognised for their category of teachers on the basis of seniority cum merit without being subjected to the condition of subject combination.
[534A D]
|
: Criminal Appeal No. 74 of 1971.
Appeal by Special Leave from the Judgment and order dated the 25th January 1972 of the Bombay High Court in Criminal Appeal 1025 of 1959.
N. H. Hingoorani and Mrs. K. Hingoorani for the Appellant.
section B. Wad and Al.
N. Shroff for the Respondent.
The Judgment of the Court was delivered by V BEG, J.
The appellant before us by special leave to appeal was convicted under Section 135(b) (ii) of the (hereinafter referred to as 'the Act '), and sentenced to six months rigorous imprisonment and a fine of Rs. 2,000/ , and, in default, to three months further rigorous imprisonment.
Goods in respect of which this offence was found to have been committed were also confiscated.
On 21 4 1967, Police Officers of the Anti Corruption and Prohibition Bureau, Greater Bombay, acting on information received, had searched room No. 10 at 56, Sheriff Deoji Street, Bombay.
This room was divided by partitions into three parts.
In the central portion the police found the appellant and three other persons.
This portion was again sub divided with a locked connecting door fixed in the passage to the sub divided part.
This was opened by one of the two Godrej lock keys produced by the appellant from a side pocket of his trousers.
Eleven wooden boxes covered with jute cloth and secured by iron strips were found there.
On opening them, six of them were found to contain cigarette lighters of "Imco Triplex Junior '? brand "Made in Austria".
Each of the six boxes were tightly packed with 1200 lighters.
The remaining five boxes contained fifty sealed tins of flints for cigarette lighters which bore the following writing: "Tego Lighter Flints of Superior Quality Made in Germany".
On the wooden boxes containing the lighters were found written "Dubai" and "Made in Austria".
The five boxes containing flints had the words "Dubai" and "Made in West Germany" inscribed on them.
A panchnama was prepared before Panchas.
A rent receipt in the name of the appellant in respect of room No. 10, in this house, of which a portion was occupied by the appellant, and a bill for the consumption of electricity were also seized from the custody of the appellant together 541 with the Godrej lock and the keys produced by the appellant.
Subsequently, the seized articles were made over to the inspector of Central Excise and Customs, Marine and Prevention Division, Bombay, on 24 4 1967, under Section 110 of the .
The value of 7200 cigarette lighters was stated as Rs. 14,400/ and of 250 tins of flints as Rs. 15,000/ on which Customs duty of Rs. 15,840/ and Rs. 10,500/ respectively was alleged to be payable.
In the complaint filed on 30th October, 1968, by the Assistant Collector of Central Excise, Marine and Prevention Division, Bombay, it is alleged that the cigarette lighters and flints were imported into India without an import licence and in contravention of provisions of Government of India, Ministry of Commerce & Industry, Import Control order No.17/55 dated 7 12 1955 (as amended) issued under Section 3(2) of the Import & Export (Control) Act, 1947, which was to be deemed to be an order passed under Section 11 of the Act.
It was submitted that the accused, having been concerned in a fraudulent evasion of payment of Rs. 26,340/ as customs duty to the Government, had committed offences punishable under Section 135(a) and (b) of the Act.
The goods were also as a necessary consequence, said to be liable to confiscation under Section 111 (d) of the Act.
The appellant had denied being in possession of the offending goods although he had admitted the production of keys from his possession He alleged that the portion of the room from which the goods were recovered was sublet to Dwarumal and Kishen who had kept the goods there.
The appellant 's explanation had been disbelieved by the trying Magistrate as well as by the High Court.
The production of the key which, according to the prosecution evidence, the appellant had at first refused to produce, proved that the portion in which the boxes were kept was in appellant 's exclusive possession with all that was contained in it.
It is possible that he may have sub let other portions of the partitioned room to other persons, but there is no reason to doubt that the appellant was not only in possession of the bodies but knew something about the incriminating nature of their contents.
Otherwise, why should he, at first, have refused to produce the key he had ? Furthermore, the appellant had not given any evidence to show that his sub tenants had placed the boxes there, or that there was any reason why he should allow them to use the portion reserved by him for himself.
His case rested on his bare assertions in a written statement.
Of course, no one had come forward to state or allege that the goods found, in the circumstances stated above? had been imported without payment of duty.
The only question raised before us was whether the presumption contained in Section 123 of the Act, corresponding to Section 128(A) of the .
Or any other provision of law would place the onus of proving innocent possession of these goods upon the appellant.
Section 123 of the Art reads as follows: "123.
Burden of proof in certain cases.
(1) Where any goods to which this section applies are seized under this Act in the reasonable belief that 542 they are smuggled goods, the burden of proving that they are not smuggled goods shall be on the person from whose possession the goods were seized.
(2) This section shall apply to gold, diamonds, manufacturers of gold or diamonds, watches, and any other class of goods which the Central Government may by notification in the official Gazette specify".
lt is true that lighters and flints were notified as provided in Section 123(2) in the official Gazette of 26 8 1967.
Nevertheless, as the provisions of Section 123(1) of the Act only lay down a procedural rule, they could be applied when the case came up for trial before the Presidency Magistrate who actually decided it on 15 7 1969.
Indeed, the complaint itself was filed on 30 10 1968.
It is immaterial that the appellant was found in possession of the goods on 21 4 1967 There is, however, another objection to the applicability of Section 123(1) of the Act.
It is that it would apply only to goods seized under the Act.
lt is contended that the goods in respect of which the appellant was prosecuted were not seized under the Act.
Reliance was placed for this contention upon Gian Chand & ors.
vs the State of Punjab (1) Even if the goods with which we are concerned here were not seized under the Act, as provided by Section 111 of the Act, it is contended on behalf of the State that Section 106, read with Section 114 of the Evidence Act, was sufficient to enable the prosecution to ask the Court to presume that the appellant knew that the goods must have been smuggled or imported in contravention of the law.
The appellant had not produced evidence to show that the goods were legally brought into India.
Reliance was placed on behalf of the prosecution on: Collector of Customs, Madras & ors.
vs D. Bhoormal (2); M/s. Kanungo & Co. vs The Collector of Customs, Calcutta & Ors(3), Issardas Daulat Ram & ors.
vs the Union of India & Ors.(4), Anant Gopal Sheorey vs The State of Bombay(5).
Learned Counsel for the appellant had in his turn, relied upon The State of Punjab vs Gian Chand & ors.(6).
He contended that it was necessary for the prosecution to prove: (1) that, the goods in question were actually smuggled or brought into the country without payment of customs duty at a time when payment of such duty had become obligatory; and, (2) that, the appellant was dealing with them knowing them to be smuggled goods.
It was contended that mere possession by the accused of such goods could not enable the prosecution to apply Section 106 of the Evidence Act when the appellant could not know where the goods came from.
It was urged that there was no evidence which could enable the appellant to know where the goods came from or when the goods were imported or that duty, if leviable was not P d on them.
The admissibility and sufficiency of (1) [1962] (Suppl.) 1 S.C.R. 364.
(2) ; (3) A.I.R. (4) [1962] Suppl.
(1) S.C.R. 358.
(5) ; (6) Criminal Appeal No. 195 of 1962 decided by this Court on 2 4 1968.
543 the inscriptions on the goods and the writing on boxes in which they were found, for proving the place from where they came, or when they were imported, were questioned.
The contention was, that even if the appellant is deemed to be in possession with full knowledge of what the goods actually were, the Court could not go further and assume them to be smuggled or imported into the country from another country of their assumed origin after a time when the restrictions on their import had been imposed.
Unfortunately, the appellant did not admit the possession of the goods at all.
If he could have succeeded in explaining satisfactorily how he was an innocent receiver of such goods without knowing that they were illegally imported or smuggled he may have had a chance of getting the benefit of doubt The very appearance of the goods and the manner in which they were packed indicated that they were newly manufactured and brought into this country very recently from another country.
The inscriptions or them and writing on the boxes were parts of the state in which the goods in unopened boxes were found from which inferences about their origin and recent import could arise.
The appellant 's conduct, including his untruthful denial of their possession, indicated consciousness of their smuggled character or means rea.
In any case, there was some evidence to enable the Courts to come to the conclusion that the goods must have been known to the appellant to be smuggled even if he was not a party to a fraudulent evasion of duty.
Consequently, the appellant had been convicted only under Section 135(1)(ii) of the Act.
We do not find sufficient reasons to interfere with this finding of fact or the sentence imposed.
It would also follow that the goods were rightly confiscated.
Accordingly, this appeal is dismissed.
V.M.K. Appeal dismissed.
| IN-Abs | Section 123(1) of the , provided that, where any goods to which this section applies are seized under this Act in the reasonable relief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be on the person from whose possession the goods were seized.
On 21 4 1967 Police officers of the Anti Corruption and Prohibition Bureau.
Greater Bombay, acting on information received, had searched room No. 10 at 56, Sheriff Deoji Street Bombay.
This room was divided by petitions into three parts.
In the central portion the police found the appellant and three other persons.
This portion was again sub divided with a locked connecting door fixed in the passage to the sub divided part.
This was opened by one of the two Godrej lock keys produced by the appellant from a side pocket of his trousers.
Eleven wooden boxes covered with jute cloth and secured by iron strips were found there.
On opening them.
six of them were found to contain cigarette lighters of "Imco Triplex Junior" brand "Made in Austria.".
Each of the six boxes were tightly packed with 1 200 lighters.
The remaining five boxes contained fifty sealed tins of flints for cigarette lighters which bore the Following writing: "Tego Lighter Flints of Superior Quality Made in Germany" inscribed on them.
A panchnama was prepared before Panchas.
A rent receipt in the name of the appellant in respect of room No. 10, in this house, of which a portion was occupied by the appellant, and a bill for the consumption of electricity were also seized from the custody of the appellant together with the Godrej locks and the keys produced by the appellant.
On 30th October.
1968 the Assistant Collector of ' Central Excise, Marine and Prevention Division.
Bombay, filed a complaint alleging that the appellant had committed offences punishable under Section 135(a) and (b) of the .
The appellant had denied being in possession of the offending goods although he had admitted the production of keys from his possession.
The trying Presidency Magistrate convicted him under section 135(b)(ii) of the and sentenced him to six months rigorous imprisonment and a fine of Rs. 2,000/ , and in default, to three months further rigorous imprisonment.
The High Court dismissed his appeal.
This appeal has been preferred on the basis of the special leave granted by this Court.
It was contended for the appellant that: (1) the presumption contained in s.123(1) of the Act would not place the onus of proving innocent possession of the goods in question upon the appellant; and, (ii) the goods in respect of which the appellant was prosecuted were not seized under the Act.
Rejecting the contentions and dismissing the appeal.
the court ^ HELD: (1) Though lighters and flints were notified provided in Section 123(2), in the official Gazette of 26 8 1967 the provisions of Section 123(1) which only lay down a procedural rule, could be applied when the case came up for.
trial before the Presidency Magistrate.
He divided it on 15 7 1969.
The complaint itself ' was filed on 30 10 1968.
It is immaterial that the appellant was round in possession of the goods on 21 4 1967.
[542 B C] (ii) The very appearance of the goods and the manner in which they were packed indicated that they were newly manufactured and brought into this country very recently from another country.
The inscriptions on them and writing on the boxes were Parts of the state in which the goods in unopened boxes were found from which inferences about their origin and recent import 540 could arise.
The appellant 's conduct, including his untruthful denial of their h possession, indicated consciousness of their smuggled character or means rea.
There was some evidence to enable the courts to come to the conclusion that the goods must have been known to the appellant to be smuggled even if he was not party to a fraudulent evasion of duty.
[543 B D] Gian Chand & ors.
vs The State of Punjab, [1962] Suppl.
l S.C.R. 364 Collector of Customs, Madras & ors.
vs D. Bhoormull ; M/s, Kanungo & Co. vs The Collector of Customs, Calcutta & ORS.
A.I. R. 1972 S.C. 2136, Issaradas Daulat Ram & ors vs The Union of India & ors [1962] Suppl.
1 S.C.R. 358, Gopal Sheorey vs The State of Bombay ; and The State of Punjab vs Gian Chand & ors.
Criminal Appeal No. 195 of 1962 decided by this court on 2 4 1968, referred to.
|
Appeal from a judgment and decree of the High Court of Judicature at Patna dated 14th February, 1946, in Appeal from Original Decree No. 117 of 1942 arising out of Title Suit No. 9 of 1939: Civil Appeal No. 40 of 1950.
S.C. Misra for the appellant.
N.C. Chatterjee (P. B. Gangoli, with him) for the re spondent.
154 1951.
February 5.
The judgment of the Court was deliv ered by MAHAJAN J.
This appeal arises out of Suit No. 9 of 1939 instituted in the Court of the Subordinate Judge of Palamau by the appellants against the respondents for a number of declarations in respect to the title to certain lands and for an injunction restraining the respondents from proceed ing with a rent suit.
The suit was decreed by the Subordi nate Judge but on appeal this decision was reversed by the High Court of Judicature at Patna and the appellants ' suit was dismissed.
The salient facts of the case are as follows: Village Darha belonged to a family of Pathaks as their ancestral lakhraj.
Over a hundred years ago the Pathaks granted the entire village in mokarrari to the ancestors of the family of Singhas (defendants ' first and second parties) at an annual jams of Rs. 24.
The mokarrari interest eventually devolved on three branches of the Singha family, each branch getting in the following proportions: Parameshwar Dayal and others, defendants ' first party, to the extent of six annas; Bisheswar Dayal Singh, defendants ' second party, to the extent of eight annas; and Madho Saran Singh, to the extent of two annas.
Subsequently, the two anna share of Madho Saran Singh was purchased by Hiranand Jha, father of the plaintiffs, jointly with.
Durganand Jha and Dharam Dayal.
Dharam Dayal was a mere benamidar for Hiranand Jha.
On the 5th June, 1916, Bisheshwar Dayal Singh purchased six anna share in the lakhraj interest from Deolal Pathak and others and on the 9th February, 1917, he purchased another two anna share from Mandil Pathak.
By virtue of these purchases he came to own the lakhraj interest to the extent of eight anna share.
He already held the mokarrari interest to the same extent which had devolved on him by inheritance.
Some time in the year 1917 or 1918 Hiranand Jha and Durganand Jha, who had acquired by purchase two anna mokar rari interest of Madho Saran Singh, 155 purchased in execution of a rent decree the raiyati interest in the whole village and came into possession of it.
They thus became mokarraridars of two anna share and raiyats of sixteen annas of the village lands.
In the year 1918, Title Suit No. 59 of 1918 was insti tuted in the court of the Subordinate Judge of Palamau for partition of the lands situate in several villages and belonging to the family of the defendants ' first and second parties.
The Jhas were impleaded as defendants in ' the suit, being co sharers in part of the property in suit.
This suit was decreed in the year 1921, and in the final partition an allotment of two annas share in Darha village was made in their favour.
The remaining fourteen anna share excluding khatian 1, 3 and 6 was allotted to the defendants ' first party.
These three khatians were allotted to Bisheshwar Dayal Singh and in exchange for the remaining portions of his interest in that village he was given some property in village Holeya.
The result of the partition proceedings was that the defendants ' first party came to hold fourteen anna mokarrari interest in village 'Darha, Bisheshwar Dayal Singh 's interest was limited to three khatians only, and the Jhas got a separate allotment for their two anna share in the mokarrari.
It appears that some time about the year 1926 the lakhraj interest holders, i.e., the Pathaks and Bisheshwar Dayal Singh, were in default in the payment of the cess due to Government.
On the 17th August, 1926, pro ceedings were taken against them for recovery of the cess and their interest was sold in execution of a certificate on the 18th October, 1927, to one Bijainandan Sahay.
The sale obviously was of the lakhraj interest.
This was confirmed on the 19th December, 1927, and a sale certificate was issued on the both March, 1928.
This was followed by deliv ery of possession on 15th July, 1928.
Possession was ob tained by one Kamta Prasad who had acquired this interest from Bijainandan Sahay on the 20th April, 1928.
On the 1st May, 1933, Kamta Prasad transferred his interest in the village to the plaintiffs who thus became proprietors of sixteen anna share in the village and mokarraridars as to two anna 156 share and raiyats of the entire sixteen annas in the whole village.
On the 21st September, 1934, the defendants ' first party as mokarraridars brought a suit against the plaintiffs for arrears of raiyati rent for the years 1338 39 F. to the extent of six annas share and for the years 134041 F. to the extent of fourteen anna share claiming that under the parti tion decree they got a fourteen anna share in the mokarrari interest in the village.
Plaintiffs contested the suit alleging that Bisheshwar 's mokarrari interest had merged in the lakhraj interest that was purchased by him from the Pathaks in the years 1916 17, and that by the sale under the Government 's certificate his whole eight anna interest in the village including both the lakhraj and the mokarrari had passed on to the plaintiffs and that the defendants ' first party could only claim rent from them to the extent of the six anna share in the mokarrari.
This plea was disallowed and the defendants ' first party 's claim for rent was decreed in full.
The decree was upheld on appeal and second appeal.
The question of title was, however, left open.
In the year 1938 another suit for rent was filed by the defendants ' first party as mokarraridars to recover fourteen anna share of the rent for the years subsequent to fasli 1341.
As a result of this suit, the plaintiffs brought the present suit for declaration and injunction on the allegation that the eight anna mokarrari interest of Bisheshwar Dayal Singh had merged in his lakhraj interest, that by the certificate sale Bisheshwar Dayal Singh lost all his interest in the village both lakhraj and mokarrari by reason of merger, that the partition decree of the year 1921 was illegal and in any case, under that decree the defendants ' first party got only six anna mokarrari interest and were entitled to realize rents from the tenants only to that extent.
An injunction was also claimed restraining the defendants from proceeding with the rent suit.
In the plaint, it was alleged that there was a private partition between the mokarraridars by virtue of which the lands of village Darha were divided between the three sets of mokarraridars, each set being 157 in separate possession of its own separate and defined shares.
It was also pleaded that there was another parti tion between the proprietors of the lakhrai interest, that is, between Bisheshwar Dayal Singh on the one hand and Deolal Pathak, Neman Pathak and Surajnath Pathak on the other, by virtue of which the lands that were in mokarrari patties of Parmeshwar Dayal Singh and others and Hiranand Jha and Durganand Jha fell in the patti of Deolal Pathak and others, while, the lands that were in the mokarrari patti of the defendants ' second party fell in his proprietary lakhraj patti and that as a result of these partitions the mokarrari interest of the defendants ' second party merged in his lakhraj interest and under a certificate sale the whole of his interest passed to the plaintiffs.
The trial Judge held that both the partitions alleged by the plaintiffs in paragraphs 5 and 8 of their plaint were proved and that the mokarrari interest of Bisheshwar Dayal Singh merged in his lakhraj interest and that at the certif icate sale the purchaser acquired his complete interest both lakhraj and mokarrari along with the eight anna lakhraj interest of the Pathaks and that the defendants ' first party were mokarraridars of six anna interest in the village and to that extent were entitled to a decree in their rent suit and could not claim a decree for rent to the extent of fourteen anna share.
The High Court in appeal held that none of the partitions alleged by the plaintiffs were proved and that the mokarrari interest of eight annas could not merge in the lakhrai interest of sixteen annas held jointly by Bisheshwar Dayal Singh with the Pathaks.
As a result of this decision the plaintiffs ' suit was dismissed.
In this appeal it was contended by the learned counsel for the appellants that the High Court had erroneously held that the two partitions set up by the plaintiffs in para graphs 5 and 8 had not been proved.
It was argued that the evidence on the record, both documentary and oral, fully established the fact of the two partitions and that in view of these partitions it should have been held that Bisheshwar Dayal Singh 158 became separate owner of eight anna lakhraj interest and in that interest his mokarrari interest of eight annas merged, and that under the certificate sale the whole of this inter est passed on to the purchaser in execution and that being so, the defendants ' first party could only maintain a suit for recovery of rent from the raiyats to the extent of their six anna mokarrari interest.
In our opinion, this appeal can be disposed of on a short point without taking into consideration the respective contentions of the parties raised before us or urged in the two courts below.
The plaintiffs ' case rests solely on the allegation of merger of the eight anna lakhraj interest of Bisheshwar Dayal Singh with his mokarrari interest to the same extent.
It, however, seems to us that there was no scope for the application of the doctrine of merger to the facts disclosed by the plaintiffs in their plaint.
If the lessor purchases the lessee 's interest, the lease no doubt is extinguished as the same man cannot at the same time be both a landlord and a tenant, but there is no extinction of the lease if one of the several lessees purchases only a part of the lessor 's interest.
In such a case the leasehold and the reversion cannot be said to coincide.
It was the plaintiffs ' case that mauza Darha was orginally granted in mokarrari under a single contract of lease and it was by inheritance that the lessee 's interest devolved on three branches of the family, Bisheshwar Dayal Singh getting an interest of eight annas in the whole of the leasehold.
He then purchased a six anna interest in the entire reversion in the year 1916 and another two anna interest in it in the year 1917.
By these purchases he became a joint owner in the entire lakhraj holding to the extent of a moiety.
He, however, never came to own the entire lakhraj interest in the village or the entire mokarrari interest therein.
There was thus no coalescence of the interest of the lessor and the lessee in the whole of the estate which was subject to lakhraj and mokarrari interests and that being so, the mokarrari interest of Bisheshwar Dayal Singh did not merge in his lakhrai interest.
159 Mere purchase by Bisheshwar Dayal Singh of portions of the lakhrai interest could not bring about an extinction of the lease or break its integrity as he was only one of the several joint holders of the mokarrari interest.
An inter se partition of the mokarrari interest amongst the mokarrari dars as alleged by the plaintiffs could not affect their liability qua the lessor for the payment of the whole rent, as several tenants of a tenancy in law constitute but a single tenant, and qua the landlord they constitute one person, each constituent part of which possesses certain common rights in the whole and is liable to discharge common obligations in its entirety.
In the words of Lord Halsbury in White vs Tyndall(1), the parties to whom a demise is made hold as tenants in common but what they covenant to pay is one rent, not two rents and not each to pay half a rent but one rent.
There is a privity of the estate between the tenant and the landlord in the whole of the leasehold and he is liable for all the covenants running with the land.
In law, therefore, an inter se partition of the mokarrari interest could not affect the integrity of the lease and it could not be said that Bisheshwar Dayal Singh under the alleged partition became a mokarraridar under another con tract of lease.
Such partitions amongst several lessees inter se are usually made for convenience of enjoyment of the leasehold but they do not in any way affect the integri ty of the tenancy or make each holder of an interest in it as a separate holder of a different tenancy.
In the present case there was not even an allegation that the tenancy was severed and the several tenancies came into existence as a result of the partition qua the landlord.
Similarly the allegation of partition inter se among the several owners of the lakhraj holding could not in any way affect the integri ty of the lease in the absence of an allegation of a fresh contract between the split up owners of the holding and the different owners in the mokarrari interest.
The lakhraj holding in the village still remains a single holding and it was not alleged that it was split up in different holdings. 'All owners (1) 13 App.
263 21 160 of the lakhraj interest are jointly responsible for payment of the cess to Government and it was because of their de fault in payment of the cess that the whole lakhraj interest was sold in the certificate sale.
In this situation none of the conditions necessary for the application of the doctrine of merger can be said to have been made out by the allega tions made in the plaint.
On the plaintiffs ' own case the lease is still a live one in respect of the six anna inter est of the defendants ' first party and in these circum stances it is not possible to hold that it has become ex tinct to the extent of eight anna interest of Bisheshwar Dayal Singh in the absence of any allegation that any fresh contract, express or implied, was arrived at between the parties.
The leasehold has not in any way been drowned in the reversion and both lakhraj and mokarrari interest are still intact.
For the reasons given above we agree with the decision of the High Court that Bisheshwar Dayal Singh 's interest in the mokarrari did not merge in his lakhraj interest and that under the certificate sale it did not pass to the execution purchaser; on the other hand, it vested in the defendants ' first party by reason of the family partition and they became entitled as mokarraridars to recover rent from the plaintiffs ' raiyats to the extent of fourteen annas share.
All that passed at the certificate sale to the execu tion purchaser and subsequently to the plaintiffs was merely the lakhraj interest of the Pathaks and of Bisheshwar Dayal Singh and it could not be that at this sale qua one judg ment debtor a larger interest passed to the execution pur chaser than in respect of the other debtor.
In view of our decision that the doctrine of merger has no application to the facts of the case, the plaintiffs ' case is bound to fail.
We accordingly hold that there is no substance in this appeal and we dismiss it with costs.
Appeal dismissed.
| IN-Abs | If a lessor purchases the whole of the lessee 's interest, the lease is extinguished by merger, but there can be no merger or extinction where one of several joint holders of the mokarrari interest purchases portion of the lakhraj interest.
A partition inter se amongst several mokarraridars does not in any way affect the integrity of the tenancy or make each holder of an interest in it a separate holder of a different tenancy, and notwithstanding such partition the mokarraridars remain liable qua the lessor for the payment of the whole rent as one tenant.
White vs Tyndall (13 App.
Cas. 263) referred to.
|
Civil Appeal No. 38 of 1954.
Appeal from the Judgment and Decree dated the 14th day of March 1951 of the High Court of Judicature at Patna in M.J.C. No. 230 of 1949.
Mahabir Prasad, Advocate General for the State of Bihar (R. J. Bahadur and section P. Varma, with him '), for the appellant.
C. K. Daphtary, Solicitor General for India (Porus A. Mehta and P.O. Gokhale, with him), for the respondent.
April 18.
The Judgment of the Court was delivered by JAGANNADHADAS J.
This is an appeal by the assessee on leave granted under section 66 A of the Indian Income Tax Act.
The assessee by name Chatturam Horilram Ltd., who is the appellant before us, is a private limited company carrying on in Chota Nagpur the business of exporting mica for sale to foreign countries.
The assessment in question is for the year 1939 40 and the accounting year is the calendar year 1938.
These proceedings were initiated on a notice issued to the assessee under section 34 of the Indian Income tax Act, 1922, (Act XI of 1922) (hereinafter referred to as the Act).
It is the applicability of this section to the facts of this case that is the sole matter for consideration in this appeal.
The circumstances under which the above mentioned notice under section 34 was issued are as follows.
The appellant had previously been assessed to tax on an income of Rs. 1,09,200 for the same year 1939 40.
by an order dated the 22nd December, 1939, which was reduced on appeal by Rs. 31,315.
That assessment was set aside by the Income Tax Appellate Tribunal on the 28th March, 1942, on the ground that the Indian Finance Act of 1939 was not in force during 292 the assessment year 1939 40 in Chota Nagpur, which was a partially excluded area.
On a reference by the Tribunal at the instance of the Income tax authorities, the High Court of Patna agreed with this view and pronounced on the 30th September, 1943, its judgment confirming the setting aside of the assessment.
Meanwhile, the Governor of Bihar promulgated Bihar Regulation IV of 1942, Which was assented to by the Governor General on the 30th June, 1942.
By this Regulation, the Indian Finance Act of 1939 (along with Finance Acts of other years with which we are not concerned) was brought into force in Chota Nagpur retrospectively as from the 30th March 1939.
The relevant portion of the Regulation was in the following terms.
"The Indian Finance Act, 1939, shall be deemed to have come into force in the area to which this Regulation extends on the 30th day of March, 1939".
On the 8th February, 1944, the Income tax Officer passed an order as follows: "Due to recent judgment of the High Court the assessment under section 23(3) stands cancelled and with it the notice under section 34 issued in this case becomes ineffective and is withdrawn.
Assessee derives income from mica mining and dealing, moneylending, mining rents and non agricultural sources of zamindary, and this has escaped assessment in its entirety.
Issue notice under section 22(2) read with section 34 again to file a return of income in the prescribed form and within the prescribed time, and inform the assessee that the original notice under section 34 has been cancelled".
It may be mentioned, in passing, that the notice under section 34 which is referred to in the above order as having become ineffective and as, therefore, withdrawn was a prior one which was issued on the 8th July, 1941, i.e., during the pendency of the assessee 's appeal relating to the earlier assessment before the Income tax Appellate Tribunal.
It is not quite clear from the record in what circumstances 'that notice came to be issued.
But it looks probable that it relates to certain items appearing in the accounts as 293 cash credits to the tune of four lakhs which, as will appear presently, were treated in the later proceedings as concealed income in the absence of any proper explanation by the assessee.
This prior notice under section 34, having been withdrawn, has no bearing on the question at issue before us in this appeal and has not been relied on by either side.
In pursuance of the order dated the 8th February, 1944, quoted above, a fresh notice under section 34 of the Act was issued to the appellant on the, 12th February, 1944.
The income of the assessee company was thereupon determined at a sum of Rs. 4,86,351, which on appeal to the Assistant Commissioner, was reduced by Rs. 11,187.
Out of this amount a sum of Rs. 4,04,618 related to two items of cash credits appearing in the name of the partners of the Company which in the absence of any satisfactory explanation, was treated by the Income tax authorities as secreted profits of the Company.
Before the Income tax Appellate Tribunal two points were raised.
(1) Whether the notice dated the 12th February, 1944, under section 34 of the Act was validly issued.
(2) Whether the Income tax authorities were right in holding that the cash credit items were secret profits.
Both the points were decided against the assessee.
On the assessee 's application to refer both the points for the decision of the High Court, the Tribunal declined to make a reference as regards the second point but referred the first for the opinion of the Court in the following terms: "Whether in the circumstances of the case, the notice issued on 12 2 1944 under section 34 of the Indian Income tax Act was validly issued for the assessment year 1939 40?" The question was answered against the assessee by the High Court and hence this appeal before us.
The assessee attempted to reopen the second question relating to secret profits before the High Court but the learned Judges declined to allow it to be canvassed, since the Tribunal did not refer the question to them.
We are, therefore, concerned in this appeal only with the question relating to the validity of the notice 294 issued on the 12th February, 1944, under section 34 of the Act.
It is obvious that if this notice is found to be invalid the assessee would get relief for the entire amount including the amount of secret profits.
The answer to the question which arises for consideration in this appeal depends on a correct appreciation of the requirements of section 34 of the Act.
Now, it has to be mentioned that section 34 of the Act as it originally stood in the Act of 1922, was amended by Act VII of 1939 and this was in turn amended by Act XLVIII of 1948.
At the relevant date, i.e., for the assessment year 1939 40, section 34 (1) as amended by Act VII of 1939 (and before its amendment in 1948) was in force.
It was as follows: "If in consequence of definite information which has come into his possession the Income tax Officer discovers that income, profits or gains chargeable to income tax have escaped assessment in any year, (or have been under assessed, or have been assessed at too low a rate, or have been the subject of excessive relief under this Act) the Income tax Officer may, (in any case in which be has reason to believe that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars thereof, at any time within eight years and) in any other case at any time within four years of the end,of that year, serve on the person liable to pay tax on such income, profits or gains, or, in the case of a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub section (2) of section 22, and may proceed to assess or re assess such income, profits or gains and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub section".
Omitting from the above sub section those portions which are inapplicable to the facts of the present case marked out within brackets it may be seen that the facts which require to be established for the validity of the notice under this sub section are (I ' the income, profits or gains sought to be assessed should be chargeable to income tax and have escaped assess 295 ment in any year, and (2) the Income tax Officer should have discovered it in consequence of definite information which has come into his possession.
The contention of the learned counsel for the appellant is that, with reference to the facts of this case, none of these conditions can be said to have been satisfied.
It is urged that the income sought to be assessed under these proceedings was not, as a fact, chargeable to income tax during the assessment year 1939 40.
It is said that in any case there can be no question of the income having escaped assessment because, as a fact, the income tax authorities did proceed to assess the income and that what happened is that the proceedings became infructuous by reason of the High Court having pronounced them to be void.
It is also contended that there is no question of discovery of any relevant fact or information, because the non assessment of the income of the assessee for the period in question was in spite of all the information relating to the income of the assessee having been previously furnished and being in the possession of the Income tax Officer as would appear from the order of the Officer dated the 22nd December, 1939.
It is convenient to deal with this last objection in the first instance.
It may be true that all the information relating to the relevant income of the assessee which is now sought to be taxed was in the possession of the Income tax Officer in the year 1939 itself when the return was submitted in compliance with the notice under section 22(2) of the Act then issued.
But what was required under section 34(1) was not merely fresh information as to the income that escaped assessment but information as to the fact of escapement from assessment of the chargeable income.
In the present case the income tax authorities proceeded to assess the appellant in the normal way during the assessment year 1939 40 itself.
Those proceedings became infructuous, by virtue of the decision of the Income tax Appellate Tribunal and the decision of the High Court confirming it, which disclosed that the Indian Finance Act of 1939 was not in operation in 296 the relevant area at the relevant period and that in the absence thereof no valid assessment could be made.
The fact, therefore, that the income of the appellant for the relevant year remained without any valid assessment emerged only on the High Court finally giving its decision that the assessment proceedings previously taken were invalid.
If, in the circumstances, there was "escapement of chargeable income from assessment" a question to be dealt with presently there can be no doubt that this fact can be reasonably said to have been discovered by the Income tax Officer only when he got definite information as to (1) the passing of the Bihar Regulation IV of 1942 applying the Indian Finance Act of 1939 retrospectively for the relevant accounting period, and (2) the judgment of the High Court pronouncing prior proceedings to be invalid It is knowledge of both these facts, together, that would, with reference to the circumstances of the present case, constitute the discovery of the relevant fact in consequence of definite information received by the Income tax Officer.
The information as to both these facts taken together could only be after the decision of the High Court on the 30th September, 1943.
As already stated, the notice under section 34(1) , whose validity is in question, was based on the order of the Income tax Officer dated the 8th February, 1944, after the judgment of the High Court was pronounced.
That order which has been extracted above, shows clearly that it was in consequence of the judgment of the High Court in the back ground of the promulgation of Regulation IV of 1942 that fresh action under section 34 (1) was being initiated.
A number of cases (C.I. T. Bombay vs Sir Mahomed Yusuf Ismail(1); Fazal Dhala vs C.I. T., B.& 0.
Raghavalu Naidu & Sons vs C.I. T., Madras(3); and Raja Benoy Kumar Sahas Roy vs C. I. T., West Bengal(,) have been cited before us to show how the phrase "definite information" and the word "discovery" used in this section have been interpreted by the various (1) [1944] 12 I.T.R. section (3) (2) (4) 297 High Courts.
It is unnecessary to deal with these cases at any length.
There is here no question as to any new subjective facts such as change of opinion consequent on a correct appreciation of law by the very same, or another, or higher officer, that is pressed into service as bringing about "definite information " and "discovery".
We are quite clear that the promulgation of the Regulation and the decision of the High Court are objective facts, information regarding which became available to the Income tax Officer when he passed the order dated the 8th February, 1944, and it is only when these facts came to his knowledge, that the Income tax Officer can be said to have discovered that chargeable income escaped assessment in the relevant year.
The main question that requires consideration in this case is whether, on the facts, it can be said that "income chargeable to income tax has escaped assessment in the relevant year".
The contention of the learned counsel for the appellant is that during the relevant year 1939 40 the income was not chargeable to tax as a fact and that the retrospective operation of the Finance Act for the relevant year by virtue of a later legislation does not make a difference for this purpose.
To decide this question it is necessary to have a clear idea of the scheme of the Income tax Act and its correlation to the Finance Act of each year.
The Income tax Act is a standing piece of legislation which provides the entire machinery for the levy of income tax.
The Finance Act of each year imposes the obligation for the payment of a determinate sum for each such year calculated with reference to that machinery.
As has been pointed out by the Federal Court in Chatturam vs C.I. T., Bihar(1) (quoting from the judgment of Lord Dunedin in Whitney vs Commissioners of Inland Revenue (2).
"there are three stages in the imposition of a tax.
There is the declaration of liability, that is the part of the statute which deter mines what persons in respect of what property are (1) at 126.
(2) 38 298 liable.
Next, there is the assessment.
Liability does not depend on assessment.
That, ex hypothesi, has already been fixed.
But assessment particularises the exact sum which a person liable has to pay.
Lastly, come the methods of recovery if the person taxed does not voluntarily pay".
The same idea has been expressed in slightly different language by Lord Romer in the judgment of the Privy Council reported in C.I.T., Bombay & Aden vs Khemchand Ramdas(1).
Chapter III of the Income tax Act headed "Taxable Income" contains the various provisions with reference to which taxable income is determined.
The tax is leviable under section 3 and is in respect of the total income of an assessee in the previous year.
The total income is defined in section 2, sub section (15).
The application of the Act to the total income in the hands of an assessee is governed by sections 4, 4 A and 4 B and is determined with reference to concepts relating to residence, receipt and accrual, as indicated therein.
Section 3, under which the actual charge of income tax arises, is as follows: "Where any Central Act enacts that income tax shall be charged for any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually".
It is by virtue of this section that the actual levy of the tax and the rates at which the tax has to be computed is determined each year by the annual Finance Acts.
Thus, under the scheme of the Income tax Act, the income of an assessee attracts the quality of taxability with reference to the standing provisions of the Act but the payability and the quantification of the tax depend on the passing and application of the annual Finance Act.
Thus, income is chargeable to tax independent of the passing of the (1) at 428.
299 Finance Act but until the Finance Act is passed no tax can be actually levied.
A comparison of sections 3 and 6 of the Act shows that the Act recognises the distinction between chargeability and the actual operation of the charge.
Section 6 says "save as otherwise provided by this Act, the following heads of income, profits and gains, shall be chargeable to income tax in the manner hereinafter appearing, etc.
" while section 3, as already quoted above, says that "where any Central Act enacts that income tax shall be charged for any year at any rate or rates, tax at that rate or those rates,, shall be charged for that year, etc." Though, no doubt, sections 3 and 4 are the charging sections in the Act as pointed out in Chatturam vs C.I.T., Bihar(1) at page 125, the wording of section 3 assumes the pre existence of chargeable income as indicated in section 6.
Hence, according to the scheme of the Act the quality of chargeability of any income is independent of the passing of the Finance Act.
In this view, therefore, though, as a fact, on account of the Finance Act not having been extended to the relevant area during the year 1939 40, legal authority was then lacking for the quantification of the tax and imposition of the liability therefor, the income of the assessee for the relevant year was nonetheless chargeable to tax at the time, in the sense explained above.
Indeed, it can also be said that the very fact of Regulation IV of 1942, having brought the Finance Act of 1939 into operation retrospectively, in this area, has factually brought about, in any case, the chargeability of the tax during that very year.
The relevant portion of the Regulation says that "the Indian Finance Act of 1939 shall be deemed to have come into force in the area to which this Regulation extends on the 30th day of March, 1939".
By virtue of this deeming provision the Indian Finance Act of 1939 must be assumed even factually to have come into operation on the date specified and the tax must be taken to have become chargeable in that very year, though the actual liability for payment could not arise until proper and (1) 300 valid steps 'are taken for quantification of the tax.
The contention, therefore, of the appellant that the income was not chargeable to tax in the year 1939 40 cannot be accepted.
The next question that arises is whether the income, though chargeable to tax in the year, can be said to have escaped assessment in the relevant year.
The argument of the learned counsel for the appellant is that since assessment proceedings had in fact been taken during the year 1939 40 by an order of assessment dated the 22nd December, 1939, it cannot be said that the income "escaped" assessment.
He urges that what happened was that, in spite of assessment having been made, the assessment proceedings became infructuous on account of the decision of the Income tax Appellate Tribunal setting aside the same and High Court agreeing with it.
He contends that, in the circumstances, this is no more than a failure of the assessment proceedings but that it is not an escapement from assessment.
He relied upon the Privy Council case in Sir Rajendranath Mukherjee vs C.I. P., Bengal(1), where their Lordships say that "the expression 'has escaped assessment ' cannot be read as equivalent to 'has not been assessed" ' and that "such a reading gives too narrow a meaning to the word 'assessment ' and too wide a meaning to the word 'escaped" '.
Learned counsel for the respondent relies on a number of subsequent 'cases of the various High Courts (Madan Mohan Lal vs C.I.T., Punjab(1); C.I. T., Bombay vs Pirojbai N. Contractor(3); and Kunwar Bishwanath Singh vs C.I. T., C.P.(4) ) which have explained.
this decision of the Privy Council and pointed out that the particular passage in that judgment which is relied upon bad reference to the, facts of that case, viz., the proceedings by way of initial assessment being still pending.
While no doubt the Privy Council case is thus distinguishable, the contention of the learned counsel for the appellant that the escapement from assessment is not to be equated to (1) at 77.
(3) (2) (4) 301 non assessment simpliciter is not without force.
Here again, it is unnecessary to lay down what exactly constitutes "escapement from assessment".
For the purpose of the present case it appears to us sufficient to say that, where earlier assessment proceedings had in fact been taken but failed to result in a valid assessment owing to some lacuna other than that attributable to the assessing authorities, notwithstanding the chargeability of income to the tax, it would be a case of chargeable income escaping assessment and not a case of mere non assessment of income tax.
The proceedings for assessment in the present case have failed to result in a valid assessment by virtue of a legal lacuna, viz., the fact of the Indian Finance Act of 1939 not having been extended to the relevant area for the relevant assessment year.
Learned counsel for the appellant suggests that the failure of the assessment proceedings in this case must be taken to have been due to the lapse of the income tax authorities.
It is said that inasmuch as Regulation IV of 1942 was actually passed during the pendency of the reference in the High Court in respect of the prior proceedings, the result would have been different, if the Regulation had been brought to the notice of the High Court.
There is, however, no reason to think so.
The High Court 's jurisdiction was only to answer the particular question that was referred to it by the Income tax Appellate Tribunal and it is extremely doubtful whether they could have taken notice of a subsequent legislation and answered a different question.
Learned counsel for the appellant also urged that in any case the deeming provision enacted in Regulation IV of 1942, may be taken to have validated the assessment proceedings previously taken in the year 1939 and at best to have restored the assessment order passed by the Income tax Officer on the 22nd December, 1939, and confirmed by the Assistant Commissioner.
But this overlooks the fact that the order had in fact been set aside by the Income tax Appellate Tribunal and that the setting aside was confirmed by the High Court on the reference made to it.
Admittedly the Regulation was passed after the decision of the 302 Income tax Appellate Tribunal.
Notwithstanding that the Regulation IV of 1942 purported to be retrospective) it cannot have the effect of effacing the result brought about by the decision of the Income tax Appellate Tribunal and the High Court on reference, unless there are clear and express words to that effect.
It might have been quite a different matter, if by the date of the Regulation the assessment pro ceedings themselves were still pending as in fact happened with reference to assessment proceedings in this area, in respect of a number of assessees for the subsequent assessment year, 1940 41, which were pending by the date of the relevant Regulation and were continued up to their termination.
They were held to be valid both by the High Court and by the Federal Court when challenged by the assessees.
(See Raja Bahadur Kamakshya Narain Singh vs C.I.T., B. & O.(1); Chatturam vs C.I. T., B. & O.(1); as also Chatturam vs C.I.T., Bihar(1).
It follows, therefore, that, in our view, the income of the assessee 'Chargeable to income tax escaped assessment in the relevant year 1939 40.
The High Court was, therefore, right in answering as it did the question referred to it.
The appeal accordingly fails and is dismissed with costs.
(1) (1946) 14 I.T R. (2) (a) at 126.
| IN-Abs | The appellant in this appeal had been assessed to Income Tax which was reduced on appeal but that assessment was set aside by the Income Tax Appellate Tribunal on the ground that the Indian Finance Act of 1939 was not in force during the assessment year in Chota Nagpur.
On a reference by the Tribunal the High Court con firmed the setting aside of this assessment.
By the promulgation of Bihar Regulation IV of 1942 by the Governor of Bihar (which was assented to by the Governor General) the Indian Finance Act of 1939 was brought into force in Chota Nagpur retrospectively as from the 30th March 1939.
On the 8th February 1944 the Income Tax Officer passed an order in pursuance of which a fresh notice was issued under section 34 which resulted in the assessment of the appellant to income tax.
The question for determination in this appeal was whether the notice under section 34 was validly issued.
Held (i) that for the purposes of section 34 of the Act the income, profits or gains sought to be assessed were chargeable to income tax according to the scheme of the Act and the provisions of sections 3 and 4 of the Act; (ii) that it was a case of chargeable income escaping assessment within the meaning of section 34 and was not a case of mere non assessment of income tax because the earlier assessment proceedings in the present case had in fact been taken but failed to result in a valid assessment owing to some lacuna which was not attributable to the assessing authorities.
C.I.T., Bombay vs Sir Mahomed Yusuf Ismail ([1944] , Fazal Dhala vs C.I.T., B. & O. ([1944] 12 I.T.R. 341), Baghavalu Naidu & Sons vs C.I.T., Madras ([1945] , Raja Benoy Kumar Sahas Boy vs C.I.T., West Bengal ([1953] , Chatturam vs C.I.T., Bihar ([1947] F.C.R. 116), Whitney vs Commissioners of Inland Revenue ([1926] A.C. 37), C.I.T. Bombay & Aden vs Khemchand Ramdas ([1938] at 428), Sir Rajendranath Mukherjee vs C.I.T., Bengal ([1934] , Madan Mohan Lal vs C.I.T., Punjab ([1935] , C.I.T., Bombay vs Pirojbai N. Contractor ([1937] , Kunwar 291 Bishwanath Singh vs C.I.T., C.P. ([1942] , Raja Bahadur Kamakshya Narain Singh vs C.I.T. B. & 0.
([1946] and Chatturam vs C.I.T., B. & 0.
([1946] , referred to.
|
Civil Appeal No. 748 of 1968.
637 (Fazal Ali, J.) Appeal by Special Leave from the Judgment and Decree dated the 14th February, 1967 of he Bombay High Court in Civil First Appeal No. 888 of 1959.
F. section Nariman and I. N. Shroff for the appellant.
K. section Ramamurthi and K. Rajendra Choudhury, for the Respondent.
The Judgment of the Court was delivered by FAZAL ALI, J.
This appeal by special leave against the judgment dated February 14, 1967, of the High Court of Bombay turns upon the interpretation of clause 3 of the agreement Ext.
39 executed between the parties containing the terms and conditions for which the plaintiff appellant was to supply electricity to the defendant the Jalgaon Borough Municipality.
What appears to us to have been a short and simple case has been rendered cumbersome and complicated by somewhat complex and involved process of reasoning adopted by the High Court in interpreting the various clauses of the agreement Ext.
The plaintiff/appellant 's case was based mainly on clause 3 of the agreement but the High Court instead of concentrating its attention on the interpretation of the scope and ambit of this particular clause appears to have entered upon a covering inquiry and a detailed determination of the history of the case, the various clauses of the agreement executed, the licence taken by the appellant, and so on, which, in our opinion, were not at all germane for the decision of the simple issue which arose in this appeal.
The facts of the case lie within a very narrow compass.
The plaintiff/appellant entered into an agreement to supply electrical energy to the Jalgaon Borough Municipality as far back as 1944.
The energy was to be supplied on the basis of the agreement executed between the parties in the year 1944.
This agreement expired to wards the end of January 1951 and a fresh agreement which is dated May 29, 1951, Ext.
39, which was to commence from February 1, 1951, was executed between the parties.
This agreement was to ensure for a period of five years.
In the present appeal we are concerned with the terms and recitals of this agreement, particularly clause 3 thereof.
The plaintiff averred inter alia that under the agreement the defendant was bound to consume electrical energy for 16 hours a day and pay the minimum charges even if no actual consumption was made.
This claim was put forward by the plaintiff in December 1953 on the basis of clause 3 of the agreement.
Consequent upon its claim the plaintiff sent a number of bills to the defendant which it refused to pay and hence the present suit was instituted on February 27, 1956.
Before the Trial Court the defendant Municipality denied the allegations of the plaintiff and averred that under the terms of is the agreement the Municipality was not bound to pay to the plaintiff Company any minimum charges even if the electrical energy was not consumed.
It was also alleged that even if there was any such clause 638 in the agreement it was void under section 23 of the 197.
A number of other defences were also taken with which we are not concerned.
The Trial Court of the Civil Judge, Senior Division, Jalgaon accepted the defendant 's plea and dismissed the suit of the plaintiff/appellant.
The plaintiff thereupon preferred an appeal to the High Court of Bombay which upheld the decree of the Trial Court and dismissed the appeal negativing the plea put forward by the plaintiff.
Counsel for both the parties agreed before us that the fate of the entire case depended upon the interpretation of clause 3 of the agreement Ext.
39 which appears on pp.
275 277 of the printed Paper Book.
Mr. F. section Nariman for the appellant submitted that the interpretation put by the High Court was absolutely wrong, whereas Mr. K. section Ramamurthi strenuously supported the judgment of the High Court.
The High Court on consideration of clauses 2 and 3 of the agreement appears to have lost sight of the essential stipulation contained in clause 3 and found that minimum charges were given only in clause 2 or the agreement and clause 3 could be of no assistance to the appellant.
The High Court also considered lot of other circumstances which were not at all relevant for the purpose of construing clause 3 of the agreement.
In order to interpret the document, it may be necessary to extract clauses 2 and 3 of the said agreement: "2.
The Company shall supply to the Municipality and the Municipality shall take from the company for a period of five years, the period commencing from 1st February 1951, electrical energy for running the electric motors to work water pumps at the Girna Pumping Station at the following rates.
1.5 annas per unit for the first 50 units per month per B.H.P. installed and the lest at 0.5 anna per unit plus an additional charge at 0.01 anna per unit per rupee rise in the fuel oil rate over Rs. 68/ per ton viz. the rate ex Power house ruling prior to war, with a minimum of 50 units per month per B.H.P. installed, first 50 units per B.H.P. shall mean and include units given by both the electric Motors and Pumps at the Girna Pumping Station.
The additional charge is to apply to all units.
The hours of supply of electrical energy for running the said electric motors shall be according to the quota of diesel oil sanctioned by the Government.
In normal times, i.e. when diesel oil becomes available in any required quantity and without any restriction, the Municipality shall take supply of electrical energy for a minimum period of 16 hours a day and the Company shall supply electricity for a maximum period of 20 hours a day i.e. excluding the four hours from 6 P.M. to 10 P.M.
An analysis of clauses 2 and 3 of the agreement clearly shows that these two clauses are independent and separate provisions dealing with 639 (Fazal Ali, J.) different contingencies.
If there is any link between the two it is only that the reason for making concession in clause a for charging rate of 0.5 annas per unit over first 50 units is the fact that the plain tiff company was guaranteed payment for electrical energy to be sup plied during fixed period whether or not it is consumed by the Municipality.
Clause 3 first of all stipulated that in normal times the Municipality was bound to take supply of electrical energy for a" minimum period of 16 hours a day and in view of this minimum guarantee the Company would supply electricity for a maximum period of 20 hours a day.
In doing this, however, four hours, namely from 6 P.M. to 10 P.M. , would be excluded, because these being the peak hours the Company would be at liberty to supply electricity to other consumers.
The terms of clause 3 appear to us to be absolutely clear and unambiguous and it was not at all necessary for the High Court to have gone into a plethora of extraneous circumstances when the terms of that document do not admit of any ambiguity.
The High Court seems to have completely overlooked the fact that clause 3 of the agreement embodied what is known in common parlance as the doctrine of minimum guarantee i.e. the Company was assured of a minimum consumption of electrical energy by the Municipality and or the payment of the same whether it was consumed or not.
That was the reason why the Company was prepared to charge a minimum rate of 0.5 anna per unit over and above the first 50 units.
The minimum charge of 0.5 anna per unit, therefore, was actually the consideration for the minimum guarantee allowed to the plaintiff under clause 3 of the agreement.
Moreover clauses 2 and 3 of the agreement seem to us to be in consonance with the spirit and letter of the proviso to section 22 of the which runs thus: "Provided that no person shall be entitled to demand or to continue to receive from a licensee a supply of energy for any premises having a separate supply unless he has agreed with the licensee to pay to him such minimum annual sum as will give him a reasonable return on the capital expenditure, and will cover other standing charges incurred by him in order to meet the possible maximum demand for those premises, the sum payable to be determined in case of difference or dispute by arbitration.
" A bale reading of clause 3 is sufficient to indicate that this particular term of the contract was in direct compliance with the provisions of the proviso to section 22 of the Act which ensures a provision for minimum guarantee for the supply of electricity.
Moreover it is obvious that if the plaintiff company was to give bulk supply of electricity at a concessional rate of 0.5 anna per unit it had to lay down lines and to keep the power ready for being supplied as and when required.
The consumers could put their switches on whenever they liked and therefore the plaintiff had to keep every thing ready so that power is supplied the moment the switch was put on.
in these circumstances, it was absolutely essential that the plain 640 tiff should have been ensured the payment of the minimum charges for the supply of electrical energy whether consumed or not so that it may be able to meet the bare maintenance expenses.
For these reasons, therefore, we are satisfied that the interpretation put by the Courts below on the agreement Ext.
39. was legally erroneous and cannot be accepted.
The next question that falls to be considered is about the question of quantum of interest to be allowed to the appellant Company.
Mr. F. section Nariman, learned counsel for the appellant, fairly conceded that he would not be in a position to press his claim for interest prior to the date of the suit and would be satisfied if he is awarded interest at the rate of 4 per cent.
per annum from the date of the suit.
The result is that the appeal is allowed, the judgments of the Trial Court and the High Court are set aside, the plaintiff 's suit is decreed with interest at the rate of 4% per annum from the date of the suit till payment.
In the peculiar circumstances of the case, we leave the parties to bear their own costs throughout.
V.M.K. Appeal allowed.
| IN-Abs | The plaintiff appellant entered into an agreement with the respondent to supply electrical energy to the respondent in 1944.
This agreement expired towards the end of January 1951, and which was to commence from February 1951, was executed between the parties.
This agreements was to ensure for a period of five years.
Clause 3 of the agreement first of ' all stipulated that in normal times, the Municipality was bound to take supply.
Of electrical energy for a minimum period of 16 hours a day and in view of this minimum guarantee Company would supply electricity for a maximum period of 20 hours a day.
In doing, this, however four hours, namely, from 6 p.m. to 10 p.m would be excluded.
The plaintiff averred that under the agreement the agreement was bound to consume electrical energy for 16 hours a day and pay the minimum charges even if no actual consumption was made. 'This claim was put forward by the plaintiff in December.
1953 on the basis of` clause 3 of the agreement Consequent upon its claim the plaintiff.
sent a number of bills to the defendant which it refused to pay and hence the present in was instituted on February ' ',.
Before the Trial Court the defendant Municipality denied the allegations of ' the plaintiff and averred that under.
the terms of the agreement the.
Municipality was not bound to pay to the plaintiff Company any minimum charges even if the electrical energy was not consumed.
It was also alleged the even if there was any such clause in the agreement it was void under section 23 of the .
The Trial Court accepted the defendant 's plea and dismissed the suit.
The plaintiff thereupon preferred an appeal to the High Court of Bombay. 'the high Court dismissed the appeal holding that the minimum charges were given only in clause 2 of the agreement and that clause 3 could be of ' no assistance to the appellant.
Allowing the appeal by special leave.
^ HELD: (i) An analysis of clauses 2 and 3 of the agreement clearly shows that these clauses are independent and separate provisions dealing with different contingencies.
The terms of clause 3 are absolutely clear and unambiguous and it was not at all necessary for the High Court to halve gone into 1 a plethora of extraneous circumstances when the terms of that document do not admit of any ambiguity.
The High Court seems to have completely overlooked the fact that clause 3 of the agreement embodied what is known in common parlance as the doctrine of minimum guarantee i.e. the Company was assured of a minimum consumption of electrical energy by the Municipality and for the payment of the same whether it was consumed or not.
That was the reason why the Company was prepared to charge a minimum rate of 0.5 anna per unit over and above the first 50 units.
The minimum charge of 0.5 anna per unit, therefore.
was actually the consideration for the minimum guarantee allowed to the plaintiff under clause 3 of the agreement.
[638 H. 639 C D] (ii) Clauses 2 and 3 of the agreement are in consonance with the spirit and letter of the proviso to s.22 of the .
A bare reading of clause 3 is sufficient to which ensures a provision for minimum guarantee for the supply of electricity.
[639 & G]
|
Civil Appeal No. 496 of 1974.
Appeal by Special Leave from the Judgment and order dated the 2nd May, 1973 of the Punjab and Haryana High Court in R.S.A. No 1469 of 1969.
O. P. Sharma for the appellant.
R. N. Dikshit for Respondent No. 1.
The Judgment of the Court was delivered by RAY, C.J.
This appeal is by special leave from the judgment dated 2 May, 1973 of the Punjab and Haryana High Court.
The appellants are venders of the land in suit.
The vendors sold the land to the appellants for Rs. 43,000/ on 26 August, 1965.
The transaction was by registered deed of sale.
The respondents filed this suit for possession by pre emption of the land in payment of Rs. 30,000/ on allegations that the respondents were on the date of sale tenants of the land under the vendors.
The respondents alleged that their right of pre emotion was superior to that of the vendees.
They also alleged that the sale took place for Rs. 30,000/ only and the remaining was fictitiously mentioned in the deed of sale.
The suit was dismissed on the ground that one suit on behalf of the four plaintiffs, who were tenants of different parts of the land, was not maintainable.
On appeal the suit was remanded for re trial.
At the trial on remand, two plaintiffs withdrew from the suit.
The trial court directed the remaining two plaintiffs respondents Sohan Lal and Nathi to deposit Rs. 6,300/ and Rs. 5,670, ' respectively on or before 1 April, 1969 less 1/5th of the pre emotion amount already deposited by them.
The Trial Court gave the respondent Sohan Lal a decree for possession by pre emotion in respect of Killa Nos.
17 and 18/1 of Rectangle 37.
The plaintiffs respondents aggrieved by the order.
filed an appeal alleging that the respondent Sohan Lal was a tenant of Killa No. 24 under the vendors and the decree should have been passed in their favor for the whole of the land and that decree should have been passed in favour of Sohan Lal in respect of Killa No. 24 of Rectangle 37.
The other ground in the appeal was that the decree should have been passed in favour of the plaintiffs respondents for whole of the land.
The Additional District Judge on 29 July, 1969 passed a decree for.
possession by pre emotion in favour of respondent Sohan Lal on payment of Rs. 9,100 and he was directed to deposit this amount in Court on or before 20 August, 1969.
The Addition District Judge passed a decree for possession by pre emption in favour of respondent Sohan Lal of Killa No. 24 of Rectangle 37.
The decree in favour the respondent Nathi was maintained without change.
Thereafter, the appellants preferred an appeal in the High Court alleging that the decision that plaintiff respondent Sohan Lal was also a 600 tenant of Killa No. 24 was incorrect and should be set aside and the decree of the Trial Court should be restored.
The appellants also prayed that the decree in favour of the two plaintiffs respondents Sohan Lal and Nathi were liable to be set aside.
The appellants contended before the High Court that respondents Sohan Lal and Nathi did not deposit the decretal amount by 1 April, 1969 as directed by the Trial Court and, therefore, the suit was liable to be dismissed under the provisions contained in order 20 Rule 14 of the Code of Civil Procedure.
The other contention of the appellants before the High Court was that the plaintiff respondent Sohan Lal should not have been granted pre emption rights in respect of Killa No. 24.
The High Court on 2 May, 1973 accepted the appeal of the appellants against the plaintiff: Nathi and dismissed the appeal against the plaintiff respondent Sohan Lal.
The High Court said that since the lower appellate court granted Mohan Lal decree for one more Killa and directed that the amount would be Rs. 9,100/ , the respondent was to comply with the appellate decree and not the decree of the Trial Court.
The appellants contended that neither Sohan Lal nor Nathi deposited the amount in accordance with the decree of the Trial Court on or before l April, 1969 and the suit should have been dismissed on that ground alone and the appeal should have been allowed.
The appellants contended that the lower appellate court had no power and jurisdiction to give further time to Sohan Lal to deposit the preemption amount by an extended date.
This Court in Naguba Appa vs Namdev(1) held that the directions given by the Trial Court are mandatory under the provisions contained in order 20 Rule 14 of the Code of Civil Procedure.
This Court in Naguba Appa 's case (supra) said that "mere filing of an appeal does not suspend the decree of the Trial Court and unless that decree is altered in any manner by the Court of Appeal, the pre emptor is bound to comply with that direction '`.
In Dattaraya s/o Keshav Tawalay vs Shaikh Mahboob Shaikh Ali & Anr.(2) this Court said that a decree in terms of order 20 Rule 14, imposes obligations on both sides and they are so conditioned that performance by one is conditional on performance by the other.
To illustrate, if the defendants by obtaining the stay order from the High Court relieve themselves of the obligation to deliver possession of the properties the plaintiff decree holder must also be deemed thereby to be relieved of the necessity of depositing the money so long as the stay order continues.
In the present case, the lower appellate court did not grant any stay to the plaintiffs respondents.
In view of the fact that the plaintiffs respondents did not deposit the amount as directed by the Trial Court (1) A.I.R. 1954 S.C. 50.
(2) ; 601 on or before 1 April, 1969, it became mandatory on the lower appellate court by reason of the ruling of this Court in Naguba Appa 's case (supra) to dismiss the suit.
The observations of this Court in Naguba Appa 's case (supra) that the pre emptor is bound to comply with the directions of the Trial Judge unless that decree is altered in any manner by a Court of Appeal do not mean that where the deposit is not made in accordance with the directions of the Trial Court, the appellate court can extend the time for payment.
Thereafter, the lower appellate court was in error in extending the time for payment till 2 .
August, 1969.
In Naguba Appa 's case the pre emption money was not deposited within the time fixed in the decree.
The pre emptor made an application to the Court for making the deposit without disclosing that the time fixed by the decree had elapsed.
The application was allowed The defendant, when apprised of the situation, made an application to the Court to the effect that the plaintiff 's suit stood dismissed on account of his failure in making the deposit in time.
The Trial Judge held that the pre emption money not having been paid within the time fixed in the decree the suit stood dismissed.
On appeal the decision was set aside.
On second appeal it was restored and it was held that the suit stood dismissed under order 20, Rule 14 Civil Procedure Code.
An appeal was preferred against the judgment of the High Court this Court Held that the High Court was right in holding that the pre emptor 's suit stood dismissed by reason of his default in not depositing the pre emption price within the time fixed in the Trial Court 's decree.
The contention of the appellants that the lower appellate court was wrong in extending the time for payment is correct because the failure of the plaintiffs respondents to deposit the amount in terms of the Trial Court 's decree would result in pre emptor 's ' suit standing dismissed by reason of their default in not depositing the pre emption price.
The contention of the appellants that the High Court was wrong in not setting aside the order of extension of time passes by the lower appellate court is correct.
It is only if the plaintiffs respondents had paid the decretal amount within the time granted by the Trial Court or if the plaintiffs respondents had obtained another order from the lower appellate Court granting any order of stay that the lower appellate court might have considered the passing of appropriate order in favour of pre emptors.
The High Court should have allowed the appellant s ' appeal and not made any distinction in dismissing plaintiff respondent Nathi 's suit and allowing plaintiff respondent Sohan Lal any extension of time to make the payment.
Further, it appears that the plaintiff respondent Sohan Lal did not pay the amount.
For these reasons the appeal is accepted.
Suit of the plaintiffs respondents is dismissed.
The appellants are entitled to costs.
V.M.K.Appeal allowed.
| IN-Abs | The vendors sold the suit land,to the appellants (vendees) by a registered deed of sale for Rs. 43,000/ .
The ' respondents filed the suit for possession by pre emption of the land in payment of Rs. 30,000/ on the allegations that the respondents were on the date of sale tenants of the land under the vendors.
I They also alleged that the sale took place for Rs. 30,000/ only and the re maining amount was fictitiously mentioned in the deed of sale.
The suit was ' dismissed on the ground that one suit on behalf of the four plaintiffs who were tenants of different parts of the land, was not maintainable.
On appeal the suit was remanded for re trial.
At the trial on remand, two plaintiffs withdrew from the suit.
The trial court directed the remaining two plaintiffs respondents Sohan Lal and Nathi to deposit Rs. 6,300/_ and Rs. 5.670/ respectively on or before 1 April, 1969 less 1/5th of the pre emption amount already deposited by them.
The Trial Court gave the respondent Sohan Lal a decree for possession by pre emption in respect of Killa Nos.
14/1 .
17 and 18/1 of Rectangle 37.
The plaintiffs respondents, aggrieved by the order filed an appeal alleging that the decree should have been Passed for the whole of the land because the respondent Sohan Lal was also a tenant of Killa , No.
24 of Rectangle 37 under the vendors.
On 29 July 1969.
the Additional District Judge passed a decree for possession by pre emption in favour of respondent Sohan Lal of Killa No. 24 of Rectangle 37 on payment of Rs. 9,100/ and he was also directed to deposit this amount on or before 20 August, 1969.
The decree in favour of Nathi was maintained without charge.
The appellants filed an appeal before the High Court and it was contended before the High Court that respondents did not deposit the decretal amount by l April, 1969 as directed by the Trial Court and, therefore, the suit was liable to be dismissed under order 20 Rule 14 of the Code of Civil Procedure.
The High Court accepted the appeal of the appellants against the plaintiff Nathi and dismissed the appeal against the plaintiff respondent Sohan Lal.
The High Court said that since the lower appellate court granted Sohan Lal decree for one more Killa and directed that the amount would be Rs. 9,100/ .
the respondent was to comply with the appellate decree and not the decree of the Trial Court.
Allowing the appeal by special leave, ^ HELD: (1) The directions given by the Trial Court are mandatory under the provisions contained in order 20 Rule 14 of the Code of Civil Procedure.
A decree in terms of order 20 Rule 14, imposes obligations on both sides and they are so conditioned that performance by one is conditional on performance bt the other.
[600E F, G].
Naguba Appa vs Namdey reported in A.I.R. l 954 S.C. 50 and Dattaraya S/o Keshav Tawalay vs Shaikh Ali and Anr.[1969] 2 S.C.R. 514 relied on.
(ii) It is only if the plaintiffs respondents had obtained another order from the lower appellate Court granting any order of stay that the lower appellate court might have considered the passing of appropriate order in favour of pre emptors.
The High Court should have allowed the appellants ' appeal and not made any distinction in dismissing plaintiffs respondent Nathi 's suit and allowing Plaintiff respondent Sohan Lal any extension of time to make the payment.
[601F G] 599
|
Civil Appeal No. 1800 of 1969.
Appeal by special leave from the Judgment and order dated the 25th January., 1967 of the Rajasthan High Court in D.B. Civil Writ Petition No. 406 of l 966.
section M. Jain, for the appellant.
The Judgment of the Court was delivered by UNTWALIA, J.
The hearing of this appeal filed by the State of Rajasthan and another by special leave proceeded ex parte against the respondents.
After examining all the pros and cons of the dispute involved in this appeal with the assistance of the learned counsel for the appellants we have come to the conclusion that the appeal should be allowed.
From time to time the Government of Rajasthan fixed or revised the minimum rates of wages for employees in the Mica Mines throughout the State of Rajasthan under section 5(2) of the Minimum Wages Act, 1948 Central Act 11 of 1948 hereinafter.
called the Act.
The employment in the Mica Mines is a scheduled employment within the meaning of section 2(g) of the Act.
Eventually the minimum rates of wages were fixed by the Government by a notification dated the 31 July, 1965, the validity of which was challenged in the Rajasthan High Court by several employers in the Mica Mines in Civil Writ No. 406/1966 and 15 other writs.
Several proceedings initiated on the basis of the impugned notification were also challenged by the employers.
A Bench of the Rajasthan High Court allowed the writ applications, quashed the impugned notification and the proceedings taken in pursuance thereof.
This appeal arises out of Civil Writ No. 406/1966 in which the employer is respondent No. 1.
The notification dated 31 7 1965 was challenged on several rounds and we will be concerned with some of them in this appeal.
The relevant facts arc these.
For the purpose of revising the minimum wages fixed by the earlier notification dated the 24th April, 1959, The State Government in the first instance appointed a Committee consisting of five members on the 17th May. 1962.
The constitution of the 643 Committee was, however, revised by notification dated the 26th November, 1962.
This committee consisted of five members, two representatives of the employers, two representatives of the employees and one Professor K. section Mathur, Head of the Department of Economics Degree College, Ajmer.
The last was taken as an independent member of the committee.
It submitted its report to the Government.
The matter was referred by the Government to the Advisory Board constituted under section 9 of the Act.
It appears that a Sub committed as appointed by the Advisory Board to go into the matter further and to consider the report of the Wage Committee appointed earlier by the government on the 26th November, 1962 '.
In the Sub committee were taken some persons who were not members of the Advisory Board.
The Sub committee also submitted is report to the Advisory Board which consisted of 21 members, 8 employers ' representatives, a employees ' representatives and S Government officers appointed in the category of independent members.
The proceedings of the Board dated the 7th May, 1965 showed that it considered the recommendations of the Wage Committee and the Sub committee and then submitted its report containing its recommendations of the wage structure suggesting an alternative scale of minimum wages according as the linking of Dearness Allowance with the consumer price indices.
The State Government accepted the wage structure recommended by the Board but with slight variation in the matter of the linking basis with Dearness Allowance and made it all inclusive rates of minimum wages per month.
The learned Acting Chief Justice of the Rajasthan High Court who delivered the leading judgment in the case, on a consideration of the various divergent decisions of the High Courts came to the conclusion that the constitution of the Wage Committee was not valid as the Professor of the Government College was not an independent member.
Similarly the constitution of the Advisory Board was also bad as the five Government officers on the Board could not be said to be independent members.
He was also of the view that the Board had exceeded to power in appointing a Sub committee add committed an illegality in taking into consideration its report while making recommendations to the Government.
The other learned Judge with some amount of reservation and diffidence agreed to the order proposed by the learned Acting Chief Justice.
It may be stated here that the fixation of the minimum ware ill the notification dated the 31st July, 1965 was also challenged before the High Court on certain grounds relating to the merits of the fixation but the High Court has over ruled such objections.
Section 5 of the Act provides the procedure for fixing and revising minimum wages in respect of any scheduled employment.
There are two types of procedure indicated in clauses (a) and (b) of sub section (1).
Obviously in the present case the procedure followed was the one provided in clause (a).
We shall now read sub section (2) of section 5 with the proviso appended thereto: "After considering the advice of the committee or committees appointed under clause (a) of sub section (1), or as the case may be, all representations received by it before the 644 date specified in the notification under clause (b) of that sub section, the appropriate Government shall, by notification in the official Gazette, fix, or, as the case may be, revise the minimum rates of wages in respect of each scheduled employment, and unless such notification otherwise provides, it shall come into force on the expiry of three months from the date of its issue: Provided that where the appropriate Government proposes to revise the minimum rates of wages by the mode specified in clause (b) of sub section (1), the appropriate Government shall consult the Advisory Board also " It would be noticed that the power to fix the minimum wages is the Government.
Under clause (e) of sub section (1) the Government can appoint as many committees and sub committees do it considers necessary to hold enquiries and advise it in respect of such fixation or revision of minimum wares.
Section 7 of the Act says: "For the purpose of co ordinating the work of committees and sub committees appointed under section 5 and advising the appropriate Government generally in the matter of fixing and revising minimum rates of wages, the appropriate Government shall appoint an Advisory Board.
" If the procedure provided in clause (a) is followed, consolation with the Advisory Board is not required in terms but is resorted to while it is mandatory in case of procedure (b).
Section 9 provides: "Each of the committees, sub committees and the Advisory Board shall consist of persons to be nominated by the appropriate Government representing employers and employees in the scheduled employments, who shall be equal in number, and independent persons not exceeding one third of its total number of members; one of such independent persons shall be appointed the Chairman by the appropriate Government." The question as to whether a Government officer could be appointed on Committee.
, Sub committee to or the Advisory Board as an independent person came up for consideration before the various High Courts.
Majority of them took the view that it could be so.
A few High Court, however took a contrary view.
In the judgment under appeal the High Court or Rajasthan has fallen in the line of the minority.
But recently be point has been set at rest by a decision of this Court in The State of Andhra Pradesh vs Narayana Velur Beedi Manufacturing Factory and others (1) .
We consider it appropriate to quote the whole of graph 10 or that judgment: "In our judgment the view which has prevailed with the Majority of the High Courts must be sustained.
The committee or the advisory board can only tender advice which is not binding on the government While fixing the minimum wages (1) [1973] 1 Labour Law Journal 476 645 or revising the same as the case may be of course, the Government is expected, particularly in the present democratic set up, to take that advice seriously into consideration and act on it but it is not bound to do so.
The language of section 9 does not contain any indication whatsoever that persons in the employment of the Government would be excluded from the category of independent persons.
These words have essentially been employed in contradistinction to representatives of employers and employees.
In other words, apart from the representatives of employers and employees there should be persons who should be independent of them.
It does not follow that persons in the service an employee of the Government were meant to be excluded and they cannot be regarded as independent persons vis a vis the representatives of the employers and employees.
Apart from this the presence of high Government officials who may have actual working knowledge about the problems of employers and employee can afford a good deal of guidance and assistance in formulating the advice which is to be tendered under section 9 to the appropriate Government.
It may be that in certain circumstances such per sons who are in the service of the Government may cease to have an independent character if the question arise of fixation of minimum wages in a scheduled employment in which the appropriate Government is directly interested.
It would, therefore, depend upon the facts of each particular case whether the persons who have been appointed from out of the class of independent persons can be regarded as independent or not.
But the mere fact that they happen to be Government officials or Government servants will not divest them of the character of independent persons.
We are not impressed with the reasoning adopted that a Government official will have a bias or that he may favour the policy which the appropriate Government may be inclined to adopt because when he is a member of an advisory committee or board he is expected to give an impartial and independent advice and not merely carry out what the Government may be inclined to do.
Government officials are responsible persons and it cannot be said that they are not capable of taking a detached and impartial view.
The learned Acting Chief Justice of the High Court considered many of such decisions of the High Courts in his judgment and posed a question "Suppose, the Government is an employer in the particular scheduled employment for which wages are sought to be fixed under the Act.
employment for be postulated in such a case that an officer of the Government can property appointed as an `independent ' person on any of the statutory bodies in question?" An answer in the negative was given.
He then said "I need hardly add in this connection that if the Government be not an employer in any of the scheduled employments, there II would be no objection to the Government officers of the requisite calibre and experience being appointed as independent persons within the meaning of the section".
But thinking that in the list of the scheduled employment are included "employments such as public motor transport.
646 and construction and maintenance of roads and building operations and may be, for aught we know, in certain other employments also" in which the State Government is an employer and the Advisory Board constituted is meant for advising the Government in those employments also he held the constitution of the Advisory Board to be bad.
In the extract which we have given.
above from the decision of this Court a sentence is to be found resembling the line of thinking of the learned Acting Chief Justice.
This Court has said "It may be that in certain 1 circumstances such persons who are in the service of the Government may cease to have an independent character if the question arises of fixation of minimum wages in a scheduled employment in which the appropriate Government is directly interested" The question as to whether in such a situation a Government officer appointed on the Board or a Committee can be said to be independent member or not will have to be cautiously considered when an appropriate occasion arises for the same.
After all, even in such cases the final authority fixing or revising the minimum wages in a scheduled employment is the Government.
(Government officers can undoubtedly come on the Board or the Committee as representatives of the employers.
Whether in such a situation more Government servants can come in the category of the independent members is a question which is open to serious debate and doubt.
But in the instant case on the authority of this Court it is clear that the constitution of either the Wage Committee or the Advisory Board Was not bad, is the Government was not an employer in the Mica Mines in respect of which employment only minimum wages were fixed by revision in the notification dated the 31st July, 1965.
No procedure has been prescribed in the Act as to the method which the Advisory Board is to adopt before making its recommendations to the State Government.
It can devise its own procedure and collect some informations by appointment of a sub committee consisting only of some of its members as was the case in the decision of the Bombay High Court in Gulamhamed Tarasaheb, a Bidi Factory by its proprietors Shamrao and others vs State of Bombay and others(1).
But surely the Advisory Board has no power to appoint a rival sub I. Committee to the one appointed by the Government and take in such subcommittee persons who are not members of the Board, as was done in this case.
There is, therefore, no doubt that the Advisory Board committed an irregularity in taking into consideration the report of the sub committee invalidly appointed by it.
Does it necessarily follow from this that the impugned notification dated 31 7 1965 based upon the report of the Advisory Board which in its turn had taken into consideration not only the report of the Committee appointed by the Government but also that of the sub committee appointed by the Board is bad? on a careful consideration of the matter we give our answer in the negative.
The irregularity, even characterising it as an illegality, committed by the Advisory Board in taking into consideration the report of the sub committee was not such as to nullify its recommendation contained in its report, or, in any event, the final decision of the Government contained in the impugned notification.
It must be remembered that the procedure followed in this case was the one provided in section 5(1) (1) A.I.R. 1962 Bombay 97.
647 (a) in which case it was not mandatory for the Government to take the opinion of the Advisory Board.
After all, the recommendations made by the Board even on consideration of the report of the Sub committee along with that of the Committee was the advice of the Board.
The Government did accept it but accepted it after some modification.
In such a situation we do not think that the notification dated 31 7 1965 deserves invalidation.
It follows as a corollary that the proceedings started pursuant to the notification cannot also be quashed.
In the result we allow this appeal, set aside.
the judgment and order of the High Court and dismiss the connected writ application filed by respondent No. 1.
Since he has not appeared there will be no order as to costs.
V.P.S. Appeal allowed.
| IN-Abs | Section 5(1) of the , provides two types of procedure for fixing and revising minimum wages in respect of any scheduled employment.
Section 7 provides for the appointment of an Advisory Board.
If the procedure provided in s.5(1) (a) is followed consultation with the Advisory Board is not u required while it is mandatory in case the procedure in cl.
(b) is followed.
Under cl.
(a), the Government can appoint as many Committees or sub committees as it considers necessary to hold inquiries and advise it in respect of such fixation or revision.
Section 9 requires that every committee, sub committee and the Advisory Board shall consist of representatives of the employers and employees in equal numbers and independent persons, whose number shall not exceed 1/3 of the total number of members.
One of the independent persons shall be appointed Chairman.
[643 G 644 F] In the present case the State Government followed the procedure under cl.
(a) and appointed a committee for revising the wages with respect to employment in Mica Mines which is a scheduled employment under the Act.
The committee consisted of five members, two representative of the employers,.
two of the employes and a Professor of ' Economics of a Government college as an independent member.
It submitted its report to the Government.
The Government referred the matter to the Advisory Board which consisted of 21 members, 8 representatives of the employers.
8 of the employees and 5 government officers as independent members.
The Advisory Board appointed a sub committee to further into matter.
In the sub committee were taken same persons who were, not members of the Advisory Board.
The sub committee made its recommendations and the Advisory Board after considering those recommendations also submitted its report and the State Government accepted it with slight variations and fixed minimum wages by a notification.
The respondent challenged its validity and the High Court struck it down holding that, (i) the constitution of The Wage Committee and the Advisory Board was not valid because the economics professor and the 5 government member were not independent members, (ii) the Board had exceeded its power.
in appointing a sub committee.
(iii) the Board committed an illegality in taking into consideration its recommendations while submitting its report to the Government.
Allowing the appeal to this Court, ^ HELD :(1) It may be that in certain circumstances persons who are in service of ' the Government may cease to have an independent character if the question arises of fixation of minimum wages in a scheduled employment.
the case of fixation of minimum wages in a scheduled employment in which the Government is directly interested, whether Government servants can come in the category of independent members in addition to the Government officer who come on the Board or Committee as representatives of the employers is a matter which has to be considered in an appropriate case.
But in the instant case the constitution of the Wage Committee or the Advisory Board was not bad as Government was not an employer in the Mica Mines in respect of which minimum wages were fixed.
[646 A E] The State of Andhra Pradesh vs Narayana Velur Beedi Manufacturing Factory and others [1973] I Labour Law Journal, 476, followed.
642 (2) The Advisory Board can device its own procedure and collect information by appointment of sub committees consisting only of some of its members.
But the Advisory Board has no power to appoint a rival subcommittee to the one appointed by the Government and take in such subcommittee, persons who are not members of the Board as was done in this case.
Therefore.
the Advisory Board committed an irregularity in appointing the sub committee and taking into consideration its report.
[646 E G] (3) But it does not follow that the impugned notification based upon the report of the Advisory Board was bad even is the irregularity is assumed to be an illegality.
The recommendations made by the Board even on consideration of the report of its sub committee was only that of the Advisor Board.
Since the procedure was under section 5(1)(a) it was not mandatory for Government to take the opinion of the Advisory Board at all.
Therefore, the impugned notification and the proceedings pursuant to it cannot be quashed [646 G 647 B] Gulamahamed Tarasaheb, a Bidi factory by its proprietors Shamrao and other vs State of Bombay and ' others A.I.R. 1962 Bombay 97 referred to.
|
Civil Appeal No. 123 of 1969 and 2023 of 1972.
From the Judgment and order dated the 25th October 1967 of the Punjab and Haryana High Court in Civil Writ No. 525 of 1966 and Civil Appeal No. 2023 of 1972.
Appeal by Special Leave from the order dated the 20th May, 1970 of the Punjab and Haryana High Court in L.P.A. No. 231 of 1970.
Naunit Lal and R. N. Sachthey for the Appellant in both the appeals.
N. N. Goswamy and Arvind Minocha for the Respondent in C.A 123 of 1969.
O. P. Sharma for Respondent No. 1 (In C.A. 2023/72).
The Judgment of the Court was delivered by KRISHNA IYER, J.
These two appeals turn on the construction of section 19B of the Punjab Security of Land Tenures Act, 1953 (Act X of 628 1953) (for short, the Act).
This legislation was enacted to bring about an agrarian re ordering so pivotal to the progress of our rural economy.
Haryana, happily a granary of our country, is one of the States where land reform laws are likely to generate great changes by banishing big concentration of Natur 's bounty in a few feudal hands, creating an enthusiastic sense of distributive justice and exploiting the productive potential of land by the possessive passion of the landless many.
So strategic is land reform that special constitutional concern has been shown for this programme.
Naturally the State enacted the Act whereby ceiling on land ownership was set; surplus lands were taken over for settling ejected tenants and others and peasant proprietorship created.
The scheme of the Act with which we are concerned is fairly simple and somewhat scientific, although its language, what with frequent amendments dovetailed from time to time, has made for ambiguity, obscurity, marginal inconsistency and a rich crop of litigation.
Indeed, the conflict of opinion at the High Court level and the bone of contention before us arise from this drafting deficiency Legal Preface: A thumb nail sketch of the Act is a prefatory necessity.
the defines 'small land owner ' [section 2(2)] having in mind the optimum ownership in the given conditions. 'Permissible area ' [section 2(3)] is a cognate concept limiting the maximum permissible extent a person may hold, and so long as he does not have any excess, he is a small landholder.
He can evict the tenants from his holding and be in actual enjoyment as provided by the Act.
If, however, he has lands beyond the permissible area, he becomes a large land owner and has to cough up the excess.
However, he is given the option to choose there best area he desires to keep, called 'reserved area ' [section 2(4)] and then he must make available to the State such excess called surplus area [section 2(5 a)].
This creation of a surplus pool or reservoir is vital to the success of the statutory project since, by distribution of such lands, rehabilitation of ejected tenants and landless persons is to be "accomplished.
Maximisation of the surplus pool and suppression of evasion by large holders are of profound legislative, concern.
Even if a person is a small holder, it is quite on the cards that, by inheritance or other operation of law, or by voluntary transfer, he may acquire lands in excess of the permissible limit.
The law takes care to see that such excess is also made available for re settlement of ejectees and their ilk.
In short, the legislative mandate is that every agricultural holder in the State shall hold no more than the permissible area and the surplus in the hands of large holders, whether acquired by voluntary transactions or involuntary operation of law, will go to feed the surplus pool.
A semi medieval set up where considerable estates are cornered by a landed gentry, will naturally resist re distributive reform measures and try ingenious methodology to defeat the law.
But the legislature has to be astute enough to outwit such devious devices and subtle subterfuges.
With this end in view, the Act has been amended to block all escape routes unearthed by the law makers as often as the High 629 Court has upheld certain patterns of alienations and oblique dealings by interpretative process.
A study of the history of the Act and the provocation for and frequency of amendments thereto, suggests an unspoken criticism about judicial approach which we will refer to later.
Suffice it to say that the law we are construing is a radical agrarian measure; its basic goals are to cut down large holdings and distribute lands to various landless people according to a design and to foster, according to legislative policy, an agrarian community of peasant proprietors.
De hoarding and defeating hide outs are essential to make the twin objects successful and so sections 10A and 19B among others, have been written into the Act.
To explore the import and ambit of these two provisions, particularly the former, with a view to see whether it strikes at a gift made by, the respondent in.
favour of his sons whereby he sought to stow away some of his lands, shed some of his excess lands and look slim on as a small holder before the law Language permiting, the Court as interpretor, must fulfil, not frustrate the legislative mission.
Factual Silhouette At this stage it is appropriate to set out the facts in the two appeals which are not in dispute and speak for themselves.
C.A. 123 of 1969: One Sampuran Singh who owned 450 bighas and 9 biswas of land, acting with foresight, gifted half of it to his mother in 1951, perhaps with a premonition of coming restrictions by way of ceiling on owner ship.
We need not speculate on that point in the light of subsequent happenings.
The Act came into force on April 15, 1953 but even before that date the.
Owner (who was the petitioner before the High Court under article 226 and respondent before us) executed a mortgage with possession over 12 bighas and 5 biswas.
There was also some waste land included in his total holding which fell outside the scope of the Act.
So much so, on the date when the Act came into force, he was the owner of about 178 bighas which, admittedly, fell safely short of the permissible area of 30 standard acres [vide section 2(3)].
Having thus dwarfed himself into a small land owner as defined in section 2(2), the 'ceiling ' provision held out no threat to him.
Certain small extents of land which were legally deductible from his total holding brought down the area in his possession to 138 odd bighas.
Unfortunately for him, his mother passed away in February 1958 and, he being the heir, all that he had gifted to her earlier came back to him as successor.
The unhappy consequence was that his holding expanded to 363 odd bighas, far in excess of the permissible area as set out in section 2(3) of the Act.
Necessarily, this spill over became surplus area as in section 2(5 a) of the Act.
Sensing the imminent peril to his property and manoeuvring to salvage it from the clutches of the legal ceiling the petitioner executed a gift of 182 bighas of land to his son by deed dated February 11, 1959.
He also executed three mortgages with possession.
The cumulative result of the shedding operations was to shrink the size of his holding to well within the permissible area.
The Collector, however, investigat 630 ed into the matter and declared an area of 117 bighas as surplus in his hands.
He reached this conclusion by ignoring the tell tale gift of February 1, 1959 in favour of the son and the three possessory mortgages executed in June 1958.
The status of 'small land owner ' thus being forfeited, the threat lo the surplus lands revived but was sought lo be warded off by the petitioner moving an unsuccessful appeal Lo the Commissioner, and a further fruitless revision to the Financial Commissioner.
Eventually, he challenged the Collector 's order i Writ Petition which, met with success.
There was disagreement between the two learned Judges on the Bench and the third learned Judge decided in favour of the petitioner holding that section 19B, read with s 10A. did not affect the petitioner 's transfers.
The two Judges, whose opinion upheld the claim of the petitioner, substantially concurred in their reasonings but the scope of the interpretative exercise.
is somewhat limited.
We, therefore, propose straight to go into a study of the relevant provisions and may perhaps indicate our conclusion in advance.
We wholly disagree with the High Court and hold that to accept the construction which has appealed to the learned Judges is to frustrate the agrarian reform scheme of the Act and the alternative reading gives life to the law, teeth to its provisions and fulfilment to its soul.
C.A. 2023 of 1972: The facts in this appeal are different but the point of law involved is identical.
In both the cases the State of Haryana has come up to this Court in appeal, the former by certificate under article 133(1)(c) and the latter by special leave granted by this Court.
Anyway, in C.A. 2023 of 1972, respondent No. 1 owned 86 odd ordinary acres of land on April 15, 1953 when the Act came into force.
After the commencement of the Act he inherited nearly 30 ordinary acres and thus he held well above the permissible area and ceased to be a small land owner.
Around the year 1957 he transferred 167 bighas of land to respondents nos.
3 to 6 pursuant to a Civil Court decree passed in 1957 in favour of his sons and wife.
We may mention here, parenthetically but pathetically, that the weapons in the armoury of large land owners to defeat the land reform law included securing simulactral decrees from civil courts against themselves in favour of their close relations, thus using the judicial process to have.
their excess lands secreted in the names of their dear and near.
This invited legislative attention and an amendment of the Act was made viz., section 10A whereby decrees and orders of courts were to be ignored in dealing with surplus lands.
Thus, the Collector ignoring the transfer of 167 bighas of land by respondent No. 1 (which resulted ill civil court decrees of 1957 in favour of his sons and wife declared 38.41 ordinary acres as surplus with respondent No. 1.
The statutory.
remedies did not see the first respondent (writ petitioner) safe ashore and so he sought harbourage by moving the High Court under article 26 where he urged that the land inherited by him and later transferred to his sons and wife were not hit by section 10A and section 19B of the Act He succeded in the Court in view of a certain strict construction adopted by the Court and the State has come up in appeal challenging the soundness of the High Court 's approach.
631 Statutory Construction: The key thought that pervades our approach is that if the constitutionally envisioned socio economic revolution is not to be a paper tiger, agrarian laws have to be meaningfully enacted, interpreted and executed and the court is not the anti hero in the drama of limping land reform.
Much to the same effect this Court observed in Amar Singh 's Case(1): "We have to 'bear in mind the activist, though inarticulate, major premise of statutory construction that the rule of law must run close to the rule of life and the court must read into an enactment, language permitting, that meaning which promotes the benignant intent of the legislation in preference to the one which perverts the scheme of the statute on imputed legislative presumptions and assumed social values valid in a prior era.
An aware court, in formed of this adaptation in the rules of forensic interpretation, hesitates to nullify the plain object of a land reforms law unless compelled by its language, and the crux of this case is just that accent when double possibilities in the chemistry of construction crop up.
" While dealing with a somewhat analogous set of provisions under the same Act.
The emphatic importance of augmenting the surplus pool for distribution by the State is brought out in Amar Singh (supra) thus: "The triple objects of the agrarian reform projected by the Act appear to be (a) to impart security of tenure (b) to make the tiller the owner, and (c) to trim large land holdings, setting sober ceilings.
To convert these political slogans and into legal realities, to combat the evil of mass evictions, to create peasant proprietorships and to ensure even distribution of land ownerships a statutory scheme was fashioned the cornerstone of which was the building up of a reservoir of land carved out of the large landholdings and made available for utilisation by the State for re settling ejected tenants." (p. 998) Unfortunately, judicial decisions construing the language of the law have resulted in stultifying the objectives of the enactment leading to further amendments.
We are concerned in the present case with sections 10A and 19B which, in their final form, appeared by an amendment of 1962 (Act XIV of 1962), but retrospective effect was given with effect from the commencement of the Act, viz., April 1953.
In this context it is convenient to excerpt the observations of this Court in Amar Singh (supra) at p. 999: (1) ; , 996. 632 "The objects and reasons of Punjab Act 14 of 1962, which brought in certain significant restrictions on alienations and acquisitions of large land holders starts off in the statement of objects thus: "Some of the recent judicial pronouncements have the effect of defeating the objectives with which the Punjab Security of Land Tenures Act, 1953, was enacted and amended from time to time.
It was intended that the surplus area of every land owner recorded as such in the revenue records should be made utilisable for the settlement of ejected tenants.
" Certain specific decisions and their impact on the legislative operation were mentioned, and then the statement of objects proceeded: "In order to evade the provisions of section 10 A of the Parent Act interested persons, being relations, have obtained decrees of courts for diminishing the surplus area.
Clause (43 of the Bill seeks to provide that such decrees should be ignored in computing the surplus area.
" The short point which confronts us in both these appeals is as to whether the gifts made by land owners who exceeded their permissible area having come by additional lands by inheritance are to be ignored or taken into account when computing the surplus area in their hands, having regard to the specific provision in section 19B living in fellowship with section 10 A.
It is appropriate to read sections 10A and 19B here, before proceeding to the crucial discussion in the case: 10 A. (a) The State Government or any officer em powered by it in this behalf shall be competent to utilize any surplus area for the resettlement of tenants ejected, or to be ejected, under clause (i) of sub section (1) or section 9.
(b) Notwithstanding anything contained in any other law for the time being ill force and save in the case of land acquired by the State Government under any law for the time being in force or by an heir by inheritance no transfer or other disposition of land which is comprised in surplus area at the commencement of this Act, shall affect the utilization thereof in clause (a) Explanation. such utilization of any surplus area will not affect the right of the landowner to receive rent from the tenant so settled.
(c) For the purposes of determining the surplus area of any person under this section, any judgment, decree or order of a court or other authority, obtained after the commencement of this Act and having the effect of diminishing the area of such person which could have been declared as his surplus area shall be ignored." 633 "19B. Future acquisition of land by inheritance, in excess of permissible area. (1) Subject to the provisions of section 10 A, if after the commencement of this Act, any person, whether as land owner or tenant, acquires any inheritance or by bequest or gift from :.
person to whom he is an heir any land, or in after the commencement of this Act and before the 30th of July, 1958, any person acquires by transfer, exchange, lease, agreement or settlement any land, or if, after such commencement, any person acquires in any other manner any land and which with or without the lands already owned or held by him exceeds in the aggregate the permissible area, then he shall within the period prescribed, furnish to the Collector, a return in the prescribed form and manner giving the particulars of all lands and selecting the land not exceeding in the aggregate the permissible area which he desires to retain, and if the land of such person is situated in more than one patwar circle, he shall also furnish a declaration required by section 5 A. (2) If he fails to furnish the return and select his land within the prescribed period, then the Collector many in respect of him obtain the information required to be shown in the return through such agency as he may deem fit and select the laud for him in the manner prescribed in sub section (2) of section 5 B. (3) If such person fails to furnish the declaration the provisions of section 5 C shall apply.
(4) The excess land of such person shall be at the disposal of the State Government for utilization as surplus are; under clause (a) of section 10 A or for such other purposes the State Government may by notification direct." Unclouded by case law, we first study section 1953.
Forgetting section 10 A for moment, we find that if, after the commencement of the Act, April 15, 1953, any person acquires any land by inheritance or bequest or gift which, with the lands already held by him exceed in the in the permissible area, than he shall furnish to the Collector a return indicating the permissible area he desires to retain.
This he shall do within the prescribed period [S 19B(1)].
If he defaults to make the return, the Collector will select the land for him [19B(2).
He will suffer a penalty for failure to furnish the declaration [19B(3)].
The excess land, i.e., the surplus area shall be at the disposal of Government for utilization under section 10 A [19B(4)1.
The surplus land will be used for re settlement of tenants ejected or to be ejected under cl.
(i) sub section
(1) of section 9 or other purpose notified by Government.
The profound concern of the law to preserve the surplus stock is manifest from the obligation cast by sub sections
(1) and (4) of 19B to declare and deliver excess lands.
How you came to hold the excess is not the question.
Why you should be permitted to keep more than what others can lawfully own is the query.
A might have 10 925 Sup CI/75 634 acquired by paying hard cash might have received by gift and by bequest and D by settlement and by partition.
The agrarian policy is equitable ownership and the reform philosophy is redistributive justice the rural goal being small peasant proprietorship.
What difference does it make as to how you came by a large holding from the standpoint above outlined? The thrust of section 19 B is that even if the source of the excess area is inheritance, bequest of gift, the capacity to own is conditioned by the permissible limit.
Section 10 A does not militate against this mandate of section 19 B.
Indeed, section 19 B had to be enacted because the High Court took the view that area which became surplus subsequent to April 15, 1953 was not hit by the ceiling set and land acquired by an heir by inheritance is saved from utilisation by the State.
Section 10 (a) is wide in its terms and encompasses all surplus area, howsoever obtained.
Even section 10A(b) strikes not discordant note.
All that it says and means is that lands acquired by an heir by inheritance are saved in so far as dispositions of such lands are concerned.
The drafting of the saving clause is cumbersome but the sense is and, having regard to the conspectus, can only be that although in the hands of the propositus, it is surplus land, if among the heirs it is not, then their transfers will not be affected by the interdict of section 10 A(a) the sins of the father shall not set the teeth of the children on edge.
If the heirs are otherwise small holders, the fact that their father was a large owner will not deprive the former of their heritage, if it is less than the permissible area.
We see no conflict between section 10 A and 19B.
Assuming some inconsistency, primacy goes to section 19B which effectuates the primary object.
It is settled law that Courts should favour an interpretation that promotes the general purpose of an Act rather than one that does not.
Counsel for the respondents adopted the arguments which found favour with the High Court and pressed two points.
The scheme of the Act, according to the learned Judges, was to see that no one held in excess of the permissible area and since by the gift to the son or wife the latter had only lands within permissible limits, there was no frustration of the policy of the law This reasoning is repugnant to the basic scheme because the surplus pool will be adversely affected if gifts and other transfers which will skim off surplus were to be allowed.
Indeed, the flaw in the High Court 's argument is that if it were allowed to prevail, there will be no surplus land at all, every large holder being free to screen his surplus in the names of his with and kin or servants or reliable friends, by going through alienatory exercises.
A legislation which has provided for ignoring decrees diminishing surplus lands and has otherwise prevented the escape of excess area by voluntary transfers, cannot conceivably be intended to permit inherited excesses.
The second argument which appealed to the High Court is a little curious, and somewhat difficult to follow.
Section 19 B directs the owner who, by inheritance, comes to own an excess area, to make a declaration of his lands within a prescribed time.
This does rot mean that the time lag is statutorily given for executing gifts and 635 transfers to defeat the law itself.
Such a conclusion would be obviously absurd.
What is intended is to give some time to the, heir to ascertain the assets he has inherited, make the choice of his 'reserved area ' which he likes to keep and make the necessary declaration.
A processual facility cannot be converted into an opportunity to pervert and to thwart the substantive object of the law.
After all, courts, faced with special case situations, have 'creatively ' to interpret legislation.
The courts are 'finishers, refiners and polishers of legislation which comes to them in a state requiring varying degrees of further.
processing ', said Donaldson J., in Corocraft Ltd. vs Pan American Airways Inc.(1) and indeed it is no secret that courts constantly give their own shape to enactments.
We feel that when economic legislation in the implementation of Part lV of the Constitution strikes new ground and takes liberties with old jurisprudence, there looms an interpretation problem of some dimensions which Indian jurists will have to tackle.
The genre of agrarian reform laws, with special constitutional status, as it were, warrants interpretative skills which will stifle evasive attempts, specially by way of gifts and bequests and suspect transfers.
Here sections 10 A, 19 A and 19B, inter alia, strike at these tactics.
Our conclusion, in conformity with the principles of statutory construction we have projected, is that the gifts in both the appeals fail in the face of section 19B.
It follows that the appeals have to be allowed, which we hereby do without hesitation, without costs how ever to either party at any stage.
P.H.P. Appeals allowed.
(1) , 732.
| IN-Abs | The respondents were small land owners within the meaning of Punjab Securrity of ' Land Tenures Act, 1953.
The respondents, later on inherited certain lands which together with the lands already held by them exceeded the ceiling area.
The respondents, therefore, ceased to be small land owners.
The respondents thereafter divested themselves of the excess lands by executing gift deed, mortgage with possession and pursuant to decrees passed in favour of their near relations.
The Collector after investigating into the matter declared the lands in excess of the ceiling area as surplus lands and ignored the subsequent transfers.
An appeal filed by the respondents was rejected by the Commissioner.
Respondents Revision Applications to the Financial Commissioner were also rejected.
The respondents thereafter filed Writ Petitions in the High Court.
The High Court allowed the Writ Petitions holding that section 19B read with section 10A did not affect the transfers made by the respondents.
According to High Court the transfers affected during the period prescribed for filing returns are valid since they were consistent with the scheme of ' the act which requires that no one should hold land in excess of permissible limits.
Section 2(2) of the Act defines small land owner as a person owning less than certain area of land.
Permissible area is defined limiting the maximum permissible extent a person may hold land.
So long as a person does not hold lands in excess of permissible area he is a small land holder.
He can evict his tenants from the holding and be in actual enjoyment as provided by the Act.
If any person has lands beyond the permissible area he becomes a large land owner and he has to surrender the excess land after choosing the best area he desires to keep.
Such excess land goes to the surplus pool which is distributed for the rehabilitation of ejected tenants and landless persons.
The Act was amended by inserting section 10A and Section 19B with retrospective effect.
Section 10A provides that for the purpose of determining the surplus area of any person any judgment, decree or order of a Court or authority contained after the commencement of the Act and having the effect of diminishing the area of such person which could have been declared as his surplus area shall be ignored.
Section 19B provides that if after the commencement, of the Act any person whether as land owner or tenant acquires by inheritance or by bequest or gift from a person to whom he is an heir or if any person after the commencement of the Act acquires in any other manner any land and which with or without the lands already owned or.
held by him exceeds in the aggregate the permissible area such a person is required to file a return with the Collector in the prescribed form giving the necessary particulars and selecting the land not exceeding the permissible area which he desires to retain.
The section further provides that the surplus land in excess of the permissible area would be distributed among the tenants who are evicted or landless persons.
On an appeal by certificate under Article 133(1)(c) in one appeal and in an appeal by Special Leave in another allowing the appeals held ^ 1.
Land reform is so strategic that special constitutional concern has been shown for this programme.
The State naturally enacted the Act whereby ceiling on land ownership was set.
surplus lands were taken over for settling ejected tenants and others.
If constitutionally envisioned socio economic revolution is 627 not to be a paper tiger, agrarian lands have to be meaningfully enacted, interpreted and executed and the Court is not the anti hero of the Drama of limping land reform.
The decision of this Court in Amar Singh 's case A.I.R. , 996 followed.
[628 B C 631 A] 2.
It is settled law that Courts should favour an interpretation that promotes the general purpose of an Act rather than one that does not.
[634 E] 3.
The agrarian reform laws with special constitutional status, as it were warrant interpretative skills which, will stiffle the evasive attempts, specialty by way of gifts and bequests and suspect transfers.
[635 C D] 4.
The profound concern of the law to preserve the surplus stock is manifest from the obligation cast by section 19B to declare and deliver excess lands.
The agrarian policy is equitable ownership and the reform philosophy is redistributive justice, the rural goal being small peasant proprietorship.
What difference does it make as to how you came by a large holding from the standpoint above outline ? The thrust of section 19B is that even if the source of the excess area is inheritance.
bequest or gift the capacity to own is conditioned by the permissible limit.
Section 10A does not militate against the mandate of section 19B.
Section 19B had to be enacted because the High Court took the view that the area which became surplus subsequent to the commencement of the Act was not hit by the ceiling and land acquired by an heir by inheritance is saved from utilisation by the State.
[633H 634A C] 5.
The reasoning of the High Court that the scheme of the Act was that no one should held land in excess of the permissible area and since after the transfers the land held by the respondent was within permissible limits there was no frustration of the policy of the law is repugnant to the basic scheme because the Surplus pool would be adversely affected if gifts and other transfers which would skim off surplus were to be allowed.
A legislation which has provided for ignoring decrees diminishing surplus lands and has otherwise prevented the escape of excess area by voluntary transfers cannot conceivably be intended to permit inherited excesses.
[634 F G] 6.
The further reasoning of the High Court that since section 19B gives to the owner who by inheritance comes to own an excess area.
a certain time for making a declaration, that during this period land owner can effect transfers, is obviously absurd.
What is intended to give some time to the heir to ascertain the assets he has inherited, make the choice of his reserved area which he likes to keep and make the necessary declaration.
The processual facility cannot be converted into an opportunity to prevert and thwart the substantive object of the law.
After all courts faced with special case situations, have creatively to interpret legislation [634 H; 635 A B]
|
ON: Criminal Appeal No. 392 of 1974 Appeal by Special Leave from the Judgment and order dated the 25th April, 1974 of the Andhra Pradesh High Court in Criminal Appeal No. 701 of 1972.
P. Basi Reddy and G. Narasimhulu, for the appellant, A, section Mulla, T. V. section N. Chari and P. P. Rao, for the respondent.
The Judgment of the Court was delivered by SARKARIA J.
This appeal is directed against a judgment of the High Court of Andhra Pradesh, converting on appeal by the State the acquittal of the appellants into conviction.
Appellant No. 1 (for short A 1) was an arrack contractor doing liquor business inter alia within the territorial jurisdiction of Police Station Indukurpet, District Nellore, while Appellant No. 2 (for short, A 2) was a Sub Inspector of Police in charge of this Police Station, The appellants and one other person were tried by the Firs Additional Sessions Judge Nellore on charges under ss.120 B, 366, 376, 302/34., 201, 218, 468/34, 324, Penal Code relating to the abduction, rape and murder etc.
Of two sisters, named Kalarani and Chandrika Rani of Nellore.
The Sessions Judge acquitted the three accused of all the charges.
Against the acquittal of the appellants only the State preferred an appeal.
The High Court partly allowed the appeal, set aside the acquittal on charges 7, 8, 9 and convicted A 2 and A I. under ss, 201, 201b34, Penal Code and sentenced each of them to five years rigorous imprisonment.
A 2 and A 1 were further Convicted under section 218 and 218/109, Penal Code and sentenced to two years rigorous imprisonment, each.
They were also convicted under 605 section 468 and 468/34, Penal Code and sentenced to two years rigorous imprisonment each.
The sentences on all the counts were directed to run concurrently.
Their acquittal on the remaining charges, including those of abduction, rape and murder, was upheld.
The facts of the prosecution case, as they emerge from the record" arc as follows: Kalarani and Chandrika Rani deceased were two of the six daughters of PW1, a legal practitioner of Nellore.
Kalarani was aged 21 and a graduate from the local Women 's College, Nellore.
She used to be the President of the College Union and as such was well known.
Chandrika Rani was, aged 17 and a B.A. student in that very college.
on 6 6 1971 in the morning the deceased girls along with their parents and other sisters attended a marriage in the house of a family friend (P.W.2).
In the afternoon they went away from the marriage house saying that they were going out to have coca cola.
At about 4 p.m. they boarded a bus bound for Mypaud which is a sea shore resort at a distance of 11 miles from Nellore.
At about 5.40 p.m. they were seen alighting from the bus as Mypaud and then proceeding towards Sagarvilla, a Travellers ' Bungalow situated near the seashore.
They were last seen at about 6 30 p.m.
On the seashore by P.Ws. 11, 12, 13 and 14.
Shortly there after, P.W. 18, a rickshaw puller was attracted to the seashore by the outcry of a woman.
When be proceeded in hat direction, Chandrika Rani came running to him for help.
P.W. 18 saw 4 persons including A 1 and A 2 carrying away Kalarani who was groaning.
On seeing P.W. 18, A 1 and A 2 turned on him.
A 1 first slapped and then stabbed P.W. 18 on his right arm with a pen knife, while A 2 gave blows on his back.
Out of fright, P.W. 18 took to his heels while Chandrika Rani was dragged away by the appellants.
On 6 6 1971 Chamundeshwari Festival was being celebrated in Gangapatnam and neighbouring areas at about 9 p.m.
It was a bright moonlight On learning that the dead body of a girl had been seen on the beach of Pallipalem which is a hamlet o Gangapatnam, many persons went there.
P.W. 23, a fisherman of Pallipalem and P.W. 25.
an employee of the Electricity Department were also among those persons.
It was the body of a girl, aged about 21 or 22 years, of fair complexion and stout built.
Blood was oozing from a reddish abrasion on the forehead.
There was a gold ring with a red stone on the finger of the body.
Next morning, P.W. 23 went to P.W. 26, the Sarpanch of Gangapatnam and informed the later about the corpse on the seashore.
P.W. 23 and P.W. 26 then went to the village Karnam (P.W. 27) as they found the village Munsiff absent.
The Kamam scribed a report to the dictation of P.W. 23.
The Sarpanch signed it and sent it at about 7 30 a.m. through a bus driver (P.W. 29) to the Police Station, Indukurpet.
The report was handed over in the Police Station at about 8 30 a.m. to the Head Constable (P.W. 34), as A 2.
the Sub Inspector was away.
The Head Constable (P.W. 34).
read the report and returned it to P.W. 29 with the objection that the bearer should fetch a report drawn up on the printed form and signed by the village Munsiff.
Within a few minutes 606 of the return of the report, between 8 30 and 8 45 A.M., A 2 returned to the Police Station.
Just at this juncture P.W. 49, a Personal Assistant to P.W. 38, a cine actor of Madras, and A 1, arrived there in Car No. M.S.V. 1539, driven by a motor driver.
The car had met an accident on the 4th June within the jurisdiction of this Police Station.
The car was therefore at least theoretically in the custody of the Police.
A 1 was a mutual friend of A 2 and of the owner of the car.
P.W. 49 therefore, had brought A 1 to the Police Station to help the former in getting the car released.
A 1 introduced P.W. 49 to A 2.
A 1 then asked A 2 if he knew that the dead body of a girl was found floating on the sea shore.
A 2 then asked the head Constable (PW 34) if any report regarding the dead body was received.
The Head Constable replied that a report from the Sarpanch about the dead body seen on the sea shore at Pallipalem had been received but had been returned, as it was not from the village Munsiff.
A 2 said some person might have drowned as it usually happened on the seashore.
The Head Constable and A 1 told A 2 that the body found on the shore was said to have been wearing drawers and might be of a person of high class family.
A 2 said that he himself would go and enquire about it.
A 2 asked P.W.4 to take him in his car to the spot.
Thereupon" A 1, A 2, P.W. 49, two constables and two others in addition to the driver, proceeded in the car.
After going some distance, the two "others" got down.
A 1 and A 2 had a talk with them.
The car was then taken to Ramudupalem.
There at about 11.30 A.M., A 1 and A 2 met the Sarpanch (P.W. 26) and asked him to follow them to Pallipalem.
The car was then taken to Gangapatnam.
There the Constables were dropped.
They left a message for the Karnam of the village to reach Pallipalem.
Thereafter, they proceeded to the sea shore of Pallipalem.
The car was left at the canal before the sea.
A 2, A 1, P.W. 49 and P.W. 26; then at about Noon, went to the beach where the dead body lay.
P.W. 23 and P.W. 25 were guarding the deadbody.
It was the body of a fair, stout girl aged about 20 years, who was wearing brassiers, blouse, striped drawers and a white petticoat.
P.W. 23 handed over the ring M.O.9 to A 2 after removing the same from the body.
On being directed by A 2, P.W. 23 washed ' the face of the corpse.
There was a mark on the forehead from which blood was oozing out.
There was a reddish abrasion on the thigh and blood marks on the drawer of the dead body.
On seeing the blood marks on the drawer, A 2 said that she might be in menses.
A 2 further remarked that the body appeared to be of a girl from a high class family who had been out of doors.
A 2 did not hold any inquest there on the dead body.
He did not prepare any record there.
He directed the village vettis (menials) to bury the dead body forthwith while he himself proceeded along with his companions towards the village.
In the distance they saw the Constables coming towards them.
A 2 signalled them not to come near the dead body but to proceed to the Travellers ' Bungalow at Mypad, while A 2 and party went to Mahalaxamma Tample in village Pallipalem.
There A 2 607 secured the signature of P.W. 25, P.W. 26, P.W. 28 and A 1 on a blank sheet of paper.
A 2 and his companions then went to the car.
The Karnam (P.W. 27) was there.
A 2 reproached the Karnam for coming late and added that he had finished all the work for which he (Karnam) had been sent for.
He further told the Karnam that he had got the body buried.
The karnam asked as to why A 2 did not send the body for post mortem examination A 2 replied that the body was of a prostitute who had committed suicide and that he did not suspect any foul play and so he ordered burial The Karnam then enquired if any relation of the deceased had come.
A 1 replied "yes", while A 2 pointed towards P.W. 49 and said that he was the person connected with the deceased.
A 1, A 2, P.W. 26, P.W. 27 and P W. 49 then got into the car and proceeded.
P.Ws. 26 and 27 were dropped near their houses.
On the way P.W. 49 asked A 2 as to why he had represented him (P.W. 49) as a relation of the deceased.
A 2 assured P.W. 49 that there was nothing to worry.
According to the prosecution, this dead body found ashore near Pallipalem which is about 2 miles from Mypad was of Kala Rani deceased who was well known to A 2.
Inspite of it in the inquest report (Ex P 11) which was not prepared on the spot but sometime later, A 2 wrote That the body was of a prostitute, named Koppolo Vijaya, daughter of Crhandravya, Baliya by caste of Ongole Town who had on 6.6.71, come to Mypad along with her prostitute friend Nirmala by Bus A.P.N. 1400 at 5.45 P.M. and thereafter both these girls committed suicide by entering sea at about 6.30 P.M. A 2 ended the report with an emphatic note: "It is conclusive that the deceased (Koppulu Vijaya) died due to drowning".
Despite the presence of injuries noticed on the dead body A 2 recorded: "There are no injuries on the dead body".
In order to support his version as; to the cause of death A 2, according to the prosecution falsely noted that the "stomach is bloated due to drinking of water".
The prosecution case further is that A 2 fabricated some time after the burial of the deadbody, a false report (Ex.
P 25) purporting to have been made to him on 7.6.1971 by one Nuthalapati Subba Rao who despite the best efforts of the investigators has remained untraced and is believed to be a fictitious person.
As this report has an important bearing on the points for determination, we will reproduce it in extenso: "Statement of Nuthalapati Subbarao, son of Venkateswarlu, aged about 30 years" Vysya of Patha Guntur: Being an orphan for about 1 years, I have been doing brokerage in supplying extras in the cine field.
Day before yesterday i.e. On Friday at Chirala near Lodges two girls Koppulu Vijaya d/o Sundrayya of Ongole and Paranjapi Nirmala d/o Raghavayya of Chilakaluripeta were met by me.
I came to know that they live by prostitution.
When I told them that I would join them in Cinema they believed me 608 and came with me.
On Sunday i.e. On 6 6 1971, in the morning we came to Nellore and stayed in Venkateswara Lodge till 3.30 p.m.
Their demand came for the girls.
I booked two males for these two girls.
Afterwards dispute arose between me and the girls in respect of my broekerage, sharing of the money got by such prostitution out of the money collected.
They scolded me in an angry tone and went away crying and weeping and saying that I took them away from their places promising to join them in Cinema, cheated them and committed rowdyism without giving them money due to them.
They had only wearing apparel with them.
Vijaya is short, stout and fair.
Nirmala is lean, tall and fair.
They did not come back.
I waited for a long time.
1 searched for them at the railway station, bus stand and lodges.
When I was inquiring at Atmakur Bus Stand I came to know that the girls went by Mypaud bus at 4.30 p.m.
I went to Mypaud and enquired.
It was learnt that the two girls went towards north of Pattapulalem and entered the sea at 6 p.m.
Having learnt that the body of Vijaya was washed ashore I went and saw the dead body.
She had died and appears to have committed suicide.
It was also learnt that the second girl also committed suicide but her dead body was not washed ashore.
Other facts about them are not known.
Sd/ N. Subbarao Taken down by me, read over to the person and admitted by him to be correct.
On this 7th day of June 1971 at 11 30.
Sd/ B. Manoharan S.I., E 3, dt. 7 6 1971.
H.C. 1212 Issue F.I.R. u/s 174, Cr.
P.C. and send copy to me for investigation.
Sd/ B. Manoharan, S.I. E 3, Camp Mypaud dt.
7 6 1971.
" The dead body of the other girl, Chandrika Rani was not washed ashore.
But in the morning of 7 6 1971, P.W. 36, a fisherman saw the dead body of a girl agled 16 or 17 years floating in the sea at a distance of about 21 or 3 mils from Pallipalem, P.W. 36 saw a piercing wound on the left arm and black marks indicating throttling, on the neck of the deadbody.
P.W. 36 removed a wrist watch, a ring and an ear ring from the deadbody and allowed it to drift away.
These articles were later handed over by P.W. 36 to the investigating officer and were identified to be of Chandrika Rani.
The disappearance of the deceased girls caused a sensation.
The local newspapers took up the matter.
Representations were made to the Home Minister to get the matter investigated by the C.I.D. The Superintendent of Police directed P.W. 59, a Probationer D.S.P., to investigate the matter.
On 18 6 1971, at the request of P.W. 59, the Tehsildar (P.W. 40) proceeded to exhume the deadbody of Kalarani.
The place was pointed out by P.W. 33.
A 2 was also present there.
On digging the bit only some clothes were found in it.
But close to 609 it, was found a skeleton.
No marks of violence were detected on the skeleton by the Medical officer, P.W. 45, who examined it at the spot.
The skeleton was sent to P.W. 44, Professor of Forensic Medicine.
Who opined that it was of a female aged between 18 to 25 years.
Further investigation of the case was taken over by P.W. 60, the C.I.D. Inspector who, after completing it laid the charge sheet against A 1, A 2 and one other person in the court of the Magistrate.
A 1 pleaded that he had been falsely implicated.
He stated that he knew nothing about the deceased girls.
He added that on 7 6 1971, he was in the Travellers ' Bungalow at Mypad and went away from that place in the afternoon.
He admitted that he had accompanied, P.W. 49, to the Police Station on 7 6 1971 to assist the latter in getting the car release, and from the Police Station both of them (A 1 and P.W. 49) on being asked by A 2, went with the latter in the car to the spot.
He further admitted that he had slab signed on a sheet of paper like others but he expressed ignorance if any inquest was held by A 2.
The plea of A 2 was that he had duly made an inquiry as to the cause of the death and prepared the inquest report exhibit P l 1.
He denied that there were injuries on the dead body.
Pleading alibi for the 5th and 6th June 1971, he said that on these dates he was away on casual leave to attend the marriage of a cousin at Chiraja which at a distance of about 100 miles from Indukurpet.
He said that he had proceeded to Chiraja in a car on the 5th morning., and after attending the marriage returned to Nellore on the 6th by 5 30 p.m. and then on the morning of the 7th June, resumed duty at Indukurpet Police Station.
On receiving information about the corpse of a female washed ashore, he went to Mypad and enquired about a person named Nathalapati Subba Rao.
The latter gave the information, exhibit P.25, which he (A 2) reduced into writing and then held the inquest in the presence of this Subba Rao and other Panchaitdars at the spot.
He did not know if Vijaya and Nirmala mentioned in exhibit P. 25 and exhibit P. 11 were fictitious persons.
He further admitted that he was unable to produce this Subba Rao in response to the memo dated 15 6 1971, issued by the D.S.P. (P.W. 59) during the stipulated time of 48 hours.
The Additional Sessions Judge held that the dead bodies found floating near the sea shore were of Kala Rani and Chandrika Rani.
He further found that PW 18, who claimed to be an eye witness of the occurrence, was not worthy of credit, and consequently, the charges of abduction, rape and murder had not been proved against the accused.
Regarding the charge under section 201, Penal Code, the trial Judge held that the prosecution had failed to`prove that an offence had been committed in respect of the deceased.
While holding that the identity of the deceased was wrongly mentioned in exhibit P. 25 and exhibit P. 11 as Vijaya and Nirmala, prostitutes he did not rule out the possibility of suicide.
In the result? he acquitted the accused of all the charges.
In appeal by the State, the learned Judge of the High Court, after an exhaustive survey of the evidence, upheld the acquittal of the 610 accused in respect of the charge of abduction, rap and murder, but reversed the findings of the trial Judge in regard to the charges under sections 201, 218 and 468, Penal Code against Al and A2.
In order to bring home an offence under section 201, Penal Code the prosecution has to prove: (1) that an offence has been committed; (2) that the accused knew or had reason to believe the com mission of such offence (3) that with such knowledge or belief he (a) caused any evidence of the commission of that offence to disappear, or (b) gave any information respecting that offence which he then knew or believed to be false; (4) that he did so as aforesaid, with the intention of screening the offender from legal punishment (5) If the charge be of an aggravated form, as in the present case, it must be proved further that the offence in respect of which the accused did as in (3) and (4), was punish able with death, or with imprisonment for life or imprisonment extending to ten years.
The High Court has found that all these ingredients of section 201, were established in the present case.
Mr. Basi Reddy, learned Counsel for the appellant assails the finding of the High Court with particular reference to the first and the last ingredients enumerated above.
Counsel contends that the conviction under section 201 cannot be sustained as there is no credible evidence on record to show that an offence had been committed.
It is maintained that the prosecution has been unable to prove that the two girls met a homicidal death.
In all probability, proceeds the argument, the deceased girls committed suicide by jumping into the sea and were drowned.
For reasons that follow we are unable to accept these contetions.
The concurrent finding of the courts below that the dead body washed ashore near Pallipalem was of Kala Rani deceased and that seer.
floating in the sea, two miles away was of Chandrika Rani deceased, has not been disputed before us.
It is also not controverted that these two girls died an unnatural death on the night between the 6th and 7th of June, 1971 sometime after 6.30 P.M. at Mypad.
Only the cause of their death is in issue.
In regard to such cause, there could be only three possibilities, the choice of any of which would lead to the exclusion of the other two.
First, the girls committed suicide by drowning.
Second, that their deaths were accidental.
Third, that they were done to death by some person or persons.
611 After a careful consideration of these alternatives in the light of ' evidence on record, the learned Judges of the High Court firmly ruled out the first and the second possibilities, and concluded in favour of the third.
In our opinion, the credible circumstantial evidence on record reinforced by the inferences available from the incriminating conduct o ' ' the appellants, particularly of A2 in deliberately preparing false records to suppress the identity and cause of the deaths of the deceased girls, fully justifies the conclusion reached by the learned judges.
We, therefore, do not feel the necessity of embarking upon a reappraisal of the entire evidence.
It would be sufficient to survey and consider the salient circumstances bearing on the alternatives posed above First, we take up the possibility of suicide.
Mr. Reddy submits with reference to the statement of PW1, the father of the deceased girls.
that on a previous occasion both these girls had without the permission of their parents, run away from home and were ultimately traced to the Rescue Home in Madras.
that Kala Rani deceased had about 4 or 5 years before the occurrence taken an overdone of tranquilizers presumably to end her life that they did not feel happy in their parental house and once attempted to join the Ashram.
This background, according to the learned Counsel, shows that the deceased had a predisposition to commit suicide.
In the alternative, suggests Mr. Reddy, something might have happened at Mypad on the 6th June, 1971, which impelled them to commit suicide.
Might be the girls got themselves into such a situation that they thought suicide was the only course left to them to get out of the same.
We are not impressed by these arguments.
It is wrong to assume that these girls were very unhappy in their parental house, or their relations with their parents were estranged.
Kala Rani, particularly, was a mature graduate girl of 22 years.
She used to be the leader of the College Union.
On the day of occurrence, the deceased girls along with their parents and sisters had participated in the festivities of a marriage in the house of a family friend.
They took their meals in the marriage house.
From Nellore, these girls brought change of clothes for two or three days ' stay.
Thereafter, they came happily to Mypad.
They first went to the Travellers ' Bungalow and were then last seen together at about 6 30 p.m.
On the sea shore.
It is in evidence that the evening of the 6th June, was an occasion of Channdamma Festival.
Procession of the deity accompanied by festivities was being taken out by the devotees of the neighbouring villages.
These circumstances unmistakably show that the diseased girls had come to enjoy and stay at the sea side resort of Mypad for 2 or 3 days.
They were not suffering from any mental depression or schizophrenia with suicidal tendencies .
Another circumstance in the case of Kala Rani which is contraindicative of suicide, is that her dead body though seen within an hour or two of the occurrence on the beach, was in a semi nude condition.
612 The sari was not on her dead body, which she was wearing when last seen at about 6 3 P.M.
It can be argued that the sari was washed off her body by the sea waves.
But considering that her dead body was detected only within a couple of hours of the occurrence and the fact that it is customary for women living in or near the coastal towns to tie their series tightly, the possibility of the sari having been swept off by the sea waves was remote.
The inference is that in all probability, she was not wearing this sari when her body was immersed in water.
Ordinarily, no Indian woman would commit suicide by jumping into the sea by getting into such a near nude condition and thereby expose her body to the risk of post mortem indignity.
Another important circumstance which militates against the suggestion of the death of Kala Rani from drowning is that when the body was first seen at 9 P.M., its stomach was not in a bloated condition, for was any froth seen coming out of the mouth of the corpse.
the fact was vouched by PW 23, a fisherman, who was rightly found worthy of credence by the High Court.
It may be added that contrary to what PW 23 has testified A 2 has in the inquest report said that the stomach was bloated with water and froth was coming out of the mouth.
But as shall be presently discussed, these notes regarding the condition of the dead body, were invented by A2 to support his false report that the deceased had committed suicide and her death was from drowning.
Medical jurisprudence tells us that in a case of death from drowning, the stomach is ordinarily found bloated with air and water which is instinctively swallowed by the drowning person during the struggle for life (see Taylor 's Medical Jurisprudence, 12th Edn.
374 375).
The facts that the stomach was not filled with water and bloated and no froth was coming out of the mouth of the deceased, are important symptoms which to a long way to exclude the possibility of death being as a result of suicide by drowning.
Then there were injuries and blood marks on the dead body.
PWs 23, 25, 26 and 27, all testified with one voice that they had seen one injury, from which blood was oozing out on the forehead, another on the thigh and blood marks on the drawer (under garment) of the deceased.
In examination in chief, even PW 49, who in cross examination tried to dilute his version in a possible attempt to favour A2, stated that he had seen a reddish strain (stain ?) on the forehead and blood marks on the drawer of the deceased.
Out of these PWs, 23, 25 and 26 were present near the dead body when A2, accompanied by Al and P.W. 49, went there to hold the presence of an inquest.
PW 23 was a fisherman of Pallipalem, PW 25 was also a resident of the same hamlet.
He was an employee of the Electricity Department.
PW 27 was the Karnam of Gangapatnam.
PWs 23 and 25 were among those villagers who had seen the deadbody washed ashore at about 9 P.M.
On 6 6 71.
The High Court found that the version of these witnesses in regard to the injuries and blood marks on the deadbody was entirely reliable.
No reason has been shown why we should take a different view of their evidence.
613 It is further in the evidence of PWs.
23, 25, 26 and 49 that when the blood marks on the drawer pointed out to A2, the latter ignored it saying that the girl had been out of doors and was in menstruation.
Contrary to what he and the PWs.
had observed at the spot, A2 wrote in the inquest report, P 11, Col. VII: "There are no injuries on the dead body".
Having excluded the possibility of suicide, we may now consider,.
whether the deaths of these girls were accidental.
It is no body 's case that on the 6th June, 1971, any sea craft, vessel or boat met with an accident off or near about Mypad resulting in loss of human life.
No suggestion of accidental death of any person, much less a women, off or.
On the sea share near or far from Pallipalem was put to any of the prosecution witnesses.
Nor such a plea has been put forward by the accused in their statements recorded under section 342, Cr.
P.C Indeed, tie learned Counsel for the appellants has not pursued any such line of argument.
We have, therefore, no hesitation in negating the possibility of accidental death.
This process of elimination inevitably leads us to the conclusion that in all probability the death of these girls, at any rate of Kala Rani, was due to culpable homicide.
Now we come to the last but the most telling circumstance which not only confirms this conclusion and puts it beyond doubt, but also.
unerringly establishes, by inference, the other ingredients of the offence, including that the accused knew or had reason to believe that culpable homicide of Kala Rani had been committed.
This circumstance is the conduct of A2, in intentionally preparing false records and its abetment by A1.
From its very start the investigation conducted by A2 was dishonest and fraudulent.
He intentionally indulged in suppressio veri and suggestio falsi at every step.
He had been informed by the Head Constable (PW 34) at about 8 or 8 45 A.M. in the Police Station that a report from the Sarpanch had been received about the dead body of a girl bearing injuries, found washed ashore near Pallipalem.
This in formation which was passed on to A 2 and on receiving which he proceeded from the Police Station for investigation, was the real I.R.
It was the duty of A 2 to enter faithfully and truly the substance of this information in the Station Diary and to record further that he was proceeding for investigation on the basis thereof.
Instead of doing so, he intentionally suppressed the factum and substance of this first information and the real purpose of his departure from the Police Station in the records prepared by him or by his subordinates in his immediate presence or under his supervision.
Instead of retrieving the written report that had been first received at 8 A.M. in the Police Station and was, returned by the Head Constable to the Sarpanch, he fabricated the document exhibit P. 25, purporting to be the F.I.R. given to him at Mypad by one N. Subba Rao.
The false story contained in this document has been substantially repeated in the inquest report, exhibit P. 25.
614 P.Ws. 23, 25, 27 and 49 discount the presence of any such person, named N. Subba Rao either at the inspection of the dead body in the sea shore by A 2 or at the 'Temple, where according to A 2, he prepared the inquest report.
None of these PWs has sworn that a statement of any N. Subba Rao was recorded in their presence by A 2.
No specific question was put by the defense to PW 49 in cross examination to establish that the report exhibit P 25 was scribed by A2 at Mypad at about 11.30, to the dictation of N. Subba Rao or any other person although the witness was generally questioned as to the number of persons carried in the car.
P. W. 27, the Karnam, has definitely excluded the presence of any informant named Subba Rao.
P.W. 27 testified that after the inquest, Al" A2, P.W. 26 and "a new person" implying PW 49, met him and thereafter all the five (including PW 27) got into the car and proceeded to the village.
P.W. 27 did not vouch the presence of a sixth man in the car.
Only PW 26 has stated that R2 had recorded the statements of witnesses including that of a per son named N. Subba Rao.
PW 26 had reason to tell a lie on this point.
PW 26 admitted that at the time of the inquest, he was an accused in a criminal case of Indukurpet Police Station.
A2 was at the material time In charge of that Police Station and was presumably concerned with the investigation of that case against PW 26.
PW 26 therefore appears to have deviated from truth in regard to the presence of N. Subba Rao, under the influence of the accused.
In any case, the evidence of PW 26 on this point stands contradicted by the reliable testimony of PWs 23, 25, 27 and 49.
In the inquest report, as also in exhibit P 25, the address of this mysterious person is recorded as "Nuthalapatti Subba Rao son of Venkateswarlu, aged about 37 years, Vysya of Patha Guntur." Despite efforts, the investigating officers, PWs 59 and 60, could not trace on the basis of this address, any person bearing the said particulars at Pata Guntur or anywhere else in the District.
In response to the memo issued by the D.S.P. (PW 59) A 2 could neither produce this N. Subba Rao, nor give any indication about his existence, though A2 claimed to have known him.
For these reasons, the High Court was right in holding that this Nathalapatti Subba Rao was a fictitious person of A2 's imagination.
Similarly, during investigation all efforts made by PWs 59 and 60 to trace and find if Vijay and Nirmala prostitutes, represented in exhibit P 25 and exhibit P 11 as the deceased persons ever existed in flesh and blood, remained futile.
In these premises, the High Court was right in concluding that Vijaya and Nirmala prostitutes were also the coinage of the brain of A2.
It is necessary to say something more about exhibit P 25 because the entire story was spun around it by A 2.
It did not see the light of the day till the 11th June.
A 2 did not send it to the Police Station for registration before that date.
It is in the evidence of P. W. 55, who at the material time was a Head Constable posted in this Police Station, that after his departure in the morning of the 7th, A 2 returned to the Police Station on the 10th evening and it was then that he handed over this document to the witness with the direction that the latter should enter that report in the relevant register, dating it as the 7th June, 1971.
The Head Constable after slight hesitation 615 agreed and inserted this report in the blank space meant for the entries of the 7th June, and thereafter, as required by A2, handed over to the latter, a copy of that report.
A 2 also made an entry (exhibit P 34) in the General Diary of the Police Station, dated 10.6.1971 on 11.6.1971 at 2 A.M.
It reads: "Returned to P.S. after leaving it on 7.6.71 at 9.30 a.m. visited Mypadu en route to Gangapatnam at 11 00 hours at 11 30 a.m., recorded statement of N. Subba Rao, sent to Police Station for issuing First Information Report u. sec.
174 Cr.
P.C. then visited Pallipalem at 12 30 p.m. investigated, held inquest over dead body of K. Vijaya.
At 20 30 p.m., left village reached Mypadu at 21.30 hours, made enquiries in Cr. 48/71 and halted.
On 9.6.71 visited Gangapatnam detailed duties for bandobust and visited Ravur, investigated into Cr. 47/71, visited Nellore at 12 30 hours" did bandobust for festival and halted for the night.
On 9.6.71 visited Mypadu for petition enquiry and investigated into Cr. 48/71, 41,42 and 44/71 and hailed.
On 10 6 71 visited Gangapatnam, supervised and did bandobust for car festival at 00. 30 hours, received First Information Reports in Cr. 49 to 51/71 at 00 45 hours, left the village with men and reached Police Station.
" A mere glance at this report betrays its falsity.
This shows how in his anxiety to suppress the truth he tried to reinforce and cover up one falsehood with another.
In this connection, it may be noted that the D.S.P. persistently pressed A 2 to send the copies of the F.I.R. and the Inquest Report.
A 2 was unable to supply any copy of the F.I.R. before the 12th of June, when the D.S.P. himself came to the Police Station and collected it.
The D.S.P. (P.W. 59) testified that on the 11th June, 1971, he had questioned A 2 about the First Information Report and the inquest report.
As a result he received a copy of the F.I.R.
On the 12th but did not receive any copy of the inquest report.
Consequently on 14.6.71, he telephoned to A2 to send the case diaries and inquest report without further delay.
Despite these efforts, the D.S.P. did not receive whose records on that day.
on 15.6.71, he issued a memo.
to A 2 directing the latter to produce immediately the complaint of N. Subba Rao, the inquest report and the case diaries.
It was only then that A2 produced the persistently requisitioned records.
These inordinate delays in sending the records prepared by A2, confirm the testimony of PWs 23, 25 and 49 that no inquest on the dead body was held at the spot, nor was the inquest report or any other record prepared there and then, and that their signatures were obtained by A2 on a blank sheet of paper.
Of course PW 26 stated that A2 had recorded statements of witnesses and had prepared the inquest report at the Temple.
As already noticed, it is not prudent to accept this version of PW 26.
He had a motive to favour A2.
Moreover, his version stands inferentially falsified by the circumstances including the unusual delay in registering the report exhibit P 25 in the Police Station and in sending the copies of the records to the D.S.P. 616 Section 174, Cr.P.C peremptorily requires that the officer holding an inquest on a deadbody should do so at the spot.
This mandate is conveyed by the word "there" occurring in sec.
174(1).
Sub section (3) of the Section further requires the officer holding the inquest to forward the body with a view to its being examined, by the medical man appointed by the State Government in this behalf, if the state of the weather and the distance admit of its being so forwarded without risk of such purification on the road as would render such examination useless.
The sub section gives a discretion to the Police officer not to send the body for post mortem examination by the medical officer only in.
One case, namely, where there can be no doubt as to the cause of the death.
This discretion however is to be exercised prudently and honestly.
Could it be said in the circumstances of the case, that there was no doubt as to the death of Kala Rani being from drowning ? In this connection it is important to note that Kala Rani was not a total stranger to A 2.
It is in evidence that A 2 used to go to Nellore for Bandobust and there he had sufficient opportunity to come across Kala Rani who was a prominent student leader.
The testimony of P.W. 47 is to the effect that when on 17.7.1971, A2 came to him and requested the witness to dissuade the father of the deceased from getting the dead body exhumed, he (A2) admitted that Kala Rani deceased was well known to him The body was not in an unidentifiable condition.
A 2 therefore could he under no mistake that it was the body of Kalarani deceased particularly when he inspected it after its face had been washed by PW. 23 under the orders of A 2.
Despite such knowledge, he laid a false trail and prepared false record mentioning that the deadbody was of a prostitute named Vijaya.
Medical jurists have warned that in the case of a deadbody found floating in water, the medical man from a mere observance of the external condition of the body should not jump to the conclusion that the death was from drowning.
Only internal examination of the body can reveal symptoms which may indicate with certainty as to whether the death was from drowning or from.
unlawful violence before the body was immersed in water.
That is what Taylor the renowned medical jurist, has said on the point: "When a deadbody is thrown into the water.
and has remained there sometimes water.
fine particles of sand, mud.
weeds etc.
may pass through the windpipe into the large air tubes.
In these circumstances, however, water rarely penetrates into the smaller bronchi and alveoli as it may by aspiration, and even the amount which passes through the glottis is small.
If immersed after death the water is found only in the larger air tubes and is unaccompanied by mucous froth.
Water with suspended matters can penetrate even to the distant air tubes in the very smallest quantity even when not actively inhaled by respiratory efforts during life The quality, or nature of the suspended matter may be of critical importance.***When decomposition is advanced the lungs 617 may be so putrefied as to preclude any opinion as to drowning but the demonstration of diatoms in distant parts of the body inaccessible except to circulatory blood, provides strong evidence of immersion in life if not of death from drowning." (emphasis supplied) A2 was a Police officer of standing and experience.
He knew the deceased.
He saw injuries on her deadbody.
He must have known if he were honest that in the circumstances of the case autopsy of the deadbody by a medical officer was a must to ascertain the cause of her death.
Instead of sending the deadbody for post mortem examination, he in indecent haste, purposely got it buried without holding, any inquest at the spot.
He did not send for the relations of the deceased.
Even a layman like the Karnam (PW 27) felt something strangely amiss in this conduct of A2.
In response to the queries made by the Karnam, A2 made false excuses.
He intentionally misrepresented (in concert with A1) that PW 49 was a relation of the deceased.
He flouted all the salutary requirements of section conduct in distorting and suppressing material evidence and in preparing false records (exhibit P 11 and P 25) as to the identity of the deadbody, the cause of the death and the falsification of the data bearing on that cause, could not be explained on any reasonable hypothesis save that of his guilt.
The circumstances established in this case unmistakably and irresistably point to the conclusion that within all human probability, accused No. 2 knew or had reasons to believe that Kala Rani had been done to death by some person or persons.
All the elements of the charge under section 201 had thus been proved to the hilt against him.
Before considering the case of Al, we may notice here the decision of this Court in Palvinder Kaur, vs State of Punjab(1).
This decision was cited by the learned Counsel for the appellants in support of his argument that the circumstances: that the deceased died, that the appellant prepared false record regarding the cause of her death or caused post haste disposal of the dead body without any autopsy or its identification by the relations of the deceased, do not establish the cause of Kalarani 's death or the manner and the circumstances in which it came about.
Counsel laid particular stress on the observation of this Court in that case that in cases depending on circumstantial evidence courts should safeguard themselves against the danger of basing their conclusions on suspicions howsoever strong.
The decision in Palvinder Kaur 's case (supra) is a precedent on its own facts.
The observations of this Court to the effect, that "Jaspal died, that his body was found in a trunk and was discovered from a well and that the appellant took part in the disposal of the body do not establish the cause of his death or the manner and circumstances in which it came about" cannot be construed as an enunciation of a rule of law of general application.
Whether the circumstantial evidence in a particular case is sufficient and safe enough to warrant a finding that an offence has been committed.
is (1) 9 L925SupCI/75 618 a question which belongs to the realm of facts and not of law.
So is the question whether the accused knew or had reasons to believe that such an offence has been committed.
It is true that this question further depends on an assessment of the accused 's mind.
Nevertheless, it is a question of fact "The state of a man 's mind", quoth Lord Bowen, "is as much a fact as the state of his digesion".
In Palvinder Kaur 's case (supra) there was, in the first place, no material, direct or indirect, justifying a finding that the death of Jaspal was caused by the administration of potassium cyanide and if the defence version was believed his death would be the result of an accident.
In that version was disbelieved then there was absolutely no proof of the cause of his death.
In the method and the manner in which the deadbody of Jaspal was dealt with and disposed of by the accused did raise some suspicion but from these facts, the Court found it unsafe to draw a positive conclusion that he necessarily died an unnatural death.
Nor could the possibility of the commission of suicide by Jaspal be totally ruled out.
The position of A2 in the present case was very different.
He was a Police officer and as such was expected to discharge the duties entrusted to him by law with fidelity and accuracy.
He was required to ascertain the cause of the death and to investigate the circumstances and the manner in which it was brought about.
His duty it was to make honest efforts to reach at the truth.
But he flagrantly abused the trust reposed in him by law.
He intentionally fabricated false clues, laid false trails, drew many a red herring across the net, smothered the truth, burked the inquest, falsified official records and short circuited the procedural safeguards.
In short, he did everything against public justice which is penalised by s 201, Penal Code.
The other circumstantial evidence apart, the series of these designed acts of omission and commission on the part of A2, were eloquent enough to indicate in no uncertain terms that A2 knew or had reasons to believe that Kalarani 's death was homicidal.
It is not disputed that A1 was a friend of A 2.
It was A l who had supported A 2 's idea that the latter should himself go to the spot to investigate as the deceased girl appeared to be from a high class family.
Standing alone, this circumstance is not of a conclusive tendency.
But in the context of his subsequent conduct it assumes significance.
He wilfully conducted himself in such a manner that there could be no doubt that he was a guilty associate of A 2.
When in the context of the burial of the deadbody ordered by A 2 without sending the body for post mortem, the Karnam (PW 27) asked whether any relation of the deceased had come, A 2 pointed towards PW 4 saying that he was related to the deceased.
Simultaneously, A 1 said .
"Yes".
This concerted conduct of A 1 in fraudulently representing PW 49 to be a relation or the deceased, when he knew that PW 49 was not such a relation, clearly marks him out as an intentional abettor and a guilty partner in the commission of the offence under sec.
201, Penal Code.
619 There can be no doubt that on the basis of the facts found, the charges under sections 218, 468, Penal Code had been fully established against the appellant; A 2 being a public servant charged with the preparation of official record relating to the investigation of the cause of the death of Kalarani, framed that record in a manner which he knew to be, incorrect with intent to save or knowing to be likely that he will thereby save the true offender or offenders from legal punishment.
obviously, he prepared this false and forged record with the fraudulent and dishonest intention of misleading his, superior officers and in during them to do or omit to do anything which they would not do or omit if they were not so deceived or induced.
A l, as discussed already, facilitated and intentionally aided A 2, in the preparation of the false and forged record.
For the foregoing reasons we uphold the convictions and sentences of the appellants, on all the counts, as recorded by the High Court, and dismiss the appeal.
V.P.S. Appeal dismissed.
| IN-Abs | On a report given by the father, regarding the disappearance of his two daughters, investigation was taken up by the D.S.P. because of certain special circumstances.
After completing the investigation, A 2, a sub inspector of police, A 1, his friend, and another were charged with offenses under sections 120B, 366, 376.
302/34, 201, 218, 468/34, and 324 I.P.C. for conspiracy, abduction, rape, murder, calling evidence of crime to disappear, fabricating reports, forgery and causing hurt.
The trial court acquitted all the accused.
On appeal by the State, the High Court convicted A.1 and A.2 for offences under sections 201, 218 and 468 I.P.C. Dismissing the appeal to this Court, ^ HELD: (1) In order to bring home an offence under section 201, I.P.C., the prosecution has to prove; (a) that an offence has been committed; (b) that the accused knew or had reason to believe that the offence has been committed; (c) that with such knowledge or belief he, (1) caused any evidence of the commission of that offence to disappear, or, (ii) gave any information`respecting that offence which he then knew or believed to be false; (d) that he did so with the intention of screening the offender from legal punishment; and (e ) if the charge be of an aggravated form, as in the present case, that the offence in respect of which the accused caused evidence to disappear was punishable with death or with imprisonment for life or with imprisonment extending to 10 years.
[610A E] Whether the circumstantial evidence in a particular case is sufficient and safe enough to warrant a finding that an offence has been committed, is a question which belongs to the realm of facts and not of law.
So is the question whether the accused knew or had reason to believe that such an offence has been committed.
[617H 618B] F Palvinder Kaur vs State of Punjab , explained.
(2) In the present case the two girls died an unnatural death.
The corpse of one was found on a beach having been washed ashore and the Corpse of the other was seen floating in the sea.
A fisherman who noticed the second body saw marks indicating throttling.
He removed a wrist watch and ornament, from it and allowed the body to drift away.
The wrist watch and ornaments were identified as belonging to the younger sister of the first victim.
The 3 possibilities are, that they committed suicide by drowning, or that their deaths were accidental, or that they were done to death by some person or persons.
The choice of any of these possibilities would lead to the exclusion of the other two.
[610G H] 3(a) The elder sister was a graduate and a nature girl of 22 who used to be the leader of the College Union.
On the day of the occurrence the deceased girls along with their parents had participated in certain festivities.
They were cheerful and there was no evidence to show that they were suffering from any mental depression with suicidal tendencies.
[611E H] 603 (b) The body on the sea shore was in a semi nude condition.
It had on only blouse, brassiere, petticoat and drawers but no sari.
From the fact that it is customary for women of the locality to tie their series, tightly the possibility of the sari having been swept off be waves was remote.
This shows that she was not wearing her sari when her body was immersed in water, but no Indian woman would commit suicide by jumping into sea in such a near nude condition because.
ii would expose her body to post mortem.
indignity.
[611 H 162 C] (c) When the body was first seen there were, an injury on the forehead from which blood was oozing, a reddish abrasion on the thigh and blood marks on the drawers.
the stomach, however, was not in a bloated condition.
These circumstances show that death was not due to drowning.
[612 G; E F] (4) It was nobody s case that any boat met with an accident off or near the sea shore resulting in loss of human life.
No suggestion of accidental death of any person or woman was put to and prosecution witness.
Such a plea had not ever been put forward by the accused in their statements recorded under s, 342, Cr.
P.C. Therefore, the possibility of accidental death must also be excluded.
[613 B D] (5) This process of elimination of suicide and accidental death inevitably leads to the conclusion that the death of these two girls, or at any rate of the first victim, was due to culpable homicide.
[613 D] (6) From the very start, the investigation conducted by A. 2 was dishonest and fraudulent.
He intentionally indulged in suppessio veri and suggestio falsi.
[613 E F] (a) The morning after the night when the dead body was seen on the beach, a report was handed at the Police Station but the Head Constable returned it saying that it should be drawn up in the printed form and signed by the village Munsuff.
A little later, A 2, the sub inspector incharge of the police station, came there and the Head Constable told him about the report.
At that time A.1 and P. W. 49, also came to the Police Station, and A.1 also referred to the finding of the dead body on the seashore.
Thereafter, A.1` A 2 and P.W. 49 and others went to the seashore at about noon.
A 2 did not hold any inquest on the dead body, but instead, directed the body to be buried.
When the Karnam questioned A 2 why he did not send the body for post mortem examination, A 2 replied that the body was that of a prostitute though the body was in an identifiable condition and he new the victim personally.
He also said that it was a case of suicide and that P.W, 49 was a relation of the victim.
A.1, who heard this, also said that P.W. 49 was a relation of the victim.
Thereafter, A 2 fabricated an Inquest Report in which he stated falsely that there were no injuries on the dead body and that the stomach was bloated due to drinking of water, suggesting that it was a case of death by drowning.
He also fabricated a false report as if given to him by one who knew the victim and the other girl to be prostitutes.
That report was handed over by A 2 at the Police Station only 5 days later and he asked the Head Constable to note the date as if given 3 days before.
The Head Constable did so after some hesitation.
Inspire of persistent requests by the D.S.P., A.2 sent the copies of the F.I.R. and Inquest Report prepared by him only after an inordinate delay.
A 2 also made false entries in the General Diary of the Police Station to corroborate the false Inquest Report and the fictitious complaint.
He even tried to dissuaded the father from getting the body, which was buried, exhumed.
[605 G 607 C; 614 G 616 E] (b) It was A 2 s duty to enter faithfully and truly the substance of the information in the station diary and to record further that he was proceeding for investigation on the basis thereof when he received information from the Head Constable about the reports regarding the finding of a dead body on the seashore.
Instead of retrieving the written report that had been first received at the police station and returned by the head constable, he fabricated another document purporting to be the first information.
All the reliable witnesses for the prosecution have deposed that no such person as the one who gave the first information was present at the scene of occurrence.
When the D.S.P. was investigating into the matter, A 2 was not able to produce or give any indication about that informant though he claimed to have known him.
Efforts to trace the existence of the two prostitutes mentioned in that report were also futile leading to the inference that they were also fictitious persons.
[613 F 614 F] 604 The credible circumstantial evidence on record re inforced by the inference available from the incriminating conduct of the appellants, particularly A 2, in deliberately preparing false records to suppress the identity and the cause of death of the deceased girls fully justifies the conclusion reached by the High Court.
[611 B C] (c) Section 174, Cr.
P.C. peremptorily requires that the officer should hold an inquest on a dead body at the spot.
This mandate is conveyed by the word there occurring in section 174(1).
Section 174(3) gives a discretion to the Police officer not to sent the body for post mortem examination only in one case, namely, where there can be no doubt as to the cause of the death.
This discretion has to be exercised prudently and honestly.
[616 A C] (d) A 2 is a police officer of standing and experience, who was expected; to discharge the duties entrusted to him by law with fidelity and accuracy.
He was required to ascertain the cause of death and investigate the circumstances and the efforts in which it was brought about.
His duty was to make honest efforts to reach at the truth.
He knew the deceased and saw the injuries on her dead body and must have known that in the circumstances of the case autopsy of the dead body was necessary to ascertain the cause or her death.
He flouted all the salutary requirements of section 174.
P.C. and his conduct in distoring and suppressing material evidence and preparing false records as to the identity of the dead body the cause of death and the falsification of the data bearing on that cause, could not be explained on any reasonable hypothesis save that of his guilt.
[617 B E; 618 D F] (7) As regards A 1, his concerted conduct, including that in supporting the fraudulent misrepresentation made by A 2 to the Karnam.
regarding PW 49 being a relation of the deceased, shows that he was a guilty associate of A 2.
|
N: Criminal Appeal No. 108 of 1971.
Appeal by Special Leave from the Judgment and order dated the 20th November, 1970 of the Allahabad High Court in Criminal Appeal No. 495 of 1968.
D. Mukherjee, U. K. Jha and U. P. Singh: for the Appellant.
D. P. Unival and o. P. Rana for the Respondent.
The Judgment of the Court was delivered by BEG, J.
The four appellants Daryao Singh, aged 46 years.
Birbal aged 50 years, Dharam Pal aged 29 years and Om Pal, aged 15 years, were tried, alongwith 14 others, for the offence of rioting in the course of which two murders were committed, on 7.6.1967, at about 6.30 a.m., on a path adjoining the field of the appellant Daryao Singh leading to village Parsoli from village Nirpura, in Police Station Doghat, in the District of Meerut.
The Trial Court acquitted eleven accused persons giving them the benefit of doubt and convicted seven including the four appellants.
Each of the accused persons was charged and convicted under Section 302, read with Sections 149, Indian Penal Code and sentenced to life imprisonment, in addition to charges and convictions under Section 149/324 and 149/34 I.P.C. and either under Section 147 or Section 148 I.P.C. depending upon the weapon alleged to have been used by an accused person.
589 The prosecution case revealed a long standing enmity between two groups of village Nirpura: one to which the appellants belonged and another to which Mukhtara and Raghubir, the murdered men, and the four other injured persons belonged.
As is not unusual, the origin of the hostility between the two sides seems to have been a dispute over cultivable land between collaterals who had some joint Khatas.
Asa Ram, P.W. 1, claimed to be in separate possession of some plots with his two brothers, including Raghubira (murdered), and his uncle Mukhtara (murdered) .
It was alleged by Asa Ram (P.W. 1) that Daryao Singh appellant wanted to take forcible possession of some land cultivated by him.
Daryao Singh and others had already filed partition suit which was pending at the time of the occurrence.
It appears that Hargyan, the father of the appellant Daryao, a first cousin of Mukhtara, the murdered man, had also been murdered in 1923 over a similar dispute.
Asa Ram (P.W.1), and Raghubira (deceased), Bija (P.W. 10) and Asghar (P.W 4) had been convicted and sentenced to life imprisonment.
They had been released on parole after five years ' imprisonment On the date of occurrence, Mukhtara, the murdered man, was said to be proceeding with Raghubir, who was also murdered, and Asa Ram, P.W.1, and Bija, P.W.10, all sitting in a buggi driven by Asghar, P.W.4, and Smt.
Jahani, P.W.3, the wife of Asa Ram, P.W.1, was said to be following the buggi at a short distance with some food for the party.
When this buggi reached the field of Daryao Singh, where a number of persons, said to be eighteen altogether, whose names are mentioned in the First Information Report lodged at Police Station Doghat at a distance of three miles from village Nirpura at 8.30 a.m., were sitting on the boundary.
These persons are alleged to have surrounded the buggi and attacked its occupants with balams and lathies shouting that the whole party in the buggi should be killed.
give occupants of the buggi, and, after that, Smt.
Jahani, who soon joined them, were injured.
Two of them, Mukhtara and Raghubir, died very soon after the attack.
It was alleged that Dharam Pal, Birbal and Daryao, appellants, and Nahar, Ajab Singh, and Ram Kishan, acquitted persons, were armed with balams, one Salek Chand was armed with a spade, and the rest with lathis.
A number of witnesses are said to have arrived in response to the shout of the injured occupants of the buggi.
The following injuries are shown to have been sustained by the victims of the attack: 1. MUKHTARA: "1.
Vertical abrasion, 1 1/2 in.
x 1/2 in.
On the head, 4 in.
above the middle of the left eye brow 2.
Transverse abrasion, 1 3/4 in.x3/4 in.
On the head, 5 in.
above the right eye brow.
Round swelling" 2 in.x2 in.
On the right side of the head, 1/2 in.
above the ear, there was a depressed fracture 2 in.x2 in.
underneath on the bone.
Transverse incised wound 1 1/2in.x1/2 in.xboneand brain deep on the head 1 in.
behind the middle of the right car.
Brain matter was coming out of the wound.
590 5.
Transverse incised wound 1 1/4in.x 1/2 in.
x bone deep on the A head 3 in.
behind the upper part of the right car.
The margins of injuries Nos. 4 and 5 were clear cut, smooth and well defined and angles on both the end were acute.
Round blue mark 2 in.x2 in.
On the right shoulder portion.
There was swelling all over the head.
There was no reference of injuries Nos. 1 and 6 in the inquest report .
RAGHUBIRA 1.
Transverse abrasion 1/4 in.x1/2.
On the left ankle inner side.
Vertical punctured wound in.x1/3 in.x1/4 in.
On the back side, of the elbow, margins, clean cut.
smooth and wall defined and angles were acute.
Transverse lacerated wound on the head, 1 1/2 in.
x 2 in.
bone deep on the right side 3 in above the car.
Round wound on the head 4 1/2 in.
above the middle of the right eye brow with margins clean cut".
ASA 1.
Punctured wound 1/2 in.x1/4 in.x1/4 in.
On the left side of the chest with abrasions on the margins, 64 in.
below the axile.
Abrasion 1/2 in.x1/4 in.
On the left shoulder.
Abrasion 1/2 in.x1/4 in.
oblique, on the right side of the chest extending towards right shoulder from epigastrium.
Abrasion 1/4 in.x1/8 in.
On the inner side of the left hand I in.
above the wrist.
Abrasion 1/4in.x1/6 in.
On the right arm back side 3 in.
above the elbow.
Contusion 3/4 in.x1/2 in.
On the right side 3 in.
below the edge of the iliac crest.
Incised wound 1/2 in.x1/10 in.
x skin deep 1/2 in.
below the left eye.
" 4. SMT.
JAHANI: 1.
Lacerated wound 1 1/3 in.
x 1/2 in.
bone deep from front to backward 3 1/2 in.
above the left ear.
Contusion 4 1/4 in.x1 in.
On the left scapular region.
2 1/2 in.
below the shoulder.
Contusion 1 1/2 in.x1/4 in.
parallel to the earth extending from the upper and inner end of injury No. 2.
These injuries were simple and had been caused by some blunt weapon, like lathi and were about 6 hours old (fresh).
I had prepared the injury report exhibit Ka 16 at the time of examination.
It bears my signature and is correct." 591 5.
ASGHAR: 1.
Contusion 2 in.x1/4 in.x1/4 in.
going from front to back 31 in.
above the nose.
Punctured wound 1 in.x ' in.x 4 in.
On the left hand, outer side 2 in.
below the elbow.
BIJAI SINGH: 1.
Contused wound 1/2 in.x1/2 in.
x skin deep at the part above the nail of the thumb of right hand with contusion 1 1/4 in.
x1/2 in.
in the inner part of the nail.
Contusion 2 1/4 in.x3/4 in.
extending from the palm on the 1st and 2nd knuckles whereblood had clotted in an area of 1/2 in.
x1/4 .
On the palmer side.
Abrasion 1/2 in.x1/4 in.
On the back and anterior side of right hand, 3 1/2 in.
above the wrist.
" Injuries were found on the side of the accused on 3 appellants only.
They were as follows: (1) OM PAL: 1.
Lacerated wound 1/2 in.x4/10 in.x2/10 in.
on the inner side of left forearm 3 1/2 in.
above the left wrist.
Lacerated wound 2/10 in.x2/10 in.x6/10 in.
On the inner side of left forearm.
Abrasion 3/10 in.
X21 10 in.
On the upper r side of left forearm, 3 1/2 in.
above the left wrist.
" 2. DARYAO: "1.
Abrasion in.x3/10 in on the left shoulder in front side.
Wound with scab 4/10 in.x2/10 in.
On the left are outer side, 6 in.
below left shoulder".
BIRBAL: 1.
Lacerated wound 2 in.x3/10 in.
bone deep on the front , side of head.
Abrased contusion 1 in.x2/10 in.
On the left side of head, 3 in.
above the left ear.
Contusion 1/2 in.x4/10 in.
On the right side of head, 2 in.
above the right ear.
Abrasion 1/4 in.x1/4 in.
On the index finger of the right hand upper side on the middle phalux.
Abrasion 1/4 in.x1/4 in.
On the upper side at the root of the middle finger of right hand.
Abrasion 1/2 in.x1/10 in.
On the inner side of the lower portion of left fore arm, 3 in.
above the wrist.
Abrasion 3/10 in.x1/10 in.
On the inner side of left wrist.
592 8.
Lacerated wound 3/10 in.x1/10 in.x3/10 in.
an the A right at a distance of 31 in.
from side of thigh, anterior iliac spine".
It is significant that in answer to the last question put to Daryao Singh, appellant, in the Committing Magistrate 's Court, under Section 342 Criminal Procedure Code, whether he had nothing else to say, the first thing that came to his mind was that Asa Ram P.W.1, and Bijai, P.W. 10 and Raghubir (deceased) had killed his father about 15 years ago.
The defense case seemed quite absurd.
It was that, Asa Ram and Bijai and Asghar, after having killed Mukhtara and Raghubir, haul come and attacked the three injured appellants at the time and place given by the, prosecution.
Their defense witness, however, in an obvious attempt to explain the injuries of the three appellants, put forward the entirely new version that, when Asa, Bijai, and Asghar, were killing Mukhtara and Raghubir, the three injuries appellants had attempted to save the murdered men and were injured as a consequence.
The accused had even filed a First Information Report on these lines.
They unsuccessfully tried to prosecute Asa and Bijai and Asghar who could not, as the Trial Court and the High Court had rightly observed, be expected to run berserk suddenly and attack persons on their own side for no explicable reason.
The prosecution had, in addition to examining injured witnesses, mentioned above, produced Rattan Singh P.W.2, Kalu, P.W.9, and Lakhi, P.W.7, whose testimony was discarded by it on two grounds: firstly, because each one was shown to have some enmity with some accused person; and, secondly, because they were said to have been standing at a Harat nearly 400 paces away from where` according to the High Court, they could not have seen the occurrence.
If there was no obstruction to the range, of vision, and none was shown by evidence, these witnesses could at least make out the number of assailants from this distance as sunlight was there.
The prosecution evidence suffered from some quite obvious infirmities.
Each of the four injured eye witnesses, while naming each of the eighteen accused persons as participants in the occurrence and specifying their weapons, without any contradiction, had failed to assign any particular part to any of them.
Each injured witness said that all the eighteen accused persons, named in the First information Report, were assaulting the injured.
This was hardly consistent with either the medical evidence or the very short time the whole occurrence was said to have lasted.
It was physically impossible for all the eighteen accused persons to attack simultaneously each of the five victims.
However, we cannot interpret the impressions of rustic witnesses, sought to be conveyed through their statements` as though they were made in carefully drawn up documents calling for a literal interpretation.
It was likely that each of them had seen some acts of some assailants, but, due to natural discrepancies in their accounts, as each could only depose the part he had observed, each had been instructed to omit this part of his testimony.
That may explain how each consistently stated that all the accused persons were attacking 593 his or her party although he or she could not specify which accused attacked which victim.
From the manner in which each witness could, without making any mistake, name each of the eighteen accused persons, almost in the same order, and specify the weapon each carried, without any discrepancy, some tutoring could be suspected.
Nevertheless, both the Trial Court and the High Court had reached the definite conclusion that the party of assailants consisted of more than five persons.
It also found that this party was sitting on the boundary of the field of Daryao, apparently waiting with their weapons for the buggi, carrying Raghubir and Mukhtara and others., to reach the spot where they surrounded it and attacked.
It was clear, from the nature and number of injuries of both sides, which we have set out above in extenso, that the attacking party must have consisted of more persons than the party of the male victims who were five in number.
Even if these five victims were sitting in the buggi they were not all empty handed.
Some of them had lathis which they plied in self defence.
The number and location of injuries on both sides also indicated an attack by a group of persons which must have surrounded the party traveling in the buggi.
Even if two persons are engaged in stopping the buggi and there are two on each of the two sides of the buggi their number would be six.
Again, even if at least one person is assumed to be the assailant of each of the victims, in a simultaneous attack upon them, the number of such assailants alone would come to at least six.
It is, however, clear from the injuries on Mukhtara and Raghubir that each was attacked by more than one person because each had injuries with sharp edged weapons and lathis.
these facts were enough to come to the conclusion that the total number of assailants could not conceivably have been less than five.
The High Court however, after giving the benefit of doubt to four of the accused persons, on the ground that their cases did not differ from those of the others acquitted, came to the obviously correct conclusion that at least the four appellants before us must have taken part in the attack because they admitted their participation in the occurrence which took place at the time and place of the incident in which Raghubir and Mukhtara had lost their lives.
Three of the accused persons as already indicated, had received injuries.
On their own version, these injuries were sustained in the same occurrence.
If, therefore, the prosecution version about the broad character of the incident is correct, the only question which remained was: Against which accused person was the case of participation in the attack established beyond reason able doubt? The High Court came to the conclusion that the admissions of the four accused, corroborated by the injuries on the bodies of three OF them, left no doubt whatsoever that they were, in any case, among the assailants.
The others had merely been given the benefit of doubt lest some injustice is done by relying implicitly on partisan witnesses appearing in a type of case in which the innocent ale not infrequently sought to be roped in with the guilty who are, of course, not spared.
This did not mean that the total number of assailants was actually less than five as the learned Counsel for the appellants asked us to presume from the fact that fourteen out of the eighteen accused persons were actually acquitted.
594 It is true that the acquittal of an accused person does raise, in the eye of law, a presumption that he is innocent even if he was actually.
guilty.
But, it is only the acquitted accused person and not the convicted accused persons who can, as a rule, get the benefit of such a presumption.
The effect of findings on questions of fact depends upon the nature of those findings.
If, for example, only five known persons are alleged to have participated in an attack but the Courts find that two of them were falsely implicated, it would be quite nature; and logical to infer or presume that the participants were less than five in number.
On the other hand, if the Court holds that the assailants were actually five in number, but there could be a doubt as to the identity of two of the alleged assailants, and, therefore, acquits two of them the others will not get the benefit of doubt about the identity of the two accused so long as there is a firm finding, based on good evidence and sound reasoning, that the participants were five or more in number.
Such a case is one of doubt only as to identity of some participants and not as to be total number of participants.
It may be that a definite conclusion that the number of participants was at least five may be very difficult to reach whale the allegation of participation is confined to five known persons and there is doubt about the identity of even one.
But, where a large number of known persons (such as eighteen, as is the case before us), are alleged to have participated and the Court acts on the principle that it is better to err on the side of safety, so that no injustice is done to a possibly wrongly implicated accused, and benefit of doubt is reaped by a large number, with the result that their acquittal, out of abundant caution, reduces the number of those about whose participation there can be no doubt to less than five, it may not be really difficult at all, as it not in she case before us, to recall the conclusion that, having laggard to undeniable facts, the number of participants could not possibly be less than five.
We have, for the reasons given above, also reached the same conclusion as the learned Judges of the Allahabad High Court.
We wish that the High Court had itself given such reasons, which are not at all difficult to find in this case, so that its conclusion on the number of participants may not have appeared ratter abrupt.
Justice has not only to be done, but, as have been often said, must manifestly appear to be done.
Even if the number of assailants could have been less them five in the instant case (which, we think, on the facts stated above, was really not possible), we think that the fact that the attacking party was clearly shown to have waited for the buggi to reach near the field of Daryao in the early hours of 7.6.1967, shows pre planning.
Some Of the assailants had sharp edged weapons.
They were obviously lying in wait for the buggi to arrive.
They surrounded and attacked the occupants shouting that the occupants will be killed.
We do not think that more convincing evidence of a pre concert was necessary.
Therefore, if we had thought it necessary, we would not have hesitated to apply Section 34, I.P.C. also to this case.
The principle of vicarious liability does not depend upon the necessity to convict a required number of persons.
It depends upon proof of facts, beyond reasonable 595 doubt which makes such principle applicable.
(See: Yehwant & Anr.
vs State of Maharashtra;(1) and Sukh Ram vs State of U.P.)(2).
The most general and basic rule, on a question such as the one we are considering, is that there is no uniform, inflexible or invariable rule applicable for arriving at what is really an inference form the totality of facts and circumstances which varies from case to case.
We have to examine the elect of findings given in each case on this totality.
It is rarely exactly identical with that in another case.
Other rules are really subsidiary to this basic verity and depend for their correct application OF the peculiar facts and circumstances in the context of which they are enunciated.
In Yeshwant 's case (supra), the question was whether the acquit(ah of an alleged participant, said to be Brahmanand Tiwari, for the murder of a man called Sukal, could make it impossible to apply the principle of vicarious liability to convict, under Section 302/34 I.P.C., Yeshwant, the only other participant in under.
This Court observed (at p.303): The benefit of this doubt can only go to the appellant Brahmanand Tiwari and not to the other accused persons 13 who were known well to each eye witness." Distinguishing Krishna Govind Patil vs State of Maharashtra (3) this Court said in Yeshwant 's case (supra) (at p. 302): "We do not think that this decision which depends upon its own facts, as criminal cases generally do, lays down any general principle that, where the identity of one of the participants is doubtful, the whole case must end in acquittal.
Such a question belongs to the realm of facts and not of law: ` The following cases were also cited before us: Dalip Singh & vs State of Punjab (4) Bharwad Mepa Dana & Anr.
vs State of Bombay;(5) Kartar Singh vs State of Punjab;(6) Mohan Singh vs State of Punjab;(7) Ram Bilas Singh & Ors.
vs State of Bihar(8) In the case of Ram Bilas Singh (supra) previous decisions of this Court on the question argued before us have been considered at some length and a passage from Krishna Govind Patil 's case (supra) was also quoted.
In none of these cases was it decided that where, out of abundance of caution, a large number of accuse(l persons obtained an acquittal with the result that the number of those whose participation is established beyond reasonable doubt is reduced to less than five, but, at the same time, it is clear that the total number of assailants could not be less than five, the convicted accused persons must necessarily get the benefit of doubt arising in the case of the acquitted accused persons.
A case like the one before us stands on the Same footing as any other case where there is certainty that the number of participants was not less than five but there is doubt only as to (1) [1973] I S.C.R. p. 291 @ 302 & 303.
(2) [1974) 2 S.C.R. p. 518.
(3) ; (4) ; (5) ; (6) ; (7) [1962] Suppl (3) S.C.R. 848.
(8) 596 The identity of some of the participants.
It has to be remembered that doubts may arise with regard to the participation of a particular accused person in circumstances whose benefit can only be reaped by the accused who raises such doubt.
Doubts may also arise about the veracity of the whole prosecution version and doubts about the participation of individual accused persons may contribute to the emergence of such doubts which may cover and engulf the whole case.
Never the less, if, as in the instant case, the Courts, whose duty is to separate the chaff from the grain, does hold that the convicted persons were certainly members of an unlawful assembly which must have consisted of more than five persons, we do not see any principle of law or justice which could stand in the way of the application of Section 149 J.P.C. for convicting those found indubitably guilty of participation in carrying out of the common object of an unlawful assembly.
The only remaining question arises from the age of Om Pal Which, at the time of trial, was found by the Trial Court to be about 15 years.
This means that Section 29 of the Uttar Pradesh Children Act, 1951, was applicable to the case.
This Section reads as follows: "29.
Commitment of child to approved school (1) Where a child is found to have committed an offence punishable with transportation or imprisonment, the Court, if satisfied on inquiry that it is expedient so to deal with the child, may order him to be sent to an approved school for such period of stay as will not exceed beyond the time when the child will attain the age of 18 years or for a shorter period, the reasons for such period to be recorded in writing.
(2) Where prior to the commencement of this Act a youthful offender has been sentenced to transportation Or imprisonment, the State Government may direct that in lieu of undergoing or completing such sentence he shall, if under the age of sixteen years, be sent to an approved school, and thereupon the offender shall be subject to all the provisions of this Act as if he had been originally ordered to be detained in such school.
" This question was not raised earlier so that the Trial Court or the High Court may take the action it was open to the Courts to take after due inquiry.
Such action, if considered expedient, could only be to send the appellant to an approved school.
We may observed that, although the appellant om Pal was said to be armed with a lathi, no specific part was assigned to him by any prosecution witnesses.
He was bound, with the background of hostility between two sides and 597 the events mentioned above, to have been misled by the bad example of his elders.
No previous participation in such a case and no previous conviction was shewn against him.
We, therefore, think that appropriate action under Section 29 of the Children 's Act could have been taken in his case if the question had been raised in time.
We hope that the punishment he has already undergone has had a salutary effect in making him conscious of the gravity of the consequences of joining an unlawful assembly.
All that we can do now, in the circumstances of Om Pal 's case, is to recommend the remission of the remaining period of om Pal 's sentence to the authorities concerned.
Subject to the observations made above with regard to om Pal, we affirm the convictions and sentences and dismiss this appeal.
| IN-Abs | The 4 appellants were tried along with 14 others for the offence of rioting in the course of which 2 murders were committed at 6 30 a.m on 7 1967.
The prosecution revealed a long standing enmity between the tyo groups; one to which the appellants belonged and the other to which the deceased belonged.
The defence case was that people belonging to the group of the deceased killed the deceased and that thereafter they attacked the 3 injured appellants.
At the trial however, the defence witnesses stated that the 3 witnesses who were injured(l a(tempted to save the deceased and were therefore injured.
The prosecution evidence suffered from some quite obvious infirmitied.
Each of the 4 injured eye witnesses while naming each of the IX accused persons as participants in the occurrence and specifying their weapons without any contradiction had failed to assign any particular part of any of them.
Each injured eye witness said that all 18 accused persons were assaulting the injured.
I his was hardly consistent with the medical evidence.
The Trial Court acquitted 11 accused giving them the benefit of doubt and convicted 7 including the 4 appellants under section 302 read with section 149.
The High Court gave the benefit of doubt to all the accused except the 4 appellants.
The High Court came to the conclusion that the 4 appellants had taken part in The attack in view of the admission of the 4 accused about their participating in the occurrence corroborated by the injuries on the bodies of 3 of them.
On appeal by Special leave it was contended by the appellants that since 14 out of 18 accused persons were actually acquitted the Court must presume that total number of assailants was less than 5 and that they.
therefore cannot be convicted under section t 49 ^ HELD: 1.
It is true that the acquittal of an accused person does raise in the eye of law, a presumption that he is innocent even if he was actually guilty.
but it is only the acquitted accused person and not the convicted accused person who can as a rule get the benefit of such a presumption.
The effect of findings on questions of fact depends upon the nature of those findings 1 only five known persons are alleged to have participated in an attack; and the counts find that 2 of them were falsely implicated it would be quite natural and logical to infer or presume that the participants were less than 5 in number.
On the other.
hand if the court holds that the assailant were actually 5 in number but there could be a doubt as to the identity of 2 of the alleged assailants and therefore acquits 2 of them the others will not get the benefit of douht.
so long as there is a firm finding based on good evidence and sound reasoning that the participants were 5 or more in number.
Such a ease is one of doubt only as to identity of some participants and not as to total number of participants.
[594A C] 2.
It is true that there are some unfirmities in the prosecution evidence However the impression of rustic witnesses sought to he conveyed through their statements cannot be interpreted as though they were made in carefully drawn up documents calling for a literal interpretation.
[592 H] 588 3.
The number and location of injuries on both sides also indicate an attack by a group of persons which must have surrounded the party of the deceased persons travelling in the Buggi.
Even is 2 persons are engaged in stopping the Buggi and there are 2 on each side of the Buggi then the number would be 6.
Again, even if one person Is assumed to be the assailant of each of the victims in a simultaneous attack upon them the number of such assailants alone would come to at least 6.
The deceased had injuries with sharp edged weapons and lathis.
It is therefore clear that each one was attacked by more than one person.
These facts were enough to come to the conclusion that the total number of assailants could not conceivably have been less than 5.
[593 C E] 4.
Even if the number of assailants could have been less than 5 (which can the facts stated was really not possible) we think that the fact that the attacking party was clearly shown to have waited for the Buggi to reach near the field of Daryao in the early hours shows pre planning.
Some of the assailants had sharp edged weapons.
They were obviously lying in wait for the Buggi to arrive.
A more convincing evidence of a pre concert was not necessary.
Therefor if necessary.
we would not have hesitated to apply section 31 of I.P.C. also to this case.
The principle of vicarious liability does not depend upon the necessity to convict the required number of persons but it depends upon proof of facts beyond reasonable doubt which makes such a principle applicable.
[594 F H 595 A] Yeshwant & Anr.
vs State of Maharashtra [1973] 1 S.C.R. 291 It 302 303 at and Sukh Ram vs State of U.P. ; distinguished.
5.The age of appellant Om Pal at the time of trial was IS years.
Section 29 of the U.P. Children Act 1951 was applicable to the case.
This question was not raised either before the Trial Court or before the High Court.
Although Om Pal accused was said to be armed with a lathi no specific part was assigned to him by the prosecution witnesses He must have been misled by the bad example of his elders.
No previous participation in such a case and no previous conviction was shown against him.
The appropriate ac(ion under section 29 of the Children Act could have been taken in his case is the question had been raised in time.
The Court recommended the remission of the remaining period of Om Pal to the authorities concerned.
[548D H. 599A C]
|
N: Criminal Appeal No. 129 of 1971 .
Appeal by Special Leave from the Judgment and order dated the 4th March, 1971 of the Bombay High Court at Bombay in Criminal Appeal No. 1502 of 1969.
R B. Datar and Rajen Yash Paul, for the Appellant.
M. N Shroff, for the Respondent.
The Judgment of the Court was delivered by BHAGWATI, J.
The appellant and one Mohd. Yusuf Gulam Mohd. were charged for an offence under section 379 read with s 34 of the Indian Penal Code for snatching two sarees from one Govind whilst he was carrying them from the show of his master to that of a washer and dyer.
The learned Presidency Magistrate, who tried the case, accepted the prosecution evidence and found the appellant and Mohd. Yusuf Gulam Mohd. guilty of the offence under section 379 read with section 34 and 664 Sentenced each of their to suffer rigorous imprisonment for six months.
It does not appear from the judgment of the learned Presidency Magistrate that, though the appellant was only seventeen years and three months old at the date of the offence and the offence was not punishable with imprisonment for life, the attention of the learned presidency Magistrate was invited to the provisions of section 6 of the Probation of offenders Act, 1958.
The appellant preferred an appeal against the order of conviction and sentence to the High Court of p Bombay but the appeal was unsuccessful.
The High Court took the same view of the evidence as the learned Presidency Magistrate and confirmed the conviction of the appellant under section 379 read with section 34.
So far as the question of sentence was concerned, a submission was made on behalf of the appellant that since he was a young boy of about seventeen years and three months and this was his first offence, leniency should be shown tow him.
But the High Court r observed that age alone was not sufficient to invoke the mercy of the Court and the appellant had not done anything since the date of the offence to deserve the mercy of the Court and it did not, therefore, see any reason to interfere with the sentence of imprisonment passed against the appellant.
It appears that once again the provisions of section 6 of the Probation of offenders Act, 1958 were not specifically brought to the notice of the High Court and the sentence of imprisonment was maintained by the High Court without applying its mind to those provisions.
Hence the appellant preferred a petition for special leave to this Court and on that petition, this Court granted special leave limited to the question "whether the provisions of the Probation of offenders Act should have been applied in the case".
We are concerned in this appeal with section 6 of the Probation of offenders Act, 1958, for it is only under that section that the appellant claims the benefit of the provisions contained in the Act.
Subsection (1) of section 6, on a plain grammatical reading of its language, provides that when any person under twenty one years age is found guilty of having committed an offence punishable with imprisonment, but not with imprisonment for life, the Court, by which the person is found guilty, shall not impose any sentence of imprisonment, unless it is satisfied that, having regard to the circumstances of the case, including the nature of the offence and the character of the offender it would not be desirable to deal with him 665 him under section 3 or section 4.
This inhibition on the power of the Court to impose a sentence of imprisonment applies not only at the state of trial court but also at the stage "High court or any other Court when the case comes before it on appeal or in revision. '.
Vide section 11, sub section
(1) of the Act.
It is, therefore, obvious that even though the point relating to the applicability of section 6 was not raised before the learned Presidency Magistrate or the High Court, this Court is bound to take notice of the provisions of that section and give its benefit to the appellant, particularly since it is a section which is intended for the benefit of juvenile delinquents, reflecting the anxiety of the Legislature to protect them from contact or association with hardened criminals in jails and retrieve them from a life of crime and rehabilitate them as responsible and useful members of society.
Here, we find that whatever date be taken as the relevant date for determining the applicability of section 6 whether the date of the offence or the date of the judgment of the learned Presidency Magistrate or the date of the judgment of the High Court the appellant was below twenty one years age.
The offence of which he is found guilty is an offence under section 379 read with section 34 and it is clearly an offence punishable with imprisonment but not with imprisonment for life.
The conditions requisite for the applicability of section 6 are, therefore, plainly satisfied and under section 6, Sub section
(1) it is not competent to the Court to impose ant sentence of imprisonment on the appellant, unless the Court is satisfied that, having regard to the circumstances of the case, including the nature of the offence and the character of the appellant, it would not be desirable to deal with him under section 3 or section 4.
It is true that sub section
(2) of section 6 requires that for the purpose of satisfying itself whether it would not be desirable to deal with the appellant under section 3 or section 4, the Court is required to call for a report from the Probation officer and consider the report, if any, but we do not think it necessary in the present case to call for any report from the Probation officer nor to remand the case to the learned Presidency Magistrate for passing an appropriate order after calling for a report from the Probation officer and considering it.
We have on record the antecedent history giving the background of the appellant.
The appellant was at one time a well known child film actor and he actually won several awards for acting in films.
It appears that at some subsequent stage he fell in bad company and took to evil ways The offence which he is convicted is, no doubt, an offence as theft which cannot be lightly ignored, but it is comparatively of a minor characters in that only two sarees were snatched away from the hands of Govind, perhaps under the stress of economic necessity.
Moreover, this is a false offence of the appellant.
We are, therefore, not at all satisfied 12 L925SupCI/75 666 that it would not be desirable to deal with the appellant under section 3 or section 4 and consequently, the sentence of imprisonment passed on the appellant must be set aside.
We accordingly set aside the sentence of imprisonment passed on the appellant and direct that he be released on his entering into a bond wit one surety in the sum of Rs. 500/ to appear in the Court of the Presidency Magistrate to receive sentence, whenever called upon to do so within a period of six months and during that period to keep the peace and be of good behaviour.
The learned Presidency Magistrate is directed to take the necessary bond from the appellant and the necessary surety bond from a surety to his satisfaction.
The appellant will continue on bail till such time as these directions are carried out, after which the bail bond will stand canceled.
P.B.R. Appeal allowed.
| IN-Abs | On the question whether the provisions of the Probation of offenders Act 1958 should have been applied in this case, Allowing the appeal, ^ HELD: (1) Even though the point relating to the applicability of s.6 was not raised before the Presidency Magistrate or the High Court, this Court is bound to take notice of the provisions of that section and give its benefit to the appellant, particularly since it is a section which is intended for the benefit of juvenile delinquents reflecting the anxiety of the Legislature to protect them from contact or association with hardened criminals in jails and retrieve them from a life of crime and rehabilitate them is responsible and useful members of society.
[665 B C] (2) Section 6 lays down an injunction not to impose a sentence of imprisonment on a reason who is under 21 years of ' age and is found guilty of having committed an offence punishable with imprisonment other the that for if unless it is satisfied that it would not be desirable to deal with him under section 3 or section 4. 'This inhibition on the power of the court to impose a sentence of imprisonment applies not only at the state of trial but also at the stage of "High, Court or any other court when the case comes before it in appeal or revision" section 11 (i) [664 H] In the instant case the appellant was below 21 years of age.
The appellant was at one time a well known child film actor and won several awards for acting in films.
Subsequently he fell in bad company and took to evil ways.
The offence of theft of two Sarees, though it could not be lightly ignored.
was of minor.
character and this was the first offence of the appellant.
It Count be said that it would not be desirable to deal with the appellant under section 3 or section 4 of the Act.
[665 G H]
|
Civil Appeal No. 1827 of 1969.
Appeal by Special Leave from the Judgment and order dated the 28th November, 1968 of the Orissa High Court in O.J.C. No. 152 of 1964.
F.S. Nariman, A. G. Meneses, Sharad Manohar and J. B. Dada chanji, for the Appellant.
S.T. Desai and M. N. Shroff ' and R. N. Sachthey for Respondents 1 and 5.
Santosh Chatterjee and G. section Chatterjee for Respondent No. 4.
The Judgment of the Court was delivered by ALAGIRISWAMI, J.
The question of bonus for 16,000 workmen for the years 1958 59 and 1959 60 is still being fought out on preliminary points and this is the second time the matter has come to this Court.
The earlier decision is reported in ; Gammon vs Industrial Tribunal, Bhubaneshwar, Orissa & Ors.(1).
In August 1957 the Hindustan Steel Ltd., the 4th respondent in the appeal, hereinafter called the company, and the appellant, a partnership of a West German company and an Indian company, hereinafter called the contractor, entered into a contract for execution of the foundation and civil engineering work of the Hot and Cold Rolling Mills at Rourkela including the purification and other civil engineering work of the Hot and with the water supply to the Rolling Mills.
The contract was a cost contract with a target sum plus fixed overheads and fee, that is, the company was to pay to the contractor all costs of construction and in addition pay fixed overhead or the head office general expenses of the (1) ; 670 contractor plus a fixed fee.
The target sum for the work was Rs 66,294,000.
The overheads were D.M. 2,800,000/ plus Rs 2,120,000/ and the fee of Rs. 6,200,000/ .
The work was to be carried out as detailed in the drawings, bills of quantities, specifications and other written orders issued or to be issued by the company.
All payments in respect of wages and salaries and connected payments made two persons engaged upon the work as may be approved by the company, comprising wages of all operatives as well as all other payments connected with wages were to be paid by the company.
Any increase beyond the initial rates specified in Enclosure III to the contract was to be subject to the approval of the company and such approval was to be taken in respect of categories and not individuals.
Emoluments of site supervisory staff as well as all other payments connected therewith were also to be paid by the company.
Payments made to statutory schemes in connection with sickness or accident or provident fund or pension or other like schemes to the above categories, payments of overtime and additional remuneration for Sunday, holiday or night work etc., and payments for leave and traveling cost were all to be made by the company.
It was also provided that the count of any other expenditure was to be admitted only on satisfactory proof being given by the contractor that such expenditure was necessary in connection with the preparation and execution of the work.
The company was to open an imprest account of Rs. 30,00,000/ and the contractor was to draw on the account to cover his day to day requirements for the work.
The imprest was to be increased or decreased from time to time depending on the amount required by the contractor to do the work.
The contractor was to submit fortnightly cash account covering the expenditure incurred from the imprest account and the company was to recoup the amounts covered by such account within seven working days.
Once in three months the contractor was to be paid a part of the fixed amount of overheads pro rata to the target cost of work done during the preceding three months.
Once in six months he was to be paid three fourths of the fee proportionate to the target cost of the work done in the preceding.
half year.
Enclosure Ill also set out the rate of wages for unskilled labourers, khalasi, mason, fitter or carpenter.
If the contractor completed the work prior to the 30th September, 1960 he was to be paid, exclusive of such sums as may be due to, or from, him a bonus equivalent to Rs. 2,00,000/ for every complete month by which the actual completion of the work precedes the 30th September, 1960.
The terms of the contract have been set out at some length as they have a relevance to the question of bonus payable to the workers because the question now agitated before this Court is that the Industrial Tribunal should be asked to decide who is to Pay the bonus, if bonus is payable to the workmen, the contractor or the company.
It would be noticed from the provisions of the contract set out above that all payments to labour were to be made by the company.
The contract contemplates payment of traveling allowance, payment in respect of sickness, accident, provident fund, pension, overtime, additional remuneration for Sunday, holiday or right work etc.
It has even mentioned the rate of wages and is thus fairly comprehensive.
There is, of course, no mention about bonus.
Now if the contractor 671 has to pay a higher rate of wages than that found in Enclosure III because of the conditions in the labour market naturally the contractor cannot be expected to pay it from out of his funds or the payments he was to receive in pursuance of the contract.
This being a contract in which the company is to pay for labour as well as for materials any increase in the cost of those items cannot be borne by the contractor, who was to be paid only a fixed sum towards its remuneration.
As the question of bonus is not mentioned in the contract the question arises as to who is to pay the bonus in case bonus is found payable to the workmen.
We express no opinion on that point.
But it appears to us that the company is adopting an ostrich like policy in trying to avoid being made a party to the reference before the Industrial Tribunal.
if it should ultimately be held that bonus is payable and the company is liable to pay it, it should do its best even from this stage to fight the question of liability to pay bonus as well as the quantum.
What is called a tripartite agreement seems to have been entered into between the workmen and the appellant in the presence of the Labour Commissioner on 12th June, 1960.
That was natural as the appellant it was that employed labour.
But that by itself does not decide the question who is to pay the bonus.
Under that agreement the appellant agreed to the payment of bonus in principle subject to the condition that they get the bonus from the company.
The quantum of bonus and exact date from which the bonus was payable was not, however, indicated.
It was also stated that when bonus was received by the management it shall notify the fact to the workers and that the union may raise this as a point of dispute when it would deem it appropriate On 15th June, 1960 the labour union appears to have written a letter to the Labour Commissioner of orissa raising a dispute for adjudication regarding bonus The union mentioned that they had also written a number of letters to the appellant as well as the company but either of them had decied the issue.
They, therefore, served a notice of strike.
The Labour Commissioner wrote to the Government on 17 10 60 about the dispute and mentioned that the appellant had agreed to pay bonus if the company paid it.
He also mentioned the fact that the appellant in reply to the letters from the workmen had stated that they had not come to any final decision in the matter.
On the ground that unless something was done there will be a strike causing complete dislocation of work of the company he suggested that the following issue may be considered for reference to the Industrial Tribunal: "Whether the workers of Hochtief Gammon are entitled to any bonus ? If so, what should be the quantum ?" He proceeded to say that if this question was finally decided it would also serve as a guiding principle for other contractors as similar demands for payment of bonus from workers were being received.
It would be noticed that though the appellant 's stand was that they would pay the bonus if it were given by the company the Labour Commissioner did not suggest that the question as to the party liable to pay the bonus, whether it was the appellant or the company, be referred for 672 adjudication.
His anxiety was that the work of the company should not A be dislocated.
He did not apply his mind to the question of the party liable to pay the bonus.
Naturally the Government also did not.
The Government therefore referred the following issue for adjudication: "Whether the workers of M/s. Hochtief Gammon.
Civil Engineers and Contractors, Rourkela are entitled to any bonus and if so, what should be the quantum?" On this a notice seems to have been served on the company and curiously enough the company said that the appellant did not complete the work as set out in the Memorandum of Agreement and hence no bonus was due to the contractors and that therefore they were not a necessary party.
This bonus, as the terms of the contract set out earlier would show.
has nothing to do with the bonus payable to the workmen.
The appellant in their written statement pointed out that under the terms of the contract the company had to bear all expenditure with reference to labour, all payments in respect of wages, salaries and other connected payments made to persons engaged in the works, that it was also responsible to make payments to statutory schemes in respect of all workmen and that they themselves were only paid a stated fee for professional services rendered to them and therefore no demand can be raised by the workmen who are engaged by the contractor against the contractor and such a demand is unsustainable in law.
They then gave reasons why the workmen were not entitled to any bonus from them.
It is not necessary to set out those reasons at length.
We have already referred to the stand of the company.
As would be apparent from the decision of this Court on the earlier occasion, which we shall set out later, the Tribunal could not have decided this question in view of the terms of reference made to it.
Thereafter the appellant filed.
an application under section 18(3) (b) of the Industrial Disputes Act praying that for a proper adjudication of the issue referred to the Tribunal it was necessary to bring on record the company as a party to the proceedings.
They pointed out that any amount payable to the labourers engaged by the contractors for what soever reason was a contract expenditure within the meaning of the term contract and payable by the company as it was entirely responsible for payment of all remuneration to the workmen and all expenditure incurred by reason of any demand put forward by the workmen in connection with the works, was debitable to the contract and payable by the company.
This application was rejected.
Thus the stand of the appellant as to the party liable to pay the bonus was never in doubt.
The appellant thereupon filed a petition before the High Court of orissa praying that the order of the Tribunal should be set aside.
that petition also having been dismissed an appeal was filed before this Court by special leave.
The relevant portion of the judgment of this Court is found at page 605, 1964(7) S.C.R.: "The next contention raised by Mr. Chatterjee is that M/s. Hindustan Steel Ltd. is a necessary party because it is the said concern which is the employer of the respondents and not the appellant.
In other words, this contention is that 673 though in form the appellant engaged the workmen whom the respondent union represents, the appellant was acting as the agent of its principal and for adjudicating upon the industrial dispute referred to the Tribunal by the State of orissa, it is necessary that the principal, viz., M/s. Hindustan Steel Ltd. Ought to be added as a party.
In dealing with this argument, it is necessary to bear in mind the fact that the appellant does not dispute the respondent Union 's case that the workmen were employed by the appellant.
It would have been open to the State Government to ask the Tribunal to consider who was the employer of these workmen and in that case, the terms of reference might have been suitably framed.
Where the appropriate Government desires that the question as to who the employer is should be determined, it generally makes a reference in wide enough terms and includes as parties to the reference different persons who are alleged to be the employers.
Such a course has not been adopted in the present proceedings, and so, it would not possible to hold that the question as to who is the employer as between the appellant and M/s. Hindustan Steel Ltd. is a question incidental to the industrial dispute which has been referred under section 10(1)(d).
This dispute is a substantial dispute between the appellant and M/s Hindustan Steel Ltd. and cannot be regarded as incidental in any sense, and so, we think that even this ground is not sufficient to justify the contention that M/s. Hindustan Steel Ltd. is a necessary party which can be added and summoned under the implied powers of the Tribunal under section 18(3)(b).
" lt would be noticed that before this Court what was admitted was that the appellant had employed the workmen but the question as to who was the employer in relation to those workman was the main question at issue.
That was why this Court pointed out that it would have been open to the State Government to ask the Tribunal to consider who was the employer of these workmen and in that case the terms of reference might have been suitably framed.
As that had not been done this Court pointed out that it would not be possible to hold that the question as to who was the employer as between the appellant and the company was a question incidental to the industrial dispute which had been referred under section 10(1)(d), as it was a substantial dispute between the appellant and the company.
Apparently taking the cue from the observations of this Court the appellant filed a writ petition out of which this appeal arises.
But before doing so the appellant had filed an application before the State Government asking them to modify the earlier reference to the Industrial Tribunal by adding the company as a party to the reference and an additional clause as under: "If bonus is payable, who is the employer and who is responsible for payment of the bonus to the workmen?" They pointed out in that application that the company was entirely responsiblele for payment of wages and connected payments and all 674 other remuneration of any kind to the workmen, that for enabling the appellant to make payments to the labourers engaged for such work on behalf of the company an imprest of Rs. 3,000,000/ was given to them out of which the payments were made, that the appellant got only a fee, that if any bonus becomes payable it was the person who pays wages that has to pay the bonus.
Thereafter they also asked for a personal hearing.
To this the reply of the Government was as follows: "With reference to their petition dated 20 5 64 on the above subject, the undersigned is directed to say that after due.
Consideration of the matter the Government do not find any materials on the basis of the petition to include Hindustan Steel Ltd., Rourkela as a party in the above case.
" It would be noticed that in the petition the appellant wanted not only that the company should be made a party but also that another issue must be referred to the Tribunal for adjudication.
They had given reasons as to why the company should be included as a party.
They had in their petition included the paragraph which we have extracted above from this Court 's judgment.
It is apparent from their reply that the Government had not applied their mind to the facts placed before them.
There was at least an arguable case on the point as to who was liable to pay the bonus and in that case the company would have been a necessary and appropriate party.
Even if the Government thought that the company was not a necessary party the question as to who was liable to pay the bonus was a very relevant question and that made the company a necessary or at least a proper party.
The attitude of the appellant had throughout been that their contract was a cost contract, that the company had to pay labour and while they have employed the workmen the employer was really the company.
That contention may or may not be upheld by the Tribunal.
Ultimately if the Tribunal should hold that the appellant is the party responsible for payment of bonus the question as between the company on the one hand and appellant on the other may have to be decided by arbitration as provided in the contract between them or otherwise.
It appears to us, therefore, that not only was this an appropriate question to be referred to the Industrial Tribunal for adjudication but even the company should be interested in getting itself impleaded as a party so as to put forward any contention which it may decide to put forward as regards the question whether bonus was payable and if so the quantum thereof, as also the question as to who would be liable to pay the bonus instead of adopting, as we have said earlier, an ostrich like policy.
The power of the Courts in relation to the orders of the appropriate Government in the matter of referring industrial disputes for adjudication is no longer in doubt.
In State of Bombay vs K.P. Krishnan & Ors.
(1) it was held: "It is common ground that a writ of mandamus would lie against the Government if the order passed by it under s.10 (1) is for instance contrary to the provisions of s.10(1) (a) to (d) in the matter of selecting the appropriate authority; (1) 675 it is also common ground that in refusing to make a reference under section 12(S) if Government does not record and communicate to the parties concerned its reasons therefore a writ of mandamus would lie.
Similarly it is not disputed that if a party can show that the refusal to refer a dispute has not bona fide or is based on a consideration of wholly irrelevant facts and circuit of mandamus would lie.
The order passed by the Government under section 12(5) may be an administrative order and the reasons recorded by it may not be justiciable in the sense that their propriety, adequacy or satisfactory character may not be open to judicial scrutiny; in that sense it would be correct to say that the court hearing a petition for mandamus is not sitting in appeal over the decision of the Government; nevertheless if the court is satisfied that the reasons given by the Government for refusing to make a reference are extraneous and not germane then the court can Issue, and would be justified in issuing, a writ of mandamus even in respect of such an administrative order.
" In Bombay Union of Journalists vs The State of Bombay(1) it was observed: "The breach of section 25F is no doubt a serious matter and normally the appropriate Government would refer a dispute of this kind for industrial adjudication; but the provision contained in section 10(1) read with section 12(5) clearly shows that even where a breach of section 25F is alleged, the appropriate Government may have to consider the expediency of making a reference and if after considering all the relevant facts the appropriate Government comes to the conclusion that it would he inexpedient to make the reference, it would be competent to it to refuse to make such a reference.
If the appropriate Government refuses to make a reference for irrelevant considerations, or on extraneous grounds, or acts malafide, that, of course, would be another matter: in such a case a party would be entitled to move the High Court for a writ of mandamus.
" The above are not the only powers of the Courts in relation to the orders of the Government or an officer of the Government who has been conferred any power under any statute, which apparently confer on them absolute discretionary powers, in this country as well as in England.
In England in earlier days the Courts usually refused to interfere where the Government or the concerned officer passed what was called a non speaking order, that is, an order which on the face of it did not specify the reasons for the order.
Where a speaking order was passed the Courts proceeded to consider whether the reasons given for the order or decision were relevant reasons or considerations.
Where there was a non speaking order they used to say that it was like the face of the Sphinx in the sense that it was inscrutable and therefore hold that they could not consider the question of the validity of the order.
Even in England the Courts have travelled very far since those days.
(1) ; , 34. 676 They on longer find the face of The Sphinx inscrutable.
Needless to say that Courts in India, which function under a written Constitution which confers fundamental rights on citizens, have exercised far greater; powers than those exercised by Courts in England, where there is no written Constitution and there are no fundamental rights.
Therefor the decisions of Courts in England as regards powers of the Courts 'surveillance ', as Lord Pearce calls it, or the control which the Judiciary have over the Executive, as Lord Upjohn put it, indicate at least the minimum limit to which Courts in this country would be prepared to go in considering the validity of orders of the; Government or its officers.
In that sense the decision of the House of Lords in Padfield vs Minister of Agriculture, Fisheries and Food(1) is a landmark in the history of the exercise by Courts of their power of surveillance.
That decision is well worth a close study but we will resist the temptation to quote more than is absolutely necessary.
That was a case where under the provisions of the Agricultural Marketing Act, 1958 the Minister had the power to appoint a committee to go into certain questions under.
section 19 of that Act but when requested to appoint a committee he refused.
In refusing to appoint the committee he had given elaborate reasons for his refusal.
It was admitted that the question of referring the complaints to a committee was a matter within the, Minister 's discretion.
It was also argued that he was not bound to give any reasons for refusing to refer a complaint to a committee and that if he gives no reason his refusal cannot be questioned and his giving reasons could not put him in a worse position.
It was held by the House of Lords that an order directing the Minister to consider the complaint according to law should be made.
It was also held that Parliament conferred a discretion on the Minister so that it could be used to promote the policy and objects of the Act which were to be determined by the construction of the Act and that was a matter of law for the court.
It was further held that though there might be reasons which would justify the Minister in refusing to refer a complaint, his discretion was not unlimited and, if it appeared that the effect of his refusal to appoint a committee of investigation was to frustrate the policy of the Act, the court was entitled to interfere.
The extracts given below of certain portions of the speeches of the learned Lords can be appreciated in that background.
Lord Reid: "The respondent contends that his only duty is to consider a complaint fairly and that he is given an unfettered discretion with regard to every complaint either to refer it or not to refer it to the committee as he may think fit.
The appellant contents that it is his duty to refer every genuine and substantial complaint, or alternatively that his discretion is not unfettered and that in this case he failed to exercise his discretion according to law because his refusal was caused or influenced by his having misdirected himself in law or by his having taken into account extraneous or irrelevant considerations.
(1) ; 677 In my view, the appellants ' first contention goes too far.
There are a number of reasons which would justify the Minister in refusing to refer a complaint.
For example, he might consider it more suitable for arbitration, or he might consider that in an earlier case the committee of investigation had already rejected a substantially similar complaint, or he might think the complaint to be frivolous or vexatious.
So he must have at least some measure of discretion.
But is it unfettered? lt is implicit in the argument for the Minister that there are only two possible interpretations of this provision .
either he must refer every complaint or he has an unfettered discretion to refuse to refer in any case.
I do not think that is right.
It was argued that the Minister is not bound to give any reasons for refusing to refer a complaint to the committee, that if he gives no reasons his decision cannot be questioned, and that it would be very unfortunate if giving reasons were to put him in a worse position.
But I do not agree that a. decision cannot be questioned if no reasons are given." Lord Hadson: The reasons disclosed are not in my opinion good reasons for refusing to refer the complaint to the committee, that if he gives no reason his decision cannot be questioned, and that it would be very unfortunate if giving reasons were to put him in a worse position.
But I do not agree that a decision cannot be questioned if no reason are given.
Lord Hodson: "The reason disclosed are not, in my opinion, good reason for refusing to refer the complaint seeing that they leave out of account altogether the merits of the complaint itself.
The complaint is, as the Lord Chief Justice pointed out, made by person affected by the scheme and is not one for the consumer committee as opposed to the committee of investigation and it was eligible for reference to the latter.
It has never been suggested that the complaint was not a genuine one.
It is no objection to the exercise of the discretion to refer that wide issues will be raised and the interests of other regions and the regional price structure as a whole would be affected.
It is likely that the removal of a grievance will, in any event, have a wide effect and the Minister cannot lawfully say in advance that he will not refer the matter to the committee to ascertain the facts because, as he says in effect, although not in so many words, "l would not regard it as right to give effect to the report if it were favour able to the appellants." Lord Pearce: "I do not regard a Minister 's failure or refusal to give any reasons as a sufficient exclusion of the court 's survellance.
It was for the Minister to use his discretion to promote Parliament 's intention.
If the court had doubt as to whether the appellants ' complaint was frivolous or repetitive, or not genuine, or not substantial, or unsuitable for investigation or more apt for arbitration, it would not interfere.
But nothing which has been said in this case leads one 678 to doubt that it is a complaint of some substance which shoukl A properly be investigated by the independent committee with a view to pronouncing on the weight of the complaint and the public interest involved.
The fact that the complaint raises wide issues and affects other regions was not a good ground for denying it an investigation by the committee.
lt is a matter which makes it very suitable for the committee of investigation, with its duty to report on the public interest, and its capacity to hear representatives of all the regions." Lord Upjohn: "The Minister in exercising his powers and duties, conferred upon him by statute? can only be controlled by a prerogative writ which will only issue if he acts unlawfully.
Unlawful behaviour by the Minister may be stated with sufficient accuracy for the purposes of the present appeal (and here I adopt the clarification of Lord Parker C.J., ill the Divisional Court): (a) by an outright refusal to consider.
the relevant matter, or (b) by misdirecting himself in point of law, or (c) by taking into account some wholly irrelevant or extraneous consideration, or (d) by wholly omitting to take into account a relevant consideration.
There is ample authority for these propositions which were not challenged in argument.
In practice they merge into one another and ultimately it becomes a question whether for one reason or another the Minister has acted unlawfully in the sense of misdirecting himself in law, that is, not merely in respect of some point of law but by failing to observe the other headings I have mentioned.
The Minister 's main duty is not to consider its suitability for investigation; he is putting the cart before the horse.
He might reach that conclusion after weighing all the facts but not until he has done so.
This introduces the idea, much pressed upon your Lordships in argument, that he had an "unfettered" discretion in this matter; it was argued, means that, provided the Minister considered the complaint bona fide, that was an end of the matter.
Here let it be said at once, he and his advisers have obviously given a bona fide and painstaking consideration to the com plaints addressed to him; the question is whether the consideration given was sufficient in law.
My Lords, I believe that the introduction of the adjective "unfettered" and its reliance thereon as an answer to the appellants ' claim is one of the fundamental matters confounding the Minister 's attitude, bona fide though it be. even if the section did contain that adjective I doubt if it would make any difference in law to his powers.
But the use of that adjective, even in an Act of Parliament, can do nothing to unfetter the control which the judiciary have over the executive, 679 namely that in exercising their powers the latter must act law fully and that is a matter to be determined by looking at the Act and its scope and object in conferring a discretion upon the Minister rather than by the use of adjectives." ' . a decision of the Minister stands on quite a different basis; he is a public officer charged by Parliament with the discharge of a public discretion affecting Her Majesty 's subjects; if he does not give any reason for his decision it may be, if circumstances warrant it, that a court may be at liberty to come to the conclusion that he had no good reason for reaching that conclusion and order a prerogative writ to issue accordingly.
" That was a case where the Minister had given elaborate reasons and it was, therefore, possible for their Lordships of the House of Lords to consider the reasons given by the Minister in elaborate detail and show how he had misdirected himself.
They also pointed out that by merely keeping silent the Minister cannot avoid the Court considering the whole question.
The principles deducible from the decisions of this Court and the above decision of the House of Lords which, though not binding on us, appeals to us on principle may be set out as follows: The Executive have to reach their decisions by taking into account relevant considerations.
They should not refuse to consider relevant matter nor should They take into account wholly irrelevant or extraneous consideration.
They should not misdirect themselves on a point of law.
Only such a decision will be lawful.
The courts have power to see that the Executive acts lawfully.
It is no answer to the exercise of that power to say that the Executive acted bona fide nor that they have bestowed painstaking consideration.
They cannot avoid scrutiny by courts by failing to give reasons.
It they give reasons and they are not good reasons, the court can direct them to reconsider the matter in the light of relevant matters, though the propriety, adequacy or satisfactory character of those reasons may not be open to judicial scrutiny.
Even if the Executive considers it inexpedient to exercise their powers they should state their reasons and there must be material to show that they have considered all the relevant facts.
Judged by these tests the order of the State Government is unsustainable.
Here the Government did not say that it considered it inexpedient to refer the question for adjudication or that the considerations put forward by the appellant before it were irrelevant.
Neither the Labour Commissioner nor the Government seem to have noticed that this contract is not one of the usual kind wherein a contractor undertakes to do a certain work for a certain sum.
In that case the question of profit and loss or as between the contractor and the party for whom he is executing the work any question as to who was to pay labour would not arise whether it is with regard to wages or bonus.
The contractor will have to bear the full cost o material as well as the full liability for paying the workmen on any head whatsoever.
In this contract the company had to pay for the material as well as labour.
The appellant 680 got paid only for its professional services.
There was in any case in A the contract no provision that the appellant was to incur any item of expenditure or make any payment in relation to the workman.
In such a contract it would be unusual if it was to be considered that the appellant were expected to pay the bonus for the workman.
This however need not be taken as our final view on this point.
But it is a relevant Matter for consideration by the Government in deciding whether to refer the matter to the Tribunal or not.
Furthermore, when the question of bonus in this case arose what is known as the Full Bench formula was holding the field in the matter of payment of bonus.
If the bonus were to be paid by the appellant it could hardly be brought within that formula.
As the company had certainly not begun production at that stage it would be difficult to calculate the bonus with reference to the business of the company either.
The mistake that the Labour Commissioner committed was in not realising that the dispute concerned not Cr merely two parties but three because from the beginning the appellant had made it clear that they would pay the bonus if the necessary amount was paid to them by the company.
We have set out the facts of this case at considerable length and considered the whole question.
We think that the Government 's order in this case really amounts to an outright refusal to consider relevant matters and the Government also misdirected itself in point of law in wholly omitting to take into account the relevant considerations which as held by the House of Lords is unlawful behavior.
It has failed to realise that in effect the contractor employed labour for the company wh() was the real paymaster.
lt held failed to take into account the fact that the workmen wanted the bonus from either the company or the appellant.
Naturally the workmen were not interested who paid them as long as they were paid.
lt would bear repetition to say again that the.
Original mistake arose out of the assumption by the Labour Commissioner that this was a case of an ordinary contract which would apply to other contractors also.
He had apparently not seen the contract between the company and the appellant and that mistake was adopted by the State Government and they stuck to it inspite of the application made to them by the appellant after the disposal of the earlier appeal by this Court, giving all relevant facts.
It does not appear from the communication of the Government to the appellant that they had applied their mind to any of the considerations set out in the appellant 's application.
In the circumstances this appeal must be allowed and the Government of orissa must be directed to reconsider this matter and take a decision in the matter of reference in the light of the relevant facts.
There will be no order as to costs.
P.H.P. Appeal allowed.
| IN-Abs | In 1957, the Hindustan Steel Limited (Company) and the appellant (contractor) entered into a contract for execution of the foundation and civil engineering work of the hot and cold rolling mills at Rourkela.
The Company was to pay to the Contractor all costs of construction and in addition pay fixed overhead charges for the head office and general office of the contractor plus a fixed fee.
All payments in respect of wages and salaries and connected pay matter made to persons engaged upon the work as might be approved by the Company comprising wages of all operatives as well as all other payments connected with wages were to be paid by the Company.
Emoluments of Site Supervisory staff as well as all other payments connected therewith were also to be paid by the Company.
The payments made to statutory schemes, in connection with sickness, or accident, or Provident Fund, or Pension or other like schemes to the above categories, payments of overtime and additional remuneration for ' Sunday, holiday or night work etc., and payments for leave and traveling cost were all to be made by the Company.
In 1960, the Labour Union of workmen employed by the Contractor raised a dispute for adjudication about the bonus payable to the workmen for doing the aforesaid job. 'The stand of ' the contractor was that they would pay the bonus if it were given by the Company.
The Government referred the question whether the workers of the contractor were entitled to any bonus and if so what should be the quantum.
The question whether the Company or the Contractor was liable to pay the bonus was not referred.
A notice was served on the company and the Company contended that since the contractor did not complete the work according to the agreement, no bonus was due to the contractor and that the Company was not a necessary party to the reference.
The contractor in the written statement contended that under the terms of the Contract the Company had to bear all costs with reference to labour, all payments in respect of wages, salaries and other connected payments made to persons engaged in the works and that the contractors were paid a stated fee for professional services rendered by them and that therefore, the demand against the contractor was not sustainable in law.
the contractor made an application to the Tribunal that for the proper adjudication of the issues referred to the Tribunal it was necessary to bring on record the Company as a party to the proceedings.
The said application was rejected by the Tribunal.
The contractor thereupon filed a Writ Petition in the High Court of orissa against the said order of the Tribunal.
The High court dismissed the said writ Petition.
The contractor filed an appeal by Special Leave to this Court.
This Court in that appeal held: "That it would have been open to the State Government to ask the Tribunal to consider as to who was the employer of the workmen and in that case the terms of reference might have been suitably framed.
In the present case such a course has not been adopted.
The dispute between the Company and the contractor would be a substantial dispute and cannot be regarded as incidental to the industrial dispute which was referred The Company was therefore a necessary party.
" 668 The Contractor, thereafter, filed an application before the Slate Government asking, them to modify the earlier reference by adding whether the bonus was payable by the Company or the contractor and by adding the Company as a party to the reference.
It was pointed out in that application that it was the Company which would be liable to pay the bonus if at all it was payable.
The contractor also asked for a personal hearing.
The Government disposed of that application by observing "Government do not find any materials on the basis of the petition to include Hindustan Steel Limited, Rourkela, as a party in the above case. ' The Government did not apply its mind to the other prayer, namely, adding one more issue to the reference.
The Contractor filed a writ Petition against the said order of the State Government.
The High Court dismissed the Writ Petition Against the judgment of the High Court the appellants appealed to Court.
Allowing the appeal, ^ HELD: 1.
It is apparent from the Government 's reply that the Government did not apply its mind to the facts placed before them.
There was at least an arguable case on the point as to who was liable to pay the bonus and in that close the Company would have been a necessary and appropriate party.
Even if the Government thought that the company was not a necessary party.
the question as to who was liable to pay the bonus was a very relevant question and that made the Company a necessary or at least a proper party.
The attitude of the contractor throughout had been that their contract was a cost contract; that the Company had to pay labour and the Company was the real employer.
That contention may or.
may not be upheld by the Tribunal.
This was however, an appropriate question to be referred to the Tribunal [674 C F] 2.
The power of the courts in relation to the orders or ' the appropriate Government in the matter of referring industrial disputes for adjudication is no longer in doubt.
[674 G] State of Bombay vs K P Krishan & Ors.
[1961] (1) [S.C.R. 227] and Bombay Union of Journalists vs The State of Bombay [1964(6) S.C.R. 22@ 24].
followed.
The powers of the Court mentioned in the above two cases in relation to the orders of the Government under any statute are not the only powers of the courts.
In England, in earlier days, the courts usually refused to interfere where the Government or the concerned officer passed what was called a nonspeaking order.
Where a speaking order was passed the Courts proceeded to consider the reasons given to see whether the reasons given were relevant reasons or considerations.
Where there was a non speaking order they used to saw it was like the face of the sphnix in the sense that it was inscrutable and.
therefore, held that they could not consider the question of the validity of the order.
Even in England, the courts have traveled very fast since those say.
They no longer find the face of the sphinx incurable.
Needless to say that the courts in India which function under a written constitution which confers fundamental rights on citizens exercise, far greater powers than those exercised by the courts in England where there is no written constitution and there are no fundamental rights.
The decision of ' House of Lords in Padfield vs Minister of Agriculture.
Fisheries and Food ; , followed.
[675 F H, 676 A] 3.
The Executive have to reach their decisions by taking into account relevant considerations.
They should not refuse to consider relevant matter.
nor should they take into account wholly irrelevant or extraneous considerations 'they should not misdirect themselves on a point of law.
only such a decision will be lawful.
The Courts have power to see that the Executive acts lawfully.
It is no answer to the exercise of that power to say that the Executive acted 669 bone fide nor that they have bestowed painstaking consideration .
They cannot avoid scrutiny by courts by failing to give reason.
If they give reasons and they are not good reasons, the court can direct them to reconsider the matter in the light of relevant matters though the propriety, adequacy or satisfactory character of these reasons may not be open to judicial scrutiny.
Even if.
the Executive considers it inexpedient to exercise their powers they should state their reasons and there must be material to show that they have considered all the relevant facts.
[679 D F] 4.
Judged by this test the order of the State Government is unsustainable.
The Government does not seem to have Noticed that the contract in question us not one of the and wherein a contractor undertakes to do a certain work for a certain sum.
In thus contract, the Company had to pay for the material as well as for labour.
the Contractor to a paid only for his professional services.
There was in any case no provision in the contract that the contractor was to incur any item of expenditure or make any payment in relation to the workmen.
The Government did not realise that the dispute concerned of merely two parties but three.
The Government order in the present case really amounts to an outright refusal to consider relevant matters and the Government also misdirected itself in point of law in wholly omitting to take into account the relevant considerations which as held by the House of Lords us unlawful behaviour.
The Government does not appear to have applied their mind to any of the considerations set out in the contractor 's application.[679 F H, 680 D&F] Allowing the appeal the Court directed the Government of Orissa to reconsider the matter and take a decision in the matter of reference in the light of the relevant facts.
[680 G]
|
Civil Appeal No. 2203 of 1970.
Appeal by Special Leave from the Judgment and order dated the 26th September.
1969 of the Allahabad High Court in Income Tax Ref No. 420 of 1963 11 L9255SupCI/75 650 A. K. Sen and M. M. Kshatriya, for the appellant.
B. B. Ahuja and section P. Nayar, for the respondent.
The Judgment of the Court was delivered by FAZAL ALI, J.
This is an appeal by special leave against the order of the High Court of Allahabad dated September 26, 1969 on a reference made to it by the Income tax Appellate Tribunal, Allahabad Bench.
The facts giving rise to the present appeal may be briefly summarised as follows: The appellant assessee is a public limited company known as `J.K. Cotton Manufacturers Ltd ' and the matter in dispute relates to the assessment year 1944 45.
The appellant entered into an agreement with the firm called Juggilal Kamlapat and employed the said firm as the Managing Agents of the Company.
The agreement was executed on August 8, 1941 and the Managing Agents were to work for the Company for a period of 20 years and were to charge commission at the rate of 21%.
About two years later the appellant decided to terminate the agreement executed in favour of Juggilal Kamlapat and the said Managing Agents readily accepted the offer made by the appellant as a result of which a deed of release was executed by the Managing Agents Juggilal Kamlapat on September 28, 1943.
Under the release the appellant agreed to pay a sum of Rs. 2,50,000 to the outgoing Managing Agents by way of compensation for terminating the agreement much earlier than stipulated under the original contract.
The appellant, however, employed another firm, namely, J.K. Commercial Corporation as their new Managing Agents and executed an agreement in their favour on September 30, 1943.
The action of the Company was approved by the Board of Directors.
The dispute in the instant case centres round the question as to whether the compensation of Rs. 2,50,000 paid to the outgoing Managing Agents was a capital or a revenue expenditure incurred by the appellant.
The stand taken by the assessee before the revenue was that as the expenses were incurred wholly and exclusively for the purpose of carrying on the business of the Company it would fall under section 10(2)(xv) of the Income tax Act, 1922, which is the same as section 37(1) of the Income tax Act, 1961, and therefore an allowable deduction under the aforesaid provision.
The appellant 's case was negatived by the Income tax officer, the Appellate Assistant Commissioner and also by the Tribunal.
The Tribunal also refused to make a reference to the High Court as in its opinion no point of law arose.
The appellant then approached the High Court of Allahabad which directed the Tribunal to make a reference on the following four points and accordingly the Tribunal made a reference to the High Court on those points: "1.
Whether there was any material on the basis ofwhichthe Appellate Tribunal could hold that the goodwill of 651 Juggilal Karnlapat Cotton Manufacturers Ltd, was transferred to the J.K. Cotton Manufacturers Ltd, 2.
Whether there was any material on the record for a finding that the said transfer had been for a sum of Rs. 1.00,000 or for any other sum, and 3.
Whether there was any material on the record from which it could be held that the land had appreciated in value form Rs. 49,526/13,/6 to Rs. 1 ,00,000, 4.
Whether a sum of Rs. 250,000 paid by the assessed to the Managing Agents for the termination of their Manning Agency is an expenditure admissible under Section 10(2) (xv) of the Income Tax Act," When the matter was heard by the High Court, the assesses did not press any other point excepting point No. 4 which related to the question whether a sum of Rs. 2,50,000 paid by the assesses to the outgoing meaning Agents was an admissible expenditure under section 10(2) (xv) of the Income tax Act, 1922.
The High Court by it judgment dated September 26, 1969, held that the expenditure in question was incurred wholly and exclusively, for the purpose of assessee 's business, but as the amount was in the nature if a capital expenditure it was not (deductible under the provisions of the income tax Act and hence this appeal before us by special leave.
Mr. Asoke Sen learned counsel for the appellant for submitted two points before us in support of his case.
In the first place it was contended that the High Court having held that the expenditure incurred was wholly and exclusively l`or the purpose of the business should have held that section 10(2) (xv) applied in terms and therefore.
the expenditure was a revenue expenditure which would be deductible under s 10(2) (xv) of the Income tax Act; and second, it was submitted that the High court was in error in not correctly applying the decision of this court in Godrej & Co. vs Commissioner of Income tax Bombay city(1).
The learned counsel for the appellant has adumbrated four pro positions before us for consideration: (1) Where a payment is made by the payer Company to the payee Company ill lieu of termination of its agency it does not follow that the said pay meat which was made for the purpose of business must ipso facto be considered to be capital expenditure in the hands of the player Company.
(2) So far as the payee Company is concerned.
the law is that generally any compensation received by it not he considered as capital receipt (1) 652 (3) So far as the payer Company is concerned, if payment is for the purpose of business, the mere fact that it has, bar virtue of the payment, increased its profits and reduced its expenses, should not be regarded as expenditure of capital nature but would be one in the course of business unless some oblique or gratuitous purpose is involved.
(4) The principles laid down in Godrej & Co. 's case (supra) would have to be read as laying down only a proposition that the payer company, namely, the managed company, was making a payment to the payee company as a capital contribution to the payee company and in the hands of the payee company the amount becomes a receipt of compensation for incurring losses.
In other words the High Court did not correctly apply the decision of this Court in Godrej & Company ' case (supra).
So for as propositions Nos.
(1) to (3) are concerned their correctness cannot be disputed, because these propositions are covered by abandon authorities.
As regards proposition No. (4) it seems to us that on a close and careful reading of the judgment of this Court in on Goderaj & Company case (supra) the contention of the learned counsel for the appellant on this point appears to be without any substance.
We shall show that the facts of the present case appear to be on all fours with the ratio laid down by this Court in Goderaj & Company 's case (supra).
Mr. Ahuja appearing for the revenue, however, submitted that the termination of the managing agency by the appellant was made for extra commercial reasons, the main intention being to benefit both the outgoing Managing Agents Juggilal Kamlapat and the incoming Managing Agents J.K. Commercial Corporation which belonged to the same family of Singhanias and, therefore, as the compensation paid to the outgoing Managing Agents led to a profit to the company it would amount to acquisition of a new asset and would, therefore be a capital expenditure.
Before dealing with the contentions raise before us by the learned counsel for the appellant, it may be necessary to mention a few facts which have been found by the Tribunal and whose correctness has not been disputed before us.
(1) That there was no suggestion nor any iota of evidence to show that the outgoing Managing Agents were in any way guilty of laches, negligence or that they had caused any loss or disadvantage to the appellant so as to justify a sudden termination of their agency after two years although it was stipulated to continue for 20 years.
On the other hand the annexures filed along with the statement of the case sent by the Tribunal to the High Court clearly show that the Board of Directors paid high compliments to the outgoing Managing Agents Juggilal Kamlapat.
653 (2) That although the` incoming Managing Agents J.K. Commercial Corporation were prepared to serve the appellant on a commission of 2 % only, there is nothing to suggest that the outgoing managing Agents had refused to reduce their commission if that was the only ground for changing hands of the managing agency .
(3) This is not a case where the appellant reduced its expenditure by doing away with the middleman 's profit, e.g. to get rid of the managing agency and taking the managing agency itself.
It is only question of substituting one Managing Agent l`or another (4) That although a compensation of Rs. 2,50,000 was paid by the appellant to the outgoing Managing Agents yet by employing the new Managing Agents a net profit of Rs 30,000 was made by the Company which was in the nature of a recurring benefit, apart from other facilities.
(5) That constitution of the two Managing Agents, namely, out going and the incoming Managing Agents shows that Singhania family (the appellant) had major interest in both of them.
These facts have been clearly proved by the additional documents filed in this Court which were the annexures filed by the Tribunal in the statement of the case sent to the High Court along with the reference.
Annexure 'G ' at p. 69 of the Paper Book shows that at the time of terminating the agency of Juggilal Kamlapat high compliments were paid to the said Managing Agents as would appear from the minutes of the meeting held on August 24, l 943 .
The following observation, were made in that meeting: "There was a frank discussion among the Directors and it was unanimously agreed that even though the present Managing Agents have been rendering very good services to the Company, and have been carrying on its affairs in a creditable manner, there was no denying of the truth that the appointment of Managing Agents of the constitution and composition of the J.K. Commercial Corporation Ltd. would give to the Company unique advantages which the present Managing agents may perhaps be not able to impart, being a partnership firm.
and further as the J.K. Commercial Corporation Ltd., has offered its services on lower terms, the company would be benefited by a saving of above Rs. 30,000/ per annum.
" The minutes quoted above would clearly show two things that vary high compliments were paid to the outgoing Agents for their very good services.
and (2) that by the terms offered to the new Agents, namely, J.K. Commercial Corporation there was to be a saving of Rs, 30,000/. per annum Similarly the Tribunal in its order of reference to the High Court and the statement of case has found as follows: (p. 65 of the Paper Book) 654 "The constitution of the two managing agents do show that the Singhania family has major interest in both them.
The Tribunal on the basis of these facts came to the conclusion that the compensation was paid due to extra commercial reasons and could not be regarded as expenditure incurred wholly and exclusively for the purpose of the business.
The High Court differed from the reasons given by the Tribunal but affirmed its view on the ground that the expenditure incurred by the assessee Company being of a capital nature it was not deductible Having regard to the facts and circumstances of the present case we have no doubt that this case is wholly covered by the decision of this court ill Godrej & Company 's case (supra).
In this case, while it is true that this Court was dealing with the case of compensation in the hands of the payee Company who were the Agents, yet in view of the clear observations made by the Court there can be no manner of doubt that be expenses incurred in the present case by way of payment of compensation to the outgoing Agents would be of a capital nature.
This Court in the aforesaid case observed as follows: "In the light of those decisions the sum of Rs. 7,50,000 was paid and received not to make up the difference between the higher remuneration and the reduced remuneration but was in reality paid and received as compensation for releasing the company from the onerous terms as to remuneration as it was in terms expressed to be.
In other words, so far as the managed company was concerned, it was paid for securing immunity from the liability to pay higher remuneration to the assessee firm for the rest of the term of the managing agency and, _ therefore, a capital expenditure and some far as the assessee firm was concerned, it was received as compensation for the deterioration of injury to the managing agency by reason of the release of its rights to get higher remuneration and, therefore, a capital receipt within the decisions of this Court in the earlier cases referred to above." Mr. Asoke Sen tried to distinguish this case on the ground that the Court was concerned in the Godrej & Company 's case (supra) only with the nature of the payment in the hands of the payee company and any observations made as to what would be the nature of the payment in the hands of the payer company would be obiter, and, therefore.
not binding on this Court.
We are, however, unable to agree with this knew.
Godrej & Company 's case (supra) has considered all the previous decisions and has clearly laid down that in the circumstances.
such as the present, the expenditure incurred would be a capital expenditure in the hands of the payer company and a capital receipt in the hands 1 of the payee company within the meaning of section 10(2)(xv) of the Income tax Act.
The distinction sought to be made by the learned 655 counsel for the appellant is extremely subtle and it is a distinction without any difference.
Moreover, there are a number of other circumstances which clearly show that the expenditure concerned cannot, but be treated as a capital expenditure.
Mr. Asoke Sen then submitted that if the Godrej and Company 's case (supra) is held to be an authority for the proposition that the amount of compensation in the hands of the payer company also would be of a capital nature, then that case was wrongly decided and should be re considered by us.
We are, however, unable to agree with this argument, because apart from the principle of stare decisis, on the facts and circumstances of the present case, we do not find any special reasons to reconsider the decision in Godrej & Company 's case (supra) particularly when in view of the facts and circumstances of this case we are really of the opinion that the amount in question is undoubtedly a capital expenditure.
Reliance was placed by the learned counsel for the appellant on a decision of the Calcutta High Court in Anglo Persian oil Co. (India) Ltd. vs Commissioner of Income tax(1).
It is true that some observations in the aforesaid case are presumably in favour of the appellant but the Calcutta High Court was careful to guard itself against its decision being treated as a general principle to apply to all cases and in this connection it observed as follows: "The case of payer and payee must be considered upon an independent statement of the relevant facts provide in his presence, there being no over riding principle of law that the Income tax authorities are entitled to tax once at least on every payment." In that case the Court proceeded on the admitted finding of fact that the expenditure incurred was wholly and exclusively for the purpose of the business.
This, however, is not the case in the present case.
In these circumstances, the decision in Anglo Persian oil Co. (India) Ltd 's case(1) does not appear to be of any assistance to the assessee.
Reliance was also placed on a decision in Commissioner of Income vs Shaw Wallace and Company(2) in which case the Judicial Committee of the Privy Council merely affirmed the finding of the High Court that the sums received by the respondents were not income, profits or gains within the meaning of the Act though they gave different reasons for that conclusion.
It may be noticed that Shaw Wallace and Company case(2) turned upon the facts and circumstances of the case and the nature of the payment made to the Company.
While affirming the finding of the High Court their Lordships observed as follows: "The question was however, re stated by the learned Chief Justice in more precise terms namely, 'whether these sums are income profits or gains within the meaning of the (1) 80 I I.T.R. 129,133, (2) L.R. 59 L.A. 206, 211, 656 Act at all, ' and for the reasons stated in his judgment he came to the conclusion that they were not.
Their Lord ships think that his conclusion was right though they arrive at this result by a slightly different road.
" Reliance was also placed on a decision of this Court in Karam Chand Thapar and Bros. P. Ltd. vs Commissioner of Income tax (Central), (Calcutta(1), where this Court observed as follows: "As held by this court in Commissioner of Income tax , Chari and Chari Ltd. , that ordinarily compensation for loss of office or agency is regarded as a capital receipt, but this rule is subject to an exception that payment received even for termination of an agency agreement would be revenue and not capital in the case where the agency was one of the many which the assessee held and its termination did not impair the profit making structure of the assessee, but was within the framework of the business, it being a necessary incident of the business that existing agencies may by terminated and fresh agencies man be taken.
" This was, however, a case where their Lordships were dealing with that question as to whether or not the amount of compensation in the hands of the payee company for loss of office or agency would be regarded as a capital receipt.
Karam Chand Thapar and Bros. Y. Ltd case (supra) does not throw any light on the point with which we are concerned in the instant case.
I Great reliance was sought to be placed on the decision of the Calcutta High Court in Commissioner of Income tax, Calcutta vs Turner Morrison & Company Private Ltd.(2) where the High Court observed as follows: "It is now well settled that the expression 'expenditure laid out or expended wholly and exclusively for the purpose of such business ' includes expenditure voluntarily incurred for commercial expediency and in order indirectly to facilitate business.
It is immaterial if a third party also benefits thereby.
It is further well settle that an expenditure incurred in maintaining the efficiency of the manpower from time to time utilised in a business is also expenditure wholly or exclusively laid out for the purpose of such business.
It is also well settled that the employment of, say a director, at a reasonable extra remuneration to supervise a particular business of the company, regard being had to his expert knowledge in that particular line of business, is expenditure within the meaning of section 10 (2) (xv) and the revenue authorities are not justified in reducing such remuneration.
The expression 'commercial expediency ' is an expression of wide import and expenditure in commercial expediency includes such expenditure as a prudent man may incur for (1) , 171.
(2) I.T.R R 147 156 657 the purposes of business.
An expenditure which is entirely gratuitous and has no connection with the business does not come within the meaning of section 10(2)(xv) of the Act.
" This case also is distinguishable from the facts of the present case, in as much as in Turner Morrison do Company 's case (supra) there was no question of termination of any managing agency but what had happened was that two directors had retired and in their place an expert director was appointed to manage the affairs of the company.
on the facts of that case this Court held that the expenditure was incurred for commercial expediency in order to facilitate business.
In the instant case, as we have already pointed out, termination of the.
managing agency of the outgoing Agents was a voluntary act not caused by any negligence, inefficiency by the outgoing managing agents In these circumstances on the facts a circumstances be would not consider whether it was commercially expedient in order to facilitate business that the managing agency of the outgoing Agents should have been terminated.
Learned counsel for the appellant also referred us to the decision of the Bombay High Court in Greaves Cotton & Co. Ltd. vs Commissioner of Income tax, Bombay City(1) where the Bombay High Court observed as follows: "We have already said that the inference drawn on the material on record is that the managing agency agreement had been terminated with the object of taking over its management by the board of directors and there is no evidence which will lead to an inference that it was done with the oblique motive or oblique purpose of securing the payment of the said amount of Rs. 17 lakhs to the managing agents.
For reasons stated above, our answer to the question is in the affirmative, i.e. in favour of the assessee.
" This was obviously a case where the Managing Agents had not changed hands at all but what happened that the managing agency was terminated and the managing agency was taken over by the Board of Directors themselves.
Thus this case also does not appear to be of any assistance to the appellant.
In C.I.T. West Bengal II, Calcutta vs Coal Shipment (P) Ltd.(2) this Court indicated the various considerations which would govern the Court in deciding whether a particular amount is of a capital nature.
Relying on a decision in the case of Atherton vs British Insulated and Helsby Cables Ltd.(3) this Court observed as follows: "The character of the payment can be determined, it was added by looking at what is the true nature of the asset which has been acquired and not by the fact whether it is a (1) , 134.
(2) [1971]3 S.C.C. 736, 740, 741.
(3) 10 T.C. 671.
658 payment in a lump sum or by installments.
It is also an accepted proposition that the words 'permanent ' and 'enduring ' are only relative terms and not synonymous with perpetual or ever lasting.
There are some other tests like those of fixed capital and circulating capital for determining the nature of the expenditure.
An item of disbursement can be regarded as capital expenditure when it is referable to fixed capital.
It is revenue when it can be attributed to circulating capital." Similarly in The Commissioner of Income Tax Madras vs M/s. Ashok Leyland Ltd. (1) this Court observed as follows: "A long line of decisions have laid down that when an expenditure is made with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade there is good reason (in the absence of special circumstances leading to the opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital.
From the facts found, it is clear that the managing agency was terminated on business considerations and as a matter of commercial expediency.
There is no basis for holding that by terminating the managing agency, the company not only saved the expense that it would have had to incur in the relevant previous year but also for few more years to come.
It will not be correct to say that by avoiding certain business expenditure, the company can be said to have acquired enduring benefits or acquired any income yielding asset.
" It may be seen that in that case there was a finding of fact that the termination of the managing agency was purely on business considerations and as a matter of commercial expediency and that no enduring benefits were acquired by the company.
Similarly in M. K. Brothers (P) Ltd. v Commissioner of Income tax, Kalipur.(2) my brother Khanna, J., speaking for the Court indicated the real tests to determine whether an amount is of a capital nature.
In this connection the Court observed as follows: "The answer to the question as to whether the money paid is a revenue expenditure or capital expenditure depends not so much upon the fact as to whether the amount paid is large or small or whether it has been paid in lump sum or by installments, as it does upon the purpose for which the payment has been made and expenditure incurred.
It is the real nature and quality of the payment and not the quantum or the manner of the payment which would prove decisive.
If the object of making the payment is to acquire a capital (1) [19731 S.C.C. 201, 204.
(2) 34.
659 asset, the payment would partake of the character of a capital payment even though it is made not in a lump sum but by installments over a period of time.
" It would thus appear that numerous cases have laid down various tests to determine as to when on the facts and circumstances of a particular case the expenses disbursed by an assessee amount to a capital expenditure or a revenue receipt.
The classic test laid down is by Viscount Cave, L.C., in Atherton 's case (supra) where he observed at pp.
192 193 as follows: But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital.
" Atherton 's case (supra) has been followed by this Court in a large number of decisions such as in M/s. Ashok.
Leyland Ltd. case (supra) and Coal Shipment (P) Ltd 's case (supra) and lot of other cases.
Several tests that have been evolved over the years by this Court as also the other High Courts may be briefly formulated as follows: (1) Bringing into an ass or advantage of enduring nature would lead to the inference that the expenditure disbursed is of a capital nature These terms, such asset" or "advantage of enduring nature" are, however, purely descriptive rather than definitive and no rule of universal application can be laid down.
Ultimately the question will have to depend on the facts and circumstances of each case, namely.
quality to, and quantum of the amount, the position of the parties, the object of the transaction which has impact on the business, the nature of trade for which the expenditure is incurred and the purpose thereof etc.
(2) An item of disbursement may be regarded as of a capital nature when it is relatable to a fixed asset or capital, whereas the circulating capital or stock in trade would be treated as revenue receipt.
Lord Haldane in John Smith & Sons vs Moore(1) has aptly and adroitly explained the terms 'field capital ' and 'circulating capital ' thus: "Fixed capital is what the assessee turns into profit by keeping it in his own possession and circulating capital is what he makes profit of by parting with it and letting it change masters.
(1) , 282 660 (3) Expenditure relating to framework of business generally capital expenditure.
(4) Another important and safe test that may be laid down particularly in cases where the managing agency is terminated would be to find out whether the termination of the agency is in termination of purely voluntary for obtaining substantial benefits.
In other words, the decisive test to determine whether or not termination of the agency is in terrorem would be to find out is in such case commercial expediency requires that the agency should be terminated as it had become onerous or it was creating difficulties or the Agents were guilty of negligence etc.
It will also include payments for retrenchment compensation or conferment of benefits on employees or termination of other disadvantages or onerous relationships.
These arc some of the instances which I have given but they are by no means exhaustive The present case, however, falls within condition No (4) pointed out by us above, and the termination of the. agency cannot be said to be in terrorem but was voluntary so as to obtain an enduring or recurring benefit.
Before applying these tests to the facts of the present case, I would like to stress the important ingredients of section 10(2)(xv) of the Income tax Act, 1922 itself.
Section 10(2)(xv) runs thus: 10.
(2) Such profits or gains shall be computed after making the following allowances, namely: (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 expanded wholly and exclusively for the purpose of such business, profession or vocation An analysis of this section would clearly show that in order to be deductible expense the amount in question must fulfil two essential conditions: (i) that expense must be laid out wholly and exclusively for the purpose of the business, profession or vocation; and (ii) that it should not be expense of a capital nature.
Both these conditions have to be complied with before an assessee can claim deduction under section 10(2)(xv).
The High Court in this case has found that while the assessee had complied with the first condition that the expenditure was incurred for the purpose of the business, yet it has held that in the circumstances the expenditure is of a capital nature.
It cannot be argued as was suggested by Mr. Asoke Sen at one time that whenever an expenditure is incurred in the course of the business it would never be a capital expenditure because section 37 of the income tax Act, 1961, 661 itself contemplates contingency where even though the expenditure may be incurred wholly and exclusively for the purpose of the business yet it may be of a capital nature.
Let us now apply the tests laid down by the Courts as specified by us to the facts of the present case.
We have already given the facts found by the Tribunal which have not been disputed before us.
In this connection there are two circumstances which clearly indicate that the expenses incurred by the assessee were not dictated by commercial expediency but were inspired be a profit hunting motive: (1) That there was absolutely no necessity to terminate the managing agency of Juggilal Kamlapat only two years after the appellant entered into agreement with them.
There was no complaint that the Agents had m any way ' caused any loss or damage to the appellant or to their reputation, nor was there anything to show that the outgoing agents were guilty of negligence, laches, fraud or negligence.
In these circumstances, therefore, the only irresistible inference that could be drown is that the assessee wanted to benefit both the firms, namely, incoming agents and the outgoing agents, which belonged to the Singhania family as found by the Tribunal and not disputed before us.
The outgoing agents were benefited because an amount of Rs. 2,50,000 was paid to them and the incoming agents were benefited because they were given the managing agency of the Company and as found by the Tribunal the appellant had pledged their goods in lieu of advance, (2) That it is the admitted case of the appellant that by virtue of the fact that the incoming agents had agreed to charge only 2% commission, the appellant got a benefit of Rs. 30,000 per annum.
this amount is a recurring benefit to the appellant and can safely be regarded as an advantage of an enduring nature so as to fall within the definition laid down by Viscount Cave, L.C In these circumstances therefore, the present case is fully covered by the 'decision of this Court in Godrej Company 's case (supra).
For these reasons we are satisfied that the High Court was right in holding that the disbursement of compensation of Rs. 2,50,000 was of a capital nature and was, therefore, not deductible expenditure under section 10(2)(xv) of the Income tax Act 1922.
We, however, feel that the High Court was in error in giving a cryptic finding that the expenditure in question was incurred wholly and exclusively for the purpose of the business.
This finding has been arrived at without considering the facts mentioned by us above and is not borne out from the facts and circumstances proved in this case.
Nevertheless we uphold the order of the High Court on reasons different from those given by the High Court.
662 We would, however, like to make it clear that we have held that the compensation paid to the outgoing Agents in the peculiar facts of the present case amounts to capital expenditure.
But we should not be understood as laying down a general rule that in all cases where compensation is paid to the Managing Agents whose agency is terminated it would amount to capital expenditure.
We have already pointed out the various tests to be applied which are by no means exhaustive, nor are they of universal application.
Each case has to be examined in the light of the circumstances of the case.
The appeal accordingly fails and is dismissed with costs.
V.P.S. Appeal dismissed.
| IN-Abs | An analysis of section 10(2) (xv) of the Income tax Act, 1922, shows that in order to be a deductible expenditure the amount has to fulfil two conditions, (i) that it must be laid out wholly and exclusively for the purpose of the business, profession or vocation.
and (ii) that it should not be an expenditure of a capital nature.
Both these conditions have to be complied with before an assessee can claim deduction under the section.
[660 G] Some of the tests that have been evolved by courts for determining when.
an the facts and circumstances of a particular case, the expenses disbursed an assessee amount to a capital expenditure or revenue receipt arc: (a) Bringing into an asset or advantage of enduring nature would lead to the inference that the expenditure is of a capital nature.
The terms `asset ' or `advantage of enduring nature ' are descriptive and the question will depend upon the facts of each case.
(b) An item of disbursement may be regarded as of a capital nature when it is relatable to a fixed asset or capital, whereas circulating capital or stock in trade would be revenue receipt.
John Smith & Sons vs Moore , 282, referred to .
(c) Expenditure relating to frame work of the business is generally of a capital nature.
(d) When a managing agency is terminated the termination is in terrorem, that is if commercial expediency requires that the agency should the terminated as it had become one, or it was creating difficulties or the agents were guilty of negligence, etc., or if any payments were made as retrenchment compensation, or confirment of benefit an employees or for termination of other disadvantages or onerous relationship it would be a capital expenditure but if it is purely voluntary obtaining substantial benefits it would be revenue expenditure.
[659E 660D] In the present case, the appellant agreed to employ a firm as its managing agent for 20 years and to pay them commission at 2 1/2%.
But after two years the appellant terminated the agreement.
The managing agents received Rs. 25,000 as compensation and executed a release deed.
The appellant thereafter employed another managing agent at 2% commission.
There was nothing to show that the out going managing agents were guilty of any faches, negligence, or that they had cause and loss or disadvantage to the appellant so as to justify the sudden termination of their agency, or that they did not agree to reduce the commission.
On the other hand, the Board of Directors paid high compliments to the outgoing managing agents.
By employing the new managing agents at the lesser commission a net profit of Rs. 30,000 was made by the appellant per annum.
The members of the outgoing and incoming agents, belonged to the same family as the appellants, showing, that the appellants were interested in both of them.
The appellant contended that the expenses of Rs. 2,50,000 was incurred by the appellant wholly and exclusively for carrying on the business or the company and would therefore be an allowable deduction under section 10(2) (xv); but the department and the Tribunal negatived the contention.
On reference, the High Court held that the expenditure was incurred wholly and exclusively for the Purpose of `appellant 's business.
as the amount was in the nature of a capital expenditure, it was not deductible under the provision.
649 Dismissing the appeal to this Court, ^ HELD: The High Court was right holding that the disbursement of compensation of Rs. 2,50,000 was of a capital nature and was therefore not a deductible expenditure under section 10(2) (xv ).
[661 (G] (1) Merely because the expenditure is incurred in the course of the business is in could not be said that it would never be a capital expenditure.
Section 37 of the 1961 Act corresponding to section 10(2)(xv) of the 1922 Act.
itself templates a contingency where, even though the expenditure us incurred wholly and exclusively for the purpose of the business, it may still be of a capital nature.
But the High Court was in error in this case in holding that the expenditure was wholly and exclusively the purpose of the business, because.
the finding is not borne out by the facts and circumstances of the case.
[660 H 661 A, G H] (2) The question whether compensation paid to the outgoing managing agents is capital or revenue expenditure depends on the facts and circumstances of each case.
[662 A B] (3) The present case is covered by the decision of this Court in Godrej Company vs C.I.T. Bombay City (47 I.T.R. 381).
That case has considered all the previous decisions and has laid down that in circumstance such as in the instant case the expenditure would be a capital expenditure in the hands of the payer and a capital receipt in the hands of the payee company within the managing of section 10(2) (xv) .
The contention that the case was concerned any as with the nature of the payment in the hands of the payee company and that the observations regarding the nature of the payment in the hands of the payer company would be abiter, is without substance.
[654C, G H] (4)(a) The appellant has brought into existence an advantage of an enduring nature by the change in managing agency, because, the amount of Rs. 30,000 which the appellant got by way of recurring benefit per annum must be regarded as an advantage of an enduring nature so as to fall within its definition in Atherton vs British Insulated and Helsby Cables Ltd. (10 T.C 671) leading to the inference that the expenditure is of a capital nature.
[661 F] (b) It was not the case of the appellant reducing its expenditure by getting rid of the managing agency and taking over the management itself to save the middleman profit.
[653 B] (c) In the present case the only inference that could be drawn from the circumstances of the case is that the termination of the managing agency by the appellant was with the oblique motive of benefiting both the managing agents, in whom the appellant was interested, and not because of and commercial expediency.
[661 D] C.I.T West Bengal II Calcutta vs Coal Shipment (P) Ltd ; , 740 41.
The Commissioner of Income tax Madras vs M/s. Ashok Leyland Ltd ; 204 and M. K. Brothers (P) Ltd. vs Commissioner of Income tax Kanpur ; , 34 followed.
Anglo Persian oil Co. (India) Ltd. vs Commissioner of Income tax 133; Commissioner of Income tax vs Shaw Wallace and Company L.R. 59 I.A. 206, 211; Karam Chand Thopar and Brothers.
(P) Ltd. vs Commissioner of Income tax (Central) Calcutta , 171.
Commissioner of Income tax Calcutta vs Turner Morrison & Company.
Private Ltd. , 156 and Greaves Cotton & Co. Ltd. vs Commissioner of Income tax Bombay City , 134, explained.
|
Civil Appeal No. 716 of 1968 Appeal by Special Leave from the Judgment and order dated the 2nd March, 1967 of the Patna High Court in Letters Patent Appeal No. S of 1962.
section C. Mishra and U. P. Singh for the appellant.
S N. Prasad , A. K. Srivastava, M. section Narasimhan and B. P. Singh for the respondents.
The Judgment of the Court was delivered by KRISHNA IYER, J.
This appeal, by special leave, turns substantially on the application of section 6 of the Bihar Land Reforms Act, 1950 (hereinafter called, the Act), to the case situation the facts having been decided concurrently and finally in favour of the appellant.
Still he lost at the stage of the Letters Patent Appeal, because 3 Division Bench of the High Court held that he had been robbed of his right to sue by Section 6 of the Act.
We may set out the relevant facts briefly.
Although a number of items of immovable property were involved in the suit, which was for ejectment on title.
the lands now in dispute are bakasht lands in the 'B ' Schedule to the plaint.
for easy reference called suit lands.
Regarding the rest the plaintiff 's suit has been decreed.
several items of property were gifted by one Ram Badan Singh to his two wives whose names were duly mutated in the revenue register.
The further course of the proprietary history takes us to the creation of a wakf and the office of mutawalli which are not relevant to the controversy before us but are interesting when we remember that the donees were Hindus and yet they had executed a wakf and constituted themselves as mutawallis.
This shows how community life absorbs and blends jural concepts, overriding religion in the creation of an inter laced legal culture.
This is by the way.
742 We may now take up the thread at the point where by further Gift deeds and transfers the lands covered be the original gift deeds case to vest in the plaintiff and defendants, second party.
they divided them as per a partition deed Exhibit 4 'a dated (October 30, 1952 whereby the suit lands fell to the exclusive share of the plaintiff, along with some other items while other properties were similarly allotted to defendants 2nd party.
Undaunted by this fact defendants, second ;3 party, sold the suit lands to the defendants first party alleging an oral partition sometime before August 1952 and under cover of that case, committed trespass.
Thereupon, a scramble for possession these properties and a proceeding under section 145 Cr.
P.C. ensued in which the defendants, first party, got their possession upheld by the Magistrate`s order dated 5.4.1954.
Inevitably the plaintiff brought the present suit in April 1955 for a declaration of his title, for possession and mesne profits on the score that his exclusive possession was by force taken away in July August 1954 by defendants, first party.
The latter put forward the plea of prior oral partition and exclusive hostile possession, tracing their claim through defendants second party.
The courts of fact found against the defendants and decreed the suit as prayed for, but in Letters Patent Appeal, the present contestig respondents, i.e., the defendants 1st party, urged with success that the plaintiff had lost his title thanks to the operation of sections 3 and 4 of the Act and could not salvage any interest under section 6 thereof.
The defeated plaintiff has come up to this Court, as appellant, assailing the findings of the High Court mainly on three grounds: According to Shri section C. Misra, learned counsel for the appellant section 6 of the Act applied to his case and so there was no vesting of title in the State of the suit lands.
He further pressed that, any way, this case, resting on the Act, which had been on the statute block for several years had not been set up at the earlier stages of the litigation and should not have been permitted at the Letters Patent Appeal stage in the High Court for the first time.
His third contention was that the deed of partition Exhibit 4/a was not legally divestative of rights in view of the provisions of the Estates Partition Act, 1897 which, in his submission, empowered the Collector alone to partition the properties, which not having been done, the lands remained in co ownership wherefore the possession of the defendants, first party, was that of co sharers.
If that were so, the possession of one co sharer was constructive possession of the other co sharer and the plaintiff was thus in khas possession under section 2k of the Act and, on that basis, section 6 of the Act saved the disputed properties from vesting in the State.
All these three fold contentions were sought to be repelled by counsel for the respondent and we proceed to examine them.
We may as well mention here, but dilate on it later, that certain items out of the B Schedule bakasht lands are, on the showing of defendants second party, not in their possession, although the plaintiff has averred.
, in his pleading, dispossession of all the B Schedule lands The legal impact of this circumstance on section 4(a) and the schemes of the Act has to be gauged, in the context of the relief claimed by the plaintiff and the eligibility of possessory benefits of the contesting defendants.
743 The central issue obviously is the resolution of the competition between vesting of the suit lands in the State by virtue of sections 3 and 4 and their exemption from such deprivation by the saving provision in section 6 in favour of tile plaintiff.
A close up of the profile of the land reform law would help us appreciate the purpose and programme of the statute and the meaning of the provision under construction .
The project, as highlighted in the Preamble in grandiose and in keeping with Part IV of thus Constitution, but ill actual implementation drags its feet.
Indeed, counsel on both sides were readily agreed only on one point, viz., that neither his Act nor the law setting a ceiling on land ownership slumbering the statue book since 1962, has been seriously enforced.
The Ninth Schedule to the Constitution can immunise a legislation from forensic challenge but what schedule can invigorate a half inert Administration into quick implementation of welfare oriented, urgently needed, radical legislation now Lying mummified in the books ? If the assertion of non implementation of land reforms laws made at the bar were true, the Bihar State Government has much to answer for to 'We the People of India ' and to the stultified legislature whose 'reform ' exercise remains in suspended animation.
In this very case, before the High Court, the Advocate General has appeared for the plaintiff landowner and yet the State has not bestirred itself to appear and claim the suit lands.
We are left in obscurity on the vital point, neither counsel nor the records throwing any light on whether the State has been given notice in the case in the High Court.
The social transformation cherished by the Constitution involved re ordering of the land system and a vigilant administration would have intervened in this 20 year old litigation long ago and extinguished the private contest to the advantage of the State.
The feudal will may, not unoften, furtively hide, in strategic positions may, be.
We may begin consideration of the merits of the rival cases by a broad projection of the Act.
Its basic object is to extinguish the proprietary rights and transfer absolutely, and free from all private interests, such ownership to the Stat.
The tillers are not to be up rooted and so, they i.e., the raiyats and under raiyats are to be settled on terms of fair rent.
The Act, making; a simplistic dischotomy sufficient for our study, thus absolutely vests in the State all lands, freed from all private rights (sec. 3) as from a date notified under section 4, but carves out of this land mass and leaves untouched.
apart from raiyati holdings, the bakasht lands in the khas possession of the 'intermediary ' i.e., the prior full owner (sec. 6).
Lands not falling within the saved category will be directly managed by the State (sec. 13), if need be, by ejecting trespassers if they are found ill illegal occupation [sec. 4(g)]. 'rh valuable rights attached to or imbedded in lands, like trees, fisheries, minerals also go to the State.
A seemingly bold legislation stroke of substantial land nationalisation will be reduced to pathetic futility if the flood gates of evasion are kept ajar by plausible but diluted interpretation of section 6 as urged by the landlords.
The Court must suppress the mischief and advance the remedy .
Indeed.
if we may anticipate our conclusion, the pronouncements of this Court in Surajnath Ahir vs 744 Prithinath Singh(1) and Ram Ran Bijai Singh & Ors vs Behari Singh @ Bagandha Singh,( ') bar and bolt the, door of escape in a big way and counsel for the appellant has striven to impress on us the need to reconsider and distinguish that view because it is inconsistent with vintage jurisprudence and Anglo American concepts bearing on possession of an owner.
Let us get down to an openheart surgery in a limited way to check upon the soundness of this cardinal submission.
The consternation expressed by appellant 's counsel that the High Court 's interpretation of sec.
6 will create rights in rank trespassers and distort and defeat the right to possess enjoyed by Zamindars does not, by itself, disturb us.
We are in a juridical province of agrarian reform.
The creative legal ideas needed to effectuate this developmental plan are conceptually alien to the old land law and 'rural ' jurisprudence, wearing as they do radical contenance.
The Court, in the process of construction must help the chariot of land reform move forward and sections 3 and 6 are the vital wheels.
Having regard to the significance of the State 's presence even in private litigation bearing on eviction and the like, section 4(ee) provides for notice to the State in certain classes of cases but the present suit and later proceedings are not covered by the term of section 4(ee) and counsel on either side, when we enquired, did not show interest in taking steps to implead the State or otherwise to give notice to it in the present appeal.
We have to Leave it at that.
The consequence of non impleader or absence of notice to the State will naturally be visited on the parties, in the sense that the State will not be bound by this adjudication and its rights vis a vis the plaintiff and the defendants, first party will remain unaffected.
So also of other third parties on the suit lands.
We have already adverted to the skeletal scheme of the Act, of vesting the lands in the State and saving in the hands of proprietors such lands as are in their khas possession, including certain categories spelt out in s.6 by settling them on fair rents under the State.
So, the crucial concept of khas possession calls for judicial scrutiny rather closely so i has loopholes for escape through the meshes of s.6 may not frustrate the land reform law itself.
But what is legitimately due by way of legislative justice to erstwhile proprietors should not be denied.
With this and in view, the Legislature has defined khas possession in s.2k which reads thus: G "2.
Definitions In this Act, unless there is anything repugnant in the subject or context, (k) 'khas possession ' used with reference to the possession of a proprietor or tenure holder of any land used for agricultural or horticultural purposes means the possession of such proprietor or tenure holder by cultivating (1) (2) 745 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; Explanation : "Land used for horticultural purposes" ' means lands used for the purpose of growing fruits, flowers or vegetables." He who runs and read will readily make out that what is meant is actual possession with one 's feet on the land, plough in the field and hands in the soil, although hired labour is also contemplated.
The emphatic point is that possession is actual possession and admits of no dilution except to the extent s.6 itself, by an inclusive process permits.
This basic idea banishes the importation of the right to possess as tantamount to khas possession.
It would be a perversion of definition to equate the two.
Of course, Shri section C. Misra, appearing for the appellant, has preset before us that jurisprudentially even the right to possess should be regarded as possession.
Indeed, this Court has had occasion to consider and construe the relevant provision in Surajnath Ahir and Ram Ran Bijai Singh (supra) and our task is largely to explain and adopt.
Before we examine this quintessential aspect presented before us will complex scholarship by Shri section C. Misra we Had better make.
short shrift of certain other questions raised by him.
He has desired ` us, by way of preliminary objection, not to give quarter to the plea, founded on section 6 of the Act, to non suit his client, since it was a point raised be nova at Letters Patent state.
The High Court have thought to this objection but overruled it, if we may say so rightly.
The Court narrated the twists and turns of factual and legal circumstances which served lo extenuate the omission to urge the point earlier but hit the nail on the head when it held that it was well settled that a pure question of law going to the root of the case and based on undisputed or proven facts could be raised even before the Court of last resort, provided the opposite side was not taken by surprise or otherwise unfairly prejudiced.
Lord Watson, in Connecticut Fire Insurance Company vs Kavanach,(1) stated the law thus: When a question of law is raised for the first time in a Court of last resort upon the construction of a document or upon facts either admitted or proved beyond controversy, it is not only competent but expedient in the interest of justice to entertain the plea.
The expediency of adopting that course may be doubted when the plea cannot be disposed of without deciding nice questions of fact in considering which the Court of ultimate review is placed in a much less advantageous position than the courts below.
But their Lordships have no hesitation in holding that the course ought not any case to be followed unless the Court is satisfied that the evidence upon which they are asked to decide establishes beyond doubt that the facts if fully investigated would have supported the new plea." (1) , 480.
17 L925SupCI /75 746 We agree with the High Court that the new plea springs from the common case of the parties, and nothing which may work injustice by allowance of this contention at the late stage of the Letters Patent Appeal has been made out to our satisfaction.
Therefore, we proceed to consider the impact and applicability of s.6 of the Act to the circumstances of the present case.
Counsel for the appellant, in his turn, in this Court went a step further to raise two new points not urged in the prior state of the litigation.
We have heard him but arc not persuaded to, agree with him.
According to him, the defendants, first party, had stated in their written statement that their possession of the disputed items as based on the order of the Magistrate under s.145 Cr. P.C.`.
That order having been found erroneous, no benefit could accrue to the defendants.
So stated, it is a little obscure and indeed the point itself is obscure.
There was a proceeding under s.145 Cr.
P.C. before the criminal court in view of the dispute regarding the claims of actual possession.
In the order of the Magistrate, the oral partition relied on by the defendants was held proved and the subsequent deed of partition relied on by the plaintiff held not been acted upon.
Counsel says that this led to the occupation by trespass of the suit properties.
Since the Magistrate 's order had led to this prejudicial consequence it was not proper to permit the party to benefit by his own wrong founded on an 'actus curiae '.
We see no force at all in this contention.
The Magistrate did not direct possession of the B shedule properties to be handed over to the defendants, first parts, but declared their actual possession.
He has done no wrong nor conferred any unjust advantage.
There is no principle on which it could be held that these circumstance deprive a party of the benefit of his possession and d of the dispossession of the plaintiff flowing from s.6 of the Act; if any rights accrued from a statutory provision, it could not withheld for the reasons urged by counsel for the appellant The next new discovery in this Court turns on the absence of jurisdiction of the civil court to give relief when the substance the matter falls within the special jurisdiction of the revenue authorities .
Counsel submitted that this new point occurred to him on reflection and was being pressed by him because it had force .
The plaintiff 's prayer .
for declaration of title and for possession was negatived by the High Court in the light of s.6 of the Act wherein it was held that he had no khas possession and his interests could not in any manner be saved by that provision It was not a case of the defendant claiming or securing any relief regarding possession but the plaintiff"s title standing negatived.
The suit itself was for ejectment on little and sans title, ejectment could not be granted The title of the plaintiff was sought to be rested on s.6 at the letters patent Appeal level but on a construction of that Provision the Court held against him In short the High Court did nothing to investigate into the possession of parties but on the admitted fact that the Defendants" first party, were in possession by trespass the plaint alleges this the Court Dismissed the suit, since section 6 of the Act divested 747 the plaintiff of his quondam proprietorship.
Moreover, there is nothing in section 35 of the Act, relied on by counsel to substantiate his submission, depriving the civil court of its jurisdiction to decide questions of declaration of title and consequential relief of possession.
Section 35 deals with different types of suits Indeed, s.6(1) with which we are concerned, also contains no inhibition against the civil court 's power to decide the issue of title and right to possession of the plaintiff and, as a necessary corollary, the claim of actual possession set up by the defendants first party Nor, can section 6(2) inferentially interdict the plenary power of the civil court.
In short, the plea of bar of the restriction is specious and fails Another peripheral issue invoked before the High Court and here to undo the defendant 's claim of exclusive possession and consequential absence of khas possession in the plaintiff was based on the provisions of the Estates Partition Act, 1897.
Shri Misra propounded what, unfortunately, strikes us as a fallacious proposition.
He went to the extreme extent of maintaining that a partition of lands, to be valid, should be in terms of the Estates Partition Act, 1897 and.
until then, a deed or decree effecting division by metes and bounds does not legally operate.
If so, Ex.4/a remains an arrangement for separate enjoyment between co owners, title continuing, joint.
The follow up of this reasoning is that the suit properties are in the possession of co shares viz, defendants first party (derived from defendents., second party) and possession of one co sharer is possession of the other.
The plaintiff thus is in constrictive possession good enough to bring him into the rescue shelter provided by s.6 Of the Act.
He relied on the ruling in Mahanth Ram Bhushan Das vs Ramrati Kuer(1) and the various provisions of the Estates partition Act to Make out his thesis.
The support derived from the decision is more apparent than real because, as noticed by the High Court, the suit there was not, unlike here, brought on the foot of` a partition and the ruling(r laid down that any 'amicable division ' among, co sharer would not bind the Revenue until the partition was effected as visualised under the Estates Partition Act.
Shri Misra 's study of the provisions of the said Act is free from confusion, save in one fundamental respect That one point, missed by him, is that the whole statutory project is to protect the land revenue, not to affect title.
The partition is valid, it divests title, it binds all; but, so far as land revenue liability is concerned, it relieves parties from the burden falling, on the other sharer 's land only if the exercise prescribed in the Estates Partition Act is gone through.
The statute is a Protective fiscal armour not a mono for division among co owners to travel.
Section 7 makes it clear.
Not that Courts have lost power to decree partition nor that co owners have become impotent to separate their shares voluntarily but that land revenue shall not be prejudiced without the procedure under that Act being gone through.
More clinching is the fact that the plaintiff has here come to Court on the sole case of partition by metes and bounds and has founded his relief not as co sharer (1) 1965 Bihar L. J. 119.
748 but as exclusive owner.
Seeming legal ingenuity has small chance in A court and to miss the point and pertinence of a measure is to travel to a wrong destination.
Now we come to the master problem presented at learned length by Shri section C. Misra and deferentially listened to by us to discover its substance and the solution. 'A 'blind understanding ' has been the result, and as his argument concluded we 'came out by the same door, as in (we) went '.
It behaves us to set out counsel 's submission and the setting of the Act to explain why we do not agree with him and what we regard is the master key to the construction of section 6.
We must first appreciate that it is a land reform law we are interpreting and not just an ordinary statute.
The social economic thrust of the law in this area should not be retarded by judicial construction but filliped by the legal process, without departing from the plain meaning and objective of the Act.
We may delineate the content and contours of section 6 with which we arc directly concerned in the present case.
The preamble to the Act, which sheds skylight on the statute, reads: "An Act to provide for the transference to the State of the interests of proprietors and tenure holders in land and of the mortgages and lessees of such interests including in tersest in trees, forests, fishries, jalkars, ferries, hats bazaars.
mines and minerals and to provide for the constitution of a l and Commission for the State of Bihar with powers to advise the State Government on the agrarian policy to be pursued by the State Government consequent upon such transference and for other matters connected therewith" From this it is fairly clear that the legislative goal s to liquidate all intermediary interests and vest the ultimate ownership on land in the State.
In this sense, the import of the Act is a tepid measure of land nationalisation.
Section 3 in unmistakable language vests the absolute proprietorship in all the lands in Bihar in the State, the succeeding sections spell out details.
F We may here read sections 3, 4(g) and 6(1) of the Act: "3.
Notification vesting an estate or tenure in the State (1) The State Government may, from time to time, by notification declare that the estates or tenures of a proprietor or tenure holder, specified in the notification, have passed to and become vested in the State.
(2) The notification referred to in sub section (1) shall be published in the official Gazette A copy of such notification shall be sent by registered post, with acknowledgement due, to the proprietor of the estate recorded in the general registers of revenue paying or revenue free lands maintained under the Land Registration Act, 1876 (Ben.
Act 7 of 1876), or in case where the estate is not entered in 749 any such registers and in the case of tenure holders, to the proprietor of the estate or to the tenureholder of the tenure is the Collector is in possession of a list of such proprietors or tenure holders together with their addresses, and such posting shall be deemed to be sufficient service of the notification on such proprietor or., where such notification is sent book post to the tenure holder, on such tenure holder for the purposes of this Act.
(3) The publication of such notification, in the Official Gazette shall be conclusive evidence of the notice of the declaration to such proprietors or tenure holders whose interests are affected by the notification" "4.
Consequences of the vesting of an estate or tenure in the State Notwithstanding anything contained in any other law for the time being in force or in any contract, on the publication of the notification under sub section (1) of section 3 or sub section (1) or (2) of section 3A the following consequences shall ensue, namely: (g) Where by reason of the vesting of any estate or tenure or any part thereof in the State under provision of this Act, the Collector is of opinion that the State is entitled to the direct possession of any property he shall, by an order in writing served in the prescribed manner on the person in possession of such property, require him to deliver possession thereof to the State or show cause, if any, against the order within a time to be specified therein and if such person fails to deliver possession or show cause or if the Collector rejects any cause shown by such person after giving him a reasonable opportunity of being heard, the Collector shall for reasons to be recorded" take or cause to be taken such steps or use or cause to be used such force as, in his opinion, may be necessary for securing compliance with the order or preventing a breach of the peace: Provided that if the order under clause (g) is passed by an officer below the rank of the Collector of a district, an appeal shall, if preferred within sixty days of the order., lie to the Collector of the district and the Collector shall dispose of the appeal in accordance with the prescribed procedure" "6.
Certain other lands in khas possession of intermediaries to be retained by them on payment of rent as raiyats having occupancy rights (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)(1) proprietor 's private lands let out under a lease for a term of years or under a lease from year 750 to year, referred to in section 116 of the Bihar A Tenancy Act, 1885 (8 of 1885), (ii) landlord 's 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 (Ben.
Act 6 of 1908), (b) lands used for agricultural or horticultural purposes and held in the direct possession of a temporary lease 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, subject to the provisions of section 7A and 7B be deemed to be settled by the State with such intermediary and he shall be entitled to retain possession thereof and hold r them as a raiyat under the State having occupancy rights in respect of such lands subject to the payment of such fair and equitable rent as may be determined by the Collector in the prescribed manner: Provided that nothing contained in this sub section shall entitle an intermediary to retain possession of any naukarana land or any land recorded as chaukidari or goraiti jagir or mafi goraiti in the record of rights or any other land in respect of which occupancy right has already accrued to a raiyat before the date of vesting.
Explantion.
For the purposes of this sub section. 'naukarana land ' means land held as a grant burdened with service in lieu of rent or held simply in lieu of wages for services to he rendered.
" Although there is a blanket vesting of proprietorship in all the lands in the State, the legislation is careful, in this initial state of agrarian reform, not to be too deprivatory of the cultivating possession of those who have been tilling the land for long.
Therefore, while the consequence of the vesting is stated to be annihilation of all interests, encumbrances and the like in the land, certain special categories of rights are saved.
Thus, raiyats and under raiyats are not dispossessed and their rights are preserved.
The full proprietor 's khas possession is if so not disturbed.
Certainly.
the large landholders, whose lands have for long been under tenancy, lose their lands to the State by virtue of the vesting operation (of course, compensation is provided for).
751 Nevertheless, the reform law concedes the continuance of a limited species of interests in favour of those Zamindars.
The three fold class of lands is brought into the saving bucket by including them in the khas possession of the proprietors.
They are legislatively included in khas possession by an extended itemisation in section 6(1).
The purpose and the purport of the provision is to allow the large land holders to keep possession of small areas which may be designated as the private or privileged or mortgaged lands traditionally held directly and occasionally made over to others, often servants or others in the shape of leases or mortgages.
The crucial point to remember is that section 3 in its total sweep" transfers all the interests in all lands to the State, the exception being lesser interests under the State set out in detail in sections 5, 6 and 7.
So much so, any person who claims full title after the date of vesting notified under section 4 has no longer any such proprietorship.
All the same, he may have a lesser right if he falls within the saving provisions viz., sections 5, 6 and 7 Sections 5 and 7 do not apply here.
The claim of the plaintiff is that he can sustain his right to recover possession in this suit, as coming within the oasis of section 6(1).
There is no case that the sub clauses (a), (b) and (c) of section 1) 6(1) apply.
Counsel 's contention is that he comes within the ambit of the main paragraph, being allegedly in khas possession.
To appreciate the further discussion, it is useful to recapitulate that the appellant has averred in his plaint that he had been dispossessed as early as 1954 by a brazen act of trespass by the contesting respondents who were holding adversely to him.
Undaunted by this fatal fact counsel claimed to be in possession and argued still.
The focus was turned by him on the concept of khas possession defined in section 2(k).
He presented a historical perspective and suggested that the genesis of khas possession could be traced to the Bengal Tenancy Act, 1885.
May be, the draftsmen might have drawn upon those earlier land tenure laws for facility, but we must understand right at the outset that the Constitution of India has inaugurated a new jurisprudence as it were, guided by Part IV and reflected in Part II.
When there has been a determined break with traditional jurisprudence and a big endeavour has been made to over turn a feudal land system and substitute what may be called transformation of agrarian relations, we cannot hark back to the bygone jura or hold a new legislation captive within the confines of vanishing tenurial thought.
De hors the historical links a break away from the past in the socio legal system is not accomplished by worship of the manes of the law khas possession means what the definition, in plain English, says.
The definition clause is ordinarily a statutory dictionary, and viewed that way, we have in the early part of this judgment explained how it means actual, cultivatory possession nothing less nothing else.
Of course, section 6(1) makes a special addition by 'including ' other demised lands by express enumeration.
Section 6 does not stop with merely saving lands in khas possession of the intermediary (erstwhile proprietor) but proceeds to include certain lands outstanding on temporary leases or mortgages with others.
752 as earlier indicated.
These are private lands as known to the Bihar Tenancy Act, privileged lands as known to the Chota Nagpur Tenancy Act, land outstanding with mortgagees, pending redemption and lands which are actually being cultivated by the proprietor himself.
Ordinarily what is outstanding with lessees and mortgagees may not fall within khas possession.
The Legislature, however, thought that while: the permanent tiller 's rights should be protected and therefore, raiyats and under raiyats should have rights directly under the state, eliminating the private proprietors, the Zamindar or proprietor also should be allowed to hold under the State., on payment of fair rent, such lands as have been in his cultivatory possession and other lands which were really enjoyed as private or privileged lands or mortgaged with possession by him.
With this end in view, section 6(1) enlarged its scope by including the special categories.
The word 'include ' is generally used in interpretation clauses in order to enlarge the meaning of that words or phrases occurring in the body of the statute.
It is obvious that section 6(1) uses the word 'including ' to permit enlargement of the meaning of khas possession for the limited purpose of that section, emphasising thereby that, but for such enlargement, the expression khas possession excludes lands outstanding even with temporary lessees.
It is perfectly plain, therefore, that khas possession has been used in the restricted sense of actual possession and to the small extent it had to be enlarged for giving relief to proprietors in respect of 'private ' 'privileged ' and mortgaged lands inclusive expressions had to be employed.
Khas possession is actual possession, that is "a foothold on the land, an actual entry, a possession in fact, a standing upon it, an occupation of it, as a real, administrative act done"(l).
Constructive possession or possession in law is what is covered by the sub clauses of section 6(1).
Even so, it is impossible to conceive, although Shri Misra wanted us to accept, that possession is so wide as to include a mere right to possess, when the actual dominion over the property is held by one in hostility to the former.
Possession, correctly understood, means effective, physical control or occupation.
"The word possession is sometimes used inaccurately as synonymous with the right to possess".
(Words and Phrases, 2nd Edn., John B. Sounders., p.151).
"In the Dictionary of English Law (Earl Jowitt) 1959 at p. l 367 "possession" is defined as follows: 'possession, the visible possibility of exercising physical control over a thing, coupled with the intention of doing so, either against all the world, or against all the world except certain persons.
There are, therefore, three requisites of possession.
First, there must be actual or potential physical control.
Secondly, physical control is not possession, unless accompanied by intention; hence, if a thing is put into the hand of a sleeping person, he has not possession of it.
Thirdly, the possibility and intention must be visible or evidence by external signs for if the thing shows no signs of being under the control of anyone, it is not possessed; . ' In the end of all, however the meaning of 'possession ' must depend on the context." (ibid.
p. 153).
May be, in certain situations, possession may cover right to possess.
It is thus clear that in Anglo American jurisprudence also, possession is actual possession and in a limited set of cases, may include constructive possession, but when (1) American Jurisprudence, Words & Phrases Vol. 33, p. 103.
753 there is a bare right to possess bereft of any dominion or factum of control, it will be a strange legal travesty to assert that an owner is in possession merely because he has a right to possess when a rival, in the teeth of owner 's opposition, is actually holding dominion and control over the land adversely, openly and continuously.
Admittedly in the present case" the possession of the plaintiff had ceased totally at least two years before the vesting under section 4 took place.
This situation excludes khas possession.
We have the uniform authority of this Court to hold that the possession of a trespasser, by no stretch of imagination, can be deemed to be khas possession or even constructive possession of the owner.
In Surajnath Ahir (supra) this Court considered the definition of khas possession in the Act in the context of section and after adverting to Brij Nandan Singh vs Jamuna Prasad, on which Shri Misra placed massive reliance, observed: "Reliance was placed by the High Court on the case reported as Brijnandan Singh vs Jamuna Prasad for the construction put on the expression 'khas possession ' to include subsisting title to possession as well, and therefore for holding that any proprietor, whose right to get khas possession of the land is not barred by any provision of law, will have a right to recover possession and that the State of Bihar shall treat him as a raiyat with occupancy right and not as trespasser.
We do not agree with this view when the definition of khas possession ' means the possession of a proprietor or tenure holder either by cultivating such land himself with his own stock or by his own servants or by hired labour or with hired stock.
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 attempt to distinguish this decision on the score that the observation is obiter does not appeal to us and the rule laid down there is in conformity with the principle as we have earlier expounded.
The law has been indubitably laid down in Ram Ran Bijai Singh (supra) where a Bench of five Judges of this Court discussed khas possession in section 2k and the scope of section 6 of the Act.
The same Full Bench(1) case earlier referred to was pressed before the learned Judges, and over ruling that case, Ayyangar,, J. speaking for the Court stated the law in these unmincing words: "Mr. Sarjoo Prasad however relied on certain observations in the judgment of the Full Bench of the Patna High Court in Sukdeo Das vs Kashi Prasad where the learned Judges appear to consider the possession even of a trespasser who has not perfected his title by adverse possession for the time requisite under the Indian Limitation Act as the khas possession of the true owner.
We consider that this equation of the right to possession with 'khas possession ' (1) A.I.R. 1958 Pat.
754 is not justified by principle or authority.
Besides this is also inconsistent with the reasoning of the Full Bench by which constructive possession is treated as within the concept of khas possession.
The possession of the contesting defendants in the present case was in their own right and adverse to the plaintiff, even on the case with which the appellants themselves came into Court." .
In this context the plea made by the plaintiffs relevant to the character of the possession of the contesting defendants assumes crucial importance, for if they were admittedly trespassers then they could not be said to hold the property on behalf of the mortgagors and the entire basis of the argument as to the property being ill the khas possession of the plaintiffs would disappear.
It was on the basis of their possession being wrongful that a claim was made against them for mesne profits and it was on the footing of their being trespassers that they were sued and possession sought to be recovered from them.
In these circumstances we consider that it is not possible for the appellants to contend that these tenants were in possession of the property on behalf of the mortgagor and in the character of their rights being derived from the mortgagor. ' The Court rejected the theory that the possession of a trespasser was that of the owner.
Other decisions of the Patna High Court and this Court were referred to at the bar but the position having been made unmistakable by the two cases just mentioned, we do not wish to burden this judgment with case law any further.
The conclusion we, therefore, draw is that on the facts found indeed, on the facts averred in the plaint the plaintiff had no khas possession of the suit lands and cannot use section 6 as a rescue raft.
His title was lost when section 4 was notified as applicable to the suit lands by section 3 in 1956.
Without title he could not maintain the action for recovery of possession.
But that is not the end of the matter.
He is certainly entitled to mesne profits from the defendants, first party, until the date of vesting, i.e." January 1, 1956.
We, grant him a decree in this behalf subject to the qualification mentioned below.
Again, the contesting defendants, in paragraph 27 of their written statement, have admitted that they had no possession of or connection with some of the plots mentioned in Schedule to the plaint and set out therein.
The High Court has dismissed the suit in entirety after noticing the admission of the contesting defendants that they have not been in possession of those items covered by paragraph 27 of the written statement.
The plea in that paragraph is that these lands have been made over to the defendants, second party.
It is undeniable that the plaintiff had title to the entire Schedule properties as against defendants.
first party, and second party.
If defendants, first party. were not in possession and defendants, second party,, were in possession, the plaintiff would still be entitled to a decree for possession of the same.
It neither is in possession the presumption that the owner is in possession holds good and he is entitled to that 755 possession being restored to him.
Therefore, a decree for possession of these items covered by paragraph 7 of the written statement filed on behalf of the contesting defendants, first party, is also granted.
Here we must utter a word of caution and condition our decree accordingly.
The State, by the vesting operation, has become the owner and very probably the plaintiff cannot sustain any claim to be in possession as against the State.
While we do not investigate this aspect, we wish to make it perfectly plain that the rights of the State, as against the plaintiff, in regard to the items for which we are giving him a decree, will not in any manner be affected.
Likewise, if some third party is in possession of those items unclaimed by the defendants, first party, their possession, if any, also will not be prejudiced.
After all, the decree of this Court can bind and regulate the rights of the parties to the litigation and not others.
Inevitably, the mesne profits which we have decreed will be confined to those items which are found to be in the possession of the defendants, first party.
There is a disturbing feature about this case.
We have already indicated how there is an apparent indifference on the part of the State in securing its rights granted by the Act.
Here is a case where the defendants, first party,, are rank trespassers and have no evident equity in their favour.
Section 4(f) declares that the Collector shall be deemed to have taken charge of the estates and interests vested in the State This means he has a public duty to take charge of lands vested in the State.
Surely, a responsible public officer like the Collector, charged with a duty of taking delivery of possession of lands which by virtue of the vesting the State is entitled to take direct possession of, will proceed to dispossess the trespasser.
In this case, defendants first party, are trespassers and the plaintiff being out of the pale of section 6, the State is entitled to the direct possession of the suit lands.
We expect the Collector to do his duty by section 4(g).
Counsel for the respondents drew our attention to rule 7H: "7 H. How to deal with cases in which proprietor, etc. not found in possession on the date of vesting If the Collector holds on the report of enquiry held under rule 7 E or 7 F that the outgoing proprietor or tenure holder, or his temporary lessee or mortgagee" was not in possession of the lands or buildings referred to in rule 7 G, he shall fix the fair rent or ground rent thereof in the manner prescribed in these rules and the person who may be found to be in possession of such lands or buildings shall thereupon be liable to pay the rent or ground rent so fixed to the State Government with effect from the date of vesting.
" Although we need not elaborately study the implications of this pro vision, it is fairly clear that this rule does not confer any right or equity to be in possession in favour of d trespasser.
All that it does is to make the man in possession, be he trespasser or not, "liable to pay the rent or ground rent so fixed to the State Government with effect from the date of vesting. ' It is the liability to pay rent that is created, not the equity to claim possession.
After all, the land reform 756 measure is intended to conserve as much land as is available in the hands of the State and any trespasser who distorts this claim and snatches possession, cannot benefit by his wrong.
May be.
there are special circumstances which may persuade the State to give possession of any land either to its erstwhile proprietor or to one who has been in long possession rightly of wrongly.
We do not make any observation in that behalf but point out that prima facie section 4(f) and (g) and rule 7 H attract the jurisdiction of the State and its revenue 13 authorities.
The policy of the Act includes the State taking over and managing lands not saved by sections 5, 6 and 7 and are not found to be in possession of the proprietor so that the eventual distribution to the landless and the like may be worked out smoothly.
The appeal is dismissed in substantial measure except to the extent of the relief by way of mesne profits and possession in regard to a few items mentioned in paragraph 27 of the contestants ' written statement The parties will bear their costs throughout in the peculiar circumstances of the case.
This judgment will not affect the rights, if any.
either party may seek or has secured from the State.
V.M.K. Appeal dismissed.
| IN-Abs | Section 3 of the Bihar Land Reforms Act, 1 950, transfers all interests in estates or tenures of a proprietor or tenure holder to the State as from a date notified under section 4.
Section 6 carves out of this land mass and leaves untouched, apart from raiyati holdings the bakasht lands in Khas possession of the 'intermediary ' i.e., the prior full owner.
Several items of property were gifted by one Ram Badan Singh to his two wives whose names were duly mutated in the revenue register.
By further gift deeds and transfers the lands covered by the original gift deeds can to vest in the plaintiff and defendants, second party.
They divided them as per a partition deed Exhibit 4/a dated October 30, 1952 whereby the suit lands fell to the exclusive share, of the plaintiff along with some other items while other properties were similarly allotted to defendants 2nd party.
Despite this fact defendants, second party, sold the suit lands to the defendants first party alleging an oral partition sometime before August 1952 and under cover of that ease, committed trespass.
Thereupon, a scramble for possession of these properties and a proceeding under section 145 Cr.
P.C. ensued in which the defendants, first party, got their possession upheld by Magistrate 's order dated S 4 1954.
The plaintiff brought the present suit in April 1955 for a declaration of ' his title, for possession and mesne profits on the score that his exclusive possession was by force taken away in July August 1954 by defendants first party the latter put forward the plea of prior oral partition and exclusive hostile possession, tracing their claim through defendants second party.
The courts of tact found against the defendants and decreed the suit, but in Letters Patent Appeal, the respondents i.e., the defendants 1st party succeeded on the ground that the plaintiff had lost his title on account of the operation of sections 3 and 4 of the Bihar Land Reforms Act, 1950.
In this appeal filed on the basis of the special leave granted by this court, it was contended for the appellant that (i) Section 6 of the Act applied to the facts of the case and so there was no vesting of title in the State of the suit lands; (ii) This case, resting on the Act, which had been on the statute book for several ' years, had not been set up at the earlier stages of the litigation at and should not have been permitted at the Letters Patent Appeal stage in the High Court for the first time; and (iii) The deed of partition was not legally divestative of rights in view of the provisions of the Estates Partition Act, 1897, which empowered the Collector along to partition the properties, which not having been done, the lands remained in co ownership therefore the possession of ' the defendants first party, was that of co sharers.
If that were so.
the possession of one co sharer was constructive possession of the other co sharer and the plaintiff was thus in khas possession under section 2k of the Act and, on that basis, section 6 of the Act saved the disputed properties from vesting in the State.
Rejecting the contentions except to a small extent of modifying the decree, ^ HELD: (i) It is well settled that a pure question of law going to the root or the case and based on undisputed or proven f acts could be raised even before the Court of last resort, provided the opposite side was not taken by surprise or otherwise unfairly prejudiced [745 E F] Connecticut Fire Insurance Company vs Kavanach.
, 480.
referred to.
740 In the present case the new plea springs from the common case of the, parties and nothing which may work injustice by allowance of this contention has been made out.
[746 A] (ii) The Magistrate did not direct possession of the B Schedule properties to be handed over to the defendants, first party, but declared their actual possession.
He has done no wrong nor conferred any unjust advantage.
There is no principle on which it could be held that these circumstances deprive .
party of the benefit of his possession and of the dispossession of the plaintiff flowing from s.6 of the Act.
[746D E] (iii) Neither the provisions of section 6(1) nor those of section 35 contain any prohibition against the civil court 's power to decide the issue of the and right to possession of the plaintiff and, as a necessary corollary, the claim of actual possession set up by the defendants, first party.
Nor can section 6(2) inferentially interdict the plenary power of the Civil court.
[746.A B] (iv) The partition is valid, it divests title it binds all.
but, so far as land revenue liability is concerned, it relieves parties from the burden falling on the other sharer 's land only if the exercise prescribed in the Estates Partition Act is gone through.
The statute is a protective fiscal armour, not a monorail for division among co owners to travel.
Section 7 makes it clear.
Not that Courts have lost power to decree partition nor that co owners have become powerless to separate their shares voluntarily but that land revenue shall not be prejudiced without the procedure under that Act being gone through.
More clinching is the fact that the plaintiff has here come to Court on the sole case of partition by metes and bounds and has founded his relief not as co sharer but as exclusive owner.
[747 G H, 748 Al Mahanth Ram Bhushan Das V. Ramrati Kuer, 1965 Bihar L.J. 119, referred (v) The purpose and purport of section 6(1) is to allow the large land holders to keep possession of small areas which may be designated as the private or privileged or mortgaged lands traditionally held directly and occasionally made over to others, often servants or others, in the shape of leases or mortgages.
It is obvious that section 6(1) uses the word 'including ' to permit enlargement of the meaning of khas possession for the limited purpose of that section, emphasising thereby that, but for such enlargement, the expression khas possession excludes lands outstanding even with temporary lessees.
It is perfectly plain, therefore, that khas possession has been used in the restricted sense of actual possession and to the small extent it had to be enlarged for giving relief to proprietors in respect of 'private ', 'privileged ' and mortgaged lands, inclusive expressions had to be employed.
Khas possession is actual possession.
Constructive possession or possession in law is what is covered by sub clauses of section 6(1).
It is not correct to say mat possession is so wide as to include a mere right to possess, when the actual dominion over the property is held by one in hostility to the former. [751 AB, G H, 752 C E.] (vi) In Anglo American jurisprudence also possession is actual possession and in a limited set of cases, may include constructive possession, but when there is a bare right to possess bereft of any dominion or factum of control, it will be a strange legal travesty to assert that an owner is in possession merely because he has a right to possess when a rival, in the teeth of owner 's opposition.
is actually holding dominion and control over the land adversely, openly and continuously.
This court has rejected the theory that the possession of a trespasser was that of the owner.
[752 H, 753A, 754 D.] Surajnath Ahir vs Prithinath Singh , Ram Bijai Singh & Ors vs Behari Singh @ Bagandha Singh relied on.
Brij Nandan Singh vs Jamuna Prasad A.I.R. 1958 Pat. 589, referred to.
(vii) It is undeniable that the plaintiff had title to the entire Schedule properties as against defendants, first party, and second party.
If defendants.
first party, were not in possession the plaintiff would still be entitled for a decree 741 for possession of the same.
If neither is in possession, the presumption that the owner is in possession holds good and he is entitled to that possession being restored to him.
Therefore, the plaintiff is entitled to a decree for possession regarding the items of properly covered by paragraph, 27 of the written statement filed on behalf of the contesting defendants, first party.
the rights of the State as against the plaintiff in regard these items of property, will not in any manner be effected.
[754H. 755 A B] observation: Prima facie section 4 (f) and (g) of the Act and rule 7 H of the Rules framed under the Act attract the jurisdiction of the State and its revenue authorities.
In the present case, the defendants, first party, are rank trespassers and have no equity in their favour.
Section 4(f) declares that the Collectors shall be deemed to have taken charge of the estates and interests vested in the State.
This means he has a public duty to take charge of lands vested in the State.
Surely, a responsible public office like the Collector, charged with duty of taking delivery of possession of lands which by virtue of the vesting the State is entitled to take direct possession, will proceed to disposses the trespasser.
In this case, defendants, first party the trespassers and the plaintiff being out of the pale of section 6, the State ii entitled to the direct possession of the suit lands.
[756B, 755 D E]
|
Civil Appeal No. 106 of 1953.
Appeal from the Judgment and Order dated the 4th September 1951 of the High Court of Judicature at Calcutta in Appeal from Original Order No. 131 of 1950 arising out of the Order dated the 29th day of August 1950 of the High Court of Calcutta in its Testamentary Intestate Jurisdiction made in Application under Section 263 of the .
P. N. Sen, (A. K. Dutt and section Ghose, with him) for the appellant.
M. C. Setalvad, Attorney General for India (A. N. Sinha, with him) for respondent No. 1. D. N. Mukherji, for respondent No. 2. 1955.
April 15.
The Judgment of the Court was delivered by SINHA J.
This is an appeal against the judgment and order dated the 4th September 1951 of the Calcutta High Court in its appellate jurisdiction reversing those dated the 29th August 1950 of a Judge of that Court sitting on the Original Side granting the appellant 's prayer for revoking and annulling the probate granted in respect of the last will and testament dated the 29th July 1912 of one Binod Lal Ghosh, deceased, whom we shall call the testator in the course of this judgment.
The testator is said to have executed a will on the 29th July 1912 which was registered on the same date at the Calcutta registry office.
By the said will the testator appointed the following five persons as executors or executrices: (1) Anil Nath Basu, Attorney at Law (2) Brindaban Chandra Mitter (These two also figure as attesting witnesses to the will) (3) His adopted son Charu Chandra Ghose (whom we shall call Charu for the sake of brevity) a minor on his attaining majority.
272 (4) His wife Haimabati Dasi, and (5) His brother 's widow Muktakesi Dasi.
He also directed that on the death of the said Anil Nath Basu, his son Achintya Nath Basu, and on the death of Brindaban Chandra Mitter, his son Debi Prosad Mitter will take their places respectively as executors; and on the death of his wife Haimabati Dasi, Charu 's wife, Latikabala Dasi, and on the death of Muktakesi Dasi, his nephew 's wife Sushamabala Dasi, will take her place respectively as executrix.
It is not necessary to set out in detail the legacies created by the will except to state that he created annuities in favour of a number of persons including his wife, his brother 's widow .
Muktakesi Dasi, his daughter in law, his niece in law aforesaid and Charu.
He also made provision in his will for annual payments in respect of the expenses of certain deities and festivals, as also for the funeral expenses of himself and the annuitants aforesaid.
He directed his executors to accumulate Rs. 12,000 a year out of the balance left after meeting the annuities and the other annual expenses aforesaid to be paid over to Charu upon the death of the said Latikabala Dasi and Sushama Bala Dasi who were to share the residue, if any, after paying the annuities and other outgoings referred to above.
It would thus appear that though the testator intended Charu to be the owner of his entire estate including the accumulations after meeting the annuities and the other annual expenses, he did not trust him to the extent of putting that estate into his hands immediately on his attaining majority.
He trusted Charu 's wife and the other ladies in his family more than Charu himself, though he specifically stated in the will "Provided always that the said adopted son shall be deemed to have a vested interest in the said estate immediately on my death".
He appointed his wife Haimabati Dasi as the guardian of the person and property of Charu and of his wife Latikabala Dasi aforesaid.
On the 5th March 1920 the testator is said to have been murdered by Charu who was placed on his trial, 273 convicted for murder and sentenced to transportation for life.
Charu served his term of imprisonment and was released from jail some time in 1933.
On the 30th September 1921 an application for probate of the will aforesaid was made on the Original Side of the Calcutta High Court on behalf of Anil Nath, Muktakesi Dasi and Latikabala Dasi aforesaid.
The application stated that the testator died on the 5th March 1920 at Baranagar, leaving him surviving his adopted son Charu and his widow Haimabati Dasi.
The will dated the 29th July 1912 was recited and the five persons named above were said to have been appointed executors and executrices of the will.
It also stated that Brindaban Chandra Mitter, one of the executors named in the will, had died in July 1913 and his son Debi Prosad Mitter was a minor.
It also recited the death of Haimabati Dasi on the 22nd May 1921, thus explaining why out of the five executors and executrices named in the will the application had been made only on behalf of the surviving three persons.
The assets of the testator 's estate were stated not to exceed a sum of Rs. 4,75,780/ .
The prayer was "that probate of the said will may be granted to your petitioners limited within the Province of Bengal reserving power of making the like grant to the said Charu Chandra Ghose and the said Debi Prosad Mitter (when he comes of age) when they will come and pray for the same".
The grant was made the same day (i.e., 30th September 1921) which fell during the long vacation and the Judge in charge passed the order "Order as prayed" no citations being issued.
This is material in view of what has been alleged subsequently about this grant, as will presently appear.
Nothing was heard about these proceedings until the 24th July 1933 when an application was made by Debi Prosad Mitter aforesaid for the grant of probate to him along with Anil Nath Basu and Latikabala Dasi.
In that application, the previous grant of probate dated the 30th September, 1921, the death of Muktakesi Dasi some time in October 1932 and the 274 fact of his attaining majority some time in January 1924 are recited.
On the 16th September 1933 Debi Prosad Mitter 's application was granted.
It appears that Latikabala Dasi and Sushamabala Dasi applied to the Calcutta High Court on the 4th December 1933 for an order for discharging the executors appointed previously and for a direction to hand over the entire estate of the testator to the applicants.
In answer to the summons Debi Prosad Mitter made an affidavit on the 7th December 1933 in which he recited the previous grants of the probate made in 1921 and 1933; and stated that the testator Binod Lal Ghosh was murdered on the 5th March 1920 by Charu and that on the death of Haimabati in May 1921, the testator 's first cousin Girish Chandra Ghosh became entitled to the residue of the estate of the testator.
In that affidavit be set out the genealogical table of the family of the testator showing how Girish Chandra Ghosh was related to the deceased.
He also made pointed reference to the fact that the surviving grantees of the probate, Anil Nath Basu and Latikabala Dasi, after the death of Haimabati bad not filed any account of the testator 's estate in their capacity as executor and executrix respectively and that on his obtaining probate of the will those persons had not complied with his request of furnishing a statement of accounts about their dealings with the testator 's estate.
He also set out the text of the letter sent by his solicitor to Anil Nath Basu and Latikabala Dasi.
The letter is dated the 4th December 1933.
It does not appear from the record as to what attitude had been taken by the executor and the executrix aforesaid in answer to the call made by Debi Prosad Mitter for submission of accounts of their dealings with the testator 's estate after the grant of probate in 1921 as aforesaid.
Ultimately, on the 16th May, 1934 the High Court dismissed the application for discharging the persons who had been granted the probate.
Girish Chandra Ghosh aforesaid died in December, 1940 without having taken any steps in court claiming his rights, whatever they were, in the 275 testator 's estate.
Anil Nath Basu also died in July, 1948.
He does not appear from the record to have rendered any accounts in respect of his dealings as the managing executor of the will of the deceased.
It was not until the 17th September, 1949 that the appellant, who is one of the four sons of the said Girish Chandra Ghosh, made an application to the Calcutta High Court on the Original Side praying that the probates dated the 30th September, 1921, and the 16th September, 1933 in respect of the will dated the 29th July, 1912 be revoked, annulled and/or set aside and that an administrator pendente lite be appointed.
The petition runs into about twenty printed pages setting out the petitioner 's relationship with the testator, the will and the grant of the probates as aforesaid, the murder of the testator by Charu, his trial, conviction and sentence for that murder.
It was also averred that the testator had "intended to revoke his said will of 29th July, 1912".
Then follows a long recital of facts tending to that conclusion.
Then follows para 19 which is in these terms: "From the said correspondence and papers it is absolutely clear that the said testator revoked his will of 29th July, 1912.
Your petitioner submits that arrangements were being made for handing over the estate of the said Binod Lal Ghosh, deceased, in the hands of the Administrator General of Bengal for the purpose of charity but the said purpose did not mature and under the circumstances your petitioner submits that the said will of 29th July, 1912 has been revoked by the said testator and no further will was executed in its place or stead".
23 is a statement of the grounds on which the case for revocation of the grants is founded.
That paragraph is in these terms: "Your petitioner submits that the probates herein should be revoked as a just cause for doing so exists inter alia, on the following grounds: (a) That no notice of either application for probate was served on your petitioner 's father, although be was the nearest male relative alive at the time when the said Binod Lal Ghosh was murdered; 276 (b) That the grants were obtained fraudulently; (c) That the grants were obtained by means of an untrue allegation of a fact essential to justify the grant; (d)That the grants were obtained by making a false declaration that the property was valued only at Rs. 4,75,780/ , although the High Court in its Criminal Jurisdiction had stated in 1920 that the estate of the said Binod Lal Ghosh was over Rs. 40,00,000/ ; (e) That the grants in any event, are useless and inoperative; (f) That there was no filing of accounts; (g) That the grants were issued by concealing the facts of the intention of the said testator to revoke the will; (h) That the deceased never lived within the Ordinary Original Civil Jurisdiction of this Hon 'ble Court".
The application was opposed by Latikabala Dasi chiefly on the ground that no citation to Girish Chandra Ghosh wag necessary, that in any event, he was cognisant of the probate proceedings and of the estate being administered by the executors and that he stood by.
It was denied by her that the said Girish Chandra Ghosh was the nearest male relative of the testator or that Charu had murdered his adoptive father.
It was also denied that the testator had revoked his will and that he died intestate as a result of which the petitioner and his three brothers became entitled to succeed to his estate.
Achintya Nath Basu took similar grounds in opposition to the application for revocation.
Debi Prosad Mitter by an affidavit of his own denied that there had been any just cause for revoking the probate but added that he had been discharged on his own application from further acting as one of the executors of the testator 's will.
Though no issues were framed, the main grounds for revocation or annulment of the probates were as stated in para.
23 set out above.
Mr. Justice P. B. Mukherjee who dealt with the case on the Original Side, after an elaborate consideration of the facts and circumstances of the case, passed orders revoking 277 and annulling the grants aforesaid and directing "that the will be proved in solemn form on notice to the applicant and the other sons of Girish and also after a general citation to all persons interested in the estate".
He also appointed the applicant, the appellant before us, as an administrator pendente lite with usual powers to take charge of the estate, with costs to the applicant to be paid out of the estate.
He directed the other opponents respondents to bear their own costs.
On the points in controversy he came to the conclusion that Girish was related to the testator as a cousin, that there was no acquiescence on the part of Girish barring the appellant from pursuing his remedy, that the non citation of Girish was by itself not sufficient to invalidate the grant, but that circumstance in conjunction with other facts, viz., of material concealment of the fact that Charu bad murdered the testator and that the testator had entertained an intention to revoke the will, though it had not actually been revoked, was sufficient ground for revoking the grant.
He held further, on the authority of the decision in Mokshadayini vs Karnadhar(1) that the question whether the will bad as a matter of fact been revoked would form the subject matter for final determination after the revocation of the grants when fresh proceedings will be taken after due citation.
He also held that in the circumstances of this case, though there was no averment of wilful default in exhibiting an inventory and accounts of the testator 's estate the executors were actually guilty of such a default and there was thus just cause for revoking the grant.
He did not hold the other grounds of attack against the grant made out by the applicant; that is to say, he did not find it established that the estate was worth over Rs. 40,00,000 and that the declaration of the value of the testator 's estate at Rs. 4,75,780 was false or fraudulent or that the grant bad become useless or inoperative otherwise, or that the case could not be heard by the Calcutta High Court, on the Original Side.
On appeal by Latikabala Dasi, the Appellate Beach (1) , 278 consisting of Sir Trevor Harries, C. J. and Banerjee, J., allowed the appeal and dismissed the application for revocation of the probate with costs of both the courts.
They held that the will in question was genuine and valid in view of the evidence and of the fact that its genuineness or validity had not been questioned specifically in the pleadings.
They also held that there was no revocation of the will or even an intention on the part of the testator to revoke the will.
They also held that Girish was entitled to citation but that the non citation did not materially affect the grant of the probate and that at any rate, Girish being fully aware of the grant stood by, and therefore acquiesced in the grant, and did not take any steps at the right time to question the grant.
They therefore did not think it just and expedient to reopen the proceedings when they were satisfied that there was no real and substantial attack against the genuineness and validity of the will itself.
In this appeal it has been argued on behalf of the appellant on the authority of the decision in Mokshadayini vs Karnadhar(1) that the Appeal Court should have agreed with the Judge on the Original Side in holding that there was material concealment of facts which considered along with the admitted position that no citation had been taken against Girish Chandra Ghosh had vitiated the proceedings for the grant of probate and that the question of the genuineness or validity of the will should have been left over for determination at a later stage of the proceedings.
It was also argued that the omission to exhibit the accounts was in the circumstances of this case wilful default without reasonable cause within the meaning of the law and was sufficient by itself to entitle the applicant to a revocation.
It was also argued that no grounds had been made out in fact to support the legal conclusion drawn by the Appeal Court that there had been an acquiescence on the part of Girish.
On behalf of the 1st respondent the conclusion of the Appeal Bench has been supported on all the grounds.
On behalf of the respondent Debi Prosad Mitter, it (1) 279 was contended that he had been unnecessarily impleaded at all the stages and that he should have been granted his costs out of the estate of the deceased.
The grant of probate was made under the provisions of the Probate and Administration Act (V of 1881); but the (XXXIX of 1925) consolidated the law relating to intestate and testamentary succession and thus incorporated the other Acts relating to the same subject, including Act V of 1881.
In order to be entitled to a revocation or annulment of the grant aforesaid the appellant has to bring his case within the purview of section 263 of the (XXXIX of 1925), which will hereinafter be referred to as the Act).
Section 263 of the Act is substantially in the same terms as section 50 of Act V of 1881.
Section 263 provides that "The grant of probate or letters of administration may be revoked or annulled for just cause".
Under the Explanation "Just cause shall be deemed to exist where (a) the proceedings to obtain the grant were defective in substance, or (b) the grant was obtained fraudulently by making a false suggestion, or by concealing from the court something material to the case, or (c) the grant was obtained by means of an untrue allegation of a fact essential in point of law to justify the grant, though such allegation was made in ignorance or inadvertently, or (d) the grant has become useless and inoperative through circumstances, or (e)the person to whom the grant was made has wilfully and without reasonable cause omitted to exhibit an inventory or account in accordance with the provisions of Chapter VII of this Part, or has exhibited under that Chapter an inventory or account which is untrue in a material respect".
After the explanation, there are eight illustrations of the grounds on which a grant of probate may be revoked, of which the first three are material.
They are as follows: 280 " (i) The court by which the grant was made had no jurisdiction.
(ii) The grant was made without citing parties who ought to have been cited.
(iii) The will of which probate was obtained was forged or revoked".
In this case the appellant tried to take advantage of the first illustration also, by suggesting in one of the grounds set out in para.
23 of his petition quoted above that the testator never lived within the Ordinary Original Civil Jurisdiction of the Calcutta High Court in exercise of which the grant in question had been made.
But that ground was negatived by the trial Judge and as it was not pressed before us, no more need be said about it.
It was vehemently argued at all stages of the case including the appeal before us that admittedly no citation was issued against Girish Chandra Ghosh aforesaid and as he was the person most interested in the testator 's estate besides the legatees named in the will, the case came directly within the purview of clause (a) of the Explanation and Illustration (ii) quoted above.
Girish Chandra Ghosh has been found by the Judge in the first instance to have been the person most vitally interested in the estate of the testator, whether he died intestate or leaving a will, in the events which had happened.
The learned counsel for the contesting respondent suggested that it had not been found by the lower Appellate Court as a fact upon the evidence adduced in this case, that Girish was the nearest agnate of the testator or that Charu had murdered his adoptive father, though these matters had been assumed as facts.
The courts below have referred to good and reliable evidence in support of the finding that Girish was the nearest reversioner to the estate of the testator.
If the will is a valid and genuine will, there is intestacy in respect of the interest created in favour of Char;, if he was the murderer of the testator.
On this question the courts below have assumed on the basis of the judgment of conviction and sentence passed by the High Court in the sessions trial that Charu was the 281 murderer.
Though that judgment is relevant only to show that there was such a trial resulting in the conviction and sentence of Charu to transportation for life, it is not evidence of the fact that Charu was the murderer.
That question has to be decided on evidence.
However, for purposes of this case we shall assume in favour of the appellant that Charu was the murderer.
The result of such an assumption is that Girish being the nearest reversioner to the estate of the testator, in case of intestacy after the death of the testator 's widow in 1921; or in case of testamentary succession after the death of the two legatees, the testator 's daughter in law and the nephew 's wife aforesaid, and the failure of the legacy in favour of Charu on account of the murder would, in either event, have sufficient interest in the estate of the testator to entitle him to challenge the grant and to obtain revocation.
But it is noteworthy that Girish who died in 1940, lived for about 19 years after the grant and took no steps in that direction.
There may be some doubt as to Girish 's knowledge of the probate proceedings and of the grant until 1933; but, in our opinion, there is ample evidence in support of the finding arrived at by the Court of Appeal below that Girish was aware of the grant at the latest in 1933 when Debi Prosad Mitter took proceedings to obtain a grant in his own favour also.
In his application, as indicated above, he clearly stated that Charu was the murderer of his adoptive father and that Girish would succeed to his estate, which otherwise would have gone to Charu.
If Girish had initiated proceedings for revocation of the grant and had insisted on the will being proved in his presence, the courts would have had no difficulty in having all the necessary evidence before it because the chief person who had played the most leading part in the execution of the will, in its registration and in its being admitted to probate, viz., Anil Nath Basu, was then alive and could have been examined.
But for reasons not made clear in these proceedings Girish did not think it worth his while to take any steps in court to 36 282 challenge the will or the grant.
The estate was worth anything between five to forty lakhs, perhaps nearer five lakhs than forty lakhs.
Girish was a mere pensioner belonging to a middle class family.
Either he did not think it worth his while to embark on a litigation with all its uncertainties or he had not the wherewithal to do so.
The record as it stands does not satisfactorily explain the reasons why Girish refrained from making any attempts to get this large estate.
If the will was not genuine or valid, Girish would take the reversionary estate at once because the testator 's widow died in 1921 and there was no other impediment in his way, except to get rid of the will.
If, on the other hand, the will was genuine and valid, even then he would stand to gain all the interest which had been bequeathed in favour of Charu.
The fact that Girish did not take advantage of his position as the nearest reversioner as on partial intestacy goes a long way to support the great probability of the will being valid and genuine, especially as it had been probated and because the appellant in his long petition for revoking the grant has not made the least suggestion casting any doubt on the genuineness and validity of the will.
But it was argued on behalf of the appellant that that stage had not yet arrived and that it would be open to the appellant after obtaining an order of revocation of the grant to show that the will was either not genuine or had not been validly executed.
Great reliance was placed in this connection on the judgment of a Division Bench of the Calcutta High Court in Mokshadayini Dasi vs Karnadhar Mandal (1) where the following observations have been made: "No question of the genuineness of the will arises for consideration till the court has decided that the probate must be revoked on one or more of the grounds specified in section 50 of the Probate and Administration Act.
The only matter for consideration at this stage is, whether the appellants have made out a just cause for revocation of the probate which was granted without notice to them: Brindaban vs Suresh (1) 283 war(1).
The question of genuineness cannot be considered till a case for revocation is made out: Durgavati vs Sourabini(2)".
The observations relied upon by the appellant were made with reference to the facts of that case and were not intended to be of universal application.
As pointed out above, section 263 of the Act also contemplates a case for revocation based on the single ground that the will in respect of which the grant in question was obtained was a forged one.
In such a case, whether or not the will was a forged one would be the only question to be canvassed before the court before the order of revocation could be made.
It was further argued on behalf of the appellant that the appeal should be allowed and the grant revoked on the simple ground, apart from any other considerations, that there had been no citation issued to Girish.
In our opinion, this proposition also is ,much too widely stated.
Section 263 of the Act vests a judicial discretion in the court to revoke or annul a grant for just cause.
The explanation has indicated the circumstances in which the court can come to the conclusion that "just cause" had been made out.
In this connection the appellant relied upon clause (a) quoted above which requires that the proceedings resulting in the grant sought to be revoked should have been "defective in substance".
We are not inclined to hold that they were "defective in substance".
"Defective in substance" must mean that the defect was of such a character as to substantially affect the regularity and correctness of the previous proceedings.
If there were any suggestions in the present proceedings or any circumstances were pointed out to show that if Girish had been cited he would have been able to enter a caveat, the absence of citation would have rendered those proceedings "defective in substance".
It may be that Girish having been found to have been the next reversioner to the testator 's estate in case of intestacy and on the assumption that Charu had murdered the testator, Girish might have been entitled to a revocation of the grant if he (1) 10 C.L.J. 263 at p. Cal.
1001, 284 had moved shortly after the grant of the probate on the simple ground that no citation had been issued to him.
The omission to issue citations to persons who should have been apprised of the probate proceedings may well be in a normal case a ground by itself for revocation of the grant.
But this is not an absolute right irrespective of other considerations arising from the proved facts of a case.
The law has vested a judicial discretion in the Court to revoke a grant where the court may have prima facie reasons to believe that it was necessary to have the will proved afresh in the presence of interested parties.
But in the present case we are not satisfied in all the circumstances of the case that just cause within the meaning of section 263 had been made out.
We cannot ignore the facts that about 27 years had elapsed after the grant of probate in 1921, that Girish in spite of the knowledge of the grant at the latest in 1933 did not take any steps in his lifetime to have the grant revoked, that there was no suggestion that the will was a forgery or was otherwise invalid and that the will was a registered one and had been executed eight years before the testator 's unnatural death.
Hence the omission of citations to Girish which ordinarily may have been sufficient for a revocation of the grant was not in the special circumstances of this case sufficient to justify the court to revoke the grant.
Learned Counsel for the appellant made pointed reference to the decision of their Lordships of the Judicial Committee of the Privy Council in Ramanandi Kuer vs Kalawati Kuer(1).
But that case is an authority for the proposition that where two grounds are taken for revocation of a grant, viz., (1) that persons who ought to have been cited were not cited, and (2) that the will was a forgery, if the first ground is established, the onus is upon the opponents to prove that the will is genuine.
That case is no authority for the proposition that in every case where there is a defect in citation, the court must order a revocation or annulment of the grant.
The annulment is a matter of substance and not of mere form.
The court (1) L.R. 55 I.A. 18, 285 may refuse to grant annulment in cases where there is no likelihood of proof being offered that the will admitted to probate was either not genuine or had not been validly executed.
But, as rightly pointed out by the lower Appellate Court, in the present case where the validity or genuineness of the will has not been challenged, it would serve no useful purpose to revoke the grant and to make the parties go through the mere formality of proving the will over again.
In our opinion, therefore, the omission of citation has had no effect on the regularity of the proceedings resulting in the grant of 1921.
It was next contended that there had been fraudulent concealment of material facts from the court in the proceedings of 1921, and that therefore the case came within the purview of clause (b) of the Explanation quoted above.
It was said in this connection that the petition for the grant of probate made in 1921 did not disclose the following material facts: 1.
That Charu was the murderer of the testator; 2.
That the testator had revoked the will or had at least intended to revoke the will; and 3.
That a false declaration as regards the value of the property constituting the estate of the deceased testator had been made, that is to say, the applicants for probate had concealed from the court the true value of the property which was forty lakhs of rupees and not only Rs. 4,75,780/ as stated by them.
It is true that in para.
4 of the petition for probate it was only stated that Charu had been found guilty of murder by the High Court and was sentenced to transportation for life and had not till then been released from jail.
Our attention was also called to the prayer portion of the petition in which the right of Charu to make an application for probate had been reserved.
We can easily dispose of the last suggestion by observing that it was a mere formal reservation.
It has no such sinister significance as is attributed to it.
It is also true that there is no statement in the application that Charu had murdered the testator.
While agreeing with the Judge in the first court that this was rather disingenuous, we must also 286 hold that that concealment, if it was deliberate, was not material to the case.
Even if that statement had been made in the petition, that would have had no effect on the grant of probate to the petitioners who were before the court.
The fact of the murder is relevant only to this extent, that it would affect the legacies in favour of Charu, but the other legacies would stand and the will would still be open to probate.
The last allegation relating to concealment is on the question of the value of the property left by the testator by his will.
It is not necessary to consider whether if such a concealment had been made out it would have been sufficient to revoke the grant.
It is enough to point out that neither of the courts below has found that the property was really worth anything like forty lakhs of rupees.
This ground has not been pressed before us either.
It must therefore be held that the appellant has failed to bring his case within the rule of material concealment.
The most serious allegation which could have a determining effect on the grant, if made out, is that the testator had revoked the will.
Such an allegation would directly come within the third illustration quoted above.
But unfortunately for the appellant he made no attempt to prove his allegation that there was any such revocation.
Apart from showing that in or about the year 1917 the testator had entertained the intention either of materially altering his will or of altogether revoking it, there is absolutely no evidence in support of the allegation that the testator actually revoked the registered will in question.
For proving that the will had been revoked, it had to be shown that the testator had made another will or codicil or by some writing declared his intention to revoke the will.
Such a document is required by section 70 of the Act to be executed in the same manner as a will.
Such a revocation could also have been proved, as the section lays down, by burning, tearing or otherwise destroying the will by the testator himself or by some other person in his presence and by his direction, thus clearly indicating his intention 287 of revoking the will.
No such proof has been offered in this case.
But it was argued that the appellant would have offered such proof after the order of revocation was made by the court.
That would be to put the cart before the horse.
If an applicant for revocation of a grant alleges as a ground for such revocation that the testator had revoked the will, he has got to prove that alleged fact at least prima facie before he can be entitled to an order of revocation.
There may be cases where such a proof may be offered at a later stage where the revocation is founded upon other grounds, for example, where the court is satisfied that there was substantial defect in the previous proceedings resulting in the grant, or that the grantee had wilfully and without reasonable cause omitted to exhibit an inventory or account; or some such other ground recognized by section 263 as just cause for annulling the grant has been established.
It was also argued on behalf of the appellant that even though he may not have proved that the testator had as a matter of fact revoked the will, he is still entitled to an order of revocation on the ground that he bad entertained the intention of revoking the will.
No authority had been cited before us in support of this contention.
It is open to a person who has made a will at any time to alter or to revoke it; but if he has died leaving a registered will and has not taken any tangible steps to revoke such a will, it is not enough to allege that the testator had at one time entertained the intention of doing so, because such an intention without being translated into action has no effect on the will actually left by him which must be treated as the last will and testament.
It remains to consider the last point, viz., whether the case is within clause (e) of the explanation to section 263.
In this connection ground (f) in paragraph 23 of the petition quoted above is the only allegation.
The omission to submit accounts is not always synonymous with "wilfully and without reasonable cause" omitting to exhibit accounts.
In certain circumstances omission to submit accounts 288 may bring the case within the purview of clause (e) aforesaid because the circumstances may tend to show that the omission was wilful and without reasonable cause.
We have therefore to consider whether in the circumstances of this case the omission to file accounts has the effect of entitling the appellant to an order of revocation.
Under the will the testator intended that Anil Nath Basu should function as the managing executor during his lifetime, as will appear from the relevant portion of paragraph 17 of the will which is as follows: "I direct that my executor Babu Anil Nath Basu shall act alone without interference of my other executors in drawing money from or depositing money to any bank, courts or any other place or places and also in drawing interest of Government Promissory Note, debentures, etc.
and in collecting rents of the houses and also in defending and instituting all suits relating to my estate and for the purpose above to sign cheques, rent bills and all papers relating to any suit in connection with my estate".
It would thus appear that Anil Nath Basu was not only the most competent man being a trained lawyer to administer the estate but had also been in terms vested with the power to handle the cash and the accounts by himself without interference by the other executors.
He must therefore have handled the incomings and the outgoings and been responsible for keeping true and proper accounts.
Whether or not he did so we do not know, because Girish, as already indicated, never made any attempt to question the will or the grant or to call him to account.
We have already made reference to Debi Prosad Mitter 's correspondence with Anil Nath Basu, the managing executor, bearing on the question of accounts.
There is nothing on the record to show what happened on that demand for accounts by Debi Prosad Mitter.
The managing executor was alive up till July 1948 and unfortunately for the appellant, he initiated the revocation proceedings more than a year after his death.
If these proceedings had been started in Anil Nath Basu 's lifetime, he would have been the best person 289 to inform the court as to how matters stood with reference to the accounts.
The fact remains that no accounts appear from the record of this case to have been submitted by the executors.
An application was made before us to take notice of the fact that accounts had been submitted up to date by the 1st respondent who is in charge of the testator 's estate.
But whether or not the respondent has filed accounts during the pendency of this appeal is wholly irrelevant.
We have to determine whether the omission to submit accounts in the circumstances of this case entitles the appellant to have an order of revocation.
In the first place, no proper pleading had been made on this part of the case.
It has not been alleged that there has been a wilful default without any reason, able cause.
Hence no proper foundation was laid in the pleadings for reception of evidence either way.
On that ground alone, in our opinion, the appellant must fail on this part of the case.
It may also be pointed out that in all the circumstances of this case referred to above, particularly in view of the fact that it was never suggested that the will in question was not genuine or had not been validly executed, it must be held that the proceedings leading up to this appeal have been misconceived.
If the appellant has any locus standi, his remedy lay not against the will or against the grant of probate, but under the will.
But it is not for this court to advise what the appellant should have done.
As, in our opinion, all the grounds raised on behalf of the appellant for revoking the grant have failed, it is not necessary to go into the question whether Girish had acquiesced in the grant in question and had therefore barred the door against the appellant from raising any further questions about it.
For the reasons aforesaid we uphold the decision of the court below and dismiss the appeal with costs to the contesting respondent No. 1.
There will be no order as to costs in respect of the other respondent.
| IN-Abs | The expression "defective in substance" in Explanation el.
(a) to section 263 of the means that the defect was of such a character as to substantially affect the regularity and correctness of the previous proceedings.
The omission to issue citations to persons who should have been apprised of the probate proceedings may well be in a normal case a ground by itself for revocation of the grant.
But this is not an absolute right irrespective of other considerations arising from the proved facts of a case.
The law has vested a judicial discretion in the court to revoke a grant where the court may have prima facie reasons to believe that it was necessary to have the will proved afresh in the presence of interested parties.
The Supreme Court was not satisfied that in all the circum stances of the present case just cause for the annulment of the grant of probate within the meaning of section 263 of the Act had been made out.
The annulment of the grant of probate is a matter of substance and not of mere form.
The court may refuse to grant annulment in cases where there is no likelihood of proof being offered that the will admitted to probate was either not genuine or had not been validly executed.
Where, as in the present case, the validity or genuineness of the will has not been challenged it would serve no useful purpose to revoke the grant and to make the parties go through the mere formality of proving the will again.
Under the circumstances of the present case the omission of citation has had no effect on the regularity of the proceedings resulting in the grant of 1921.
Mokshadayini Dasi vs Karnadhar Mandal ( [1914] 19 C.W.N. 1108), Brindaban vs Sureshwar ( , Durgavati vs Sourabini ( Cal. 1001) and Ramanandi Kuer vs Kalawati Kiter ( [1927] L.R. 55 I.A. 18), referred to. 271
|
Civil Appeal No. 2059 of 1974.
Appeal by special leave from the Judgment and order dated the 10th June, 1974 of the Andhra Pradesh High Court in Writ Petition No. 895 Of 1974 621 P.A. Chowdhary and K. Rajendra Chaudhury, for the appellant.
P. Ram Reddy and P. P. Rao, for respondent No. 1.
A. V. Rangam and A. Subhashini, for respondent No. 2.
G. Narasimhulu, for respondents Nos. 3, 5 and 6.
G. N. Rao, for respondent No. 4.
A. V. K. Rao, the intervener, appeared in person.
The Judgment of the Court was delivered by UNTWALIA, J.
In this appeal by special leave we are once again called upon to lay down the meaning and scope of Article 233 of the Constitution of India relating to the appointment of District Judges.
This Article alongwith other Articles in Chapter VI of Part VI of the Constitution came up for consideration and was interpreted by this Court on several occasions in the past, yet, a Bench of the High Court of Andhra Pradesh in its judgment under appeal felt persuaded to take a wholly erroneous view as to the meaning of the Article and committed a serious error in the application of the principles of law settled by this Court to the facts of the instant case.
We shall state the facts in a narrow compass shorn of unnecessary details.
On 3 1 1972 the Government of Andhra Pradesh, respondent No. 1 was requested by the High Court, respondent No. 2, to take necessary steps "for filling up six vacancies by notifying six posts of District and Sessions Judges, Grade II for direct recruitment.
" By a D.O. letter dated 14 9 1972 the first respondent informed the second respondent that the six vacancies were being notified for direct recruitment.
They were actually notified in the Gazette of that date.
With the approval of the High Court, an advertisement was published on 1 8 1972 in the Deccan Chronicle.
The total number of applications received in response to the advertisement was 381.
Twenty six applications were found to be not in order and rejected.
The remaining 355 candidates were called by the High Court for interview.
92 did not turn up and the remaining 263 were interviewed by the Selection Committee of the High Court on various dates.
Shri A. Panduranga Rao, the sole appellant in this appeal was one of the candidates interviewed on 14 6 1973.
The High Court eventually made its recommendations in its D.O. letter dated 13 7 1973 recommending in order of merit six persons "as most suitable candidates from among the applicants, for being appointed as District and Sessions Judges, Grade II.
" This letter was written by the Registrar of the High Court as directed "by the Hon 'ble the Chief Justice, and the Hon 'ble Judges of the Andhra Pradesh High Court.
" The appellant 's name was the fifth amongst the six names recommended.
Although it is not very relevant to say so, just to complete the link in the chain of relevant events, it may be stated here that the recommendations made by the High Court seems to have leaked out.
Whoever might have been responsible for this leakage it was all the same a very unfortunate thing.
This led the Bar Association City Civil Court, Hyderabad and the High Court Bar Association to pass certain 622 resolutions and to send certain memoranda to the Government even to the extent of making some adverse comments against some of the persons recommended by the High Court for appointment.
On receipt of the same, Government wrote a D.O. letter to the High Court on 24 7 1973 expressing surprise at the leakage of secret information but at the same time inviting the High Court to send its comments.
The High Court sent a detailed reply and comments in its D.o.
letter dated 26 7 1973 pointing out that the leakage of the secret information could not be possible at the High Court end.
It is not necessary for us to advert to the comments or resolutions of the Bar Associations or the views of the High, Court expressed in its letter dated 26 7 1974.
We now come to the relevant letters in question.
A D.o.
letter dated 26 7 1973 was written by the Government to the High Court with reference to the latter 's letter of recommendation dated 13 7 1973.
We may point out here that this letter dated 26 7 1973 was written by the Government without any reference to, and in all probability, before the receipt of the High Court 's letter dated 26 7 1973 in reply to the Government 's of 24 7 1973.
In the Government 's letter dated 26 7 1973 attention of the High Court was invited to Instruction 12(5) of the Secretariat instructions and a request was made "to send the list of persons whom the High Court considered to have reasonable claims to the appointment or suitable therefore the posts of District and Sessions Judges, Grade II alongwith remarks regarding the qualifications and claims of the several persons in the list.
" It may be stated here that as usual the correspondence was going on between the Chief Secretary on behalf of the Government and the Registrar on behalf of the High Court.
The latter in reply to the former 's letter dated 26 7 1973 sent the following reply on 1 8 1973: "Your letter reached me on 28 7 1973.
With reference to your above letter dated 26 7 1973, I have been directed to forward the entire list of the candidates interviewed by the High Court, with the marks obtained by them.
the High Court has no further remarks to offer.
All the applications of the candidates sent by you are returned separately.
" Thereupon the Government wrote D.o. letter dated 30 11 1973 to the Chief Justice of the High Court intimating that Government had decided to select the six candidates mentioned in that letter for filling up the six vacancies.
Out of the persons so selected two were those who had been recommended by the High Court alongwith four others in its letter dated 13 7 1973.
They were serials 1 and 4.
Four out of the six were not appointed and in their place, as it appears, treating the entire list of 263 as a list recommended by the High Court in order of merit persons at serials 9, 12, 13 and 16 were selected by the Government for appointment.
And finally orders appointing the six persons so selected were issued on 7 12 1973.
Several writ applications were filed in the High Court to challenge the appointments made by the Government.
We are in this appeal concerned with the judgment of the High Court dismissing the Writ Petition No. 895/1974 filed by the appellant to challenge the appointment of only four viz.,, respondents 3 to 6 and the non appointment of the appellant.
His case was that respondents 3 to 623 6 were appointed in violation of the constitutional provision contained in Article 233 and that he was not appointed on grounds which are unsustainable in law.
The High Court has taken the view that the appointments have been made by the Government consistent with the requirement of Article 233(2) out of the entire list of 263 recommended by the High Court.
The appellant 's claim on merits for appointment to the post has not found favour with the High Court.
In the view which we take as to the violation of Article 233 in this case, we would not like, nor is it necessary to do so, to examine the claim of the appellant for appointment in one of the six vacancies.
It would be convenient to read once again Article 233 of the Constitution.
" (1) Appointments of persons to be, and the posting and promotion of, district judges in any State shall be made by the Governor of the State in consultation with the High Court exercising jurisdiction in relation to such State.
(2) A person not already in the service of the Union or of the State shall only be eligible to be appointed a district judge if he has been for not less than seven years an advocate or a pleader and is recommended by the High Court for appointment.
" As pointed out at page 89 by this Court in Chandra Mohan vs State of Uttar Pradesh & Ors (1) "There are two sources of recruitment, namely, (1) service of the Union or of the State, and (ii) members of the Bar.
The said judges from the first source are appointed in consultation with the High Court and those from the second source are appointed on the recommendation of the High Court.
" A candidate for direct recruitment from the Bar does not become eligible for appointment without the recommendation of the High Court.
He becomes eligible only on such recommendation under clause (2) of article 233.
The High Court in the judgment under appeal felt some difficulty in appreciating the meaning of the word "recommend".
But the literal meaning given in the Concise oxford Dictionary is quite simple and apposite.
It means "suggest as fit for employment." In case of appointment from the Bar it is not open to the Government to choose a candidate for appointment until and unless his name is recommended by the High Court.
The recommendation of the High Court for filling up the six vacancies was contained in its letter dated 13 7 1973.
Government was not bound to accept all the recommendations but could tell the High Court its reasons for not accepting the High Court 's recommendations in regard to certain persons.
If the High Court agreed with the reasons in case of a particular person the recommendation in his case stood with drawn and there was no question of appointing him.
Even if the High (1) 624 Court did not agree the final authority was the Government in the matter of appointment and for good reasons it could reject the High Court 's recommendations.
In either event it could ask the High Court to make more recommendations in place of those who have been rejected.
But surely it was wrong and incompetent for the Government to write a letter like the one dated 26 7 1973 inviting the High Court 's attention to Instruction 12(5) of the Secretariat instructions and on the basis of that to ask it to send the list of persons whom the High Court considered to have reasonable claims to the appointment.
On the basis of the furore created by two Bar Associations of Hyderabad and the High Court 's letter dated 26 7 1973 written in reply to the Government 's letter dated 24 7 1973 no person 's candidature recommended by the High Court had been rejected when the letter dated 26 7 1973 was written by the Government.
Even after rejection the Government could not ask the High Court to send the list of all persons whom the High Court considered to have reasonable claim to the appointment We feel distressed to find that instead of pointing out the correct position of law to the Government and itself acting according to it, a letter hike the one dated 1 8 1973 was sent by the High Court in reply to the Government 's letter dated 26 7 1973.
It is not clear from this letter whether it was written under the direction of the Chief Justice alone or under the directions of Chief Justice and the other Judges of the High Court as in the case of the letter dated 13 7 1973.
But surely it was very much wrong on the part of the High Court to forward the entire list of the candidates interviewed with the marks obtained by them and adding at the same time that the High Court had no further remarks to offer.
We could not understand the reason for writing such a letter by the High Court.
But if we may hazard a surmise it seems to have been written in utter disgust at the Government 's unreasonable attitude displayed in its letter dated 26 7 1973.
By no means could it be, nor was it, a recommendation by the High Court of all there 263 candidates interviewed, that all of them had a reasonable claim, or in other words, were fit to be appointed District Judges.
We must express our displeasure at and disapproval of all that happened between the Government and the High Court in the former writing the letter dated 26 7 1973 and the letter sending the reply dated 1 8 1973.
Then comes the letter dated 30 11 1973.
After tracing the history of the recommendation made by the High Court in its letter dated l 3 7 1973 and "in the light of the further information about these candidates as required from High Court", Government decided to select the six candidates mentioned therein including respondents 3 to 6 as if they were from "the list recommended by the High Court .
It was further stated in this letter "Reasons for not selecting candidates placed by the High Court higher than those now selected are given in the annexure enclosed to this D.o. letter.
" The High Court, to be more accurate, the Chief Justice to whom the letter dated 30 11 1973 was addressed seems to have not resented or protested against the selection so made by the Government in clear violation of Article 233 of the Constitution.
We find it intriguing that the letter written by the Registrar of the High Court on 1 8 1973 was treated as a recommendation of all the 263 candidates as having been found fit for appointment as District Judges.
By no means could it be so.
It was not so.
And yet the High Court or the 625 Chief Justice did not object to the appointment of respondents 3 to 6 as District Judges.
They were not eligible to be so appointed as their names had never been recommended.
In the result we allow this appeal and set aside the judgment of the High Court.
The writ application filed by the appellant succeeds only to this extent that the appointments of respondents 3 to 6 are quashed.
The four posts manned by them are declared vacant.
There will be no order as to costs.
P.B.R. Appeal allowed.
| IN-Abs | Under Article 233(2) of the Constitution a person not already in service of the Union or of the State shall only be eligible to be appointed a District Judge, if he has been for not less than 7 years an advocate or pleader and is recommended by the High Court for appointment.
After interviewing a large number of candidates to fill six posts of District Judges the High Court recommended six persons as the most suitable candidates from among the applicants.
The appellant was one of ' them.
This recommendation having leaked out, the Government requested the High Court to send a list of persons whom the High Court considered to have reasonable claims to the appointment. 'The High Court sent the entire list of the candidates interviewed by it with the marks obtained by them, but without offering any remarks.
Treating the entire list of candidates sent by the High Court as candidates recommended by it in the order of merit, respondents 3 to 6 were selected, in addition to two candidates earlier recommended by the High Court.
The appellant 's name did not find place in the final list.
He, therefore moved the High Court contending that respondents 3 to 6 were appointed in violation of the provisions contained in article 233.
The High Court dismissed the petition holding that the entire list of the candidates should be taken as recommended by the High Court.
Allowing the appeal to this Court, ^ HELD :In the case of appointment of District Judges from the Bar it is not open to the Government to choose a candidate for appointment unless and until this name is recommended by the High Court.
The word 'recommend ' means "suggest as rut for employment." (2) 'The Government was not bound to accept all the recommendations made by the High Court but could tell the High Court its reasons for not accepting its recommendations in regard to certain persons.
If the High Court agreed with the reasons in case of a particular person the recommendation in his case stood withdrawn and there was no question of appointing him.
But it was certainly wrong and incompetent for the Government to write to the High Court and ask it to send the list of persons whom it considered to have reasonable claim to the appointment.
It was very much wrong on the part of the High Court to forward the entire list of the candidates interviewed with the marks obtained by them and adding at the same time that the High Court had no further remarks to offer. 'The reply sent by the High Court was by no means a recommendation of the High Court of all the candidates interviewed that all of them had reasonable claims or in other words were fit to be appointed as District Judges.
[623 H; 624 B, D E] Chandra Mohan vs State of Uttar Pradesh & Ors. , referred to (3) Respondents 3 to 6 were not eligible to be appointed as District Judges as their names had never been recommended by the High Court.
[625 A]
|
Civil Appeals Nos.
2557/69, 20/70, 1423 1434, 1733, 2474, 2575 2578/72, 95 105, 1318, 1371 74, 2040/73, 2100 2102/74 and 120, 121 & 536 of 1975.
From the Judgment and Order dated 24 9 69, 16 8 71, 25 1 72, 16 2 72, 11 2 72, 10 2 72, 22 11 72, 21 7 72, 8 2 72, 25 7 72, 31 5 72 and 4 3 75 of the Kerala High Court in W.A. Nos.809/69, 846 47, 855, 867, 894 and 940 of 1969, 261/71 and 957 58,983,988 and 1021/69,942/69, 427/71, 458, 415, 407, 408 & 68 of 1971 and 211, 241/70, 3 and 7/71, 342/72, 36, 42 and 43 of 1971 and 559 Civil Appeal No. 2117 of 1972.
Appeal by Special Leave from the Judgment and Order dated 17 8 71 of the Kerala High Court in W.A. No. 1021 of 1969.
Lal Narain Sinha, Solicitor General of India, A. G. Puddissery for the Appellant in C.A. No. 2557/69.
V. A. Seyid Mohammed and K. M. K. Nair for the Appellant in C.A. No. 20/70.
A. K. Sen (In C.A. Nos. 1423/72), M. P. Jha (In C.A. 1423/72), A. G. Puddissery (In all the petitions) for the appellants in C.As.
1423, 1434, 1735, 2474, 2575, 2576 78/72, 1318, 1371, 1374, 2040/73, 2100 2102/74, 120 121, 536/75.
P. C. Chandi, K. M. K. Nair and K. R. Nambiar for the Appellants in CAs.
2117/72 and 95 105/73).
section V. Gupte, Ajay Ray and P. Mathai, O. C. Mathur, K. J. John and J. B. Dadachanji for the Appellants in CA.
No. 1457/71.
G. Rathi, Advocate General for the State of Orissa and B. Parathasarthy for the Appellant in C.A. Nos.
1652/74.
Vinoo Bhagat for the Appellants (In C.As.
1653 54774).
section V. Gupte (In CA.
No. 2557/69), P. Mathai, Ajay Ray, O. C. Mathur K. John, J. B. Dadachanji and Mrs. section Bhandare (In C.A. No. 20/70 for Respondent Nos. 1 (In CA.
No. 2557/69) & (In CAs.
Nos.20/70, 1423 24/72).
G. B. Pai, K. J. John, O. C. Mathur, J. B. Dadachanji and P. K. Kurian (In CAs.
1733/72) for Respondent No. 1 (In CAs.
1426 1429, 1431 1434, 1733/72, 2577 78, 95 96, 99 100 and 102 105/73).
N. Sudharkaran, P. Mathai and P. K. Pillai for Respondent Nos. 1 (In CA.
No. 2575/72) and (C.A. No. 1425/72).
K. R. Nambiar for Respondent No. 2 (In CA.
No. 2575/72, 2576 78/72 and 2040/73).
Miss Lily Thomas for Respondent No. 1 (In CA.
No. 2576/72).
A. section Nambiar for Respondent No. 1 (In CA.
No. 2578/72).
N. Sudharkaran for Respondent No. 1 (In CA.
No. 97773).
G. B. Pai (In CA Nos.
2100 2102/74, 121/75), P. Mathai (In CA.
1318/75) Ranjit Mahanty, Ajay Ray (In CAs.
No. 1652/74) and O. C. Mathur, K. J. John and J. B. Dadachanji (In all matters) for Respondent No.1 (In C.A. No. 1318/73, 2100 2102/74, 121/75) for the Respondents (In C.As.
1652/74).
Lal Narain Sinha, Solicitor General of India (In C.A. No. 1457/71) A. G. Puddissery for the Respondent (In CA.
No. 1457 and 1641/71).
560 T. section Krishnamoorthy Iyer, P. Mathai, N. Sudharkaran and P. K. Pillai for Respondent No. 1 (In CA.
No. 1371 and 1374/73) and (In C.A. No. 1373/73) K. M. K. Nair for Respondent No. 2 (In C.As.
1371 1374/73).
G. L. Sanghi, P. Mathai, K. J. John, O. C. Mathur and J. B. Dadachanji for Respondent No. 1 (In CA.
No. 1372/73).
G.Rathi, Advocate General for the State of Orissa and B. Parthasarthy for Respondents (In CAs.
1653 1654774).
P. K. Pillai for the Intervener (In CA.
No. 20/70).
G. L.Sanghi, P. V. Kapur, U. K. Khaitan (for Ferro Alloys Corpn.) K. R. Choudhry K. Raj Choudhry (for A.P. Electricity Board) for the Intervener (In C.A. No. 1652/74).
section Balakrishnan for Respondent No. 1 (in CA.
No. 2040/73).
Note: Mrs. Sunanda Bhandare, Advocate appeared for the applicant intervener in CA.
1457 and 1642/71 and CA.
1652 1654/74 and Mr. B. Sen, Senior Advocate, appeared for Respondent No. 1 (In CA.
20/70 and applicant intervener in CA.
No. 1652/74).
The Judgment of the Court was delivered by Alagiriswami, J.
A. C. Gupta, J. gave a dissenting Opinion.
ALAGIRISWAMI, J.
The validity of the Kerala State Electricity Supply (Kerala State Electricity Board and Licensees Areas) Surcharge Order 1968 is in question in these appeals.
That Order was passed in exercise of the powers conferred by section 3 of the Kerala Essential Articles Control (Temporary Powers) Act, 1961.
It obliges the Board to collect surcharges from non licensee consumers of electricity even though the Board may have entered into long term contracts with them with regard to the rate at which electricity is to be supplied to them.
The Act is one to provide, in the interest of the general public for the control of the production, supply and distribution of, and trade and commerce in, certain articles.
Section 2(a) of the Act defines "essential articles" as meaning any article (not being an essential commodity as defined in the Essential Commidities Act, 1955) which may be declared by the Government by notified order to be an essential article.
Section 3 enables the Government, if of opinion that it is necessary or expedient so to do for maintaining or increasing the supplies of any essential article or for securing their equitable distribution and availability at fair prices, to make notified orders providing for: (a) regulating by licences, permits or otherwise the production or manufacture of any esential article: (b) controlling the price at which any essential article may be bought or sold; 561 (c) regulating by licences, permits, or otherwise the storage, distribution, transport, disposal, acquisition, use or consumption of any essential article; (d) prohibiting the withholding from sale of any essential article ordinarily kept for sale; (e) requiring any person holding in stock any essential article to sell the whole or a specified part of the stock to the Government or to an officer or agent of the Government or to such other person or class of persons and in such circumstances as may be specified in the order; (f) regulating or prohibiting any class of commercial or financial transactions relating to any essential article, which, in the opinion of the authority making the order, are, or if unregulated are likely to be detrimental to the public interest; (g) collecting any information or statistics with a view to regulating or prohibiting any of the aforesaid matters; (h) requiring persons engaged in the production, supply or distribution of, or trade or commerce in any essential article to maintain and produce for inspection such books, accounts and records relating to their business and to furnish such information relating thereto as may be specified in the order; (i) regulating the processing of any essential article; (j) exercising over the whole or any part of an existing undertaking, such functions of control and subject to such conditions, as may be specified in the order; (k) 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 article 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 committed, the grant or issue of licences, permits or other documents, and the charging of fees therefor.
In exercise of the powers under section 2(a) electricity was declared as an essential article in 1965.
Electricity is the only article declared as an essential article under the Act so far and in spite of the wide powers with regard to making of notified orders under section 3 the impugned Surcharge Order is the only order so far made.
It provides, as already stated, for levying of a surcharge on supplies of electricity made to bulk consumers, many of whom are respondents in these appeals.
The validity of the Act itself is not seriously questioned except in one respect which we shall deal with later; but it is contended that by the declaration of electricity as an essential article under the Act, the 562 Act impinges upon various matters either in List I or List III of the Seventh Schedule to the Constitution.
According to Mr. Gupte, who appeared for the respondent in Civil Appeal No. 2557 of 1969, the legislation is repugnant to the Electricity Act, 1910 and the , in particular the latter, which falls within Entries 43 and 44 of List I.
According to Mr. B. Sen, who appeared for the respondents in Civil Appeal No. 20 of 1970, the Act trenches upon the field occupied by the which falls partly under Entry 43 of List I and partly under Entry 38 of List III.
According to Mr. G. B. Pai, who appeared for the 1st respondent in Civil No. 1733 of 1972 the 1948 Act falls within Entry 44 of List I and the Kerala Act impinges upon that field.
On the contrary, the Solicitor General appearing on behalf of the Kerala State Electricity Board contends that the Kerala Act falls under Entries 26 and 27 of List II of the Seventh Schedule to the Constitution.
There is, in the arguments on behalf of the respondents, a certain amount of confusion.
The question of repugnance arises only in case both the legislations fall within the same List III.
There can, therefore, be no question of repugnance between the Electricity Act and the on the one hand and the Kerala Act on the other, if the former fall in List I or List III and the latter in List II.
If any legislation is enacted by a State Legislature in respect of a matter falling within List I that will be without jurisdiction and therefore void.
The scope of the legislative powers of the Parliament and the State Legislatures is now well settled.
They are found in Article 246 of the Constitution, which reads : 246.
(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the "Union List").
(2) Notwithstanding anything in clause (3), Parliament and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the "Concurrent List").
(3) Subject to clauses (1) and (2), the Legislature of a State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in the Constitution referred to as the "State List").
(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List.
" 563 In view of the provisions of Article 254, the power of Parliament to legislate in regard to matters in List III, which are dealt with by clause (2) is supreme.
The Parliament has exclusive power to legislate with respect to matters in List I. The State Legislature has exclusive power to legislate with respect to matters in List II.
But this is subject to the provisions of clause (1) (leaving out for the moment the reference to clause 2).
The power of Parliament to legislate with respect to matters included in List I is supreme notwithstanding any thing contained in clause (3) (again leaving out of consideration the provisions of clause 2).
Now what is the meaning of the words "notwithstanding" in clause (1) and "subject to" in clause (3) ? They mean that where an entry is in general terms in List II and part of that entry is in specific terms in List I, the entry in List I takes effect notwithstanding the entry in List II.
This is also on the principle that the `special ' excludes the `general ' and the general entry in List II is subject to the special entry in List I.
For instance, though house accommodation and rent control might fall within either the State List or the Concurrent List, Entry 3 in List I of Seventh Schedule carves out the subject of rent control and house accommodation in cantonments from the general subject of house accommodation and rent control (see Indu Bhusan vs Sundari Devi(1).
Furthermore, the word `notwithstanding ' in clause (1) also means that if it is not possible to reconcile the two entries the entry in List I will prevail.
But before that happens attempt should be made to decide in which list a particular legislation falls.
For deciding under which entry a particular legislation falls the theory of "pith and substance" has been evolved by the Courts.
If in pith and substance a legislation falls within one List or the other but some portion of the subject matter of that legislation incidentally trenches upon and might come to fall under another List, the Act as a whole would be valid notwithstanding such incidental trenching.
These principles have been laid down in a number of decisions.
In re The Central Provinces and Berar Act No. XIV of 1938(2) Sir Maurice Gwyer observed, with reference to the corresponding provisions of the Government of India Act, as follows : "It will be observed that by s.100(1) the Federal Legislature is given exclusive powers enumerated in the Federal Legislative List, "notwithstanding anything in the two next succeeding sub sections" of that section.
Sub section (2) is not relevant to the present case, but s.s.(3) is, as I have stated; the enactment which gives to the Provincial Legislatures the exclusive powers enumerated in the Provincial Legislative List.
Similarly Provincial Legislatures are given by s.100(3) the exclusive powers in the Provincil Legislative List "subject to the two preceding sub sections", that is s.ss.
(1) and (2).
Accordingly, the Government of India further contend that, even if the impugned Act were otherwise within the competence of the Provincial Legislature, it is nevertheless invalid, because the effect of the 564 non obstante clause in s.100(1), and a fortiori of that clause read with the opening words of s.100(3), is to make the federal power prevail if federal and provincial legislative powers overlap." He observed further : "Only in the Indian Constitution Act can the particular problem arise which is now under consideration; and an endeavour must be made to solve it, as the Judicial Committee have said, by having recourse to the context and scheme of the Act, and a reconciliation attempted between two apparently conflicting jurisdictions by reading the two entries together and by interpreting, and, where necessary, modifying, the language of the one by that of the other.
If indeed such a reconciliation should prove impossible, then, and only then, will the non obstante clause operate and the federal power prevail; for the clause ought to be regarded as a last resource, a witness to the imperfections of human expression and the fallibility of legal draftsmanship.
" In Subrahmanyan Chettiar vs Mutuswami Goundan(1) the same learned C.J. observed : "Section 100(3) of the Constitution Act provides that a Provincial Legislature has the exclusive power of legislating with respect to the matters enumerated in List II, the Provincial Legislative List.
But this power is expressly stated to be subject to the provisions of s.100(1), which give an exclusive power to the Federal Legislature to legislate with respect to the matters enumerated in List I, the Federal Legislative List.
Hence, though Parliament has no doubt done its best to enact two lists of mutually exclusive powers, it has also provided, ex majori cautela, that if the two sets of legislative powers should be found to overlap, then the federal legislation is to prevail.
And the reason for this is clear.
However carefully and precisely lists of legislative subjects are defined, it is practically impossible to ensure that they never overlap; and an absurd situation would result if two inconsistent laws, each of equal validity, could exist side by side within the same territory.
" In the same case Sulaiman, J. observed : "On a very strict interpretation of s.100, it would necessarily follow that from all matters in List II which are exclusively assigned to Provinicial Legislatures, all portions which fall in List I or List III, must be excluded.
Similarly, from all matters falling in List III, all portions which fall in List I must be excluded.
The section would then mean that the Federal Legislature has full and exclusive power to legislate with respect to matters in List I, and has 565 also power to legislate with respect to matters in List III.
A Provincial Legislature has exclusive power to legislate with respect to List II, minus matters falling in List I or List III, has concurrent power to legislate with respect to matters in List III, minus matters falling in List I.
In its fullest scope, section 100 would then mean that if it happens that there is any subject in List II which also falls in List I or List III, it must be taken as cut out from List II.
On this strict interpretation there would be no question of any real overlapping at all.
If a subject falls exclusively in List II and no other List, then the power of the Provincial Legislatures is supreme.
But if it does also fall within List I, then it must be deemed as if it is not included in List II at all.
Similarly, if it also falls in List III, it must be deemed to have been excluded from List II.
The dominant position of the Central Legislature with regard to matters in List I and List III is thus established.
But the rigour of the literal interpretation is relaxed by the use of the words "with respect to" which as already pointed out only signify "pith and substance", and do not forbid a mere incidental encroachment.
" In Governor General in Council vs Province of Madras(1) the Judicial Committee of the Privy Council observed : "For in a Federal Constitution, in which there is a division of legislative powers between Central and Provincial legislatures, it appears to be inevitable that controversy should arise whether one or other legislature is not exceeding its own, and encroaching on the other 's constitutional legislative power, and in such a controversy it is a principle, which their Lordships do not hesitate to apply in the present case, that it is not the name of the tax but its real nature, its "pith and substance" as it has sometimes been said, which must determine into what category it falls." In Prafulla Kumar Mukherjee and Others vs Bank of Commerce, Limited, Khulna(2) the Judicial Committee of the Privy Council quoted with approval the observations of Sir Maurice Gwyer C.J. in Subrahmanyan Chettiar 's case (supra) to the effect : "It must inevitably happen from time to time that legislation, though purporting to deal with a subject in one list, touches also on a subject in another list, and the different provisions of the enactment may be so closely intertwined that blind observance to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the legislature enacting them may appear to have legislated in a forbidden sphere.
Hence the rule which has been evolved by the Judicial Committee, whereby the impugned statute is examined to ascertain its `pith and substance, ' or 566 its `true nature and character, ' for the purpose of determining whether it is legislation with respect to matters in this list or in that.
" They also held : "Thirdly, the extent of the invasion by the Provinces into subjects enumerated in the Federal List has to be considered.
No doubt, it is an important matter, not, as their Lordships think, because the validity of an Act can be determined by discriminating between degrees of invasion, but for the purpose of determining what is the pith and substance of the impugned Act.
Its provisions may advance so far into Federal territory as to show that its true nature is not concerned with Provincial matters, but the question is not, has it trespassed more or less, but is the trespass, whatever it be, such as to show that the pith and substance of the impugned Act is not money lending but promissory notes or banking ? Once that question is determined the Act falls on one or the other side of the line and can be seen as valid or invalid according to its true content.
This view places the precedence accorded to the three lists in its proper perspective.
" The matter has been elaborately discussed in Union vs H. section Dhillon(1).
All the relevant earlier decisions have been considered there and for the purpose of these cases it is not necessary to enter into any further discussion on this aspect.
Having discussed the question of the legislative field it might be necessary to discuss the question as to what happens if it should be held that the matter under consideration in these cases falls within the Concurrent List, that is, Entry 38 in List III as contended in the alternative by some of the respondents.
As already mentioned the question will arise only if it should be held that the Kerala State Act falls under Entry 38 as contended by Mr. B. Sen.
If the impugned legislation falls under List III then the question of repugnancy of that legislation with the existing law or the law made by Parliament, as the case may be, will have to be considered.
Both the 1910 Act as well as the 1948 Act are existing law as contemplated under Article 372 of the Constitution.
An existing law continues to be valid even though the legislative power with respect to the subject matter of the existing law might be in a different list under the Constitution from the list under which it would have fallen under the Government of India Act, 1935.
But after the Constitution came into force an existing law could be amended or repealed only by the legislature which would be competent to enact that law if it were to be newly enacted.
In that sense both the 1910 Act and the 1948 Act could be amended or repealed by the Parliament and also by the State Legislature if it obtains the Presitential assent to an Act amending or repealing the 1910 Act or 1948 Act (leaving aside for the moment the question whether they 567 fall wholly or partly under Entries 43 and 44 of List I of the Seventh Schedule to the Constitution).
That the question of repugnancy can arise only with reference to a legislation falling under the Concurrent List is now well settled.
In A. section Krishna vs State of Madras(1) after referring to section 107 of the Government of India Act, 1935, which is in terms similar to clause (1) of Article 254, this Court observed: "For this section to apply, two conditions must be fulfilled : (1) The provisions of the Provincial law and those of the Central legislation must both be in respect of a matter which is enumerated in the Concurrent List, and (2) they must be repugnant to each other.
It is only when both these requirements are satisfied that the provincial law will, to the extent of the repugnancy, become void.
" To the similar effect is the decision in P. N. Kaul vs The State of J&K(2).
The whole question of repugnancy is elaborately discussed in J & K State vs M. section Farooqi(3).
Let us now, therefore, consider what in its pith and substance is the subject matter of the Kerala Act.
Is it an Act dealing with incorporation, regulation and winding up of trading corporations, including banking, insurance and any financial corporations but not including cooperative societies (Entry 43); or incorporation, regulation and winding up of corporations, whether trading or not, with objects not confined to one State, but not including universities (Entry 44)? Clearly the Act itself does not deal with any of these subjects.
It is true that the notification issued under section 2(a) declaring electricity as an essential article enable orders to be made under section 3 of the Act.
But the only question we are concerned with in this case is the validity of the surcharge order.
No notified order has been made under any of the powers conferred on the State by section 3 except the impugned Surcharge Order.
If the Act had stood as it is or even if the notification had stood as it is nobody would have any cause for complaint.
It is only by the issue of the Surcharge Order that the respondents have been affected.
It is for the purpose of deciding the question of the validity of the Surcharge Order that we have to decide the validity of the declaration under section 2(a) of electricity as an essential article.
Does the notification make the legislation one relating to electricity under Entry 38 of List III ? Was it necessary to get the President 's assent for this notification as contended of the respondents ? Quite clearly no Presidential assent to the notification.
Article 254(2) does not contemplate assent to notifications issued under the Act.
The Article contemplates Presidential assent only to laws made by the Legislature of a State.
We shall later deal with the question whether the assent of the President to the Act after the 1965 notification declaring electricity as an essential article validates that notification.
The Electricity Act 1910 and the can be said to cover the whole field relating to electricity under Entry 568 38 of List III of the Seventh Schedule.
We are clearly of the opinion that the argument of Mr. Pai that the 1948 Act falls under Entry 44 of List I has no substance.
It does not deal with the incorporation, regulation and winding up of a corporation with objects not confined to one State.
The Central Electricity Authority created by that Act is not an incorporated body, whereas the various State Electricity Boards are incorporated.
The Act deals with the incorporation and regulation of the State Electricity Boards.
Where a State Electricity Board is to operate beyond the limits of the State for which it is constituted, it is done only by means of an agreement with the other State in which it is to operate.
The Statement of Objects and Reasons of that Act does not help his contention.
The coordinated development of electricity in India on a regional basis, for which the Government felt it necessary to bring in legislation which resulted in the cannot show that it deals with the incorporation and regulation of an inter State corporation.
The statement itself proceeds on the basis that the executive power will vest in the Provinces, which means that the legislation falls in the Concurrent List.
The Statement of Objects and Reasons also mentions the necessity for the constitution of semi autonomous bodies like Electricity Boards to administer the grid systems.
The Electricity Boards, as already mentioned, are confined to the jurisdiction of States.
The Statement of Objects and Reasons itself shows that what was contemplated was a legislation under the Entry in the Concurrent List.
The Statement of Objects and Reasons, however, mentions Entry 33 of the Federal List of the Government of India Act, 1935 as the Entry under which the legislation was undertaken.
That Entry corresponds to Entries 43 and 44 of List I of Seventh Schedule to the Constitution.
Therefore, the Statement of Objects and Reasons does not show that the falls under Entry 44.
The question then is whether it falls within Entry 43.
The fact that the Statement of Objects and Reasons mentions Entry 33 of List I (of the Government of India Act) as the legislative head under which the legislation was being undertaken is not conclusive.
We have, therefore to consider whether the falls under Entry 43 as contended by some of the respondents.
There is no doubt that the Act does deal with the incorporation and regulation of the Electricity Boards, but the question is whether in pith and substance it is a legislation regarding the constitution and regulation of the Electricity Boards falling under Entry 43 of List I or on electricity falling under Entry 38 of List III.
The object of the as seen from the preamble is to rationalise the production and supply of electricity and to take measures conducive to electrical development.
In the Statement of Objects and Reasons it is stated that "there is necessity for the constitution of semi autonomous bodies like Electricity Boards to administer the grid system on quasi commercial lines, and that such Boards cannot, however, be set up by Provincial Governments under the existing Constitutional Act as they would be in the nature of trading corporations within the meaning of Entry 33 of the Federal Legislative List.
" The Statement of Objects and 569 Reasons though not relevant for the purpose of interpreting the sections of the Act, will throw light upon the object of the legislature from the historical viewpoint.
Let us now look at the Act itself.
Section 3 provides for the constitution of a Central Electricity Authority.
It says that the Central Government shall constitute a body called the Central Electricity Authority to exerise such functions and perform such duties and in such manner as the Central Government may prescribe or direct.
Section 5 provides for the constitution and composition of State Electricity Boards.
Section 6 says that the Government of any State may in lieu of constituting a Board under section 5 enter into an agreement with the Government of a contiguous State to provide that the Board constituted for the latter State shall exercise the functions of a Board under the Act in the former State.
Section 7 deals with the effect of inter State agreement as contemplated in section 6.
Section 8 provides for terms and conditions of appointment of the members of the Board.
Section 9 relates to the qualifications of the members of the Board.
Section 10 deals with removal or suspension of the members of the Board.
Section 10A gives power to the State Government to declare void certain transactions in connection with which a member has been removed under the provisions of section 10 on 12 provides that the Board shall be a body corporate.
Section 14 provides for the meetings of the Board.
Section 15 deals with the appointment of the staff by the Board.
Section 16 states that the State Government shall constitute a State Electricity Consultative Council for the State and provides for constitution of that body.
Section 17 provides for the constitution of a Local Advisory Committee.
Section 18 describes the general duties of the Board.
Section 19 says that the Board may supply electricity to any licensee or person requring such supply in any area in which a schme sanctioned under Chapter V is in force.
Section 20 provides for power of the Board to engage in certain undertakings.
Section 21 concerns the power of the Board in relation to water power.
By section 22 the Board is invested with power to conduct investigations, experiments and trials for the improvement of the methods of transmission, distribution and supply etc.
of electricity.
Section 24 deals with the power of the Board to contribute to contribute to certain associations engaged in generation, distribution and supply of electricity.
Section 25 says that the Board may, from time to time, appoint qualified persons to be Consulting Engineers to the Board.
Section 26 says that the Board shall have all the powers and obligations of a licensee under the .
Section 28 concerns the preparation of scheme for establishement of generating stations etc.
Section 29 provides for publication and sanctioning of schemes prepared under section 28.
Section 30 deals with the matters to be considered by the authority in recommending a scheme.
Sections 31 and 32 also relate to sechemes.
Section 34 deals with controlled stations.
Section 35 provides for the supply by the Board to licensees owning generating stations while section 36 gives power to the Board to close down generating stations.
Section 37 provides for Purchase of generating stations of undertaking or main transmission lines by the Board.
Section 38 makes provision for establishing new generating stations by 570 the Board.
Section 39 deals with the arrangements to be made with the licensee for operation of the Board 's generating stations.
Section 40 makes provision regarding the connections with main transmission lines purchased by the Board.
Section 41 relates to the use by the Board of transmission lines.
Section 42 provides for power of the Board for placing wires, poles etc.
Section 43 describes the powers of the Board to enter into arrangements for purchase or sale of electricity ' under certain conditions.
Section 44 places certain restrictions on establishment of new generating stations or major additions or replacement of plant in generating statons.
Section 45 says that if any licensee fails to close down his generating station, pursuant to a declaration of the Board under section 36, or if any person establishes or acquires a new.
generating station, the Board may authorise any of its officers to enter upon the premisess of such station and shut down the station.
Section 46 provides for Grid Tariff.
It says that a tariff to be known as the Grid Tariff shall, in accordance with any regulations made in this behalf, be fixed from time to time by the Board in respect of each area for which a scheme is in force, and tafiffs fixed under the section may, if the Board thinks fit, differ for different areas, and subsection (2) of that section provides that the Grid Tariff shall apply to sales of electricity by the Board to licensees in other so required under any of the first, second and third schedules and shall also be applicable to sales of electricity by the Board to licensees in other cases.
Section 47 vests power in the Board to make alternative arrannements with licensees.
Section 49 makes provision for sale of electricity by the Board to persons other than licensees.
Section 50 says that the Board should not supply electricity in certain circumstances.
Section 55 provides that licensees should comply with the directions of the Board.
Section 63 says that the State Government may make subventions to the Board for the purpose of the Act.
Section 64 provides for loans by the State Government to the Board.
Section 65 gives power to the Board to borrow.
Section 66 provides for guaranteeing of loans raised by the Board by the State Government.
Section 67 provides for priority of the liabilies of the Board.
Section 68 makes provision for depreciation reserve.
Secton 69 deals with the accounts of the Board and their audit.
Section 76 provides for arbitration of all disputes arising between the State Government or the Board and licensee or other person.
Section 78 vests power in the State Government to make rules.
Section 78A says that in the discharge of its functions, the Board shall be guided by such directions on question of policy as may be given to it by the Government.
Section 79 vests power in the Board to make regulations.
Section 81 says that all members, officers and servants of the Board shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code.
It would be obvious that one part of the Act does deal with the constitution of the Board, the incorporation of the Board and the regulation of its activities.
But the main purpose of the Act is for rationalising the production and supply of electicity.
The regulation contemplated in Entries 43 and 44 is not regulation of the business of production, distribution and supply of electricity of the corporation.
As the 1910 and 1948 Acts together form a complete code, with res 571 pect to Entry 38 in List III the Board is only an instrument fashioned or carrying out this object.
The provision regarding the incorporation and regulation of the Electricity Board should be taken to be only incidental to the provision regarding production, supply and distribution of electricity.
It was observed by this Court in R. C. Cooper vs union(1) "The argument raised by Mr. Setalvad, intervening on behalf of the State of Maharashtra and the State of Jammu and Kashmir, that the Parliament is competent to enact Act 22 of 1969, because the subject matter of the Act is "with respect to" regulation of trading corporations and matters subsidiary and incidental thereto and on that account is covered in its entirety by Entries 43 and 44 of List I of the Seventh Schedule cannot be upheld.
Entry 43 deals with incorporation, regulation and winding up of trading corporations including banking companies.
Law regulating the business of a corporation is not a law with respect to regulation of a corporation.
In List I entries expressly relating to trade and commerce are Entries 41 & 42.
Again several entries in List I relate to activities commercial in character.
Entry 45 "Banking" Entry 46 "Bills of exchange, cheques, promissory notes and other like instruments; Entry 47 "Insurance"; Entry 48 "Stock exchanges and future markets", Entry 49 "Patents, inventions and designs.
" There are several entries relating to activities commercial as well as non commercial in List II Entry 21 "Fisheries", Entry 24 "Industries . "; Entry 25 "Gas and Gas works"; Entry 26 "Trade and commerce": Entry 30 "Money lending and money lenders"; Entry 31 "Inns and Inn keeping"; Entry 33 "Theaters and dramatic performances, cinemas etc.";.
We are unable to accede to the argument that the State Legislatures are competent to legislate in respect of the subject matter of those entries only when the commercial activities are carried on by individuals and not when they are carried on by corporations.
Therefore the provisions in the 1948 Act regarding the Board 's functions do not make it one falling under Entry 43 of List I.
In Ramtanu Housing Society vs Maharashtra(2) this Court had dealt with the Maharashtra Industrial Development Act, 1961 and the question whether the Maharashtra Development Corporation formed under the Act was a trading corporation.
In holding that the legislation fell under Entry 24 of the State List and not under Entry 43 of the Union List this Court observed .
(1)[1970] 3 S.C.R.530.
(2)[1971] 1 S.C.R.719.
572 "The Act is one to make a special provision for securing the orderly establishment in industrial areas and industrial estates of industries in the State of Maharashtra, and to assist generally in the organisation thereof, and for that purpose to establish an Industrial Development Corporation, and for purposes connected with the matters aforesaid.
The Corporation is established for the purpose of securing and assisting the rapid and orderly establishment and organisation of industries in industrial areas and industrial estates in the State of Maharashtra.
Broadly stated the functions and powers of the Corporation are to develop industrial areas and industrial estates by providing amenities of road, supply of water or electricity, street lighting, drainage .
Or otherwise transfer any property held by the Corporation on such conditions as may be deemed proper by the Corporation.
The principal functions of the Corporation in regard to ' the establishment, growth and development of industries in the State are first to establish and manage industrial estates at selected places and secondly to develop industrial areas selected by the State Government.
When industrial areas are selected the necessity of acquisition of land in those areas is apparent.
The Act, therefore, contemplates that the State Government may acquire land by publishing a notice specifying the particular purpose for which such land is required. .
Where the land has been acquired for the Corporation or any local authority, the State Government shall, after it has taken possession of the land, transfer the land to the Corporation or that local authority It is in the background of the purposes of the Act and powers and functions of the Corporation that the real and true character of the legislation will be determined. . .
Industries come within Entry 24 of the State List.
The establishment, growth and development of industries in the State of Maharashtra does not fall within Entry 7 and Entry 52 of the Union List.
Establishment, growth and development of industries in the State is within the State List of industries. .Acquisition or requisition of land falls under Entry 42 of the Concurrent List.
In order to achieve growth of industries it is necessary not only to acquire land but also to implement the purposes of the Act.
The Corporation is therefore established for carrying out the purposes of the Act.
The pith and substance of the Act is establishment, growth and organisation of industries, acquisition of land in that behalf and carrying out the purposes of the Act by setting up the Corporation as one of the limbs or agencies of the Government.
The powers and functions of the Corporation show in no uncertain terms that these are all in 573 aid of the principal and predominant purpose of establishment, growth and establishment of industries.
The Corporation is established for that purpose.
We, therefore, hold that the Act is a valid piece of legislation.
" In the present case the incorporation of the State Electricity Boards is merely for the rationalisation of the production and supply of electricity.
for taking measures conducive to Electrical development and for all matters incidental thereto.
The incorporation of the Electricity Boards being incidental to the rationalisation of the production and supply of electricity and for being conducive to electrical development, the 1948 Act in pith and substance should be deemed to be one falling under Entry 38 of List III.
Furthermore, Electricity Boards are not trading corporations.
They are public service corporations.
They have to function without any profit motive.
Their duty is to promote co ordinated development of the generation, supply and distribution of electricity in the most efficient and economical manner with particular reference to such development in areas not for the time being served or adequately served by any licensee (Section 18).
The only injunction is that as far as practicable they shall not carry on their operations at a loss (Section 59).
They get subventions from the State Governments (Section 63).
In the discharge of their functions they are guided by directions on questions of policy given by State Governments (Section 78A).
There are no shareholders and there is no distribution of profits.
This is another reason why the 1948 Act cannot be said to fall under Entry 43 of List I. The question, therefore, is whether the impugned legislation falls under Entry 38 of List III or Entries 26 and 27 of List II and if the former, whether it is repugnant to the existing law on the subject.
that is, the 1910 and 1948 Acts and if that were so, whether that repugnancy has been cured by Presidential assent ? Even assuming that part of the 1948 Act is legislation with respect to incorporation and regulation of a trading corporation, falling under Entry 43 of List I of Schedule Seven, the rest of it will fall under Entry 38 of List III.
That part of the Act relating to the regulation of the activities regarding production and distribution of electricity would, as we have shown, fall under the Entry 'Electricity '.
The Kerala Act has nothing to do with the incorporation and regulation of the Electricity Board and, therefore, it can only relate to Entry 38 of List III, if at all.
The argument of the learned Solicitor General appearing on behalf of the Kerala Electricity Board in support of his submission that the legislation falls under Entries 26 and 27 of List II may be summarised as follows: Those entries do not enable the State Legislatures to legislate with regard to all conceivable goods like arms, ammunition, atomic minerals etc.
as was argued by Mr. Sen. A legislature while legislating with respect to matters within its competence should be deemed to know its limits and its legislative authority and should not be deemed to be legislating beyond its jurisdiction.
One thing that has always 574 got to be kept clear in one 's mind is that there may be more than one aspect with regard to a particular subject matter.
"Essential articles ' is a term which has acquired a definite connotation in Indian legislative practice and is not a vague or a general term.
In the Government of India Act 1935 Entries 27 and 29 in List I correspond to Entries 26 and 27 of List II in the Constitution.
There was no entry in that Act corresponding to Entry 33 of List III of the Constitution.
Section 102 of that Act enabled the Federal Legislature to legislate in the State List during the emergency.
During the World War the Defence of India Act 1939 enabled the Central Government to make such rules as appeared to it necessary or expedient for maintaining supplies and services essential to the life of the community.
Rule 81 of the Defence of India Rules dealt with maintaining supplies and services essential for the life of the community and electricity was specifically referred to as an article within the scope of that rule Many orders regarding electricity were made during the course of that war like Electricity Control order, 1942 of Bihar.
When the proclamation of emergency was revoked on 1.4.1946 the laws made by the Federal Legislature with respect to matters included in the Provincial Legislative List would have ceased to have effect and therefore the British Parliament enacted India (Central Government and Legislative) Act, 1946 enabling the Federal Legislature to make laws with respect to trade and commerce (whether or not within the Province ) in, and production, supply and distribution of cotton, woollen textiles, papers, foodstuffs etc.
and in exercise of that power the Central Legislature enacted Essential Supplies (Temporary Powers) Act, 1946 for continuance of powers to control production, supply and distribution etc.
In respect of articles not covered by the Central Act the Provinces passed similar laws regarding other essential commodities, for instance, Madras Essential Articles Control and Requisitioning Act, 1949 in respect of ten articles including electricity.
At present electricity is the only article included within the scope of that Act.
The was passed by Parliament on 1.4.55.
Essential commodity was defined in that Act.
It practically included every matter regarding industry within the legislative competence of Parliament.
Thus the word 'essential commodity ' is an expression corresponding to a commodity essential to the life of the community.
It is not, therefore, open to the authority exercising powers under section 2(a) of the Kerala Act to declare any and every commodity as an essential commodity.
That Act deals with essential articles not being essential articles dealt with by the Central Act of 1955.
It is not an Act with respect to the incorporation or regulation of trading corporations and therefore does not all under Entry 43 or 44 of List I.
It is not a legislation with respect to electricity and therefore does not fall under Entry 38 of List III.
Electricity being beyond doubt an essential article may be declared to be an essential article under the Act.
In that case the power exercised is not in relation to electricity qua electricity but electricity as an essential article.
The Act therefore in pith and substance is with respect to trade and commerce and production, supply and distribution.
We agree that this is the correct view.
It is not a permanent legislation with respect to electricity but a temporary one dealing with a temporary situation.
There can be no 575 doubt about the argument on behalf of the Board that the Surcharge order is necessary for its survival and existence without which there can be no production or supply of electricity.
That is why it is a matter falling under Entries 26 and 27 of List II.
It is no valid criticism of this view to say that the powers of the Board under the 1948 Act are overridden by the Surcharge order and the order is therefore repugnant to the 1948 Act.
Indeed the Board is more than willing, it is anxious, for the Surcharge order to be made.
It is not necessary to resort to section 59 for this purpose.
This is a simple case of a contract being overridden in exercise of statutory powers.
In the alternative it is argued as follows: The Kerala Act insofar as it deals with electricity can be deemed to be legislation under Entry 38 in List III.
Though the Act itself has not declared any article as an essential article, when a declaration was made under section 2(a) in 1965 declaring electricity as an essential article for the purposes of the Act, it became part of the Act.
When the President assented to the Kerala Act in 1962 it may be that it cannot be deemed that he had assented to it on the basis that the provisions of that Act were repugnant to some Act made by Parliament or some existing law in the concurrent field because there was nothing in the Act itself which made it repugnant to any Act passed by Parliament or any existing law.
But when he assented in 1967 to the Act extending the life of the Kerala Act by another two years the declaration of electricity as an essential article had been made and should be deemed to have become part of the Act.
So far we are in agreement with the argument of the learned Solicitor General.
But when he goes further and argues that insofar as the consequence of such declaration was that the State Government was enabled to make orders regarding production, supply and distribution of electricity, there was a possibility of such orders being repugnant to the provisions of the Electricity Act, 1910 and the and therefore any such repugnance was cured by the assent given by the President, we cannot agree.
We agree that the assent should be Deemed not merely to the substitution of the words "five years" by the words "seven years" in the Kerala Act, but to the Act as a whole, that is, as amended by the 1967 Act and any repugnance between the Kerala Act and the Electricity Act, 1910 and the should be deemed to have been cured by such assent.
When assenting to the 1967 Act the President should naturally have looked into the.
whole Act, that is, the 1961 Act as amended by the 1967 Act.
But the declaration itself did not create any repugnancy with the 1948 Act.
It was in 1968 that the Surcharge order was made, in pursuance of which the bills were served on the various respondents in these appeals and demands made for enhancing charges for electricity.
And it was the Surcharge order that can be said to create the repugnancy if at all.
It is only actual repugnancy that can be cured by Presidential assent and not the possibility of repugnancy.
Mr. Krishnamoorthy Iyer appearing for the respondents in Civil Appeals Nos. 1371 and 1373 74 of 1973 is therefore right when he argues that the declaration of electricity as an essential article in 1965 did not in any way affect the rights of the respondents but only the 576 Surcharge order of 1968 and that as the bills for enhanced charges for electricity were served on the respondents in 1968 before the 1969 amendment of the Act the Surcharge order and the demands made were not cured of their repugnancy till the 1969 Amendment Act was assented to by the President assuming that there is such repugnancy.
It there is such repugnancy by virtue of the Surcharge order the assent of the President can cure the repugnancy between the Kerala Act and the 1910 and 1948 Acts only if it is subsequent to the Surcharge order.
It is the exercise of the power under section 3 of the Kerala Act that is alleged to have created the repugnancy.
We do not pause to consider whether there is in fact any repugnancy between the Surcharge order and the 1948 Act.
The question still remains whether when a declaration is made under section 2(a) of the Act declaring an article as an essential article or an order is made under section 3 such a declaration or order becomes part of the Act ? In England even where an Act declares that subsidiary legislation shall have effect as if enacted in the Act it does not preclude the Court from calling in question the subsidiary legislation where it is inconsistent with the provisions of the Act Minister of Health vs The King(1).
But it would appear that where the statute provides for the laying of the rules before Parliament and the Parliament could have annulled them, such a provision would make the subordinate legislation beyond challenge Institute of Patent Agents vs Lockwood (2).
In India many statutes both of Parliament and of State Legislatures provide for subordinate legislation made under the provisions of those statutes to be placed on the table of either the Parliament or the State Legislature and to be subject to such modification, amendment or annulment, as the case may be, as may be made by the Parliament or the State Legislature.
r Even so, we do not think that where an executive authority is given power to frame subordinate legislation within stated limits, rules made by such authority if outside the scope of the rule making power should be deemed to be valid merely because such rules have been placed before the legislature and are subject to such modification, amendment or annulment, as the case may be, as the legislature may think fit.
The process of such amendment, modification or annulment is not the same as the process of legislation and in particular it lacks the assent either of the President or the Governor of the State, as the case may be.
We are therefore, of opinion that the correct view is that notwithstanding the subordinate legislation being laid on the table of the House of Parliament or the State Legislature and being subject to such modification, annulment or amendment as they may make, the subordinate legislation cannot be said to be said unless it is within the scope of the rule making power provided in the statute.
What happens then to a declaration made under section 2(a) or an order made under section 3 If such a declaration or order is not within the scope of the Act it should be held to be not valid.
Does the subsequent assent of the President to an Amending Act, which as (1) [1931] A.C.494.
(2)[1894] A.C.347.
577 we have shown earlier in effect amounts to an assent to the whole Act, cure this defect ? We consider that the declaration itself can still be attacked if the power to make such a declaration is beyond the scope of the power delegated.
Whether the power delegated can be attacked on the ground of excessive delegation of the legislative powers or on the ground that in so conferring the legislative power on the executive authority the legislature has abdicated its function or the legislature itself could not have me such a law is ' a different question.
There is a slight difference between such a situation and the one where it is held that the declaration is beyond the scope of the Act.
That electricity is an essential article and therefore the 1965 declaration under section 2(a) declaring electricity as an essential article is valid cannot be disputed.
It is not disputed that an article which is not in fact an essential article cannot be declared to be an essential article.
The next question to be considered, therefore, is whether the declaration or the order can be said to be bad on the ground either that there was excessive delegation or that the legislature can be said to have abdicated its powers ? In The Queen vs Burah(1) it was observed: "Their Lordships agree that the Governor General in Council could not by any form of enactment, create in India, and arm with general legislative authority, a new legislative powers.
not created or authorized by the Council 's Act.
Nothing of that kind has, in their Lordships ' opinion, been done or attempted in the present case.
What has been done is this.
The Governor General in Council has determined, in the due and ordinary course of legislation, to remove a particular district from the jurisdiction of the ordinary Courts and offices, and to place it under new Courts and offices, to be appointed by and responsible to the Lieutenant Governor of Bengal; leaving it to the Lieutenant Governor to say at what time that change shall take place; and also enabling him, not to make what laws he pleases for that or any other district, but to apply by public notification to that district any law, or part of a law, which either already was, or from time to time might be, in force, by proper legislative authority, "in the other territories subject to his government." The Legislature determined that, So far, a certain change should take place; but that it was expedient to leave the time, and the manner, of carrying it into effect to the discretion of the Lieutenant Governor.
and also, that the laws which were or might be in force in the other territories subject to the same Government were such as it might be fit and proper to apply to this district also; but that, as it was not certain that all those laws, and every part of them, could with equal convenience be so applied, it was expedient, on that point also, to entrust a discretion to the Lieutenant Governor This having been (1) 5.L.R.178,194. 578 done as to the Garo Hills, what was done as to the Khasi and Jaintia Hills ? The Legislature decided that it was fit and proper that the adjoining district of the Khasi and Jaintia Hills should also be removed from the jurisdiction of the existing Courts, and brought under the same pro visions with the Garo Hills, not necessarily and at all events but if and when the Lieutenant Governor should think it desirable to do so; and that it was also possible that it might be expedient that not all, but some only, of those provisions should be applied to that adjoining district.
And accordingly the Legislature entrusted, for these purposes also, a discretionary power to the Lieutenant Governor.
Their Lordships think that it is a fallacy to speak of the powers thus conferred upon the Lieutenant Governor (large as they undoubtedly are) as if, when they were exercised, the efficacy of the acts done under them would be due to any other legislative authority than that of the Governor General in Council.
Their whole operation is, directly and immediately, under and by virtue of this Act (XXII of 1869) itself.
The proper Legislature has exercised its judgment as to place, person, laws, powers; and the result of that judgment has been to legislate conditionally as to all these things.
The conditions having been fulfilled, the legislation is now absolute.
Where plenary powers of legislation exist as to particular subjects, whether in an imperial or in a provincial Legislature, they may (in their Lordships ' judgment) be well exercised, either absolutely or Conditionally.
Legislation, conditional on the use of particular powers, or on the exercise of a limited discretion, entrusted by the Legislature to persons in whom it places confidence, is no uncommon thing; and, in many circumstances, it may be highly convenient.
The British Statute Book abounds with examples of it: and it cannot be sup posed that the Imperial Parliament did not, when constituting the Indian Legislature, contemplate this kind of conditional legislation as within the scope of the legislative powers which it from time to time conferred.
" We are of opinion that the power conferred by the Kerala Act is a case of conditional legislation as contemplated in the above decision.
The various types of powers that can be exercised under that Act are enumerated in it.
Only the article with reference to which those powers are to he exercised is left to be determined by the executive.
That will vary from time to time; at one time salt may be an essential article, at another time rice may be an essential article and on a third occasion match boxes.
It is the executive that would be in a position to judge when and under what circumstances an article becomes an essential article and therefore it is necessary to 579 control the production, supply and distribution or trade and commerce in a particular article.
The corresponding Madras Act, the Madras Essential Articles Control and Requisitioning (Temporary Powers) Act, 1949 originally had ten articles included in the schedule as "essential articles" with powers to add others to the schedule.
It now contains only one article in the schedule, electricity.
It cannot therefore be said to suffer from the vice of excessive delegation either.
Subsequent decisions of this Court only emphasize this point.
We may however refer to two recent decisions of this Court.
In State of Punjab vs Khan Chand(1) dealing with East Punjab Movable Property (Requisitioning) Act, 1947 this Court held as follows: "The Act confers uncontrolled power on the State Government or the officers authorised by it to requisition any movable property.
No guidelines have been laid down regarding the object or the purpose for which it becomes necessary or expedient to requisition a movable property.
Even the authority requisitioning movable property is not required to specify the purpose for which it has become necessary or expedient to requisition that property.
There is no provision in the Act that the power of requisitioning movable property can be exercised under the Act only for a public purpose nor is there any provision that powers under the Act can be exercised only in an emergency or in some special contingency.
Hence the provisions of the Act violate Articles 14 and 19 of Constitution The Act did not even.
provide for suitable machinery for determining the compensation payable to the owner of the movable property nor did it contain any guiding principles for determining the amount of compensation.
But in the very same decision it was observed: 'Considering the complex nature of problems which have to be faced by a modern State, it is but inevitable that the matter of details should be left to the authorities acting under an enactment.
Discretion has, therefore, to be given to the authorities concerned for the exercise of the powers vested in them under an enactment.
" This decision considered the relevant decisions on the subject and is not against the view which we have taken We must, however, refer to the decision of this Court in Gwalior Rayon Mills vs Asst.
Commr.
T.(2) relied upon by the respondents.
In that case it was found that the Parliament had laid down legislative policy and had not abdicated its legislative function.
It is necessary to refer to the view taken in that case by the majority judgment that it is not correct to say that if the legislature can repeal an enactment, it retains enough control over the authority making the subor (1) A.I.R.1974 S.C.543.
(2) A.I.R l974 S.C.1660.
580 dinate legislation and, as such, it is not necessary for the legislature to lay down legislative policy, standard or guidelines in the statute.
That was, of course, not the argument on behalf of the appellants in this case.
But having regard to the fact that reference was made to the decision in Cobb & Co. Ltd. vs Kropp(1) which is very often relied upon for contending that if the legislature conferred certain powers on an executive authority it could be upheld because the legislature could any time repeal the legislation and withdraw such authority and discretion as it had vested in that authority, it is necessary to look a little more closely into that judgment.
The main dispute there was about the State Transport Act, 1960 passed by the legislature of Queensland.
It was attacked on the ground that it unlawfully and unconstitutionally delegated to the Commissioner for Transport sovereign plowers of the legislature of Queensland to impose and levy taxes and would constitute an unlawful and unconstitutional transfer of sovereign power of legislature to the Commissioner or an abdication of such power in his favour.
There were various other contentions to which it is not necessary to refer.
In the same case the validity of the State Transport Facilities Act, 1946 was also in question.
Under the 1946 Act, however, a determination or a decision of the Commissioner was to be submitted to the Minister for his confirmation.
Stable J. described this provision as one under which 'the commissioner had a Parliamentary hand on his shoulder '.
After referring to the various provisions of the Acts as well as the powers of the Queensland Legislature the Privy Council rejected the argument that the effect of the Acts was to create a new legislative authority.
The Privy Council pointed out that it cannot rationally be said that there was any abandonment or abdication of power in favour of a newly created legislative authority, and referred to the observations of the Privy Council in the Queen vs Burah (supra).
The Privy Council then went on to point out that ' nothing comparable with "a new legislative power" armed with "General authority" has been created by the passing by the Queensland Legislature of the various Transport Acts.
Reference was then made to the decisions in Hodge vs The Queen(2) and Powel vs Apollo Candle Company Ltd.(3) and it was pointed out that the Queensland Legislature preserved its own capacity insect and retained perfect control over the Commissioner for Transport.
It was in that context that they added "inasmuch as it could at any time repeal the legislation and withdraw such authority and discretion as it had vested in him".
This portion of the observations cannot be relied upon in every case where the question of excessive delegation arises to justify it merely on the ground that it is open to the legislature to repeal the legislation and withdraw the authority.
This would be apparent from the extract from the judgment of Stable J. which immediately follows thereafter: "obviously Parliament cannot directly concern itself with all the multitudinous matters and considerations which necessarily arise for daily and hourly determination within (1)[1967] 1 A.C.141.
(2)(1883)9 App.
Cas.117 P.C. (3)(1885)10App.
Cas.282 P.C. 581 the ramifications of a vast transport system in a great area in the fixing of and collection of licensing fees.
So, as I see it on the face of the legislation, Parliament has lengthened its own arm by appointing a commissioner to attend to all these matters, including the fixing and gathering of the taxes which Parliament itself has seen fit to impose.
The commissioner has not been given any power to act outside the law as laid down by Parliament.
Parliament has not abdicated from any of its own power.
It has laid down a framework, a set of bounds, within which the person holding the office created by Parliament may grant, or refrain from granting licenses, and fix, assess, collect or refrain from collecting fees which are taxes." and the succeeding observations to the following effect: "The legislature were entitled to use any agent or any subordinate agency or any machinery that they considered appropriate for carrying out the objects and purposes that they had in mind and which they designated.
They were entitled to use the Commissioner for Transport as their instrument to fix and recover the licences and permit fees.
They were not abrogating their power to levy taxes and were not transferring that power to the commissioner.
What they created by the passing of the Transport Acts could not reasonably be described as a new legislative power or separate legislative body armed with general legislative authority (see R. vs Burah, 3 App.
Nor did the Queensland legislature "create and endow with its capacity a new legislative power not created by the Act to which it owes its own existence" (see In re The Initiative and Referendum Act.
; P.C.).
In no sense did the Queensland Legislature assign or transfer or abrogate their powers or renounce or abdicate their responsibilities.
They did not give away or relinquish their taxing powers.
All that was done was done under and by reason of their authority.
It was by virtue of their will that licence and permit fees became payable. ' We agree with the view taken by the majority of this Court in Gwalior Rayon Mills ' case.
In the result we hold that the Kerala Act, the 1965 declaration under section 2(a) and the 1968 Surcharge order under section 3 are all valid The result is that the appeals will have to be allowed; but in Civil Appeals Nos. 1425, 2575, 2576 of 1972 and 97, 1373 and 1374 of 1973 a question regarding Article 14 has been raised which has not been considered by the High Court.
In these cases the High Court will deal with that question alone and dispose of the matter afresh.
In Civil Appeal No. 1372 of 1973 the respondent is what is called a sanction holder under section 28 of the , 191 582 and as such a licensee within the meaning of that term n clause (6) of section 2 of the .
The respondent has no objection to collecting the surcharge from those to whom it supplies electricity.
The respondent 's contention is a limited one that it need not pay surcharge on the electricity which it consumes.
We consider this contention well founded and it is supported by the provisions of clause (3) and (8) of the Surcharge order which read together leave no room for doubt on that point.
Clause (3) reads as follows: "3.
Notwithstanding anything to the contrary contained in any agreement entered into with any consumer or the conditions of service agreed upon by the Kerala State Electricity Board; the Kerala State Electricity Board shall levy a surcharge in accordance with clause 5 on all supplies of electrical energy made by it either directly or through licensees: Provided that no surcharge under this order shall be levied on (a) Bulk supplies of energy to the licensees; (b) Low Tension supplies of energy for domestic residential purposes; (c) Low Tension supplies of energy for agricultural purposes.
" The respondent is a licensee and bulk supplies have been made to the licensee.
It is not a consumer to whom the Board supplies electrical energy directly or through a licensee.
It cannot be said that in consuming electricity itself the respondent is supplying electricity to itself.
The Surcharge order clearly makes a distinction between the consumer on the one hand and the licensee on the other and makes no provision for surcharge in the case of consumption of electricity by a licensee.
It would be therefore declared that the respondent in this appeal need not pay the surcharge on the electricity consumed by it.
There will be no order as to costs.
GUPTA, J.
I regret I am unable to agree that the Kerala Essential Articles Control (Temporary Powers) Act, 1961 and the declaration and the surcharge order made respectively under sections 2(a) and 3 of that Act are valid.
In my opinion the Kerala act is an invalid piece of legislation and as such the declaration and the surcharge orders are of no consequence.
It is not necessary to restate the facts which have been set out fully in the Judgment of brother Alagiriswami J.; I shall briefly state the reasons for the view I have taken.n The State Lagislature has power to make laws only with regard to matters specified in List II and List III in the Seventh Schedule of the Constitution subject to the provisions of article 254(2).
The Kerala Act, as its long title shows, is in Act to provide for the control of the produc 583 tion, supply and distribution of, and trade and commerce in, "certain articles".
The Preamble of the Act also states that it was passed as it was considered expedient to provide for the control of the production, supply and distribution of, and trade and commerce in, "certain articles", Sec.
1(3) of the Act provides that the Act would remain in force for five years from the date of its commencement which was in January 1962.
Sec.3(1) empowers the State Government to make provisions by a notified order for regulating or prohibiting the production supply and distribution of any 'essential article ' and trade and commerce therein if the Government thought it was expedient so to do for maintaining or increasing the supplies or for securing the equitable distribution of such essentiai articles.
Sec. 2(a) defines essential article as any article not being an essential commodity as defined in the which the Government by notified order might declare to be an essential article.
The definition leaves it to State Government to decide what should be an essential article for the purpose of the Act.
The Legislature is of course presumed to know the limits of its competence and assuming it is permissible to attribute similar knowledge to the Government as to the bounds of its authority under sec. 2(a), an essential article may be any article covered by any of the entries in List 11 or List III except the classes of commodities mentioned as essential commodity in the .
Until therefore, the Government issued a notification on December 10, 1965 under sec. 2(a) declaring electrical energy to be an essential article almost four years after the act came into force, it was not possible even to guess what the Act was about.
Thus the Act as passed had no positive content, it was an empty husk and its insubstantiality, if by itself not, an ill validating factor, exposes the want of a declared legislative policy in the Act.
The Act does not give any indication as to the nature of the articles in respect of which it sought to control the production, supply and distribution, and trade and commerce.
It confer on the Government the authority to declare any article an essential article and to exercise the aforesaid powers in respect of that article.
The Act does not provide any guidance or lay down any test to ascertain what makes an article essential for the purpose of the Act.
The reference to the in sec.
2(a) which defines 'essential article ' is merely to exclude from its purview the commodities covered by the ., and only serves to emphasize its indefiniteness and makes it more difficult to find any clue to the nature of the articles the Legislature had in mind in enacting the Kerala Essential Articles Control (Temporary Powers) Act, 1961.
Almost the entire legislative field was left open to the Government to choose from and decide according to their own lights what should be an essential article.
It hardly needs repetition that the Legislature cannot delegate the essential legislative function, which means that the Legislature must declare the policy of the law and provide a standard for the guidance of the subordinate law making authority.
The Kerala Act authorises the Government to declare any article as essential, except those mentioned in the , without laying down any define criteria or standards.
This, I think, is surrendering unguided and un 584 canalised power to the executive.
I do not see how the Act can be called an instance of conditional legislation this is not a case where the Legislature having determined the policy has left the details to be supplied by the executive authority.
I cannot think of a case where the Legislature 's self effacement could be more complete.
In my opinion the power conferred on the Government by the Kerala Act exceeds the limits of permissible delegation.
I may now refer to another aspect of the case.
As stated earlier, the Kerala Essential Articles Control (Temporary Powers) Act, 1961 came into operation in January 1962 and was to remain in force for five years from the date of its commencement.
However, the life of the Act was extended by successive amending Acts passed in 1967, 1969 and 1970.
article 254(2) of the Constitution provides: "Where a law made by the Legislature of a State with respect to one of the matters enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State: Provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State." It appears that the President had given his assent to the principal Act of 1961 and also to the successive amending Acts extending the life of the principal Act.
The Act as it was passed in 1961 does not appear to contain any provision which was repugnant to any Central Act or existing law, that being so, the assent given to it seems redundant and of no consequence.
(obviously, article 254(2) contemplates an existing repugnancy and not possible future inconsistencies.
in December 10, 1965 the State Government issued a notification declaring electrical energy to be an essential article under sec.
2(a) of the Act, and on June 1, 1968 the State Government made the Kerala State Electricity Supply Surcharge order in exercise of the powers conferred by sec.
The surcharge order made in 1968 following the declaration of electrical energy as an essential article in 1965 is said to be in conflict with the provisions of the and the Electricity Supply Act,1948.
Both these Acts are existing laws.
It was argued that assent of the President received for the amending Acts of 1967, 1969 and 1970 cured the repugnancy introduced by the surcharge order.
Assuming that assent given to the amending Acts would have the effect of curing the repugnancy, if any, in the principal Act, the question remains where the declaration and the surcharge order part of the Act under which they were made ? If they were not, if the order declaring electrical energy as an essential article and the surcharge order were outside the Act, then the assent given to the Act could not cure 585 the repugnancy arising from these two orders.
article 254(2) requires the State legislation containing the repugnant provision to be reserved for the consideration of the President before he gives his assent to it.
Could it be said that the declaration and the surcharge order were provisions in the Kerala Essential Articles Control (Temporary Powers) Act 1961 ? this Court considered a similar question though in a different context in Chief Inspector of Mines vs Lala Karam chand Thappar.(1) In that case this Court was examining the effect of the repeal of the Mines Act, 1923 on the regulations framed under that Act.
Mines Act, 1923 was repealed and was re enacted with certain modifications as the .
Sec. 29 of the 1923 Act empowering the Central Government to make regulations consistent with the Act for specified purposes was reenacted in the 1952 Act as Sec.
Regulations were made in 1926 under sec.
29 of the 1923 Act, but no regulations had been made under sec.
57 of the 1952 Act at the relevant date in 1955.
The question was whether in view of sec.
24 of the General Clauses Act the Mines Regulations of 1926 could be said to have been in force at the relevant date as there was nothing in the later providing otherwise, and the regulations were not inconsistent with the re enacted provisions.
Sub sec.
(4) of sec.
31 of the 1923 Act laid down, inter alia, that regulations and rules made under the Act would have the effect "as if enacted in this Act." overruling the contention that the regulations became part of the Act in view of sub sec.
(4) of sec.
31 and that with the repeal of the Act the regulations also stood repealed as part of that Act, this Court observed at page 23 of the report: "The true position appears to be that the rules and regulations do not lose their character as rules and regulations even though they are to be of the same effect as it contained in the Act.
They continue to be rules subordinate to the Act, and though for certain purposes, including the purpose of construction, they are to be treated as if contained in the Act, their true nature as subordinate rule is not lost.
There is thus at least one decision of this Court which seems to support the view that the orders made by the State Government under sec. 2(a) and sec.
3(1) of the impugned Act could not be called part of the Act; this Act does not even say that such orders are to be treated as if enacted in the Act.
This is an important aspect of the case, and I do not think it can be assumed or taken for granted without further consideration that these orders formed part of the Act and the President 's assent (1)[1962] 7 L925SlupCI/75 586 to the Act cured the repugnancy created by the surcharge order.
However, as I have already held the Act to be invalid on the other ground.
I prefer not to express any concluded opinion on this point.
In may judgment the Kerala Essential Articles Control (Temporary Powers) Act, 1961 is invalid on the ground of excessive delegation.
I would therefore dismiss the appeals but without any order as to costs.
ORDER In view of the decision of the majority.
the appeals are allowed and Civil Appeals Nos.
1425, 2575, 2576 of 1972 and 97, 1373 and 1374 of 1973 are remanded to the High Court.
There will be no order as to costs.
P. B. R .
| IN-Abs | In exercise of powers conferred by s.2(a) of the Kerala Act, the State Government declared 'electricity ' as an essential article in 1965.
In 1968, the State Government passed an Order called the Kerala State Electricity Supply (Kerala State Electricity Board and Licensees Areas) Surcharge Order, 1968, under s.3 of the Kerala Act, by which, the State Electricity Board was required to collect surcharge from non licensee consumers of electricity even though the Board may have entered into long term contracts with them with regard to the rate at which electricity was to be supplied to them.
The respondents, who were bulk consumers of electricity, questioned before the High Court the validity of the order.
The order having been struck down by the High Court, in appeal to this Court, the respondents supported the judgment of the High Court on the grounds: (i) The Kerala Act is repugnant to the Electricity Act, 1910 and the (both of which are Central Acts) and, in particular the latter, which falls within Entries 43 and 44 of List I; and that the State Act trenches upon the field occupied by the 1948 Act which falls partly under Entry 43 of List I and partly under Entry 38 of List III.
On behalf of the appellants it was contended that the Kerala Act falls under Entries 26 and 27 of List II, and in any event, the Presidential assent to the Kerala Act has cured the repugnancy.
Allowing the appeal (per majority Alagiriswami, Bhagwati, Goswami and Sarkaria, JJ.): ^ HELD: The Kerala Act, the declaration of 'electricity ' as an essential article under section 2(a), and the Surcharge Order made under section 3, are valid.
[581 G] 1.
The question of repugnance arises only in case both the legislations fall within the same List, namely, List III.
If any legislation is enacted by a State Legislature in respect of a matter falling within List I that will be void.
There can, therefore, be no question of repugnance between the Electricity Act, 1910 and the . 1948 on the one hand, and the Kerala Act on the other if the first two Acts fall in List I or List III and the State Act in List II.
[562 D] Indu Bhushan vs Sundari Devi ; referred to.
553 2.
(a) The words "notwithstanding" in clause (1) and "subject to" in clause (3) of article 246 of the Constitution mean that where an entry is in general terms in List II and part of that entry is in specific terms in List I the entry in List I takes effect notwithstanding the entry in List II.
This is also on the principle that the 'special" excludes the "general" and the general entry in List II is subject to the special entry in List I. [563 C] (b) The word "notwithstanding" also means that if it is not possible to reconcile the two entries the entry in List I will prevail.
But before that happens attempt should be made to decide in which List a particular legislation falls.
For deciding under which entry a particular legislation falls, the theory of "pith and substance" has been evolved by Courts.
If in pith and substance a legislation falls within one list or the other, but some portion of the subject matter of that legislation incidentally trenches upon and might come to fall under another List, the Act as a whole would be valid notwithstanding such incidental trenching.
[563 D E] (c) Both the 1910 Act as well as the 1948 Act are existing law as contemplated under article 372 of the Constitution.
An existing law continues to be valid even though the legislative power with respect to the subject matter of the existing law might be in a different List under the Constitution from the List under which it would have fallen under the Government of India Act, 1935.
But, after the Constitution came into force an existing law could be amended or repealed only by the Legislature which would be competent to enact that law if ' it were to be newly enacted.
[566 G] 3(a) The Statement of Objects and Reasons though not relevant for the purpose of interpreting the sections of an Act, will throw light upon the object of the Legislature from the historical point of view [569 A] (b) The 1948 Act was enacted for the purpose of co ordinated development of electricity in India on a regional basis.
The Statement of objects and Reasons states that there was necessity for the constitution of semi autonomous bodies like Electricity Boards to administer grid system on quasi commercial lines.
The Act deals with the incorporation and regulation of Electricity Boards.
It created a central authority (which is not an incorporated body) as well as various provincial Electricity Boards (which are incorporated bodies).
A Provincial Electricity Board located in one Province and operating in a neighbouring Province could carry on its operations by agreement with the other Province or Provinces.
The jurisdiction of an Electricity Board, however, was confined mainly to the jurisdiction of an Province under the Act the executive power vested in the Provinces.
The Statement of objects and Reasons further says that the semi autonomous Electricity Boards contemplated under the Act could not be set up by provincial Governments under the then existing constitutional Act as they would be in the nature of trading corporation within the meaning of entry 33 of the Federal Legislative List of the Government of India Act, 1935.
[568A H] 4.
The argument that the 1948_Act falls under entries 43 and 44 of List I has no substance.
[568 A] (a) A reading of the Statement of Objects and Reasons shows that the 1948 Act was a legislation under an entry in the Concurrent List.
Although the Statement of objectcs and Reasons mentions entry 33 of the Federal List of the Government of India Act, 1935 (corresponding to entries 43 and 44 of List I of the Seventh Schedule to the Constitution) it does not show that the 1948 Act falls under entry 44.
Nor is the fact that entry 33 of List I of the Government of India Act, 1935 was mentioned in the Statement of objects and Reasons a conclusive test.
[568 E] (b) From an examination of the provisions of the 1948 Act it would be obvious that one part of the Act deals with the constitution of the Board,the incorporation of the Board and the regulation of its activities.
But the main purpose of the Act is for, rationalising the production and supply of electricity.
The regulation contemplated in entries 43 and 44 of List I is not regulation of the business of production, distribution and supply of electri 554 city of the Corporation.
The provision regarding the incorporation and regulation of Electricity Boards should be taken to be only incidental to the provisions regarding production, supply and distribution of electricity.
Therefore, the provisions of the 1948 Act regarding the Board 's functions do not make it one falling under entry 43 of List I. [570 H; 571A] R. C. Cooper vs Union and Ramtanu Housing society vs Maharashtra ; followed.
(c) The 1948 Act in pith and substance, should be deemed to be one falling under entry 38 of List III.
In the Present case the incorporation of the Stage Electricity Boards is merely for the rationalisation of the production and supply of electricity, for taking measures conducive to electrical development and for all matters incidental thereto.
Furthermore, Electricity Boards are not trading corporations; they are established to promote co ordinated development of the generation, supply and distribution of electricity on a no profit no loss basis.
In the discharge of their functions, they are guided by directions on questions of policy given by the State Governments.
There are no shareholders and there is no distribution of profits.
This is another reason why the 1948 Act cannot be said to fall under entry 43 of List I. [573 B D] (d) Even assuming that part of the 1948 Act is a legislation with respect to incorporation and regulation of a trading corporation, falling under entry 48 of List I of Schedule Seven, the rest of it will fall under entry 38 of List III.
The Kerala Act has nothing to do with the incorporation and regulation of the Electricity Boards and, therefore, it can only relate to entry 38, List III, if at all.
[573 F G] (e) The 1910 and 1948 Acts together form a complete code with respect to entry 38 in List III and the Board is only an instrument fashioned for carrying out this object.
[571 A] (f) Therefore both the 1910 Act and 1948 Act could be amended or repealed by the Parliament and also by the State Legislature if it obtains Presidential assent to an Act amending or repealing the 1910 Act or 1948 Act.
[566 H] A. K. Krishna vs State of Madras ; ; P. N. Kaul vs The State of J & K. [1959] Supp.2 SCR 270 and J & K State vs M. section Farooqi ; , referred to.
(g) The assent of the President should be deemed not merely to the substitution of the words five years by the words seven years in the Kerala Act but to the Act as a whole and any repugnance between the Kerala Act on the one hand and the 1910 Act and 1948 Act on the other should be doemed to have been cured by such assent.
The Kerala Act in so far as it deals with electrieity can be deemed to be legislation under entry 38 of List III Though the Act itself has not declared any article as an essential article, when the declaration was made under s.2(a) in 1965 it became part of the Act.
When the President assented to the Amendment Act of 1967 the declaration of electricity as and essential article had been made and should be deemed to have become a part of the Act.
[575 F; C] (5) But the Kerala Act is a matter falling under entries 26 and 27 of List II.
[575 A] (a) "Essential article" is a term which has acquired a defining connotation in Indian legislative practice and is not a vague or a general term.
"Essential commodity" defined in the includes practically every matter regarding industry within the legislative competence of Parliament.
The term "essential commodity" is an expression corresponding to a commodity essential to the life of the community.
It is not open to the authority exercising powers under s.2(a) of the Kerala Act to declare and any every commodity as an essential commodity.
That Act deals with esential articles not being essential article dealth with the by Central Act of 1955.
It is not a legislation with respect to electricity and, therefore, does not fall under entry 38 of List III.
Electricity, being beyond doubt an essential article may be declared to be an essential article under the Act.
In that case the power 555 exercised is not in relation to electricity qua electricity but electricity as an essential article.
The Act, therefore in pith and substance is with respect to trade and commerce and production, supply and distribution of electricity.
It is not a permanent legislation with respect to electricity but a temporary one dealing with a temporary situation.
[574 A; F H] (b) The Surcharge order was necessary for the survival and existence of the Board without which there can be no production or supply of electricity.
It is no valid criticism of this view to say that the powers of the Board under the 1948 Act are over ridden by the Surcharge order and the order is, therefore, repugnant to the 1948 Act.
The Board was anxious to make no Surcharge order.
This is a simple case of a contract being over ridden in exercise of statutory powers.
[575 B] 6(a) It is not correct to say that in so far as the consequence of a declaration under s.2(a) of the Kerala Act was that the State Government was enabled to make orders regarding production, supply and distribution of electricity, there was a possibility of such orders being repugnant to the provisions of the 1910 Act and the 1948 Act and, therefore, any such repugnancy was cured by the assent given by the President.
It is only the actual repugnancy that can be cured by Presidential assent and not the possibility of repugnancy.
[575 G] (b) No Presidential assent was possible to the notification article 254(2) does not contemplate Presidential assent to notifications issued under the Act.
The Article contemplates Presidential assent only to laws made by the Legislature of a State.
[567 G] 7(a) Notwithstanding the fact that subordinate legislation is laid on the table of House of Parliament or State Legislature and being subject to such modification, annulment or amendment as they may make the subordinate legislation cannot be said to be valid unless it is within the scope of the rule making power provided in the statute.
Where an executive authority is given power to frame subordinate legislation within stated limits, rules made by such authority, if outside the scope of the rule making power should not be deemed to be valid merely because such rules have been placed before the Legislature and are subject to such modification, annulment or amendment as the Legislature may think fit.
The process of such amendment, modification or annulment is not the same as the process of legislation and in particular it lacks the assent either of the President or the Governor of the State.
[576 E G] Minister of Health vs The King, and Institute of Patent Agents vs Lockwood, referred to.
(b) If a declaration made under section 2(a) or an order made under s.3(a) is not within the scope of the Act, it should be held to be not valid.
[576 H] (c) A declaration can still be attack if the power to make such a declaration was beyond the scope of the power delegated.
even if subsequent to the declaration the Act was amended and the President had given his assent to the to Amending Act.[577 A] (d) But the power conferred by the Kerala Act is a case of conditional legislation.
The various types of powers that can be exercised under that Act are enumerated in it.
Only an article with reference to which those powers are to be exercised is left to be determined by the Executive.
That will vary from time to time.
It is the Exceutive that would be in a position to judge when and under what circumstances an article becomes an essential article and, therefore, it is necessary.
to control the production, supply and distribution of trade.
and commerce in that article.[578 H] The Queen vs Burah (5 L.R.178@ 194) State of Punjab vs Khan Chand ; and Gwalior Rayon Mills vs Asst.
Commr.
S.T. ; followed.
556 The Kerala Essential Articles Control (Temporary Powers) Act, 1961 is an invalid piece of legislation on the ground of excessive delegation and the declaration and Surcharge order made respectively under s.2(a) and s.3 of that Act are of no consequence.[582 G] 1(a) The definition of essential article leaves it to the State Government to decide what should be an essential article for the purpose of the Act.
The legislature is, of course presumed to know the limits of its competence and assuming it is permissible to attribute similar knowledge to the Government as to the bounds of its authority under s.2(a) an essential article may be any article covered by any of the entries in List II or List III except the classes of commodities mentioned as an essential commodity in the .
Until, therefore, the Government issued a notification under s.2(a) declaring electrical energy to be an essential article almost four years after the Act came into force, it was not possible even to guess what the Act was about.
Thus the Act as passed had no positive content, it was and empty husk and its insubstantiality, if by itself not an invalidating factor, exposes the want of a declared legislative policy in the Act.
The Act does not provide any guidance or lay down any test to ascertain what makes an article essential for the purpose of the Act.
The reference to the in s.2(a) which defines "essential article" is merely to exclude from its purview the commodities covered by the and only serves to emphasise its indefiniteness and makes it more difficult to find any clue to the nature of the articles the Legislature had in mind in enacting the Kerala Act.
Almost the entire legislative field was left open to the Government to choose from and decide according to their own lights what should be an essential article.
[583 C G] (b) The Legislature cannot delegate the essential legislative function, which means that the Legislature must declare the policy of the law and provide a standard for the guidance of the subordinate law making authority.
The Kerala Act authorises the Government to declare any article as essential except those mentioned in the without laying down any definite criteria or standards.
This is surrendering unguided and uncanalised power to the executive.
The Act cannot be called an instance of conditional legislation.
The powers conferred on the Government by the Kerala Act exceed the limits of permissible delegation.
[583 H] (c) The Kerala Act of 1961 was to remain in force for a period of five years from January 1962.
The Principal Act as well as the Amending Acts of 1967, 1969, and 1970 received the assent of the President.
But the Act as passed in 1961 did not appear to contain any provision which was repugnant to any Central Act or existing law; that being so, the assent given to it seems redundant and of no consequence.
Article 254(2) contemplates an existing repugnancy and not possible future inconsistencies.
[Obiter: Assuming that assent given by the President to the amending Acts would have the effect of curing the repugnancy between the declaration under s.2(a) and the Surcharge Order under s.3 of the principal Act on the one hand and the Central Acts of 1910 and 1948 on the other, If the declaration and the Surcharge Order were outside the Act,could not cure the repugnancy arising from these two orders.[584 H] The orders made by the State Government under s.2(a) and s.3(1) of the impugned Act could not be called part of the Act.
The Act did not even say that such orders were to be treated as if enacted in the Act.
The President 's assent could not be said to have cured the repugnancy created by the Surcharge order.
[585 G] Arguments for the appellant: The impugned Kerala Act is a legislation under Entry 26 of List II (Trade and Commerce).
It may also fall under Entry 27, List II (Production, Distribution and Supply of Goods).
Assuming that the Electricity Supply Act falls under Entries 43 and/or 44 of List I, the State Legislature is competent 557 to pass legislation relating to the trading and commercial activities of the Corporation set up under the Central Act passed under Entry 43 and/or 44 of List I. Assuming that the Kerala Act encroaches on the powers of the Electricity Board under s.49, such encroachment is incidental and is justified under the doctrine of pith and substance.
Assuming that the Central legislation as well as the State legislation falls under Entry 38 of List III, there is no repugnancy or conflict between the powers of the Board under s.49 and the impugned Act and the orders because they are made within the provisions of the Act and to aid and support the powers of the Board.
If the surcharge had not been introduced the Electricity Board would not have been able to carry on the business and would have been compelled to close down its business.
Arguments on behalf of Electricity Board: The Act applies to essential commodities i.e. all essential commodities as understood at the time of legislation in 1962.
In view of the programme of industrialisation, and the limited scope of the Central , the present Act was conceived.
The background of the Act strongly indicates the content of the expression 'essential commodities ' as meaning the same thing as "essential to the life of the community".
Under the impugned Act by s.2(a) the power to select the articles for control is delegated to the State Government.
The power to take orders for control is delegated both to the State Government and authorised officers.
The articles falling within the Central are excluded from the purview of the Act not because control of those articles is not desired but because the State Government have the necessary powers under the Central Act itself.
The definition in s.2(a) should be understood to mean "essential articles" notified by the State Government and essential articles should be understood as those which are essential to the life of the community.
The word 'control ' in the preamble is indicative of the limited scope of the Act.
This interpretation saves the Act from the vice of abdication of essential legislative function by the Legistature.
The preamble to the Act is a key note to the understanding of an Act as well as the Statement of Objects and Reasons clearly indicates the scope and purpose of the Act.
"Trade and Commerce" as well as "supply and distribution" must be in respect of articles or goods but on that account it will not be permissible to dissect the Act and make it relatable to each commodity over which control is imposed.
The pith and substance of the Act makes them fall within List II, Entries 26 and 27.
The law is not a law relating to electricity as such nor relating to the incorporation or power of the Electricity Board established under the Electricity Supply Act, 1948.
The Supply Act, 1948, as clearly expressed in the preamble and worked out in the Act through several agencies including the Board shows that the pith and substance of the Act is development of electricity and falls within List III, Entry 31 of the Government of India Act.
The incorporation of State Electricity Board for each State is only one of the means of achieving the objective.
Moreover, the Board is not a trading Corporation since it is not created to earn profits but to carry out development and supply energy at the most economical rate.
Each Board is established by a State.
The whole law falls in the Concurrent List and in any event not under List I, Entry 43 because the Board is not a trading corporation nor does it fall under Entry 44 because the Board is a State Board for the State.
The Supply Act was passed under the Government of India Act, 1935 and was an "existing law" and not an impediment to the State passing a law within its competence.
There is no conflict between the impugned notification and the exercise of powers of the Board under s.40 of the supply Act.
Assuming that both the legislations fall under List III, the President 's assent to the impugned Act was operative, the conflict was immaterial.
558 Arguments for the respondent: The Electricity Supply Act of 1948 is relatable partly to List I entry 43 and 44 (Government of India Act List I Entry 33) and partly to List III Entry 38 (Government of India Act List III Entry 31).
Part of the Act is concerned with the constitution and powers of the Electricity Board which is something like the memorandum and Article of a Limited Company and another part of the Act may be said to be concerned with electricity.
The Kerala Act is a vague piece of legislation.
The Articles to which this Act may apply are not mentioned.
It is only after the power under the Act is exercised that it is possible to say whether it would conflict with any other legislation.
The impugned Act may be applicable to Articles relatable to as many as 20 legislative entires from List I, II and III at the discretion of the Government.
Regulation and Control with regard to many of the matters are covered by existing Central Acts such as Industries Regulation and Development Act, Factories Act, Central Excise and Salt Act, Defence of India Act, , Electricity Supply Act, 1948.
Every aspect of electricity in respect of generation, control price fixation must be relatable to entry 38 of List I and not Entry 26 or 27 of List II.
The Central Legislature has already legislated on all these aspects in the of 1910 and Supply Act 1948.
If these were the subject matter of Entries 26 and 27 of List II, the Central Legislature could not have legislated.
Any argument on the basis that the Electricity Supply Act 1948 is existing law, is not relevant because the 1948 Act has been extensively amended in 1956 and 1966 and these amendments relate to the field of control under the Kerala Act, if the same is applied in respect of electricity.
The Presidential assent given to the Kerala Act could be said to be an assent within the meaning of Article 254 since at the time when the assent was given the Act did not disclose any inconsistency with any Central Act since the items to which the Kerala Act was applicable did not appear in the statute.
The conflict arose only when an order was made by the State Government applying the Act to electricity.
No steps were even taken to incorporate in the Act the commodities to which the Act could apply and to take President 's assent thereon.
The Kerala Act suffers from excessive delegation because at the will of the State Government the Act could be made applicable to any article, except those covered by the .
The State Government could apply the Act even to items falling in List I since there is no guideline.
|
Civil Appeal Nos. 95 and 96 of 1971.
From the Judgment and order dated 3rd October, 1969 of the Allahabad High Court in Writ Petitions Nos. 351 and 462/69.
section C. Manchanda and o. P. Rana, for the Appellants.
Promod Swarup and section Markendeya, for the Respondent.
The Judgment of the Court was delivered by FAZAL ALI, J.
These appeals by the sales tax officer have come up to this Court by certificate of fitness granted by the High Court of Allahabad.
The appeals involve a very short point, turning upon the interpretation of rule 7A of the U.P. Sales Tax Act (hereinafter referred to as the Act).
It appears that the respondent is a partnership firm, carrying on business in the district of Moradabad.
The assessment quarters in question are two quarters of 1968.
By an order dated 31st December, 1968, the sales tax officer found from the 777 turn over of the firm as revealed from the quarterly returns filed by the assessee that it disclose an assessable income.
The sales tax officer, therefore, proceeded to make a provisional assessment in respect of the portion of the assessment year concerned, purporting to act under section 7A of the U.P. Sales Tax Act.
The assessee being aggrieved by this order, instead of going in appeal against the order, challenging the same before the High Court praying that the sales tax officer had no jurisdiction to make a provisional assessment, because the assessee had in fact filed a return.
This argument appears to have found favour with the High Court which quashed the order of the sales tax officer and held that the sales tax officer could have made a provisional assessment to the best of his judgment only if no return had been filed by the assessee.
Mr. Manchanda appearing in support of the appeals has contended that the High Court has completely overlooked the purport ambit of section 7A of the Act, which does not exclude but in fact implies the provisions of the Act, including section 7(3).
The sheet anchor of the High Court 's judgment is section 7(3) which runs thus "If no return is submitted by the dealer under sub section (1) within the period prescribed in that behalf or, if the return submitted by him ` appears to the assessing authority to be incorrect or incomplete, the assessing authority shall after making such enquiry as he considers necessary, determine the turnover of the dealer to the best of his judgment and assess the tax on the basis thereof. ' Provided that before taking action under this sub section the dealer shall be given a reasonable opportunity of proving the correctness and completeness of any return submitted by him.
" The High Court was of the opinion that as conditions mentioned in section 7(3) did not apply to the facts of the present case inasmuch as it was not a case in which the assessee had not filed a return at all, no assessment could have been made by the sales tax officer.
In our opinion, the High Court was in error in taking this view.
Section 7A runs thus: (1) "The State Government may require any dealer to submit return of his turn over of a portion of the assessment year, and the assessing authority may, without prejudice to the provisions of section 7 may provisional assessment in respect of such portion of the assessment year in accordance with the provisions of this Act in so far as they may be made applicable if the turn over of the dealer as determined by the assessing authority for such portion of the amount, if any, specified in or notified under sub section (2) of Section 3 or sub section (2) of Section 3 D, as the case may be, as the period under assessment years to twelve months.
19 L925SCI /75 778 (2) Where the assessing authority has made a provisional assessment under sub section(1), it shall not, by reason of such assessment,, be precluded from redetermining in the turn over and making the assessment for the whole year.
" This section clearly authorizes the assessing authority to make a provisional assessment in respect of the assessment year to the best of his judgment, and does not contain any pre conditions at all.
On the other hand, it applies the provisions of the Act which includes the provisions of section 7(3), which is the provision that confers power on the assessing authority to make all assessment to the best of his judgment.
The High Court was rather carried away by the language of rule 41(3) which runs thus: "(3) If no return is submitted in respect of any quarter or month, as the case may be, within the period or if the return is submitted without the payment of tax in the manner prescribed in Rule 48, the Sales Tax Officer shall, after making such enquiries as he considers necessary, determine the turnover Lo the best of his judgment, provisionally assess the tax payable for the quarter or the month, as the case may be and serve upon the dealer a notice in Form XI and the dealer shall pay the sum demanded within the time and in the manner specified in the notice.
| IN-Abs | By an order dated 31st December, 1968, the sales tax officer found from the turnover of the respondent firm as revealed from the quarterly returns filed by the assessee that is disclosed an assessable income.
He proceeded to make a provisional assessment in respect of the portion of the assessment year 1968 concerned purporting to act under section 7A of ' the U.P. Sales Tax Act.
The respondent challenged the same before the High Court praying that the sales tax officer had no jurisdiction to make a provisional assessment, because the assessee had in fact filed a return.
The High Court of Allahabad accepted the contention and quashed the order of the sales tax officer.
The High Court hold that as conditions mentioned in section 7(3) did not apply to the facts of the case in as much as it was not a case in which the assessee had not filed a return at all, no assessment could have been made by the sales tax officer.
Allowing the appeal by special leave, ^ HELD: Section 7A clearly authorises the assessing authority to make provisional assessment in respect of the assessment year to the best of his judgment, and does not contain any pre conditions at all.
On the other hand it applies the provisions of the Act which includes the provisions of section 7(3) which is the provision that confers power on the assessing authority to make an assessment to the best of his judgment.
It is true that sub rule (3) of rule 41 contains a provision that the provisional assessment to the best of the judgment can be made where no return is submitted, but this rule has to be read as supplemental to the provisions of the parent Act.
What this rule implies is that whether the return is filed by the assessee or not, the assessing authority will have the power to make provisional assessment.
There is no inconsistency between section 7A and rule 41(3) of the Rules framed under the Act.
[778 A B, D F]
|
Civil Appeal No 707 of 1973.
From the Judgment and Decree dated the 23rd December 1971 of the Madras High Court in Civil Suit No. 158 of 1966.
K. section Ramamurthi, section Balakrishnan, N. M. Ghatate for the appellant.
A.K. Sen, J. section Arora and H. K. Puri for respondent No. 1.
G. L. Sanghi and Girish Chandra for respondents Nos. 2 and 3.
The Judgment of the Court was delivered by CHANDRACHUD, J.
The Trustees of the Port of Madras, appellants herein, filed suit No. 158 of 1966 in the High Court of Madras for recovering a sum of Rs. 3,1 8,968.04 from the respondents by way 724 of demurrage.
The 1st respondent is a firm called M/s. Aminchand Pyarelal, the 2nd respondent is the Union of India and the 3rd respondent is the Collector of Custom, Madras.
A learned single Judge referred the suit to a Division Bench which dismissed it by a judgment dated December 23, 1971.
This is an appeal by certificate granted by the High Court under Article 133(1)(a) of the Constitution.
On April 10, 1963 a Steamer "A.P.J. AKASH" arrived at the Madras Port and landed, among other goods, a consignment of 202 bundles of black plain sheets of various sizes.
The appellants received the goods and stored them in transit sheds.
The goods were imported by the 1st respondent under an authorisation issued by the State Trading Corporation of India which held a licence dated June 16, 1962 to import the goods from Hungary.
The Clearing Agents of the 1st respondent filed a Bill of Entry with the 3rd respondent but the customs authorities detained the goods as the specifications in the import licence did not tally with the description of the imported goods.
The Customs authorities then issued a show cause notice to the 1st respondent and after considering its explanation the 3rd respondent passed an order on November 12, 1963 confiscating the goods under section 111 (a) of the .
The 1st respondent preferred an appeal against that order to the Central Board of Excise and Customs, New Delhi, which was allowed by the Board on July 27, 1964.
On August 21, 1964 the Clearing Agents of the 1st respondent requested the customs authorities to issue a certificate for the permission of the transit dues for the period during which the goods were detained.
A certificate was accordingly issued by the 3rd respondent stating that the goods were detained by the Customs Authorities from April 24, 1963 to August 21, 1964 for examination under section 17(3) and section 17(4) of the , other than in the ordinary process of appraisement and that the detention was due to no fault or negligence on the part of the 1st respondent.
Acting on this certificate, appellants waived the demurrage for the period covered by the certificate, whereupon the 1st respondent cleared the consignment on August 25 and August 27, 1964 on payment of the Harbour dues, Cranage charges and Demurrage charges for the period not covered by the certificate.
Thinking that the certificate was issued erroneously, appellants wrote a letter dated January 27, 1965 to the 3rd respondent requesting him to reconsider the matter.
By his letter of April 12, 1965 the 3rd respondent owned up the mistake and stated that the certificate was incorrect as the goods were detained in order to ascertain whether the Import Trade Control formalities were complied with and not for examination and assessment of duty under section 17(3) and (4) of the .
The case of the appellants is that due to the negligent mistake committed by the 3rd respondent in issuing the certificate, they charged to the 1st respondent a sum of Rs. 1963.60 only whereas 725 it was liable to pay a sum of Rs. 3,20,951.64 by way of demurrage.
The appellants called upon the 3rd respondent to pay up the balance but the latter, by his reply dated July 6, 1965 repudiated all liability, contending that the Union of India could not be held liable for the negligent or tortious acts of its officers done in good faith during the course of their official duties and that the appellants should seek J their remedy against the 1st respondent.
Later, the appellants brought the present suit against the three respondents to recover the demurrage.
The case of the appellants as made out in the plaint is that the liability of respondents 2 and 3 was in the region of contract or quasi contract, that the appellants were put to a loss due to the wrong certificate issued by the 3rd respondent and therefore respondents 2 and 3 could not repudiate their liability to pay the demurrage.
As regards the 1st respondent, the case of the appellants is that it had contravened the Import Trade Control regulations, that it was fully aware of the true facts that it was not open to it to take advantage of the wrong certificate issued by respondent 3 and that therefore it was also liable to pay the demurrage.
The 1st respondent disputed its liability to pay the demurrage contending that it could not be penalised either for the delay caused by the Customs authorities in clearing the goods or for the issuance by them of a wrong certificate.
According to the 1st respondent, the consignment imported in April, 1963 was one of a series of consignments which the 1st respondent had imported under a con tract with the State Trading Corporation for a fixed remuneration.
The 1st respondent had not authority to deal with he imported goods but was bound to hand them over at the agreed price to the State Trading Corporation or its nominee The 1st respondent further stated that the only controversy raised by the Customs authorities related to a difference in the size of the sheets imported under the import licence and that if the appellants had called upon it to pay by way of demurrage a sum as large as over rupees 3 lakhs, the 1st respondent would have rejected the goods as against the supplier unless the State Trading Corporation was willing to accept the goods.
The import clearance orders were granted on the recommendation of the Corporation which held the import licence and which arranged for the grant of import clearance permits to persons like the 1st respondent on the basis that the goods were imported on behalf of the Corporation.
Finally the 1st respondent contended that the scale of charges in the Port Trust Regulations under the heading "Chapter IV Demurrage" was void and ultra vires both for the reason that it was unreasonable and because the scale of charges was not within the authority of the appellants.
The unreasonableness of the demurrage charges, according to the 1st respondent, was obvious from the fact that whereas the goods were of the value of Rs. 1,31,501 appellants were claiming a sum of over rupees 3 lakhs by way of demurrage.
726 The 2nd respondent, the Union of India, set out the various facts attendant upon the import of the goods and contended that the appellants had no cause of action against it or the 3rd respondent.
The 3rd respondent adopted the written statement of the 2nd respondent.
The High Court held that the levy of demurrage ill cases where the goods were detained by the Customs authorities for no fault or negligence on the part of the importer, was unreasonable and also beyond the powers of the appellants and that the appellants were not entitled to recover demurrage from any of the respondents.
Two questions, mainly, arise for consideration in this appeal : firstly, whether the scale of fees under which the appellants charge demurrage is void as being unreasonable and as being beyond their powers; and, if the answer to the first question is in the negative, whether the 1st respondent is liable to pay the demurrage claimed by the appellants.
Counsel for the appellants did not press the claim against respondents 2 and 3.
The decision of the first question turns on the relevant statutory provisions but before considering the validity of the levy, it would be necessary to know the procedure which is adopted in the Madras Port during the process of importation and clearance of goods.
The local agents of the ship inform the Traffic Manager of the Port Trust of the probable date of arrival of the ship and submit to the customs House the "Import General Manifest" which contains a description of the goods which are at board for landing at the Port.
The Dock Labour Board supplies the labour to the Master of the ship for unloading the goods and for putting them on the quay side so as to enable the Port Trust authorities to take charge of the goods.
The Port Trust labour handles the goods on the shore and when the Port Trust takes charge of the same, it is obliged under section 39(3) of the Madras Port Trust Act, 1950, to give a receipt to the Master of the Ship.
With few exceptions, all goods received by the Port Trust are kept in the transit sheds.
The Port Trust charges Harbour Dues for receiving the goods, handling them and keeping them in tile transit sheds.
The importer then files the Import Application and the Steamer Agent 's Delivery order which is in the nature of an authority from the Steamer as bailor, to the Port Trust as the bailee, to deliver the goods to the importer or his agent.
Section 45 of the forbids the person having the custody of any imported goods in the customs area from permitting their removal except under and in accordance with the written permission of the Customs authorities.
The goods are cleared by the Customs authorities if the importation is not contrary to any law and if the importer pays the import duty assessed on the goods and the other charges payable under the .
If the customs officer is of me opinion that the goods have been imported contrary to any prohibition imposed by the or the Imports and Exports (Control) Act, or by the orders issued or the rules framed thereunder, 727 a notice is issued under section 111 or section 112 of the calling upon the importer to show cause why the goods should not be confiscated.
If the importer shows good cause" the goods are released and thereupon the Customs authorities issue a Detention Certificate stating if that be true, that the goods were detained for examination under sections 17(3) and (4) of the and that the detention was due to no fault or negligence on the part of the importer.
The Port Trusts are under a statutory obligation to perform certain duties and equally so they have statutory powers to fix scales of fees and rates.
The statute with which we are here concerned directly is the Madras Port Trust Act, 2 of 1905, (hereinafter called "the Act").
It is necessary to notice the relevant provisions thereof in order to understand the controversy in this appeal.
Section 5(1) defines the "Board" to mean the Trustee of the Port of Madras appointed under the Act.
Section 5(12) defines "Rate" as including any toll, due, rent, rate or charge leviable under the Act.
By section 7 the Board consists of 21 Trustees including the Chairman.
Section 8 provides that the Chairman of the Board shall be appointed by the Central Government and the remaining trustees shall be (1) the Collector of Customs, Madras, (2) the Municipal Commissioner for the City of Madras, (3) the General Manager, M. & section M. Railway, (4) the General Manager, South Indian Railway; (5) one representative of the Mercantile Marine Department chosen by the Central Government; (6) one representative of the Defence Services chosen by the Central Government.
(7) one representative of the State Government chosen by the State Government; (8) two representatives of labour chosen by the Central Government after consultation with the registered trade unions, if ally, composed of persons employed in the port; and (9) eleven elected trustees.
By section 8(2), of the eleven elected trustees one is elected by the Madras Municipal Corporation and the remaining by such provincial or local bodies representing commercial interests as the Central Government may, from time to time, by notification in the official Gazette, specify.
Such notification may also specify the number of trustees that each of such bodies may elect.
Section 10 which lays down disqualifications for the trustee 's office provides, inter alia, that a person shall be disqualified to be a trustee if, inter alia, he holds any office or place of profit under the Board.
This provision does not, however, apply to the Chairman.
ex officio Trustees and Trustees appointed by virtue of office.
Section 23(1) lays down the procedure governing the proceedings of the Board while section 23 (2) provides that the Board may, from time to time, appoint committees consisting of not less than five of its members for carrying into effect any part of the provisions of the Act with such powers and under such instructions, directions or limitations as shall be defined by the Board.
By section 39 the Board is under an obligation, according to its powers, to provide all reasonable facilities for, and has the power to 728 undertake the services of the description mentioned in the sub section among those services are landing of goods from vessels in the Port, and receiving, storing or delivering goods brought within the Board 's premises.
Section 39(2) imposes upon the Board the obligation, if so required by any owner, to perform in respect of goods all or any of the services mentioned in clauses (a), (b) and (d) of section 39(1).
Under section 39(3) the Board shall, if required, take charge of the goods for the purpose of performing the service and shall give a receipt in the prescribed form.
After the goods have been taken charge of and the receipt given by the Board, no liability for any loss or damage which may occur to the goods can attach to any person to whom a receipt shall have been given by the Board or to the master or the owner of the vessel from which the goods have been landed.
Under section 40 the responsibility of the Board for the loss, destruction or deterioration of goods of which it has taken charge is, subject to cerain provisions, that of a bailee under sections 151, 152 and 161 of the Indian Contract Act subject to certain modifications.
Chapter VI of the Act which appears under the heading "Imposition and Recovery of Rates" contains provisions which have direct impact on the contentions raised in this appeal.
Section 42 empowers the Board to frame a scale of rates at which and a statement of the conditions under which any of the services specified in clauses (a) to (e) of the section shall be performed by the Board.
Clause (b) refers to landing of goods from any vessel upon any land or building in the possession or occupation of the Board or at any place within the limits of the Board.
Clause (d) refers to "wharfage, storage or demurrage of goods on any such place".
Sections 43 and 43 A also confer on the Board power similar to that conferred by section 42.
By Section 44 every scale and every statement of conditions framed by the Board under sections 42, 43 and 43 A shall be submitted to the Central Government for sanction and, when so sanctioned and published in the official Gazette, such scale and statement of conditions have the force of law.
The Central Government has power under section 44(1a) at any time to cancel any of the scales framed by the Board or to call upon the Board to modify any portion of such scales whereupon the Board shall modify the scales according to the directions of the Central Government.
Section 44(2) confers power on the Board, in special cases, for reasons to be recorded in writing, to remit the whole or any portion of the rates or of any charge leviable according to any scale.
Under section 50 rates in respect of goods to be landed are payable immediately on the landing of the goods; rates in respect of goods to be removed from the premises of the Board are payable before the goods are removed.
Under section 51 the Board has a lien on the goods for the amount of all rates leviable under the Act on the goods and it may seize and detain the goods until the rates are fully paid.
This lien has by section 52 priority over all other liens and claims except for general average and the ship owner 's lien for freight and other charges where 729 such lien exists and has been preserved in the manner provided in section 53.
Under section 56, if the rates payable to the Board remain unpaid, it is competent to the Board to sell the goods by public auction after expiry of two months from the time That the goods have passed into its custody and in the case of perishable goods after the expiry of a shorter period not being less than 24 hours.
Section 57 requires that the notice of sale must be published in the official Gazette.
By section 58 notice is also required to be given to the owner of the goods, if the address of the owner is known.
Under section 58 A? notwithstanding anything contained in the Act, where any goods placed in the custody of the Board are not removed by the owner or other person entitled there to from the premises of the Board within one month, the Board may, after due notice, required that the goods be removed forthwith or that in default of compliance the goods would be liable to be sold by public auction.
In cases where all the rates and charges payable under the Act have been paid, such a notice for removal of the goods cannot be given before the expiry of two months from the date on which the goods.
were placed in the custody of the Board.
If the notice is not complied with, the Board may at any time after the expiration of one month from the date on which the notice was served or published sell the goods by public auction.
Section 62 preserves the right of the Board to recover the rates by a suit.
Section 95 of the Act which appears ill Chapter XI called "Bye Laws" empowers the Board to make bye laws not inconsistent with the provisions of the Act, inter alia, for the safe and convenient use of sheds, for the reception and storage of goods brought within the premises of the Board, for the mode of the payment of the rates leviable under the Act and generally for carrying out the purposes of the Act.
Section 109 of the Act which has an important bearing on these proceedings provides that nothing contained in the Act shall affect any power vested in the Chief officer of Customs under any Law for the time being in force.
Section 49 of the , 52 of 1962, provides that where in the case of any imported goods, the Assistant Collector of Customs, is satisfied on the application of the importer that the goods cannot be cleared within a reasonable time, the goods may, pending clearance, be permitted to be stored in a public warehouse or in a private warehouse if facilities for deposit in a public warehouse are not available.
Acting in pursuance of the power conferred by sections 42, 43 and 43 A, the appellants have framed a "Scale of Rates" payable at the Port of Madras, which has been duly sanctioned by the Central Government under section 44 of the Act.
We are concerned with the rates framed under section 42 which are contained in Chapter IV of the Scale of Rates.
The various scales of rates arc divided into three parts: Book I, Book II and Book III.
Chapter IV is headed "Demurrage " and it occurs in Book I called "Charges for certain 16 L925SupCI/75 730 services which the Board is prepared to render to the public".
The introductory part of Chapter IV says: "Demurrage is chargeable on all goods left in the Board 's transit sheds or yards beyond the expiry of the free days.
After demurrage begins to accrue no allowance is made for Sundays or Board 's holidays.
The free days are fixed by the Board from time to time.
" Scale 'A ' of Chapter IV prescribes conditions governing "Free Days", the normal rule being that two working days in the case of coast cargo and three working days in the case of foreign cargo excluding Sundays and the Board 's holidays arc treated as free after complete discharge of a vessel 's cargo, or the date when the last package was put overside.
Rule 13(b) is the focus of controversy between the parties and it would be used to read along, with it clause (a) as well: "13.
The following free periods are allowed in addition to the free periods applicable as per description of goods: (a) Periods during which goods are detained by the Collector of Customs for examination under Section 17(3) and (4) for chemical test under Section 144 of the other than the ordinary processes of appraisement and certified by the Collector of Customs to be not attributable to any fault o.; negligence on the part of the Importers plus one working day.
The Customs holidays will also be treated as free days in addition.
(b) Where goods are detained by the Collector of Customs, on account of Import Trade Control formalities or for compliance of formalities prescribed under the Drug 's Act and certified by the Collector of Customs to be not attributable to any fault or negligence on the part of Importers, demurrage shall be recovered for this period at the rate of 30 per cent of the normal rate, i.e. the rate at which the goods would in cur demurrage had there been no detention by the Customs.
This concession in demurrage shall be limited to a period of 30 days plus one working day and demurrage shall be recovered at the full rate (i.e., third slab) for detention beyond the above said period.
" Under clauses (c) and (d) of Rule 13, period during which the goods are detained by the Port Health Authority and the periods during which the Board is unable to trace packages owing lo congestion of accommodation, wrong sorting or incorrect tallying are also treated as Free Days.
The High Court dismissed the appellants suit for the following reasons: (1) The Scale of Rates fixed by the Board is in the nature of Bye Laws; (2) Bye Laws may be treated as ultra vires for the 731 reasons, inter alia, that they are repugnant to the statute under which they are made or that they are unreasonable; (3) Viewed as a bye law, Rule 13(b) under which the Board can charge demurrage for the period during which the goods are detained for no fault or negligence of the importer or his agent, is unreasonable and therefore void; (4) In principle, there can be no distinction between cases falling under clause (a) and those falling under clause (b) of Rule 13, and if no demurrage is leviable in respect of cases falling within clause (a), no demurrage could be charged in respect of cases falling within clause (b).
The distinction made by the Board between the two kinds of cases is therefore arbitrary and unreasonable; (5) 'Demurrage ', being a charge for wilful failure to remove the goods within the free period can be believed only if the failure to remove the goods is due to the fault or negligence of the importer or his agent; (6) Having regard to this well accepted meaning of the word 'demurrage ', the authority give to the Board by section 42 of the Act to frame the scale of rates can be exercised only for the purpose of levying charges where the importer was not prevented by any lawful authority from clearing the goods from the transit area and he had defaulted or was negligent in clearing the goods; (7) Since Rule 13(b) empowers the Board to charge demurrage even when the goods are detained for no fault or negligence of the importer or his agent, it is beyond the authority conferred by section 42 and is therefore void; (8) All the same, if two views are reasonably possible" a construction which favours the validity of a rule or statute should be preferred to that which renders it void Therefore, under the scale of charges for demurrage provided in Chapter IV, the appellants can levy demurrage only in cases where the delay in clearing the goods is due to the fault or negligence of the importer or his agent.
The first four of these reasons relate to the invalidity of Rule 13(b) viewed as a bye law while the last four relate to its invalidity on the ground that it is in excess of the power conferred by section 42 of the, Act.
Both of these sets of reasons appear to us unsustainable.
As stated in "Craies on Statute Law" (7th Ed., pp.
325 326), bye laws may be treated as ultra vires on the grounds, amongst others, that they are repugnant to the statute under which they are made or that they arc unreasonable.
But the error of the High Court 's judgment lies in the assumption that the "Scale of Rates and Statement of Conditions" framed by the appellants under sections 42, 43 and 43 A are bye laws.
Section 42 with which we are concerned confers authority on the Board to "frame a scale of rates at which and a statement of the conditions under which any of the services specified" in the section shall be performed.
Section 43 confers an identical power in the Board in regard to certain other matters while section 43 A authorises the Board to prescribe consolidated rates.
Provision for framing bye laws is made in Chapter XI called "Bye Laws" and section 95 which occurs in that Chapter mentions the various subjects on which the Board may frame bye laws.
Under Chapter XI, the Board has no power to frame bye laws for fixing scales of rates or a statement of the conditions under which any of the services specified in sections 42, 43 and 43 A shall be performed.
The nearest that section 95 touches the subject of rates is by clause (6) which refers to the 732 mode of the payment of the rates leviable under this Act.
The Board having expressly empowered by section 42 to frame.
I scale of rates and a statement of the conditions under which it shall perform the services specified in the section and the Board having in terms exercised that power under the aforesaid section, there is no justification for supposing that in framing the scale of rates and the statement of conditions, the Board has purported to frame a bye law.
What the High Court has done is to assume, in the first place, that the Board has not exercised the power which it undoubtedly possesses and which in fact and in terms it did exercise.
The High Court then assumed that the Board had exercised the power which it did not possess" a power which the Board has not even purported to exercise.
Making these unfounded assumptions, the High Court invalidated Rule 13 (b) on the basis that it was a bye law and a bye law could be declared ultra vires on the ground that it is unreasonable.
We are unable to accept the High Court 's view that the scale of rates prescribed by the Board under sections 42, 43 and 43 A consists, as it were, of so many bye laws or that Rule 13 is in the nature of a bye law.
A bye law has been said to be an ordinance affecting the public.
Or some portion of the public, impose by same authority clothed with statutory powers, ordering something to be done or not to be done, and accompanied by some sanction or penalty for its non observance.(1) The Board 's power to frame the scale of rates and statement of conditions is not a regulatory power to order that something must be done or something may not be done.
The rates and conditions govern the basis of which the Board performs the services mentioned in sections 42, 43 and 43 A.
Those who desire to avail of the services of the Board are liable to pay for those services at prescribed rates and to perform the conditions framed in that behalf by the Board.
Indeed, some of the services which the Board may perform are optional and if the importer desires to have the benefit of those services, he has to pay the charges prescribed therefore in the Scale of Rates.
For example, any one wanting to use the Board 's premises for any of the purposes mentioned in clauses (a) to (d) of section 43 would have to pay the charges prescribed by the Board for the use of its premises.
Similarly any one desiring to have the benefit of the Boards 's services in behalf of cranage or storage as specified in clauses (c) and (d) of section 42 shall have to pay for these services at the prescribed rates.
Whether the services are from the importer 's point of view optional in the sense that he may or may not require them or whether the importer has no option save to avail himself of the basic services of the Board as for landing and keeping the goods in the transit area, the services have to be paid for at the scale of rates prescribed by the Board.
In such matters, where services arc offered by a public authority on payment of a price, conditions governing the offer and acceptance of services are not in the nature of bye laws.
They reflect or represent an agreement between the parties, one offering its services at prescribed rates and the other accepting the services as those rates.
(1)See Halsbury 's Laws of England, 3rd Ed.
24, p. 510, paragraph 940 citing Kruce vs Johnson at p. 96.
733 As, generally, in the case of bye laws framed by a local Authority, there is in such cases no penal sanction for the observance of the conditions on which the services are offered and accepted.
If the services are not paid for, the Board can exercise its statutory lien on the goods under section 51 and enforce that lien under section 56 of the Act; or else, the Board may take recourse to the alternative remedy of a suit provided for by section 62.
With this, the entire reasoning of the High Court on the first aspect of he matter must fall because Rule 13(b) has been declared ultra vires on the basis that it is a bye law and, as such, it is arbitrary and unreasonable.
But we would like to point out, since the High Court has taken pains to go into the matter quite elaborately, that even a bye law cannot be declared ultra vires on the ground of unreasonableness merely because the court thinks that it goes further than is necessary or that it does not contain the necessary qualifications or exceptions.
In Kruse vs Johnson(1) a question was raised as to the validity of a bye law made by a county council for regulating street music.
I Lord Russell of Killowen observed in that case .
"When the Court is called upon to consider the bye laws of public representative bodies clothed with the ample authority which I have described, accompanied by the checks and safeguards which I have mentioned.
I think the consideration of such bye laws ought to be approached from a different standpoint.
They ought to be supported if possible.
They ought to be, as has been said, benevolently interpreted ' and credit ought to be given to those who have to administer them that they will be reasonably administered.
" The learned Chief Justice said further that there may be "dases in which it would be the duty, of the court to condemn by laws made under such authority as these were made (by a county council) as invalid because unreasonable.
But unreasonable in what sense ? If, for instance, they were found to be partial and unequal in their operation as between different classes; if they were manifest unjust; if they disclosed bad faith; if they involved such oppressive or gratuitous interference with the rights of those subject to them as could find no justification in the minds of reasonable men, the court might well say, 'Parliament never intended to give authority to make such rules; they are unreasonable and ultra vires. ' But it is in this and this sense only, as I conceive, that the question of reasonableness or unreasonableness can properly be regarded.
A bye law is not unreasonable merely because particular judges may think that it goes further than is prudent or necessary or convenient or because it is not accompanied by an exception which some judges may think ought to be there." (1) , at pp.
734 In Slattery vs Naylor(1) it was observed that when considering whether a bye law is reasonable or not, the court need a strong case to be made out against it, and decline to determine whether it would have been wiser or more prudent to make the bye law less absolute, nor will they hold that it is unreasonable because considerations which the court would itself have regarded in framing such a bye law have been overlooked or rejected by its framers.
n In the first place, Port Trusts are bodies of a public representative character who are entrusted by the legislature with authority to frame a scale of rates and statement of conditions subject to which they shall or may perform certain services.
Port Trusts are not commercial organisations which carry on business for their own profit.
Sections 39(1) and (2) of the Act cast on the Board an obligation, according to its powers, to provide all reasonable facilities, if so required by any owner, for various kinds of services mentioned in clauses (a), (b) and (d) of section 39(1), which include services in regard to landing of goods between vessels and docks in possession of the Board and receiving, storing or delivering goods brought within the Board 's premises.
The Board under section 39(3) shall, if required, take charge of the goods for the purpose of performing the service.
After the goods are thus taken charge of and a receipt given for them, no liability for any loss or damage which may occur to the goods attaches to any person to whom the receipt has been given or to the master or owner of the ship from which the goods have been landed.
The responsibility of the Board for the loss, destruction or deterioration of goods of which it has taken charge is, under section 40 of the Act, that of a bailee under sections 151, 152 and 161 of the Contract Act, subject to some modifications.
Thus rates which the Board levies are a consolidated charge for the various services it renders and the liability which it is compelled by statute to undertake.
The Board of Trustees is a representative body consisting of 21 Trustees out of whom eleven are elected.
The Collector of Customs the Municipal Commissioner, the General Managers of Railways, a representative each of the Mercantile Marine Department and the Defence Services of the Central Government, and two representatives of labour are the other members of the Board.
Out of the eleven elected Trustees, one is elected by the Municipal Corporation and the remaining by provincial or local bodies representing commercial interests.
The Board of Trustees is thus a broad based body representing a cross section of variety of interests.
It is the Board thus constituted that frames the Scale of Rates and Statement of Conditions under which the services shall or may be performed by it.
Every scale and every statement of conditions framed by the Board has to be submitted to the Central Government for sanction under section 44 and it is only when it is so sanctioned that it has the force of law.
The requirement of sanction by the Central Government is a restraint on unwise, excessive or arbitrary fixation of rates.
Section 44(2) confers on the Board the power, in special cases and for reasons to be record (1) , 452.
735 ed in writing, to remit the whole or any portion of rates or charges leviable according to any scale in force under section 44.
Thus, the statute provides for the necessary safeguards, checks and counter checks as an insurance against fixation and levy of harsh or unjust rates.
Section 109 of the Act provides that nothing in the Act shall affect any power vested in the Chief officer of Customs under any law for the time being in force.
Section 49 of the confers power on the Assistant Collector of Customs, if he is satisfied on the application of the importer that the goods cannot be cleared within a reasonable time, to permit that the goods may, pending clearance, be stored in a public warehouse and if such a, facility is not available, then in a private warehouse.
This provision together with section 44(2) of the Act constitutes a measure of mitigation.
In face of these considerations, it is impossible to characterise the scheme for the levy of rates as arbitrary or unreasonable.
The High Court contrasted clause (b) of Rule 13 with its clause (d) and held that there is no distinction between the two classes of cases and if cases falling under clause (a) are wholly exempt from the payment of demurrage, so ought to be those falling under clause (b).
The error of this conclusion lies in equating cases falling under clause (b) with those falling under clause (a).
The two clauses deal with different sets of cases: clause (a) deals with cases where the goods are detained for examination under sections 17(3) and (4) or for chemical test under section 144 of the , other than for the ordinary processes of appraisement; clause (b) deals with cases where the goods are detained on account of Import Trade Control formalities or for compliance of formalities prescribed under the Drugs Act.
We see no warrant for the court substituting its own view as to the allowance of Free Days in a technical matter like the fixation of rates which has been considered by an expert Board of Trustees and whose decision has been confirmed by the Central Government.
Equating the two classes of cases dealt with by clauses (a) and (b) of Rule 13 may seem to the court a more prudent or reasonable way of fixing scales of rates but that is not a correct test for deciding the validity of the impugned provision.
There is a fundamental aspect of the fixation of rates which the High Court has overlooked.
What is the object and purpose of the rates which the Board charges to the importer ? Port Trusts do not do the business of warehousing goods and the rates which the Board charges for storage of goods are not levied as a means of collecting revenue.
The Board is under a statutory obligation to render services of various kinds and those services have to be rendered not for the personal benefit of this or that importer but in the larger national interests.
Congestion in the ports affects the free movement of ships and of essential goods.
The scale of rates has therefore to be framed in a manner which will act both as an incentive and as a compulsion for the expeditious removal of the goods from the transit area.
Ships, like wagons, have to be kept moving and that can happen only if there IS pressure on the importer to remove the goods from the Board 's pre 736 mises with the utmost expedition.
The appellants in their reply statement filed in the High Court have referred to the Report of the Committee set up in 1967 by the Ministry of Transport and Shipping, Government of India.
The Committee consisted of top level experts, one each from the Ports of New York, London and Notterdam who made a general survey of the Ports and Harbours in India.
The Committee observed in its Report: "To effect quick clearance of the cargo from the Harbour, the demurrage rates may be so fixed as to make it unprofitable for importers to use the port premises as a warehouse.
"Viewed from this angle, the scale of rates cannot be characterised as unreasonable.
That takes us to the question whether the scale of rates fixed by the Board is beyond the power conferred on it by section 42 of the Act.
If section 42 were to authorise the Board to fix rates of 'Demurrage '.
it might perhaps have been arguable that the Scale of Rates and the Statement of Conditions must conform to the accepted meaning of the word 'Demurrage '.
But the statute has placed no such limitation on the power of the Board to fix the rates.
By Section 42 power is conferred on the Board to frame "a scale of rates at which and a statement of the conditions under which any of the services 1> specified" in the section "shall be performed".
And the Board has fixed the scale of rates and the statement of conditions for the services it may have to perform.
It is difficult to see in what manner or respect the Board has exceeded its power under section 42.
The High Court seems to have thought that the Board had the limited right to fix rates of demurrage and therefore rates could only be levied on goods which were not removed from the Board 's premises due to some fault or negligence on the part of the importer or his, agent.
The High Court was probably misled in this conclusion by the use of word 'demurrage ' in clause (d) of section 42.
But 'demurrage ' is surely not a service to be performed by the Board and is, on any view, a charge leviable on goods.
Clauses (a) lo (d) of section 42 refer to various services like transshipment of passengers and goods, landing and shipment of passengers or goods, cranage or porterage of goods and wharfage or storage of goods.
It is these services in respect of which section 42 authorises the Board to frame a scale of rates and the statement of conditions.
The circumstances that the Board has used the expression 'Demurrage ' as a heading for Chapter IV of the Scale of Rates or that it has used that expression in Rules 13(b) and (c) cannot constitute a fetter on its powers to fix the rates.
The validity of the exercise of that power has to be judged on the language of section 42 which is the source of the power.
The High Court has cited many texts and dictionaries bearing on the meaning of 'Demurrage ' but these have no relevance for the reason that demurrage being a charge and not a service, the power of the Board is not limited to fixing rates of demurrage.
Besides, it is plain that the Board has used the expression 'Demurrage ' not in the strict mercantile sense but merely to signify a charge which may be levied on goods after the expiration of Free Days Rule 13(b) itself 737 furnishes a clue to the sense in which the expression 'demurrage ' is used by the Board.
It provides, inter alia, that "demurrage" shall be recovered at a concessional rate for a period of thirty days plus one working day where the goods are detained for compliance with certain formalities and where the Collector of Customs certifies that tile detention of goods is "not attributable to any fault or negligence on the part of Importers".
The High Court was therefore in error in holding the scale of rates fixed by the Board as ultra vires and void on the grounds that it is unreasonable and that it is in excess of the power conferred by section 42 of the Act.
The only question which now remains to be considered is whether the respondents are liable to pay the demurrage demanded of them by the appellants.
The appellants ' claim against respondents 2 and 3 has no foundation in law and was rightly not pressed by the appellants ' counsel.
Respondent 3 is the Collector of Customs who, obviously., cannot be made personally liable to pay the demurrage.
Respondent 2 is the Union of India against whom and respondent 3.
the appellant 's claim is said to reside partly in the region of "contract or quasi contract".
We are unable to spell out any such basis on which the claim of the appellants could rest.
The issuance of an incorrect 'Detention Certificate ' by the 3rd respondent cannot also help the appellants to fasten the liability for demurrage on respondents 2 and 3 on the ground of their negligence.
As observed by the High Court, all the relevant facts were before the appellants who could, with reasonable care, have avoided the consequences flowing from the Certificate issued by the 3rd respondent.
As regards the appellants ' claim against the 1st respondent, the High Court was prepared to hold the latter liable to pay the demur rage except for the fact that the scale of rates was unreasonable and beyond the power of the Board.
As we have set aside the High Court 's findings on those points, it has to be examined whether the 1st respondent is liable to pay the demurrage.
Unfortunately, parties fought in the High Court a legal battle and gave no importance to facts on which the liability of the 1st respondent may be said to rest.
Facts must come before the law for, legal principles cannot be applied in a vacuum.
No oral evidence was led by the parties and we find it difficult on a mere Perusal of documents to say that respondent 1 ought to be held liable to meet the appellants ' claim.
Documents do not prove themselves nor indeed is the admissibility of a document proof by itself of the truth of its contents.
Import Licence No. CL/ 53/3/02105 1 dated June 16, 1962 under which the goods were imported stood in the name of the State Trading Corporation of India.
It issued an authorization in favour of the 1st respondent which, as the documents go, was liable to deliver the consignment to the nominees of the Corporation.
The 1st respondent.
it would appear, was only entitled to charge a commission for the work done by it in pursuance of the authorisation issued by the Corporation.
The 1st respondent had no title to or interest in the goods except to deliver them 738 in accordance with the instructions of the Corporation.
If the appellants were to enforce their statutory lien, the incidence of the demurrage would have fallen on the Corporation in whom the title to the goods was vested.
The appellants permitted the goods to be cleared without then demanding the demurrage which they claimed later, thereby depriving the 1st respondent of an opportunity to reject the goods as against the supplier unless, of course, the Corporation was within to accept them and along with them the liability for the payment of demurrage.
In the absence of any more facts we find it impossible on the record as it stands, to accept the appellants ' claim against the 1st respondent.
Out of 15 issues framed in the suit, issues 1 and 10 only pertain to the liability of the 1st respondent and on those issues, the facts appearing; on the record are too scanty to support the appellants ' claim against the 1st respondent.
We., therefore, hold that the claim against the 1st respondent must also fail In the result, we confirm the decree of the High Court dismissing the appellants ' suit, though for entirely different reasons.
In the circumstances, there will be no order as to costs.
P.H.P. Appeal dismissed .
| IN-Abs | On 10 4 1968, a steamer arrived at the Madras port and landed inter alia a consignment or 202 bundles of black plain sheets of various sizes.
The appellants received the goods and stored them in the transit sheds.
The goods were imported by the first respondent under an authorisation issued by the State Trading Corporation of India which held a licence to import the goods from Hungary.
The clearing agents of the first respondent filed a bill of entry with the Collector of Customs.
But, the Customs authorities detained the goods as the specifications in the import licence did not tally with the description of the imported goods.
The Customs Authorities then issued a show cause notice to the 1st respondent and after considering his explanation passed an order confiscating the goods.
The first respondent preferred an appeal against that order to the Board which allowed the appeal.
On an application of respondent No. 1 the Customs Authorities issued a certificate stating that the goods were detained by the Customs Authorities from 24 4 1963 to 21 8 1964 for examination under sections 17(3) and 17(4) of the other than in the ordinary process of appraisement and that the detention was due to no fault or negligence on the part of the correspondent.
Acting on this certificate, the appellants waived the demurrage for the period covered by the certificate.
As a result of the said certificate, the appellant charged respondent No. 1, Rs. 1963/ instead of Rs. 3,20,951/ by way of demurrage.
Thereafter, the respondent No. I cleared the consignment.
In January, 1965, the appellants wrote a letter to the Customs Authorities stating that the certificate was issued erroneously and that the Customs Authorities should reconsider the matter.
In April, 1965, the Customs Authorities owned the mistake that the certificate was incorrect as the goods were detained in order to ascertain whether the Import Trade Control formalities were complied with and not for examination and assessment of duty under Sections 17(3) and 17(4) of the .
The appellants brought the present suit against respondent No. 1.
and the Union of India and Customs Authorities to recover the balance of ' demurrage amounting to about Rs. 3 Lacs.
The first respondent disputed is liability to pay the demurrage on the ground that it could not be penalised either for the delay caused by the Customs Authorities in clearing the goods or in the issuance by them of a wrong certificate.
The first respondent also contended that the scale of charges in the Port Trust Regulations under the heading Demurrage was void and ultra vires both for the reason that it was unreasonable and because the scale of charges was not within the authority of the appellants.
The High Court dismissed the suit for the following reasons (1) The Scale of rates fixed by the Board is in the nature of bye laws.
(2) Viewed as a bye law Rule 13(b) under which the Board can charge demurrage for the period during which the goods are detained for.
no fault or negligence of the importer or his agent, is unreasonable and therefore void.
(3) In principle, there can be no distinction between cases falling under clause (a) and those falling under clause (b) of Rule 13 and if 722 no demurrage is leviable in respect of cases falling within clause (a) no demurrage could be charged in respect of cases falling within clause (b).
The distinction made by the Board between the two kinds of cases was therefore arbitrary and unreasonable.
(4) 'Demurrage ', being a charge for wilful failure to remove the goods, can be levied only if the failure to remove the goods is due to the fault or negligence, of the importer or his agent.
(5) Having regard to this well accepted meaning of the word 'demurrage ', the authority given to the Board by section 12 of the Act to frame the scale of rates can be exercised only for the purpose of levying charges where the importer was not prevented by any lawful authority from clearing the goods from the transit area and he had defaulted or was negligent in clearing the goods.
(6) Since Rule 13(b) empowers the Board to charge demurrage even when the goods are detained for no fault or negligence of the importer or his agent, it is beyond the authority conferred by section 42 and is therefore, void.
Allowing the appeal, ^ HELD:(1) The High Court erred in holding that the sale of rates and statements of condition framed by the appellant under sections 42, 43, and 43A are by laws.
Those sections confer authority on the.
Board to frame a sale of rates at which and a statement of conditions under which any of the services specified therein shall be performed.
[732 C, 731 F] 2.
A bye law has been said to be an ordinance affecting the public, or some portion of the public, imposed by some authority clothed with statutory powers, ordering something to be done or not to be done and accompanied by some sanction or penalty for its non observance.
The Board 's power to frame a scale of rates and statement of conditions is not a regulatory power to order that something must be done or something may not be done.
The rates and conditions govern the basis on which the Board performs the services.
Those who desire to avail of the services of the Board are liable to pay for those services at prescribed rates and to perform the conditions framed by the Board.
In fact some of the services which the Board renders are optional.
Where services are offence by a public authority on payment of a price, conditions governing the offer and acceptance of services are not in the nature of bye laws.
They reflect or represent an agreement between the parties one offering his services at the prescribed rates and the other accepting the service at those rates.
[732 D H] 3.
Bye laws may be treated as ultra vires on the grounds, amongst others that they are repugnant to the statute under which they are made or that they are unreasonable.
But even a bye law cannot be declared ultra vires on the ground of unreasonableness merely because the court thinks that it goes further than is necessary or that it does not contain the necessary qualifications or exceptions.
Kruse vs Johnson , relied on.
[731 F. 733 B] 4.
Port Trusts are bodies of a public representative character who are entrusted by the Legislature with authority to, frame a scale of ' rates and a statement of conditions subject to which the shall or may perform certain services.
Port Trusts are not commercial organisations which carry on business for their own profit.
The Board of Trustees is broad based body representing a cross section of a variety of interests.
The requirement of sanction by the Central Government is a restraint on unwise, excessive, or arbitrary fixation of rates.
section or a variety of interests.
The requirement of sanction by the Central whole or any portion of rates or charges leviable according to any scale in force under section 44.
Thus the Statute provides for the necessary safeguards, checks and counter checks as an insurance against fixation and levy of harsh or unjust rates.
Section 49 of the Act confers power on the Assistant Collector of Customs if he is satisfied that the goods cannot be cleared within a 723 reasonable time to permit that the goods might pending clearance be stored in a public warehouse or in a private warehouse.
In face of these considerations it is impossible to characterise the scheme for the levy of rates as arbitrary or unreasonable.
[734 & G H, 735 A C] 5.
The High Court erred in equating cases falling under clause (h) with those falling under clause (a) of Rule 13.
The two classes deal with different sets of cases.
Clause (a) deals with cases where goods are detained for examination under sections 17(3) and 17(4) or for chemical test under section 144 whereas clause (b) deals with cases where the goods are detained on account of Import Trade Control formalities or for compliance of formalities prescribed under the Drugs Act.
There is no warrant for the court substituting its own view as to the allowance of three days in a technical matter like the fixation of rates which has been considered by an export Board of Trustees and whose decision has been confirmed by the Central Government.
Equating the two clauses of cases dealt with by clauses (a) and (b) of Rule 13 might seem to the court a more prudent or reasonable way of fixing scales of rates but that is not a correct test for deciding the validity of the impugned provision.
[735 D F] 6.
The High Court overlooked a fundamental aspect of fixation of rates.
The Board is under a statutory obligation to render services of various kinds and those services have not to be rendered for the personal benefit of this for that importer but in the larger national interest.
Congestion in the ports affects the free movement of ships and of essential goods.
The scale of rates has, therefore, to be framed in a manner which will act both as an incentive and as a compulsion for the expeditious removal of the goods from the transit area.
Ships, like wagons, have to be kept moving and that can happen only if there is pressure on the importer to remove the goods from the Board 's permises with the utmost expedition.
1735 F H; 736 A] 7.
As regards the appellants ' claim against the first respondent.
facts must come before the law because legal principles cannot be applied in a vacuum.
No oral evidence was let by the parties and documents do not prove them selves nor indeed is the admissibility of a document proof by itself of the truth of its; contents.
The Import Licence stood in the name of the State Trading Corporation.
It issued an authorisation in favour of the first respondent.
The first respondent was only entitled to charge a commission for the work done by it in pursuance of the authorisation issued by the Corporation.
If the appellants were to enforce the statutory lien.
the incidence of the demurrage would have fallen on the Corporation in whom the title to the goods was vested.
The appellants permitted the goods to be cleared without demanding the demurrage which they claimed later, thereby depriving the respondent of the opportunity and the right to reject the goods as against the supplier.
In the absence of any more faces, it is impossible on the record as it stands, to accept the appellants ' claim against the first respondent.
[737 F H, 738 A B]
|
Civil Appeals Nos.
814 815 of 1968.
From the Judgment and Order dated 7th September.
1966 of the Andhra Pradesh High Court in Writ Appeal Nos. 71 and 72 of 1964 respectively.
R. V. Pillai, for the appellant.
P Ram Reddy and C. N. Rao, for the respondents.
The Judgment of the Court was delivered by KRISHNA IYER J.
A forest contractor the appellant who had allegedly excess felled trees beyond the permitted number under two contracts entered into by him with the State of Andhra Pradesh, was directed by the Conservator of Forests the firs, respondent to suffer two.
levies.
One item represented the loss sustained by the State on account of the illicit cutting and the other was a penalty imposed under r. 29 of the Forest Contract Rules (for short, the Rules) issued in exercise of the powers conferred under sections 44 and 79 of the Hyderabad Forest Act, 1355F (for short, the Act).
The factual story out of which the legal controversy springs may be narrated in simple terms.
Admittedly, the appellant was granted two forest contracts to fell and remove a specific number of trees from government forest, in accordance with the Act and the Rules.
The Contracts were of two years ' duration ending with 31st December 1960.
It was found by the Forest officers that the appellant contractor had felled more trees and so he was given a notice calling for his explanation about this detected breach of condition.
In C.A. 814 of 1968 such notice was issued on June 25, 1960 but no explanation was forthcoming.
So the Conservator determined the amount representing the loss caused by the unauthorised cutting of trees.
On July 22, 1960 the District Forest officer informed the appellant that the Conservator of Forest, who is the appropriate authority under the Rules, had fixed Rs. 11,426/ as representing the loss sustained by Government and Rs.11,250/ as penalty under r. 29.
The contractor.
thereupon, prayed for re enumeration of the 772 trees cut from the forest by his application, dated July 30, 1960.
He was informed by the forest authorities, by communication dated August '24, 1960 to check the stumps in the coupe as desired by the petitioner before September 15, 1960.
This opportunity was also not availed of by the appellant.
Consequently, the Conservator levied a penalty, as earlier proposed.
Thus there were two items (1) the loss caused by illicit cutting; (ii) the penalty imposed under the rules for breach of conditions of the contract.
There were three small amounts of fine also, all together resulting in a sum of Rs. 23,088.00.
Eventually, the contract was terminated on December 28, 1960 under r. 30 of the Rules.
Long later, in January 1962, the amount stated above was sought to be realised by revenue recovery process by the Tahsildar, `by his attachment order, dated January 8, 1962.
Thereupon a writ petition was filed by the appellant challenging the demand.
He succeeded before the learned Single Judge but a Division Bench, in appeal carried by the State, reversed this order and the appellant has invoked the jurisdiction of this Court under article 133(1) (a) and (b) of the Constitution.
In C.A. 815 of 1968 a similar excess felling by the same contractor was detected by the concerned officials and notice was issued to the appellant to explain how he had felled 255 trees in excess of the contractual figure.
The appellant denied the illicit felling whereupon a date was fixed for checking the coupe in his presence, as requested by him.
The contractor however did not avail himself of the opportunity so afforded despite a second date for inspection being fixed to suit his convenience.
Eventually the Conservator of Forests fixed the loss sustained by government on account of the illicit felling of trees and also the penalty for breach of the conditions of the contract.
This was done on October 16, 1960 and the appellant was asked to pay the sum by notice.
dated October 28, 1960.
On the same date, the lease was also terminated.
Long later, on January 9, 1962 proceedings for realisation of the amounts were initiated by the Tahsildar.
This step drove the contractor to move a writ petition, which shared the fate, at the single Judge 's level and in appeal, of the sister writ petition already adverted to.
In the same manner he has moved this Court in appeal, by certificate.
Two points were urged by Mr. R V. Pillai, learned counsel for the appellant, one relating to the loss assessed and sought to be realised by the State under the two contracts on account of excess felling, the other relating to the imposition of penalty under r. 29 and its validity.
The first point does not survive because in both the writ petitions which were disposed of together by a common judgment the learned Single Judge rejected the contention with the observation 'I find no substance in the arguments advanced in this behalf .
No provision was brought to any notice which disentitles the government to collect those items '.
If the appellant had been aggrieved by the negation of his plea under this head he should have challenged it in appeal which he did not.
Thus the matter has become final and he` cannot, in this Court, revive it at all.
There is only a single question that therefore deserves our consideration.
773 Was the penalty in the two cases imposed validly ? The learned Single Judge held, on a study of rr. 29 and 31 that the impost was illegal for reasons which we find difficult to accept.
The Division Bench, in appeal, disagreed with the learned Single Judge for reasons which are unclear although our conclusion concurs with theirs.
The rules regulating the consequence of a breach of the conditions of forest contracts were originally promulgated in Urdu in the Hyderabad State but we have been handed up the Manual of Civil Laws, Andhra Pradesh, which contains those rules in English.
Rule 29(3) reads slightly obscurely but, in the absence of the original Urdu rules, we have to make do with the English version.
There are two types of penalties which we may conveniently designate as 'major ' and 'minor ', in the contemplation of the Forest Rules Rule 29 deals with the major penalties while r. 31 relates to minor penalties.
Where the breach of the conditions of the contract committed by the forest contractor is serious, the contract itself is to be terminated and a substantial penalty is to be imposed which 'shall not exceed one quarter of the total consideration paid by the contractor '.
If the branch is of lesser significance, then the authority may not propose to terminate the contract on account thereof but may recover a portion of the 'whole penalty provided for in r. 29 ' not exceeding Rs. 100/ .
In short, if the contravention is grave, the contract is cancelled and a heavy penalty imposed but if the breach is inconsequential the contract continues but a lighter penalty is imposed.
In the present case it is apparent that the authorities terminated the contract and it is equally clear that the breach was serious.
Rule 31 which deals with trivial breaches and lighter penalties is inapplicable.
The only question then is whether the exercise of the power to impose a penalty under r. 29 has been (a) in compliance with natural justice; and.
(b) in fulfilment of the conditions precedent for the exercise of the power.
The facts we have set out earlier make it clear that an opportunity had been afforded in the case of both the contracts before finally quantifying the penalty to be levied but, the contractor did not avail himself of the opportunity.
While it is clear that in the absence of a statutory exclusion of natural justice any exercise of power prejudicially affecting another must be in conformity with the rules of natural justice, we are satisfied that in the present case there is no foundation for the grievance of the petitioner on this score.
The substantial issue is as to whether the termination of the contract for breach of conditions should precede the impost of penalty.
According to Shri Pillai, that is the meaning of r. 29 read in the light of r. 30(3).
There is seeming varbal support for this contention but n closer scrutiny pricks the bubble.
Rule 29 may well be read at this stage '29.
(1) Penalty on termination of a contract for breach of conditions.
Every forest contract shall be in writing in the form annexed hereto and shall contain a provision whereby the 774 forest contractor binds himself to do all the duties and acts A required to be done by or under the contract, and covenants that he and his servants and agents shall abstain from all the acts forbidden by or under such contract.
(2) The sums to be mentioned in a forest contract as payable in case of a breach of any such stipulation shall not exceed one quarter of the total consideration to be paid by the contractor, and shall be recoverable in accordance with the provisions of the Hyderabad Forest Act 1355 F and of this rule: Provided that where such consideration is not an ascertained amount the forest officer executing the contract shall make an estimate of the total amount that would be payable if the contract were fully complied with, and such estimate shall be deemed to be., for the purpose of this sub rule, the total consideration to be paid by the contractor.
(3) This sum shall be realized from the contractor if the contract has been duly terminated in accordance with the provisions of rule 30, and then only under the written order of the forest officer executing the contract." Shri Ram Reddy, for the respondent, urges that ascertaining the amount which is to be levied as a penalty need not be preceded by the termination of the contract.
Indeed, according to him, it is only` if there is an investigation of the nature of the breach, the quantum of loss inflicted on the State and other circumstances that a decision as to whether the contract should be terminated or not can be taken.
If it is found that the breach of condition be willful and the damage substantial, the penalty will be imposed under r. 29 and a decision will be taken for termination of the contract.
However, the sum fixed as penalty shall not be realised from the contractor until the contract has been duly terminated in accordance with the provisions of r. 30.
This is because you cannot keep a contract alive and claim that a grave breach of conditions has been committed.
That would be too inconsistent a stance for the State to adopt.
It is true that the termination of the contract under r. 30 is a condition precedent to realisation of the penalty from the contractor but realisation is different from imposition.
The forest authorities quantify and impose the penalty.
The revenue authorities as well as the forest authorities adopt the various steps prescribed in r. 30(3) for realisation of the sum In the present case it was the Tehsildar who sought to realise the penalty and he did this after the contract was terminated.
Indeed, r. 30(3) uses the expression 'recover ' which is in consonance with 'realise ' in r. 29(3) .
We think that the true meaning of rr. 29 and 30, read together, is that the forest authorities must move from stage to stage in the following manner.
Once they detect a breach, they must investigate to understand and estimate, the nature and degree of damage caused by the breach.
If it is serious, they must proceed to ascertain the 775 sum to be fixed as penalty.
In doing this, a reasonable opportunity must be given to the affected party.
After that the penalty shall be quantified and the contract shall be terminated, in the event of the authorities coming to the decision that the breach is grave enough for that drastic step.
Once the contract is terminated, the last procedure is realisation which can in no case be before the termination of the contract.
The realisation of the penalty may be in one or other of the was set out for recovery under r. 30.
Of course, if the breach is of a venial nature, r. 31 is attracted, the contract is continued and only a small portion of the penalty envisaged in r. 29 is collected.
The view we have taken of the scheme of the rules leaves us in no doubt that the order of penalty is right and the judgment of the Division Bench is correct in the conclusion and the appeals, in the result, must fail.
The circumstances are such that the litigation is purely induced by the obscure official translation of r. 29 from Urdu to English with an obvious omission of 'not '.
This and the other attendant features of the case persuade us to direct that the parties shall bear their costs throughout.
V.M.K. Appeals dismissed.
| IN-Abs | The appellant & Forest Contractor felled trees in excess of the permitted number authorised by the contract entered into by him with the State of Andhra Pradesh Certain penalty was imposed on the appellant under rule 29 of he Forest Contract Rules framed in exercise of the powers conferred by Hyderabad Forest Act The Forest Officer found that the appellant felled more trees and therefore, gave a show cause notice to the appellant The appellant prayed for re enumeration of the trees given from the forest.
He was given an opportunity which was not availed by him to check the stumps in the coupe as desired by him Consequently, a penalty was levied.
Thereafter, the contract was terminated After the termination of the contract the process for recovery of the penalty was started Rule 29 reads as under: (1) Penalty on termination of a contract for breach of conditions: Every forest contract shall be in writing in the form annexed hereto and shall contain a provision whereby the forest contractor binds him self to do all the duties and acts required to be done by or under the contract, and convenants that he and his servants and agents shall abstain from all the acts forbidden by or under such contract (2) The sums to be mentioned in a forest contract as payable in case of a breach of any such stipulation shall not exceed one quarter of the total consideration to be paid by the contractor, and shall be recoverable in accordance with the provisions of the Hyderabad Forest Act 1355 and of this rule Provided that where such consideration is not an ascertained amount the forest officer executing the contract shall make an estimate of the total amount that would be payable if the contract were fully complied with, and such estimate shall be deemed to be for the purpose of this sub rule the total consideration to be paid by the contractor.
(3) This sum shall be realized from the contractor if the contract has been duly terminated in accordance with the provisions of rule 30, and then only under the written order or the forest officer executing the contract" The appellant filed a Writ Petition in the High Court challenging the validity of the imposition of the penalty.
The learned Single Judge allowed the Writ Petition but the Division Bench allowed` the appeal filed by the State In an appeal by certificate, it was contended by the appellant before this Court that the termination of the contract for breach of conditions mentioned in rule 29 should precede the impost of penalty.
It was further contended that the principles of natural justice were violated The respondent contended that ascertaining the amount which is to be levied as a penalty.
need not be preceded by the termination of the contract.
Dismissing the appeal, ^ HELD: 1 It is clear that in the absence of a statutory exclusion of natural justice any exercise of power prejudicially affecting another must be in conformity with the rules of natural justice.
In the present case.
we are satisfied 771 that there is no foundation for the grievance of the appellant on the score of natural justice since an opportunity was afforded to the appellant before finally quantifying the penalty to be levied but the appellant did not avail himself of the opportunity.
[773 E F] 2.
On a true construction of rule 29 once a Forest Authority detects a breach it must investigate the extent and estimate, the nature and degree of damage caused by the breach, If it is serious they must proceed to ascertain the sum to be fixed as penalty.
In doing this, a reasonable opportunity must be given to the affected party.
After that, the penalty shall be quantified and the contract shall be terminated in the event the authorities come to the conclusion that the breach is grave enough for that drastic step.
Once the contract is; terminated the last procedure is realisation which can in no case be before the termination of the contract.
[774H, 775 A B.]
|
Civil Appeal No. 732 of 1975.
Appeal by Special Leave from the Judgment and Order dated the 19th March, 1975 of the Allahabad High Court in Civil Misc.
Writ No. 5935 of 1974.
R. K. Garg, section C. Agarwala, V. J. Francis, T. M. Ansari for the Appellants.
M. C. Bhandare, R. Nagarathnam, section Bhandare, for Respondent No. 1.
The Judgment of the Court was delivered by ALAGRISWAMI, J.
To fill up a casual vacancy in the office of the President of the Municipal Board, Soron in the district of Etah in Uttar Pradesh, the District Magistrate issued notices to he members of the Board informing them that nomination papers should be filed in his of lice by 26th of September, 1974 and if necessary the election will take place on 1st October, 1974.
The 1st respondent thereupon filed a petition under Article 226 of the Constitution challenging the validity of the procedure adopted by the District Magistrate for holding the election and prayed for an order to the District Magistrate not to hold the election on 1st October, 1974.
The election programme had been notified in the U.P. Gazette dated 21 9 74 but it was published in the Gazette dated 24 9 74.
The objection to the procedure for election was based on the allegation that it did not conform to the provisions of Rule 6 of the U.P. Municipalities (Conduct of Election of Presidents and Election Petitions) Order, 1964, which reads as follows: "6.
Appointment of date for nomination, etc. (1) As soon as may be after the election of members of a board is completed at a general election within the meaning of section 43 of the Act or a equal vacancy occurs in the office of President of a board.
the District Magistrate shall, by notification in the official Gazette, appoint for the election to the office of President of the Board.
(a) the date for making nominations which shall be a date at least four days after the date of notification; and (b) the date for scrutiny of nominations which shall be me date next following the date fixed under clause (a); and (c) the last date for withdrawal of candidatures which shall be the third day after the date fixed for scrutiny of nominations; and 811 (d) the date on which and the hours during which a poll shall, if necessary, be taken: Provided that the date for taking the poll shall be a date not more than five days after the last date fixed under clause (c) .
(2) on the issue of notification under sub para (1), the Returning Officer shall give public notice of the election in Hindi in form I by affixing a copy of the notice at his office and another copy at the office of the Board and in such other manner, if any, as he may think fit and shall also cause to be dispatched by post under certificate of posting a copy of the notice to the last known address of each member.
" Though there was a prayer in the writ petition for all order to the District Magistrate not to hold the election on 1 10 74 the learned Judges who admitted the writ petition directed that the election would be subject to ultimate decision in the writ petition.
Consequently the election took place on the 1st of October and the 1st Appellant was declared elected.
Thereafter the 1st respondent filed an application for impleading the 1st appellant and the Municipal Board as parties and also claimed a further relief for quashing the election proceedings that took place on the 1st of October, 1974.
The learned Judges allowed the petition and set aside the entire election proceedings relating to the election of the 1st Appellant as the President of the Municipal Board.
We are of the opinion that the whole approach of the learned .
Judges of the High Court to this problem was mistaken.
After the decision of this Court in N. P. Ponnuswami vs Returning Officer, Namakkal Constituency & Ors.(1), there is hardly any room for Courts to entertain applications under Article 226 of the Constitution in matters relating to elections.
Before dealing with this question we may set out section 43 B of the U.P. Municipalities Act, which is the provision of law dealing with cases where the election of the President is questioned: "43 B. Judicial officer to decide the question of validity of election to the office of President. (1) No election of the President shall be called in question except by any election petition presented in accordance with the provisions of this Act.
(2) An election petition may be presented by any member entitled to vote at the election or by a candidate who has been defeated at the election on one or more of the following 'grounds, that is to say (a) that the returned candidate has committed any corrupt practice within the meaning of section 28; (1) ; 812 (b) that the nomination of, any candidate has been wrongly rejected, or the nomination of the successful candidate or any other candidate who has not withdrawn his candidature has been wrongly included; (c) that the result of the election has been materially affected by (i) the improper rejection or refusal of a vote, or (ii) any non compliant with the provisions of this Act or of any rules or orders made under this Act.
(3) An election petition shall be presented to the District Judge, or in a district where there is no headquarters of the District Judge, to the Civil Judge, within whose jurisdiction the municipality to which the election petition relates is situate: Thus the only way by which the election of a President can be called in question is by means of an election petition Presented in accordance with the provisions of this Act.
The election itself can be questioned only on one of the three grounds mentioned above.
The only ground in the present case on the basis of which the election of the appellant was questioned is that there was a non compliance with the provisions of rule 6, already referred to.
Under the Act the non compliance with any rule or order made under the Act or any provision of the Act does not ipso facto result in the election being set aside.
That result can be set aside only if the election Tribunal comes to the conclusion that the result of the election has been materially affected by such noncompliance.
The jurisdiction to decide the validity of the election of a President is an exclusive one conferred on the District Judge.
In the circumstances there was no room for the High Court exercising its powers under Article 226 in order to set aside the election.
In keeping aside the election the High Court plainly erred because it did not consider whether the result of the election had been materially affected by non compliance with the rule in question.
In any case that is a matter within the exclusive jurisdiction of the District Judge.
As early as 1928 in its decision in Desi Chettiar vs Chinnasami Chettiar(1) the Madras High Court observed: "It is clear that there is another side of the question to be considered, namely, the inconvenience to the public administration of having elections and the business of Local Boards held up while individuals prosecute their individual grievances.
We understand the election for the elective seats in this Union has been held up since 31st May because of this petition, the result being that the electors have been unable since then to have any representation on the Board, and the Board is functioning, if indeed it is functioning, with a mere (1) A. 1.
R. 813 nomination fraction of its total strength; and this state of affairs the petitioner proposes to have continued until his own personal grievance is satisfied".
These observations were quoted with approval by this court in Ponnuswami 's case (supra) In that decision this Court arrived (supra).
In that decision this Court arrived at the following conclusions: "(1) Having regard to the important functions which the legislatures have to perform in democratic countries, it has always been recognised to be a matter of first importance that elections should be concluded as early as possible according to time schedule and all controversial matters and all disputes arising out of elections should be postponed till, after the elections are over, so that the election proceedings may not be unduly retarded or protracted.
(2) In conformity with this principle, the scheme of the election law in this country as well as in England is that no significance should be attached to anything which does not affect the "election"; and if any irregularities are committed while it is in progress and they belong to the category or class which, under the law by which elections are governed, would have the effect of vitiating the "election" and enable the per son affect ed to call it in question, they should be brought up before a special tribunal by means of an election petition and not be made the subject of a dispute before any court while the election is in progress.
" In absence of any express provisions in the Act to the contrary these principles are applicable equally to cases of elections to local bodies also.
This Court also pointed out that the right to vote or stand as a candidate for election is not a civil right but is a creature of statute or special law and must be subject to the limitations imposed by it.
It referred to the decision in Wolverhampton New Water Works Co. vs Hawkesford(1) where it had been held: "There are three classes of cases in which a liability may be established founded upon statute.
One is, where there was a liability existing at common law, and that liability is affirmed by a statute which gives a special and peculiar form of remedy different from the remedy which existed at common law; there, unless the statute contains words which expressly or by necessary implication exclude the common law remedy, the party suing has his election to pursue either that or the statutory remedy.
The second class o cases is, where the statute gives the right to sue merely, but provides not particular form of remedy: there, the party can only proceed by action at common law.
But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy (1) 814 for enforcing it.
The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class.
The form given by the statute must be adopted and adhered to." and after referring to the provisions of the Representation of the People Act pointed out that it will be a fair inference that the Act provides for only one remedy, that remedy being by an election petition to be presented after the election is over, and there is no remedy provided at any intermediate stage.
This Court also held that the word 'election ' connotes the entire procedure to be gone through to return a candidate whenever we talk of elections in a democratic country.
It follows that the right to vote or stand for election to the office of the President of the Municipal Board is a creature of the statute, that is, the U.P. Municipalities Act and it must be subject to the limitations imposed by it.
Therefore, the election to the office of the President could be challenged only according to the procedure prescribed by that Act and that is by means of an election petition presented in accordance with the provisions of the Act and in no other way.
The Act provides only for one remedy, that remedy being an election petition to be presented after of the election is over and there is no remedy provided at any intermediate stage.
These conclusions follow from the decision of this Court in Ponnuswami 's case (supra) in its application to the facts of this case.
But the conclusions above stated were arrived at without taking the.
provisions of Article 329 into account.
The provisions of Article 329 are relevant only to the extent that even the remedy under Article 226 of the Constitution is barred as a result of the provisions.
But once the legal effect above set forth of the provision of law which we are concerned with is taken into account there is no room for the High Courts to interfere in exercise of their powers under Article 226 of the Constitution.
Whether there can be any extraordinary circumstances in which the High courts could exercise their power under Article 226 in relation to elections it is not now necessary to consider.
All the considerations applied in coming to the conclusion that elections to the legislatures should not be delayed or protracted by the interference of Courts at any intermediate stage before the results of the election are over apply with equal force to elections to local bodies.
| IN-Abs | To fill up a casual vacancy in the office of the President of the Municipal Board, Soron in the district of Etah in Uttar Pradesh, the District Magistrate issued notices to the members of the Board informing them that nomination paper should be filed in his office by 20th of September, 1974 and if necessary the election will take place on 1st October, 1974.
The 1st respondent thereupon filed a petition under Article 226 of the Constitution challenging the validity of the procedure adopted by the District Magistrate for holding the election and prayed for an order to the District Magistrate not to hold the election on 1st October, 1974.
The objection to the procedure for election was based on the allegation that it did not conform to the provisions of Rule of the U.P. Municipalities (Conduct of Election of Presidents and Election Petitions) order, 1964.
The High Court admitted the Writ Petition and directed that the election would be subject to ultimate decision in the Writ Petition.
Consequently the election took place on the 1st of October and the 1st appellant was declared elected.
Thereafter the 1st respondent filed an application for impleading the 1st appellant and the Municipal Board as parties and also claimed a further relief for quashing the election proceedings that took place on the 1st of October, 1974.
The High Court allowed the petition and set aside the entire election proceedings relating to the election of the 1st appellant as the President of the Municipal Board.
Allowing the appeal by special Leave, ^ HELD: The right to vote or stand for election to the office of the President of the Municipal Board is a creature of the statute, that is the U.P. Municipalities Act and it must be subject to the limitations imposed by it.
Therefore the election to the office of the President could be challenged only according to the procedure prescribed by that Act and that is by means of an election petition presented in accordance with the provisions of the Act and in no other way.
The Act provides only for one remedy, that remedy being an election petition to be presented after the election is over and there is no remedy provided at any intermediate stage.
[813 E, 814A B, 814C D] N. P, Ponnuswami v, Returning officer, Namakkal Constituency & Ors. ; relied on.
Desi Chettiar vs Chinnasami Chettiar A.I.R. 1928 Mad. 1271 and Wolverhamption New Water Works Co. vs Hawkesford ; referred to.
(ii) These conclusions in Punnuswami case were arrived at without taking the provisions of Article 329 of the Constitution into account.
Tho provisions of Article 329 are relevant only to the extent that even the remedy under Article 226 is barred as a result of the provisions.
But on e the legal effect of the provisions of law contained in Article 329 and in section 43 B of the U.P. Municpalities Act is taken into account there is no room for the High Courts to interfere in exercise of their powers under Article 226 of the Constitution.
810 Quaere: Can there be any extraordinary circumstances in which the High courts could exercise their power under Article 226 of the Constitution in relation to elections ? [814 E]
|
ivil Appeal Nos.
1186 to 201 of 1975.
Appeals by Special Leave from the Judgment and orders dated the 11th November, 1974, 6th December, 1974 and 27th November, 1974 of the Allahabad High Court in Civil Misc.
Writ Nos. 4139, 5354, 5352 5353, 5355 5357, 4065, 4912, 4326, 4212, 4218, 4545, 4328, 4543 and 4769 of 1972 respectively.
804 G. section Pathak (In CA 1186/75), section Swarup Shri Narain for the appellants (In CAs.
Nos.1186, 1194 1195 and 1196 1197/75).
V. Gupte, R. N. Bhalgotra and S.S. Khanduja for the appellants (In CA No. 1187/75).
section section Khanduja for the appellants (In CAs.
1188 1192 of 1975) .
V. J. Francis of M/s Ramamurthy & Co. for the appellants (In CA No. 1193/75).
Yogeshwar Prasad and Miss Rani Arora for the appellants (In CA No. 1198/75) and (1199/75).
N. N. Goswamy and Arvind Minocha for the appellant (In CA No. 1201/75).
The Judgment of the Court was delivered by KRISHNA IYER, J.
We should have made short shift of this batch of appeals on the brief but fatal ground that the appellants all sugar millers who had over priced this essential consumer article and had failed in their challenge of the controlled price had no moral nor legal claim to keep the huge sums which the High Court had right to directed them to disgorge.
When the price of 'levy sugar ' was pegged down by the State, these factory owners rushed to the Court impeaching the validity of the control and secured a stay of operation of the order.
Under cover of the Court 's stay order which was granted, on bank guarantee for the excess price being furnished to the court, the appellants sold sugar at free market rates, a euphemism for blackmarket racket unfortunately, with judicial sanction.
Crores of rupees were admittedly funnelled into the millers ' tills.
But, eventually, the High Court upheld the control of price and the unhappy obligation to restore the unjust enrichment arose.
The High Court, whose process kept the control price in cold storage, had to do justice by the community of consumers who were the unwitting victims of this judicially declared holiday from control which was quickly converted into a fleece as you please seller situation.
And so the Court made the following direction: "We, therefore, direct that the Registrar will take immediate steps to encash the security and recover the amount so over charged by the petitioners and pay the same to the State Government which will keep it in a separate account.
The petitioners will furnish to the State Government, within a period of six weeks of this order, a list of all such persons to whom they sold the levy sugar of 1971 72 season, together with their addresses, quantity of such sugar sold to and the amount of excess price charged from each of them.
The State Government will then refund to the persons concerned the excess amount realised from each of them, if necessary, after verifying the claim for refund of such amount made by such persons.
" 805 The reluctant millers have sought and got leave to appeal against this just direction and in the course of arguments have made some suggestions about the disposal of the moneys.
The inarticulate assumption was, presumably, that crores of rupees could remain with them until a suitable schemes for percolation of the excess prices to the ultimate small buyer could be fashioned.
Indeed, at some stage, a hesitant proposal was made that since the sugar industry has allegedly had lean years, these considerable sums 'picked ' from the pockets of a considerable number of consumers had better be allowed to be retained by the millers.
Another diffident hint was made that these several crores of rupees be used for stablising the sugar cane growers ' economic position.
The easy to see through design behind these 'developmental ' ideas was to have use of this large windfall till some distant project was evolved.
Indubitably, the appellants are in unrighteous enjoyment of colossal sums which belong to small consumers.
Not amount more can the millers keep what the Court has ordered the Registrar to collect by enforcing the bank guarantees.
Indeed, they have had dubious business use of these vast sums for a few years nearly a year, soon after the High Court 's final judgment.
Once we disenchanted them, as arguments proceeded, that the conscience of the Court would unconditionally compel the money to be called in forthwith, their interest in making fertile pro bono public.co suggestions as to how best to organise the disbursement of the small sums to the actual buyers flagged and, later in the day, Shri Dadachanji, Advocate on record in these cases, even moved that if leave had not been formally granted, the special leave petitions be allowed to be withdrawn and if leave had been already granted, Court fee exemption for these many appeals may be directed.
This shows up the public concern of these sugar manufacturers.
Anyway, the Registrar of the High Court shall take immediate steps to encash the security furnished by the appellants.
The money of the many little men gotten by the few millers by selling an essential commodity to the community at what is frankly black market price under the umbrella of Court order of stay shall get back to the scattered crowd of a small consumers as early and as inexpensively as possible.
A public injury perpetrated by calling in aid Court process must quicken judicial conscience to improvise an ad hoc procedure to restore through the Court 's authority what has been nibbled from the numerous buyers.
Innovative realism is obligated on the Court on the broad basis actus curiae neminem gravabit.
Why did the buyers pay higher prices for levy sugar ? Because, they respected the High Court 's order.
In this justice situation conventional procedures of each small claimant being left to litigate for his little sum from the miller or wholesaler is to write off the remedy and allow the ill gotten wealth to be in the coffers of the wrong doer (who got the charter to charge high, from a Court order).
Nor is the seemingly sweet suggestion, that a representative action under order 1.
r. 8 C.P.C., be instituted on be half of the class of consumers, feasible.
Who is to start? Against whom ? How is he to meet the huge litigative costs and how long (O, Lord, how long!) is he to wait with long drawn out trial procedures appeal, second appeal, special appeal" and Supreme Court appeal ? For, on the other side is the miller with the millions to be coughed up 806 The handling of small claims is probably the most deplorable feature of the administration of civil justice and yet small claims are in many respects more significant than large ones, involving large numbers and inter class disputes.
If the confidence of the community in the justice system, especially consumer protection, is to be created, radical reform of the processual law is needed now and here.
Rejecting, therefore, the recommendations for solution of the problem arising here.
as put forward by counsel for the appellants, we have to devise other measures.
We are aware of our limitations .
"The judge" even when he is free, is still not wholly free.
He is not to innovate at pleasure.
He is not a knight errant roaming at will in pursuit of his own ideal of beauty or of goodness.
He is to draw his inspiration from consecrated principles.
He is not to yield to spasmodic santiment, to value and unregulated benevolence.
He is to exercise a discretion informed by tradition, methodized by analogy, disciplined by system, and subordinated to 'the primordial necessity of order in social life. ' Wide enough in all conscience is the field of discretion that remains.
" (1) The difficulty we face here cannot force us to abandon the inherent powers of the Court to do.
"The inherent power has its roots in necessity and its breadth is co extensive with the necessity".(2) Certainly, we cannot go against any statutory prescription.
Had India had a developed system of class actions or popular organisation taking up public interest litigation, we could have hoped for relief otherwise than by this Court 's order.
We lag in this regard" although people are poor and claims are individually trivial.
Legal aid lo the poor has a processual dimension As things stand, if each victim were remitted to an individual suit the remedy could be illusory, for the individual loss may be too small, a suit too prohibitive in time and money and the wrong would go without redress.
If there is to be relief, we must construct it here by simple legal engineering.
The Solicitor General appearing for the State of U.P. and the Union of India, informed us that legislation was about to be enacted to take care of these situations.
If it did come, it were welcome.
After all, the Legislature must show better legal concern for the small marl, as this class of consumers who are wronged or deceived are on the increase In the present case, we think that the following complex of directions will pragmatically meet the needs both of the appellants and the range of buyers from whom higher prices were charged : A.
The security by way of bank guarantee furnished by every appellant will be encashed by the Registrar.
Of the High Court and kept in short term deposit in the State Bank of India r (1) Benjamin Cardozo 's 'The Nature of the Judicial Process ' Yale university Press (1921) (2) Theoretical Basis Inherent Powers Doctrine Text material prepared by Jim R. Carrigan Publication of National College of The state Judiciary, U.S.A. 807 B. The appellants will be given complete immunity from liability to any sugar buyer, wholesaler or other" to whom sugar has been sold by the appellants at higher prices during the period covered by the High Court 's stay order.
If any exceptional case of claim were to be made by any buyer, it . . should be done by motion before the High Court which will I be justly disposed of.
The Registrar, under orders of the High Court, will directly or by making over to the State Government, receive and dispose of claims from the ultimate consumer for excess price paid on proper proof.
If the State Government is to undertake this task, a proper, easy and cheap machinery for distribution to the real, last buyers will be produced before the High Court and orders obtained.
The process should not be too expensive or too formalised.
D. Wide publicity will be given about the project and method of returning small claims and the money sent by post or otherwise.
The claims also would be received by post or otherwise and verified without delay.
The interest accruing from the bank deposits will be used for the incidentals to work out the distribution.
F. It will be open to the wholesaler to prove by vouchers the retailers and the latter in turn may prove who the ultimate , buyers are.
The High Court may devise modifications of this scheme or direct the State Government to act on any scheme subject to the moneys reaching the real small buyers from the retailers.
If any further directions in the mechanics of the scheme are felt necessary, the High Court will report to this court.
If, within one year from today, any amounts remain unclaimed they will go into a separate deposit in the High Court to be operated on application by any claimant.
If any legislation dealing with this subject were to be made before the amounts are disbursed, the legislative scheme will pro tanto prevail over the directions given above.
The court fee on these civil appeals will be exempted in the special circumstances of the case.
K. Parties will bear their own costs in this Court.
May be the procedure we have suggested above is somewhat unconventional but where public interest is involved.
"Courts of equity may, and frequently do, go much further both to give and withhold relief in furtherance of the public interest than they are accustomed to go where only 808 private interests are involved.
Accordingly, the granting or withholding of relief may properly be dependent upon considerations as of public interest . "(1) We hope the vigilant legislature will activise itself on behalf of the little men and the law and make quick moving, easily accessible and free of cost consumer protection measures.
Slogans are not law and the rule of law in a welfare oriented constitutional order demands 'poverty law none too soon; with emphasis on the delivery of legal services with distances shortened and road hazards removed.
It is not for the Court to spell out more, but it is for the State to awaken to a overlooked, but not infrequent, legal phenomenon.
P.H.P. Appeals dismissed.
| IN-Abs | The appellants challenged the validity of fixation of price of levy the high Court.
During the pendency of the petitions, the appellants a stay order from the High Court for charging the price in eyes price fixed by the State on furnishing Bank guarantees for the excess price Ultimately, the High Court upheld the control of price and directed appellants to restore the excess money recovered from the consumer to the through the State Government.
The appellants filed the present Special Leave against the said order of the High Court and contended that since the Sugar Industry had lean year, the excess amount should be allowed to retained by the appellant or that the excess amount should be to be utilised for stabilising the sugarcane growers ' economic position alternative, it was prayed that the excess amount could remain with the appellant unite a suitable scheme for the return of the excess amount to the was made.
Dismissing the appeals, ^ HELD : 1.
The appellants had doubt business use of these crores of rupees for nearly a year even after the High Court 's final judgment.
The money of the many little men got by the few millers by selling an essential commodity to the community at what is frankly black market price under the umbrella of court order of stay shall get back to the scattered crowd of small consumers as early and as inexpensively as possible.
A public injury perpetrated by calling in aid court process must waken judicial conscience to improvise an ad hoc procedure to restore through the court 's authority what has been nibbled from the numerous buyers.
The handling of small claims is probably a must deplorable features of the administration of civil justice and yet small claims are in many respect more signification than large ones, involving large numbers and inter class disputes.
If the confidence of the community in the justice system especially consumer protection.
is to be created, radical reform of the processual law is needed now and here.
The inherent power of the court has its roots in the necessity and its breadth is co extensive with the necessity.
The Court directed that the Bank guarantees furnished by the appellants should be encashed by the Registrar and kept in short term deposit.
That he claims of the consumers should be settled by the Registrar of the High Court under the order of the High Court through an easy and cheap machinery.
That wide publicity should be given about the method of returning and that small claims might be accepted by cost and money also returned by post.
[804 C E. 806 A. D 807 BD]
|
N: Criminal Appeal No. 120 of 1971.
Appeal by Special Leave from the Judgment and order dated the 24th July, 1970 of the Allahabad High Court at Allahabad in Criminal Appeal No. 581 of 1968.
A. N. Mulla and O. N. Mohindroo for the Appellant.
D. P. Uniyal and O. P. Rana for the Respondent.
The Judgment of P. N. Bhagwati and R. section Sarkaria was delivered by R. section Sarkaria, J. Beg, J. gave a separate opinion.
BEG, J. I have had the advantage of going through the judgement of my learned brother Sarkaria.
I confess that I do not feel confident enough about the veracity of the defence case and the evidence found in support of it to be able to hold that it is proved on a balance of probabilities.
But, I think that what transpires from a consideration of the whole evidence is enough to entitle the accused to a benefit of doubt for the reasons given below.
The findings of the Trial Court on the defence version indicate that a question of law arise here which seems to have troubled several High Courts.
It gave rise to two Full Bench decisions of the Allahahad High Court, the first in Parbhoo vs Emperor,(l) and the second in Rishi Kesh Singh & ors.
vs the State( ').
It does not seem to have been considered in the same form by this Court.
r I think this is an appropriate case in which this Court could consider and decide it, and, it is because this aspect of the case was ignored by the Trial Court as well as the High Court that I consider this to be a fit case for a reconsideration of evidence and interference by this Court under Article 136 or the Constitution.
The Trial Court, after assuming that there may be some truth in the defence version that Ram Nath had gone to the scene of occurrence with a bhala, said: "Even if Ram Nath had arrived there armed with bhala, there could be no apprehension of death or grievous hurt to any one of the accused persons as the accused persons were armed with gun and pistol and could defend themselves if Ram Nath tried t(3 strike them with 'bhala '.
Pratap and Suresh 'accused could not be justified in firing gun shots and pistol shots at Ram Nath in the expectation that Ram Nath may reach the place where Puttu Lal accused was standing and may strike him with 'bhala '.
(1) A.l.
R. 1941 All.
402 (FB).
(2) AIR 1970 All.
Sl (FB).
760 Pratap and Suresh accused had started from their house A with gun and pistol before they had known about the reaching of Ram Nath at that place with a 'bhala '.
It can reasonably be inferred from the own case of the defence that Pratap and Suresh accused, or at least Pratap accused, had arrived there with the intention of committing the murder of Raj Kumar or of any body who may interfere in the wordy duel between Raj Kumar P.W. and Puttu Lal accused".
This shows that the Trial Court was inclined to believe that the defence version was true to the extent that Ram Nath had rushed to the scene of occurrence with a bhala, when a quarrel between the two sides was taking place.
But, it overlooked here that Ram Nath, while going to the help of Raj Kumar, had actually expressed his intention to break the heads of members of Puttu Lal 's party.
At any rate, according to the prosecution evidence.
, Ram Nath was acting in such a way as to appear like a "lion" bent on interference to protect Raj Kumar in a quarrel between the two sides.
If this was Ram Nath 's conduct, could he not have done something which gave rise to the right of private defence of person ? If that right had arisen how could shooting him be murder ? Even if it was exceeded the offence could not be culpable homicide amounting to murder.
Why should Pratap, the appellant, have spared Raj Kumar who, according to the prosecution evidence itself, had given offence to Puttu Lal in the past and then on the date of incident by actually demolishing a nali and then advancing towards him with his phawra, threatening to strike Puttu Lal, but shoot at Ram Nath who appeared subsequently and was, according to the prosecution version, quite unarmed ? The prosecution evidence is that Puttu Lal had called his son Pratap and asked him to bring his gun only when Raj Kumar had threatened to attack him with his phawra and had advanced towards Puttu Lal.
Nevertheless, Pratap and Suresh are alleged to have shot down Ram Nath, even though Ram Nath was empty handed, but did nothing to Raj Kumar who was, according to the prosecution version, more offensive and threatening with a phawrah and was the cause of the whole trouble Such conduct, attributed to Pratap and Suresh, in the setting alleged, seems quite unnatural and eccentric.
Raj Kumar, P.W. 1, also stated that Atma Ram, Achhe Ram and Sia Ram, Pradhan, took their stand in parti land at about the same time as Ram Nath had arrived on the scene and had asked Ram Nath not to loose heart or to be discouraged as he was coming to deal with each one of Raj Kumar 's adversaries.
Then, at Puttu Lal 's instigation, Pratap and Suresh are alleged to have shot at Ram Nath.
Why is it that this version of the obviously interested Raj Kumar, PW 1, is, only supported by two chance witnesses of another village, but neither Atma Ram nor Achhe Ram, nor Sia Ram, Pradhan of village Sant Kuiyan, who had, according to the prosecution version, witnessed the occurrence not produced by the prosecution at all ? The prosecution could select its witnesses.
But, why was such an objectionable selection made ? Was it not a case in which the Court should have exercised its power under Section 540 Criminal Procedure Code to summon at least Sia Ram 761 Pradhan, in whose grove Ram Nath was shot, so as to ascertain the whole truth more satisfactorily ? Had not the Trial Court and the High Court too readily assumed that absolute truth fell from the lips of prosecution witnesses as regards the commencement of aggression even when their own statements contained admissions indicating that the whole or the real truth had not been revealed by them ? These are some of the doubts which the rather mechanical examination of evidence by the Trial Court and the High Court do not dispel.
The question which arises in this case is: Even if the defence version is not held to be fully established, by a balance of probabilities, were there not sufficient pointers in evidence of what was probably the truth which leaked out from some statements of the prosecution witnesses themselves ? They had indicated the bellicose and threatening attitude of Ramnath while he was advancing.
Did this not tend to corroborate the defence version that he was actually advancing menacingly armed with a bhala piosed for an attack with it when he was shot at ? It was held in the case of Rishi Kesh Singh (supra) by a majority of a Full Bench of nine Judges of the Allahabad High Court explaining and relying upon the decisions of this Court discussed there (at p. 51): "The accused person who pleads an exception is entitled to be acquitted if upon a consideration of the evidence as a whole (including the evidence given in support of the plea of the general exception) a reasonable doubt is created in the mind of the Court about the built of the accused".
In that case, the result of a consideration of the decisions of this Court in relation to the provisions of Section 105 of the Evidence Act was summed up by me as follows (at page 97 98): ".
an accused 's plea of an exception may reach one of three not sharply demarcated stages, one succeeding the other, depending upon the effect of the whole evidence in the case judged by the standard of a prudent man weighing or balancing probabilities carefully.
These stages are: firstly, a lifting of the initial obligatory presumption given at the end of section 105 of the Act; secondly, the creation of a reasonable doubt about the existence of an ingredient of the offence; and, thirdly, a complete proof of the exception by 'a preponderance of probability ', which covers even a slight tilt of the balance of probability in favour of the accused 's plea.
The accused is not entitled to an acquittal if his plea does not get beyond the first stage.
At the second stage, he becomes entitled to acquittal by obtaining a bare benefit of doubt.
At the third stage, he is undoubtedly entitled to an acquittal.
This, in my opinion, is the effect of the majority view in Parbhoo '.
case which directly relates to first two stages only.
The Supreme Court decisions have considered the last two stages so far, but the first stage has not yet been dealt with directly or separately there in any case brought to our notice." 18 L925SupCl/75 762 Provisions of Section 105 of the Evidence Act, which are applicable in such cases, contain what are really two kinds of burden of the accused who sets up an exception; firstly, there is the onus laid down of proving the existence of circumstances bringing the case within any of the General exceptions in the Indian Penal Code, or, within any special exception or proviso contained in any other part of the same Code, or in any law defining the offence, and, secondly, there is the burden of introducing or showing evidence which results from the last part of the provision which says that "the Court shall presume the absence of such circumstances".
The effect of this obligatory presumption at the end of Section 105 of the Evidence Act is that the Court must start by assuming that no facts exist which could be taken into consideration for considering the plea of self defence as an exception to the criminal liability which would otherwise be there.
But, when both sides have led evidence of their respective versions, the accused can show, from any evidence on the record, whether tendered by the prosecution or the defence, that the mandatory presumption is removed.
the last mentioned burden is not really a burden of establishing the plea fully but of either introducing or of showing the existence of some evidence to justify the taking up of the plea.
The burden resulting from the obligatory presumption is not difficult to discharge and its removal may not be enough nor an acquittal.
D Section 105 of the Evidence Act was thus explained in Rishi Kesh Singh 's case (supra) (at P. 95): "Even a literal interpretation of the first part of Section 105 could indicate that 'the burden of proving the existence of circumstances bringing the case ' within an exception is meant to cover complete proof of the exception pleaded, by a preponderance of probability, as well as proof of circumstances showing that the exception may exist which will entitle, the accused to the benefit of doubt on the ingredients of an offence.
If the intention was to confine the benefit of bringing a case within an exception to cases where the exception was established by a pre ponderance of probability, more direct and definite language would have been employed by providing that the accused must 'prove the existence ' of the exception pleaded.
But, the language used in the first part of Section 105 seems to be deliberately less precise so that the accused, even if he fails to discharge his duty fully, by establishing the existence of an exception, may get the benefit of the exception in directly when the prosecution fails in its duty to eliminate genuine doubt about his guilt introduced by the accused.
Again, the last part of Section 105, even if strictly and literally interpreted, does not justify reading into it the meaning that the obligatory presumption must last until the accused 's plea is fully established and not just till circumstances (i.e. not necessarily all) to support the plea are proved.
Moreover, a restrictive interpretation of Section 105, excluding an accused 11 from the benefit of bringing his case within an exception until he fully proves it, is ruled out by the declaration of law by the Supreme Court that there is no conflict between Section 763 105 and the prosecution 's duty to prove its case beyond reasonable doubt.
Hence, the obligatory presumption, at the end of Section 105, cannot be held to last until the accused proves his exception fully by a preponderance of probability.
It is necessarily removed earlier or operates only initially as held clearly by judges taking the majority view in Parbhoo 's case, 1941 All LJ 619 AIR 1941 All 402 (FB)".
It was also said there (at p. 89): "The legal position of a state of reasonable doubt may Be viewed and stated from two opposite angles.
One may recognise, in a realistic fashion, that, although the law prescribes only the higher burden of the prosecution to prove its case beyond reasonable doubt and the accused 's lower burden of proving his plea by a preponderance of probability only, yet, there is, in practice, a still lower burden of creating reason able doubt about the accused 's guilt, and that an accused 's can obtain an acquittal by satisfying this lower burden too in practice.
The objection to stating the law in this fashion is that it looks like introducing a new type of burden of proof, although, it may be said, in defence of such a statement of the law, that it only recognises what is true.
Alternatively, one may say that the right of the accused to obtain the benefit of a reasonable doubt is the necessary outcome and counterpart of the prosecution 's undeniable duty to establish its case beyond reasonable doubt and that this right is available to the accused even if he fails to discharge his own duty to prove fully the exception pleaded.
This technically more correct way of stating the law was indicated by Woolmington 's case and adopted by the majority in Parbhoo 's case, and, after that, by the Supreme Court.
It seems to me that so long as the accused 's legal duty to prove his plea fully as well as his equally clear legal right to obtain the benefit of reasonable doubt, upon a consideration of the whole evidence, on an ingredient of an offence, are recognised, a mere difference of mode in describing the position, from two different angles, is an immaterial matter of form only.
Even if the latter form appears somewhat artificial, it must be preferred after its adoption by the Supreme Court".
(See: K. M. Nanavati vs State of Maharashtra AIR Applying the principle of benefit of doubt, as I had ' explained above, to the plea of private defence of person in the instant case, I think that, even if the appellant did not fully establish his plea, yet, there is sufficient evidence, both direct and circumstantial, to justify the finding that the prosecution has not established its case beyond reasonable doubt against Pratap on an essential ingredient of the offence of murder: the required mens rea.
After examining all the facts and circumstances revealed by the prosecution evidence itself and the defence evidence and considering the effect of non production of the better evidence available which for some unexplained reason, was not produced, I am not satis 764 fied that the plea of private defence of person can be reasonably ruled A out here.
This is enough, in my opinion, to entitle the appellant to get the benefit of doubt.
I may observe here that the High Court had not only failed to grapple with this difficulty arising from the evidence in the case and some of the findings of the Trial Court, which seemed to think that the intention to murder or the required mens rea for murder must be presumed from the mere fact of homicide (a wholly incorrect approach in a case where a plea of private defence had been raised and sought to be established by some evidence), but, the High Court itself started from a totally unsound premise when it observed: "It was Puttu Lal who was committing aggression by insisting that Raj Kumar should not dismantle the Nali It is again admitted by Puttu Lal that he cried out for help in response to which Pratap arrived armed with a double barrel gun.
" In other words, the High Court assumed that a mere insistence by Puttu Lal that Raj Kumar should not dismantle the nali amounted to an "aggression" begun.
The word "aggression" is generally used for an actual invasion of the property of another or an attack on the body of another.
It is true that it is not necessary that an actual attack should commence before a right of private defence can arise.
Nevertheless, a reasonable apprehension of injury could not be said to arise by a mere prohibition to dig up a "nali" or drain.
It could arise if a man is advancing aggressively towards others holding out threats to break their heads even if he is armed with a lathi with which he could carry out such a declared intention.
The extent of the right or its justification is another matter depending again upon facts which have a bearing on extent of the right or its reasonable exercise.
In the circumstances of the case before us, I think, we can hold, that, even if Ram Nath was not positively proved to be threateningly advancing with a bhala poised for attack towards Pratap, appellant, or Puttu Lal, yet, a consideration of all the probabilities and evidence on record leads us to infer that this was reasonably likely to be true.
If this was so, it is clear that the appellant must have discharged his gun when Ram Nath had advanced and come near enough in a manner which must have been so menacing as to raise an apprehension of an attack with the bhala.
Such an assumption fits in with medical evidence too showing that the shots were fired from a close enough range to cause charring.
Another feature of the case is that the High Court itself did not rely on the statements of the alleged eye witnesses when it acquitted Suresh, who was also alleged to have shot with his pistol" giving him the benefit of doubt because, unlike Puttu Lal and Pratap, he had denied his presence or participation in the occurrence and was said to be only distantly related to Puttu Lal.
765 I think, on an analysis of the whole evidence, that the appellant Pratap was also entitled to the benefit of a doubt which could be said to be reasonable.
I, therefore, concur in the order proposed by my learned Brother.
SARKARIA, J.
This appeal by special leave is directed against a judgment of the High Court of Allahabad dismissing the appeal of Partap appellant and maintaining his conviction under section 302, Penal Code.
The facts of the prosecution case as narrated at the trial by Raj Kumar, the star witness of the prosecution, were as follows: Raj Kumar had installed a Tubewell in his field known as 'Chharelawala.field ' in the revenue estate of village Sant Kuiyan, in the year 1962.
The water pumped out from this tubewell was utilised by him not only for irrigating his own fields but also those of the neighbours against charges.
Subsequently, Puttu Lal accused also set up a tubewell in his land situate in the vicinity of Chharelawala field.
Puttu Lal, too, started letting out the use of his tubewell on hire.
An unhealthy competition ensued between Raj Kumar and Puttu Lal in this water business, and their relations became strained.
There was a water channel running from north to south in Raj Kumar 's field through which Puttu Lal used to supply water to others.
To the south of Chharelawala field, there is grove belonging to Sia Ram, Pardhan of the village.
The tubewell of Puttu Lal is located towards the south of that grove.
To the west of the Chharelawala field, is a plot belonging to Puttu Lal.
Two or three days before the occurrence in question, there was an exchange of hot words between Raj Kumar and Puttu Lal when the latter insisted on taking water through the said channel.
Raj Kumar firmly refused Puttu Lal the use of that channel.
on S 1 1967, at about 7.45 a.m., Raj Kumar and his brothers Ramchander and Bhagwan Sahai, started demolishing their channel so that Puttu Lal should not be able to supply water through it.
About fifteen minutes thereafter, Puttu Lal and his son, Ram Parkash, appeared on the northern ridge of the grove of Siya Ram.
Puttu Lal was carrying a lathi and Ram Parkash a bhala.
Puttu Lal asked Raj Kumar and his companions not to demolish the channel.
Raj Kumar rudely refused asserting that the channel belonged to him and he had every right to erase it.
Raj Kumar advanced towards Puttu Lal threatening to break his head with the spade, and thus settle the matter once for all.
On being so threatened, Puttu Lal shouted to his son, the appellant, to come immediately with his gun.
In response to Puttu Lal 's call, the appellant, armed with the double barrel licensed gun of Puttu Lal, and Puttu Lal 's other son, Suresh, armed with a pistol, came.
A couple of minutes after the arrival of the appellant and Suresh, the deceased Ram Nath who was the son of Raj Kumar 's wife 's brother, came out running from the grove.
He shouted to 766 Raj Kumar not to be afraid as he would settle the matter with every A one of the accused and break their heads.
On seeing the deceased, Puttu Lal said: "He thinks himself to be a lion, let us see him first of all".
On this instigation, Partap fired his gun at Ram Nath from a distance of four or five paces.
On receiving the gun shot, Ram Nath turned back when he was hit by a second shot fired by Suresh from his pistol.
Ram Nath, dropped dead.
The accused then ran away taking their weapons with them.
Raj Kumar PW 1 went home, scribed the report.
ka 3, and handed it over in the Kain Ganj Police Station, 8 miles away, at 9.30 a.m.
After registering a case on the basis of this report, Sub Inspector Kartar Singh reached the spot and started the investigation.
He prepared the inquest report and sent the body for post mortem examination.
The autopsy was conducted by Dr. section P. Chaturvedi, PW 3, on 6 1 1967, at 12.40 p.m.
The Doctor found five gunshot wounds of entry and three of exit on the deadbody.
There was blackening around all the wounds of entry.
The death, in the opinion of the Doctor, was due to shock and haemorrhage on account of the gunshot wounds of the head and the right lung.
The accused surrendered in the court of the Additional District Magistrate, Farrukhabad on 7 1 1969, and thereafter their custody was taken over by the Police.
After conducting the preliminary enquiry the Magistrate committed Puttu Lal, Suresh and Partap accused for trial to the court of Session on charges under sections 302/34, 109 Penal Code All the three accused were convicted and each of them was sentenced to imprisonment for life and a fine of Rs. 200/ .
The plea of the accused was one of denial of the prosecution case.
Suresh pleaded alibi and alleged false implication.
Partap pleaded that the deceased was about to strike him with a bhalla and consequently, he fired two shots, in self defence, from his double barrel gun at the deceased.
The accused examined Chhote Khan, DW 1.
in defence.
The trial judge rejected the defence version and convicted and sentenced the accused as aforesaid.
In appeal, the High Court acquitted Suresh accused but maintained the conviction of Puttu Lal and Partap.
Before the admission of the special leave petition under Article 136 of the Constitution by this Court, Puttu Lal died.
Thus only the appellant 's conviction survives for consideration in this appeal.
The decision of the courts below rests mainly on the testimony of the three eye witnesses, namely, Raj Kumar, PW 1, Atma Ram PW 2, and Achhey Ram, PW 4.
Mr. A. N. Mulla, the learned Counsel for the appellant contends that the evidence of P.Ws. 2 and 4 was not worthy of credence; that being residents of another village and having failed to give a credible reason for their presence at the scene of occurrence, they were chance witnesses of the worst type; that as admitted by their brother" Bisheshar Dayal, PW 15, they were not only related to the deceased but were 767 stock witnesses of the Police.
that since the witnesses did not frankly and fully admit their mutual blood relationship" they were of a type to whom truth, even in trifles, appeared to be unpalatable; that the prosecution had failed to examine Siya Ram and Mahabir who were also named as eye witnesses in the F.I.R. and the courts below had erred in not drawing an adverse inference against the prosecution on that score.
Although this criticism levelled against P.Ws. 2 and 4 is not totally devoid of force, we do not think it a sufficient ground to depart from the settled rule of practice according to which this Court does not, in the absence of material irregularity, illegality or manifest error, itself reappraise the evidence.
In spite of these infirmities, the courts below have believed their presence at the time and place of occurrence.
The reasons given by the witnesses for their presence at the spot, may be vulnerable, even wrong.
True, they are residents of the neighbouring village, 1 1/2 or 2 miles away, and belong to the caste of the deceased.
PW 15 may be bearing some relationship with the deceased.
But the fact remains that PWs 2 and 4 have been named as eye witnesses in the F.I.R. which was lodged in the Police Station, 8 miles away, with utmost promptitude.
Be that as it may, the fate of the case did not depend on the evidence of these two witnesses.
Raj Kumar 's evidence corroborated by the F.I.R. and the other evidence on the record, was by itself, sufficient to hold that the appellant had fired a fatal shot at the deceased from close range with the double barrel gun of his father.
Thus, the only question that falls to be considered in this appal is, whether Ram Nath was shot dead by the appellant in the exercise of his right of private defence ? We have carefully scrutinised the judgments of the courts below.
In our opinion, their finding in regard to the plea of self defence is clearly erroneous.
They appear to have overlooked he distinction between the nature of burden that rests on an accused under section 105 Evidence Act to establish a plea of self defence and the one cast on the prosecution by Section 101 to prove its case.
It is well settled that the burden on the accused is not as onerous as that which lies on the prosecution.
While the prosecution is required to prove its case beyond a reasonable doubt, the accused can discharge his onus by establishing a mere preponderance of probability.
Since the approach of the courts below is basically wrong, it has become necessary to examine the material on record bearing on the plea of self defence.
This plea was specifically taken by the appellant at the trial in his examination under section 342, Cr.
It was put to Raj Kumar PW 1, the chief witness of the prosecution, in cross examination.
Raj Kumar replied: "It is wrong to suggest that Ram Nath would have murdered Partap if Partap had not fired at him.
Ram Nath had nothing in his hand.
" The courts below have accepted without demur the ipse dixit of Raj Kumar that the deceased was unarmed.
We find it impossible to swallow this so improbable a version the credibility of which was extremely underminded by the telling 768 circumstances appearing in the prosecution evidence, itself.
It was the admitted case of the prosecution that following the threatening gesture made by Raj Kumar to break Puttu Lal 's head with the spade, and the call given by Puttu Lal, the appellant came there armed with a gun and immediately thereafter, the deceased came running, proclaiming that he would break the heads of and settle the scores with everyone of the accused party.
It is further admitted that the deceased had reached at a distance of 3 or 4 paces from the appellant when the latter fired.
The blackening found around the wounds of entry on the deadbody by the medical witness, confirm that the deceased was within six feet of the assailant when he received those injuries.
Again, it is the case of the prosecution that at the time of the first gun fire the deceased was facing the appellant.
The medical evidence also confirms it, inasmuch as two entrance wounds (1 and 5) were located on the front side of the deceased.
From this circumstance it is clearly discernible that the deceased was charging at the gunman and had reached within a striking distance when his charge was foiled by the gun fire.
It is difficult to believe that the deceased would have behaved in the bold and truculent manner he did, if he were not armed with a formidable weapon.
It was put to Raj Kumar by the defence that if the deceased was empty handed as was alleged by the witness how did he proclaim to break the heads of the accused.
The witness had no satisfactory answer to it.
Conscious that he was suppressing the fact in question, all that he could say in befuddled embarrassment, was: '`I do not know with what weapon he was going to break the heads.
" The appellant 's plea that the deceased was going to strike him with a Bhalla, when the gun was fired, was highly probable.
one of the reasons given by the learned Judges of the High Court for ignoring this plea was that it was belated and had not been set up by the appellant during his examination in the Committal Court.
A glance at the record of that examination would show that he was not properly examined in that court.
Only a composite question with regard to all the circumstances of the prosecution case, was put to him in the Committal Court, which he denied.
The omission of the appellant to set up the plea of private defence in the Committal Court, therefore, was no ground to brand it as an after thought, particularly when there was foundation for it in the prosecution evidence, itself.
The circumstances appearing in the prosecution evidence, and the statement of the appellant recorded under Sec 342, Cr.
P.C. did not exhaust the material in support of the plea of self defence.
There was the direct testimony of Chhote Khan, DW 1, who testified that he was attracted from his house to the spot by the outcry of Puttu Lal accused which was to the effect, that he was being killed.
Witness saw Ram Nath deceased, armed with a spear, running towards the move of Siya Ram.
Thereafter, he heard two reports of gun fire.
On reaching the grove, the witness saw Ram Nath lying dead with a spear by his side.
Partap appellant and Puttu Lal were also seen running away from the scene.
Partap was carrying a gun.
Witness did not see Suresh and Ram Parkash there.
Excepting the precise words of 769 Puttu Lal 's call and the fact of the deceased being armed with a spear, Chhote Khan 's evidence in so far as it goes, fits in with the prosecution story.
The High Court has rejected hi, evidence without much discussion for two reasons; firstly, that he was not speaking the truth inasmuch as he stated that Puttu Lal was raising an outcry that he was being killed, because it was no body 's case that any body assaulted or attempted to assault Puttu Lal.
Secondly, the witness did not appear and make any statement before the investigating officer.
Neither of these was a good ground to reject his testimony but of hand.
Chhote Khan was a resident of the same village.
The place of occurrence is not situated at a far off distance from the village, Indeed, it was the prosecution case that the appellant and deceased came to the spot after hearing the shouts of Puttu Lal and Raj Kumar.
Chhote Khan 's coming to the spot from the village on hearing the same shouts, was therefore, equally probable.
In any case, his reaching the scene on hearing the reports of gun fire and seeing Ram Nath lying dead with a spear, was a highly probable fact.
Nor could his version that Puttu Lal was raising an outcry that he was being killed, be rejected outright.
It was admitted by Raj Kumar in cross examination, that he and his companions had advanced 2 paces towards the accused Puttu Lal and others, threatening to break their heads with the Phawra (spade and that the witness was then carrying (rather brandishing) the spade.
It is further admitted that it was after this threat that Puttu Lal gave a call to the appellant to come armed with the gun.
In the face of such a threat, it was not improbable for Puttu Lal to cry out for help saying that he was being killed.
Chhote Khan was an independent witness.
Nothing was brought out in cross examination to show that he was hostile towards the complainant party or had any special interest in the defence.
In the light of the above discussion, the conclusion is inescapable that the appellant had succeeded in establishing by a preponderance of probability, that the deceased was within a striking distance, poised for imminent attack on the appellant with a spear, when the latter fired the fatal gunshot.
In such a situation, the appellant had reasonable and immediate apprehension that he would suffer death or grieous hurt if he did not fire at the deceased.
Thus the death was, in all probability, caused by the appellant in the exercise of his right of private defence.
For the foregoing reasons we allow the appeal, set aside the conviction of the appellant and acquit him.
V.P.S Appeal allowed .
| IN-Abs | The appellant, his father and another were charged with murder and convicted by the trial court.
The first information referred to eye witnesses, of whom the prosecution examined only two.
These two were chance witnesses of another village, but the others who belonged to the village where the occurrence took place, were not examined.
The third accused was acquitted on appeal.
by the High Court and the father died after his conviction was con firmed by the High Court.
The appellants plea of private defence was rejected both by the trial court and the High Court.
Allowing the appeal to this Court, ^ HELD (Per M. H. Beg J.): Section 105 of the Evidence Act contains two kinds of burden on the accused who sets up an exception (i) the onus of proving the existence of circumstances bringing the case within any of the general or special exceptions in the I.P.C. Or in any other law; and (ii) the burden of introducing or showing evidence, resulting from the last part of the provision which says that the court shall presume the absence of such circumstances.
The effect of the obligatory presumption at the end of Section 105 is that the court must start by assuming that no facts exist which could be taken into consideration for considering the plea of self defence as an exception to the criminal liability which would otherwise be there.
But when both sides have led evidence of their respective versions the accused ' can show, from the evidence on record, whether tendered by the prosecution or the defence that the mandatory presumption is removed.
The last mentioned burden is not really a burden of establishing the plea fully but of either introducing or showing the existence of some evidence to justify the taking up of the plea.
The burden resulting from the obligatory presumption is not difficult to discharge and its removal may not be enough for acquittal.
But the right of the accused to obtain the benefit of reasonable doubt is the necessary outcome and counter part of the prosecution 's undeniable duty to establish its case beyond reasonable doubt and that right is available to the accused even if he fails to discharge his own duty to prove fully the exception pleaded.
[762A D; 763E] In the present case, even if the appellant did not fully establish his plea.
yet, there is sufficient evidence, both direct and circumstantial, to justify the finding that the prosecution has not established its case beyond reasonable doubt against the appellant on an essential ingredient of the offense of murder namely the required mens rea.
An examination of all the facts and circumstances revealed by the entire evidence, including the effect of non production of the better evidence available which.
for some unexplained reason was not produced, shows that the plea of private defence cannot be reasonably ruled out.
Even if the deceased was not positively proved to be advancing threateningly with a spear poised for attack, towards the appellant or his father, yet, a consideration of the whole evidence leads to the inference that this was reasonably likely to be true.
[763C 764A E] (1) The trial court was inclined to believe that the defence version was true to the extent that the deceased had rushed to the scene with a spear.
It overlooked that the deceased while going to help P.W. 1, had actually expressed his intention to break the heads of the members of the accused party and that he was acting in such a was as to appear to be bent on physically aggressive interference in a quarrel between the two sides.
If that was the conduct of the deceased, it is reasonable to infer that he must have done some 758 thing which gave rise to the right of private defence in favour of the appeallant Otherwise, the conduct of the appellant, in sparing, P W. 1, who according to the prosecution had given offence to his father in the past and on the day of the incident.
and was advancing towards the father threatening to strike him with a spade, but shooting the deceased who appeared on the scene subsequently and was, according to the prosecution version unarmed becomes inexplicable If the right of self defence had arisen the shooting could not be murder, even if the right was exceeded the offence could not he culpable homicide amounting to murder.[760B F] (2) Further, the prosecution version is supported only by two chance witnesses, hut the other persons, who had according to the prosecution version witnessed the occurrence and whose names were mentioned in the FIR.
were neither produced by the prosecution nor were they examined as court witnesses [760G 761B] (3) Moreover the High Court itself did not rely on the statements of the alleged eye witnesses when it acquitted the third accused who was also alleged to have shot with his pistol [764H] Parbhoo vs Emperor, AIR 1941 All 402(FB) and Rishi Kesh Singh ors.
vs The State AIR 1970 All] 51 (FB), referred to (Per P. N. Bhagwati and R.S. Sarkaria, JJ) The appellant had established by a preponderance of probability, that the deceased was within a striking distance poised for imminent attack on the appellant with a spear, when the appellant fired the fatal shot, and hence.
the death was caused by the appellant in the exercise of the right of private defence.[769F G] (1) Nothing turns on the evidence or the two witnesses who were examined but the approach of the trial court and the High Court to the plea of self defense raised by the appellant was wrong necessitating a review of the evidence by this Court [767D,G] (2) The burden on the accused under s.105, Evidence Act is not as onerous as that which lies on the prosecution under s 101, Evidence Act, to prove its case.
While the prosecution is required to prove its case beyond reasonable doubt, the accused can discharge his onus by establishing a mere preponderance of probability [767 T] (3) The plea of private defence was specifically taken by the appellant at the trial in his examination under s 342 Cr.P.C., and was put to P.W. 1.
the chief eye witness for the prosecution.
The High Court was wrong in branching the plea as an after though on the ground that he did not raise it in the committal court, especially when there is foundation for it in the prosecution evidence itself.
The record also shows that only a composite question was put to the appellant and that he was not properly examined in the committal court.
[767;768E G] (4) The appellant plea that the deceased was about to strike with his spear when the gun was fired was highly probable.
The prosecution case was that, following the threatening gesture made by P.W. 1.
to break the father 's head with a spade and the call given by him, the appellant came to the scene of occurrence with a gun; that immediately thereafter the deceased came proclaiming that, he would break the heads of, and settle scores with everyone of, the accused party, and that the deceased had reached a distance of 3 or 4 paces from the appellant and was charging at him with the appellant fired.
The prosecution story that the deceased was unarmed is improbable.
He would not have behaved in that bold and truculent manner unless he was armed with a formidable weapon.
[767H 767D] (5) The defence witness also testified that he was attracted from his house to the scene of occurrence by the outcry of the father, that he saw the deceased 759 armed with a spear running towards the scene of occurrence and that he saw the deceased Lying dead with a spear beside him.
He was an independent witness and nothing was brought out in the cross examination to show that he was either hostile towards the complainant 's party or had any special interest in the accused.
His version was probable and the High Court Was wrong in rejecting his evidence.
[769D F]
|
N: Criminal Appeal No. 131 of 1971.
Appeal by special leave from the judgment and order dated the 4th March.
1971 of the Bombay High Court in Criminal Appeal No. 1954 of 1969.
K. R. Chaudhury, section L. Setia, Rajendra Chaudhury and Veena Khanna, for the appellant.
H. R. Khanna and M. N. Shroff, for the respondent.
The Judgment of the Court was delivered by SARKARIA, J.
This appeal by special leave is directed against a judgment of the High Court of Bombay upholding the conviction and sentence passed against the appellant under section 379, Penal Code.
The facts are these : The appellant was tried in the court of the Presidency Magistrate 5th Court, Dadar on the charge of committing theft of three drums containing phosphorous pentaoxide, valued at Rs. 300/ from the premises of the Bombay Port Trust on 1 8 1968 at 8.40 a.m.
The First Information Report of the theft lodged with the police by Murari Bhikaji Bidya (PW 1 ) Shed Superintendent of Haji Bunder, at 9.15, was as follows: "Today in the morning at about 8.
a.m. I reported for duty at Haji Bunder.
At about 8.40 a.m. or so, the Canteen boy named Shri Babu Durga came to me and informed me that one M/Car had come inside Haji Bunder and removed 3 small drums which were lying between 'A ' Shed and Canteen in an open place along with several drums.
I immediately asked Shri Joshi the gate keeper who was present in my office at that particular time, to go out and see what was the matter after some time Shri Joshi came to my office and informed me that before he could reach the gate, the car had already left.
However, he has noted down the number of the Car as 6649.
He further told me that he shouted to stop the car but the driver of the said car drove away the Car at a fast speed.
I then went in the open place in between 'A ' Shed and Canteen where the drums were lying when the above said Canteen boy showed me a gap in between bigger size drums from where the small drums were removed . " Sub Inspector Thorat PW 7, conducted the investigation.
After making inquiries from the Regional Transport office, he traced the 717 owner of the car, BML 6649, and requested him to send his car driver to the Police station.
Accordingly, the driver, Babu Vithal (PW 5), accompanied by the accused (appellant) appeared before the Sub Inspector in the Police Station on September 26, 1968.
The Sub Inspector took the accused into custody.
He then called the Panchas (including PW 6) and, in their presence, interrogated the accused who made a statement which was recorded by the Sub Inspector.
Rendered into English, this statement (incorporated in the Panchanama exhibit C) reads: "I will tell the place of deposit of the three Chemical drums which I took out from the Haji Bunder on 1st August.
" The accused then led the Police officer and the Panchas to a Musafirkhana in Crowford Market and pointed out the three drums lying there, bearing the markings, 'ACC I Phosphorous Pentaoxide '.
Thereafter, the drums were identified by PW 1 as the same which had been stolen.
Among others, the prosecution examined Bhikaji (PW 1) the informant, Vishnu Sakharam (PW 2), the Gate keeper, Govindji (PW 3) the Clearing Agent and Rasal Mohd. (PW 6), a panch witness of the discovery.
The driver of the car BML 6649 was also put in the witness box as PW 5.
He turned hostile and the prosecution cross examined him to impeach his credit.
The plea of the appellant was one of plain denial of the prosecution case.
The courts below have concurrently found these facts: 1.
That three drums had been stolen from the shed of the Bombay Port Trust on 1 8 1968 at 8.4 A.M. 2.
That the drums in question were the same that had been stolen.
That these drums were discovered in consequence of the information (vide exhibit C) given by the accused whilst in police custody.
That such information, as admissible under section 27 Evidence Act, showed that the accused was admittedly in possession of these stolen drums on 26 9 1968 and therefore, under illustration (a) of sec.
114, Evidence Act, he would be presumed to be the thief.
Mr. Chaudhry, the learned Counsel for the appellant does not seriously dispute the first two findings.
But he forcefully assails the third and the fourth.
His contentions are: (a) that the courts below have not only misconstrued the statement made by the accused but have used more of it than was permissible under Sec.
27, Evidence Act; (b) that properly read, the admissible portion of the statement, 718 in the circumstances of the case, did not warrant an inference under illustration (a) to Sec.
114, Evidence Act, that the appellant was the thief or a receiver of stolen property.
As against this, Mr. H. R. Khanna, learned Counsel for the State submits that the whole of the information supplied by the accused was admissible udder sec.
Although the interpretation and scope of sec.
27 has been the subject of several authoritative pronouncements, its application to concrete cases is not always free from difficulty.
It will therefore be worthwhile at the outset, to have a short and swift glance at the section and be remained of its requirements.
The Section says: "Provided that, when any fact is deposed to as discovered in consequence of information received from a person accused of any offence, in the custody of a Police officer, so much of such information, whether it amounts to a confession or not, as relates distinctly to the fact thereby discovered may be Proved." The expression "Provided that" together with phrase "whether it amounts to a confession or not" shows that the section is in the nature of an exception to the preceding provisions particularly Secs.
25 and 26.
It is not necessary in this case to consider if this section qualifies, to any extent, Sec. 24, also.
It will be seen that the first condition necessary for bringing this section into operation is the discovery of a fact, albeit a relevant fact, in consequence of the information received from a person accused of an offence.
The Second is that the discovery of such fact must be deposed to.
The third is that at the time of the receipt of the information the accused must be in police custody.
The last but the most important condition is that only "so much of the information" as relates distinctly to the fact thereby discovered is admissible.
The rest of the information has to be excluded.
The word "distinctly" means "directly", "indubitably", "strictly", "unmistakably".
The word has been advisedly used to limit and define the scope of the proveable information.
The phrase "distinctly" relates to the fact thereby "discovered" is the linchpin of the provision.
This phrase refers to that part of the information supplied by the accused which is the direct and immediate cause of the discovery.
The reason behind this partial lifting of the ban against confessions and statements made to the police, is that if a fact is actually discovered in consequence of information given by the accused, it affords some guarantee of truth of that part, and that part only, of the information which was the clear, immediate and proximate cause of the discovery.
No such guarantee or assurance attaches to the rest of the statement which may be indirectly or remotely related to the fact discovered.
At one time it was held that the expression "fact discovered" in the section is restricted to a physical or material fact which can be perceived by the senses, and that it does not include a mental fact (see 719 Sukhan vs Crown,(1) Rex vs Ganee) (2).
Now it is fairly settled that the expression "fact discovered" includes not only the physical object produced, but also the place from which it is produced and the knowledge of the accused as to this (see Palukuri Kotayya and ors.
vs Emperor(3), Udai Bhan vs State of Uttar Pradesh.(4) Before proceeding further, it is necessary to be clear about the precise statement which had been made by the appellant to the Police officer.
This statement finds incorporation in the panchnama, exhibit and we have reproduced an English rendering of the same earlier in this judgment.
While considering this statement, the High Court observed that the accused had stated that "he had kept them (drums) there".
We have perused the original record of the statement which is in Hindi, and we are of opinion that by no stretching of the words this statement can be so read or construed as has been done by the High Court.
The copy exhibit of the Panchnama, in the Paper book contains a correct English rendering of the same.
What the accused had stated was: "I will tell the place of deposit of the three Chemical drums which I took out from the Haji Bunder on first August".
It will be seen that he never I said that it was he who had deposited the drums at the place from which they were produced.
It seems the latter part of the statement which was an outright confession of the theft, was not completely ruled out of evidence and something of it was imported into and superimposed on the first part of the statement so as to fix the responsibility for deposit and possession of the stolen drums there, on the accused.
Having cleared the ground, we will now consider, in the light of the principles clarified above, the application of section 27 to this statement of the accused.
The first step in the process was to pinpoint the fact discovered in consequence of this statement.
Obviously, in the present case, the threefold fact discovered was: (a) the chemical drums in question, (b) the place i.e. the Musafirkhana, Crawford Market, wherein they lay deposited and (c) the accused 's knowledge of such deposit.
The next step would be to split up the statement into its components and to separate the admissible from the inadmissible portion or portions.
Only those components or portions which were the immediate cause of the discovery would be legal evidence and not the rest which must be excised and rejected.
Thus processed.
in the instant case, only the first part of the statement, viz., "I will tell the place of deposit of the three Chemical drums" was the immediate and direct cause of the fact discovered.
Therefore, this portion only was admissible under Sec. 27.
The rest of the statement, namely, "which I took out from the Haji Bunder on first August", constituted only the past history of the drums or their theft by the accused: it was not the distinct and Proximate cause of the discovery and had to be ruled out of evidence altogether.
After culling out and rejecting the inadmissible portion, it was to be considered further whether the admissible portion of the infor (1) I.L.R. F.B. (2) I.L.R. (3) 74 I. A. 65; (4) [1962] Supp. 2 S.C.R. 830 720 mation taken in conjunction with the facts discovered was sufficient to draw the presumption that the accused was the thief or receiver of stolen property knowing it to be stolen.
The answer to this questions in the circumstances of the case, had to be in the negative.
The drums in question were found in the compound or yard of a Musafirkhana which was a place of rest and waiting for Musafirs (travellers).
It was not alleged by the prosecution much less proved that the drums were lying concealed, or that the compound was under the lock and key of the accused.
There is not even an oblique hint that the place of the deposit of the drums was in any way under the control or occupation of the accused.
The place being a Musafirkhana, was from its very nature accessible to all and sundry.
It must be remembered that an inference under section 114, Illustration (a) should never be reached unless it is a necessary inference from the circumstances of the given case, which cannot be explained on any other hypothesis save that of the guilt of the accused.
Such is not the case here.
The facts proved by the prosecution, particularly.
The admissible portion of the statement made by the accused" could give rise to two alternative hypotheses, equally possible, namely: (1) that it was the accused who had himself deposited the stolen drums in the Musafirkhana, or (ii) the accused only knew that the drums were lying at that place.
The second hypothesis was wholly compatible with his innocence.
In the ultimate analysis, therefore, the appellant was entitled to the benefit of doubt.
Accordingly, we allow his appeal, set aside his conviction and acquit him of the charge levelled against him.
P.B.R. Appeal allowed.
| IN-Abs | The appellant was charged with an offence of theft or three drums of chemicals.
He was taken into police custody.
On interrogation he said : I will tell the place of deposit of the three chemical drums which I took out. " The drums were thereafter recovered from the place mentioned by him.
The trial court held that the.
information given by the appellant as a result of which the stolen drums were discovered, was admissible under section 27 of the Evidence Act and that under illustration (a) to s 114 Evidence Act, the appellant would be presumed to be the thief.
Allowing the appeal to this Court, ^ HELD: 1(a) The conditions necessary for bringing this section into operation are (1) the discovery of a fact, albeit a relevant fact, in consequence of the information received from a person accused of an offence (ii) the discovery of such fact must be deposed to, (iii) at the time of the receipt of ' the information the accused must be in police custody, and (iv) only "so much of the information" as relates distinctly to the fact thereby discovered is admissible.
The rest of the information has to be excluded.
[718 E] (b) The word 'distinctly means 'directly ', 'indubitably ' 'strictly ', 'unmistakably.
The word has been advisedly used to limit and define the scope of the proveable information.
The phrase "distinctly relates to the fact thereby discovered" refers to that part of the information supplied by the accused which is the direct and immediate cause of the discovery.
[718 F] (c) If a fact is actually discovered in consequence of information given by the accused, it affords some guarantee of truth of that part, and that part only, of the information which was the clear, immediate and proximate cause of the discovery.
No such guarantee or assurance attaches to the rest of the statement which may be indirectly or remotely related to the fact discovered.
[718 G] Palukuri Kotayya and ors.
vs Emperor 74 I.A. 65 and Udai Bhan vs State of Uttar Pradesh [1962] Supp. 2 S.C.R 830 referred to.
In the instant case only the first part of the statement, namely "I will tell the place of deposit of the three chemical drums" was the immediate and direct cause.
Of the fact discovered.
Therefore this portion only was admissible under section 27.
The rest of the statement was not a distinct and a proximate cause of the discovery and had to be ruled out evidence altogether.
[719 G] 2(a) It cannot be said that the admissible portion of the information taken in conjunction with the facts discovered was sufficient to draw the presumption that the accused was the thief or receiver of stolen property knowing it to be stolen.
The drums were in a Musafirkhana which was a place accessible to all and sundry.
The drums were not alleged to be lying concealed nor was the compound under the lock and key of the appellant.
[720 A B] (b) The inference under section 114(a) can never be reached unless it is a necessary inference from the circumstances of a given case which could not be explained on any other hypothesis save that of the guilt of the accused.
In the present case two alternative hypotheses are equally possible (1) that it was the accused who had himself deposited the stolen drums in The Musafirkhana 716 or (ii) the accused only knew that the drums were lying at that place.
The second hypothesis was compatible with the innocence of the accused and he is entitled to the benefit of doubt.
[720 C D]
|
N: Criminal Appeal No. 128 of 1975.
780 Appeal by Special Leave from the Judgment and order dated the 22nd November, 1974 of the Allahabad High Court in Criminal Revision No. 2475 of 1971.
K. C. Agarwala and M. M. L. Srivastava, for the appellant.
O. P. Rana, for the respondent.
The Judgment of the Court was delivered by B FAZAL ALI J.
This appeal by special leave involves a short point of law relating to the legal enforceability of a personal bond executed by the appellant before the police for the production of the car belonging to him, which was alleged to have been stolen.
The facts leading to the appeal fall within a very narrow compass.
The appellant appears to have bought a car No. USD 5317 from the dealers ON] the basis of a hire purchase agreement.
He filed a report before the police alleging that Ran Singh and others had practised a fraud on him and had taken away his car and had not returned the same.
On 3 12 1969, the police during the course of investigation recovered the car and handed it over to the appellant on supardnama on his executing a personal bond whereby the appellant undertook to produce the car in the court whenever necessary, and in the case of failure to do so, he bound himself to pay a penalty of Rs. 5,000/ .
By the time the matter came to the Court, two years had elapsed and on 14 9 1971, the munsiff magistrate, Meerut, called upon the appellant to produce the car, and as he was unable to do so, a notice was issued under section 514 of the Code of Criminal Procedure for forfeiture of the bond.
After hearing the appellant, the magistrate ordered the forfeiture of the bond and directed the appellant to pay penalty of Rs. 5,000/ .
The appellant went up in appeal to the learned Session Judge against the magistrate 's order.
But the appeal was dismissed.
The appellant met the same fate in revision which was preferred to the High Court.
Hence, this appeal before us.
The short point taken by learned counsel for the appellant is that even accepting the prosecution case as it stands, the bond is not legally enforceable under the Criminal Procedure code, because it was not executed before a court, but it was executed before a police officer.
It is not disputed by counsel for the parties that as the occurrence took place long before the Criminal Procedure Code, 1973, the present case will be covered by the old Criminal Procedure Code, 1898.
The Criminal Procedure Code contains separate provisions for the custody of property (1) during the course of investigation, (2) during the course of enquiry and trial, and (3) after the accused is convicted or acquitted.
In the instant case, we are concerned, however, with the case while it was under investigation.
Section 523 of the Code runs thus: "The seizure by.
any police officer of property taken under section 51, or alleged or suspected to have been stolen, or found under circumstances which create suspicion of the commission of any offence, shall be forthwith reported to a Magistrate, who shall make such order as he thinks fit res 781 pecting the disposal of such property or the delivery of such property to the person entitled to the possession there of, or, if such person cannot be ascertained, respecting the custody and production of such property." , It would thus appear from a perusal of this provision that the moment a police officer seizes a property suspected to have been stolen or which is the subject matter of an offence" he has to report the matter to the magistrate concerned and it is for the magistrate to pass such orders as he thinks fit regarding the disposal of the property.
The learned counsel or the respondent, Mr. O. P. Rana, has, however, drawn our attention to Regulation 165 of the Government of Uttar Pradesh Police Regulations in order to contend that this provision concerned clear authority on the police officer to take possession of the property seized and to give it on superdnama to any respectable person.
165(ii) runs thus: "(ii) Bulky property, other than livestock taken possession of under section 25 of the Police Act V of 1861, attached, distrained or seized under section 88, 387 or 523 of the Code of Criminal Procedure shall ordinarily, pending the orders of the Magistrate, be left at the place where it was found in the charge of some land holder or other respect able person willing to undertake responsibility for its custody and to produce it when required by the court.
" It is true that this provision read with section 423 undoubtedly authorizes the police to seize the property and to make a summary order of the custody of the property, but neither section 523 nor rule 165(ii) authorize the police officer to take a bond from the person to whom the property is entrusted.
The policy of the law appears to be that the execution of the bond involves a civil liability and, therefore, it is ill the fitness of things that it should be executed before a court.
Section 514 of the Code runs thus: "514(1) Whenever it is proved to the satisfaction of the Court by which a bond under this Code has been taken, or of the Court of a Presidency Magistrate or Magistrate of the first class,".
A perusal of this section clearly shows that a bond for the production of the property seized by the police must be executed before the Court, although a bond for the appearance of any person before the Court can be taken by the police under section 170(2) of the Code of Criminal ` Procedure.
This section also clearly enjoins that a bond can be forfeited only if it is executed before a Court or before a Presidency Magistrate or a Magistrate of the first class.
Section 6 of the Code of Criminal Procedure classifies the classes of courts which includes magistrate of the first class also.
In the present case, therefore, once the car was seized by the police, it was the duty of the police under section 523 to report the matter to the magistrate and get an order from him regarding the custody of the car.
This does not appear to have been done.
Even the bond which was executed by the appellant, was not before the 782 court or the magistrate but before the police officer, and in these circumstances, therefore, the aforesaid bond was not one as contemplated by section 514 and, therefore, could not be forfeited.
This Court in .
Rameshwar Bhartia vs The State of Assam(1) went into this very question and observed: "The other point taken on behalf of the appellant is` a more substantial one.
The security bond was taken from him not by the court but by the Procurement Inspector.
It is true that it contained the undertaking that the seized paddy would be produced before the court, but still it was a promise made to the particular official and not to the court.
The High Court was in error in thinking that section 514 Criminal Procedure Code applied.
Action could be taken only when the bond is taken by the court under the provisions of the Code . " The facts of the present case squarely fall within the ratio laid down in that case.
It follows, therefore, that unless a personal bond is executed by a person for the production of the property, before a court it shall not be valid in law.
In view of these circumstances, therefore, we are satisfied that the bond executed by the appellant was not legally enforceable and the older of the courts belong forfeiting the bond must, therefore, be quashed.
Before closing this judgment, we would like to observe that even r. in the new Criminal Procedure Code, there is no express provision which empowers the police to get a bond from the person to whom the property seized is entrusted.
This may lead to practical difficulties for instance in cases where a bulky.
property, like an elephant or a car is seized and the magistrate is living at a great distance, it would , be difficult for a police officer to report to the magistrate with the property.
In these circumstances, we feel that the Government will be well advised to make suitable amendments in the Code of Criminal Procedure to fill up this serious lacuna by giving pow.
r to the police for taking the bond in such circumstances.
We would also like to make it clear that since the bond is legally invalid.
it is not enforceable under section 514, Criminal Procedure Code, but we refrain from making any observation regarding any other liability of the appellant under the law.
For the reasons given above, we allow this appeal, set aside the orders of the courts below and discharge the appellant from the bond V.M.K. Appeal allowed.
| IN-Abs | The appellant bought a car from the dealers on the basis of a hire purchase agreement.
He filed a report before the police alleging that Ran Singh and others had practised a fraud on him and had taken away his car and had not returned the same.
On 3 12 1969, the police during the course of investigation recovered the car and landed it over to the appellant on supurdnama on his executing a personal bond whereby the appellant undertook to produce the car in the court whenever necessary, and in the case of failure to do so, he bound himself to pay a penalty of Rs. 5000/ .
By the time the matter came to the Court, two years had elapsed and on 14 9 1971, the munsiff magistrate, Meerut, called upon the appellant to produced the car, and as he was unable to do so.
a notice was issued under section 514 of the Code of Criminal Procedure for forfeiture of the bond.
After hearing the appellant, the magistrate ordered the forfeiture of the bond and directed the appellant to pay a penalty of Rs. 5000/ .
He failed in his appeal and his revision petition to the High Court was also dismissed.
Allowing the appeal by special leave, ^ HELD :(1) A perusal of section 514 (1) of the Code of Criminal Procedure.
1898 clearly shows that a bond for production of the property seized by the police must be executed before the Court, although a bond for the appearance of any person before the Court can be taken by the police under section 170(2) of the Code of Criminal Procedure.
This section also clearly enjoins that a bond can be forfeited only if` it is executed before a Court or before a Presidency Magistrate or a Magistrate of the first class.
In the present case, therefore.
Once the car was seized by the police, it was the duty of the police under section 523 to report the matter to the magistrate and get an order from him regarding the custody of the car.
This was not done.
Even the bond which was executed by the appellant, was not before the Court or the magistrate but before the police officer, and in these circumstances, therefore, the aforesaid bond was not one as contemplated by section 514 and, therefore.
could not be forfeited.
Rameshwar Bhartia v The State of Assam, A.I.R. 1952 'S.C. 405, relied on.
[781 FH. 782 Al (ii) Though the provisions of Regulation 165(ii) of the Government of Uttar Pradesh Police Regulations read with section 423 of the Code undoubtedly authorizes the police to seize the property and to make a summary order.
Of the custody of ' the property, neither section 523 nor rule 165 (ii) authorize the police officer to take a bond from the person to whom the property is entrusted.
[781 D E] Observation: Even in the new Criminal Procedure Code, there is no express provision which empowers the police to get a bond from the person to whom the property seized is entrusted.
This may lead to practical difficulties, for instance in cases where a bulky property is seized and the magistrate is living at a great distance, it would be difficult for a police officer to report to the magistrate with the property.
The Government will be well advised to make suitable amendments in the code to fill up this serious lacuna by giving power to the police for taking the bond in such circumstances.
1782 E Fl
|
Appeal No. 252 of 1954.
Appeal by Special Leave from the Judgment and Order dated the 22nd January 1953 of the Election Tribunal, Vellore in Election Petition No. 35 of 1952.
N.C. Chatterjee (A. N. Sinha and N. H. Hingorani, with him), for the appellant.
C. V. L. Narayan, for respondent No. 1. 1955.
March 29.
The only question for determination in this appeal by special leave is whether the appellant is disqualified under section 7(d) of the Representation of the People Act, 1951 (hereinafter called the Act) for election to the House of the People, as held by the Election Tribunal, North Arcot, Vellore, by its orders dated the 20th January, 1953 in Election Petition No. 35 of 1952.
The facts of this case are not in dispute and lie within a narrow compass.
The appellant and respondents I to 3 contested the last general elections from the Dharmapuri Parliamentary Constituency in the district of Salem in the State of Madras.
Respondents 4 to 10 who were added subsequently by an order of the Tribunal were also candidates for election.
Their nominations also had been held to be valid but they ultimately withdrew their candidature before the polling took place.
The appellant was in due course declared to have been elected to the House of the People.
Thereafter, on the 5th March, 1952 the 1st respondent filed an election petition before the Election Commission contesting the appellant 's election 85 on the ground that the appellant was disqualified under section 7(d) of the Act as, from the date of his nomination and until the date of election and after, the appellant had a contract with the Government of India in the Postal Department for the transport of postal mail which was a service undertaken by the Government of India.
At this stage it is necessary to state that it is admitted that the appellant is and has been the holder of a stage carriage service permit (exhibit B 2) dated the 26th April 1949, issued by the Regional Transport Authority, Salem, Madras.
It was one of the conditions of the said permit that if called upon the appellant will enter into an agreement with the Government of India for the transport of postal articles and mail bags.
In pursuance of that obligation the appellant entered into a registered agreement with the Government of India on the 16th November 1949 (exhibit A 3) to be noticed in detail hereinafter.
After the appellant had filed his nomination paper, the 1st respondent by his petition dated the 28th November 1951 raised the objection to the effect that his nomination should be rejected on the ground that he had entered into a contract with the Government of India for his own benefit for the transport of mail between Salem and Yercaud.
The Returning Officer for the Dharmapuri Parliamentary Constituency, Salem, by his orders (exhibit A 2) of the same date overruled the objection holding that the service rendered by the appellant of carrying mail is not under an agreement but on an imperative order of the Government under Rule 160 B of the Madras Motor Vehicles Rules.
Apparently the registered agreement (exhibit A 3) had not been placed before him.
To the election petition filed by the 1st respondent the appellant filed his written statement on the 28th May 1952 denying that he was disqualified for election as a member of Parliament by virtue of the provisions of section 7(d) of the Act.
His contention was that "it is the exclusive privilege of the Government of India to convey all postal articles from one place to another and it is a normal function of the Government statutorily reserved to itself.
There is no justifi 86 cation to regard the carrying of mails from one place to another as the performance of any service undertaken by the Government".
It was further averred on behalf of the appellant that it was not justifiable to regard him as having any interest in a contract for the performance of any service undertaken by the appropriate Government within the mischief of section 7(d) of the Act; and that he had been only carrying out the obligations imposed upon him by Rule 160 B of the rules framed under the Motor Vehicles Act.
It was also contended that under article 103 of the Constitution of India the question as to the dis qualification of a member has to be decided by the President whose decision shall be final.
On those pleadings the following issues were framed by the Election Tribunal: 1.Is the nomination of the 1st respt.
invalid because of the prohibition contained in section 7(d) of the Representation of the People Act, 1951, or for any of the reasons set forth in paras.
9 to 11 of the petition? 2.Has this Tribunal no jurisdiction to decide the question as regards the disqualification of the returned candidate, because of article 103 of the Constitution of India? It is not necessary to refer to the additional issue bearing on the question of limitation arising from an interlocutory application for impleading those candidates (respondents 4 to 10) whose nomination had been accepted but who had withdrawn from the contest.
Both these issues were decided against the appellant.
The Tribunal on a very elaborate discussion of the points raised before it, held that the postal service including the transport of mails is a service undertaken by the Central Government within the meaning of section 7(d); that at the date of the nomination the appellant was a contractor under the Central Government; that the agreement between the Government and the appellant involved mutual obligations which could not be referable to a bare statutory duty on the part of the appellant but that it was the result 'of mutual assent based upon a free 87 offer and acceptance; and that the agreement was supported by valid consideration.
The Tribunal also held that article 103 of the Constitution was not a bar to its jurisdiction to decide, the controversy.
Accordingly it allowed the election petition and held the appellant 's election to be void in terms of section 100(1)(c) of the Act, with costs to the respondent.
Hence this appeal.
In this appeal the contentions raised before the Election Tribunal, except the objection to the Tribunal 's jurisdiction in view of the provisions of article 103 of the Constitution, have been pressed before us by the learned counsel for the appellant.
It is manifest that the determination of this case must depend upon the true construction and legal effect of the agreement (exhibit A 3) admittedly entered into by the appellant with the Central Government.
It is therefore necessary to set out in some detail the relevant clauses of the agreement.
The appellant (called the "contractor") is of the one part and the Governor General of India of the other.
The preamble says "Whereas the said contractor Sri.
N. Sathianathan has offered to contract with Governor General for the provision of a Motor Vehicle Service for the transit conveyance and delivery of all postal articles and mail bags as defined in the Indian Post Office Act, 1898, as amended from time to time,. . . from the 15th day of December 1949 to the 14th day of December 1952 and the Governor General has accepted such offer upon the terms and Conditions hereinafter appearing. . .
Now this indenture witnesseth that the contractor in pursuance of the said agreement and in consideration of the premises and of the payments hereinafter agreed to be made to him. . .
It is hereby mutually agreed and declared between and by the parties hereto as follows: 1.Contract to carry: The contractor shall during the continuance of this contract, that is to say, from the 15th day of December 1949 until the 14th day of December 1952 or until the said contract shall be determined by such notice as is hereinafter men 88 tioned or otherwise in (hereinafter referred to as the said contract period) duly and safely convey. . by means of motor vehicles of good and reliable manufacture all postal articles and mail bags. . . ." By clause 4 the contractor is permitted to carry passengers and their luggage by bus provided there is accommodation available and provided that the mail service is not prejudiced in any way.
By clauses 5 and 6 the contractor is required to maintain in good order and repair a number of motor buses and their spare parts at his own expense and to bear all municipal and other taxes payable in respect of the motor vehicles.
Clause 7 contains the schedule of penalties in the event of non completion of any journey or of delay in completion thereof in accordance with the time table, etc.
By clause 8 the contractor is made absolutely liable and responsible for the due and safe custody and delivery in good order and condition of postal articles and mail bags.
By clause 10 nongazetted postal and telegraph officers travelling on duty on the route allotted to the appellant are declared to be entitled to travel free of all charges and such official passengers shall have precedence over ordinary passengers.
Clause 13 provides that the contract shall not be transferred by the contractor to any person or company without the previous consent in writing of the Director General of Posts & Telegraphs.
By clause 15 the Government agrees to pay to the contractor Rs. 200 per month during the subsistence of the agreement "as his remuneration for service to be rendered by him hereunder" '.
This monthly sum of Rs. 200 is liable to be increased or decreased proportionately to the increase or decrease in the mileage to be covered.
Clause 18 is in these terms: "In the event of the contractor failing to secure a renewal of the permit on the line this contract will automatically terminate on the date up to which the old permit shall be valid and in such case no compensation shall be payable to either party for such termination.
This contract may be absolutely determined and put an end to by either of the contracting 89 parties giving four calendar months notice in writing to the other of his intention so to determine and put an end to the same".
Clause 21 contains the usual arbitration clause to the effect that all disputes and differences arising out of or in any wise touching or concerning the agreement shall be referred to the sole arbitration of the Director General of Posts and Telegraphs or his nominee.
It is also provided that the award of the arbitrator shall be final and binding on the parties.
It will be observed that the agreement set out above is a formally drawn up document which satisfies all the requirements of a contract.
It is not the appellant 's case that the contract has been vitiated by undue influence, fraud or such other cause.
But it has been argued that it was a necessary sequel to the stage carriage permit granted by the Transport Authority under the Motor Vehicles Act read along with the relevant rules.
In this connection reference was made to rule 160 B of the Madras Motor Vehicles Rules which is as follows: "It shall be a condition of every stage carriage permit that the holder of the permit shall, if so required by the transport authority which granted the permit, carry mails at such rates and on such terms as the transport authority may fix after consultation with the holder of the permit and the postal authorities concerned".
The rule quoted above has apparently been made under the authority of section 48(d) of the Motor Vehicles Act.
It is common ground that the agreement aforesaid between the appellant and the Central Governmentis in pursuance of rule 160 B aforesaid; but it has been argued on behalf of the appellant that though the agreement aforesaid has the "semblance of a contract", it is lacking in the "essential ingredients of a free consensus of acceptance and offer".
This argument is based on the further contention that the appellant has been carrying mail on his buses in performance of a statutory obligation which cannot come within the mischief of 12 90 section 7(d) of the Representation of the People Act, 1951.
The material portion of the section is in these terms: "A person shall be disqualified for being chosen as, and for being, a member of either House of Parlia ment. . . . . (b)if, whether by himself or by any person or body of persons in trust for him or for his benefit or on his account, he has any share or interest in a contract for. . . . . . the performance of any services undertaken by the appropriate Government".
It has further been argued alternatively that if the agreement has the force of a contract, it is totally lacking in consideration because the monetary consideration provided for in the agreement is no more than the subsidy already fixed by the Regional Transport Officer by his orders dated the 23rd July, 1949; that the agreement in question being with a third party, namely, the Governor General, to render service which was already due to another party, namely, the Transport Authority for the same consideration cannot amount to a valid contract supported by consideration; and finally, that the transport of mail is not a "service undertaken by the Central Government".
In our opinion, there is no substance in any one of these contentions.
It is true that the appellant entered into the contract aforesaid with the Central Government for the transport of postal articles and mail bags on the 16th November, 1949.
From before that date be had been carrying on the business of plying buses on the route allotted to him by the Regional Transport Authority.
But he entered into the contract with his eyes open and knowing full well his rights and liabilities under the same.
No one is compelled to carry on the business of stage carriage service or for the matter of that, of transporting postal articles and mail bags.
In terms of the permit, it is open to the Government to call upon a permit holder to undertake the additional burden of carrying postal articles and mail bags which carries with it the additional remuneration to be fixed by the Transport Authority after consultation with the postal autho 91 rities and the carrier.
It is not every stage carriage permit holder who is called upon to do so.
At the time the appellant entered into the contract with the, Government in the postal department he may not have had any idea of standing for election to the House of the People when in future the general elections came to be held.
If he wished to steer clear of the difficulty created by section 7 of the Act, he could have given due notice to Government under clause 18 of the contract referred to above.
On the expiry of the term of the notice he would have been free to stand for election to a State or Central Legislature.
Section 7 of the Act is clearly intended to.
avoid a conflict between public duty and private interest.
The Tribunal discussed a number of authorities with reference to the English and the American Law of Contract for arriving at the conclusion that the agreement between the appellant and the Government of India in the Postal Department had all the ingredients of a valid contract.
The Tribunal need not have travelled so far afield, especially when the provisions of the Indian Con tract Act which govern the case are sufficient to answer all the contentions raised on behalf of the appellant.
On the face of the transaction the agreement was between two competent parties with their free consent.
There was no question but that there was lawful consideration, The permit for the stage carriage had been granted by, the authority under the Motor Vehicles Act; and the agreement for transport of postal articles and mail bags was between the Government of India in the Postal Department and the appellant for a cash consideration.
But it was argued that the agreement was in pursuance of a pre existing obligation imposed by the rule aforesaid framed under the Motor Vehicles Act.
It is true that the permit does contain a condition that the permit holder may be called upon to undertake transport of mail bags and postal articles but that is only a notice to intending applicants for a stage carriage permit that the grantee of such a per mit may have to render that additional service for an 92 additional remuneration if called upon to do so by the authorities of the Postal Department.
If any one was not prepared to undertake that additional responsibility, he was free not to make an application for such a permit; but that does not mean that the agreement actually entered into between the Postal Department and the permit holder is not an independent contract governed by its own special terms.
As indicated above, clause 18 has reserved the right to either party to terminate the contract on giving four months ' notice.
The appellant must be presumed to have known that the agreement that he had entered into with the Postal Department will stand in the way of his running as a candidate for election to the Central or the State Legislature.
There was nothing to prevent him from giving the necessary notice to the department and thus terminate his agreement so as to be free to stand as a candidate for election to the legislature.
Section 7 of the Act is intended to ensure that there is no occasion for a conflict between public duty and private interests.
The appellant had a clear and free choice before him.
If he was anxious to serve the community as a member of the Central Legislature, he had to give up his private gains in the shape of the remuneration for carrying postal articles and mail bags in his buses.
It may be that on his terminating the agreement with the postal department he would have to give up his stage carriage permit also but not necessarily so.
If on the same route a number of bus services are permitted to different parties, the Postal Department may choose any one of them to enter into the agreement for the carriage of mail bags and postal articles.
But even if there was only one service for the route in respect of which the appellant held the stage carriage permit, if he had to give up his permit, some other party would take his place for running the bus service and carrying the postal articles and mail bags.
It was further argued that the appellant had no hand in the fixing of the remuneration to be paid by the Postal Department for carrying its mails, etc.
But it is clear, by a reference to the terms of the rule 93 quoted above, that the amount of the remuneration had to be fixed by the department after consultation with the carrier.
It was always open to the latter to demur to the terms proposed by the department and if he found that the department was not prepared to accept his terms he was not bound to enter into the agreement.
The fact that he had agreed to carry postal articles and mail bags was possibly an additional qualification for him to obtain a renewal of his permit and thus gave him an advantage over his competi tors.
Hence instead of being an additional burden or a handicap to him, it was an additional advantage to him in the matter of getting a renewal of his permit in preference to others.
The agreement was therefore based on mutual promises, by the appellant to carry the mail bags, etc., and by the Postal Department to pay him suitable remuneration for the services thus rendered.
It was further contended on behalf of the appellant that the Central Government could not be said to have 'undertaken ' any 'service ' within the meaning of section 7(d) of the Act when it made arrangements for the carriage of mail bags and postal articles through the appellant. ' It has not been and cannot be contended that the Government is bound in the discharge of its duties as a sovereign state to make provision for postal mail service.
The provisions of the Indian Post Office Act, VI of 1898, are only enabling in the sense that they authorize the State agency to have the exclusive privilege of conveying letters, etc.
for the convenience of the public and for the benefit of the Government, without making it obligatory upon it to provide every individual and every place with those facilities.
It may be that those facilities are being extended from time to time and are being brought nearer to every home but that is only evidence of the fact that the State as a welfare state is anxious to provide for the conveniences of the public in the matter of communications and correspondence.
That is to say, the Government in the Postal Department has only undertaken a service to be rendered to the community and that such 94 a service is not an essential function of a sovereign state.
It cannot be gainsaid that the Governmentr in the Postal Department is rendering a very useful service and that the appellant has by his contract with the Government undertaken to render that kind of service on a specified route.
The present case is a straightforward illustration of the kind of contract contemplated by section 7(d) of the Act.
At all material times the appellant has been directly concerned, for his own benefit, in the contract of carrying mail bags and postal articles entered into by him with the Government in the Postal Department.
For the reasons aforesaid we have not the least hesitation in holding that the conclusions arrived at by the Tribunal are entirely correct.
The appeal is accordingly dismissed with costs.
Appeal dismissed.
| IN-Abs | The question for determination in this appeal was whether the appellant was disqualified under section 7(d) of the Representation of the People Act, 1951 for election to the House of the People.
The material portion of section 7(d) of the Act reads as follows: "A person shall be disqualified for being chosen as and for being, a member of either House of Parliament. . (b) if, whether by himself or by any person or body of persons in trust for him or for his benefit or on his account, he has any share or interest in a contract for. . the performance of any service undertaken by the appropriate Government".
The appellant (a contractor) had entered into an agreement with the Central Government.
The relevant portion of the said agreement was as follows: "The contractor has offered to contract with the Governor General for the provision of a Motor Vehicle Service for the transit conveyance of all postal articles and mail bags from December 15, 1949 to December 14, 1952 and the Governor General has accepted the offer.
"The Government agrees to pay to the contractor Rs. 200 per month during the subsistence of the agreement 'as his remuneration for service to be rendered by him ' ".
Held that on the face of it the agreement was between two competent parties with their free consent, and there was a lawful cash consideration for it.
The Appellant entered into the agreement with his eyes open knowing full well his rights and liabilities under the same.
84 The case was a straightforward illustration of the kind of contract contemplated by section 7(d) of the Act.
At all material times the appellant had been directly concerned, for his own benefit, in the contract of carrying mail bags and postal articles entered into by him with the Government in the Postal Department.
Section 7 of the Act is clearly intended to avoid a conflict between public duty and private interests.
|
Civil Appeal No. 1136 of 1975.
Appeal by Special Leave from the Judgment and order dated the 11th day of March, 1975 of the Madras High (court in C.S.A. No. 64 of 1974.
section V. Gupte, Mrs. section Bhandare for the appellant.
799 section Govinda Swaminath.
Raghavan, R. Chandrasekhar and Jayaram for respondent Nos. 1 to 2.
M. C. Bhandare, A. T. M. Sampath and M. M. L. Srivastva for respondent No. 3.
The Judgment of the Court was delivered by UNTWALIA, J.
The question which falls for our determination in this appeal by special leave is as to what is the meaning and scope of section 186 of the hereinafter called the Act.
For the determination of the said question it will suffice to state only a few facts from the judgments of the Madras High Court.
There were two Managing Directors of Century Flour Mills Ltd. respondent No. 3.
Their names are S/Shri P. Govindaswamy and section P. Sithambaram.
Both of them had been duly appointed as such in the year 1972 They subsequently fell out.
In August, 1974 certain shareholders of the company including respondents I and 2 lodged a requisition under section 169 of the Act for the calling of an extraordinary In general meeting of the company for removal of Govindaswamy.
Certain other share holders lodged a similar requisition for removal of Sithambaram form the post of Managing Director.
Both the requisitions were considered by, the Board of Directors in their meeting held on 19 8 1974.
As per the requisitions, they called an extraordinary general meeting of the company to be held on 14 9 1974.
The meeting was directed to be held at the residence of one of the shareholders of the company instead of its registered office.
The shareholders were divided into two factions belonging to the two groups of the Managing Directors.
Apprehending very many difficulties and troubles in the holding and the conduct of the meeting on 14 9 1974, respondents 1 and 2 filed an application under section 186 of the Act, Company Petition No. 85/1974 in the Madras High Court.
They prayed to the Court to appoint an Advocate Commissioner as Chairman of the meeting to be held on 149 1974 so that the proceedings may be conducted in a regular manner.
The only respondent impleaded in the said petition was the company which filed a counter affidavit to resist the prayer of respondents 1 and 2.
A learned single Judge of the High Court took the view that power under section 186 of the Act could be exercise even where a meeting had already been called, but it was impracticable to hold or conduct the meeting.
In other words, the learned Judge was of the opinion that the Court even without ordering a meeting of the company to be called could appoint a person to be the Chairman of the meeting.
But on appreciation of the facts of the case in the light of certain decisions of the High Courts, he came to the conclusion that it was not impracticable to hold or conduct the meeting and hence dismissed the application filed by respondents 1 and 2.
O. section Appeal No. 64/1974 was filed in the High Court under clause 15 of the Letters Patent against the order dated 11 9 1974 of the learned single Judge.
By an order made on September 12 1974 a Bench the High Court stayed the convening of the meeting called to be held on 14 9 1974.
It appears that in spite of the service of me order 3 L127SCI/75 800 dated 129 1974 on September 13, the meeting was held on 14 9 1974 CMP No. 10935/1974 was taken out in the form of a Judges ' summons under Rule g of the Company Code Rule, 1959 to declare the meeting held on 149 1974 as void and the resolutions passed therein as illegal and inoperative.
The said appeal and the CMP alongwith other CMPs which are not necessary to be referred to in this judgment were heard by a Bench of the High Court presided over by the learned Chief Justice.
The Bench allowed CMP 10935/1974, put back the parties in the same position as they stood immediately prior to the service of the order dated 12 9 1974 and declared that the meeting held on September 14, 1974 and the resolutions passed thereunder would have no effect whatsoever.
By a separate judgment, Appeal No. 64/1974 was also allowed by the Division Bench.
It agreed with the single Judge as regards the meaning and scope of section 186 of the Act but differed from him on the merits of the case.
They appointed an Advocate of the Court as the Advocate Chairman to hold and conduct the meeting and directed that the meeting would take place at the premises of the registered office of the Company.
The sole appellant in this appeal is a shareholder of the company.
Feeling aggrieved by the orders of the Division Bench of the High Court in CMP No. 10935/74 and in OS Appeal No. 64/1974 he filed special leave applications in this Court seeking leave to file appeals in both the matters.
By order dated 29 8 1975 a Bench of this Court dismissed as withdrawn SLP No. 1156/1975 arising from the judgment and order dated 11 3 1975 of the High Court in CMP No. 10935/ 1974.
Special leave was granted from the judgment and order dated 17 3 1975 of the High Court passed in OS Appeal No. 64/1974.
Mr. section V. Gupte, learned counsel for the appellant urged the following three points in support of the appeal.
(1) That power under section 186 of the Act could not be exercised until it was found that it was impracticable to call a meeting of the Company other than an annual general meeting and to hold and conduct the meeting in the manner prescribed by the Act or the Articles of the company.
The Court had no jurisdiction merely to appoint a Chairman of the meeting without an order for the calling of the meeting.
(2) That the High Court was wrong in holding that it was impracticable to hold or conduct the meeting of the company which had already been called.
(3) That during the pendency of the appeal in the High Court, Company Law Amendment Act of 1974 came into force on 1 2 1975.
The powers and jurisdiction of court under section 186 stood transferred to Company Law Board by the said amendment.
The court, therefore, had no power to make an order under section 186 on 17 3 1975.
801 Since in our opinion the first point urged on behalf of the appellant is well founded and has to be accepted as correct, neither of the other two points need any determination or answer and we express no opinion in respect of them.
Section 186 of the Act as it stood at the relevant time reads as follows: "Power of Court to order meeting to be called.(1) If for any reason it is impracticable to call a meeting of a company, other than an annual general meeting in any manner in which meetings of the company may be called, or to hold or conduct the meeting of the company in the manner prescribed by this Act or the articles, the Court may, either of its own motion or on the application of any director of the company, or of any member of the company who would be entitled to vote at the meeting, (a) order a meeting of the company to be called, held and conducted in such manner as the Court thinks fit; and (b) give such ancillary or consequential directions as the Court thinks expedient, including directions modifying or supplementing in relation to the calling, holding and conducting of the meeting the operation of the provisions of this Act and of the company 's articles.
Explanation The directions that may be given under this sub section may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.
(2) Any meeting called, held and conducted in accordance with any such order shall, for all purposes, be deemed to be a meeting of the company duly called" held and conducted.
" It corresponds with slight variation to section 79(3) of the Companies Act, 1913 and section 135 of the English Companies Act, 1948.
The plain meaning of section 186 is that the court may order a meeting of the company to be called, held and conducted in such manner as the court thinks fit in any or more of the following contingencies.
(1) If for any reason it is impracticable to call a meeting of the company other than an annual general meeting.
(ii) If for any reason it is impracticable to hold the meeting of the company in the manner prescribed by the Act or the Articles.
(iii)If for any reason it is impracticable to conduct the meeting of the company in the same manner.
on the occurring of any or more of the said contingencies the court has to order the calling of a meeting of the company and its holding 802 and conducting in such manner as the court thinks fit.
The use of the word 'and ' between the words 'held ' and 'conduct ' in clause (a) of sub section (1) clearly shows that the court has no power to make any order regarding the holding and conducting of any meeting which has already been called without ordering a meeting of the company to be called in place of the meeting already called.
If an order under clause (a) has been made such ancillary or consequential directions as the court thinks expedient could be given under clause (b) including a direction within the meaning of the explanation appended thereto.
The language of sub section (2) further fortifies the above interpretation of sub section (1) and makes any meeting called, held and conducted in accordance with an order under sub section (1) to be a meeting of the company duly called, held and conducted.
The use of the word or in the first part of sub section (1) may be disjunctive or conductive in the manner we have interpreted above.
But undoubtedly the order under clause (a) has got to be for all the three purposes and not merely for holding or conducting of the meeting.
In Company Petition No. 85/1874 no prayer was made to the Court for an order for the calling of a meeting of the Company nor has any such order been made by the High Court in appeal.
In our opinion, therefore, the application as presented in the Court under section 186 of the Act was not maintainable.
No prayer was ever made to the Court for an order that a meeting of the company be called.
A fresh application, it goes without saying, if necessary, can be made under section 186 of the Act.
But then it will have to be made to the authority mentioned in the amended section.
For the reasons stated above, we allow this appeal set aside the judgment and order of the High Court passed in OS Appeal No 64/1974 and dismiss Company Petition No. 85/1974 as being not maintainable.
We shall direct the parties to bear their own costs throughout.
P.B.R. Appeal allowed.
| IN-Abs | Under section 186(1)(a) of the , if for any reason it is impracticable to call a meeting of the company, other than an annual general meeting, or to hold, or conduct it in then manner prescribed by the Act or the articles of the company, the Court may order the meeting to be called, held and conducted in such manner as the Court thinks fit; and section 186(2) provides that such a meeting should be deemed to be a meeting of the company duly called, held and conducted.
The Board of Directors of a company called an extraordinary general meeting of the company for the purpose of considering petitions filed by shareholders regarding the managing directors.
Apprehending trouble in the holding and conducting of the meeting two share holders filed a petition in the High Court under section 186 of the praying for the appointment of an advocate Commissioner as Chairman of the meeting, which was called.
The High Court, in letters Patent appeal, granted the prayer.
In appeal to this Court it was contended, inter alia that the power under section 186 of the Act could not be exercised until it was found that it was impracticable to call the meeting and to hold and conduct it in the manner prescribed by the Act or articles of association, and that the High Court had not jurisdiction merely to appoint a Chairman of the meeting already called.
Allowing the appeal to this Court, ^ HELD: Under section 186 the Court may order a meeting of the Company to be called, held and conducted, in such manner, as the Court thinks fit in any one or more of the contingencies, namely, if for any reason it is impracticable (1) to call a meeting of the company other than an annual general meeting.
(ii) to hold the meeting in the manner prescribed by the Act or the Articles of Association; and (iii) to conduct the meeting of the company in the same manner.
The use of the word 'or ' in the first part of sub section
(1) (a), may, therefore, be disjunctive or conjunctive as interpreted above but the use of the word and between the words 'held and conducted ' in the same clause shows that the order under cl.
(a) has got to be made for all the three purposes of calling, holding and conducting and not merely for holding or conducting the meeting.
Therefore, the Court has no power to make any order regarding the holding and conducting of any meeting which has already been called, without ordering a meeting of the company to be called, in place of the meeting already called.
The language of sub section
(2) also fortifies the above interpretation.
Since there was no prayer for an order of calling a meeting the application to the Court under section 186 was not maintainable.
[802A D]
|
ivil Appeals Nos. 817 to 819 of 1968 and 1456 to 1458 of 1969 From the Judgment and order dated the 19th May, 1966 and appeals by Special Leave from the Judgment and order dated the 7th November 1968 of the Punjab & Haryana High Court in C.W. No. 2205, 2206 and 2215 of 1965 and in C. Revsn.
771 to 773 of 1967 respectively.
Rameshwar Dial and A, D. Mathur for the appellants (In all the appeals) .
K. L. Gosain and E. C. Aggarwala for respdt.
Nos. 1 (In C.A. Nos. 817/68, 1456 1457/69) respdt.
Nos. 1 and 3 (in Cas.
Nos. 818/68 and 1458/69) and respdt.
No. 1 (In CA No. 819/68).
The Judgment of the Court was delivered by KRISHNA IYER,J.
These two batches of appeals stem from the same judgment but raise two different questions of law under the Punjab Security of Land Tenures Act, 1953 (Punjab Act X of 1953) (for short, the Act), the forensic focus being turned on two different facets of section 18 of the Act.
The first set of appeals relates to the right of the tenants to purchase the ownership of the common landlord, Teja, while the second set of appeals turns on the principles of compensation awardable to the landlord pursuant to the vesting of ownership in the tenant.
Taja, the landlord, was admittedly a large land owner under whom there were three tenants.
Each of them applied for purchase of ownership under section 18(1) of the Act.
The Assistant Collector, who is the primary authority, found them eligible, fixed the price and the instalments of payment, and they duly deposited the first instalment.
The statutory consequence of such deposit was that title to the property vested in the tenants on that date.
All these events took place in the early '60s.
Had the scheme of agrarian reform in the Punjab been simple and had the virtue of early finality so necessary in such a measure been present, the law would have operated with speed and changed the rural landscape radically, instead of provoking a heavy run of never ending litigation.
Section 24 of the Act has had this unwitting effect.
Too many tiers of quasi judicial review, too long at each deck and in a system which is slow moving, tempt disappointed parties to litigate to the disastrous end.
Such a statutory creation, calculated to give ultimate justice, is like a Frankenstein 's monster, the very prolonged over judicialised litigative engine, bleeding justice to death.
A legislature, with care and concern for the agrarian community should be vigilant enough to design a quick and competent legal engineering project absent by contrast in most land reform laws blessing the rural poor.
And it is noteworthy that legal battles are fought largely before Collectors, Commissioners and Financial Commissioners and then the writ chapter begins.
This litigation, it is worthy of note, began before the Collector in 1961/62.
A fundamental assessment of the comparative economic and social costs of multi decked determination procedure would have induced the legislature to reduce institutional levels of adjudication.
This is by the way, although we strongly recommend that the legislatures do pay serious attention to producing an early termination to land reform reordering by a mammoth and immediate decision making instrumentality.
849 C.As 817 819/68 Shortly put, and shorn of details, the simple contention of the appellants in these appeals is that although their prepositus Teja was a large landowner, on his death his heirs, the present appellants, became entitled to shares and, in this process of fragmentation, they became 'small landowners ' within the meaning of section 2(2) of the Act.
This event occurred after the tenants had been found entitled to purchase from the landowner the lands held by them and after they had deposited the first instalment as set down in section 18(4).
The plea is that an appeal is a continuation of the original proceeding and, therefore, if there is a change of circumstances in the landlord 's ownership during the pendency of the appeal, resulting in his legal representatives becoming 'small landowners ', the tenants will be disentitled to purchase the land.
Of course, a tenant of a 'small landowner ' has no right to purchase the land.
But, in the present case, the landowner admittedly was a large landowner at the time the tenants applied for purchase.
Section 18(1) reads, dropping the irrelevant portions, thus: "18.
Right of certain tenants to purchase land: (1) Notwithstanding anything to the contrary contained in any law, usage or contract, a tenant of a land owner other them a small landowner (i) (ii) (iii) shall be entitled to purchase from the land owner the land so held by him . in the case of a tenant falling within cl.(i) or cl.(ii) at any time, and in the case of a tenant falling within cl (ii) within a period of one year from the date of commencement of this Act." It is common case that the application has been made in time and that at the time such application was made, the tenants were competent to buy the land.
Section 18(4) (a) and (b) may, at this stage, be read: "18(4) (a) The tenant shall be competent to pay the purchase price either in a lump sum or in six monthly instalments not exceeding ten in the manner prescribed.
(b) on the purchase price or the first instalment there of, as the case may be, being deposited, the tenant shall be deemed to have become the owner of the land, and the Assistant Collector shall, where the tenant is not already in possession and subject to the provisions of the Punjab Tenancy Act , (XVI of 1887), put him in possession thereof.
" It is absolutely plain that on the deposit of the first instalment of the purchase price, the tenant shall be deemed to have become the owner of the land.
In the present case, all these happenings had resulted in the respondents becoming the owners.
850 The death of the large landowner occurred pending the appeal.
the argument of counsel for the appellant, which found favour with the Financial commissioner, but failed before the High Court, is that an appeal being a re hearing of the suit, relief must be given to the legal representatives of the original landowner who, by devolution, became small landholders.
If this contention be sound, the tenants would have to be denied relief since they would be holding under small landowners.
The solitary point which thus falls for determination is as to whether the subsequent event of the landowner 's death at the appellate stage unsettles the right acquired by the tenants or whether the tribunal must uphold rights which have crystallized as on the date the applications were made and, in any event, the deposits of the first instalment were made by each of the tenants.
We see no difficulty in answering this question against the appellant, but, in view of the persistent submission based upon a few rulings of this Court, the Federal Court and the High Courts, made by counsel for the appellant, we may as well consider the question of law , adopting an interpretative attitude which will further and not frustrate the legislative will in case there are alternative choices for the Court.
Of course, a construction which will promote predictability of results, maintenance of reasonable orderliness, simplification of the judicial task advancement by the Court of the purpose of the legislation and the judicial preference for what it regards as the sounder rule of law as between competing ones, must find favour with us.
A plain reading of section 18, without reference to consideration of subsequent events at the appellate level, yields the easy and only conclusion that the rights of parties are determined on the date they come to Court and what is an insurmountable obstacle to any other construction is that once the deposit is made the title to the land vests in the tenant.
Agrarian reform law affects a considerable number of people and to keep rights uncertain over a long stretch of time till appeals and reviews and revisions and other processes are exhausted, is to inject unpredictability of results, for it is quite on the cards that a landlord may die in the long course of litigation, or other events may happen at later stages beyond the trial Court.
Can rights of parties fluctuate with such uncertain contingencies ? If so, stabilization of land ownerships, so vital to the new pattern of agrarian relations, will be postponed for a long time.
Is not the judicial task simplified by adopting the golden rule that the rights of parties must be determined when they seek justice and not when the last Court has had its last say, long years after the litigation was initiated ? A system of orderliness about rights in land will result from this approach.
More than all, the sounder rule of law as between rival claims to consideration of, or indifference to, subsequent events is surely that which excludes the later event factually or legally.
Such a reading of the statutory scheme rhymes well with rapid agrarian reform contemplated by the framers.
The philosophy of the approach which commends itself to us is that a litigant who seeks justice in a perfect legal system gets it when he asks for it.
Rut because human institutions of legal justice function slowly, and in quest of perfection, appeals and reviews at higher levels are provided for, the end product comes considerably late.
But these higher Courts pronounce upon the rights of parties as the facts stood when the 851 first Court was first approached.
The delay of years flows from the infirmity of the judicial institution and this protraction of the Court machinery shall prejudice no one.
Actus curiae neminem gravabit(1).
Precedential support invoked by the appellant 's counsel also lets him down provided we scan the fact situation in each of those cases and the legal propositions therein laid down.
The realism of our processual justice bends our jurisprudence to mould, negate or regulate reliefs in the light of exceptional developments having a material and equitable import, occurring during the pendency of the litigation so that the Court may not stultify itself by granting what has become meaningless or does not, by a myopic view, miss decisive alterations in fact situations or legal positions and drive parties to fresh litigation whereas relief can be given right here.
The broad principle, so stated, strikes a chord of sympathy in a court of good conscience.
But a seeming virtue may prove a treacherous vice unless judicial perspicacity, founded on well grounded rules, studies the plan of the statute, its provisions regarding subsequent changes and the possible damage to the social programme of the measure if later events are allowed to unsettle speedy accomplishment of a re structuring of the land system which is the soul of this which enactment.
No processual equity can be permitted to sabotage a cherished reform, nor individual hardship thwart social justice.
this wider perspective explains the rulings cited on both sides and the law of subsequent events on pending actions.
In P. Venkateswarlu vs Motor & General Traders(2) this Court dealt with the adjectival activism relating to post institution circumstances Two propositions were laid down.
Firstly, it was held that 'it is basic to our processual jurisprudence that the right to relief must be judged to exist as on the date a suitor institutes the legal proceeding '.
This is an emphatic statement that the right of a party is determined by the facts as they exist on the date the action is instituted.
Granting the presence of such facts, then he Is entitled to its enforcement.
Later developments cannot defeat his right because, as explained earlier, had the court found his facts to be true the day he sued he would have got his decree.
The Court 's procedural delays cannot deprive him of legal justice or rights crystallised in the initial cause of action.
This position finds support in Bhajan Lal vs State of Puniab(3) .
The impact of subsequent happenings may now be spelt out.
First, its bearing on the right of action, second, on the nature of the relief and third, on its impotence to create or destroy substantive rights.
Where the nature of the relief as originally sought, has become obsolete or unserviceable or a new form of relief will be more efficacious on account of developments subsequent to the suit or even during the appellate stage, it is but fair that the relief is moulded, varied or re shaped in the light of dated facts.
Patterson(4) illustrates this position.
It is important (1) "An act of the court shall prejudice no one" Lalin for lawyers Sweet & Maxwell.
(2) A. I. R. , 1410.
(3) (4) Patterson vs State of Alabama ; , 607; 852 that the party claiming the relief or change of relief must have the same right from which either the first or the modified remedy may flow.
Subsequent events in the course of the case cannot be constitutive of substantive rights enforceable in that very litigation except in a narrow category (later spelt out) but may influence the equitable jurisdiction to mould reliefs.
Conversely, where rights have already vested in a party, they cannot be nullified or negated by subsequent events save where there is a change in the law and it is made applicable at any stage.
Lachmeshwar Prasad Shuku vs Keswar Lal Chaudhuri(1) falls in this category.
Courts of justice may, when the compelling equities of a case oblige them, shape reliefs cannot rights to make them justly relevant in the updated circumstances.
Where the relief is discretionary, courts may exercise this jurisdiction to avoid injustice.
Likewise, where the right to the remedy depends, under the statute itself, on the presence or absence of certain basic facts at the time the relief is to in ultimately granted, the Court, even in appeal, can take note of such supervening facts with fundamental impact.
Venkateswarlu (supra), read in its statutory setting, falls in this category.
Where a cause o action is deficient but later events have made up the deficiency, the Court may, in order to avoid multiplicity of litigation, permit amendment and continue the proceeding, provided no prejudice is caused to the other side.
All these are done only in exceptional situations and just cannot be done if the statute, on which the legal proceeding is based, inhibits, by its scheme or otherwise, such change in cause of action or relief.
The primary concern of the court is to implement the justice of the legislation.
Rights vested by virtue of a statute cannot be divested by this equitable doctrine (See Chokalingam Chetty: P.C.).
The law stated in Ramji Lal vs the State of Punjab(2) is sound: "Courts do very often take notice of events that happen.
subsequent to the filing of suits and at times even those that have occurred during the appellate stage and permit pleadings to be amended for including a prayer for relief on the basis of such events but this is ordinarily done to avoid multiplicity of proceedings or when the original relief claimed has, by reason of change in the circumstances, become inappropriate and not when the plaintiff 's suit would be wholly displaced by the proposed amendment (see Steward vs The North Metropolitan Tramways Company and a fresh suit by him would be so barred by limitation.
" One may as well add that while taking cautious judicial cognizance of 'post natal ' events, even for the limited and exceptional purposes explained earlier, no court will countenance a party altering, by his own manipulation.
a change in situation and plead for relief on the altered basis.
The apparently divergent strains of the several decisions has persuaded us to dilate on this branch of processual jurisprudence.
Let us now apply the law to the circumstances here.
The legislation we are interpreting relates to agrarian reform, regarded as the vitaI base to build a (1) (2) I. L. R. [1966] Punj.
125. 853 new social order.
The Constitution has stressed not merely the supreme significance of this rural transformation but the fleet footed implementation thereof, even going to the extreme extent of walling off litigative assaults on constitutionality by creation of the Ninth Schedule and the like.
Moreover, the Act itself takes care to prevent future accumulation of lands or motivated slimming process by transfers, interfering with the scheme of surplus pool and settlement of ejected tenants and the like.
Peasant proprietorship is a cherished goal of the statute and so it provides that even on the payment of the first instalment of the price the tenant gets the title of the landlord.
To hold that, if the landlord dies at some distant date after the title has vested in the tenant, the statutory process would be reversed if by such death, his many children, on division, will be converted into small landholders, is to upset the day of reckoning visualized by the Act and to make the vesting provision 'a teasing illusion ', a formal festschrift to agrarian reform, not a flaming programme of 'now and here '.
These surrounding facts drive home the need not to allow futurism,, in a dawdling litigative scene, to foul the quick legislative goals.
Moreover, the right of the respondents is fixed under section 18(1 ) and (41 and that cannot be uprooted by supervening circumstances.
We are not called upon to mould the relief but to reject the right.
We are not asked to avoid multiplicity of suits but to non suit and thus stultify the agrarian law.
We are not required to permit the appellate authority to re assess the facts as they stood when the action was brought (that is part of appellate power) but to project the landholder 's subsequent death backwards to refuse a right already acquired.
A flash back camera, in this context, frustrates forensic objectives.
Individual misfortune may be real but larger social changes will claim martyrs in law and in fact.
How can we miss the sublime impact of the Passion of Christ for the Redemption of Mankind ? The great fact is that, if uniformly relentlessly and swiftly enforced, neither landlord nor tenant can keep more than the 'permissible area '.
That is the equity and equality of this agrarian law.
We see no merit in the appeals and dismiss them, leaving parties to bear their respective costs throughout.
1456 1458/69 These appeals raise an interesting question of law bearing on compensation payable to landholders whose lands are vested in tenants and this turns on the connotation of 'similar land ' in section 18(2) of the Act in the context of averaging the price for ten years before the filing of the application for purchase.
The primary fact which projects this point 854 Of law is as to whether the purchased land is irrigated or non irrigated for purposes of valuation.
We are relieved from the need to investigate the implications of the issue because the factual foundation about the nature of the land in question was never put in issue nor considered in the High Court.
Thus the appellants have missed the bus and we cannot hear them on a question raised de novo and demanding enquiry into facts not raised at the next below level.
We dismiss these appeals, without costs.
V.M.K, Appeals dismissed.
| IN-Abs | Section 18(1) of the Punjab Security of Land Tenures Act, 1953.
lays down that, notwithstanding to the contrary contained in any law, usage or contract, a tenant of a land owner other then a small land owner shall be entitled to purchase from the land owner the land so held by him in the Case of a tenant falling within Cl.
(i) or cl.
(ii) at any time.
and in the case of a tenant falling within Cl.
(iii) within a period of one year from the date of commencement of this Act.
Section 18(4)(a) provided that the 'tenant shall be competent to pay the purchase price either in a lump sum or in six monthly instalments not exceeding ten in the manner prescribed.
Clause (b) provided that, on the purchase price or the first instalment thereof, as the case may be, being deposited, the tenant shall be deemed to have become the owner of the land.
Teja, the landlord was a large land owner under whom there were three tenants.
Each o them applied for purchase of ownership under section 18(1) of the Act.
The Assistant Collector found them eligible, fixed the price and the instalments of payment, and they duly deposited the first instalment.
After this Teja died.
Before the Financial Commissioner, the appellants contended that on the death of Teja, they as the heirs of 'Teja, became entitled to shares and, in this process of fragmentation, they became small landowners within the meaning of section 2(2) of the Act and therefore the tenants will be disentitled to purchase the land.
Their plea was that an appeal is a continuation of the original proceeding and, therefore is there is a change of circumstances in the landlord 's ownership during the pendency of the appeal, resulting in his legal representatives becoming small landowners ' the tenants will be disentitled to purchase the land.
The appellants succeeded before the Financial Commissioner, but failed before the High Court.
This appeal has been preferred on the basis of the special leave granted by this Court.
Dismissing the appeals, ^ HELD: (i) It is absolutely plain that on the deposit of the first instalment of the purchase price, the tenant shall be deemed to have become the owner of the land.
In the present case, all these happenings had resulted in the respondents becoming the owners.
[849 H] (ii) Where rights have already vested in a party, they cannot be nullified or negated by subsequent events save where there is a change in law and it is made applicable at any stage.
[852 B] P. Venkataswarlu vs Motor & General Traders ; , 1410, Bhajan Lal vs State of Panjab , Patterson vs State of Alabama ( 1934) 294 U.S. 600, 607 Lachmeshwar Prasad Shukul v, Keshwar Lal Chau ; , 607 Lachmeshwar Prasad Shukul vs Keshwar Lal Chaudhuri and Ramji Lal vs The State of Panjab, I.L.R. [1966] Punj.
125 referred to.
The death of the large landowner occurred pending the appeal.
The right of the respondents is fixed under sub sections (1) and (4) of S 18 of the Act and that cannot be uprooted by supervening circumstances.
A plain reading of section 18 Yields the only conclusion that the rights of parties are determined on the date they come to court.
[853 D] 6 1127SCI/75 848
|
ivil Appeal No. 685 Form the Judgment and order dated the 22nd November, 1963 of the Madras High Court in Appeal Nos 329 and 468 of 1959 F. section Nariman, A. Subba Rao, R. V. Pillai and P. Ramaswami, for the appellants.
M. Natesan, P. section Srisailam and M. section Narasimhan, for L.rs.
Of respondent No. 1 and respondents 2 and 3.
FAZAL ALI, J. This is the plaintiffs ' appeal against the Judgment of the High Court of Madras dated November 22, 1963 by certificate.
The appeal arises out of a partition suit filed by plaintiffs Nos. 1 to 4 for concellation of partition made between the father of the plaintiffs who is defendant No. 5 and defendant No. 1 the elder brother of defendant No. 5.
It appears that as far back as May l, 1940 the two brothers, namely section M. Kuppuswami Chettiar defendant No. 1 and section M. Ranganatham Chettiar defendant No. S, who were originally members of Undivided Hindu Family partitioned their shares by virtue of a registered partition deed dated May 10, 1940.
At the time when the partition was made plaintiffs Nos. 2 to 4 were minors and defendant No. 3 was also a minor.
Under the partition deed both immovable and movable properties were divided between the two brothers voluntarily through the aid and assistance of D.W. 3 K. Narayanswami who was the family auditor of defendant No. 1 and was his friend and adviser.
The partition deed with respect to the immovable properties is Ext.
B l which appears at pp.
243 248 of the Paper Book.
Under the partition deed two Lists were prepared itemising the properties which were to go to the two brothers.
The list of properties is contained in Ext.
B 115 of the Paper Book.
As regards the movable properties it appears that the partition had taken place a month earlier i.e. On April 12, 1940 and 865 the partition deed is Ext.
B 3, which consists of two Schedules Schedule A and Schedule B movables mentioned in Sch.
A were allotted to the defendant No. 1 and those contained in Sch, were allotted to the share of defendant No. 5.
The plaintiffs ' case was that the two brothers who were members or the Undivided Hindu Family along with the plaintiffs and other minor coparaceners betrayed the interests of the minors and the division made between them was both unjust and unfair and had the effect of depriving the minors of their legal shares in the properties the lion 's share having fallen to the lot of elder brother defendant No. 1 section M. Kuppuswami Chettiar hereinafter referred to as 'S.M.K. '.
The plaintiffs? father who is defendant No. 5 being a person of weak intellect did not care to protect the interests of the minors and he accordingly accepted any share that was allotted to him without any objection.
Defendant No. 5 section M. Ranganathan Chettiar would be hereinafter referred to as 'S.M.R. ' Plaintiffs also alleged that the partition was secured by practising fraud and undue influence and by suppressing large assets belonging to the family which were taken by defendant No. I by taking advantage of the weakness of the plaintiffs ' father.
We might mention at the outset that Mr. F. section Nariman the learned counsel for the appellants did not at all press the plea of fraud and undue influence taken by the plaintiffs before the Trial Court and confined his arguments only to the allegation that the partition offered between the two brothers S.M.K. and S.M.R. was on the very face of it unjust and unfair and detrimental to the interests of the minors.
The plaintiffs also laid claim to a sum of Rs. 10,000/ from the cash deposit which is said to have been given to the mother of defendants 1 & 5 but this claim was not pressed before us ill the course of the arguments.
Other minor claims which were also made before the Trial Court were not pressed before us.
The suit was resisted by defendant No. 1 S.M.K. and his major sons defendants 1 and 4 and a minor son defendant 3 who however attained majority during the pendency of the suit before the Trial Court.
We might also mention here that plaintiffs Nos. 2 to 4 sons of S.M.R. were also minors at the time when the suit was filed but plaintiff No. 2 attained majority on October 3, 1958 just about a month and a half before the judgment in the suit was delivered by the Subordinate Jude, Coimbatore.
The defendants stoutly denied the allegations made by the plaintiffs and averred that there was absolutely no disparity in the division of the properties, that no fraud ' or undue influence had been practised, that the properties were divided between defendants I and 5 with the explicit consent of defendant No. 5 and that the division of the properties would show that the partition was neither unjust nor unfair, both parties having taken equal shares in the immovable and movable properties.
A number of other pleas was also raised by the defendants, but it is not necessary for us to deal with them in view of the points pressed before us by the learned counsel for the appellants.
The Trial Court framed as many as 18 issues and after considering the oral and documentary evidence produced before it held that so far as the partition of the immovable properties was concerned which 866 was done by sparate document and was clearly severable from the partition of the movable properties, the partition was neither unjust nor unfair so as to entitle the minors to re open the partition after a long period.
The learned Trial Judge, however, was of the opinion that so far as the partition of movable properties was concerned it was ex facie unjust and unfair and the plea of the plaintiffs for re opening the same must succeed.
The Trial Court accordingly passed a preliminary decree for re partition of the movable properties and directed the appointment of a Commissioner to go into the valuation of the assets sought to be re partitioned.
Both the plaintiffs and the defendants filed separate appeals before the High Court of Madras.
The plaintiffs filed an appeal before the high Court against that part of the decree which dismissed their suit for re opening the partition of the immovable properties., while the defendants filed an appeal against the decree of the Trial Court directing reopening of the partition of movable properties and thus decreeing the plaintiffs ' suit to that extent.
The High Court decided both the appeals by one common Judgment dated November 22, 1963 and by upholding the findings of the learned Subordinate Judge, Coimbator, the High Court made a slight variation in the decree by setting aside the directions of the Subordinate Judge for the appointment of a Commissioner and by quantifying the value of the disparity in the share of the plaintiffs the High Court passed a decree to the extent of 2/5th share of Rs. 17,700/.
The plaintiffs alone have filed the present appeal against the judgment and decree of the High Court after obtaining a certificate from that Court.
Before going into the merits of the case, it may be necessary to mention a few unique aspects of the present case.
It would appear from the findings arrived at by the two courts that defendant No. 1 was undoubtedly an honest man and defendant No. S the younger brother appears to be an idealist a person to whom the value and prestige of the family was a consideration much above mundane monetary matters.
Secondly, the partition between the two brothers was voluntarily made about 35 years ago and the father of the plaintiffs had most willingly and with good grace accepted the partition and the shares that were allotted to him.
Thirdly, since a very long time had elapsed since the partition took place, it would be well nigh impossible for any court to determine the value of the assets, some of which might have disappeared, others may be shrouded in mystery, and for determining the rest the necessary data may not be available.
It appears to us to be too late in the day in 1975 to appoint a Commissioner in order to go into a situation which existed in 1940 and the to pass a decree which may result in a fresh spate of litigation for another decade.
It was possibly this consideration which weighed with the High Court in quantifying the amount of the share of the plaintiffs which they had suffered under the division of the assets.
Finally, the plaintiff 's father defendant No. 5 was a shrewd business and after his elder brother had suffered from some illness, he was carrying on the business of the family a few years in before the partition.
Both the parties were assisted by an Auditor Mr. K. Narayanswami in effecting the partition by metes and bounds.
In these circumstances, therefore, there could be no question of practising 867 any fraud or undue influence as alleged by the plaintiffs and if the partition was unjust or unfair to the minors it was merely because defendant No. 5 made an error of Judgment with respect to some properties.
Lastly, we have not been able to find any material to justify the conclusion of the High Court that the difference in the allotment of the shares to the plaintiffs would be 2/5th of Rs. 17,700/ .We shall deal with this point a little later and show that the difference is much more.
Mr. Nariman learned counsel for the appellants submitted two points before us.
In the first place, he assailed the partition of the immovable properties on the ground that no valuation of the properties was fixed according to the market value and that the plaintiffs were not given any share in the agricultural properties.
As regards the movable properties it was argued that the division was wholly unjust and unfair because the lion 's share was taken by defendant No. 1 and the choice made by defendant No. S the father of the plaintiffs was neither wise nor prudent and was extremely detrimental to the interests of the plaintiffs.
As an instance of the unfairness of the partition Mr. Nariman pointed out that a comparison of Schedules A and of Ext.
B 3 would show that defendant No. 1 was allotted movable properties worth Rs. 1,10,274 2 6, whereas defendant No. 5 was given properties worth Rs. 90,142 4 0 there being a difference of about Rs, 20,000/odd.
He also pointed out that shares of Lakshmi Textile Mills were allotted to defendant No. 1 which were extremely valuable and gave very rich dividends, where as defendant No. S was allotted the shares of Lakshmi Sugar Mills which was one of the sick Mills running at a loss whose dividends were insignificant.
We shall consider this contention raised by counsel for the appellants a little later.
The learned counsel appearing for the respondents Mr. Natesan, however, submitted that the present suit is frivolous and has been filed only with a view to harass the defendants and to re open a partition which was both just and equitable and which was entered by both the brothers with their eyes open and with the aid of their financial expert.
Learned counsel for the respondents, further submitted that there is no reliable evidence to show that there was any cash deposits of Rs. 65,000 as mentioned in Sch.
B, and if there was one it would have been divided on the spot instead of being postponed to a future date.
Similarly it was submitted that so far as the shares are concerned they were chosen by defendant No. S himself and their valuation was equal.
As regards the immovable properties we find ourselves in complete agreement with the arguments of the learned counsel for the respondents that the partition of these properties was fair and just and there is no material on the record to show that the partition worked in any way injustice or was detrimental in any way to the interests of the minors; In this collection we might try to illustrate our point from the findings of the Trial Court regarding the valuation of the immovable properties divided between the two; brothers.
The partition of immovable properties Ext.
B 1 which appears at pp.
243 to 248 of the Paper Book consists of to Schedules A & B. The Trial Court has, after careful consideration of the evidence, very scientifically itemised the properties 868 allotted to each of the brothers and the value of those properties.
For A instance, item 1 of Sch.
allotted to defendant No. 1 is a tank fed nanja land is Kurichi village measuring 3.80 acres and has been valued at Rs. 4,000/ .
Item 2 is a similar land in village Kurichi which is self cultivated and has been valued at Rs. 7000/ .
Thus [he total value of items 1 and 2 of Sch.
A comes to Rs. 11,000/ .
As against this defendant No. 5 was allotted item 2 of Sch.
which on the basis of capitalised value at the rate of Rs. 601/ per month has been fixed at Rs. 14,000/ .
Items 1 & 2 of Sch.
A are the only agricultural properties possessed by the family and the Trial Court has rightly pointed out that whereas defendant No. 1 took the agricultural properties, defendant No. 5 got urban properties not only of the same value but of a higher value.
Similarly item No. 3 of Sch.
A allotted to defendant No. 1 is a house in the Big Bazaar Street and has been valued at Rs. 16,50/ .
As against this the family house in the Oppanakkara Street has been allotted to defendant No. 5 whose value is much more than item No. 3 of Sch.
The capitalised value of the family house in the oppanakkara Street on the basis of rental of Rs. 700/ per month would come to near about Rs. 96,000 .
Item 4 of Sch.
A is a house and site in Ramanathapuram and has been valued at Rs. 7,000/ because it was purchased in 1938 for a sum of Rs. 5,650/ vide Ext.
B 139 dated March 6, 1938.
The learned Subordinate Judge has roughly put the valuation of the said house and site at Rs. 7,000/ in 194().
As against this item 3 allotted to defendant No. 5 is a shop building in the Big Bazaar Street carrying a rental of Rs. 300/ per month at the time of the partition whose capitalised value would be Rs. 7,000/ .
Item No. 5 of Sch.
A which was allotted to defendant No. 1 has been valued at Rs. 2,300/ representing the purchase price of the property mentioned in Exts.
B 140 to B 142.
As against this item 4 of Sch.
which has been allotted to defendant No. 5 was purchased for a sum of Rs. 2,100/ .
It would thus appear that the division of immovable properties is just, fair and equal.
It is true that the properties were not actually valued according to the market rate and that a notional valuation had been given in the partition deed.
But in view of the detailed examination by the two Courts of the fact regarding capitalised value of the properties allotted to the two brothers it cannot be said that the partition of immovable properties was either unfair or unjust or in any way detrimental to the interests of the minors.
After considering the evidence.
, the Trial Court found as follows: "It is thus found from the available evidence that there was no unfairness or inequality in the partition of the immovable properties effected under Exhibit B 1 and that no ground exists for reopening that partition.
" The High Court upheld the findings of the Trial Court in these words: "Thus in regard to the division of the immovable proper ties it is not possible for us to say that there was unfairness or fraud or irregularity in the allotment of the properties between the brothers.
The scheme of the division of the immovable properties seems to us to be fair and we cannot say that the plaintiffs ' father (5th defendant) acted against the interests of his sons 869 or that the 1st defendant took any advantage of his position as the eldest member of the family and allotted to himself the best among the properties available for division.
We there fore confirm the finding of the learned Subordinate Judge that the partition of the immovable properties effected under Exhibit B 1 is binding on the plaintiffs and that the plaintiffs are not entitled to reopen the partition.
" It is a well settled practice of this Court not to interfere with a con current finding of fact given by the two Courts below in the absence of any extra ordinary or special reasons.
In the instant case we hold that the finding of the l High Court as well as of the Trial Count based on a full and complete consideration of the evidence both oral and documentary and an elaborate and meticulous discussion of all the surrounding circumstances.
We, therefore do not feel inclined to interfere with this concurrent finding of fact which is hereby affirmed.
We might state that the objection regarding the properties not having been properly valued falls to the ground when we find that instead of notional value mentioned in the partition deed which is Rs. 12,517 13 0 for defendant No. l and Rs. 12,000/ for defendant No. S the capitalised value of the items allotted to the two brothers either on the basis of their purchase price or on the basis of the rent fetched by them is almost equal.
The first contention regarding the partition of immovable properties raised by the learned counsel for the appellants being unfair and unjust must therefore be overruled.
We now come to the question of the division of movable proper ties.
In this connection our attention was drawn by Mr. Nariman to Ext.
E 3 which is to be read along with the pencil note of K. Narayana swami D.W. 3, who was the auditor of Defendant No. 1 himself.
Exhibit B 3 is the partition deed of movable properties consisting of shares, deposits, promotes, mortgage deeds and cash, particulars of which are given in Schs.
A & B. Movable properties mentioned in Sch.
A were allotted to defendant No. 1 and those mentioned in Sch.
B, were allotted to defendant No. 5 father of the plaintiffs.
It will appear from a plain examination of the two schedules that whereas defendant No. 1 admittedly got properties worth Rs. 1,10,274 2 6 defendant No. 5 got properties only worth Rs. 90,142 4 0 there being a clear disparity of Rs. 10,000/ because the share of each of the two defendants would be Rs. 1,00,2081 .
On the defendant No. 1 's own documents, therefore? it is clear that a loss of Rs. 10,000/ was caused to defendant No. 5 in the year 1940 and the share of the plaintiffs in this loss would be 2/5th i.e. about Rs. 4,000/ which would swell into a large amount if we add interest for all these 35 years.
That apart the learned counsel for the appellants has submitted that the document Ext.
B 3 deliberately omits to mention a sum of Rs. 65,000/ which was a cash deposit alleged to have been kept in the safe and out of which Rs. 10,000/ were agreed to be given to the mother of the two brothers and the rest, viz. Rs. 55,000/ were to b divided between the two brothers, each defendant getting Rs. 27,500/ .
This is 870 undoubtedly proved by Ext.
A 2 where these figures are clearly mentioned.
Entry No. l of Ext.
A 2 runs thus: Total Settlement section M. K. section M. R. (1) (2) (3) (4) (5) (6) Thanichontham 65,000 55,000 27,500 27,500 Belonging exclusively *Scored out in pencil.
This cash amount of Rs. 65,000/ is denied by defendant No. 1 and it is said that this amount might have been hidden money which never came to the share of the parties.
D.W. 3 K. Narayanaswami has positively admitted in his evidence that he had made this entry in his on hand writing but he scored out this entry as the amount was not available.
Both the Suborclinate Judge, Coimbatore and the High Court have accepted the explanation given by D.W. 3 Narayanaswami although the explanation appears to us to be prima facie false and unconvincing.
Even assuming that this entry was made due to some mistake and had to be scored out, we cannot believe that a person of the expert knowledge and status of D.W. 3 Narayanaswami Iyer the Auditor would forget to make a corresponding correction in the total amount which is given below the statement of account signed by him.
If the amount of Rs. 65,000/ was scored out, then the total would be Rs. 200116/ in Ext.
A 2, but the total shown in pencil in Ext.
A 2 is Rs 2,65,116/ which completely demolishes the case of defendant No 1 and the explanation given by D.W. 3 that the entry was made due to some mistake.
The Courts below have however, relied on a number of circumstances which are purely of a speculative nature, in order to hold that the plaintiffs have not been able to prove the existence of the cash amount of Rs.65,000/ .
One of the circumstances was that according to the evidence of defendant No. 5 the amount of Rs. 65,000/ was taken out from the safe and counted in the presence of defendants 1 and 5 and yet defendant No. 5 did not care to divide it at that time into two equal parts, nor did he insist on the same.
Defendant No. S has, however, given an explanation that as his elder brother wanted that this money should be divided later he did not want to join issue on the subject and trusted his elder brother.
A perusal of the evidence of defendant No. 5 clearly shows that he is an extremely emotional sort of a person who believes in the respect of the family above all consideration.
It is.
, therefore, not unlikely that defendant No. 5 quietly accepted the advice of his elder brother to divide the amount later on.
It was however argued by the learned counsel for the respondents that defendant No. 5 was a shrewd business man having managed the family affairs for quite some time and if such a huge amount was concealed from him by his elder brother he would have undoubtely raised objection at any time before the suit.
This conduct of defendant No. 5 cannot, however, put the plaintiffs out of court.
He had decided to abide by the advice of his elder brother and if he thought that his elder brother did not want to divide the amount of Rs. 65,000/ he kept quiet which is quite in consonance with the 871 character of this man as revealed in his evidence and the circumstances of the case.
Assuming however that defendant No. 5 did not take any objection, as the amount was very huge the silence of defendant No. 5 or even his acquiescence in allowing his elder brother to swallow this amount was not a prudent act and has caused serious detriment to the interests of the minors which he had to protect, because the minors at that time were members of the Hindu Undivided Family.
In view of these circumstances, therefore, we are satisfied that the plaintiffs ' case regarding the deliberate suppression of the cash amount of Rs. 65,000/ has been proved and if this amount would have been available to defendant No. 5, then the plaintiffs would have got 2/5th share of Rs. 55,000/ , (Rs. 10,000/ reserved for the mother) viz. Rs. 27,500/ , as far back as 1940.
The argument of Mr. Nariman on this point is, therefore, well founded and must prevail.
The only other point that was stressed before us by the learned counsel for the appellants was that the Trial Court was right in ordering the appointment of a Commissioner for going into the assets of the movable properties, particularly the question of the shares of the Lakshmi Mills.
We are, however, unable to agree with this argument.
Mr. Natesan learned counsel for the respondents has drawn our attention to some important documents to show that the shares were equaly divided between defendants Nos. 1 and 5 and were actually chosen by defendant No. 5 with his eyes open.
Exhibit B 153 which is a share market report dated April 5, 1940 shows that the paid up value of each share of Lakshmi Sugar Mills was Rs. 50 but the current price of the share at that time was Rs. 41/8/ i.e. it was Rs. 8/8/ below the paid up value and the dividend paid on the share was only Rs. 9/ yearly.
It was, therefore, suggested by counsel for the respondents that defendant No. 5 was given the choice to take the shares of the Lakshmi Mills or the Lakshmi Sugar Mills and in view of the low market rate of the Lakshmi chose to take the shares of the Lakshmi Sugar Mills to the extent of Rs. 10,000/.
In lieu of the shares of other Mills defendant No. 5 took a cash amount of Rs. 13,000/ as would appear from Ext.
It is true that the shares of Lakshmi Textile Mills went up enormously a few years later in view of the international war situation in the continent but defendant No. 5 could not have foreseen such a contingency and if he had made the choice which he thought would be beneficial to the interests of the minors his conduct would have been at best an error of judgment which would not be sufficient to reopen the choice made by him.
Mr Nariman, however, strenuously relied on the evidence of D.W. 3 Narayanaswami Auditor which was to the effect that he expressed great surprise when defendant No. 5 chose the shares of Lakshmi Sugar Mills and in his opinion that was his foolish act.
This is, however, a matter of opinion but the fact remains that the market report of the Lakshmi Mills was not encouraging and therefore there was some justification for defendant No. 5 for not opting for the shares of the Lakshmi Mills.
In these circumstances we hold that so far as the shares of the various Mills were concerned there was no unjust or unequal distribution between the parties.
This item of movable properties, therefore, was correctly divided between the parties.
872 Learned counsel for the respondents submitted that taking a broad view of the whole case the Court should hold that it was not a case of unfair or unjust partition, because both defendant Nos. 1 and 5 were persons who had shrewd business experience and had voluntarily accepted the partition of the properties which was by and large equal.
The learned counsel relied on the decision of this Court in Devarajan and Ors.
vs Janaki Ammal and Ors(1) where this Court observed as follows: "Generally speaking, a partition once effected is final and cannot be reopened on the ground of mere inequality of shares, though it can be reopened in case of fraud or mistake or subsequent recovery of family property: [see Moro Vishvanath vs Ganesh Vithal Further an allotment bona fide made in the course of a partition by common consent of the coparceners is not open to attack when the shares are not absolutely equal, or are not strictly in accordance with those settled by law.
It is true that minors are permitted in law to reopen a partition on proof that the partition has been unfair and unjust to them.
Even so, so long as there is no fraud, unfair dealing or over reaching by one member as against another, Hindu law requries that a bona fide partition made on the basis of the common consent of coparceners must be respected and is irrevocable:" It was submitted that the evidence and circumstances of the case clearly show that there was no inequality of shares and the plea of fraud or mistake has not been accepted by the courts and that on the whole the partition was bond fide.
It is true that if this was the position the ratio of the decision in Devarajan 's case (supra) would undoubtedly apply to this case.
But this Court had taken care to point out in these very observations which are underlined by us that this rule did not apply to the minors who are undoubtedly permitted in law to reopen the partition once it is proved that the partition was unfair or unjust to them.
In view of the concurrent finding of fact of the two Courts below that the partition of movable properties, excepting those with respect to the shares, was unfair and unjust, even according to the decision mentioned above the partition with respect to the movable properties has to be reopened.
Moreover in an earlier decision of this Court in Bishundeo Narain and Anr.
vs Seogeni Rai and Jagernath it was observed: "It is well established that a minor can sue for partition and obtain a decree if his next friend can show that that is for the minor 's benefit.
It is also beyond dispute that an adult coparcener can enforce a partition by suit even when there are minors.
Even without a suit, there can be a partition between members of a joint family when one of the members is a minor.
In the case of such lastly mentioned 873 partitions, where a minor can never be able to consent to the same in law, if a minor on attaining majority is able to show that the division was unfair and unjust, the Court will certainly set it aside.
" In our opinion the present case falls within the ratio laid down by the decision cited above.
Apart from that there are numerous authorities which have sonsistently held that where a partition is unjust and unfair and detrimental to the interests of the minors the partition would be reopened irrespective of the question of bona fides.
In Lal Bahadur Singh vs Sispal Singh and Ors.(1) it was observed that even though the ground of fraud and mistake failed, the partition which affected the interests of the minor could be reopened.
Similarly in Chanvira 'Pa ' vs Da 'Na ' 'Va ' & Ors.(2) a Division Bench of the Bombay High Court held that a partition will be binding on the minors only if it was just and legal, but if it was made and finalised there being no means of testing the validity of the assets the partition was not final.
The same view was taken in Maruti vs Rama(3) Thus on a consideration of the authorities discussed above and the law on the subject, the following propositions emerge: (1) A partition effected between the members of the Hindu Undivided Family by their own volition and with their consent cannot be reopened, unless it is shown that the same is obtained by fraud, coercion, misrepresentation or undue influence.
In such a case the Court should require a strict proof of facts because an act inter vivos cannot be lightly set aside.
(2) When the partition is effected between the members of the Hindu Undivided Family which consists of minor coparceners it is bindig on the minors also if it is done in good faith and in bona fide manner keeping into account the interests of the minors.
(3) Where, however a partition effected between the members of the Hindu Undivided Family which consists of minors is proved to be unjust and unfair and is detrimental to the interests of the minors the partition can certainly be reopened whatever the length of time when the partition took place.
In such a case it is the duty of the Court to protect and safeguard the interests of the minors and the onus of proof that the partition was just and fair is on the party supporting the partition.
(4) Where there is a partition of immovable and movable properties but the two transactions are distinct and separable or have taken place at different times.
If it is found that only one of these transactions is unjust and 874 unfair it is open to the Court to maintain the transaction which is just and fair and to reopen the partition that is unjust and unfair.
The facts of the present case, in our opinion, fall squarely within propositions Nos.
(3) and (4) indicated above.
In the instant case we find from a perusal of the two schedules 'A ' and 'B ' of Ext.
B 3 that there has been ex facie a disparity of about Rs. 10,000/ to which must be added Rs. 27,500/ which we have discussed above.
Thus the total disparity comes to Rs. 37,500/ and the share of the minor plaintiffs would be 2/5th which comes to Rs. 15,000/ .
This amount of Rs. 15,000/ should have been available to the minor plaintiffs as far back as 1940 when the partition was made and they have been deprived of that amount ever since.
We find that in the peculiar facts and circumstances of the case as already stated it will not be in the interests of the minors nor conducive in the interests of justice to order the appointment of a Commissioner for reopening the entire partition when the shares of the minor plaintiffs are easily ascertainable in terms of money and can be quantified.
In these circumstances we think the best course is to determine the money value of the share of the plaintiffs and to pass a decree for the same which will protect the minors from protracted litigation which might follow the passing of a preliminary decree.
This was the approach made by the High Court but we do not agree with the amount quantified by it.
If we add interest at the rate of 6% per annum as prayed for in the plaint on the amount of Rs. 15,000/ ,the interest calculated at this rate for 35 years from 1940 to 1975 would come to Rs. 31500/ .
Thus the total amount payable to the plaintiffs comes to Rs. 46,500/ .
We, therefore, allow the appeal in part and modify the decree of the High Court to the extent that there will be a decree for a sum of Rs. 46,500/ in favour of the plaintiffs/appellants which represents their share of the movable properties of which they were deprived of.
The plaintiffs would be entitled to future interest at the rate of 6% per annum till payment.
In the circumstances of the case, there will be no order as to costs.
This course, in our opinion, safeguards the interests of the minors to give them their just due and to protect them from a protracted and fruitless litigation.
V.P.S. Appeal partly allowed.
| IN-Abs | (1) A partition effected between the members of an Hindu Undivided Family by their own volition and with their consent cannot be reopened unless it is shown that it was obtained by fraud, coercion, misrepresentation or undue influence.
In such a case.
the Court should require strict proof of facts, because, an act inter vivos cannot be lightly set aside.
(2) When the partition is effected between the members of the Hindu Undivided Family which consists of minor coparceners it is binding on the minors also, if it is done in good faith and in a bona fide manner keeping into account the interests of the minors.
(3) But if the partition is proved to be unjust and unfair and is detrimental to the interests of the minors the partition can be reopened after any length of time.
In such a case, it is the duty of the Court to protect and safeguard the interests of the minors and the onus of proof that the partition was just and fair is on the party supporting the partition.
(4) Where there is a partition of immovable and movable properties, but the two transactions are distinct and separable, or have taken place at different times, if it is found that only one of these transactions is unjust and unfair, it is open to the court to maintain the transaction which is just and fair and to reopen the partition that is unjust and unfair.
[873D 874B] In 1940, two brothers, defendants 1 and 5 partitioned their movable and immovable properties by two separate transactions.
At that time defendant S had two sons who were minors.
They and their minor brothers filed a suit in 1952 for cancellation of the partition and for re opening it on the ground that the partition was unjust and unfair and had the effect of depriving the minors of their legal shares in the properties.
The trial court passed a preliminary decree for re partition of the movable properties as it was ex facie unjust and unfair and directed appointment of the Commissioner to go into the valuation of the assets sought to be partitioned while holding that the partition of immovable properties was neither unjust nor unfair.
In appeal, the High Court agreed with the findings of the trial court but set aside the direction of the trial court for the appointment of Commissioner; quantified the value of the disparity in the share of the plaintiffs and passed a decree to the extent of 2/5th share of Rs. 17.700.
In appeal to this court, passing a decree for a sum of Rs. 46,500/ with future interest in modification of the High Court 's decree, ^ HELD: (1) The division of immovable properties was just fair and equal.
The properties were not actually valued according to the market rate and only a notional valuation had been given in the partition deed; but, in view of the detailed examination by the two courts of the facts regarding capitalised value of the properties allotted to the two brothers, it could not be said that the partition of the immovable properties was either unfair or unjust.
This court will not interfere with concurrent findings of the fact given by the courts below in the absence of any extraordinary or special reasons.
[868E F; 869B C] 2(a) But a perusal of the schedules to the partition deed relating to movable properties shows an ex facie disparity of about Rs. 10,000.
[874B] (b) Further, the evidence disclosed that a sum of Rs. 55.000 with defend ant 1, was agreed upon between the brothers to be divided later, but this 7 1127 SCI/75 864 amount was not included in the partition deed.
Assuming that defendant 5 had not taken any objection, since the amount was very large, his Silence or his acquiescence in allowing his elder brother to swallow the amount was not a prudent act and has caused serious detriment to the interests of the minors which he had to protect because.
he and his minor sons were member of an Hindu Undivided Family.
[870H 871B] (c) Taking these two sums into account and calculating the plaintiff 's share in 1940 and adding interest thereon till date of decree, the plaintiffs would be entitled to Rs. 46,500.
[874D E] (d) The High Court was right in holding that it would not be in the interest of the minors or.
Of justice to order the appointment of a Commissioner for re opening the entire partition when the shares of the plaintiffs are easily ascertainable in terms of money and can be quantified.
[874C D] Bishunodeo Narain and vs Seogeni Rai and Jagernath.
556, followed.
Devarain and ors.
vs Janaki Ammal and Ors.
C.A. No. 2298 of 1066 dated r March 20, 1967, Lal Bahadur Singh vs Sispal Singh and ors.
T.L.R. 14 All 498; Chanvira 'Pa ' vs Da 'Na ' 'Va ' & ors.
I.L.R. and Maruti vs Rama I.L.R. referred to.
|
Civil Appeals Nos.
76 to 80 of 1971 From the Judgment and orders dated the 17th October, 1968 of the Madhya Pradesh High Court in Misc.
Petitions No. 277, 279 to 282 of 1966.
G. C. Sharma, P. L. Juneja and section P. Nayar, for the appellant.
S, Chowdhury, Leila Seth and U. K. Khaitan, for respondent.
The Judgment of the Court was delivered by FAZAL ALI, J.
These appeals are by Income tax officer, 'A ' Ward, Indore, against the judgment of the Madhya Pradesh High Court and involve a question of law regarding the interpretation of section 220 sub sections
(2) and (3) of the Income tax Act, 1961.
In order to understand the scope and ambit of the question involved, it may be necessary to mention a few facts leading to these appeals.
The respondent firm carries on the business of manufacturing cloth.
In 1947 the then Maharaja of Gwalior granted to the firm exemption from tax for a period of twelve years from the date when the firm started its factories.
Under the Part States (Taxation Concessions) Order, 1950 the Commissioner of Income tax of the region concerned approved of the exemption only to the weaving division of the respondent for ten years, but deferred decision regarding the staple fibre division until the ' factory started functioning in 1954.
The Commissioner was approached again for granting exemption but he refused to do so.
The respondent thereafter moved the Hi h Court of Madhya Pradesh for cancelling the order of the 857 Commissioner refusing exemption.
The writ petition before the High Court succeeded and the respondent 's right to exemption was upheld by the High Court.
Thereafter the Revenue filed an appeal to this Court which was allowed and by its order dated April 28, 1964 reported in this Court reversed the decision of the High Court and maintained the order of the Commissioner refusing exemption.
As a result of the cancellation of; the exemption, a huge amount of income tax became due from the respondent, and the provisional assessments made for the years 1959 60 to 1965 65 reached the aggregate amount of over Rs. 6.60 crores which was payable by the firm was actually demanded from the respondent.
In fact the effect of the order of this Court was that the amount exempted became payable at once and was according demanded from the respondent but the respondent instead of paying the amount tried to negotiate with the Revenue for certain concessions.
In this connection a series of correspondence followed between the respondent and the Income tax `Department including a letter which was written by the assessee on December 26, 1964 by which the assessee paid a sum of Rs. 3 crores and wanted the balance of Rs. 3.60 crores to be paid in instalments.
The assessee further undertook to pay interest on the arrears at the rate ' of 5% per annum, even though under sub s (2) of section 220 of the Income tax Act, 1961 hereinafter referred to as 'the Act he was required` to pay interest at the rate of 4% only.
In view of these favourable terms offered by the assessee, the Income tax officer acceded to its request by his letter `dated January 16, 1965.
The assessee had agreed to pay the arrears in the following manner: Rs. 1,00,00,000 by March 15, 1966.
Rs. 1,20,00,000 by March 15, 1967.
Rs. 1,34,76,000 by March 15, 1968.
Soon after the request of the assessee was granted by the Income tax officer, sub section
(2) of section 220 of the Act was amended by the Finance Act, 1965 by which the rate of interest was increased from 4 to 6% per annum.
In view of this amendment, the Income tax Officer by his letter dated January 10,1966 informed the assessee that on the unpaid balance of tax arrears the respondent would be liable to pay interest at the rate of 6% per annum with effect from April 1, 1965 instead of 5% as agreed to by the Income tax officer in his previous letter.
The Income tax officer pointed out that this course was necessitated in view of the amendment made by the Finance Act, 1965.
Consequently a notice of demand under section 156 of the Act was served on the respondent which resulted in his filing writ petitions before the High Court with the result mentioned above.
The main point urged in the petitions before the High Court by the respondent was that the Income tax officer having acceded to the request of the assessee a settlement between the parties was arrived at to pay the balance of arrears at the rate of interest at 5% per annum and it was not open to the Income tax officer to vary that 858 rate to the prejudice of the assessee even in spite of a change in the rate of interest by the Finance Act 1965, because a vested right could not be taken away by a statute which in terms did not apply retrospectively.
This plea appears to have found favour with the High Court, though not on the ground expressly taken by the respondent.
The High Court found that in view of the notice of demand the liability of the assessee to pay the arrears arose only after the expiry of 35 days and this period had expired before the Finance Act, 1965 amending section 220(2) of the Act and therefore the Revenue had no jurisdiction to demand payment of the arrears at the rate of 6% interest.
Thus it would appear that the High Court actually decided the case on a point which was not raised by the respondent in his petition but after making out a new case made out at the time of arguments and without giving any opportunity to the Revenue to rebut the same.
The High Court has written a detailed judgment regarding the time as to when the liability of the assesse to where a notice of demand under section 156 of the Act is issued would arise.
It is, however, not necessary for us to consider the reasons given by the High court in detail because in the view that we take we find that the basis on which the High Court has decided this case is wholly irrelevant and is not at all germane to the issue that was involved.
It was not a case of a notice of demand under section 156 of the Act simpliciter, but the admitted position was that in view of the decision "f the Supreme court the respondent was in arrears of tax and had to pay heavy amounts of over Rs. 6.6 crores.
The respondent voluntarily paid the amount of Rs. 3 crores and requested the Income tax officer to allow it to pay the balance in instalments and Persuaded the Income tax officer to accept the request even by agreeing to pay a higher rate of interest of 5% than the rate prescribed under section 22()(2) of the Act.
The liability to pay the arrears was never disputed and the only dispute between the parties was as to rate of interest that was payable.
Section 22n, sub sections
( '2) and (3) run thus: "(2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub section (1), the assessee shall be liable to pay simple interest at four per cent per annum from the day commencing after the end of the period mentioned in sub section (1).
Provided that, where as a result of an order under section 154.
Or section 155, or section 250, or section 254, or section 260 or section 262, or section 264.
the amount on which inter st was payable under this section had been reduced.
the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded.
(3) Without prejudice to the provisions contained in sub section (2), on an application made by the assessee before 859 the expiry of the due date under sub section (1), the Income tax officer may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case.
" The fact that the arrears were demanded from the assessee is not disputed as would appear from the statement made by the respondent in paragraph 2 of the writ petition filed before the High Court where it was averred thus: "Subsequently when assessments for the assessment years 1959 60 to 1964 65 were provisionally made, a huge amount aggregating to over Rupees six and a half crores became payable and was demanded from the petitioner.
" In these circumstances, therefore, the conditions precedent to the application of subs.
(2) of section 220 of the Act were undoubtedly fulfilled, in this case.
It would be seen that before the assessee entered into correspondence with the Revenue, the rate of interest prescribed under sub section
(2) of section 220 was only four per cent and yet the assessee offered to pay a higher rate namely 5% per annum is he was allowed to pay the arrears in instalments.
This request of the assessee was accepted by the Income tax officer on January 16, 1965 when there was no amendment in the provisions contained in section 220(2) of the Act and the order passed by the Income tax officer must be construed as one made under sub section
(3) of section 220 of the Act.
It was suggested before the High Court that the order of the Income tax officer amounted to an irrevocable agreement which could not be varied merely because the rate of interest contained in sub section
(2) of section 220 of the Act was enhanced.
Mr. section C. Choudhry learned counsel for the respondent, however, has fairly conceded that there was no question of an agreement or settlement because section 220(3) does not empower the Income tax officer to enter into agreement or settlement in order to bind the Revenue.
We find ourselves in complete agreement with this view.
Section 220(3) merely empowers the Income tax officer to extend the time for payment or allow payment by instalments on such conditions as he may impose.
In the instant case the Income tax officer merely exercised his powers under sub section
(3) of section 220 by imposing the condition that the assessee shall be allowed to pay the arrears by instalments if he paid interest at the rate of 5% per annum offered by him.
What is important however, is that sub section
(3) is not independent of sub section
(2) but is inter connected with it.
The words 'without prejudice to the provisions contained in sub section (2) ' clearly show that any order passed by the Income Tax officer under sub section
(3) must neither be inconsistent with nor prejudicial to the provisions contained in sub section
In other words, the Position is that although sub section
(3) is an independent provision the power under this sub section has to be exercised subject to the terms and conditions mentioned in sub section
(2) so far as they apply to the facts mentioned in sub section
Thus if sub section
(2) of section 220 provided that the rate of interest chargeable would be 860 four per cent per annum any order passed under sub section (3) could not vary that rate, and if it did, then the order to that extent would stand superseded.
The argument o the assessee.
is that sub sections
(2) and (3) of section 220 were independent provisions which operated in fields of their own.
We are, however, unable to accept this somewhat broad proposition of law.
Sub sections (2) and (3) form part of the same section, namely section 220, and are therefore closely allied to each other.
It is no doubt true that the two sub sections deal with separate issues but the non obstante clause of sub section
(3) clearly restricts the order passed under sub section
(3) to the conditions mentioned in sub section
(2) of section 220 of the Act.
Further more, it is the Finance Act which fixes the rate of interest payable under sub section
(2) of section 220 and it is common knowledge that every year the Finance Act makes important amendments in the rates payable under the various provisions of the Income tax Act.
In these circumstances, therefore, it is not within the competence of the Income tax officer to vary the rate of interest fixed by the Finance Act under sub section
(2) of section 220 from time to time.
We are fortified in this view by a decision of this Court in Esthuri Aswathaiah vs Commissioner of Income tax, Mysore(1) where this Court observed thus "The Income tax officer has no power to vary the rate on which the income of the previous year is to be assessed.
The rate of tax is fixed by the Finance Act every year.
By section 3, the tax is levied at that rate for an assessment year in respect of the income of the previous year.
Once the length of the previous year is fixed and the income of the previous year is determined, that income must be charged at the rate specified in the Finance Act and at no other rate.
" As we have already pointed out sub section
(3) of section 220 of the Act does not empower the officer to enter into and indefeasible settlement with the assessee or to clothe the Income tax officer with any such power so as to vary the statutory inhibition contained in sub section
Any order which is passed under sub section
(3) would be subject to the rate of interest mentioned in sub section
(2) and as soon as the rate mentioned in sub section
(2) is varied or enhanced by the Legislature it would have to be read into sub section
(2) from the date of the amendment and any order passed under sub section
(3) would be subject to the rate so fixed.
In fact if this is not the position, then the order passed under sub section
(3) being prejudicial to sub section
(2) becomes illegal and invalid and the Income tax officer exceeds the limits of his jurisdiction in passing such an order.
In the instant case the Finance Act of 1965 became effective form April 1, 1965 and the Income tax officer in his letter dated (1) ,416.
861 January 10,, 1966, to the assessee had merely given effect to the legal provisions of the Finance Act by insisting that in view of the variation in the rate of interest under sub s (2) of section 220 the assessee would have to pay interest at the rate of 6% per annum only from April 1, 1965.
There was absolutely no question of the Finance Act operating retrospectively, near there was any question of the Finance Act taking away a vested right which had accrued to the assessee because we have already held that the order of the Income tax officer under sub section
(3) of section 220 does not amount to any final settlement or agreement.
There is yet another view of the matter.
In the present case the assessee himself wanted extension of time for being allowed to pay the arrears by instalments.
The assessee could be permitted to seek this indulgence under sub section
(3) of section 220 only within the four corners of the law and not outside the same.
The moment the Finance Act, 1965, came into operation and the rate of interest in sub section
(2) of section 220 was increased from 4% to 6% per annum any order passed by the Income tax officer would automatically operate in accordance with the Finance Act with effect from April 1 1965.
This is what has happened in the present case.
Thus it is manifest that the Income tax Officer could not have passed any order against the statutory provisions of sub section
(2) of section 220 either with or without the consent of the assessee.
Even the order of the Income tax officer dated January 16, 1965, accepting the offer of the assessee to pay interest at the rate of 5% per annum was legally invalid, because if the rate of interest fixed by the statute was 4% the parties could not be allowed to contract out of the statute.
The only relief, therefore, which the assessee could get is that it was liable to pay interest at the rate of 4% and not 5% per annum for the period January to march 1965.
But from April 1, 1965 it was bound to pay interest at the rate of 6% per annum as found by the income tax officer.
Reliance was placed by Mr. G. C. Sharma appearing for me Revenue on a decision of the Orissa High Court in Biswanath Ghosh vs Income tax Officer, Ward and Another(1) where a Division Bench of that Court observed as follows: "As we find, the Income tax officer has charged interest at 6 per cent until the provision was amended to enhance the rate of interest at 9 per cent.
In fact in the counter affidavit given by the Income tax officer in O.J.C. No. 195 of 1972 that position has been clarified.
Mr. Pasayat for the petitioner claims that the rate of interest must he only at 6 per cent in view of the fact that default in this case had occurred prior to the amendment.
It is only here that he relies upon the decision of the Madhya Pradesh High Court in Gwalior Rayon Silk Manufacturing (Weaving) Co. vs Income tax Officer (1) , 374.
862 That was a case in respect of penalty under section 220(2) of the Act and the court took the view that the rate of interest as provided on the date when default occurred would apply to the facts of the case.
We do not agree with the view expressed in the said decision.
It is true that central Act 27 of 1967 has no retrospective effect, but in respect of continuing default after the amendment, in our view, the rate of interest as provided thereunder would apply." The Orissa High court expressly dissented from the view taken by the Madhya Pradesh High Court in the present judgment under appeal and we find ourselves in complete agreement with the view taken by the orissa High court.
We have already pointed out, the Madhya Pradesh High Court did not at all go into the question which really arose in this case with respect to the payment of interest at the rate of 6 per cent in accordance with the Finance Act, 1965 .
For these reasons, therefore, the appeals are allowed and the order of the High Court is set aside with slight modification, namely In that the assessee shall pay interest on the entire amount of arrears the rate of 4 per cent per annum only during the period January to March 1965.
So far as rest of the period is concerned, the order of the Income tax officer directing the assessee to pay interest at the rate of 6 per cent per annum is restored.
In view of the peculiar circumstances of the case, however, we leave the parties to bear their own costs throughout.
P.B.R. Appeals allowed.
| IN-Abs | Sub section (2) of 9. 220 of the Income tax Act.
1961 makes an assessee liable to pay simple interest at 4% p.a.
if the amount specified in any notice of demand under section 156 was not paid within the period limited under sub section
Sub section (3) states that without prejudice to the provisions contained in sub section
(2) on an application made by the assessee before the expiry of the due date under sub section
(1) the Income tax officer may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case.
Out of a large sum of money which became payable by the respondent as income tax, half the amount was paid and in respect of the remaining half which was allowed to be paid in three instalments, the respondent had under taken to pay interest at the rate of 5% p.a.
even though section 220(2) of the Income tax Act, 1961 prescribed 4% as the rate of interest payable on such arrears.
The Income tax Officer accepted the term.
By the Finance Act, 1965 the rate of interest payable under this section was raised from 4% to 6% p.a.
On receipt of a notice from the Income tax officer, that on the unpaid balance of the tax arrears the company was liable to pay interest at 6% p.a., the respondent moved the high Court contending that it was not open to the Income tax officer to vary the rate from 5% to 6% even in spite of the change made by the Finance Act, 1965, in that a vested right could not be taken away by a statute which did not apply retrospectively.
The High Court allowed the writ petition.
On appeal to this Court it was contended by the respondent that sub sections
(2) and (3) of section 220 were independent provisions which operated in fields of their own.
Allowing the appeal to this Court, ^ HELD: (1) Sub sections (2) and (3) form part of the same section namely, section 220 and are therefore closely allied to each other.
It is true that the two sub sections deal with separate issues but the non obstante clause of sub section (3) clearly restricts the order passed under sub section
(3) to the conditions mentioned in sub section
(2) of section 220 of the Act.
[860 B] (2) It is the Finance Act which fixes the rate of interest payable under sub section
(2) of section 220.
It is not within the competence of the Income tax officer to vary the rate of interest fixed by the Finance Act under subs.
(2) of section 220 from time to time.
[860C D] Esthuri Aswathaiah vs Commissioner of Income fax Mysore and 416, followed.
(3) Sub section (3) of section 220 does not empower the Income tax officer to enter into any indefeasible settlement with the assessee or to clothe the Income tax officer with any such ,power so as to vary the statutory inhibition contained 856 in sub section
Any order which is passed under sub section
(3) would be subject to the rate of interest mentioned in sub section (2) and as soon as the rate mentioned in sub section
(2) is varied or enhanced by the legislature it would have to be read into sub section
(2) from the date of the amendment and any order passed under sub section
(3 ) would be subject to the rate so fixed.
If this is not the position then the order passed under sub section
(3) being prejudicial to sub section
(2) becomes illegal and invalid and the Income tax officer exceeds the limits of his jurisdiction in passing such an order.
[860F H] In the instant case there was no question of the Finance Act operating retrospectively nor was there any question of the Finance Act taking away a vested right which had accrued to the assessee because the order of the Income tax officer under sub section
(3) of section 220 does not amount to any final settlement or agreement.
The notice had merely given effect to the legal provisions of the Finance Act.
[861 B] (4) In is manifest that the Income tax officer could not have passed any order against the statutory provisions of sub section
( 2) of section 220 either with or without the consent of ' the assessee.
Even the order of the Income tax officer accepting the Offer.
Of the assesse to pay interest at the rate of 5% p.a. was legally invalid because if the rate of interest fixed by the statute was 4% the parties could not be allowed to contract out of the statute.
The only relief which the assessee could get was to pay interest at 4% p.a.
prior to the Finance Act, 1965 and at 6% after 1st April, 1965.
[861D E] Biswanath Ghosh vs Income tax officer, Ward, B. and Another , 374, approved.
|
Civil Appeal No. 1154 of 1972.
Appeal by special leave from the Judgment and order dated 18th December, 1969 of the Allahabad High Court in Special Appeal No. 324 of 1962.
827 Yogeshwar Prasad, section K. Bagga, Mrs. section Bagga and Miss Rani Arora, for the appellant.
G. N. Dikshit and O. P. Rana, for the respondent.
The Judgment of the Court, was delivered by ALAGIRISWAMI, J.
The appellant is a tenant of plot No. 428 in mauza Dehra Khas, pargana Central Doon, district Dehradun.
This land along with some other pieces of land was notified under section 4(1) of the Land Acquisition Act on February 8, 1962 for acquisition for the purpose of setting up an industrial estate at Dehradun.
By the same notification, under section 17(4) of the Act it was directed that the provisions of section 5A shall not apply on the ground that the provisions of section 17(1) were applicable to the facts of the case.
He filed a writ petition out of which this appeal arises for the issue of a writ of certiorari for quashing the notification dated 8th February, 1962.
He made various allegations which it is not necessary to go into for the purpose of this appeal.
A learned single Judge of the Allahabad High Court dismissed the petition and an appeal filed by him was dismissed by a Division Bench of the same High Court.
The only point argued before us was that there was a pucca construction on plot No. 436 which was also notified for acquisition under the impugned notification and consequently the provisions of s.17(4) would not be applicable to that land as it was not arable or waste land which could be acquired by dispensing with the enquiry under s.5A and as such the whole notification is bad and should be quashed.
Admittedly the appellant 's land is a waste and arable land and thus falls under s.17 (1) .
There was therefore no objection to the Government dispensing with the provisions of s.5A by resorting to the power conferred by s.17(4).
The person who could have taken objection to the enquiry under section 5A being dispensed with was the owner of plot No. 436.
He has not objected to the acquisition.
He has taken the compensation awarded to him and walked out.
It is, therefore? not open to the appellant to question the validity of this notification.
If possibly the owner of the land sought to be acquired but any person in the locality derations might arise.
The appellant who is only the owner of plot No. 428 in relation to which section 17(1) and 17(4) are applicable and therefore enquiry under s 5A could properly be dispensed with, cannot object to the same notification because the notification also relates to another land to which s.17(1) and 17(4) are not applicable when the owner of that land has not chosen to challenge the notification.
on behalf of the appellant, however, reliance was placed on certain observations of this Court in Sarju Prasad vs State of U.P.(1) to.
the following effect: "It was contended by Mr. section P. Sinha appearing on behalf of the Municipal Board, Basti, that a part of the land notified for acquisition was waste or arable and in support of his contention, counsel referred us to certain revenue record.
But (1) A. I. R. 828 if only a part of the land is waste or arable and the rest is not, notification under section 17(4) dispensing with compliance with the requirements of section 5 A would be invalid.
It would not be open to the Court to regard the notification as partially good and partially bad, for if the State had no power to dispense with the inquiry in respect of any part of the land notified under section 4(1), an inquiry must be held section 5 A giving an opportunity to persons interested in the land notified to raise the objections to the proposed acquisition and in that inquiry the persons interested cannot be restricted to raising objections in respect of land other than waste or arable land " That case is the converse of the present case.
The appellant therein was a person who was entitled to object to the notification.
Under those circumstances the question whether the notification is to be quashed completely or only partially might well arise.
But such a question cannot arise where a person like the appellant has no right to impugn the notification.
It was, however, urged that under section 5 A(1) it is not only the owner of the land sought to be acquired but any person in the locality may object and his objections will have to be heard.
Section 5 A(l) reads as follows: "5A.(1) Any person interested in any land which has been notified under section 4, sub section (1), as being needed or likely to be needed for a public purpose or for a Company may, within thirty days after the issue of the notification, object to the acquisition of the land or of any land in the locality.
as the case may be. "This section should be understood in the background of the provisions of section 4(1) which reads as follows s "4.(1) Whenever it appears to the appropriate Government that land in any locality is needed or is likely to be needed for any public purpose, a notification to that effect shall be published in the official Gazette, and the Collector shall cause public notice of the substance of such notification to be given at convenient places in the said locality.
" It may be noticed that under this section what is necessary is that only the locality the land in which appears to the appropriate Government as needed or as likely to be needed for any public purpose need be specified in the notification under that section.
But in actual practice always the survey numbers of the lands sought to be acquired are given in such notifications.
The question of notifying the locality might probably arise when all the lands in a village are sought to be acquired otherwise the word 'locality ' is a word of such indefinite import that it is difficult to conceive of any locality in any particular village being notified for acquisition.
Therefore when a locality in the sense of a village or perhaps a group of villages is notified for acquisition any person interested in any 829 land in that locality would be entitled to be heard under section 5A.
But where the land proposed to be acquired is specifically mentioned in the notification it is only the person interested in that land who is entitled to be heard under section 5A.
That is why s.5A provides that any person interested in any land which has been notified under s.(1) may object to the acquisition of the land or of any land in the locality as the case may be.
The latter part would apply to a case where lands in any locality are notified under section 4(1).
That is the significance of the use of the words "as the case may be".
To give and other interpretation to this section would mean that any person interested in any land which has been notified may object to the acquisition of his land or to the acquisition of any land ill the locality.
This cannot be correct because he would not be a person interested in any land in the locality which is a pre requisite before a person can object to the acquisition of any land.
In other words in the background of section 4 (1), section 5A provides that where land in any locality is notified under section 4(1) any person who is interested in any land in the locality may object to the acquisition of his land or any land in the locality as the case may be.
We are therefore of opinion that there are no merits in this appeal.
It is accordingly dismissed with costs P.H.P. Appeal dismissed.
| IN-Abs | The appellant is a tenant or Plot No. 428.
A notification was issued under Section 4 (1) of the Land Acquisition Act for setting up an industrial estate in respect of Plot No. 428 and Plot No. 436.
By a notification under Section 17 (4) the provisions of section 5A were dispensed with in the ground that provisions of section 17(1) (Urgency) were applicable.
The appellant filed a Writ Petition in Hugh Court challenging the said notification issued under section 17 (4) The Single judge dismissed the Writ Petition.
An appeal filed to the Division Bench was also dismissed.
On an appeal by Special Leave, it was contended by the appellant that there was a pucca construction on Plot No. 436 which was also notified for acquisition under the impugned notification and consequently the provisions of Section 17 (4) would not be applicable to that land as it was not arable or waste land and could not be acquired by dispensing with the enquiry under section 5A and as such, the whole notification is bad and should be quashed.
Dismissing the appeal, ^ HELD: 1.
Admittedly the appellant 's land is a waste and arable land and thus falls under section 17(1).
The person who could have taken objection to the enquiry under section 5A being dispensed: with was the owner of Plot No. 436.
He has not objected to the acquisition it is, therefore, not open to the appellant to question the validity of the notification.
If the owner of Plot No. 436 had objected to the notification different considerations might arise.
Sarjoo Prasad vs State of U.P. (AIR distinguished.
[1827E F] 2.
Section 5A should be understood in the back ground of section 4(1).
Section 4 ( I ) requires only the locality in which the land is situate, to be mentioned in the notification.
But in actual practice the survey numbers of the lands sought to be acquired are given in such notifications.
The question of notifying the locality might probably arise when all the lands in village are sought to be acquired.
Otherwise.
the word locality is a word of such indefinite import that it is difficult to conceive of any locality in any particular village being notified for acquisition.
When a locality in the sense of a village or a group of villages in notified for acquisition any person interested in any land in that locality would be entitled to be, heard under section 5A.
But where land proposed to be acquired is specifically mentioned in the notification it is only the person interested in that land who is entitled to be heard under section 5A.
That is why section 5A provides that any person interested may object to the acquisition of land or of any land in the locality as the case may be.
The latter part would apply to a case where lands in.
any locality are notified under section 4 ( 1 ) .
That is the significance of the use of the words "as the case may be.
" Any person unconnected with land cannot object to the acquisition of the land in the locality since he would not be a person interested.
[828 F H 829A C]
|
Civil Appeal Nos. 1359 to 1365 of 1973.
From the Judgment and order dated the 15th day of December, 1972 of the Mysore High Court in Writ Petitions Nos. 192,193.
478, 670, 940, 1303 and 1809 of 1972.
H. Gururaj Rao and section Markendeya, for the appellants in all the appeals.
F. section Nariman and Narayan Nettar, for respondent No. 1 in all the appeals.
section section Javali, K. R. D. Karanth, A. K. Srivastava and B. P. Singh, for Respondents Nos. 2, 3, 5, 6, 13 and 15 in C.A. 1359/73 The Judgment of the Court was delivered by RAY, C.J.
: These appeals are by special leave against the judgment dated 15 December, 1972 of the High Court of Mysore.
The appellants in the writ petition asked for quashing the Gradation List of Officers published by the State on 13 January, 1972.
The consequential prayer is for assigning correct ranks to the appellants.
The principal question is the relative seniority between direct recruits and promotees to the cadre of Assistant Commissioners of Mysore Administrative Service Class I (Junior Scale).
By a notification dated 13 January, 1972 the Government published the Gradation List which was prepared as on 1 January, 1972.
In the Gradation List respondents No. 2 to 24 were placed at serial No. 214 to 236.
The appellants are placed in the Gradation List at serial No. 273 to 280.
The appellants challenge the seniority of the respondents in the Gradation List.
On 2 December, 1957 the Mysore Administrative Service (Recruitment) Rules 1957 (hereinafter referred to as the 1957 Recruitment Rules) framed under Article 309 of the Constitution came into force and the previous Rules were superseded.
Under the 1957 Recruitment Rules Class I posts were divided into two categories.
One was the senior scale post and the other was the junior post.
The junior scale 818 posts were to be filled up in the proportion of 66.2/3 per cent by pro motion from Class II officers and 33.1/3 per cent by direct recruitment be competitive examination to be held by the Public Service Commission.
By notification dated 23 January, 1958 issued under Article 309 of the Constitution the Governor constituted the Mysore Administrative Service (Cadre) Rules with effect from 1 November, 1956 (hereinafter referred to as the Cadre Rules).
The cadre consisted only of permanent posts comprising 12 Senior Scale posts and 135 Junior Scale Posts.
The Cadre did not include temporary posts.
It may be stated here that the initial cadre strength of Assistant Commissioners Class I Junior Scale posts was filled by persons allotted to the new State of Mysore on 1 November, 1956 when the new State of Mysore was formed.
The allottees exceeding the strength of the cadre were gradually adjusted against substantive vacancies.
Till 2 December, 1957 the Government did not frame special rules of recruitment applicable to the Mysore Administrative Service.
Consequently all the vacancies arising until 2 December, 1957 were filled by promotion.
On 2 December, 1957 the 1957 Recruitments Rules came into existence for filling 66.2/3 per cent posts by promotion and 33.1/3 per cent posts by direct recruitment.
In September, 1959 the Government issued the Mysore Recruitment of Gazetted Probationers Rules, 1959 (hereinafter referred to as the 1959 Probationers Rules) whereby the quota for direct recruitment to the Mysore Administrative Service was increased from one third to two thirds for a period of five years and the quota for promotion was reduced from two thirds to one third.
Pending finalisation of the inter State seniority lists of Officers allotted to the new State of Mysore on 1 November, 1956 to the cadre of Assistant Commissioners the Government could not by reason of pending proceedings in courts in respect thereof confirm officers working as Assistant Commissioners for a long time.
In order to meet the exigencies of service.
_, officers in Class II service were promoted on officiating basis as Assistant Commissioners in Class I service (Junior Scale) from time to time Under Rule 17(b) of the 1957 Recruitment Rules the Government could fill up posts temporarily by promotion in vacancies reserved for direct recruits but such promotees became liable to be reverted after appointment of officers by direct recruitment.
The Government permitted many officers from Class II including the appellants to officiate as Assistant Commissioners in Class I service subsequent to 1 November 1956.
The earliest to be promoted on officiating basis among those promotees was Narsingharao Kallurkar on 30 November, 1959 who is numbered 268 in the Gradation List as on 1 January, 1972.
In September, 1959 the Government initiated steps for the first time for appointment of officers by direct recruitment to fillup the vacancies within the quota prescribed for direct recruits.
The advertisement referred to 20 vacancies for the posts of Assistant Commissioners Class I and two vacancies for Assistant Controllers in the State Accounts 819 Service.
These vacancies for direct recruits had arisen (luring the period immediately prior to the issue of the notification.
These vacancies arose between 2 December, 1957 when the 1957 Recruitment Rules came into existence and 11 September, 1959 when the 1959 Probationers Rules came into force.
The notification made it clear that the appointment of probationers by direct recruitment was subject to the 1957 Recruitment Rules the Mysore Government Servants Probation Rules, 1957, and the 1959 Probationers Rules.
The Public Service Commission conducted the competitive examination and selected 17 among respondents No. 2 24 for appointment as Assistant Commissioners Class I (Junior Scale) on probation.
It may be stated here that the other six respondents were allotted to the service as a result of judgment of this Court.
There is no dispute that all the 23 persons being respondents No. 2 to 24 are treated as direct recruits.
Respondents No. 2 to 24 were appointed on probation by order dated 26 October 1962.
They were required to undergo training and probation for a period of two years.
During the said period their appointments were provisional and liable to termination on one month 's notice, as was the case of recruitment of probationers.
In order to cause minimum prejudice to the officiating promotees and in order to meet the audit objections by reason of lack of provision in the 1957 Recruitment Rules for training reserves the Government sanctioned 20 temporary posts to accommodate the probationers for the period of their training.
On completion of the period of probation the Government issued a declaration under Rule 5 of the Mysore Government Servants Probation Rules 1957 that the respondents had satisfactorily completed the period of probation on 26 October, 1964.
Consequent upon such declaration each of the respondents became entitled under Rule 9 of the Government Servants Probation Rules, 1957 to be confirmed as a full member of the service in the class or category for which he was selected at the earliest opportunity to any substantive vacancy which may exist or arise in the permanent cadre of such class or category.
Respondents became entitled to be full members of the service and to confirmation in the permanent cadre against vacancies existing within their quota since the promulgation of the 1957 Recruitment Rules.
The Government action declaring respondents to have satisfactorily completed the probation under Rule S of the Probation Rules resulted in the confirmation of the respondents in substantive vacancies with effect from 26 October, 1964.
The creation of temporary posts for the duration of the training of respondents No. 2 to 24 as probationers was not renewed in 1964.
The actual confirmation was delayed because of the finalisation of inter State seniority lists of the allottees.
The appellants contended first that the word "vacancies occurring in the 1957 Recruitment Rules means not only vacancies in the permanent posts but also in temporary posts, and, therefore, the quota rule applies to vacancies in all posts whether permanent or temporary.
Or what construction it is said that upto 10 September, 1959 there were 59 vacancies and though the quota was for 39 promotions and 20 for 820 direct recruitment there were in fact 59 promotions and no direct recruitment with the result that 59 promotees filled up all the vacancies permanent or temporary.
The second contention of the appellants was that the respondents were directly recruited as Assistant Commissioners on 26 October, 1962 against temporary vacancies created with effect from 26 October, 1962 are not entitled to claim seniority over the appellants who had been promoted earlier than them and whose promotion was within the quota of 59 vacancies.
The third contention was that the direct recruits were not entitled to count their seniority from a date anterior to the date of their recruitment by taking advantage of the fact that the vacancies required to be filled up by direct recruitment had not been actually filled up by direct recruitment.
but had been filled up actually by promotion.
The fourth contention was that all the Assistant Commissioners who were directly recruited or promoted to the posts of Assistant Commissioners formed one class and their inter seniority in the cadre of Assistant Commissioners has to be determined on the basis of length of service rendered by them in the category in order to have equality.
The fifth contention was that the respondents who were appointed on temporary basis and the appellants who were promoted on officiating basis were entitled to have their seniority determined in accordance with the provisions of Rule 2(c) of the Mysore Government Servants (Seniority) Rules 1957, Rule 2(c) is as follows: "Seniority inter se of persons appointed on temporary basis will be determined by the dates of their continuous officiation in that grade and where the period of officiation is the same the seniority inter se in the; lower grade shall prevail".
The sixth contention was that the respondents were appointed on temporary basis with effect from 26 October, 1962 against temporary posts created for them and they could not claim seniority to appellants for these reasons.
Under Rule 5 of the Mysore Government Servants Probation Rules, 1957 the probationers are deemed to have satisfactorily completed their probation on the issue of an order to that effect.
The respondents who were confirmed in substantive vacancies could be confirmed only in vacancies which might exist or arise after 26 October, 1964 and not earlier.
The respondents were confirmed against substantive vacancies which arose from 12 September, 1960 onwards.
Both the 1957 Recruitment Rules and the 1959 Probationers Rules contemplate observance of quota rule at the time of appointment and promotion.
The question of enforcement of quota rules does not apply at the time of confirmation.
The quota rule will only apply when the vacancies are filled up either by direct recruitment or promotion.
The appellants are promoted prior to the direct recruitment of the respondents, and therefore, they are entitled to claim seniority.
One of the most important matters to be kept in the forefront is that the permanent cadre strength of the Mysore Administrative Service is 147 of which senior duty posts are 12 and the junior posts 135.
821 The substantive vacancies which arose between 2 December, 1957 and 10 September, 1959 were classified into vacancies which were required to be filled up by direct recruitment and by promotion, in the ratio of 1/3 and 2/3 respectively in accordance with the 1957 Recruitment Rules which came into force on 2 December, 1957.
The substantive vacancies which arose from 11 September, 1959 to 26 October 1964, the date when the direct recruits were confirmed were classified as direct recruitment and promotional vacancies on two thirds and one third basis respectively in accordance with the 1959 Probationers rules which came into existence on 11 September, 1959.
The substantive vacancies which arose between 26 October 1964 upto 1 September, 1965 have been classified as direct recruitment and promotional vacancies on two thirds and one third basis respectively in accordance with the 1959 Probationers Rules which continued to be operative upto 11 September, 1965.
From 11 September, 1965 to 8 October, 1971 the quota for direct recruitment became one third and for promotional vacancies it was two third.
The contention of the appellants that the respondents were recruit ed to temporary vacancies is wrong for these principal reasons.
First, the cadre here consists only of permanent posts.
the cadre does not consist of any temporary post.
The total number of vacancies between 2 December, 1957 and 10 September, 1959 were 59 under the quota 39 were promotional vacancies and 20 were direct recruitment vacancies.
There were in fact 59 promotees.
They were 20 in excess of their quota.
There was however no direct recruitment during that period.
Again, between 11 September, 1959 and 10 September, 1965 the total number of vacancies were 208.
Under the quota system 71 were promotional vacancies and 137 were direct recruitment vacancies.
There were in fact 168 promotees during the period.
Therefore 97 promotees were in excess of their quota.
Out of the 137 direct recruitment quota only 20 were filled up during the period.
In this background it appears that when in 1962 direct recruitment was made there were 20 direct recruitment vacancies in the quota which were not filled up.
The promotees however, being 20 in excess were not entitled to confirmation, against the vacancies within the quota of the direct recruits.
The promotees were promoted on officiating basis.
Therefore, when the respondents were appointed by direct recruitment on probation under order dated 26 October, 1962 they were required to undergo training and probation? for a period of two years.
In order to meet the audit objections by reason of lack of provisions in the Recruitment Rules for training reserves the Government sanctioned 20 temporary posts to accommodate the probationers for the period of their probation.
On the completion of the period of training there was no renewal of the temporary posts.
Therefore the temporary posts which were created for the direct recruits during their period of probation cannot be taken into account in working out the.
quota rule and for adjustment of seniority.
It may also be stated here that the promotees had not been deprived of their appointment and they had not been subjected to any reversion.
The implementation of the quota rule has resulted in the adjustment of 822 seniority consistent with the quota.
The confirmations had been issued in the case of promotees and direct recruits having regard to the permanent strength of the cadre and the quota.
Second, the advertisement of the Public Service Commission inviting direct recruits stated that the posts "are likely to be made permanent".
The order of appointment of the respondents as gazetted Probationers on selection be the Public Service Commission stated that the respondents were appointed as probationer Assistant Commissioners.
The order of appointment refers obviously to the 1959 Probationers Rules.
Third, Rule 9 of the Mysore Government Servants Probation Rules states that a probationer who has been declared to have satisfactorily completed his probation has to be confirmed as a full member of the service at the earliest opportunity in any substantive vacancy which may exist or arise in the permanent cadre of the service in respect of which he has been recruited as a probationer.
This Rule excludes temporary posts from the cadre.
It is, therefore, impossible to hold that the direct recruits were temporary employees outside the permanent cadre of the service.
Counsel on behalf of the appellants contended that the quota rule applies to vacancies in all posts, whether permanent or temporary and relied on the decisions of this Court in Bishan Sarup Gupta vs Union of India (1), G. R Luthra, Additional District Judge Delhi vs Lt. Governor, Delhi & Ors.(2) and A. K. Subraman vs Union of India(3).
In all these cases the cadre comprised of both permanent and temporary posts.
In Bishan Sarup 's case (supra) the cadre consisted of permanent and temporary posts.
In Luthra 's case (supra) cadre post as defined in the Rules includes a temporary post.
In Subraman 's case (supra) it was said that a cadre might consist only of permanent posts or sometimes also of temporary posts.
In the present case Rule 9 of the Probation Rules of 1957 provides for confirmation of a probationer as a full member of the service in any substantive vacancy in the permanent cadre of such class.
This rule establishes the exclusion of temporary posts from the cadre.
In E. P. Royappa vs State of Tamil Nadu(4) this Court said on the construction of Rule 4(2) of the relevant Cadre Rules in that case that the State Government might add for a period to the cadre one or more posts.
But the posts 53 added could not become cadre posts.
The temporary posts which are created due to exigencies of the service are posts which are outside the cadre.
In working out the, quota rule, these principles are generally followed.
First, where rules prescribe quota between direct recruits and promotees confirmation or substantive appointment can only be in respect of clear vacancies in the permanent strength of the cadre.
Second, confirmed persons are senior to those who are officiating.
Third, as between persons appointed in officiating capacity, seniority is (1) A. r. R. (2) A.I.R. 1974 section C. 1908.
(3) A. 1.
R. (4) [1974] 2 section C. R. 348. 823 to be counted on the length of continuous service.
Fourth, direct recruitment is possible only by competitive examination which is the prescribed procedure under the rules.
In promotional vacancies, the promotion is either by selection or on the principle of seniority cum merit.
A promotion could be made in respect of a temporary posts or for a specified period but a direct recruitment has generally to be made only in respect of clear permanent vacancy either existing or anticipated to arise at or about the period of probation is expected to be completed.
Fifth, if promotions are made to vacancies in excess of the promotional quota, the promotions may not be totally illegal but would be irregular.
The promotees cannot claim any right to hold the promotional posts unless the vacancies fall within their quota.
If the promotees occupy any vacancies which are within the quota of direct recruits, when direct recruitment takes place the direct recruits will occupy the vacancies within their quota.
Promotees who were occupying the vacancies within the quota of direct recruits will either be reverted or they will be absorbed in the vacancies within their quota in the facts and circumstances of a case.
The quota between promotees and direct recruits is to the fixed with reference to the permanent strength of 135 Junior Duty posts.
Persons who were allotted the Junior Duty posts under the States Reorganisation Act are to be accommodated within the permanent cadre strength of 135 posts.
If they are in excess of the number then the excess will have to be accommodated in the promotional vacancies during the sub sequent period commencing from 2 December, 1957 to 10 September, Persons No. 1 to 164 in the Gradation List consist of persons who were allotted under the States Reorganisation Act on 1 November, 1956.
the ranks of those 164 persons were determined in accordance with the final inter State Seniority List.
Persons No. 165 to 184 are promotees who were allotted to substantive vacancies arising from 1 November, 1956 to 1 December, 1957 on the basis of their continuous service in the cadre.
There was no quota rule for the period 1 November" 1956 to 1 December 1957.
Therefore, neither the promotions of those persons nor their relative seniority can be disturbed.
Persons No. 185 to 213 are promotees.
Persons No. 214 to 236 are direct recruits.
Persons No. 237 to 280 are also promotees.
From 2 December, 1957 when the 1957 Recruitment Rules came into existence till 1 September, 1959 when the 1959 Probation Rules came into force the State promoted many persons from Class II.
Two thirds of the total vacancies for the period 2 December, 1957 to 10 September, 1959 were promotional vacancies.
Therefore all persons promoted to those two thirds vacancies cannot be disturbed.
Those promotees who are in excess of the two thirds vacancies will be pushed down to the vacancies in the subsequent period.
The remaining one third vacancies were for direct recruitment.
Direct recruits equal in number to those one third vacancies should be placed; next after the promotees placed in the first two thirds vacancies 824 between 2 December, 1957 and 10 September 1959.
If direct recruits are in excess of the quota they will similarly be shifted to the subsequent period.
The next period is from 11 September, 1959 to 26 October, 1964.
From 11 September, 1959 the promotional vacancies became one third and direct recruitment vacancies became two thirds.
The excess promotees during the previous period will be first absorbed in the promotional vacancies and thereafter promotees during the period will be absorbed.
Again, if there would be excess promotions they will be shifted to the following period.
The important principle is that as long as the quota rule remains neither promotees can be allotted to any of the substantive vacancies of the quota of direct recruits nor recruits can be allotted to promotional vacancies.
The result is that direct recruitment vacancies between 11 September, 1959 and 26 October, 1964 cannot be occupied by any promotees.
The fact that direct recruits were confirmed on 26 October, 1964 will not rob the direct recruits of their quota which remained unfilled from 2 December, 1957.
The Government confirmed the direct recruits and the appellants by adjustment of vacancies within their respective quota and determined their seniority in accordance with Rule 2(b) of the Seniority Rules.
Seniority is based on confirmation as full member of the service ill the substantive vacancy.
In section C. Jaisinghani vs Union of India (1) it was said that when the quota was fixed for the two sources of recruitment the quota could not be altered according to exigencies of the situation.
It was held there that the promotees who had been promoted in excess of the prescribed quota should .
be held to have been illegally promoted.
In Bishan Sarup 's case (supra) it was held that when it was ascertained that not more than 1/3 of the vacancies were to go to the promotees and the rest to the direct recruits, the ratio was not made dependent on whether any direct recruit was appointed in any particular year or not the promotees were entitled to 1/3 of the vacancies in any particular year, whether or not there was direct recruitment by competitive examination in that year.
Two principles are established in the decision referred to.
One is that quotas which are fixed are unalterable according to exigencies of situation.
quotas which are fixed can only be altered by fresh determination of quotas under the relevant rule.
The other is that one group cannot claim the quota fixed for the other group either on the ground that the quotas are not filled up or on the ground that because there has been a number in excess of quota the same should be absorbed depriving the other group of quota.
In Bachan Singh & Anr.
vs Union of India & ors.(2) t he two appellants were promoted in the years 1958 and 1959.
The respon (1) ; (2) [1972] 3 section C. R. 898.825 825 dents were appointed by direct recruitment in 1962, 1963 and 1964 the respondents were confirmed in their posts before the appellants.
The appellants contended that the respondents who were directly appointed after the appellants had been promoted were not to be confirmed in permanent posts before the appellants.
It was held that the direct recruits were confirmed against permanent vacancies within their quota.
The earlier confirmation of direct recruits though appointed later was upheld on the ground that they fell within their quota of permanent vacancies.
Subraman 's case (supra) on which the appellants relied also held that each quota would have to be worked independently on its own force.
In that case the Assistant Executive Engineers who were initially entitled to 3/4th and subsequently to 2/3rd of the vacancies while Assistant Engineers who were entitled initially to 1/4th and subsequently to l/3rd of such vacancies were held to be entitled to their respective quotas independent of the fact whether any person from one class or the other was promoted or not.
It was illustrated by saying that if there were three vacancies in a year, two would go to the Assistant Executive Engineers and one would go to the Assistant Engineers and even if there were not eligible Assistant executive Engineers who could be promoted to fill in two vacancies belonging to their quota, one vacancy is to be filled up by promotion of an Assistant Engineer, if he was eligible.
Similarly, if two vacancies belonging to the quota of Assistant Executive Engineers are to be filled by Assistant Engineer for want of availability of eligible Assistant Executive Engineers the appointment of Assistant Engineers to fill in those two vacancies would be irregular because they would have to be pushed down to later years when their appointment could be regularised as a result of absorption in their lawful quota for those years.
For the foregoing reasons, we hold that the respondents No. 2 to 24 were entitled to the vacancies within their quota which had not been filled up and they are senior to the appellants.
We affirm the judgment of the High Court and dismiss the appeals.
Parties will pay and bear their own costs in these appeals.
P. R. Appeals dismissed.
| IN-Abs | The Mysore Administrative Service (Recruitment) Rules, 1957 classified class I posts into two categories: senior scale posts and the junior.
scale posts.
Two thirds of the junior class I post were filled by promotion from Class II ' ' Officers and the balance of one third by direct recruitment by the Public Services Commission.
The Mysore Administrative Service (Cadre) Rules, 1958 fixed the cadre strength at 12 senior scale posts and 1 35 junior scale posts, all of which were permanent.
By the Mysore Recruitment of Gazetted Probationers Rules, 1959 the quota for direct recruitment to the Mysore Administrative Service was increased from one third to two thirds for a period of five years consequence of which the quota for promotees had been reduced to one third.
Rule 17(b) of the 1957 Recruitment Rules empowered the Government to fill up posts temporarily by promotion against vacancies for direct recruits but such promotees were liable to be reverted after the appointment of direct recruits.
In exercise of this power, the eight appellants along with 51 other were promoted to officiate as junior Class I officers in the 59 vacancies (39 for promotees and 20 for direct recruits).
In 1962, the Government appointed direct recruits to 20 of the junior Class I posts but to avoid any hardship to the officiating promotees and to avoid audit objections, the Government sanctioned 20 temporary posts to accommodate the probationer for the two year period of their training.
At the end of two years, and on completion of probation, in 1964 the Government terminated the probation of the direct recruits, as a result of which they became entitled, under Rule 9 of the Government Service Probation Rules.
to be confirmed as full members of the service.
They were accordingly confirmed in the 20 substantive vacancies exist in within their quota.
The Government, however, did not renew the temporary vacancies after the direct recruits had been confirmed in the permanent vacancies.
In January, 1972, a Gradation List was published in which the direct recruits (respondents) were shown as senior to the appellants.
The numbers of the respondents in the list were 214 to 236 whereas those of the appellants were 273 to 280.
The appellants challenged the seniority of the respondents in writ petitions on the ground mainly that the respondents were recruited only to the 20 temporary posts created and that the appellants and 51 others were appointed to 59 permanent vacancies.
The High Court dismissed the writ petitions.
Dismissing the appeal to this Court, ^ HELD: The contention of the appellant that the respondents were recruited to temporary vacancies is wrong.
Respondents (direct recruits ) were entitled to the vacancies within their quota which had not been filled up and they were senior to the appellants.
[821D; 825F] (1) The principles generally followed in working out the quota rule are, (i) Where rules prescribe quota between direct recruits and promotees confirmation or substantive appointment can only be in respect of clear vacancies in the permanent strength of the cadre.
(ii) confirmed persons are senior to those who are officiating; (iii) as between person appointed in officiating capacity.
seniority is to be counted on the length of continuous service: (iv) direct recruitment is possible only by competitive examination which is the Prescribed procedure under the rules In promotional vacancies the Promotion is either 4 L1127SCI/75 816 by selection or on the principle of seniority cum merit.
A promotion could be made in respect of a temporary post or for a specified period, but direct recruitment has generally to be made only in respect of a clear permanent vacancy, either existing or anticipated to raise at or about the period of probation is expected lo be completed; (v) if promotions are made to vacancies in excess of the promotional quota, the promotions may, not be totally illegal but would be irregular.
the promotees cannot claim any right to hold promotional posts unless the vacancies fall within their quota.
If the promotees occupy any vacancies which are within the quota of direct recruits, when the direct recruitment takes place, the direct recruits will occupy the vacancies within their quota.
Promotees who are occupying the vacancies within the quota of direct recruits will either be reverted or they will be absorbed in the vacancies within their quota.
in the facts and circumstance of the case and (vi) as long as the quota rule remains neither promotees can be allotted to any of ' the substantive vacancies of the quota of direct recruits nor direct recruits can be allotted to promotional vacancies.
and (vii) quotas which are fixed are unalterable according to exigencies of the situation.
They can only be altered by fresh determination of quotas under the relevant rules.
One group cannot claim the quota fixed for the other group either on the ground that the quotas are not filled up or that because there had been a number in excess of the quota the same should be absorbed depriving the other group of quota.
[822H, 823A C; 824 C&G] Bishan Sarup Gupta vs Union of India ; ; section Jaisinghani vs Union of India [1967] 2 S.C.R. 703; A.K. Subraman vs Union of India and Bachan Singh & Anr.
vs Union of India & ors.
[ ; referred to.
(2) The cadre, in the present case, consisted only of permanent posts through out the period.
After the rules came into force the promotees were in excess of ' the quota but when in 1962 direct recruitment was made there were 20 direct recruitment vacancies in the quota which were not filled up.
The promotees, however, being 2 in excess were not entitled to confirmation against the vacancies within the quota of the direct recruits.
The promotees were promoted on officiating basis.
On the completion of the period of training of the 20 direct recruits there was no renewal of the temporary posts and, therefore.
the temporary posts which were created for the direct recruits during their period of probation could not be taken into account ill working out the quota rule and for adjustment of seniority.
In fact, they were created due to certain exigencies and were outside the cadre.
[821 D G] (3) The promotees had not been deprived of their appointment and they had not been subjected to any reversion.
The implementation of the quota.
rule has resulted in the adjustment of seniority consistent with the quota.
The confirmations had been issued having regard to the permanent strength of the cadre and the quota.
[821H; 822A] (4) It is impossible to hold that the direct recruits were temporary employees outside the permanent cadre of the service.
Rule 9 of the Mysore Government Servant 's Probation Rules excludes temporary posts from the cadre.
It also provides for confirmation of a probationer as full member of the service in any substantive vacancy in the permanent cadre of such class.[822C D] Bishan Sarup Gupta vs Union of India A.T.R. G. R. Luthra Additional District Judge Delhi vs Lt.
Governor Delhi & Ors. ; and A. K. Subman vs Union of India , referred to.
(5) There was no quota rule for the period between I November.
1956 and 1 December., 1957.
During the period from 2 September, 1957 and 10 September, 1959 (the dates on which the 1957 and 1959 Rules came into force) many persons were promoted from Class II.
Since two thirds of the vacancies during this period were promotional vacancies, persons promoted to those vacancies could not be disturbed.
However, those promotees who were in excess of the two third vacancies would be pushed down to the vacancies in the subsequent 817 period Again, during the same period direct recruits equal in number to those one third vacancies should be placed next after the promotees placed in the first set of two thirds vacancies.
If the direct recruits were in excess of the quota they would be shifted to the subsequent period.
[823G H: 824A] (b) During the period II September, 1959, to 26 October, 1964, (direct recruitment vacancies became two third and the promotional vacancies one third, as a result of which the excess promotees during the previous period would be first absorbed in the promotional vacancies and subsequent promotees would hereafter be absorbed.
The resulting position was that direct recruitment vacancies between 11 September 1959 and 26 October, 1964, the date of confirmation of the respondents (direct recruits) could not be occupied by the promotees.
The fact that direct recruits were confirmed would not, therefore, rob them of their quota which remained unfilled from 2 December, 1957 onwards.
The Government, therefore, rightly confirmed the direct recruits and the appellate by adjustment of vacancies within their respective quotas and determined their seniority in accordance with Rule 2(b) of the Seniority Rules.
[824 B.D.]
|
Civil Appeal No. 675 of 1968.
From the judgment and order dated the 19th January, 1967 of the Bombay High Court in S.C.A. No. 16 of 1967.
section J. Deshpande and A. G. Ratnaparkhi, for the appellant.
M. C. Bhandare and M. N. Shroff, for respondent nos.
1, 2 and 4. D. V. Patel, K. Laxmanrao and section Gopalakrishnan, for respondent No. 3 876 The Jugement of the Court was delivered by KRISHNA IYER, J. Brevity will do no inequity in this appeal where three points were urged but only one survives for serious scanning.
The subject matter is the validity of land acquisition proceedings whereby a Municipality compulsorily purchased the appellant 's land for the stated public purpose of running a country fair or market (mondha) under the Hyderabad Land Acquisition Act (for short, the Act) which is closely similar to the Land Acquisition Act, 1923 (Central Act).
The first charge is that the High Court dismissed the Writ Petition in limine.
Seven years after the 1968 event, we cannot consider sending back the case even if there be justice in the submission.
We have therefore heard counsel Shri Deshpande on his substantive grievances.
The second contention is that there is no 'public purpose ' to support the acquisition which is allegedly ultra a vires the Municipality 's powers.
We disagree.
Providing a village market is an obvious public purpose and a municipal facility.
The last plea which has been pressed strenuously is that the acquisition exercise is bad being mala fide an uphill task to make out against a public body.
Was this colourable exercise of power ? Striking down any act for mala fide exercise of power is a judicial reserve power exercised lethally, but rarely.
The charge of mala fides against public bodies and authorities is more easily made than made out.
It is the last refuge of a losing litigant.
Even so, we will examine the merits of the contention here from the point of view of the serious factors placed for our consideration.
Was this acquisition done colore officii ? The circumstances relied on may be examined from this standpoint.
Section 5(3) of the Act provides for declaration of the public purpose, like section 6(3) of the Central Act.
This declaration was made in 1960 and covered at least 28 acres of land belonging to the appellant.
His counsel contends that there in no public purpose mentioned in the notification because what is stated is 'government purpose '.
There is no force in this terminological deviation.
The purpose has been set down as for a 'mondha ' or 'country fair ' which is obviously a public purpose.
So counsel shifted to another shade of the same argument and state that 'mondha ' is not a word known to law and has not been defined anywhere and so such a purpose cannot be taken cognizance of by the law.
We cannot agree to the linguistic game masquerading as a legal point.
It is plain that a 'mondha ' is a country fair or village market. 'Market ' is defined in section 2(20) of the Hyderabad District Municipalities Act in wide terms, and section 72 of the said Act enumerates the purposes for which property may be vested in a municipality.
This includes 'markets '.
It inexorably follows from a joint reading of sections 2(20) and 72(a) that the purpose of providing a market for the townsfolk falls within the powers of a municipality.
Failing here, counsel finally stressed that in any case no market for a small municipal town requires 28 acres of land, especially because the Master Plan prepared for the Municipality had allotted 877 only 15 acres for this purpose.
lt is not for the Court to investigate into the area necessary for running a market.
Moreover there is no mala fides emerging from this circumstance.
What has to be established is mala fide exercise of power by the State Government the acquiring authority although the beneficiary of the acquisition is eventually the Municipality.
There is no scintilla of evidence suggestive of malus animus in Government.
At this state Shri Deshpande complained that actually the Municipal Committee had sold away the excess land marking them out into separate plots for a housing colony, apart from the fact that a housing colony is a public necessity, once the original acquisition is valid and title has vested in the Municipality, how it uses the excess land is no concern of the original owner and cannot be the basis for invalidating the acquisition.
There is no principle of law by which a valid compulsory acquisition stands voided because long later the requiring authority diverts it to a public purpose other than the one stated in the section 5(3) declaration.
There is no merit in the appeal which is dismissed without costs.
P.B.R. Appeal dismissed.
| IN-Abs | Certain lands belonging to the appellants were compulsorily acquired under the Hyderabad Land Acquisition Act for running a country fair or market (mondha).
After the acquisition, the municipality parcelled out the excess land and sold it for a housing colony.
The High Court dismissed the appellants ' writ petition, in limine.
On appeal to this Court it was contended that the acquisition was not for a public purpose and that it was mala fide.
Dismissing the appeal, ^ HELD: (1)(a) Providing a village market is an obvious public purpose.
[876C D] (b) A mondha is a country fair or village market.
Market is defined in section 2(20) of the Hyderabad District Municipalities Act in wide terms and section 72 of the said Act enumerates the purposes for which property may be vested in a municipality.
This includes markets.
It inexoorably follows from a joint reading of Ss. 2(20) and 72(a) of the District Municipalities Act that the purpose of providing a market for the townsfolk falls within the powers of the municipality.
[876G H] (2)(a) Striking down any Act for mala fide exercise of power is a judicial resered power exercised lethally, but rarely.
The charge of mala fides against public bodies and authorities is more easily made than made out.
It is the last refuge of a losing litigant.
[876D] (b) What has to be established is mala fide exercise of power by the State Government although the beneficiary is the municipality.
There is no evidence of malus animus in Government.
[877B] (c) Apart from the fact that a housing colony is a public necessity, once the original acquisition is valid and title has vested in the municipality how it uses the excess land is no concern of the original owner and cannot be the basis for invalidating the acquisition.
There is no principle of law by which a valid compulsory acquisition stands voided because long later the requiring authority diverts it to a public purpose other than the one stated in the declaration.
[877C]
|
Civil Appeal No. 2473 of 1972.
Appeal by Special Leave from the Judgment and order dated the 30th October 1972 of the Madhya Pradesh High Court in Misc.
Second Appeal No. 33/72.
section N. Andley, H. B. Mangal, Rameshwar Nath and Rajinder Narain for the appellant.
G. B. Pai, section K. Bagga, Mrs. section Bagga, R. K. Mehta and V. C. Parashar for respondents.
The Judgment of the Court was delivered by UNTWALIA, J.
This appeal by special leave has been filed by the tenant defendants.
The plaintiff respondents, the landlords, filed a suit against the appellants in the Court of Second Civil Judge, Class II, Gwalior for a decree for eviction from the suit premises and for certain other reliefs.
The appellants ' eviction was sought on statement of facts mentioned in paragraph 3 of the plaint which squarely fell within clause (f) of sub section (1) of Section 12 of the Madhya Pradesh Accommodation Control Act, 1961 (hereinafter referred to as 'the Act ').
The appellants filed a written statement and in paragraph 3, they denied the respondents ' assertion in plaint, paragraph 3.
It appears that the suit which was filed in the year 1966 proceeded to trial in October, 1967 and some evidence was adduced.
But eventually, the parties entered into a compromise, filed a petition to that effect in the Trial Court which passed a decree for eviction and other reliefs in January, 1968 in accordance with the terms of the compromise.
Pursuant to the said compromise decree the appellants were to vacate the shop the suit promises by 31 12 1970.
On their failure to do so, execution was levied by the respondents.
The appellants objected to the execution on the ground that the compromise decree was void and inexecutable as being against the provisions of the Act.
The execution court accepted the appellants ' objection to the execution of the decree and dismissed the execution case.
A miscellaneous appeal filed by the respondents was dismissed by the Third Additional District Judge Gwalior.
They preferred a second miscellaneous appeal before the Madhya Pradesh High Court.
A learned single Judge following the Bench decision of that Court in Smt.
Chandan Bai vs Surja,(1) came to the conclusion that the decree was not a 880 nullity and was executable.
Hence this appeal by the tenant judgment deobtors.
The point which fails for determination in this appeal is not resintegra and has been the subject matter of consideration in several decisions of this Court.
In Bahadur Singh & Anr.
vs Muni Subrat Dass & Anr.(1) a decree for eviction based on an award without anything more was found to be a nullity as it was held to have been passed against the prohibitory mandate of section 13(1) of the Delhi and Ajmer Rent Control Act, 1952.
Following the said decision the compromise decree was also held to be a nullity in the case of Kaushalya Devi & Ors.
vs Shri K. L. Bansal.(2) The earlier two decisions were followed again in Ferozi Lal Jain vs Man Lal and Anr.(3) In all these three cases the decrees were found to have violated section 13(1) of the Delhi Act of 1952.
The law was reviewed exhaustively by this Court in K. K. Chari vs R. M. Seshadri.(4) Vaidialingam, J. delivering the judgment on his behalf as also on behalf of Dua, J. pointed out that under the terms of the compromise under consideration in that case the defendant had withdrawn all his defence to the application filed by the landlord and submitted to a decree for eviction unconditionally.
The three earlier cases of this Court were distinguished and it was said at page 704.
"The true position appears to be that an order of eviction based on consent of the parties is not necessarily void".
And finally it was held "it is no doubt true that before making an order for possession the Court is under a duty to satisfy itself as to the truth of the landlord 's claim, if there is a dispute between the landlord and tenant.
But if the tenant in fact admits that the landlord is entitled to possession on one or other of the statutory grounds mentioned in the Act, it is open to the Court to act on that admission and make an order for possession in favour of the landlord without further enquiry".
One of us (Alagiriswami, J.) while agreeing with Vaidialingam, J. added a few words of his own.
In the separate judgment it has been pointed out that the view taken by Grover, J. of the Punjab High Court in Vas Dev vs Milkhi Ram(5) was exactly the position in K. K. Chari 's case.
Sarkaria, J. delivering the judgment on behalf of the Court in Nagindas Ramdas vs Dalpatram Inchharam @ Brijram and Otheres(6) took pains to go into the matter elaborately once more and said at page 552: "From a conspectus of the cases cited at the bar, the principle that emerges is, that if at the time of the passing of the decree, there was some material before the Court, on the basis of which, the Court could be prima facie satisfied, about the existence of a statutory ground for eviction, it will be presumed that the Court was so satisfied and the decree for eviction, though apparently passed on the basis 881 of a compromise, would be valid.
Such material may take the shape either of evidence recorded or produced in the case, or it may partly or wholly be in the shape, of an express or implied admission made in the compromise agreement, itself.
" On facts of the case of Nagindas Ramdas was found to fall in line with that of K. K. Chari.
Distinguishing the earlier cases, Chari 's case was followed.
Before we state the principles of law governing such a case we would like to point out that the language of Section 12 of the Act is somewhat different from many similar State Statutes.
Section 12(1) says: "Notwithstanding anything to the contrary contained in any other law or contract, no suit shall be filed in any Civil Court against a tenant for his eviction from any accommodation except on one or more of the following grounds only, namely :" Thereafter grounds (a) to (p) have been enumerated.
On a superficial reading of the provision aforesaid it would appear that the inhibition related to the filing of the suit only.
No suit can be filed for eviction of a tenant except on one or more of the grounds enumerated in Section 12(11).
In sub sections (2) to (11) of Section 12 certain conditions have been engrafted to show under what circumstances an order for the eviction of tenant cannot be passed in relation to some of the grounds enumerated in sub section (1).
Reading the section as a whole and remembering the beneficial object of the Act for the protection of a tenant based upon public policy, we do not find much difficulty in bringing the section at par with other similar State Statutes and holding as a matter of construction that no decree for the eviction of a tenant from any accommodation can be passed except on one or more of the grounds mentioned in Section 12(1).
A Bench of the Madhya Pradesh High Court in Smt.
Chandan Bai 's case (supra) seems to have taken too literal a view of the section when in paragraph 5 of the judgment it says "There is nothing in Section 12 of the Act or any other provision which prevents the tenant in vacating the accommodation in spite of the fact that none of the grounds mentioned in Section 12 exists.
Similarly, there is nothing in the Act which may prevent the tenant in agreeing to vacate the accommodation in future".
It says further in paragraph 10 "Merely enumeration of grounds on which relief can be claimed does not either expressly or impliedly exclude the operation of Order 23, rule 3, because grounds for claiming relief are always limited whether the relief be claimed under the general law or a statute".
A similar argument advanced in the case of Nagindas Ramdas (supra) with reference to the relevant provisions of Bombay Rent Act, 1947 was repelled at page 550 and the view taken by a Bench of the Gujarat High Court in the case of Shah Rasiklal Chunilal vs Sindhi Shyamlal 882 Mulchand (1) "that in spite of the fact that there is no express provisions in the Bombay Rent Act prohibiting contracting out, such a prohibition would have to be read by implication consistently with the public policy underlying this welfare measure" was approved.
In order to get a decree or order for eviction against a tenant whose tenancy is governed by any Rent Restriction or Eviction Control Act the suitor must make out a case for eviction in accordance with the provisions of the Act.
When the suit is contested the issue goes to trial.
The Court passes a decree for eviction only if it is satisfied on evidence that a ground for passing such a decree in accordance with the requirement of the Statute has been established.
Even when the trial proceeds ex parte, this is so.
If, however, parties choose to enter into a compromise due to any reason such as to avoid the risk of protracted litigating expenses, it is open to them to do so.
The Court can pass a decree on the basis of the compromise.
In such a situation the only thing to be seen is whether the compromise is in violation of the requirement of the law.
In other words, parties cannot be permitted to have a tenant 's eviction merely by agreement without anything more.
The compromise must indicate either on its face or in the background of other materials in the case that the tenant expressly or impliedly is agreeing to suffer a decree for eviction because the landlord, in the circumstances is entitled to have such a decree under the law.
It is too late in the day to contend that the provisions of Order 23, Rule 3 of the Code of Civil Procedure cannot apply to eviction suits governed by the special statutes.
Undoubtedly, a compromise of such suit is permissible under the said provision of law.
The protection of the tenant is inherent in the language of Order 23, Rule 3 when it says "Where it is proved to the satisfaction of the Court that a suit has been adjusted by any lawful agreement or compromise. the Court shall order such agreement, compromise or satisfaction to be recorded, and shall pass a decree in accordance therewith so far as it relates to the suit".
If the agreement or compromise for the eviction of the tenant is found, on the facts of a particular case, to be in violation of a particular Rent Restriction or Control Act, the Court would refuse to record the compromise as it will not be a lawful agreement.
If on the other hand, the Court is satisfied on consideration of the terms of the compromise and, if necessary, by considering them in the context of the pleadings and other materials in the case, that the agreement is lawful, as in any other suit, so in an eviction suit the Court is bound to record the compromise and pass a decree in accordance therewith.
Passing a decree for eviction on adjudication of the requisite facts on or their admission in a compromise, either express or implied, is not different.
We now proceed to consider the facts of the case in hand.
The ground for eviction from the accommodation let for non residential purposes mentioned in clause (f) of section 12(1) of the Act is that the accommodation "is required bona fide by the landlord for the purpose of continuing or starting his business. . and that the land 883 lord. . has no other reasonably suitable non residential accommodation of his own in his occupation in the city or town concerned".
In paragraph 3 of the plaint the respondents ' necessity was pleaded both in the positive and the negative aspects of clause (f).
Both were denied in paragraph 3 of the written statement of the appellants.
Paragraph 1 of the compromise petition says: "That due to the necessity of the plaintiffs for their own business opening grocery shop, decree for ejectment may be granted to them against the defendants".
In this case it is not necessary to refer to any piece of evidence adduced at the inconclusive trial.
The meaning of paragraph 1 of the compromise petition is clear and definite especially in the background of the pleadings of the parties and in our opinion it squarely makes out a case of eviction within the meaning of Section 12(1) (f) of the Act on admission of the appellants.
We reject the argument of Mr. Andley, learned counsel for the appellants, that paragraph 1 of the compromise petition was an admission in respect of only the first part, namely, the positive aspect of clause (f) and not of the second part, namely, that the landlord has no other reasonably suitable nonresidential accommodation.
The admission, by necessary implication, was in respect of both.
In the order recording the compromise the Court said: "On a perusal of the joint compromise it was found that the same is legal and is within the purview of the plaint.
Therefore, plaint verification is accepted and the case is decreed in accordance with the conditions of the compromise as under: 1.
That the defendants shall vacate the shop in dispute by 31 12 1971".
The order so recorded in our judgment was in full compliance with the requirement of Order 23, Rule 3 of the Code of Civil Procedure.
The Court found that the compromise was legal, that is to say, lawful and was in accordance with the plaint.
The averment in the plaint was, therefore, accepted and the suit was decreed.
It is regrettable that though the appellants got about three years ' time to vacate the shop in dispute from the date of the compromise decree, they were ill advised to fight the litigation further and thus cause delay in the vacating of the shop by another five years.
We have no doubt in our mind that on the facts and in the circumstances of this case the compromise decree was clearly valid and executable.
We uphold the decision of the High Court but on a slightly different basis.
For the reasons stated above, the appeal fails and is dismissed with costs.
P.H.P. Appeal dismissed.
| IN-Abs | The respondent landlord filed a suit for eviction against the appellant tenant on the ground of bona fide personal requirement and that he has no other resonably suitable accommodation of his own which is one of the grounds of eviction under the Madhya Pradesh Accommodation Control Act.
The appellant filed a Written Statement denying the claim of the respondent.
After some evidence was recorded the parties entered into a compromise and filed it in the Court.
The compromise deed mentioned that "due to the necessity of the plaintiffs for their own business opening grocery shop, the decree for ejectment may be granted to them against the defendant".
The Trial Court passed a decree in terms of the compromise after coming to the conclusion that the compromise was legal.
the appellant was given 3 years ' time to vacate the premises under the compromise.
On the appellant 's failure to vacate after the expiry of three years, the respondent filed Execution Application.
The appellant objected to the execution on the ground that the compromise decree was void and inexecutable as being against the provisions of the Act.
The Execution Court accepted the appellant 's objection and dismissed the Execution Case.
The District Judge dismissed the appeal filed by the respondent.
The High Court allowing the Second Miscellaneous Appeal came to the conclusion that the decree was not a nullity and that it was executable.
In an appeal by Special Leave the Appellant contended that the decree was nullity since the Court was not satisfied that the eviction was in accordance with the provisions of the Act.
The counsel further contended that even if what is stated in the compromise deed might be accepted as admission, the admission is only about the bona fide requirement and that there is no admission about the landlord not having any other suitable accommodation. ^ HELD: dismissing the appeal: 1.
In order to get a decree or order for eviction against a tenant whose tenancy is governed by any Rent Restriction or Eviction Control Act the Suitor must make out a case for eviction in accordance with the provisions of the Act.
When the suit is contested the issue goes to trial.
The Court passes a decree for eviction only if it is satisfied on evidence that a ground for passing such a decree in accordance with the requirement of the Statute has been established.
Even when the trial proceeds ex parte, this is so.
If, however, parties choose to enter into a compromise due to any reason such as to avoid the risk of protracted litigation, expenses it is open to them to do so.
The Court can pass a decree on the basis of the compromise.
In such a situation the only thing to be seen is whether the compromise is in violation of the requirement of the law.
In other words, parties cannot be permitted to have a tenant 's eviction merely by agreement without anything more.
The compromise must indicate either on its face or in the background of other materials in the case that the tenant expressly or impliedly is agreeing to suffer a decree for eviction because the landlord, in the circumstances, is entitled to have such a decree under the law.
The case of K. K. Chari vs P. M. Seshadri, followed [882 A D] 2.
It is too late in the day to contend that the provisions of order 23 rule 3 of the Code of Civil Procedure cannot apply to eviction suits governed by the special statutes.
A compromise of suit is permissible under the said provisions of law.
[882 E F] 879 3.
If the compromise for the eviction of the tenant is found on the facts of a particular case to be in violation of a Rent Control Act, the Court would refuse to record the compromise as it would not be a lawful agreement.
If the Court is satisfied on consideration of the terms of the compromise and if necessary by considering them in the context of the pleadings and other materials in the case that the agreement is lawful as in any other suit in an eviction suit the court is bound to record the compromise and pass a decree in accordance therewith.
[882 F G] 4.
The meaning of the term the bona fide requirement in the compromise deed is clear and definite specially in the background of the pleadings of the parties and it makes out a case of eviction within the meaning of the Act.
[883 C]
|
Appeals Nos.
1458 1459 of 1970.
Appeal by special leave from the judgment and order dated the 1st January, 1970 of the Allahabad High Court in S.T.R. No. 344 and S.T.R. No. 347 of 1967.
745 N. D. Karkhanis and 0.
P. Rana, for the appellant.
No. appearance, for the respondent.
The Judgment of the Court was delivered by SARKARIA, J.
The common question of law for determination in these appeals by special leave is ': Whether section 14(2) of the Limitation Act, in terms, or, in principle, can be invoked for excluding the time spent in prosecuting an application under Rule 68(6) of the J.P. Sales Tax Rules for setting aside the order of dismissal of appeal in default, under the U.P. Sales Tax Act, 1948 (for short, the Sales= Act), from computation of the period of limitation for filing a revision under that Act? It arises out of these circumstances.
The respondent, M/s. Parson Tools and Plants (hereinafter referred to as the assesse) carries on business at Kanpur.
The Sales tax Officer assessed tax for the assessment years, 1958 1959 and 1959 60, on the, assessee by two separate orders.
The assessee filed appeals against those orders before the Appellate Authority.
On May 10, 1963, when the appeals came up for hearing, the assessee was absent.
The appeals were, therefore, dismissed in default by virtue of Rule 68(5) of the U.P. Sales tax Rules.
Sub rule (6) of Rules 68 provided for setting aside such dismissal and re admission of the appeal.
On the same day (May 10, 1963), the assessee made two applications in accordance with Sub rule (6) for setting aside the dismissal.
During the pendency of those applications, Sub rule (5) of Rule 68 was declared ultra vires the rule making authority by Manchanda J. of the High Court who further held that the Appellate Authority could not dismiss an appeal in default but was bound to decide it on merits even though the appellant be absent.
When these, applications under Rule 68(6) came up for hearing, on 20 10 1964, the Appellate Authority dismissed them outright in view of the ruling of Manchanda J. Against the order of dismissal of his appeals, the assessee on 16 12 1964 filed two revision petitions under section 10 of the Sales tax Act,, before the Revisional Authority (Judge (Revisions) Sales tax).
These revision petitions having been filed more than 18 months after the dismissal of the appeals, which was the maximum, period of limitation prescribed by sub . 73) of s 10 were prima facie time barred.
They were however, accompanied by two applications in which the assessee prayed for exclusion of the time spent by him in prosecuting the abortive proceedings under Rule 68(6) for setting aside the dismissal of his appeals.
The Revisional Authority found that the assessee had been pursuing his remedy under Rule 68(6) with due diligence and in good faith.
It therefore excluded the time spent in those proceedings from computation of limitation by applying section 14, Limitation Act and in consequence, held that the revision petitions were within time.
On the motion of the Commissioner of Sales tax, the Revisional Authority made two references under section 11 (I) of the Sales tax Act to the High Court for answering the following question of law : "Whether under the circumstances of the case, section 14 of the Limitation Act extended the period for filing 746 of the revisions by the time during which the restoration applications remained pending as being prosecuted bona fide.
" The references were heard by a Full Bench of three learned Judges, each of whom wrote a separate Judgment.
Dwivedi J. with whom Singh J. agreed after reframing the question held "that the time spent in prosecuting the application for setting aside the order of dismissal of appeals in default can be excluded from computing the period of limitation for filing the revision by the application of the principle underlying section 14(2).
Limitation Act.
" Hari Swarup J. was of the opinion: "The Judge (Revisions) Sales tax while hearing the revisions under section 10 of the U.P. Sales Tax Act does not act as a Court but only as a revenue tribunal and hence the provisions of the Indian Limitation Act cannot apply to proceedings before him.
If the Limitation Act does not apply then neither section 29(2) nor section 14(2) of the Limitation Act will apply to proceedings before him.
," The learned Judge was further of the view that the principle of section 14(2) also, could not be invoked to extend the time beyond the maximum fixed by the Legislature in sub section (3 B) of section 10 of the Sales tax Act.
Sub section (2) of section 14, Limitation Act, runs thus "In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceedings, whether in a Court of first instance or of.
appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a Court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it." (emphasis added).
If will be seen that this sub section will apply only if (1) both the prior and subsequent proceedings are civil proceedings prosecuted by the same party; (2) the proceedings had been prosecuted with due diligence and in good faith; (3) the failure of the prior proceedings was due to a defect of jurisdiction or other cause of a like nature; (4) both the proceedings are proceedings in a Court.
Mr. Karkhanis, learned Counsel appearing for the appellant does not dispute the view taken by the High Court that the Proceedings in question under the Sales tax Act could be deemed as civil proceeding.
Learned Counsel, however, contends that the authorities, irrespective of whether they exercise, original, appellate or revisional 747 jurisdiction under the Sales tax Act are not 'Courts ' within the ' contemplation of section 14(2) of the Limitation Act.
It is pointed out that his question stands concluded by this Court 's decision in Jagannath Prasad vs State of U.P.(1) Mr. Karkhanis is right that this matter is no longer res Integra.
In Shrimti Ujjam Bhai vs State of U.P.(2) Hidayatullah J. (as he hen was) speaking for the Court, observed : "The taxing authorities are instrumentalities of the State,.
They are not a part of the legislature, nor are they a part of the judiciary.
Their functions are the assessment and collection of taxes and in the process of assessing taxes, they follow a pattern of action which is considered Judicial.
They are not thereby converted into Courts of Civil judicature.
They will remain the instrumentalities of the State and are within the definition of "State" in Article 12.
" The above observations were quoted with approval by this Court Jagannath Prasad 's case (supra), and it was held that a Sales tax officer under U.P. Sales tax Act, 1948 was not a Court within the meaning of section 195 of the Code of Criminal Procedure although he is required to perform certain quasi judicial functions.
The decision in jaganath Prasad 's it seems, *as not brought to the notice of he High Court.
In view of these pronocements of this Court, here is no room for argument that the Appellent Authority and the judge (Revisions) Sales tax exercising jurisdiction under the Salestax Act, are courts.
" They are merely administrative Tribunals and not courts." Section 14, Limitation Act, therefore does not, in terms apply to proceedings before such Tribunals.
Further question that remains is : Is the general principle underlying section 14 (2) applicable on grounds of Justice, equity and good conscience for excluding the time spent in prosecuting the abortive applications under Rule 68 (6) before the Appellate Authority., for computing limitation for the purpose of revision applications.
Mr. Karkhanis maintains that the answer to this question, also, must be in the negative because definite indications are available in the scheme and language of the Sales tax Act, which exclude the application of section 14(2), Limitation Act even in principle or by or by analogy.
Learned Counsel further submits that the ratio of the Privy Council decision in Ramdute Ramkissen Dass vs E. D. Sesson & Co.(s) relied upon by the majority judgment of the High is not applicable for computing limitation prescribed under the Sales tax Act.
Reference in this connection has been made to Purshottam Dass Hassaram vs Impex (India) Lid.(4) wherein a Division Bench of the Bombay High Court explained the rule of decision in Ramdutt 's case (supra) and found it to be inapplicable for the purpose of computing limitation for ap plications under the .
(1) ; (2) [1963] 1, S.C.R. 778.
(3) AlR , (4) A.I.R. 1954 Bom, 309 748 The material pail of s.10 runs thus : "(3) (i).
The Revision Authority. . may, for the purpose of satisfying itself as to the legality or propriety of any order made by any appellate or assessing authority under this Act, in its discretion call for and examine, either on its own motion or on the application of the Commissioner of gales tax or the person aggrieved, the record of such order and pass such order as it may think fit.
* * * * * * (3A). . (3B) The application under sub section (3) shall be made within one year from the date of service of the order complained of, but the Revising Authority may on proof of sufficient cause entertain an application within a further period of six months.
" Three features of the scheme of the above provision are noteworthy.
The first is that no limitation has been prescribed for the suo motu exercise of its jurisdiction by the Revising Authority.
The second is that the period of one year prescribed as, limitation for filing an application for revision by the aggrieved party is unusually long.
The third is that the Revising Authority has no discretion to extend this period beyond a further period of six months, even on sufficient cause shown.
As rightly pointed out in the minority judgment of the High Court, pendency of proceedings of the nature contemplated by section 14(2) of the Limitation Act, may amount to a sufficient cause for condoning the delay and extending the limitation for filing a revision application, but section 10 (3 B) of the Sales tax Act, gives no jurisdiction to the Revising Authority to extend the limitation, even in such a case, for a further period of more than six months.
The three star features of the scheme and language of the above provision, unmistakably show that the legislature has deliberately excluded the application of the principles underlying sections 5 and.
14 of the Limitation Act, except to the extent and in the truncated form embodied in sub section
(3 13) of section 10 of the Sales tax Act.
Delay in disposal of revenue matters adversely affects the steady inflow of reve nues and the financial stability of the State.
Section 10 is therefore designed to, ensure speedy and final determination of fiscal matters within a reasonably certain time schedule.
It cannot be said that by excluding the unrestricted application of the principles of sections 5 and 14 of the Limitation Act, the Legislature has made.
the provisions of section 10, unduly oppressive.
In most cases, the discretion to extend limitation, on sufficient cause being shown for a further period of six months only, given by sub section
( 3_B) would be enough to afford relief.
Cases are no doubt conceivable where an aggrieved party, despite sufficient cause, is unable to make an 749 application for revision within this maximum period of 18 months.
Such harsh cases would be rare.
Even, in such exceptional cases of extreme hardship, the Revising Authoritly may, on its own motion, entertain revision and grant relief.
Be that as it may, from the scheme and language of section 1 0, the intention of the Legislature to exclude the unrestricted application of the principles of sections 5 and 10 of the Limitation Act is manifestly clear.
These provisions of the Limitation Act which the Legislature did not, after due application of mind, incorporate in the Sales tax Act, cannot be imported into it by analogy.
An enactment being the will of the legislature, the paramount rule of interpretation, which overrides all others, is that a statute is to be expounded "according to the intent of them that made it".
"The will of 'the legislature is the supreme law of the land, and demands perfect obdience".(1) "Judicial power is never exercised" said Marshall C. J. of the United States, "for the purpose of giving effect to the will of the Judges; always for the purpose of giving effect to the will of the Legislature; or in other words, to the will of the law".
If the legislature wilfully omits to incorporate something of an 'analogous law in a subsequent statute, or even if there is a casus omissus in a statute, the language of which is otherwise plain and unambiguous, the Court is not competent to supply the omission by engrafting on it or introducing in it, under the guise of interpretation, by analogy or implication, something what it thinks to be a general principle of justice and equity.
To do so would be entrenching upon the preserves of Legislatures, 'The primary function of a court of law being jus dicere and not jus dare. ' In the light of what has been said above, we are of the opinion that the High Court was in error in importing whole hog the principle of section 14(2) of the Limitation Act into section 10 (3 B) of the Sales tax Act.
The ratio of the Privy Council decision in Ramdutt Ramkissen Dass vs E. D. Sasson & Co. (Supra) relied upon by the High Court is not on speaking terms with the clear language of section 10 (3 B) of the Sales tax Act.
That decision was rendered long before the passage of the Indian .
It lost its efficacy after the enactment of the which contained a specific provision in regard to exclusion of time from computation of limitation.
The case in point is Purshottam Dass Hussaram vs Index (India) Ltd. (supra).
In this Bombay case, the question was, whether the suit was barred by limitation.
It was not disputed that Article 115 of the Limitation Act governed the limitation and if no other factor was to be taken into consideration, the suit was filed beyond time.
But what was relied upon by the plaintiff for the purpose of saving (i) see Maxwell on interpretation of statutes, 11th Edn.,pp.l, 2 and 25l, 750 limitation was the fact that there were certain infructuous arbitration,, Proceedings and if the time taken in prosecuting those proceedings was eXcluded under section 14, the suit would be within limitation.
It was held that if section 14 were to be construed strictly, the plaintiff would not be entitled to exclude the period in question.
On the authority of Ramdutt Ramkissen 's case (supra), it was then contended that.
the time taken in arbitration proceedings should be excluded on the analogy of section 14.
This contention was also negatived on the ground that since the decision of the Privy Council, the legislature had in section 37(5) of the , provided as to what extent the provisions of the Limitation Act would be applicable to the proceedings before the arbitrator.
Section 37(5) was as follows : "Where the cow orders that an award be set aside or orders, after the commencement of an arbitration, that the arbitration agreement shall cease to have effect with respect to the difference referred, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Indian Limitation Act, 1908, for the commencement of the proceedings (including arbitration) with respect to the difference referred.
" The reasons advanced, the observations made and the rule enunciated by Chagla C.J., who spoke for the Bench in that case, are opposite and may be extracted with advantage ". . we have now a statutory provision for exclusion of time taken up in arbitration Pr when a suit Is filed, and the question arises of computing the period of limitation with regard to that suit, and the time that has got to be excluded is only that time which is taken up as provided in section 37(5).
There must be an order of the Court setting aside an award or there must be an order of the Court declaring that the arbitration agreement shall cease to have effect, and the period between the commencement of the arbitration and the date of this order is the period that has got to be excluded.
it is therefore no longer open to the Court to rely on section 14 Limitation Act as applying by analogy to arbitration proceedings.
If the Legislature intended that section 14 should apply and.
that all the time taken up in arbitration proceedings should be excluded, then there was no reason to enact section 37(5).
, The very fact that section 37(5) has been enacted clearly shows that the whole period referred to in. a, 49 Limitation Act is not to be excluded but the limited '. indicated in section 37(5).
* * * * * * 751 "it may seem rather curious and it may also in certain cases result in hardship as to why the legislature should not have excluded all time taken up in good faith before an arbitrator just as the time taken up in prosecuting a suit or an appeal in good faith is excluded.
But obviously the Legislature did no t intend that parties should waste time infructuous proceedings before arbitrators.
The Iegisla ture has clearly indicated that limitation having once begun to run, no time could be excluded merely because parties chose to go before an arbitrator without getting an award or without coming to Court to get the necessary order indicated in section 37(5).
" What the learned Chief Justice said about the inapplicability of section 14, Limitation Act, in the context of section 37(5) of the , holds good with added force with reference to section 10 (3 B) of the Sales tax Act.
Thus the principle that emerges is that if the legislature in a special statute prescribes a certain period of limitation for filing a particular application thereunder and provides in clear terms that such period on sufficient cause being shown, may be extended, in the maximum, only upto a specified time limit and no further, than the tribunal concerned has no jurisdiction to treat within limitation, an application filed before it beyond such maximum time limk specified in the statute, by excluding the time spent in prosecuting in good faith and due diligence any prior proceeding on the analogy of section 14(2) of the Limitation Act.
We have said enough and we may say it again that where the legislature clearly declares its intent in the scheme and language of a statute, it is the duty of the court to give full effect to the same without scanning its wisdom or policy, and without engrafting, adding or implying anything which is not congenial to or consistent with such expressed intent of the law giver; more so if the statute is a taxing statute.
We will close the discussion by recalling what Lord Hailsham (1) has said recently, in regard to importation of the principles of natural justice into a statute which is a clear and complete Code, by itself : "It is true of course that the courts will lean heavily ,against any construction of a statute which would be manifestly fair.
But they have no power to amend or supplement the language of a statute merely because in one view (1)At P. 11 in Pearl Berg vs Varty , 752 of the matter a subject feels himself entitled to a larger degree of say in the making of a decision than a statute accords him.
Still less is it the functioning of the courts to form first a judgment on the fairness of an Act of Parliament and theft to amend or supplement it with new provisions so as to make it conform to that judgment.
" For all the reasons aforesaid, we are of the opinion that the object, the scheme and language of s.10 of the Sales tax Act do not permit the invocation of s.14(2) of the Limitation Act, either, in terms, or, in principle, for excluding the time spent in prosecuting proceedings for setting aside the dismissal of appeals in default, from com putation of the period of limitation prescribed for filing a revision under the Sales tax.
Accordingly, we answer the question referred, in the negative.
In the result, we set aside the judgment of the High Court and accept these appeals.
Since the appeals have been heard ex parte, there will be no order as to costs.
| IN-Abs | The Sales Tax Officer assessed tax for the assessment years 1958 1959 and 1959 60, on the respondent assessee by two separate orders.
The assessee filed appeals against those orders before the Appellate Authority.
On May 10, 1963, when the appeals came up for hearing, the assessee was absent.
The appeals were, therefore.
dismissed in default by virtue of Rule 68(5) of the U.P. Sates tax Rules.
Sub rule (6) of Rule 68.
provided for setting aside such dismissal and for re admission of the appeal.
On the same day (May 10, 1963), the assessee made two applications in accordance with Sub rule (6) for setting aside the dismissal.
During the pendency of those applications, Subrule (5) of Rule 68 was declared ultra vires the rule making authority by Manchanda J. of the High Court who further held that the Appellate Authority could not dismiss an appeal in default but was bound to decide it on merits even though the appellant be absent.
When these applications under r. 68(6) came up for hearing.
on 20 10 64, the Appellate Authority dismissed them outright in view of the ruling of Manchanda J. Against the order of dismissal of his appeals, the assesees on 16 12 1964 filed two revision petitions under section 10 of the Sales tax Act, before the [Judge (Revisions) Sales tax].
These revisions petitions having been filed more than 18 months after the dismissed of the appeals which was the maximum period of limitation prescribed by sub section
(3) of section 10 were prima facie time barred.
They were however, accompanied by two application 's in which the assessee prayed for exclusion of the time spent by him in prosecuting the abortive proceedings under r. 68(6) for setting aside the dismissal of his appeals.
The Revisional Authority found that the assessee had been pursuing his remedy under r. 68(6) with due diligence and in good faith.
It therefore excluded the time spent in those proceedings from computation of limitation by applying section 14, Limitation Act and in consequence, held that the revision petitions were within time.
On the motion of the Commissioner of Sales tax.
the Judge (Revisions) Sales *ax made two references under section 11(1) of the Sales_tax Act to the High Court for answering the following question of law "Whether under the Circumstances of the case, section 14 of the Limitation Act extended 'the period for filing of the revisions by the time during which the restoration applications remained pending as being prosecuted bona fid.
" The references were heard by a Full Bench of three learned Judges each of whom wrote a separate Judgment.
Dwivedi J. with whom Singh J. agree utter refraining the question held "that the time spent in prosecuting the application for setting aside the order of dismissal of appeals in default can be 744 excluded from computing the period of limitation for filing the revision by the application of the principle underlying section 14(2), Limitation Act.
" Hari Swarup J. was of the opinion : "The Judge (Revisions) Sales tax while hearing the revisions under section 10 of the U.P. Sales Tax Act does not act as a Court but only as a revenue tribunal and hence the provisions of the Indian Limitation Act cannot apply to proceedings before him.
If the Limitation Act does not apply then neither section 29(2) nor is 14(2) of the Limitation Act will apply to proceedings before him." The learned Judge was further of the view that the principle of section 14(2) also, could not be invoked to extend the time beyond the maximum fixed by the Legislature in sub section (3 B) of section 10 of the Sales tax Act.
These appeals have been preferred on the basis of the special leave granted by this court.
Allowing the appeals, HELD : (i) If the legislature wilfully omits to incorporate something of an analogous law in a subsequent statute, or even if there is a casus omissus in a statute, the language of which is otherwise plain and unambiguous, the Court is not competent to supply the omission by engrafting on it or introducing in it, under the guise of interpretation, by analogy or implication, something what it thinks to be.
a general principle of justice and equity.
To do so "would be entrenching upon the preserves of Legislature", the primary function of a court of law being jus dicere and not jus dare.
[749D E] (ii) If the ' legislature in a special statute prescribes a certain period of limitation for filing a particular application thereunder and provides in 'clear terms that such period on sufficient cause being shown, may be extended, in the maximum, only upto a specified time limit and no further, then the tribunal concerned has no jurisdiction to treat within limitation, an application filed before it beyond such maximum time limit specified in the statute, by excluding the time spent in prosecuting in good faith and due diligence any prior proceeding on the analogy of section 14(2) of the Limitation Act.
[751D E] Ramdutt Ramkissen Dass vs E. D. Sesson & Co. A.I.R. 1929, P.C. 103 and Purshottam Dass Hassaram vs Impex (India) Ltd. A.I.R. 1954 Bom.
309, referred to.
(iii) In view of the pronouncements of this Court in Shrimati Ujjani Bhai vs State of U.P., and jagannath Prasad vs State of U.P. ; , there is no room for argument that the Appellate Authority and the Judge (Revisions) exencising jurisdiction under the U.P. Sales Tax Act, 1948, are 'Courts '.
They are merely administrative Tribunals and "not courts".
Section 14, Limitation Act, therefore, does not, in terms apply to proceedings before such Tribunals.
[747E] (iv) Three features of the scheme of provisions of section 10(3)(i) and section 10(3B) are noteworthy.
The first is that no limitation has been prescribed for the suo matu exercise of its jurisdiction by the Revising Authority.
The second is that the period of one year prescribed as limitation for filing an application for revision by the aggrieved party is unusually long.
The third is that the Revising Authority has no discretion to extend this period beyond a further period of six months, even on sufficient cause shown.
The three stark features of the scheme and language of these provisions, unmistakably show that the legislature has deliberately excluded the application of the principles of Ss. 5 and 14 of the Limitation Act.
except to the extent and in the truncated form embodied in sub section
(3 B) of section 10 of the Act.
[748D F]
|
Civil Appeal No. 1664 of 1974.
Appeal by Special Leave from the judgment and order dated the 18th December, 1973 of the Kerala High Court in original Petition No.860 of 1973 and Civil Appeals Nos.
891 892 of 1975 Appeal by special leave from the judgment and order dated the 25th January, 1974 of the Rajasthan High Court in S.B. Civil Writ Petitions Nos.
352 & 1826 of 1971 respectively.
section N. Prasad, for the appellants (in all the appeals).
section M. Jain, V. section Dave and Inder Makwana, for the respondent (In C.A. No. 891/75) The Judgment of the Court was delivered by FAZAL ALI, J.
Civil Appeal Nos.
1664 of 1974 and 891 of 1975 are appeals by special leave directed against the judgments of the Kerala High Court dated December 18, 1973 and the Rajasthan High Court dated January 25, 1974, respectively allowing the writ petitions filed before the High Courts by the respondents concerned.
Civil Appeal No. 892 of 1975 has also been filed against the judgment of the Rajasthan High Court dated January 25, 1974 with respect to the respondent Abdul Hamid whose petition was allowed by the same judgment of the High Court dated January 25, 1974, which was decided in favour of the respondent Narsing.
It would thus appear that the cases of the respondents Narsingh and Abdul Hamid had been decided by one common judgment of the High Court of Rajasthan.
It was agreed at the Bar that as the points involved in all the three cases arc the same, they may be disposed of by one common judgment.
We, therefore, propose to dispose of all the three cases by one common judgment indicating, however, the facts of each individual case, wherever necessary.
As regards Civil Appeal No. 1664 of 1974 the respondent T.R. Challappan was a Railway Pointsman working at Irimpanam on Olavakkot Division of the Southern Railway.
On August 12, 1972 at about 3 30 P.M. he was arrested at the olavakkot railway station platform for disorderly drunken and indecent behavior and a criminal case under section 51(A) of the Kerala Police Act was registered against him After due investigations the challan was presented before the Sub Magistrate, Palghat who after finding the respondent guilty instead of sentencing him released him on Probation under section 3 of the Probation of offenders Act.
After the respondent was released the Disciplinary Authority of the Department by its order dated January 3, 1973 removed him from service in view of the misconduct which led to the conviction of the respondent on a criminal charge under section 51(A) of the Police Act.
The order removing the respondent from service merely shows that it proceeded on the basis of the 786 conviction of the accused in the criminal case and there is nothing A to show that the respondent was heard before passing the order.
The Kerala High Court held that as the respondent was released by the criminal court and no penalty was imposed on him, therefore, r. 14(1) under which the respondent was removed from service did not in terms apply.
The High Court accordingly quashed the order passed by the Disciplinary Authority and allowed the writ petition.
In Civil Appeal No. 891 of 1975 the respondent Narsingh was working as a Railway Khallasi working at the Railway Workshop at Jodhpur and was found to be in possession of stolen copper weighing 4 Kilos and 600 Grammes.
The respondent was prosecuted and was ultimately,.
convicted by the Trial Magistrate under section 3 of the Indian Railway Property (Unlawful Possession) Act, 1966.
On appeal the learned Additional Sessions Judge, Jodhpur, while maintaining the conviction of the respondent set aside the sentence and released him on probation under the provisions of the Probation of offenders Act.
On the basis of the order of conviction passed by the Criminal Court the Assistant Personnel officer (W), who was the Disciplinary Authority removed the respondent from service by his order dated February 26, 1971 and the departmental appeal against this order was eventually rejected.
Thereafter the respondent moved the High Court in its writ jurisdiction and the petition was allowed by the High Court and the order of removal from service was quashed by the High Court of Rajasthan.
In Civil Appeal No. 892 of 1975 the respondent Abdul Hamid was a second fireman at the Railway Workshop at Jodhpur and he was prosecuted and ultimately convicted under section 420 of the Indian Panel Code by the Special Magistrate, Jaipur by his order dated September 9, 1970.
The Magistrate, however, instead of sentencing him ordered him to be released on probation under the provisions of the Probation of offenders Act.
The Assistant Mechanical Engineer by his order dated February 3, 1971, removed the respondent from service on the ground of his conviction by a criminal court and the departmental appeal against this order filed by the respondent was rejected on March 2, 1971.
Thereafter the respondent moved the Rajasthan High Court under article 226 of the Constitution and the High Court quashed the order by which the respondent was removed from service hence the appeal by special leave by the Union of India against the judgment of the Rajasthan High Court.
A close analysis of the facts of the cases of each of the respondents would doubtless reveal that the points involved in the three cases are almost identical, though the grounds on which the respective High Courts leave proceeded may be slightly different.
Mr. section N. Prasad appearing for the appellants in all the three cases raised three points before us: H (1) That section 12 of the Probation of offenders Act con templates an automatic disqualification attached to the conviction and not an obliteration of the misconduct 787 of the accused so as to debar the Disciplinary Authority from imposing penalties under the Rules against an employee who has been convicted for misconduct.
(2) Rule 14 of the Railway Servants (Discipline and Appeal) Rules, 1968, is in terms similar to proviso (a) to article 311(2) of the Constitution and confers power on the appointing authority to pass an order of dismissal against an employee who is found guilty of a criminal offence without giving any further notice to the delinquent employee.
further, r. 14 does not in terms contemplate that the appointing authority will consider the penalty after either hearing the accused or after ordering special inquiry.
(3) That in the absence of any provision similar to r. 14 the Government is entitled.
in the exercise of its executive power, to terminate the services of.
the employee who has been convicted of a criminal charge without any further departmental inquiry.
Learned counsel appearing for the respondents in Civil Appeal No. 891 of 1975 as also Civil Appeal No. 892 of 1975 contested the contentions raised by the counsel for the appellants and submitted that the judgment of the High Court laid down the correct law and that the mere fact that the delinquent employee has been convicted of a criminal charge cannot ipso facto result in his automatic dismissal from service.
We have given our earnest consideration to the arguments advanced before us by counsel for the parties.
To begin with, the Kerala High Court appears to have allowed the writ petition solely on the ground that the order of the Magistrate releasing the respondent T. R. Challappan on probation did not amount to imposition of penalty as contemplated by r. 14 of the Railway Servants (Discipline and Appeal) Rules, 1968 hereinafter called 'the Rules of 1968 ', and therefore the order passed by the Disciplinary Authority was illegal.
In order to understand it, it may be necessary to examine the scope and object of r. 14 of the Rules of 1968 which will also throw a great light on the second point which has been dealt with at great length by the Rajasthan High Court, namely the import of the closing part of r. 14 where the disciplinary authority has to consider the circumstances of the case before making any order In the instant case we are concerned only with clause (1) of r. 14 of the Rules of 1968 which runs thus: "Notwithstanding anything contained in rules 9 to 13 . (1) where any penalty is imposed on a railway servant on the ground of conduct which has led to his conviction on a criminal charge, 788 the disciplinary authority may consider the circumstances of the case and make such orders thereon as it deems fit.
" The word penalty imposed on a railway servant, in, our opinion, does not refer to a sentence awarded by the Court to the accused on his conviction, but, though not happily worded it merely indicates the nature of the penalty impossible by the disciplinary authority if the delinquent employee has been found guilty of conduct which has led to his conviction of a criminal charge.
Rule 14 of the Rules of 1968 appears in Part IV which expressly contains the procedure for imposing penalties.
Further more, r. 14 itself refers to rr.
9 to 13 which contain the entire procedure for holding a departmental inquiry.
Rule 6 of Part III gives the details regarding the major and minor penalties.
Finally r. 14(1) merely seeks to incorporate the principle contained in proviso (a) to article 311(2) of the Constitution which runs: thus "(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 o, those charges and where it is proposed, after such inquiry, to impose on him any such penalty, until he has been given reasonable opportunity of making representation of 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; " An analysis of the provisions of article 311(2) extracted above would clearly show that this constitutional guarantee contemplates three stages of departmental inquiry before an order of dismissal, removal or reduction can be passed, namely, (1) that on receipt of a complaint against a delinquent employee charges should be framed against him and a departmental inquiry should be held against him in his presence; (ii) that after the report of the departmental inquiry is received he appointing authority must come to a tentative conclusion regarding the penalty to be imposed on the delinquent employee; and (iii) that before actually imposing the penalty a final notice to the delinquent employee should be given to show cause why the penalty proposed against him be not imposed on him.
Proviso (a) to article 311(2), however, completely dispenses with all the three states of departmental inquiry when an employee is convicted on a criminal charge.
The reason for the proviso is that in a criminal trial the employee has already had a full and complete opportunity to contest the allegations against him and to make out his defence.
In the criminal trial charges are framed to give clear notice regarding the allegations made against the accused, secondly, the witnesses are examined and cross examined in his presence and by him; and thirdly, the accused is given full opportunity 789 to produce his defence and it is only after hearing the arguments that the Court passes the final order of conviction or acquittal.
in these circumstances, therefore, if after conviction by the Court a fresh departmental inquiry is not dispensed with, it will lead to unnecessary waste of time and expense and a fruitless duplication of the same proceedings all over again.
it was for this reason that the founders of the Constitution thought that where once a delinquent employee has been convicted of a criminal offence that should be treated as a sufficient proof of his misconduct and the disciplinary authority may be given the discretion to impose the penalties referred to in article 311(2), namely, dismissal, removal or reduction in rank.
It appears to us that proviso (a) to article 311(2) is merely an enabling provision and it does not enjoin or confer a mandatory duty on the disciplinary authority to pass an order of dismissal, removal or reduction in rank the moment an employee is convicted.
This matter is left completely to the discretion of the disciplinary authority and the only reservation made is that departmental inquiry contemplated by this provision as also by the Departmental Rules is dispensed with.
In these circumstances, therefore, we think that r. 14(1) of the Rules of 1968 only incorporates the principles enshrined in proviso (a) to article 311(2) of the Constitution.
The words 'where any penalty is imposed ' in r. 14(1) should actually be read as 'where any penalty is impossible ', because so far as the disciplinary authority is concerned it cannot impose a sentence.
it could only impose a penalty on the basis of conviction and sentence passed against the delinquent employee by a competent court.
Furthermore the rule empowering the disciplinary authority to consider circumstances of the case and make such orders as it deems fit clearly indicates that it is open to the disciplinary authority to impose any penalty as it likes.
In this sense, therefore, the word 'penalty ' used in r. 14(1) of the Rules of 1968 is relatable to.
the penalties to be imposed under the Rules rather than a penalty given by a criminal court.
Another important aspect of the matter is that a criminal court after.
conviction does not impose any penalty but passes a sentence whether it is one of fine, or imprisonment or whipping or the like.
The Penal Code has been on the statute book for a large number of years and the rule making authority was fully aware of the significance of the words 'conviction ' and 'sentence ' and if it really intended to use the word 'penalty ' as an equivalent for 'sentence ' then it should have used the word 'sentence ' and not 'penalty.
In these circumstances we are satisfied that the word 'penalty ' has. been used in juxtaposition to the other connected provisions of the Rules appearing in the same Part The view of the Kerala High Court, there fore.
that as the Magistrate released the delinquent employee on probation no penalty was imposed as contemplated by r. 14(1) of the Rules of 1968 does not appear to us to be legally correct and must be overruled Nevertheless we would uphold the order of the Kerala High Court.
On the ground.
that the last Dart of r. 14 of the Rules of 1968 which requires the` consideration of the circumstances 790 not having been complied with by the disciplinary authority, the A order of removal from service of the delinquent employee was rightly quashed.
This brings us to the consideration of two inter connected questions, namely, as to what is the effect of the order of the Magistrate releasing the accused on probation and the effect of section 12 of the Probation of Offenders Act.
It was suggested by the respondents that if the Magistrate does not choose, after convicting the accused to pass any sentence on him, but releases him on probation then the stigma of conviction is completely washed out and obliterated and, therefore, r. 14(1) of the Rules of 1968 will not apply in terms.
We are, however, unable to agree with this somewhat broad proposition.
A perusal of the provisions of the Probation of offenders Act, 1958, clearly shows that the mere fact that the accused is released on probation does not obliterate the stigma of conviction.
The relevant portion of the Probation of offenders Act, 1958, hereinafter referred to as 'the Act ' runs thus . " . notwithstanding anything contained in any other law for the time being in force the Court may, instead of sentencing him to any punishment or releasing him on probation of good conduct under section 4, release him after due admonition.
" Similarly the relevant part of section 4(1) of the Act runs thus: " . notwithstanding anything contained in any other law for the time being in force, the Court may, instead of sentencing him at once to any punishment, direct that he be released on his entering into a bond, with or without sureties, to appear and receive sentence when called upon during such period, not exceeding three years, as the Court may direct, and in the mean, time to keep the peace and be of good behaviour." Sections 9(3) & (4) of the Act read as under: "9.
(3) If the Court, after hearing the case is satisfied that the offender has failed to observe any of the conditions of the bond or bonds entered into by him, it may forthwith (a) sentence him for the original offence; or (b) where the failure is for the first time, then, without prejudice` to the continuance in force of the bond, impose upon him a penalty not exceeding fifty rupees.
(4)If a penalty imposed under clause (b) of sub section (3) is not paid within such period as the Court may fix, the Court may sentence the offender for the original offence :" These provisions would clearly show that an order of release on probation comes into existence only after the accused is found guilty 791 and is convicted of the offence.
Thus the conviction of the accused or the finding, of the Court that he is guilty cannot be washed out at all because that is the sine qua non for the order of release on probation of the offender.
The order of release on probation is merely in substitution of the sentence to be imposed by the Court.
This has been made permissible by the statute with a humanist point of view in order to reform youthful offenders and to prevent them from becoming hardened criminals.
The provisions of section 9(3) of the Act extracted above would clearly show that the control of the offender is retained by the criminal court and where it is satisfied that the conditions of the bond have been broken by the offender who has been released on probation, the Court can sentence the offender for the original offence.
This clearly shows that the factum of guilt on the criminal charge is not swept away merely by passing the order releasing the offender on probation.
Under sections 3, 4 or 6 of the Act, the stigma continues and the finding of the misconduct resulting in conviction must be treated to be, a conclusive proof.
In these circumstances, therefore we are unable to accept the argument of the respondents that the order of the Magistrate releasing the offender on probation obliterates the stigma of conviction.
Another point which is closely connected with this question is as to the effect of section 12 of the Act which runs thus: "Notwithstanding anything contained in any other law, person found guilty of an offence and dealt with under he provisions of section 3 or section 4 shall not suffer disqualification, if any, attaching to a conviction of an offence under such law.
" It was suggested that section 12 of the Act completely obliterates the effect of any conviction and wipes out the disqualification attached to a conviction of an offence under such law.
This argument, in our opinion, is based on a gross misreading of the provisions of section 12 of the Act.
The words "attaching to a conviction of an offence under such law" refer to two contingencies: (1) that there must be a disqualification resulting from a conviction; and (ii) that such disqualification must be provided by some law other than the Probation of offenders Act.
The Penal Code does not contain any such disqualification.
Therefore, it cannot be said that section 12 of the Act contemplates an automatic disqualification attaching to a conviction and obliteration of the criminal misconduct of the accused.
it is also manifest that disqualification is essentially different in its connotation from the word 'misconduct '.
Disqualification cannot be an automatic consequence of misconduct unless the statute so requires.
Proof of misconduct may or may not lead to disqualification, because this matter rests on the facts and circumstances of a particular case or the language in which the particular statute is covered.
In the instant case neither article 311(2) proviso (a) nor r. 14(1) of the Rules of 1968 contain any express provision that the moment a 792 person is found guilty of a misconduct on a criminal charge he will have to be automatically dismissed from service.
Article 311 (2) proviso (a) is an enabling provision which merely dispenses with the various stages of the departmental inquiry and the show cause notice.
Rule 14 despite incorporating the principle of proviso (a) to article 311(2) enjoins on the discriplinary authority to consider the circumstances of the case before passing any order.
Thus, in our opinion, it is a fallacy to presume that the conviction of a delinquent employee simpliciter without any thing more will result in his automatic dismissal or removal from service.
It was, however, suggested that r. 14(1) of the Rules of 1968 is the provision which contains the disqualification by dispensing with the departmental inquiries contemplated under rr. 9 to 13 of the said Rules.
This cannot be the position.
because as we have already said r. 14(1) only incorporates the principle of proviso (a) to article 311(2).
If section 12 of the Probation of offenders Act completely wipe out the disqualification contained in article 311(2) proviso (a) then it would have become ultra vires as it would have come into direct conflict with the provisions of the proviso (a) to article 311(2).
In our opinion, however, section 12 of the Act refers to only such disqualifications as are expressly mentioned in other statutes regarding holding of offices or standing for elections and so on.
This matter was considered by a number of High Courts and there is a consensus of judicial opinion on this point that section 12 of the Act is not an automatic disqualification attached to the conviction itself.
In R. Kumaraswami Aiyar vs The Commissioner Municipal Council, Tiruvannamalai and another(1) Rajagopala Ayyangar, J., as he then was, observed as follows.
"If for instance the petitioner is dismissed from service because he has been found guilty of an offence involving moral turpitude it cannot be said that he is suffering from a disqualification attaching to a conviction.
What section 12 A has in view is an automatic disqualification flowing from a conviction and not an obliteration of the misconduct of the accused.
In my judgment the possibility of disciplinary, proceedings being taken against a Person found guilty is not a disqualification attaching to the conviction within the meaning of section 12 A of the Probation of offenders Act.
" The same view was endorsed by the Full Bench of the Punjab and Haryana High Court in Om Prakash vs The Director Postal Services (Posts and Telegraphs Deptt.) Punjab Circle, Ambala and other(2) where it was observed: "What Section 12 removes is a disqualification attaching to a conviction.
In my opinion neither liability to be departmentally punished for misconduct is a disqualifica (1) , 256.
(2) A. T. R. 1973 Punjab 1, 4 793 tion, nor it attaches to the conviction.
"Disqualification" its ordinary dictionary meaning connotes something that disqualifies or incapacitates.
To disqualify a person for a particular purpose means to deprive that person of the qualities or conditions necessary to make him fit for that purpose.
" It was further observed by the High Court: " The other reason why Section 12 of the Act does not help the petitioner is that the departmental proceedings are not attached to the conviction of the offence.
Departmental proceedings are not taken because the man has been convicted.
The proceedings are directed against the original misconduct of the Government servant.
No part of Section 12 is intended to exonerate a Government servant of his liability to departmental punishment for misconduct.
This provision does not afford immunity against disciplinary proceedings for the original misconduct.
What forms basis of the punishment is the misconduct and not the conviction.
A Full Bench of the Delhi High Court in Director of Postal Services and Anr.
vs Daya Nand(1) held the same view and observed thus: " Firstly, the ordinary meaning of 'qualification ' is the possession of some merit or quality which makes the possessors eligible to apply for or to get some benefit.
The word 'disqualification ' used in section 12 has the opposite meaning It imposes a disability on the person to whom the disqualification is attached in applying for or getting such benefit.
The disqualification contemplated by section 12 is something attached to the conviction, namely, something which is a consequence or the result thereof.
Instances of such disqualification may be found in a statute statutory rule or in administrative practice.
Under section 108 of the Representation of People Act, 1951, a person is disqualified to he a member of Parliament or State Legislature if he is convicted of certain offences.
It would also be an administrative consideration in entertaining applications for jobs or for grant of licences to disfavour an applicant a convict.
Such a disqualification is removed by section 12.
This meaning of disqualification does not include the reason who a hearing prior to punishment is dispensed with by proviso (a) to Article 311(2) of the Constitution.
Secondly the object of section 12 is to remove a disqualification attached to conviction.
It does not 'go beyond it ' (1) 794 The decision in R. Kumaraswami Aiyar 's case (supra) was followed in a later case in Embaru vs Chairman, Madras Port Trust.(1) The Andhra Pradesh High Court in Akella Satyanarayana Murthy vs Zonal Manager, Life Insurance Corporation of India, Madras(2) appears to have taken the same view where it was observed thus: " . we are of the view that what Section 12 of the Central Act has in view is an automatic disqualification flowing from a conviction and not an obliteration of the misconduct of the official concerned.
The disciplinary authority is not precluded from proceeding under Regulation 89(4) .
" The Madhya Pradesh High Court also took the same view in Premkumar vs Union of India and others(3) where it was observed: " We have heard the learned counsel at some length but we find ourselves unable to agree with the above contention.
The relevant words of the section are 'shall not suffer disqualification, if any, attaching to a conviction of an offence under such law '.
The words can only be read so as to remove the disqualification which under some law may attach to a person on account of his conviction.
For instance, if a person is convicted of an offence, he is disqualified from standing for election to the Central or State Legislatures.
But if such a person is given benefit under the Probation of offenders Act then by virtue of Section 12 of that Act the disqualification for that purpose (standing for election) will stand removed.
" A Division Bench of the Delhi High Court in Iqbal Singh vs Inspector General of Police, Delhi & Ors.(4) took a contrary view but that decision has been overruled by a later decision of the Full Bench of the same High Court in Director of Postal Services vs Daya Nand (Supra) to which we have already referred to.
Even the Rajasthan High Court in its judgment concerning Civil Appeal No. 891 of 1975 has endorsed the view taken by the Madras High Court and followed by the other High Courts.
We find ourselves in complete agreement with the view taken by the Madras High Court as referred to above and as endorsed by the Delhi, Rajasthan, Punjab, Andhra Pradesh and Madhya Pradesh High Courts.
We now come to the third point that is involved in this case, namely, the extent and ambit of the last part of r. 14 of the Rules of 1968.
The concerned portion runs thus: "The disciplinary authority may consider the circumstances of the case and make such orders thereon as it deems fit: " (1) [1963] I L. L.J.49.
(2) AIR.
1969 A.P. 371,373 (3) [1971] Lab.
& Ind. Cases 823,824 (4) A.1.
R.1970 M.P. 240(1971) 2 S.L.R 257 795 In this connection it was contended by the learned counsel for the appellants that this provision does not contemplate a full dress or a fresh inquiry after hearing the accused but only requires the disciplinary authority to impose a suitable penalty once it is proved that the delinquent employee has been convicted on a criminal charge.
The Rajasthan High Court in (civil Writ Petition No. 352 of 1971 concerning Civil Appeal No. 891 of 1975 has given a very wide connotation to the word 'consider ' as appearing in r. 14 and has held that the word 'consider ' is wide enough to require the disciplinary authority to hold a detailed determination of the matter.
We feel that we are not in a position to go to the extreme limit to which the Rajasthan High Court has, gone.
The word 'consider ' has been used in contradistinction to the word 'determine '.
The rule making authority deliberately used the world 'consider ' and not 'determine ' because the word 'determine ' has a much wider scope.
The word 'consider ' merely connotes that there could be active application of the mind by the disciplinary authority after considering the entire circumstances of the case in order to decide the nature and extent of the penalty to be imposed on the delinquent employee on his conviction on a criminal charge.
This matter can be objectively determined only if the delinquent employee is heard and is given a chance to satisfy the authority regarding the final orders that may be passed by the said authority.
In other words, the term 'consider ' postulates consideration of all the aspects, the pros and cons of the matter after hearing the aggrieved person.
Such an inquiry would be a summary inquiry to be held by the disciplinary authority after hearing the delinquent employee.
It is not at all necessary for the disciplinary authority to order a fresh departmental inquiry which is dispensed with under r. 14 of the Rules of 1968 which incorporates the principle contained in article 311(2) proviso (a).
This provision confers power on the disciplinary authority to decide whether in the facts and circumstances of a particular case what penalty if at all, should be imposed on the delinquent employee.
It is obvious that in considering this matter the disciplinary authority will have to take into account the entire conduct of the delinquent employee, the gravity of the misconduct committed by him, the impact which his misconduct is likely to have on the administration and other extenuating circumstances or redeeming features if any present in the case and so on and so forth.
It may be that the conviction of an accused may be for a trivial offence as in the case of the respondent T. R. Challappan in Civil Appeal No. 1664 of 1974 where a stern warning or a fine would have been sufficient to meet the exigencies of service.
It is possible that the delinquent employee may be found guilty of some technical offence, for instance, violation of the transport rules or the rules under the Motor Vehicles Act and so on, where to major penalty may be attracted.
It is difficult to lay down any hard and fast rules as to the factors which the disciplinary authority would have to consider, but I have mentioned some of these factors by way of instances which are merely illustrative and not exhaustive.
In other words, the position is that the conviction of the delinquent employee would be taken as sufficient proof of misconduct and then 796 the authority will have to embark upon a summary inquiry as to the nature and extent of the penalty to be imposed on the delinquent employee and in the course of the inquiry if the authority is of the opinion that the offence is too trivial or of a technical nature it may refuse to impose any penalty in spite of the conviction.
This is very salutary provision which has been enshrined in these Rules and one of the purposes for conferring this power is that in cases where the disciplinary authority is satisfied that the delinquent employee is a youthful offender who is not convicted of any serious offence and shows poignant penitence or real repentence he may be dealt with as lightly as possible.
This appears to us to be the scope and ambit of this provision.
We must, however, hasten to add that we should not be understood as laying down that the last part of r. 14 of the Rules of 1968 contains a licence to employees convicted of serious offences to insist on reinstatement.
The statutory provision referred to above merely imports a rule of natural justice in enjoining that before taking final action in the matter the delinquent employee should be heard and the circumstances of the case may be objectively considered.
This is in keeping with the sense of justice and fair play.
The disciplinary authority has the undoubted power after hearing the delinquent employee and considering the circumstances of the case to inflict any major penalty on the delinquent employee without any further departmental inquiry if the authority is of the opinion that the employee has been guilty of a serious offence involving moral turpitude and, therefore, it is not desirable or conducive in the interests of administration to retain such a person in service.
Mr. section N. Prasad appearing for the appellants submitted that it may not be necessary for the disciplinary authority to hear the accused and consider the matter where no provision like r. 14 exists.
because in such cases the Government can, in the exercise of its executive powers, dismiss, remove or reduce in rank any employee who has been convicted of a criminal charge by force of proviso (a) to Art 311(2) of the Constitution.
In other words, the argument was that to cases where proviso (a) to article 311(2) applies a departmental inquiry is completely dispensed with and the disciplinary authority can on the doctrine ' of pleasure terminate the services of the delinquent employee.
We however refrain from expressing any opinion on this aspect of the matter because the cases of all the three` respondents before us are cases which clearly fall within r. 14 of the Rules of 1968 where they have been removed from service without complying with the last part of r. 14 of the Rules of 1968 as indicated above.
In none of the cases has the disciplinary authority either 797 considered the circumstances or heard the delinquent employees on the limited point as to the nature and extent of the penalty to be imposed if at all.
On the other hand in all these cases the disciplinary authority has proceeded to pass the order of removal from service straightaway on the basis of the conviction of the delinquent employees by the criminal courts.
For the reasons given above the High Courts of Kerala and Rajasthan were, in the Circumstances, fully justified in quashing the orders of the disciplinary authorities removing the respondents from service.
The appeals therefore fail and are accordingly dismissed but in view of somewhat unsettled position of law on the question involved we leave the parties to bear their own costs.
V.P.S. Appeals dismissed.
| IN-Abs | Rule 14(1) of the Railway Servants (Discipline and Appeal) Rules, 1968 provides that not withstanding anything contained in rr.9 to 13, where any penalty is imposed on a railway servant on the ground of conduct which has led to his conviction on a criminal charge, the disciplinary authority may consider he circumstances of the case ' and make such orders thereon as it deems fit, Section 12 of the Probation of ' Offenders Act, 1958, provides that not with standing anything contained in any other law a person found guilty of an offence and dealt with under the provisions of s.3 or s.4 shall not suffer a disqualification, if any, attached to a conviction of an offence under such law.
The respondents were found guilty of certain minor offences and instead of being sentenced, were released on probation under the provisions of the Probation of offenders Act.
The concerned Disciplinary Authorities however, re moved them from service on the ground of their conviction without any further opportunity to the respondents.
The respondents challenged the orders of removal and the High Court quashed the orders.
Dismissing the appeals to this Court, ^ HELD: (1) The conviction of the delinquent employee would be taken as sufficient proof of misconduct, and then, the authority will have to hold a summary inquiry as to the nature and extent of the penalty to be imposed If the authority is of the opinion that the offence is too trivial or of a technical nature it may not impose any penalty in spite of the conviction.
If the authority is of the opinion that the employee has been guilty of a serious offence involving moral turpitude, and therefore it was not desirable or conducive in the interests of administration to retain such a person in service, the disciplinary authority has the undoubted power, after hearing the employee and considering the circumstances of the case, to inflict any penalty without any further departmental inquiry.
As there was no such application of mind and consideration of circumstances the orders of removal are rightly quashed [795H 796E, H] (2) The view of the Kerala High Court, that as the Magistrate released the 7 delinquent employee on probation, no penalty was imposed and that therefore r.14 (1) did not apply, is not correct.
The word 'penalty ' in the rule is relatable to the penalties to be imposed by the Disciplinary Authorities under the Rules and not to the sentence passed by a criminal court.
Because, so far as the disciplinary authority is concerned it could only impose a penalty and not a sentence, just as a criminal court, after conviction, does not impose a penalty but passes a sentence.
Hence, the words "where any penalty is imposed" in r.14 (1) should be read as 'where any penalty is impossible ' by the Disciplinary Authority.
[787E F; 788A R; 789D H] 2 L1127SCI/75 784 (3) If the Magistrate did not choose, after convicting the accused, to pass any sentence on him but released him on probation it could not be said that, the stigma of conviction is completely washed out or obliterated or that no disciplinary action could be taken under r. 14(1).
[790B C] Sections 3, 4 and 9 of the Probation of offenders Act show that an order of ' release on probation comes into existence only after the accused is found guilty and is convicted of the offence.
Such an order is merely in substitution of the sentence from a humanist point of view.
The control over the offender is retained by the criminal court and where it is satisfied that the conditions of the bond had been broken by the offender, who has been released on probation the Court can sentence on the basis of the original conviction, showing that the guilt is not obliterated.
[790H 791D] (4) The words disqualification, if any attaching to a conviction of an offence under such law, in section 12 mean (1) that there must be a disqualification resulting from a conviction; and (ii) that such disqualification must be provided by some law other than the Probation of offenders Act.
It could not be contended that the `disqualification ' referred to is the 'liability under r. 14(1) to disciplinary action without a departmental enquiry ', and that such disqualification is removed by release on probation.
The disqualification must he an automatic disqualification; such as regarding holding of officer or standing for elections, as a consequence of ' the conviction.
Rule 14(1) incorporates the principle contained in proviso (a) to article 311(2).
But neither of these provisions contain any express provision that the moment a person is found guilty of misconduct of a criminal charge he will have to be automatically dismissed from service.
These provisions are merely enabling and do not enjoin or confer a mandatory duty on the disciplinary authority to pass an order of dismissal, removal or reduction in rank the moment an employee is convicted.
The proviso to article 311(2) was enacted because, when once a delinquent employee has been convicted of a criminal offence at a trial, where he had a full and complete opportunity to contest the allegations, that should be treated as a sufficient proof of his misconduct, and the disciplinary authority may be given the discretion to impose the penalties referred to in article 311(2), without holding a fresh full dress departmental inquiry.
If r. I ' ' of the Probation of offenders.
Act completely wipes out this liability to disciplinary action on the basis that it is a 'disqualification ' under the section then it would be ultra vires as it would be in direct conflict with the Constitutional provision.
[788G H; 789C D, 791F 792F] R. Kumaraswami Aiyar v The Commissioner Municipal council, Tiruvannamai and another [1957] Cri.
L. J. 255, 256 Om Prakash vs The Director Postal Services (posts and Telegraphs Deptt.) Punjab Circle, Ambala and others, A.I. R. 1973 Punjab 1, 4; Director of Postal Services and Anr.
vs Daya Nand, , 341, Embaru vs Chairman Madras Port Trust Akella Satyanarayana Murthy vs Zonal Manager.
Life Insurance Corporation of India, Madras.
A.I.R. 1969 A.P. 371, 373 and Premkumar vs Union of India and others, [1971] Lab. & Ind. Cases 823, 824.
approved.
(5) Therefore the Rajasthan High Court was wrong in giving 1 wide connotation to the word 'consider ' in r. 14 and holding that it requires the disciplinary authority to hold a detailed determination of the matter once again.
The rule making authority deliberately used the word 'consider ' and not 'determine ' because, the latter word has a much wider scope.
the word 'consider ' merely connotes that there should be active application of mind by the disciplinary authority after considering the entire circumstances of to case in order to decide the nature and the extent of the penalty to be imposed on the delinquent employee on his conviction on a criminal charge.
This could only be objectively determined if the delinquent employee is heard and given a chance to satisfy the authority regarding the final orders that may be passed The provision merely imports the rule of natural justice that before taking final action the delinquent employee should be heard and the circumstances objectively considered.
[795B 795D]
|
Civil Appeal No. 200 of 1954.
Under Article 133 of the Constitution and section 109 of the Code of Civil Procedure from the Judgment and decree dated the 6th December 1952, of the Circuit Bench of the Punjab High Court at Delhi (Weston C.J. and Bhandari J.) in Regular First Appeal No. 72 of 1952, arising out of the Judgment and Decree dated the 14th day of April 1952, of the Court of Subordinate Judge, Delhi in Suit No. 657 of 1950.
N. C. Chatterjee, (Tarachand Brijmohanlal and B. P. Maheshwari, with him) for the Appellant.
R. section Narula, for the Respondent, 405 1955.
April 21.
The Judgment of the Court was delivered by BosE J.
The defendant appeals.
The plaintiffs were the partners of a firm known as Harnam Singh Jagat Singh.
Before the partition of India they carried on the business of cotton cloth dealers at Lyallpur which is now in Pakistan.
The defendant is the Delhi Cloth and General Mills Co. Ltd. It is a registered company carrying on business at Delhi and other places and has its head office at Delhi.
One of the places at which it carried on business before the partition was Lyallpur.
The plaintiffs ' case is that they carried on business with the defendant company for some three or four years before 1947 and purchased cloth from the company from time to time.
In the course of their business they used to make lump sum payments to the defendant against their purchases.
Sometimes these were advance payments and at others the balance was against them.
When there was an adverse balance the plaintiffs paid the defendant interest: see the plaintiff Sardari Lal as P. W. 3.
On 28 7 1947 the account stood in the plaintiffs ' favour.
There was a balance of Rs. 79 6 6 lying to their credit plus a deposit of Rs. 1,000 as security.
On that day they deposited a further Rs. 55,000 bringing the balance in their favour up to Rs. 56,079 6 6.
The defendant company delivered cloth worth Rs. 43,583 0 0 to the plaintiffs against this amount at or about that time.
That left a balance of Rs. 11, 496 6 6.
The suit is to recover this balance plus interest.
The claim was decreed for Rs. 12,496 6 6 and this was upheld on appeal to the High Court.
The defendant appeals here.
The defendant admits the facts set out above but defends the action on the following ground.
It contends that when India was partitioned on 15 8 1947, Lyallpur, where these transactions took place and where the money is situate, was assigned to Pakistan.,.
The plaintiffs fled to India at this time and thus 406 became evacuees and the Pakistan Government froze all evacuee assets and later compelled the defendant to hand them over, to the Custodian of Evacuee Property in Pakistan.
The defendant is ready and willing to pay the money if the Pakistan Government will release it but until it does so the defendant contends that it, is unable to pay and is not liable.
The only question is, what are the rights and liabilities of the parties in those circumstances? The amount involved in this suit, though substantial, is not large when compared with the number of claims by and against persons in similar plight.
The defendant itself is involved in many similar transactions.
A list of them appears in exhibit D 11.
Mohd Bashir Khan, D.W. 1, says that the total comes to Rs. 1,46,209 1 9.
The defendant has accordingly chosen to defend this action as a test case.
The further facts are.
as follows.
At the relevant period, before the partition, cloth was rationed and its distribution controlled in, among other places, the Punjab where Lyallpur is situate.
According to the scheme, quotas were allotted to different areas and the manufacturers and suppliers of cloth could only distribute their cloth to retailers in accordance with those quotas, and dealers in those areas could only import cloth up to and in accordance with the quotas allotted to them.
If the suppliers themselves had a retail shop or business in a given area, then the quota for that area was divided between the supplier and a Government quota holder or quota holders called the nominated importer or importers.
The local agency of the suppliers was permitted to import up to the portion of the quota allotted to it in that area and the suppliers were obliged to give the balance of the quota to the Government quota holder or holders.
The plaintiffs were the Government quota holders for Lyallpur and the defendant company also carried on business there through the General Manager of the Lyallpur Mills.
It is admitted that the defendant owns these mills but it is a matter of dispute before us whether the mills are a branch of the defendant company; but 407 whatever the exact status of the Lyallpur mills may be, it is clear from the evidence and the documents that the General Manager of these mills conducted the defendant 's cotton business at Lyallpur.
It seems that the details of the cloth distribution scheme for Punjab, in so far as it affected the defendant company, were contained in a letter of the 24th October 1945 from the Secretary, Civil Supplies Department, Punjab.
That letter has not been filed and so we do not know its exact contents but reference to it is found in a series of letters written by the defendant company from Delhi to the District Magis trate at Lyallpur.
Those letters range in date from 3 1 1946 to 19 4 1947: (Exs.
P 5 to P 12).
They are all in the same form, only the figures and dates differ.
It will be enough to quote the first, exhibit P 5.
It is dated 3 1 1946 and is from the Central Marketing Organisation of the defendant company, the Delhi Cloth and General Mills Co. Ltd. It is written from Delhi to the District Magistrate, Lyallpur, and is as follows: "The District Magistrate, Lyallpur.
Re: Cloth Distribution Scheme.
Dear Sir Ref:Letter No. 15841 CL (D) 45/8342 of 24th Oct. 1945 from Secretary, Civil Supplies Deptt.
Punjab Govt., Lahore.
Kindly note that we have allotted 28 bales for your district for the month of January 1946.
Out of this a quantity of 18 bales will be despatched to our Retail stores in your district/State and the balance of 10 bales will be available for delivery to your nominated importer.
We shall be obliged if you kindly issue instructions to your nominated importer to collect these goods from us within 15 days of the two dates for delivery fixed, namely by the 20th of January and 5th of February 1946 respectively.
It may be noted that the first half quota will lapse in case delivery is 52 408 not taken by you by the former date and the second half will lapse if not taken by the latter date.
Yours faithfully, D.C. & Gen. Mills Co., Ltd. In each case a copy was sent to the plaintiffs marked as follows: "Copy to nominated importer: Jagat Singh Harnam Singh, Cloth Merchants, Lyallpur".
The Indian Independence Act, 1947 was passed on 18 7 1947 and the district of Lyallpur was assigned to Pakistan subject to the award of the Boundary Commission.
Then followed the partition on 15 8 1947 and at or about that time the plaintiffs fled to India.
This made them evacuees according to a later Ordinance.
But before that Ordinance was promulgated the Assistant Director of Civil Supplies, who was also an Under Secretary to the West Punjab Government, wrote to the defendant 's General Manager at Lyallpur (the General Manager of the Lyallpur Cloth Mills) on 17 2 1948 and told him that "The amount deposited by the non Muslim dealers should not be refunded to them till further orders".
(exhibit D 1).
The defendant did all it could, short of litigation, to protest this order and to try and get it set aside.
Its General Manager at Lyallpur wrote letters to the Assistant Director of Civil Supplies on 14 4 48, 9 8 48 (Exs.
D 2 and D 4) , 23 4 49 (exhibit D 7) and 6 6 49 (exhibit D 8), but the replies were unfavourable.
On 30 4 48 the Assistant Director said that "in no case" should the sums be refunded (exhibit D 3) and on 1 1 1 48 directed that these amounts should be deposited with the Custodian of Evacuee Property (exhibit D 5).
This was in accordance with an Ordinance which was then in force.
Later, on 8 11 48, the General Manager received orders from the Deputy Custodian that the moneys should be deposited with the Deputy Custodian(Ex.
D 6) and on 23 6 49 these orders were repeated by the Custodian (EX.D 9).
Meanwhile, the plaintiffs, who by then had shifted 409 to Delhi, made a series of demands on the defendant in Delhi for payment.
These are dated 3 1 49 (exhibit P.W. 4/4), 27 1 49 (exhibit P.W. 4/1), 11 3 49 (exhibit P.W. 4/3) and 26 3 49 (exhibit P.W. 4/2).
The defeddant 's attitude is summed up in its letter to the plaintiffs dated 12 2 49 (exhibit P 3).
The defendant said that its had received orders from the West Punjab Government, through the Assistant Director of Civil Supplies, not to make any refunds without the orders of the West Punjab Government.
On 15 10 1949 the Ordinance of 1948 was replaced by Ordinance No. XV of 1949 (exhibit D 26) but that made no difference to the law about evacuee funds and properties.
On 4 7 1950 the plaintiffs served the defendant with a notice of suit (exhibit P 14).
This notice was forwarded to the defendant 's General Manager at Lyallpur by the defendant 's Managing Director in Delhi urging the General Manager to try and obtain the sanction of the West Punjab Government for payment of the money to the plaintiffs; and on 27 7 1950 the defendant wrote to the plaintiffs saying "We confirm that the sum of Rs. 11,496 6 6 and Rs. 1,000 are due to you on account of your advance deposit and security deposit respectively with our Lyallpur Cotton Mills, Lyallpur, and the sum will be refunded to you by the said Mills as soon as the order of prohibition to refund such deposits issued by the West Punjab Government and served upon the said Mills is withdrawn or cancelled, and that your claim shall not be prejudiced by the usual time limit of three years having been exceeded ' (exhibit P 4).
The defendant 's reply did not satisfy the plaintiffs, so they instituted the present suit on 16 12 1950.
After the suit, the defendant 's Managing Director wrote personally to the Joint Secretary to the Government of Pakistan on 2 4 1951 but was told on 21 4 1951 that the matter had been carefully examine and that the money must be deposited with the Custodian (exhibit D 25).
A second attempt was made 30 4 1951 (exhibit D 24) and the Joint Secretary was again approached.
Soon after, an Extraordine 410 Ordinance was promulgated on 9 5 1951 (exhibit D 27) exempting "cash deposits of individuals in banks" from the operation of the main Ordinance.
But the Joint Secretary wrote on 2 6 1951 that this did not apply to private debts and deposits and again asked the defendant to deposit the Money with the Custodian (exhibit D 23).
Finally, the Custodian issued an order on 6 11 1951 directing that the deposits be made by the 15th of that month, "failing which legal action will have to be taken against you".
(exhibit D 10).
The money was deposited on 15 11 1951 on the last day of grace (exhibit D 12).
The first question that we must determine is the exact nature of the contract from which the obligation which the plaintiffs seek to enforce arises.
The sum claimed in the suit, aside from the interest, is made up of three items: (1)Rs.
79 6 6 outstanding from a previous account; (2)Rs.
11,496 6 6 being the balance of a sum of Rs. 55,000 deposited on 28 7 1947; and (3) Rs. 1,000 as security.
The three items appear to be linked up but we ' will, for the moment, concentrate on the largest, the deposit of Rs. 55,000.
Both sides have spoken of it as a "deposit" throughout but we will have to examine its exact nature because deposits are of various kinds and it will be necessary to know which sort this was before we can apply the law.
Unfortunately, the evidence is meagre and scrappy, so we have been obliged to piece much disjointed material together to form an intelligible pattern.
It is admitted that the distribution of cloth in this area was controlled by the Government of Punjab (in undivided India) at all material times.
It is also admitted that the plaintiffs were, what were called, "Government nominees" for Lyallpur.
In the plaint the plaintiffs also called themselves the "reserve dealer".
This term has not been explained but the use of these words and the words "nominated importer", indicates that the plaintiffs occupied a privileged ]position.
The letters (Exs.
P 5 to P 12), on 411 which the plaintiffs relied very strongly, also point to that; exhibit P 5, for example, shows that the defendant was obliged to give 10 bales out of a quota of 28 for that area to the plaintiffs under the orders of the Punjab Government and could only keep 18 for its own retail stores in the month of January 1946.
In April the defendant was allowed to keep all 28 but in July the distribution was 35: 25 in the plaintiff 's favour.
In September, November (1946) and April 1947 it was half and half.
In February and March 1947 it was 10 : 26 and 29 : 26 for the plaintiffs and the defendant 's stores respectively.
Now, ordinarily, a privilege has to be paid for and it seems that the price of this privilege was (1) payment of a security deposit of Rs. 1,000 and (2) payment of a second deposit against which cloth was issued from time to time in much the same way as a banker hands out money to a customer against deposits of money in a current account, only here the payments were issues of cloth instead of sums of money.
We draw this inference from what we have said above and from the following facts: (1) Both sides have called the payment a "deposit" in their pleadings; (2) The plaintiffs speak of receiving goods "against this deposit" (paragraph 3 of the plaint) and Mohd. Bashir Khan (D.W. 1) of delivery being made "against this advance"; (3) The plaintiff Sardari Lal (P.W. 3) says that the parties have been carrying on dealings for 3 or 4 years and that "advances used to be made to the mills from time to time.
Sometimes our balance stood at credit"; (4) Sardari Lal says that when their balance was on the debit side, they paid the defendant 's interest but the defendant paid no interest when the balance was in the plaintiffs ' favour.
(This is the position when there is an overdraft in a bank); (5) There was a balance of Rs. 79 6 6 standing in the, plaintiffs ' favour when the deposit of Rs. 55,000 was made; (6) The plaintiffs said in their letter (exhibit P.W. 4/1) 412 to the defendant that they had a "current account" with the defendant in which a sum of Rs. 11,496 6 6 was in "reserve account".
This figure of Rs. 11 ,496 6 6 is made up by including the old balance of Rs. 79 6 6 in this account; (7) In their letter exhibit P 14 the plaintiffs said that they had "deposited" money in the plaintiffs ' account at Lyallpur "as reserve dealers", against that they received goods leaving a balance of Rs. 11,496 6 6.
Again, this figure includes Rs. 79 6 6.
All this shows that the payment of Rs. 55,000 was not just an advance payment for a specified quantity of goods but was a running account very like a customer 's current account in a bank.
The only matter that can be said to indicate the contrary is the fact that the defendant has listed this money in exhibit D 11 under the head "Purchaser 's advance".
But the mere use of this term cannot alter the substance of the transactions any more than the mere use of the word "deposit".
The fact that the parties choose to call it this or that is, of course, relevant but is not conclusive, and in order to determine the true nature of a transaction it is necessary to view it as a whole and to consider other factors.
But in this case we need not speculate because the plaintiffs have themselves explained the sense in which the term "Purchasers advance account" is used.
In their statement of the case which they filed here, they say "The defendants maintained a 'Purchasers advance account ' in their books at Delhi.
The plaintiffs used to pay the defendants advance amounts against which cloth was supplied and the balance had to be adjusted periodically".
But the banking analogy must not be pushed too far.
The stress laid by the parties on the terms "Government nominees", "nominated importer" and Preserve dealer", both in the correspondence and in the pleadings and evidence, suggests that the defendant was dealing with the plaintiffs in their capacity of "Government nominees" and that, in its turn, imports the condition that the dealings would stop the moment the plaintiffs ceased to occupy that pri 413 vileged position.
As we have seen, the import of cloth was controlled by the Punjab Government at all relevant times with the result that the defendant could not sell to anybody it pleased.
The sales had to be to the Government nominees.
Therefore, if Government withdrew their recognition, the defendant would not have been able to sell to the plaintiffs any longer and it is fair to assume that the parties did not contemplate a continuance of their relationship in such an eventuality.
But, as this was not a definite contract for the supply of a given quantity of goods which were to be delivered in instalments but a course of dealings with a running account, it is also reasonable to infer that the parties were at liberty to put an end to their business relationship at anytime they pleased by giving due notice to the other side and in that event whichever side owed money to the other would have to pay.
But, either way, the place of performance would, in these circumstances, be Lyalipur.
We say this because all the known factors were situate in Lyallpur.
The plaintiffs were the Government nominees for Lyallpur and they were resident there.
The defendant carried on business there and the goods had to be delivered at Lyallpur and could not be deliverer] elsewhere, and so performance was to be there.
The accounts were kept at Lyallpur, and though copies appear to have been forwarded to Delhi from time to time, the books were situate there and the Lyallpur office would be the only place to know the up to the minute state of the accounts.
In the circumstances, it is reasonable to assume, as in the case of banking and insurance (matters we shall deal with presently), that on the termination of the contract the balance was to be paid at Lyallpur and not elsewhere.
That localises the place of primary obligation.
This also, in our opinion, imports another factor.
The defendant in Delhi would not necessarily know of any change of recognition by the Lyallpur authorities.
The correspondence with the Collector indicates that the Government nominee cleared the goods from the defendant 's Lyallpur godowns under the orders of the District Magistrate.
If, therefore, the 414 nominee was suddenly changed, intimation of this fact would have to be given to the defendant at Lyallpur and not at Delhi, otherwise there would be a time lag in which the defendant ' Lyallpur office might easily deliver the goods to the plaintiffs as usual despite withdrawal of the recognition.
Everything therefore points to the fact that the notice of termination would have to be given at Lyallpur and the obligation to return the balance would not arise until this notice of termination was received.
That obligation would therefore necessarily arise at Lyallpur.
The plaintiffs ' learned counsel argued very strongly that the defendant 's Lyallpur business was carried on from Delhi and that the accounts were kept there, that there was no branch office at Lyallpur and that Lyalipur had no independent local control of the business.
He relied on the letters written by the defendant to the District Magistrate, Lyallpur, about the allotments of quotas (Exs.
P 5 to P 12) and also on exhibit D 7, a letter written by the defendant 's General Manager at Lyallpur to the Deputy Custodian of Evacuee Property at Lyallpur in which he says that a " Complete list showing the list of all non Muslims falling under item (3) with the amount to be paid has been asked for from our Head Office and will be submitted as soon as received".
Counsel contended that the Lyallpur people bad so little to do with the accounts that they were notable to supply even a list of the persons who dealt with them.
they had to find that out from Delhi.
These matters should have been put to the defendant 's witnesses.
exhibit D 7 was written in reply to a letter from the Deputy Custodian of Evacuee Property.
That letter is exhibit D 6 and in it the Deputy Custodian refers to some earlier correspondence with the Under Secretary to the West Punjab Government, Lahore, which has not been filed.
When we turn to the list that was eventually supplied from Delhi (exhibit D 1 1) we find that it relates to accounts from allover Pakistan such as, Multan, Peshawar, Lahore, Sialkot, Rawalpindi and even Karachi and Sukkar.
Obviously, a local office like the Lyallpur office would not be in 415 a position to supply that sort of information.
The defendant 's accountant at Lyallpur, Sewa Ram (P.W. 4), says that "Purchasers ' deposits at Lyallpur were not recorded in the books of the defendant at Delhi but statements used to be despatched from there to Delhi.
An account book was prepared from statements received from Lyallpur.
That book is known as 'Reference Book ' ".
Presumably, that would also be the practice of the other branch offices, so the head office would be the only place from where a general overall picture (which appears to be what was asked for) could be obtained.
Now, the plaintiffs resided at Lyallpur at all relevant times and the defendant carried on business there through a local General Manager.
We do not know where the contract was made but we do know that the plaintiffs contracted in a special capacity that was localised at Lyallpur, namely as the Government nominees for Lyallpur.
We know that the goods were to be delivered at Lyallpur and could not be delivered anywhere else.
We know that there was a running account and that that account was kept at Lyallpur, and we have held that the 'debt" did not become due till the defendant was given notice at Lyallpur that the business relationship between the parties had terminated.
The termination came about because of acts that arose at Lyallpur, namely the assignment of Lyallpur to the newly created State of Pakistan and the flight of the plaintiffs from Lyallpur which made further performance of the primary contract impossible.
The only factors that do not concern Lyallpur are the defendant 's residence in India and the demands for payment made in Delhi.
The fact of demand is not material because the obligation to pay arose at the date of termination and arose at Lyallpur, but if a demand for payment is essential, then it would, along the lines of the banking and insurance cases to which we shall refer later, have to be made at Lyallpur and a demand made elsewhere would be ineffective.
On these facts we hold that the elements of this contract, that is to say, the contract 53 416 out of which the obligation to pay arose, were most densely grouped at Lyallpur and that that was its natural seat and the place with which the transaction had its closest and most real connection.
It follows from this that the "proper law of the contract", in so far as that is material, was the Lyallpur law.
We have next to see when notice 'to close the account and a demand for return of the balance was made and where.
The plaintiff Jagat Singh (P.W. 5) says that he made a written demand in October 1947.
But the earliest demand we have on record is exhibit P.W. 4/4 dated 3 1 1949.
It is understandable that the plaintiffs, who had to flee for their lives, would have no copies of their correspondence, but it is a matter for comment that the demand which is filed (exhibit P.W. 4/4) does not refer to an earlier demand or demands.
The defendant was asked to produce all the correspondence because the plaintiffs had lost their own files.
The defendant produced all we have on record and no suggestion was made that anything had been suppressed.
Consequently we are not prepared to accept the plaintiffs ' statement and we hold that there was no demand before 3 1 1949.
Another point is that the earlier demand, even if made, could not have been made at Lyallpur.
The plaintiff Jagat Singh says he made the demand to the defendant 's Managing Director.
He resides in Delhi and the plaintiffs had by then fled from Pakistan.
Therefore, the demand could not have been made at Lyallpur, and apart from those demands, there is no other notice of termination, so, technically, the defendant would have been justified in declining to pay on the strength of a demand made in Delhi.
The same defect attaches to exhibit P. W. 4/4.
However, we are fortunately absolved from the need to base on so technical a ground.
Now at the date of the demand the Pakistan Ordinance (exhibit D 26) was in force and under it the defendant was prohibited from paying the money to the plaintiffs who were evacuees according to Pakistan laws.
The defendant was directed, instead, to deposit the money with the Deputy Custodian of Evacuee 417 Property.
This was done on 15 11 1951 (exhibit D 12) and the deposit was made along with other similar deposits.
We now have to determine the legal liabilities which arise out of these facts.
This raises complex questions of private international law, and two distinct lines of thought emerge.
One is that applied by the English Courts, namely, the lex situs; the other is the one favoured by Cheshire in his book on Private International Law, namely, the "proper law of the contract".
The English approach is to treat the debt as property and determine its situs and then, in general, to apply the law that obtains there at the date when payment is due.
But the difficulty of the English view is that they have different sets of rules for ascertaining the situs, with the result that the situs shifts from place to place for different purposes, also that it is determined by intention.
Thus, it can be in one place for purposes of jurisdiction and in others for those of banking, insurance, death duties and probate.
The situs also varies in the cases of simple contract debts and those of speciality.
That a debt is property is, we think, clear.
It is a chose in action and is heritable and assignable and it is treated as property in India under the Transfer of Property Act which calls it an "actionable claim": sections 3 and 130.
But to give it position in space is not easy because it is intangible and so cannot have location except notionally and in order to give it notional position rules have to be framed along arbitrary lines.
Cheshire points out in his book on Private International Law, 4th edition, pages 449 to 451 that the situs rule is not logical and leads to practical difficulties when there is a succession of assignments because it is not possible to fix the situation of a debt under the situs rule in one place and only one place.
Speaking, of that Cheshire, quoting Foote, where Foote says that the assignment of a chose in action arising out of a contract is governed by the "proper law of the contract" paraphrases Foote thus at page 450 418 "If we understand him correctly, the appropriate law is not the 'proper law ' (using that expression in its contractual sense) of the assignment, but the proper law of the original transaction out of which the chose in action arose.
It is reasonable and logical to refer most questions relating to a debt to the transaction in which it has its source and to the legal system which governs that transaction.
One undeniable merit of this is that, where there have been assignments in different countries, no confusion can arise from a conflict of laws, since all questions are referred to a single legal system".
The expression the "proper law of the contract" has been carefully analysed by Cheshire in Chapter VIII of his ' book.
In Mount Albert Borough Council vs Australasian Temperance and General Mutual Life, Assurance Society(1) Lord Wright defined it at page 240 as "that law which the English or other Court is to apply in determining the obligations under the contract", that is to say, obligation as contrasted with performance.
Lord Wright drew the distinction between obligation and performance at page 240.
In a later case, Lord Simonds described it as "the system of law by reference to which the contract was made or that with which the transaction has its closest and most real connexion".
Bonython vs Commonwealth of Australia(2).
Cheshire sets out the definition given by some American Courts at page 203 and adopts it: "It is submitted that, at any rate with regard to the question of valid creation, the proper law is the law of the country in which the contract is localized.
Its localization will be indicated by what may be called the grouping of its elements as reflected in its formation and in its terms.
The country in which its elements are most densely grouped will represent its natural seat the country with which the contract is in fact most substantially associated and in which lies its natural seat or centre of gravity".
(1) ; , (2) , 219.
419 This involves two considerations.
The first is whether the proper law is to be ascertained objectively or whether parties are free to fix it subjectively by ranging over the world and picking out whatever laws they like from any part of the globe and agreeing that those laws shall govern their contract.
Cheshire points out at page 202 that "the subjective theory may produce strangly unrealistic results".
It is also obvious that difficulties will arise if the contract is illegal or against public policy according to the laws of the country in which it is sought to be enforced though lawful according to the laws of the country which the parties choose: see Lord Wright in Mount Albert Borough Council vs Australasian Temperance, etc.
Society(1) at page 240.
Cheshire prefers the view of an American Judge which he quotes at page 203 "Some law must impose the obligation, and the parties have nothing whatsoever to do with that, no more than with whether their acts are torts or crimes".
The contract we are considering is silent about these matters.
There is no express provision either about the law that is to obtain or about the situs.
We have therefore to examine the rules that obtain when that is the case.
The most usual way of expressing the law in that class of case is to say that an intention must be implied or imputed.
In the Bank of Travancore vs Dhrit )Ram(2), Lord Atkin said that when no intention is expressed in the contract the Courts are left to infer one by reference to considerations where the contract was made and how and where it was to be performed and by the nature of the business or transaction to which it refers.
In the Mount Albert Borough Council case(1), Lord Wright put it this way at page 240 "The parties may not have thought of the matter at all.
Then the Court has to impute an intention, or to determine for the parties what is the proper law which, as just and reasonable persons, they ought or would have intended if they had thought about the question when they made the contract".
(1) (2) 69 I.A. 1, 8.
420 But , to us, it seems unnecessarily artificial to impute an intention when we know there was none, especially in a type of case where the parties would never have contracted at all if they bad contemplated the possibility of events turning out as they did.
In our opinion, what the Courts really do, when there is no express provision, is to apply an objective test, though they appear to regard the intention subjec tively, and that is also Cheshire 's conclusion at page 201 where, after reviewing the English decisions, he says "In other words, the truth may be that the judges, though emphasising in unrestricted terms the omnipotence of intention, in fact do nothing more than impute to the parties an intention to submit their contract to the law of the country with which factually it is most closely connected".
If driven to a choice, we would prefer this way of stating the law but we need not decide this because, so far as the present case is concerned, the result is the same whether we apply the proper law of the contract or the English rules about the lex situs.
It may be that in some future case this Court will have to choose between these two views but the question bristles with difficulties and it is not necessary for us to make the choice here.
All we wish to do here is to indicate that we have considered both and have envisaged cases where perhaps a choice will have to be made.
We gather that English judges fall back on the lex situs and make rules for determining the position of a debt for historical reasons.
Atkin, L. J. said in New York Life Insurance Company vs Public Trustee(1) that the rules laid down in England are derived from the practice of ecclesiastical authorities in granting administration because their jurisdiction was limited territorially.
"The ordinary had only a jurisdiction within a particular territory, and the question whether he should issue letters of administration ' depended upon whether or not assets were to be found within his (1) , 119.
421 jurisdiction, and the test in respect of simple contracts was: Where was the debtor residing?. . the reason why the residence of the debtor was adopted as that which determined where the debt was situate was because it was in that place where the debtor was that the creditor could, in fact, enforce payment of the debt".
(See also Dicey 's Conflict of Laws, 6th edition, page 303).
The rules, therefore, appear to have been arbitrarily selected for practical purposes and because they were found to be convenient.
But despite that the English Courts have never treated them as rigid.
They have only regarded them as primafacie presumptions in the absence of anything express in the contract itself: see Lord Wright 's speech in Mount Albert Borough Council case (1) at page 240.
Also, many exceptions have been engrafted to meet modern conditions.
Atkin, L. J. draws attention to one in New York Life Insurance Company vs
Public Trustee(2) at page 120 where he says"therefore, cases do arise where a debt may be enforced in one jurisdiction, and the debtor, being an ordinary living person, resides elsewhere".
So also Lord Wright in Mount Albert Borough Council case(1) at page 240 "It is true that, when stating this general rule, there are qualifications to be borne in mind, as for instance, that the law of the place of performance will prima facie govern the incidents or mode of performance, that is, performance as contrasted with obligation".
and at page 241 he says "Again, different considerations may arise in particular cases, as, for instance, where the stipulated performance is illegal by the law of the place of performance".
And so also Lord Robson in Rex, vs Lovitt(3) at page 220 "It cannot mean that for all purposes the actual situation of the property of a deceased owner is to be (1) ; (2) , 119.
(3)1912 A.C. 212.
422 ignored and regard had only to the testator 's domicil, for executors find themselves obliged in order to get the property at all to take out ancillary probate according to the locality where such property is properly recoverable, and no legal fiction as to its 'following the owner ' so as to be theoretically situate elsewhere will avail them".
And he says at page 221 that these rules are only "for certain limited purposes".
In banking transactions the following rules are now settled: (1) the obligation of a bank to pay the cheques of a customer rests primarily on the branch at which he keeps his account and the bank can rightly refuse to cash a cheque at any other branch: Rex vs Lovitt(1) at 219, Bank of Travancore vs Dhrit Ram(2) and New York Life Insurance Company vs Public Trustee(3) at page 117; (2) a customer must make a demand for payment at the branch where his current account is kept before he has a cause of action against the bank: Joachimson vs Swiss Bank Corporation(4) quoted with approval by Lord Reid in Arab Bank Ltd. vs Barclays Bank(5).
The rule is the same whether the account is a current account or whether it is a case of deposit.
The last two cases refer to a current account; the Privy Council.
case (Bank of Travancore vs Dhrit Ram(2)) was a case of deposit.
Either way, there must be a demand by the customer at the branch where the current account is kept, or where the deposit is made and kept, before the bank need pay, and for these reasons the English Courts hold that the situs of the debt is at the place where the current account is kept and where the demand must be made.
This class of case forms an exception to the rule that a debtor must seek his creditor because, though that is the general rule, there is nothing to prevent the parties from agreeing, if they wish, that that shall not be the duty of the debtor and, as Lord Reid explains in the Arab Bank case(5) at page 531, a contract of current account necessarily implies an (1) (2) 69 I.A. 1, 8 and 9.
(3) , 119.
(4) (5)[1951] A.C. 495, 531.
423 agreement that that shall not be the bank 's duty, otherwise the whole object of the contract would be frustrated.
We have stressed the word "primarily" because the rules we have set out relate to the primary obligation.
If the bank wrongly refuses to pay when a demand is made at the proper place and time, then it could be sued at its head office as well as at its branch office and, possibly, wherever it could be found, though we do not decide that.
But the reason is that the action is then, not on the debt, but on the breach of the contract to pay at the place specified in the agreement: see Warrington, L. J. at page 116 and Atk in, L. J. at page 121 of New York Life Insurance Co. V. Public Trustee(1).
Now the rules set out above are not confined to the business of banking.
They are of wider application and have also been applied in insurance cases: Fouad Bishara Jabbour vs State of Israel(2) and New York Life Insurance Co. vs Public Trustee(1).
Similar considerations obtain in England when an involuntary assignment of a debt is effected by garnishment.
Cheshire has collected a list of English cases at pages 460 to 463 of his Private International Law from which we have quoted above.
He sums up the position at page 461 thus "It is difficult to state the rule with exactitude but it is probably true to say that a debt is properly garnishable in the country where, according to the ordinary usages of business, it would normally be regarded as payable".
But when all is said and done, we find that in every one of these cases the proper law of the contract was applied, that is to say, the law of the country in which its elements were most densely grouped and with which factually the contract was most closely connected.
It is true the judges purport to apply the leX Situs but in determining the situs they apply rules (and modify them where necessary to suit changing modern conditions) which in fact are the very rules (1) (2) , 424 which in practice would be used to determine the proper law of the contract.
The English Judges say that when the intention is not express one must be inferred and the rules they have made come to this: that as reasonable men they must be taken to have intended that the proper law of the contract should obtain.
The other view is that the intention does not govern even when express and that the proper law must be applied objectively.
But either way, the result is the same when there is no express term.
The "proper law," is in fact applied and for present purposes it does not matter whether that is done for the reasons given by Cheshire or because the fluid English rules that centre round the lex situs lead to the same conclusion in this class of case.
That, however, raises a further question.
Which is the proper law? The law that obtains when the contract was made and the obligation fashioned or the law in force at the time when performance is due? Here again, we think the answer is correctly given by Cheshire at page 210, quoting Wolff 's Private International Law, page 424, and Be.
Chesterman 's Trusts(1): "A proper law intended as a whole to govern a contract is administered as 'a living and changing body of law ' and effect is given to any changes occur.
ring in it before performance falls due".
This is what the English Courts did in New York Insurance Co. vs Public Trustee(2), Re.
Banque Des Marchands De Moscou(3), Fouad Bishara Jabbour vs State of Israel(4), and Arab Bank Ld.
vs Barclays Bank(5).
They were all cases in which the law changed because of the outbreak of war and where performance became impossible because of local legislation.
In the last two cases, the debts vested in the Custodian because of local legislation and payment by the debtor to the Custodian was regarded as a good discharge of the debt.
The position in those two cases was just what it is here.
(1)[1923] 2 Ch.
466, 478.
(2) (3) (4) (5)[1954] A.C. 495, 529.
425 Counsel argued that as Lyallpur was part of India, when the contract was made, the Indian law must be applied and that no different intention can be imputed to the parties.
But that is not the law, as we understand it, whether we apply the "proper law" or the situs rules.
The proper law will be the law at Lyallpur applied as a living and changing whole, and this would have been the case even if India had not been divided, because each State had the right to make different local laws even in undivided India, as witness the different money lending laws and the cloth and grain control orders: indeed this very case is an illustration of that, for the controls which gave rise to this very contract were not uniform throughout India.
But even apart from the "proper law" the decision of the Privy Council in Arab Bank Ld.
vs Barclays Bank(1) and of the Queens Bench Division in Fouad Bishara Jabbour vs State of Israel (2 ) negatives this contention when ail intention has to be imputed or a clause in the contract implied.
It is necessary, however, to bear in mind that, under modern conditions, choses in action arising out of contract have two aspects: (1) as property and (2) as involving a contractual obligation for performance.
The property aspect is relevant for purposes of assignment, administration, taxation and the like; the contractual aspect for performance.
In the present case, we are primarily concerned with the property aspect because the Pakistan Ordinance regards debts as property and vests all evacuee property in the Custodian and requires every person holding such property to surrender it to the Custodian on pain of penalties prescribed by the Ordinance, and section 11(2) states that "Any person who makes a payment under subsection (!) shall be discharged from further liability to pay to the extent of the payment made".
The payment was made and that, in our opinion, exonerated the defendant from further liability.
Such payment would operate as a good discharge even under the English rules: see Fouad Bishara Jabbour vs (1) , 529.
(2) 426 State of Israel(1) at page 154 where a number of English authorities are cited, including a decision of the Privy Council in Odwin vs Forbes(2).
That was also the result of the decisions in the following English cases, which are similar to this, though the basis of the decisions was the situs of the debt and the multiple residence of corporations: Fouad Bishara Jabbour vs State of Israel(1), Be Banque Des Marchands De Moscou(3) and Arab Bank Ld.
vs Barclays Bank (4).
The same result follows from the decision of the Judicial Committee in the Bank of Travancore Ltd. vs Dhrit Ram(5) where Lord Atkin said "When consideration is being given to the question, what law did the parties intend to govern the contract? it seems proper to bear in mind that the promisor is a bank incorporated under Travancore law with, apparently, some connection with the State of Travancore, and governed as to its business by any law of Travancore that may affect banking. .
The only difference between that case and this is that at the date of the deposit in this case there was no difference between the laws of Punjab and Delhi on the present point.
But they could have differed even if India had not been divided, as we have just pointed out.
The English cases are, however, in point and we can see little in principle to distinguish them from this case.
The learned counsel for the plaintiffs respondents argued that even if the law is what we have said, the Pakistan Ordinance does not apply to this case because "a cash deposit in a bank" is excluded.
The argument was based on the definition of "property" in section 2(5) of the Ordinance.
But this is not a cash deposit in a bank as between the plaintiffs and the defendant.
It is a debt which the defendant owes, or owed, to the plaintiffs, and the same definition states that "property" means, among other things, any debt or actionable claim The portion of the definition which speaks of a "cash deposit in a bank" means that such a deposit is not to be treated as (1) (2) (3) (4) , 529, (5)69 I. A. 1, 9. 427 "property" for the purposes of the Ordinance as between the bank and the customer who owns or controls the deposit.
We hold, therefore, that whether the proper law of the contract applies or the English law of situs in a case of this kind, the defendant is exonerated because, the debt being "property", the Ordinance divested the plaintiffs of ownership in it and vested the debt in the Custodian and at the same time interfered with the obligation for performance by providing that payment to the Custodian shall operate as a discharge of the obligation.
But we wish to emphasize that we decide this because payment was in fact made to the Custodian and that we express no opinion about what would happen in a case where there is no payment and the defendant has no garnishable assets in Pakistan out of which the West Punjab Government could realise the debt by attachment of the defendant 's property.
Different conclusions might possibly arise in such a case.
Lastly, it was urged that the Pakistan Ordinance is a penal law and is confiscatory in character, therefore, no domestic tribunal will recognise it or give effect to it.
That proposition is, in any event, too widely stated, but we are unable to condemn this law as opposed to the public policy of this country be,cause we have exactly the same kind of laws here, as do other civilised countries which find themselves in similar predicament or at the outbreak of war; see Arab Bank Ltd. vs Barclays Bank(1) and also Fouad Bishara Jabbour vs State of Israel(2) and Re.
Munster(3) where a like argument was repelled.
We hold that this legislation is not confiscatory.
The same rules apply to the item of Rs. 79 6 6 and to the deposit of Rs. 1,000 as security.
The appeal succeeds.
The decrees of the lower Courts are set aside.
A decree will now be passed dismissing the plaintiffs ' claim, but in the special circumstanoes of this case the parties will bear their own costs throughout.
(1) (2) , 157, (3) [1920] 1 ch.268.
| IN-Abs | During the years in question cloth was rationed at Lyallpur, then a part.
of the Punjab in undivided India, and sales could only be made to government nominees and other authorised persons.
The plaintiffs, resident in Lyallpur, were the government nominees, The 403 defendant company, with its head office at Delhi had a branch office and mills at Lyallpur, and supplied the plaintiffs with cloth from time to time in accordance with the government quota through its branch manager at Lyallpur.
Their dealings lasted some 4 or 5 years prior to 1947.
In accordance with their contract the plaintiffs left a security deposit of Rs. 1,000 with the defendant 's branch manager at Lyallpur, and deposited further sums of money with him from time to time at Lyallpur.
The defendant supplied the plaintiffs with their quota of cloth against those deposits.
There was thus a running account between the parties in which the balance was sometimes in the plaintiffs ' favour and sometimes against them; when against, they paid the defendant interest on the "overdraft".
The goods had to be supplied at Lyallpur and all moneys were paid there.
The accounts were kept at Lyallpur though copies were sent to the defendant 's head office at Delhi.
In 1947, when India was partitioned, Lyallpur was assigned to Pakistan.
The plaintiffs thereupon fled the country and entered India as refugees.
They settled in Delhi and thus became "evacuees" according to a Pakistan ordinance.
At that time there was a balance of Rs. 11,496 6 6 in the plaintiffs ' favour.
They accordingly made a demand at Delhi for payment of this sum and for return of their security deposit.
In the meanwhile the Pakistan Government issued an ordinance (1) vesting all evacuee property in the Custodian of Evacuee Property in Pakistan (2) prohibiting the 'payment of money to evacuees; and (3) requiring all moneys payable to, or claimable by, evacuees to be paid to the Deputy Custodian of Evacuee Property in Pakistan.
Payments so made were to operate as a discharge from further liability to the extent of the payment.
Breach of this law was punishable as an offence.
The Deputy Custodian demanded payment from the defendant of the moneys owing to the plaintiff.
After some correspondence and demur, the payment was made as required.
The defendant pleaded this as a defence to the action.
Held: (1) Lyallpur was the place of primary obligation because under the contract the balance remaining at its termination was to be paid there and not elsewhere, accordingly the demand for payment made at Delhi before a demand and refusal at Lyallpur was ineffective; (2) That the elements out of which the contract to pay arose were most densely grouped at Lyallpur, so Lyallpur was the natural seat of the contract and the place with which it had its closest and most real connection.
Accordingly, the "proper law of the contract" was the Lyallpur Law; (3) Under the English doctrine also the situs of the debt was Lyallpur; and so 404 (4) either way, the Lyallpur law applied (5) as it obtained at Lyallpur at the time when performance was due because a " proper law" intended as a whole to govern a contract is administered as a "living and changing body of law", accordingly, effect is given to any changes occurring in it before performance is due; (6) a "debt" being a chose in action is "property" within the meaning of the Pakistan Ordinance and so, (7) the money was rightly paid to the Deputy Custodian and that operated as a good discharge and exonerated the defendant from further liability.
But quaere, whether different conditions would not arise in a case where no payment is made and the defendant has no garnishable assets in Pakistan out of which the West Punjab Government could realise the debt out of the defendant 's property there.
(8)The provisions of the Pakistan ordinance relevant to the case are not opposed to the public policy of India and so can be relied on as a defence to an action of this nature.
Appeal allowed.
Mount Albert Borough Council vs Australasian Temperance, etc.
; , Bonython vs Commonwealth of Australia at 219), Bank of Travancore vs Dhirt Ram (69 I.A. I at 8), New York Life Insurance vs Public Trustee ([1924] 2 Ch.
101 at 119), Rex vs Lovitt , Joachinsons vs Swiss Bank Corporation ([1921] 3 K.B. 110), Arab Bank vs Barclays Bank at 531), Fouad Bishara vs State of Israel ([1954] 1 A.E.R. 145).
Chesterman 's Trusts [(1923] 2 Ch.
466 at 478), Be.
Banque Des Marchands De Moscou ([1954] 2 A.E.R. 746), Odwin vs Forbes and Re. Munster ([1920] 1 Ch.
268), referred to.
|
Civil Appeal No. 90 of 1973.
From the Judgment and Order dated the 24th and 25th July, 1972 of the Gujarat High Court in Election Petition No. 2 of 1971.
section N. Andley, K. J. John and Shri Narain Mathur for the appellant.
F. section Nariman, P. H. Parekh, Mrs. section Bhandare and Manju Jaitley for respondent No. 1.
The Judgment of the Court was delivered by ALAGIRISWAMI, J.
This appeal arises out of an election petition questioning the election of 1st respondent in the election held in March 1971 to the Lok Sabha from the Banaskantha constituency in Gujarat.
In that election the 1st respondent, a nominee of the Ruling Congress was declared elected securing 1,16,632 votes as against 92,945 votes secured by the 2nd respondent, a nominee of the Organisation Congress.
The appellant, a voter in the constituency, also belonging to the Organisation Congress, filed a petition challenging the validity of the election on various grounds out of which only those covered by issue No. 10, hereinafter set out, survive for consi deration: "(10) Whether respondent No. 1 or his agents or/ other persons with his consent made a gift or promise of gratification to the petitioner with the object directly or indirectly of inducing the petitioner to vote for respondent No. 1 or to refrain from voting for respondent No. 2 ?" The allegation relating to this charge in the election petition is that the 1st respondent and his agent Maulvi Abdur Rehman and the 1st respondent 's son Bipin Popatlal Joshi with the consent of the 1st respondent had made a gift and a promise of gratification to the appellant for voting in 1st respondent 's favour.
The appellant as well as one Madhusudansinhji, who has been examined as P.W. 10, seem to have been at that time prominent members of the Organisation Congress and also leaders of the Kshatriya community which formed 900 about 20 to 25 per cent of the votes in the Banaskantha constituency.
It was alleged that on February 9, 1971 the 1st respondent and Maulvi Abdur Rehman came to the appellant 's residence and persuaded him to leave Congress (O) and join Congress (R) offering (1) to secure a party ticket for the appellant for the election to the Gujarat Legislative Assembly in 1972, (2) to meet all his expenses for that election and to pay him Rs. 10,000/ in cash towards the said expenses, and (3) to construct a hostel for the Kshatriya students of the Banaskantha district.
A specific allegation was made that the 1st respondent wanted the appellant to vote for him.
It was also alleged that the 1st respondent asked the appellant to convey to Madhusudansinhji an offer of a party ticket for the Legislative Assembly election in 1972 and to pay him also a sum of Rs. 10,000/ .
The Prime Minister was addressing a meeting at Palanpur on that day.
The appellant, his wife and Madhusudansinhji were taken to the helipad, Palanpur when the Prime Minister landed there and also to the dais from which the Prime Minister was addressing a public meeting.
One Akbarbhai Chavda, convener of the District Congress Committee announced that the appellant and Madhusudansinhji had joined Congress (R), and asked the appellant to say a few words.
The appellant went to the microphone, took out the bundle of notes of Rs. 10,000/ given to him and flung it in the air and told the gathering that he and his colleagues could not be purchased and that they would remain loyal to the Organisation Congress.
During the trial of the election petition Madhusudansinhji, who had by that time joined the Ruling Congress and Maulvi Abdur Rehman were examined as witnesses on behalf of the appellant.
The learned Judge of the High Court after considering the evidence before him held that Bipin Popatlal Joshi, son of the 1st responident, handed over Rs. 10,000/ to the appellant as a bribe to bring about the appellant 's defection from the Organisation Congress.
But he took the view that the object of the gift was to bring about the appellant 's defection from the Organisation Congress and not induce directly or indirectly any voters to cast their votes for the Ruling Congress candidate or to refrain from voting in favour of the 2nd respondent.
As regards the offer to build the hostel for Kshatriya students he held that the fact that a person who defects from another party to the Ruling Congress would be expected to work for that party and would be expected to use his personal influence in support of the candidate of that party does not mean that the object of bringing about the defection was to indirectly induce the Kshatriya voters to cast their votes for the 1st respondent.
He therefore held that payment of such money and holding out such inducement does not amount to any offence under the Election Law and it was with regret that he had to decide the case in favour of the 1st respondent.
We are in entire agreement with the finding of the learned Judge as regards the payment of Rs. 10,000/ to the appellant and also the offer to build hostel for Kshatriya students and do not consider it 901 necessary to go into the evidence in support of that finding.
That finding is supported not only by the evidence of Madnusudansinhji and Maulvi Abdur Rehman but also the letter exhibit T, passed by the latter to the appellant and Madhusudansinhji.
The question is whether that finding is enough to establish the charge of bribery against the 1st respondent.
There is still another finding necessary in regard to the allegations made in the petition in respect of which the learned Judge has given no finding and that is with regard to what happened of the 9th of February 1971.
We are at one with the view of the learned Judge that the payment of Rs. 10,000/ to the appellant was with a view to induce him to defect from organisation Congress to the Ruling Congress.
It may carry with it the implication that he was expected to use his influence with the voters to vote for the candidate set up by the Ruling Congress.
It has been held by this Court in Kalia Singh vs Genda Lal & ors.(1) to which two of us (Untwalia & Alagiriswami JJ) are party, that a payment made to a person in order to induce him to canvass votes on behalf of the bribe giver would not be bribery within the definition of that word in section 123(1) of the Representation of the People Act.
It was held that it is only in a case where the payment to a third person by itself induces the voter to vote for the bribe giver that it would fall under section 123(1).
Mr. Andley appearing on behalf of the appellant tried to persuade us that that decision requires reconsideration.
After having considered his arguments we are still of the opinion that the view taken in that decision is correct.
The object of providing that a payment should not be made to a person in order that that payment should induce some other person to vote for the bribe giver is obvious.
It is apparently intended to cover situations where payment to a husband, wife, son or father is intended to induce the wife, husband, father or son to vote for the bribe giver.
That would be indirect inducement.
otherwise it would be easy for the bribe giver to say that he did not bribe the voter himself and therefore it is not bribery.
That this provision was not intended to cover a case where money is paid to a certain person in order to make him induce another person to vote for the person who paid him the money would be obvious by looking at the converse case.
Under section 123(1)(B)(b) the receipt of or agreement to receive, any gratification, whether as a motive or a reward by any person whomsoever for himself or any other person for voting or refraining from voting or inducing or attempting to induce any elector to vote or refrain from voting, or any candidate to with draw or not to withdraw his candidature is bribery.
Under this clause any person who receives or agrees to receive any gratification as a reward for inducing or attempting to induce any elector to vote etc. would be receiving a bribe.
The law therefore contemplates that where a person makes any payment to another person in order to make him use his influence to induce a third person to vote for him that is not bribery by the person who pays but the receipt of money by the second person for inducing or attempting to induce another elector to vote is bribery.
It is also bribery for the voter himself to receive 902 the money.
We, therefore, reiterate the view that when a candidate or anybody on his behalf pays any gratification to a person in order that the payment made to him may induce the voter to vote for the bribe giver it is bribery.
But where the gratification is paid to a person in order that he may induce the other persons to vote for the bribe giver it is not bribery on the part of the bribe giver.
It is, however, as we have explained above, bribery on the part of the bribe taker even when he takes it in order to induce an elector to vote for the bribe giver.
In this case it is obvious that the primary object of the payment made to the appellant was to induce him to defect from the Organisation Congress to the Ruling Congress.
That is not a corrupt practice under the Representation of the People Act.
Even if the payment was received with the promise that he would induce the voters to vote for the bribe giver it will not be bribery on the part of the bribe giver but only bribery on the part the bribe taker.
The defection of the appellant to the Ruling Congress, if it took place, might mean that he was expected to work for the Ruling Congress.
Equally it may not.
A person who changes his party allegiance at the time of the election probably might not command much respect among electors if the 1 electors knew that he had done so after receiving some money.
Otherwise the fact that two important persons the appellant and Madhusudansinhji, a younger brother of the ex ruler of Danta Stata had joined the Ruling Congress might be expected to influence the voters to vote for the candidate set up by the Ruling Congress.
But that would be not because of the payment made to the appellant and Madhusudansinhji.
Nor would such payment be bribery.
To reiterate, it is the payment to the appellant that must induce the voters to vote for the candidate set up by the Ruling Congress in order that it might amount to bribery.
It is not enough that his defection from organisation Congress to the Ruling Congress induces voters to vote for the Ruling Congress candidate.
As we said earlier, if the payment to the appellant came to be known as the cause for his changing allegiance it may have a boomerang effect.
It is therefore clear that the payment made to the appellant would not have induced the voters to vote for the Ruling Congress candidate.
While after his defection therefore the appellant might have been expected to work for the Ruling Congress candidate or equally might not have been, it is perhaps implicit that he would also vote for the Ruling Congress candidate.
Is this enough to make the payment made to the appellant bribery ? The payment was made not for the purpose of inducing him to vote but to make him defect to the Ruling Congress.
That was the purpose for which the payment was made.
That incidentally he might vote for the Ruling Congress candidate does mean that the payment was made to him in order to make him vote for the Ruling Congress candidate.
The bargain was not for his vote, the bargain was for his defection.
Therefore on this point we agree with the learned Judge of the High Court.
But if there was a specific request by the 1st respondent to the appellant that he should vote for him then the position would be different.
In that case it would be bribery and even bribery to one 903 person is enough to make an election void.
A specific allegation to that effect has been made in the election petition and that has not been considered by the learned Judge of the High Court.
We shall now proceed to do so.
The appellant gave evidence to the effect that the 1st respondent asked him on 9th February to vote for him and made the three promises earlier referred to.
He was not cross examined on that point but the 1st respondent in his turn deniesd this when he gave evidence.
Maulvi Abdul Rehman speaks to his having met the appellant on February 9, 1971 but he says that the 1st respondent was not with him at that time.
Madhusudansinhji says that he had met the appellant before the 14th and that at that time the appellant told him that the Maulvi and the 1st respondent were insisting that the appellant and he (Madhusudansinh) should join Congress (R).
He also denied a suggestion put to him in cross examination that it was not true that the appellant had told him before the 14th of February anything about the Maulvi or the 1st respondent telling the appellant that the appellant and he (Madhusudansinh) should join the Congress (R) on certain terms.
This is the evidence relied on to show that on the 9th the 1st respondent also had met the appellant.
If the appellant and Madhusudansinhji had met at Palanpur before the 14th and the appellant then told him that Maulvi and the 1st respondent were insisting that they should join the Ruling Congress the meeting should have been on the 13th or earlier and the request to him on the 12th or earlier.
Naturally having chosen to examine Madhusudansinhji, who had by that time joined the Ruling Congress, as his witness the appellant would not have risked putting questions about the exact date on which Maulvi and the 1st respondent had met him.
Quite possibly there was no such meeting on the 9th of February and that was why that question was not specifically put to him.
When that question was put to Maulvi Abdul Rehman, who was examined as P.W. 8 a little earlier, he denied that the 1st respondent was with him on the 9th February.
Coming to the conversation which the appellant and Madhusudansinhji had before the 14th, if the Maulvi and the 1st respondent were insisting either on the 13th or earlier that the appellant should join the Ruling Congress there should have been a meeting between them a little earlier than the 13th and it should have been on the 9th is the argument on behalf of the appellant.
But there are many imponderables in this argument.
If the Maulvi and the 1st respondent were insisting that the appellant and Madhusudansinhji should join the Ruling Congress it does not mean that they both did so at the same time.
They could have been doing it on different occasions separately.
Nor does it follow that the Maulvi and the 1st respondent met him on the 9th.
Nor does it follow that on that date the 1st respondent asked the appellant to vote for him.
The statement of Madhusudansinh is too slender a foundation on which this argument could be built.
It is thus a case of the appellant 's oath against 1st respondent 's oath and in a case of a serious charge like bribery we would not be satisfied merely on the basis of an oath against oath to hold that it has been satisfactorily established that the 904 1st respondent asked the appellant on 9th February to vote for him.
He may also mention that with regard to the alleged visit of the Maulvi and the 1st respondent to the appellant three other possible witnesses including the appellant 's wife, Pushpaben who could have been examined to establish that the 1st respondent accompanied the Maulvi to the appellant had not been examined.
A further fact which improbabilises this story is that in the election petition it is stated that the 1st respondent told the appellant that he would arrange for a ticket for Madhusudansinh in the 1972 elecations and pay him Rs. 10,000/ if Madhusudansinh left organisation Congress and joined the Ruling Congress and voted and worked for him (1st respondent) and asked him to convey the offer to Madhusudansinh.
No evidence was let in about the voting and what is more Madhusudansinh was not a voter in the Banaskantha Constituency.
This shows that the allegation regarding the request to appellant to vote for 1st respondent is of the character as the request to Madhusudansinh and put in merely for the purposes of the election petition and not a fact.
On broader considerations also it is very unlikely that when the talk was about the appellant and Madhusudansinh defecting to the Ruling Congress from the organisation Congress there would have been any talk about the voting itself.
All parties would have proceeded on the understanding that when they defected to the Ruling Congress they would both work and vote for the Ruling Congress.
The distinction between a gift or offer combined with the request to vote and the gift or offer to a person asking him to work for him with the incidental result that person might vote for him should always be kept in mind.
In such a case there is no specific bargain for the vote.
Were it not so it would be impossible for persons standing for election to get any person to work for them who is not also a voter in the constituency.
This was brought out by this Court in the decision in onkar Singh vs Ghasiram Majhi(1).
We would, therefore, hold that the case that 1st respondent bargained for the appellant 's vote has not been satisfactorily made out.
On behalf of the 1st respondent it was urged that the actions of the appellant and Madhusudansinhji immediately after the payment of Rs. 10,000/ and the dramatic developments at the meeting addressed by the Prime Minister show that there would not have been any bargaining for the appellant 's vote.
The points relied upon were (1) that it was not said by the appellant when he threw the money into the crowd on the 18th that he was asked to vote for the 1st respondent, (2) that it was not mentioned in the statement (exhibit 5) made by the appellant and Madhusudansinhji on 18 2 1971, (3) that was not mentioned in the interview given to the newspaper reporters found in exhibit 7 or in the newspaper report exhibit 8.
We do not consider that these things are of much importance.
At that time the most important factor was the attempt to persuade the appellant and Madhusudansinhji to defect to the Ruling Congress and any request to the appellant to vote for the 1st respondent would have been insignificant 905 even as we have held that when requesting the appellant and Madhusudansinhji to defect to the Ruling Congress it is not likely that they would have been asked to vote for the 1st respondent.
The reference to the piece of evidence just mentioned cannot be said to establish that there was no request made to the appellant to vote for the 1st respondent.
That would have to be decided on other factors and other evidence and on the basis of that evidence we have already held that it is not established that the 1st respondent requested the appellant to vote for him.
Now remains the question of the offer to build a hostel for Kshatriya boys.
Strictly speaking this does not arise on issue 10.
This is probabilised by the evidence of Madhusudansinhji, Maulvi Abdul Rehman and the appellant as well as exhibit T.
Whether it was to be in Danta or Banaskantha does not make much difference as long as it was for the Kshatriya boys.
The two places are near to each other though in different Parliamentary constituencies and in whichever place it was situate it will benefit Kshatriya boys and there is No. doubt that if the hostel were constructed by respondent No. 1 or the Ruling Congress party at his instance that would induce the voters to vote for the Ruling Congress candidate.
But before that happens the matter should come to the knowledge of the voters.
Only if the voters knew that the promise had been made to the appellant and Madhusudansinhji that promise would induce the voters to vote for 1st respondent.
But the knowledge of the prormise remained confined to the appellant and P.W. 10, in addition of course to Maulvi Abdul Rehman and the 1st respondent 's son.
If the payment or the promise was to induce the voters, it cannot induce the voters unless they come to know about the payment or the promise.
There is no evidence her that the voters knew about the promise to build the hostel.
The bargain in such cases as we have mentioned in the judgement delivered by us today in section Iqbal Singh vs Gurdas Singh & Ors. is really an offer on the part of the bribe giver that he would do such a thing if the voters would vote for him.
It is not necessary that the voters should have accepted it.
But the voters should have a knowledge about the offer.
Then only it would be a bargain.
An offer contemplated and retained in the mind of the offerer and not articulated and made known to the offeree will not be a bargain.
It therefore follows that in this case the offer to build a hostel does not also amount to bribery.
In the result we upheld the judgment of the High Court and dismise this appeal.
We make no order as to costs.
P.H.P Appeal dismissed.
| IN-Abs | The first respondent, a candidate of the ruling Congress was elected to the Lok Sabha from Banaskantha constituency in Gujarat, defeating his rival candidate of Organisation Congress.
The appellant a voter in the constituency belonging to the Organisation Congress filed an election petition challenging the validity of election of respondent No. 1 on various grounds.
The only ground surviving now is the allegation that respondent No. 1 or his agents or other persons with his consent made a gift or promise of gratification to the petitioner with the object of directly or indirectly inducing the petitioner to vote for respondent No 1 or to refrain from voting for respondent No. 2.
The allegation is that the first respondent 's agent Maulvi and the respondent 's son Bipin with the consent of the first respondent made a gift of Rs. 10,000/ and promised to secure a party ticket for the appellant and to construct a hostel for the Kshatriya students of the Bansaskantha district.
A specific allegation was made that the first respondent wanted the appellant to vote for him.
It was also alleged that the first respondent asked the appellant to convey to Madhusudan Sinhji, another voter an offer of a party ticket for the Legislative Assembly election, and to pay to him also a sum of Rs. 10,000/ The High Court after considering the evidence held that Bipin handed over Rs. 10,000/ to the appellant to bring about the appellant 's defection from the Organisation Congress.
The High Court took the view that the object of the gift was to bring about the appellant 's defection from the Organisation Congress and not to induce directly or indirectly any voters to cast their votes for the ruling Congress candidate or to refrain from voting in favour of the second respondent.
The High Court held that the payment of Rs. 10,000/ and holding out inducement to build the hostel for Kshatriya students does not amount to any offence under the election law.
On an appeal, the appellant contended: (i) that the first respondent or his agent or his son with his consent induced the appellant and Madhusudan Sinhji to vote for respondent No. 1 and to refrain from voting for respondent No. 2.
(ii) that the whole purpose of the defection was that the appellant and Madhusudan Sinhji should canvass votes for respondent No. 1.
particularly, from the Kshatriya voters on the inducement of building hostel for the Kshatriya students.
(iii) that the decision of this Court in the case of Kalia Singh vs Gendalal requires to be reconsidered.
(iv) that there was a specific request by respondent No. 1 to the appellant to vote for him in exchange for the gift and inducement.
Dismissing the appeal, ^ HELD: (1) We are in entire agreement with the finding of the High Court as regards the payment of Rs. 10,000/ to the appellant and also the offer to build hostel for Kshatriya students.
[900 H] 898 (2) The payment of Rs. 10,000/ to the appellant was with a view to induce him to defect from Organisation Congress to the ruling Congress.
It may carry with it the implication that he was expected to use his influence with the voters to vote for the candidate set up by the ruling Congress.
[901 B C] (3) The decision of this Court in the case of Kalia Singh vs Genda Lal approved.
The said decision does not require any re consideration.
The expression "directly or indirectly" is intended to cover situations where payment to a husband, wife son or father is intended to induce the wife, husband, father or son to vote for the bribe giver, that would be indirect inducement.
Otherwise it would be easy for the bribe given to say that he did not bribe the voter himself.
This provision was not intended to cover a case where money is paid to a certain person in order to make him induce another person to vote for the person who paid him the money would be obvious by looking at the converse case.
When a candidate or anybody on his behalf pays any gratification to a person in order that the payment made to him may induce the voter to vote for the bribe giver, it is bribery.
But where the gratification is paid to a person in order that he may induce the other person to vote for the bribe giver, it is not bribery on the part of the bribe giver.
[901 C H, 902 A] (4) In this case it is obvious that the primary object of the payment made to the appellant was to induce him to defect from the Organisation Congress to the ruling Congress.
The bargain was not for his vote.
The bargain was for defection.
That is not a corrupt parctice under the Representations of the People Act.
Even if the payment was received with the promise that he would induce the voters to vote for the bribe giver, it will not be bribery on the part of the bribe giver but only bribery on the part of the bribe taker.
The defection of the appellant to the ruling Congress, if it took place, might mean that he was expected to work for the ruling Congress.
Equally it may not.
The fact of the appellant and Madhusudan Sinhji 's joining the ruling Congress might be expected to influence the voters to vote for the candidate set up by the ruling Congress.
But, that would not be because of the payment made to the appellant and Madhusudan Sinhji nor would such payment be bribery.
It is the payment to the appellant that must induce the voters to vote for the candidate set up by the ruling Congress in order that it might amount to bribery.
It is not enough that his defection from Organisation Congress to the ruling Congress induces voters to vote for the ruling Congress candidate.
[902 B E] (5) As far as the promise to build a hostel for the Kshatriya students is concerned, before it can be termed a bribery the matter should come to the knowledge of the voters.
Only if the voters know that the promise has been made to the appellant and Madhusudan Sinhji, can that promise would induce the voters to vote for the first respondent.
In the present case, the knowledge of the promise remained confined to the appellant.
If the payment or the promise was to induce the voters, it cannot induce the voters unless they come to know about the payment or the promise.
It is not necessary that the voters should have accepted the bribe but the voters must have a knowledge about the offer.
Then only it would be a bargain.
Therefore, in the present case the offer to build a hostel does not amount to bribery.
[904 D F] (6) But, if there was a specific request by the first respondent to the appellant that he should vote for him in exchange for the gift and the inducement in that case it would be bribery and even bribery to one voter is enough to make a election void.
A specific allegation to that effect was made in the election petition and that has not been considered by the High Court.
This Court, therefore, went through the evidence and came to the conclusion that no such request for vote was made to the appellant for the following reasons.
[902H; 903A] (i) Madhusudan Sinhji was not put a question about the exact date on which Maulvi and the first respondent met him.
Quite possibly there was no such meeting on the 9th February and that is why the question was not put to him.
[903 E] 899 (ii) The statement of Madhusudan Sinhji is too slander a foundation on which the argument could be built.
It is, thus, a case of the appellant 's oath against the first respondent 's oath and in a case of serious charge like bribery we would not be satisfied merely on the basis of an oath against an oath.
[903 H] (iii) Three other possible witnesses including the appellant 's wife Pushpa who could have been examined to establish that the first respondent accompanied the Maulvi to the appellant had not been examined.
[904 A] (iv) No evidence was led about the first respondent 's having asked the appellant to vote.
The allegation regarding the request to appellant to vote for first respondent is put in merely for the purpose of election petition and not a fact.
[904 C] (v) All parties would have proceeded on the understanding that when the appellant defected to the ruling Congress, he would both work and vote for the ruling Congress.
There could not have been a specific bargain for the vote.
[904 D]
|
Civil Appeal No 837 of 1975.
Appeal by special leave from the judgment and order dated 6th March,, 1975 of the Andhra Pradesh High Court in Writ Appeal No. 96/75.
A. V. Koteswara Rao and B. Kanta Rao, for the appellant.
P. Ram Reddy and P. P. Rao, for the respondent.
The Judgment of the Court was delivered by ALAGIRISWAMI J.
On 15 7 1974 the appellant applied for a licence under the Andhra Pradesh (Andhra Area) Places of Public Resort Act, 1888 for conducting games of skill and dances and other quality performances in a village adjoining the district headquarters ' town of Nellore, with its 12 cinema theaters, in Andhra Pradesh.
That Act has been extended to this Panchayat.
On 25 9 1974 the licence was refused by the Executive Officer of the Panchayat.
Its grant had been objected to by the Superintendent of Police as also two associations called Mitramandali and the Town Yuvajanasangham.
But on appeal to the village Panchayat as provided in section 129 of the Panchayats Act a licence was granted on 1st October, 1974.
The Mitramandali made a representation to the Chief Minister and the District Panchayat officer, the Deputy Superintendent of Police, the Superintendent of Police, the Tehsildar, and the Revenue Divisional officer also reported against the grant of licence.
On 21st January 1975 the Additional District Magistrate issued a notice to the appellant to show cause why the licence issued to him should not be cancelled.
The appellant had in the meanwhile put up semi permanent structures as required under the terms of the licence which even according to the Executive Engineer, Zila Parishad, Nellore should have cost him Rs. 27,000/ .
He commenced his business on 22nd January 1975 and the show cause notice issued by the District Magistrate reached him on the 25th.
He sent a reply on the 27th and on the 28th the licence was cancelled.
The appellant 's writ petition questioning the cancellation was dismissed by a Single Judge of the Andhra Pradesh High Court, so was an appeal against that dismissal by a Division Bench.
This appeal has been filed in pursuance of special leave granted by this Court.
In his reply to the show cause notice the appellant had asked for copies of the various documents on the basis of which the show cause notice had been issued and stated that in their absence he was not in a position to submit a detailed explanation in reply and he was, however,, offering a tentative explanation promising a fuller and detailed 4 L1276SCI/75 40 explanation after the receipt of the copies.
In particular in respect of a reference to a murder in the show cause notice he stated that it took place in the premises of another amusement park long after it was closed for want of licence.
The District Magistrate considered that the explanation offered was a routine one and was not convincing.
Section 12 of the Andhra Pradesh (Andhra Area) Places of public Resort Act enables the District Magistrate to call for and examine the record, of any proceeding taken under the Act, to call for any report in connection therewith, to make or cause to be made any further enquiry and to pass any order which the authority holding the proceeding might have passed.
Under section 9 any authority granting a licence may for reasons recorded in writing, revoke or suspend the same when he has reason to believe: (a) that the licence has been fraudulently obtained; (b) that the enclosed place or building has been used for other purposes of public resort or entertainment than that for which the licence was granted; and (c) that the place or building can no longer be safely used for the purpose for which the licence was granted.
Undoubtedly none of the reasons applied in this case.
Under section 7 if the authority is satisfied (a) that the enclosed place or building may safely be used for the purpose of public resort or entertainment proposed; (b) that no objection, arising from its situation, ownership, or the purpose proposed, exists, he shall grant to the applicant a written licence.
The only ground in this section applicable to the present case would be 'the purpose pro posed '.
The argument before us was that the power of the District Magistrate to revoke the licence under section 12 can be for only any of the grounds mentioned in section 9.
The power under section 12 is to pass any order which the authority holding the proceeding might have passed" that is, an order granting revoking or suspending.
In other words, if the authority competent to grant the licence refuses, the District Magistrate in exercise of his power under section 12 may grant the licence and vice versa, Similarly he can revoke or suspend the licence granted by the authority or where the authority has revoked or suspended the licence cancel that order.
In other words the power under section 12 is to pass the kind of order which might be passed under section 7 or 9.
The reasons for which this power can he exercised are not restricted to those mentioned in section 7 or 9.
The revisional power under section 12 is not a limited one.
It is as wide as that of the original authority.
The considerations which the District Magistrate took into account in revoking the appellant 's licence were the same as those which were before the Village Panchayat when it decided to grant the licence.
The revising authority is entitled on the same material to take a view different from that of the authority whose order is revised.
41 But the main ground of attack against the order of cancellation is that in making it the district Magistrate had failed to observe the principles of natural justice.
The order that the District Magistrate passed is a quasi judicial order and therefore the appellant is right in contending that the principles of natural justice should have been followed before that order was passed.
It is now well established by decisions of this Court that such is the requirement of law even where the statute in question itself does not so provide.
It is also well established that the principles of natural justice do not necessarily conform to a fixed formula, nor is it a procrustean bed into which all proceedings must be fitted.
The principles of natural justice will always depend upon the facts of each case.
The learned Judges of the High Court examined the various documents the copies of which had been asked for by the appellant and came to the conclusion that the show cause notice issued to him contained a summary of all those documents which was sufficient to enable the appellant to make his representation.
We cannot say that this conclusion is wrong.
It is not always necessary that the documents asked for should itself be furnished provided the substance of those documents is furnished, always provided, however, that the summary is not misleading.
Such is not the case here.
But when the appellant asked for the original documents he could at least have been told that he had already been given a summary of the documents which was sufficient to enable him to make his representation and he could make his fuller representation as he had promised in his earlier so called interim reply.
The District Magistrate 's characterisation of the interim reply of the appellant as a routine one is not correct.
After all the opinion of the Village Panchayat which is a representative body of all the villagers is entitled to great if not greater weight than that of the Mitramandli and the Town Yuvajanasangham, the composition of which or the strength of which we do not know.
The Village Panchayat was also competent on a consideration of all the facts to form its own opinion.
The opinions of representative bodies should not be lightly brushed aside unless of course there is reason to think that they have acted out of considerations other than relevant.
We are of opinion that the order passed by the District Magistrate post haste immediately he received the appellants reply without either giving him the copies asked for or at least telling him that the material already furnished was sufficient to enable him to make his representation and if he had ally further representation to make he could do so offends the principles of natural justice.
We are aware that we are dealing with an appeal questioning the proceedings initiated under Article 226 of the Constitution where the power of the court is a limited one, that is to say, limited to cases where there is any error of law apparent on the face of the record.
But the observance of the principles of natural justice is fundamental to the discharge of any quasi judicial function.
We therefore allow the appeal and set aside the order of the District Magistrate.
There will be no order as to costs.
P.B.R. Appeal allowed .
| IN-Abs | Section 12 of the Andhra Pradesh (Andhra Area) Places of Public Resort Act, 1888, empowers the District Magistrate to can for examining the record any of any proceeding taken under the Act to can for any report in connection .
therewith, to make or cause to be made any further enquiry and to pass any order which the authority holding the proceeding might have passed.
Section 7 of the Act states when the authority concerned could grant a licence Section 9 states when an authority granting a licence could revoke or suspend the same.
The appellant was granted a licence for conducting games of skill and dances and other quality performances.
Objections having been raised the Additional District Magistrate issued a show cause notice to the appellant In reply the appellant had asked for copies of certain documents on the basis of which the show cause notice had been issued.
In the meantime, however the appellant submitted a tentative explanation stating that a detailed explanation would be sent after the receipt of the copies of the documents.
Immediately thereafter the District Magistrate cancelled the licence on the ground that the explanation offered was a routine one and was not convincing.
The High, Court dismissed the writ petition of the appellant.
On appeal to this Court it was contended that (i) the order of cancellation was in violation of the principles of natural justice.
and (ii) the District Magistrate could revoke the licence under s.12 only on any of the grounds mentioned in s.9.
Allowing the appeal.
^ HELD : 1 (a) The order passed by the District Magistrate immediately after he received the appellant 's reply without either giving him the copies asked for or at least telling him that the material already furnished was sufficient to enable him to make his representation and if he and any further representation to make, he could do so, offends the principles of natural justice.
[41 F].
(b) It is now well established by decisions of this Court that an authority making a quasi judicial order should follow the principles of natural Justice before passing an order, even where the statute in question does not so provide.
It is also well established that principles of natural justice do not necessarily is l; conform to a fixed formula nor is it a procrustean bed into which all proceedings must be fitted.
The principles of natural justice will always depend upon the facts of each case.
[41 B].
In the instant case when the appellant asked for the original documents, .
he could at least have been told that he had already been given a summary of the documents which was sufficient to enable him to make his representation.
The District Magistrate 's characterisation of the interim reply of the t appellant as a routine one is not correct.
[41 D E] 2.
The revising authority under the Act is entitled on the same material, to take a view different from that of the authority whose order is revised.
" The power under section 12 is to pass any order which the authority holding the r 39 proceeding might have passed, that is an order granting, revoking or suspending a licence.
If the authority competent to grant a licence refuses, the District Magistrate, in exercise of his powers under section 12, may grant a licence and l ice versa.
Similarly, he could revoke or suspend the licence granted by the authority or where the authority has revoked or suspended the licence, cancel that order.
The reason for which this power could be exercised are not restricted to those mentioned in section 7 or 9.
The revisional power under section 12 is not a limited one.
It is as wide as that of the original authority.[40 G H].
|
Civil Appeal No. 1172 of 1973.
From the Judgment and Order dated the 10th April, 1973 of the Punjab & Haryana High Court at Chandigarh in Election Petition No. 1 of 1971.
Hardayal Hardy, Bishamber Lal and Mrs. Indira Sahni, for the appellant.
H. L. Sibal, Kapil Sibal, P. H. Parekh, Mrs. section Bhandare, Miss Manju Jaitley and section section Kang, for respondent No. 1.
The Judgment of the Court was delivered by ALAGIRISWAMI, J.
This appeal relates to the election to the Parliament from the Fazilka constituency in Punjab held on 5th March 1971.
The Parliamentary constituency consisted of eight assembly constituencies of Malout, Muktsar, Gidderbha, Fazilka, Jalalabad, Abohar, Lambi and Faridkot.
The votes were counted on 10th and 11th of March at five different places.
The counting of the votes of the Malout Assembly constituency was held on 10th March by Mr. Aggarwal, Assistant Returning Officer, of Muktsar and Gidderbha on 10th and 11th by Mr. Sayal, of Fazilka and Jalalabad on the 10th and 11th by Mr. Mahajan, of Lambi and Abohar on the 10th and 11th 886 by Mr. Ram Lal and of Faridkot on the 11th by Mr. Garg.
6,409 votes were declared invalid and the 1st respondent was declared elected having secured 1,52,677 votes.
The appellant obtained 1,47,354 votes.
There were six other candidates about whom it is not necessary to refer.
A number of allegations were made in the election petition about many irregularities that took place on the date of the polling.
It is not necessary to refer to them as the issues concerned with them were not pressed even before the High Court.
Only two issues, issue 1 and 4 were considered by the High Court and those are the issues urged before us also.
They are: "1.
Whether the respondent No. 1 is guilty of corrupt practices specified in paras 19, 20, 22 and 23 and 26 to 29 of the election petition as amended ? If so, what is the effect ? 4.
Whether 15000 ballot papers were invalid and were wrongly polled and counted ? If so, with what effect ?" It is also necessary to refer to issues 3 and 6 for they have some relevance in discussing issues 1 and 4: "3.
Whether the petitioner is entitled to the scrutiny of the ballot papers alleged to have been illegally rejected and those of the respondent alleged to have been illegally accepted and on that account is entitled to a recount? 6.
Whether the allegations made in para 7 of the petition are correct, and if so, what is the effect ?" As issue 6 was not pressed the various allegations of irregularities at the time of polling including collusion by Polling Officers and consequent false voting and stuffing of ballot boxes could not be considered.
As issue 3 was not pressed recount cannot be asked for on the allegation of wrong counting of votes that is that the appellant 's votes were wrongly rejected and the 1st respondent 's votes were wrongly accepted.
With regard to issue 1 the allegation was that corrupt practice of bribery was committed in the interest of the 1st respondent by his brother Shri Parkash Singh Badal, who was at that time the Chief Minister of Punjab.
One of the items of bribery alleged was that large sums of money were distributed to Harijans in the form of contributions towards construction of Dharamshalas for the purpose of inducing them to vote in favour of the 1st respondent.
The second allegation was that Shri Parkash Singh Badal directed Mr. Sayal, one of the Assistant Returning Officers, to issue 3,304 gun licences for furthering the prospects of the 1st respondent 's election and that this was a gratification for inducing the electors to vote for the 1st respondent.
Similarly, Mr. O. P. Garg, another Assistant Returning Officer was alleged to have issued 485 gun licences in the months of February and March, 1971.
Shri Parkash Singh Badal was alleged to have arranged and addressed a number of meetings in various 887 villages promising to help the voters in many ways if they would vote for his brother.
There were certain other allegations of corrupt practices but the only ones canvassed before us were those relating to gun licences and grants in respect of construction of Dharamshalas to Harijans.
The allegations which relate to issue 4, as found in the petition, were that at least 15,000 invalid and void votes had been included and counted in favour of the returned candidate, which should have been rejected and not counted at all and that in addition at least 3,000 invalid ballot papers which should have been rejected under rule 56 had been wrongly counted as valid votes in favour of the returned candidate.
The distinction between 15,000 and 3,000 votes was this: The 15,000 ballot papers were said to consist of (i) spurious ballot papers (ii) ballot papers not bearing serial number or design authorised for use at the particular polling stations, and (iii) ballot papers not bearing booth marks and the full signatures of the Presiding Officer.
The 3,000 ballot papers were said to have been so marked as to render it doubtful to which candidate the vote is given, or the ballot papers bore marks with instrument other than the one supplied for the purpose, or ballot papers marked in favour of more than one candidate had been wrongly counted in favour of the returned candidate.
No evidence in fact was let in respect of the 3,000 votes.
The attack was concentrated on the 15,000 invalid and void votes.
In view of issues 3 and 6 having been given up, the effect of which we have earlier referred to, the only question that arises is whether these 15,000 votes should not have been counted at all, whether for the appellant or for the 1st respondent on the basis that they bore neither the stamp nor the signature of the Polling Officer.
The whole of the evidence let in was of a uniform type that a number of ballot papers did not bear the signature of the Polling Officer or the stamp of the booth.
Indeed the allegation in the petition on this point is "ballot papers not bearing booth marks and full signatures of the Presiding Officer were wrongly counted as valid votes".
It is not said that the ballot papers bore neither the mark nor the signature of the Presiding Officer.
The rule in question, rule No. 56, was amended in 1971 providing that only a ballot paper which did not contain both the mark and signature would be deemed invalid but even then it is not as though it automatically became invalid.
The Returning Officer had to scrutinise it in order to see whether the ballot paper was a genuine ballot paper.
This provision was apparently put in because under pressure of work the Polling Officer might have failed either to affix the stamp or his signatur.
If the Returning Officer was satisfied that the failure to affix the stamp or the signature was due to the fault of the Polling Officer but the ballot paper was itself genuine he could include it among the valid ballot papers.
Therefore, merely by giving evidence that the ballot papers did not contain both the signature and the stamp it would not be established that the ballot paper concerned was not a valid ballot paper.
But that is the only type of evidence which has been let in.
Apart from this the number 15,000 seems to be a case of wild guess.
The appellant 's voting agents were alleged to have kept a note 888 of the number of invalid ballot papers that they had noticed but none was produced.
Some of the counting agents gave evidence that they brought it to the notice of the chief counting agent who sat on the dais along with the Assistant Returning Officer at the time of the counting.
Neither the counting agents nor the chief counting agent had complained in writing to the Assistant Returning Officer.
It is impossible to believe that if there were as many as 15,000 invalid ballot papers, which amount to about two thousand from every assembly constituency they would have kept quiet without raising hell.
On both the days of counting an observer deputed by the Election Commissioner had gone round all the places where the votes were counted.
No serious infirmities were pointed out to him.
One or two ballot papers which did not bear either the signature of the Polling Officer or the stamp were shown to him only in the Lambi constituency and he scrutinised them and found that the serial numbers tallied and he was satisfied about their genuineness.
He as well as the various Assistant Returning Officers had offered that if there were any complaints the candidates could ask for a recheck.
No such recheck was asked for.
It was argued on behalf of the appellant that the recheck offer meant only a check on whether the number of votes had been correctly added.
We find it impossible to accept this suggestion.
The reference to the checking in the observer 's report shows that the checking meant also scrutiny as to whether the ballot paper was signed by the Presiding Officer.
The Returning Officer has also mentioned in his order on the application made by the appellant for a recount that he was asked to specify as to whether in any assembly segment he or any of his agents had asked for the recheck or pointed out any discrepancy in the figures and that the appellant had failed to cite any such specific instance, and that he was also asked as to whether he wanted the recounting of any specific assembly segment but he reiterated that he wanted a total recount.
Four of the Assistant Returning Officers, Mr. Sayal, Mr. Ram Lal, Mr. Garg and Mr. Aggarwal have been examined and they did not support the appellant 's case that there were such a large number of invalid ballot papers or that it was brought to their notice even orally.
Mr. Ram Lal said that at the most there might be 200 such votes which were objected to; that is in respect of the two constituencies in which he was the Assistant Returning Officer.
This would mean that there might have been about one thousand invalid ballot papers at the most and we have already mentioned that 6,409 votes had been declared invalid.
We do not know how many of them were ballot papers which did not contain either the signature or the stamp.
The way the appellant 's case has been developed is also very interesting.
We have pointed out that votes of four constituencies were counted on the 10th and of four other constituencies on the 11th.
The first move of the appellant was to send a telegram on the 11th.
By that time half the number of votes had been counted and probably more than half because we do not know at what time on the 11th the telegram, exhibit B 2 was sent.
Even assuming that nearly half the number of votes had been counted the appellant probably had an inkling of the possibility of his being defeated.
In this telegram he re 889 ferred to about fifteen thousand ballot papers which did not contain either the signature of the Presiding Officer or the Polling Officer of the polling station and booth numbers.
He also mentioned that about six thousand three hundred votes had been wrongly rejected.
Apparently he wanted to imply that they would otherwise have gone in his favour.
But his case of six thousand votes which ought to have gone to him, but had been wrongly rejected, had been completely given up later.
Another telegram sent on the 13th March 1971 was similar to the telegram sent on the 11th.
A similar telegram was sent by the appellant to the General Secretary of the Congress Party as also the Prime Minister.
But in the petition given to the Returning Officer asking for a recount on the same day the complaint was that some of the ballot papers did not bear the official stamp on their back as provided by rules and they seem to have been smuggled illegally and the number given in "thousands".
Another complaint was that some of the ballot papers did not bear the signatures of the Presiding Officer on the back, which were also "in thousands" and even more than five thousand.
So here we do not find the allegation that the ballot papers contained neither the signature nor the stamp.
In his petition before the Election Commission asking for recount he mentioned fifteen thousand ballot papers as having been found which bore no distinction mark or signature of the Presiding Officer.
He also mentioned the rejection of more than 6,000 votes.
As we have already pointed out, there is absolutely nothing on record to show how the figure 15,000 was arrived at.
We are, therefore, satisfied that the mention about 15,000 votes, 3,000 votes and 6,000 votes are only steps in the attempt to secure a recount at any cost and to fish for evidence.
As we have already pointed out, the allegation in the petition was that 15,000 invalid votes were counted in favour of the returned candidate but in the evidence as well as the arguments it was only claimed that there were 15,000 invalid ballot papers which were counted.
There is nothing to show how many of those 15,000 went to the appellant and how many to the 1st respondent.
Indeed as we have earlier explained what was asked for was elimination of the 15,000 votes altogether from the counting.
The whole thing is mere kite flying.
We are therefore, in agreement with the learned Judge of the High Court that the appellant has not succeeded in establishing the allegations covered by issue No. 4.
There are a large number of decisions of this Court on the question regarding the circumstances under which a recount can be ordered.
It has been recognised in all those decisions that there can never be any hard and fast rule as to the circumstances when an order of recount would be permissible and should always be dependent upon the circumstances of the case.
We do not therefore consider it necessary to refer to any of those decisions.
Suffice it to say that the facts of this case do not leave even the slighest justification for ordering a recount.
Now we come to the question corrupt practice.
We shall first of all deal with the grant for construction of Dharamshalas for Harijans.
The Punjab Government appears to have set apart a sum of Rs. 50,00,000 for this very purpose.
All that is established is that a sum of Rs. 3,00,000 was spent towards the end of the official 890 financial year 1970 71 in the district in which this Fazilka Parliamentary Consituency is situate.
Punjab has 11 districts and it cannot therefore be said that this sum is disproportionately large.
The anxiety to spend the money towards the end of the financial year is also natural.
If the end of the financial year also happens to be the period when an election is going on parties in power naturally bestir themselves to show that they are active in helping the people to get what they want.
The election time is the time when people in power as well as ordinary politicians are active in trying to show that they are out to help the people.
They address meetings and hold out all sorts of promises.
Where a large section of the people are concerned, who only get an amenity which they ought in any case to get and which they get probably a little more easily because it happens to be election time, it cannot be said that the person in authority making that promise and holding out that he would carry out many remedial measures to benefit the people was resorting to bribery or bargaining for votes.
It may not amount to setting up a very high standard and it may be very desirable that whatever is done for the people should be done by persons in authority throughout the period of their office.
But they naturally are more active at election time than other times.
That cannot be said to amount to corruption.
We then come to the question of gun licences.
It has been pointed out that during the months of January, February and March 1971 Mr. Sayal had issued 3,304 gun licences and Mr. Garg 485 gun licences, the usual number in an ordinary year being about 300.
When every explanation offered on behalf of the officials is taken into consideration, the fact remains that an unusually large number of gun licences had been issued during that period.
We are satisfied that to some extent at least this amounts to improper use of power.
We do not say that this is an abuse or misuse.
In fact there is evidence that the proper procedure has been followed in these cases.
In one case, for instance, a man who had applied for a gun licence long time back approached the Chief Minister when he had come to the village and he at once told the District Magistrate and the man got his licence.
We can see nothing improper in that instance.
But the gun licences themselves are issued by the officials and not by the Chief Minister.
It also appears that a large number of relatives of the Chief Minister as well as his Mukhtiar e Aam, his maternal uncle, and even the returned candidate had taken interest in the issue of gun licences.
It was sought to be proved that the Chief Minister had addressed a number of meetings promising to issue gun licences if they would vote for his brother.
But there was no allegation in the election petition relating to the meetings he addressed or his having held out the promise in those meetings that he would issue gun licences if the people voted for his brother.
The 1st respondent himself not having had notice of the specific allegation of meetings at which such promises were held out we have left out of consideration the evidence regarding the meetings and the promises held out by the Chief Minister in those meetings as inadmissible.
Assuming that it was the returned candidate or his agent that had held out an inducement to get gun licences issued for people who vote 891 for the returned candidate, does it amount to bribery under section 123(1) of the Representation of the People Act ? Bribery is defined thus: "123(1) 'Bribery ', that is to say, (A) any gift, offer or promise by a candidate or his agent or by any other person with the consent of a candidate or his election agent of any gratification, to any person whomsoever, with the object, directly or indirectly of in ducing (a) . . . . (b) an elector to vote or refrain from voting at an election, or as a reward to (i). . . . . (ii) an elector for having voted or refrained from voting; (B) the receipt of or agreement to receive, any gratification, whether as a motive or a reward (a). . . . . (b) by any person whomsoever for himself or any other person for voting or refraining from voting, or inducing or attempting to induce any elector to vote or refrain from voting, or any candidate to withdraw or not to withdraw his candidature.
Explanation.
For the purposes of this clause the term gratification ' is not restricted to pecuniary gratifications or gratifications estimable in money and it includes all forms of entertainment and all forms of employment for reward but it does not include the payment of any expenses bona fide incurred at, or for the purpose of any election and duly entered in the account of election expenses referred to in section 78.
" In order to understand the exact implication of the word 'gratification ' it may be useful to refer to another statute which has been in force for over a century, that is, the Indian Penal Code as most legislations tend to folow established precedents.
In section 161 of the Code, which deals with bribery, one of the explanations is as follows: "Gratification.
" The word "gratification" is not restricted to pecuniary gratification, or to gratification estimaable in money.
" Illustration (a) to the section is as follows: "(a) A, a munsif, obtains from Z, a banker, a situation in Z 's bank for A 's brother, as a reward to A for deciding a cause in favour of Z. A has committed the offence defined in this section.
" We may also quote section 171 B of the Code and section 171 E which find a place in the Chapter of Offences Relating to Elections, which was inserted in the Code in the year 1920: 892 "171 B. (1) whoever (i) gives a gratification to any person with the object of inducing him or any other person to exercise any electoral right or of rewarding any person for having exercised any such right; or (ii) accepts either for himself or for any other person any gratification as a reward to exercising any such right or for inducing or attempting to induce any other person to exercise any such right, commits the offence of bribery: Provided that a declaration of public policy or a promise of public action shall not be an offence under this section.
(2) A person who offers, or agrees to give, or offers, or attempts to procure, a gratification shall be deemed to give a gratification.
(3) A person who obtains or agrees to accept or attempts to obtain a gratification shall be deemed to accept a gratification, and a person who accepts a gratification as a motive for doing what he does not intend to do, or as a reward for doing what he has not done, shall be deemed to have accepted the gratification as a reward." "171 E. Whoever commits the offence of bribery shall be punished with imprisonment of either description for a term which may extend to one year or with fine, or with both.
Provided that bribery by treating shall be punished with fine only.
Explanation. "Treating" means that form of bribery where the gratification consists in food, drink, entertainment, or provision.
" It would be noticed that the Explanation to section 123(1) of the Representation of the People Act and the Explanation to section 161 of the Indian Penal Code relating to gratification are similar.
In addition, the Representation of the People Act refers to all forms of entertainment and all forms of employment for reward.
The employment for reward is covered by illustration (a) to section 161 of the Indian Penal Code.
The words "all forms of entertainment" in the Explanation to section 123(1) of the Representation of the People Act apparently refer to offence of treating found in section 171 E of the Indian Penal Code.
When Parliament enacted the provision regarding bribery in the Representation of the People Act it should have had before it the comparable provisions in the Penal Code.
It is to be noticed that the giving of any gratification with the object of inducing the receiver or any other person to vote is an offence while acceptance of gratification by a person either for himself or for any other person or for inducing any other person to vote is an offence.
In other words giving is an offence if paid to the voter or such giving induces another person to vote.
It is not giving a gratification in order that he may induce another person to vote that is an offence whereas 893 receipt of a gratification in order to induce another person to vote is an offence.
The reason for the distinction between the provision in section 123(1) (A) and 123(1) (B) seems to be this: In the former case a person standing for election has necessarily to have a number of people to work for him and he may have to bear their expenses.
That by itself should not be deemed to be bribery.
In the latter case when a person takes money offering to induce other people, of course, induce by wrong means, to vote for the person who pays him the money he is really poking his nose into something which is no business of his and that practice should be discouraged.
See Kalya Singh 's case(1) and our judgment in Harisingh Pratapsingh Chawda vs Popatlal Mulshanker Joshi & Ors.(2) So far as we are aware it has never been held that the issue of a gun licence amounts to bribery under section 171 B. We are of opinion that the word 'gratification ' should be deemed to refer only to cases where a gift is made of something which gives a material advantage to the recipient.
There is hardly any need to say that giving of anything whose value is estimable in money is bribery.
A gun licence gives no material advantage to its recipient.
It might gratify his sense of importance if he has a gun licence in a village where nobody else has a gun licence.
So might the conferment of an honour like Padma Bhushan.
A praise from a high quarter might gratify the sence of vanity of a person.
But the word 'gratification ' as used in section 123(1) does not refer to such gratifications any more than in section 171 B of the Indian Penal Code.
Taking the case of licences: Possibly the grant of a licence which enables a man to do some business and thus make money may confer a material advantage to him.
We are not here speaking of licences which are insisted upon merely for regulatory purposes like municipal licences.
But a licence given to a person to deal in fertilizers might confer a financial advantage to that person; so might an import licence or an export licence.
Such licences differ from licences for regulatory purposes.
Arms licence is a licence for regulatory purposes.
Its possession gives no material advantage to its possessor.
A licence in a prohibition area to deal in liqueur might confer a material advantage to the licensee.
But a licence enabling a person to imbibe liqueur in such area gives the licensee no material advantage.
Such a licence is only regulatory.
We must therefore distinguish between various kinds of licences and hold that where a licence gives a material advantage to the licensee the grant of such licences amounts to a gratification.
In that sense the grant of gun licences to voters in the Fazilka Constituency would not amount to bribery.
We have discussed this question on the basis that the authority to grant a licence is the returned candidate or his brother the Chief Minister.
We have already pointed out that there is no evidence regarding bargaining for votes by promise of gun licences.
A bargain for the purposes of this section does not mean that the candidate or his agent makes an offer and the voter accepts it in the sense that he promises to vote.
It is enough if the candidate or his agent makes the gift or promise on that condition.
If a candidate or his agent pays money to a voter saying that he wants him to vote it is a bargain for the pur 894 poses of this section.
It is not necessary that the voter should say that he would vote and thereafter the candidate or his agent should pay the money.
Even in such a case the voter after receiving the money might or might not vote.
The law regarding bribery in elections in our country has been discussed in various decisions of this Court.
In Maganlal Bagdi vs Hari Vishnu Kamath(1) the candidate offered to construct a well in a village if the voters voted for him and not for the rival candidate and money was actually deposited for this purpose and was to await the result of the election.
It was held that there was a clear bargain for votes.
In Khader Sheriff vs Munnuswami Gounder & Ors.(2)it was observed by this Court that it may be meritorious to make a donation for a charitable purpose but on the eve of an election such a gift may be open to construction that it was made with the intention of buying votes.
In Ghasi Ram vs
Dal Singh(3) it was held that the gift must be proved to have a direct or indirect connection with votes and this must admit of no other reasonable excuse.
In Radha Krishna Shukla vs Tara Chand Maheshwar(4) general promises by Ministers to redress certain public grievances or to erect certain public amenities like hospitals, if elected, were held not to amount to corrupt practice.
They were treated as promises of general public action.
In Amirchand vs Surendra Lal Jha(5) it was laid down that if a Minister redresses the grievances of a class of the public or people of a locality or renders them any help, on the eve of an election, it was not corrupt practice unless he had obtained promises from the voters in return, as a condition for their help.
The promise to grant gun licences would really amount to a redressal of the grievances of a class of the public or rendering them any help.
There is no evidence here of obtaining a promise from the voters in return.
The observations made in Ghasi Ram 's case (supra) regarding the action taken by a Minister which helps a class of the public may be noticed in this connection: "The position of a Minister is difficult.
It is obvious that he cannot cease to function when his election is due.
He must of necessity attend to the grievances, otherwise he must fail.
He must improve the image of his administration before the public.
If everyone of his official acts done bona fide is to be construed against him and an ulterior motive is spelled out of them, the administration must necessarily come to a standstill.
The State of Haryana came into existence on November 1, 1966.
With an election in the near future, the political party had to do acts of a public nature.
The grant of discretionary grants were parts of the general scheme to better community development projects and to remove the immediate grievances of the public.
The money was required to be spent in about 3 months ' time.
The action of the Minister had often the concurrence and recommendation of his subordinate staff.
It is for this reason 895 that the orders about the improvement of the supply of waters were not pressed.
They were incapable of being construed against the first respondent.
Therefore, emphasis was placed upon the distribution of money.
The money was not distributed among the voters directly but was given to Panchayats and the public at large.
It was to be used for the good of those for and those against the candidate.
No doubt they had the effect of pushinf forward his claims but that was inevitable even if no money was spent, but good administration changed the people 's condition.
We cannot, therefore, hold that there was any corrupt practice.
If there was good evidence that the Minister bargained directly or indirectly for votes the result might have been different but there was no such evidence.
" The issue for decision in Om Prabha Jain vs Abnash Chand & Anr.(1) was similar to the case here in respect of the grants for Dharamshalas for Harijans.
It was held that the action of the Minister could not be construed against her and that it was done in the ordinary course of her duties as Minister and there was no evidence that it was, directly or indirectly, part of a bargain with the voters.
In Bhanu Kumar vs Mohan Lal(2) it was alleged that the Chief Minister by ordering the covering of a nallah, the construction of a road, the installation of water taps and the grant of pattas to the inhabitants of a colony for construction of houses had made a bargain with the people for votes and thus committed corrupt practice as defined in section 123(1) of the Representation of the People Act.
This Court pointed out that ordinarily amelioration of grievances of the public is innocuous and cannot be construed against a candidate who is a Minister but that if there is evidence to indicate that any candidate at the election abused his power and position as a Minister in the Government by utilising public revenues for conferring advantage or benefit on a particular group of people for the purpose of obtaining their votes, different considerations will arise and it may be held to be a corrupt practice within the meaning of section 123(1).
In that case it was held that in all the instances relied upon by the appellant the evidence showed that there were long standing public grievances and the Government had from time to time made suggestions and recommendations for redress of the grievances and amelioration of the condition of the people and that it could not be said that on the eve of election there was any sudden or spontaneous outburst of public activity in the shape of 896 diverting money to win electors to the side of the Chief Minister by throwing baits or giving them any particular and specially favoured treatment.
These observations apply to the case of grants for Harijan dharamshalas.
We are therefore saisfied that the case of both the allegations of corrupt practice there was no gratification offered, that there was no bargaining for votes in the sense we have explained earlier and these issues must also be found against the appellant.
The appeal is, therefore, dismissed with costs.
V.P.S Appeal dismissed.
| IN-Abs | In the election to Parliament from a constituency in Punjab the respondent was declared elected.
The appellant filed an election petition alleging, inter alia, (i) that at least 15,000 invalid and void votes had been included and counted in favour of the respondent, and (ii) that the Chief Minister of Punjab, who was the brother of the respondent, directed, (a) the distribution to Harijans of large sums of money for construction of Dharamshalas, and (b) the issue of a large number of gun licences, as gratification for inducing voters to vote for the respondent and that thereby, the corrupt practice of bribery under section 123(1), Representation of the People Act, 1951, was committed.
The High Court dismissed the election petition Dismissing the appeal to this Court, ^ HELD: (1) On the evidence, the High Court was right in holding that the appellant had not succeeded in establishing the allegation regarding the 15,000 votes.
[889F] (a) Rule 56 of the Conduct of Elections Rules as amended in 1971, provides that only a ballot paper which did not contain both the mark and the signature of the polling officer would be invalid.
Even then it does not automatically become invalid.
If the Returning Officer was satisifed that the failure to affix the stamp or signature was due to the fault of the polling officer but the ballot paper was itself genuine he could include it among the valid ballot papers, because, under pressure of work, the polling officer might have failed either to affix the stamp or his signature.
[887F H] (b) The evidence adduced on behalf of the appellant is not consistent as to the ground of invalidity of the ballot papers; as to how the number of 15,000 was arrived at; and as to whether they were counted in favour of the respondent or both the appellant and the respondent.
[889E F] (c) There cannot be any hard and fast rule as to the circumstances when an order of recount would be permissible and it always depends upon the circumstances of the case.
On the facts of the present case, there is not the slightest justification for ordering a recount.
[889G H] (2) In the case of both the allegations regarding Dharamshalas and gun licences, there was no gratification offered and there was no bargaining for votes, and hence there was no corrupt practice.
[896B] (a) The word 'gratification ' in section 123(1) should be deemed to refer only to cases where a gift is made of something which gives a material advantage to the recipient.
There is a distinction between licences which give a material advantage and those which do not.
For example, a licence in a prohibition area to deal in liqueur confers a material advantage on the licensee, whereas a licence enabling a person to imbibe liqueur in such an area gives him no material advantage.
It is only the grant of the former that might amount to gratification.
Arms licence is a licence for regulatory purposes.
Its possession give no material advantage to its possessor.
[893C G] (b) To constitute the corrupt practice of bribery under section 123(1) there must be a bargain for votes.
But a bargain for the purposes of the section does not mean that the candidate or his agent makes an offer and the voter accepts it in the sense that he promises to vote.
It is not necessary that the 885 voter should say that he would vote and that thereafter only the candidate or his agent should pay the money.
It is enough if the candidate or his agent makes the gift or promise on that condition.
[889G 890A] (c) In the present case, the State Government had set apart a sum of Rs. 50 lacs for the purpose of construction of Dharamshalas for Harijans.
A sum of Rs. 3 lacs was spent towards the end of the financial year, in the district in which this particular parliamentary constituency was situate.
Punjab has 11 districts and it cannot, therefore, be said that, the amount is disproportionately large.
[889H 890A] (d) The anxiety to spend the money towards the end of financial year is also natural.
[890A B] (e) It may not be setting up a high standard and it may be very desirable that whatever is done for the people should be done by persons in authority throughout the period of their office and not when election time is approaching.
But where a large section of the people get an amentiy which they ought, in any case to get, and which they got probably a little more easily because it was election time, it cannot be said that the person in authority making a promise and holding out that he would carry out many remedial measures to benefit the people was resorting to bribery or bargaining for votes.
[890B D] (f) The issue of the unusually large number of gun licences may be an improper use of power.
But, there is no evidence regarding bargaining for votes by the promise of gun licences.
[890D G, 893G] (g) Maganlal Bagdi vs Hari Vishnu Kamath, Khadar Sheriff vs Munnuswami Gounder & Ors.
A.I.R. 1955 S.C. 775, Ghasi Ram vs Dal Singh ; , Radha Krsihna Shukla vs Tara Chand Maheshwar , amirchand vs Surendra Lal Dha E.L.R. 57, Om Prabha Jain vs Abnash Chand & Anr. ; ,Bhanu Kumar vs Mohan Lal ; , referred to.
|
Civil Appeal No. 30 of 1971.
Appeal by special leave from the judgment and order dated the 19th February, 1970 of the Andhra Pradesh High Court in case Reference No. 2 of 1967.
R. M. Mehta and section P. Nayar for the appellant.
P. Ram Reddy and A.V.V. Nair for the respondent.
The Judgment of the Court was delivered by KRISHNA IYER, J.
Keynote thought.
Politics and philanthropy may well fall victims to the contruction of section 5(a) and (j) of the Expenditure.
Tax Act, 1957 (the Act for 1018 short) if we fall victim to the submission naively made, at the first stage, by counsel for the State.
In fairness to him, we must state that later he retracted from that position, and rightly so, for the Act, in spirit and letter, does not intend this blow on the profession of politics or the disposition for donations.
A fair reading of the provisions in question convincingly excludes from 'taxable expenditure ' sums wholly and exclusively incurred for the purpose of a profession or occupation carried on by the assessee and no modern man may dispute that politics is a profession or occupation.
Likewise, expenditure by way of gift or donation incurred by the assessee is also excluded and no politically conscious soul will deny that donation to the party in a democracy squarely comes within this exclusionary provision.
The factual matrix Expenditure tax under the Act was sought to be levied from the assessee PVG Raju, the respondent before us.
Paradoxical, perhaps, it may appear but here is a case of a rich Maharaja practising the politics of socialism, spending lavishly for furthering his party 's popularity and the prospects of his fellow candidates at the elections to the Andhra Pradesh Legislative Assembly.
This expenditure, falling under two heads, was taxed by the assessing authority and upheld up to the Tribunal level.
The High Court, on reference, reversed the findings on both counts and the Commissioner of Expenditure Tax, the appellant, challenges the legality of this verdict.
The best beginning in stating the facts may well be to extract the questions of law referred by the Tribunal in its own words: "(1) Whether on the facts and in the circumstances of the case the expenditure of Rs. 38,832/ claimed to be the amount incurred by the assessee for the benefit of other candidates for election is excludible from the taxable expenditure either under Section 5 (a) or under Section 5 (j) of the Expenditure Tax Act ? (2) Whether on the facts and in the circumstances of the case the sum of Rs. 47,867/ claimed to be party expenses could be excluded from the taxable expenditure of the assessee either under Section 5(a) or under Section 5(i) of the Expenditure Tax Act ? We have to assume the following facts as implied in the very questions referred to the High Court and from the attendant circumstances.
They are: (a) that the respondent, during the relevant period was the Chairman of the State Socialist Party which was interesting itself in electoral politics; 1019 (b) the respondent was a wealthy socialist; (c) that he was meeting not only the expenditure of his own elections but spending moneys for the benefit of other candidates belonging to his party; (d) that he was issuing cheques to the Secretary and other office bearers of his party to meet the expenses involved in party work.
He expended Rs. 38,832/ for propelling the election prospects of other party candidates during the election.
Likewise, he gave Rs. 47,867/ to his party through its office bearers.
On these facts the question is whether he is eligible for exclusion of the two sums from expenditure tax either under section 5(a) or under section 5(j) of the Act.
Consideration of the legal issue It is appropriate to start with reading the relevant portion of s 5 of the Act: "section 5.
No. expenditure tax shall be payable under this Act in respect of any such expenditure as is referred to in the following clauses, and such expenditure shall not be included in the taxable expenditure of an assessee.
(a) any expenditure, whether in the nature of revenue expenditure or capital expenditure, incurred by the assessee wholly and exclusively for the purpose of the business, profession, vocation or occupation carried on by him or for the purpose of earning income from any other source; (b) to (i). (j) any expenditure incurred by the assessee by way of, or in respect of any gift, donation or settlement on trust or otherwise for the benefit of any other person.
" The assessee was Party Chairman and politics was undoubtedly his profession or occupation, it being admitted that his interest in politics was not causal nor sporadic but abiding and ambitious.
The contention of the respondent which met with success before the High Court was that the election expenses of other candidates set up by him as Chairman of the Socialist Party, loosely described as 'party expenditure ', were incurred wholly and exclusively for the purpose of his 'profession ' or 'occupation '.
So, the first point which arrests our attention in examining this contention is as to whether politics of the socialist brand or otherwise is a profession or occupation.
There can hardly be any doubt that it is either, or both.
Harold Laski treated politics as a science and wrote his well known book on the Grammar of Politics, but the art of politics at a practical level has also been the subject of comment and has been praised and denounced on the basis that it is a profession.
To Gandhiji it is sacred as religion.
In Lincoln it rises to noble heights of statesman 1020 ship.
Lenin, Nehru and a galaxy of other great visionaries and makers and moulders of the modern world have dedicated themselves to politics as a profession.
Of course in its vulgar and vicious manifestations, this occupation has been regarded by literary giants like Dr. Johnson as the last refuge of a scoundrel '.
Robert Louis Stevenson has used barbed words: 'Politics is perhaps the only profession for which no preparation is thought necessary (Familiar studies of Men and Books, 'Yoshida Torajiro ').
George Bernard Shaw uses stinging language in Major Barbara: 'He knows nothing; and he thinks he knows everything.
That points clearly to a political career '.
It is thus clear, without reference to the wealth of case law relied on by the High Court, that politics has been a profession and, indeed, under modern conditions in India, perhaps the most popularand uninhibited occupation with its perils, of course.
Law cannot take leave of realities and therefore section 5(a) must bear the construction that politics is a profession or occupation.
The next question is whether the expenditure incurred by the assessee for the election of candidates set up by him as Chairman of his party can be legitimately regarded as incurred 'wholly and exclusively ' for the purpose of his profession or occupation.
We have grave doubts whether meeting the expenses of other candidates can be fulfilment of his professional expenses, but this question deserves no deeper probe for the simple reason that section 5(j) embraces the expenditure as it does answer the description of a donation.
When a person gives money to another without any material return, he donates that sum.
An act by which the owner of a thing voluntarily transfers the title and possession of the same from himself to another, without any consideration, is a donation.
A gift or gratuitous payment is, in simple English, a donation.
We do not require lexicographic learning nor precedential erudition to understand the meaning of what many people do every day, viz., giving donations to some fund or other, or to some person or other.
Political donations are not only common, but are assuming deleterious dimensions in the public life of our country.
It is therefore clear that when this Raja assessee gave money to the candidates of his Party for them to meet their election expenses, he made donations.
Even if he met their election expenditure, it was money gratuitously given on their behalf and therefore amounted to donation.
Without straining language, we reach the natural conclusion that what the respondent expended for the other candidates during the elections was 'donation ' in the language of the law.
There is no suggestion nor evidence that any material return was in contemplation when he spent these sums.
Being a politically important man with plenty of money and vitally interested in boosting his Party 's standing in the State, he donated liberally for candidates set up by the party.
In this view section 5(j) aplies to these donations which earn exemption from the expenditure tax.
The next item relates to sums gives to the Socialist Party.
It is reasonable to assume that the amounts paid to the office bearers 1021 of the party were without an eye on any material return other than loyalty or gratitude.
They were outright gifts.
Indeed, many rich people out of diverse motives make donations to political parties.
The hope of spiritual benefit or political goodwill, the spontaneous affection that benefaction brings, the popularisation of a good cause or the prestige that publicised bounty fetches these and other myriad consequences or feelings may not mar a donation to make it a grant for a quid pro quo.
Wholly motiveless donation is rare, but material return alone negates a gift or donation.
We need not investigate the propriety or political donations 'unlimited ' and often invisible.
All that we need consider is whether such sums are gifts and donations or are non gratuitous payments with a tag of return.
We have no doubt that on the question as framed, and on the facts and circumstances present, these sums were paid purely as gifts and donations to his Party by the respondent.
It is not surprising either, because he was the Chairman of the said party, had a long and liberal purse from which to draw and a large circle of support to build up in the long run.
The inevitable conclusion from our discussion is that both the heads of expenditure fall under s.5(j) of the Act and, therefore, flow out of the assessable zone.
The High Court 's conclusion is sound and the appeal deserves to be and is hereby dismissed, but without costs.
V.P.S. Appeal dismissed.
| IN-Abs | Under section 5 (a) and (j) of the Expenditure Tax Act, 1957, no expenditure tax shall be payable on any expenditure incurred by the assessee wholly and exclu sively for the purpose of his business profession or vocation, and on any expenditure incurred by the assessee by way of donation.
The respondent assessee was the Chairman of the State Socialist Party and politics was his profession or occupation.
He is a wealthy socialist and spent Rs. 38,832/ towards election expenses of other candidates of his party, and gave Rs. 47,867/ to the office bearers of his party to meet the expenses involved in party work.
^ HELD: The two amounts are eligible for exclusion from expenditure tax.
[1021 B] (1) Under modern conditions, politics is a profession or occupation.
[1020 C] (2) But the expenses incurred on behalf of other candidates cannot be the assessee 's professional expenses.
[1020 D] (3) The amounts, however, fall under section 5(j) of the Act.
When a person gives money to another without any material return, he donates that sum.
Therefore, when the assessee gave money to the candidates of his party for their elections expenses, it was money gratuitously given, that is he made donations.
[1020 E G] (4) Similarly, the amounts paid to office bearers of the party were not for any material return.
They were for loyalty or gratitude.
Wholly motiveless donation is rare but material return alone negates a gift or donation.
Therefore, they also were outright gifts.
[1021 A C]
|
Civil Appeal No. 2104 of 1969.
Appeal by Special Leave from the Judgment and order dated the 27th February, 1969 of the Industrial Tribunal, Bihar, Patna in reference No. 54 of 1966.
section V. Gupte and U. P. Singh for the Appellant.
E A. K. Nag and D. P. Mukherjee for Respondents.
The Judgment of the Court was delivered by ALAGIRISWAMI, J.
This appeal is by special leave granted by this Court against the award of the Industrial Tribunal, Bihar at Patna in reference No. 54 of 1966 made by the Government of Bihar on 25th November, 1966.
The special leave granted is limited only to the question whether there should be a contributory provident fund scheme on the basis of basic wages or total wages.
It was noted at the time of granting the special leave that the appellant Board is willing to extend that scheme to all the workers except the Government servants who are on deputation and those to whom the Employees Provident Fund Act applies.
Therefore the only item in reference No. 54 of 1966 which is relevant for the purpose of this appeal is the following: "Whether the benefit of the Employees ' Provident Fund Act, 1952 should be extended to any additional categories of workmen ? If so, what should be the terms and conditions and from what date ?" The Employees ' Provident Fund Act applies only to establishments which are factories.
It could be applied to establishments which are not factories if the Central Government by notification in the official 44 Gazette specifies in this behalf.
The industry in question" electricity including the generation, transmission and distribution thereof, is on to which the Act applies.
But as is well known only a small proportion of employees connected with the generation of electricity is in establishment which are factories.
The transmission and distribution is all over the State and the employees concerned with transmission and distribution and the maintenance of those lines of transmission and distribution are spread all over the State and probably far outnumber those working in establishments which are factories.
To them the Employees ' Provident Fund Act does not apply.
The Board maintains a Contributory Provident Fund where the contribution is on the basis of basic wage, the Board and the employees contributing equally.
The workmen claimed that all workmen of the Board should have the same and similar benefits and that therefore there should be no distinction between the Board 's Contributory Provident Fund scheme and the scheme under the Employees Provident Fund Act.
Moreover, the contribution under the Act is 8 per cent whereas under the Board 's scheme it is 6.25 per cent.
The employees also contended that the services of the workmen of the Board are liable to be transferred from one establishment to another both which may not he covered by the same scheme under the Act and therefore it will bring about serious injustice if they are deprived of their benefits under the Act, and such anomalies will be removed by making the benefits under both the schemes similar.
The Board 's contention was that this would impose additional financial liabilities which the Board would not be able to bear.
Therefore, the main question which the Tribunal had to consider was the Board 's financial capacity to implement the Provident Fund scheme as demand: ed by the workmen.
It seems to have been argued on behalf of the workmen that the State Government is the financier of the Board which charges interest now at the rate of 6.25 per cent as against the previous 4 per cent per annum.
It, was also contended that no scheme run by the Board was running at a loss.
Exhibit 17, purported to contain trading results of the Board., was shown to the Tribunal and it was argued that in the year ending March 1969 Board 's gross profits amounted to Rs. 305.12 lakhs and it had been continuously rising from Rs. 59.39 lakhs in 1961.
Exhibit 18 shows the loans which have been received from the Government by the Board and the balance sheet shows a very large amount in the shape of interest payable to the Government.
It was argued on behalf of the Union that this amount should be taken as dividend to be paid to the Government by the Board and should not be taken into consideration while deciding matters regarding benefits to be made available to its employees.
The validity of none of these contentions was considered by the Tribunal.
It referred to an award made by it in 1964 in reference No. 19 of 1960 in which it had held that if the interests realised by the State were excluded from consideration, there would be surplus in favour of the Board.
In that award it had been pointed out that it had not been explained by the management how the depreciation had been calculated.
That award also pointed out that one of the main reasons for the deficits shown was heavy interest on the capital investment, that in an electrical establishment capital investments are heavy in the initial stages, that the Board expected that after the load developed fully the scheme would start giving adequate 45 profits.
The Tribunal thought that the position at present was not worse than what it was earlier and that therefore the Board should extend the benefits of the Contributory Provident Fund to all workmen other than those who are covered by the Act.
It therefore ordered that the contribution should be 6.25 per cent but not on the basic wages but on the total wages.
The Tribunal has treated the whole matter in a very perfunctory manner.
The main question for consideration by the Tribunal was the financial capacity of the Board.
It has made no effort at all to analyse the balance sheet of the Board to show the actual results of its working.
It has made no effort to work out the financial implications of its order.
It has not made it clear what exactly are the total wages.
In Gramophone Co. vs Its Workmen(1) it was held by this Court that: "Before the real profit for each of the relevant years is ascertained amounts to be provided for taxation and for development rebate reserve could not be deducted in order to ascertain the financial capacity of the employer.
In considering the question of provident fund and gratuity which stands more or less on the same footing the industrial tribunal has to look at the profits made without considering provision for taxation in the shape of income tax and for reserves.
The provision for income tax and for reserves must take second place as compared to provision for wage structure and gratuity, which stands on the same footing as provident fund which is also a retiral benefit.
Payment towards, provident fund and gratuity is expense to be met by an employer like any other expense including wages and if the financial position shows that the burden of payment of gratuity and provident fund can be met without undue strain on the financial position of the employer, that burden must be borne by the employer.
It will certainly result in some reduction in profits; but if the industry is in a stable condition and the burden of provident fund and gratuity does not result in loss to the employer that burden will have to be borne by the employer like the burden of wage structure in the interest of social justice.
While on the one hand casting of this burden reduces the margin of profit, on the other hand it will result in the reduction of taxation in the shape of income tax." That case was a case of an ordinary commercial concern.
Even so it was noticed that the stability of the industry as well as the fact that the burden of provident fund and gratuity does not result in loss to the employer are to be taken into consideration.
the actual burden was calculated and it was pointed out that 63 per cent of it would be met by reduction in taxation.
Nothing of the sort has been done by the Tribunal in this case.
It is true that in that case it was said that the amounts to be provided for taxation and for development rebate reserve could not be deducted in order to ascertain the financial capacity of the employer.
Nothing was said there about the depreciation reserve (1) [1964] II L. L. J.131.
46 which is obligatory under section 68 of the the Electricity Board is not an ordinary commercial concern.
It is a public service institution.
It is not expected to make and profit.
It is expected to extend the supply of electricity to unserved areas without reference to considerations of loss that might be incurred as a result of such extension.
The Government makes subventions to the Board for the purposes of the Act.
Section 59 of the Electricity supply Act, 1948 provides that as far as practicable and after taking credit for any subventions from the State Government the Board shall carry on its operations so as not to incur a loss.
Under section 64 the State Government may advance loans to the Board and under section 65 the Board itself has the power to borrow.
Under section 66 the State Government may guarantee the payment of principal and interest of any loan proposed to be raised by the Board.
Under section 67 after meeting its operating maintenance and management expenses and after provision has been made for the payment of taxes on its income and profits the revenues of the Board have to be distributed as far as they are available in the following order, namely: (i) interest on bonds not guaranteed under section 66; (ii) interest on stock not so guaranteed; (iii)credits to depreciation reserve under section 68; (iv) interest on bonds guaranteed under section 66: (v) interest on stock so guaranteed; (vi) interest on sums paid by the State Government under guarantees under section 66; (vii)the write down of amounts paid from capital under the proviso to sections 59; (viii)the write down of amounts in respect of intangible assets to the extent to which they are actually appropriated in any year for the purpose in the books of the Board; (ix) contribution to general reserve of an amount not exceeding one half of one per centum per annum of the original cost of fixed assets employed by the Board so however that the total standing to the credit of such reserve shall not exceed fifteen per centum of the original cost of such fixed assets; (x) interest on loans advanced or deemed to be advanced to the Board under section 64, including arrears of such interest: (xi) the balance to be appropriated to a fund to be called the Development Fund to be utilised for (a) purposes beneficial, in the opinion of the Board, to electrical development in the State; (b) repayment of loans advanced to the Board under section 64 and required to be repaid: 47 Provided that where no such loan is outstanding, one half of the balance aforesaid shall be credited to the Consolidated Fund of the State.
Section 68 lays an obligation on the Board to make a credit to the depreciation reserve in the prescribed manner.
The facile assumption by the Tribunal that the interest should No. be taken into account in working out the profits is not borne out by the provisions of the statute.
Indeed the Tribunal did not look into the Act at all.
Whether in view of the statutory obligations laid on ii under the various sections just now referred to in analysing the capacity of the Board to bear any additional burden in the matter of provident fund or other amenities the same considerations that applied in the case of private commercial concerns could be applied is a rather difficult question.
In fact the decision might very often depend on a close analysis of the financial condition of the Board.
We do not want at present to express one view or the other.
one thing at least is obvious, that the various sums payable under the provisions of section 67 have to be deducted before the profits could he ascertained.
Even with regard to the depreciation reserve the provisions of section 68 may have to be taken into account.
If it is not it would have to be met by loans on which interest will have to be paid and deduction of interest so paid will have to be taken into account in calculating the profits.
The contribution to the depreciation reserve is a statutory obligation and is a definite proportion whereas it is open to an ordinary commercial concern to credit any amount to the depreciation reserve.
These and other matters cannot be properly decided in the absence of a detailed examination of the finances of the Board.
That is why we said that the Tribunal has dealt with the matter in a perfunctory way.
It should.
be directed to dispose of the matter afresh in the light of the observations made in this judgment.
The appeal is accordingly allowed.
There will be no order as to costs.
P.H.P. Appeal allowed.
| IN-Abs | Electricity Supply Act, 1948 section 59, 64, 65, 66 67 and 68.
The Employees Provident Fund Act applies only to establishments which are factories.
The industry in question electricity including generation, transmission and distribution thereof, is one to which the Act applies.
But only a small proportion of employees connected with the generation of electricity is establishments which are factories.
To the rest the Act does not apply.
The appellant maintains a contributory provident fund for those employees who are not covered by the Act where the contribution is on the basis of basic wage the appellant and the employees contributing equally.
The contribution under the Act is 8 per cent whereas under the appellant 's scheme it is 6.25 per cent.
The workmen respondents claimed before the Industrial Tribunal in a reference made by the Govt.
Of Bihar (1) that all workmen of the appellant should have the same and the similar benefits and that, therefore.
there should be no distinction between the appellant 's contributory provident fund scheme and the scheme under the Employees Provident Fund Act.
(2) The services of the workmen of the appellant are liable to be transferred from one establishment to another both of which may not be covered by the same scheme and such anomalies can be removed by giving the same benefits to all the workmen; (3) That the State was the financier of the appellant which now charges interest at the rate of 61 per cent as against previous 4 per cent; (4) That no scheme run by the Board was running at a loss; (5) That a large amount was paid to the Government by me appellant in the shape of interest towards the loans received from the Government and that such amounts should be taken as dividends to be paid to the Government by the appellant and should not be taken into consideration while deciding the matters regarding benefits to be made available to its employees.
The appellant contended before the Industrial Tribunal that the demand of the workmen would impose additional financial liabilities which the appellant would not be able to bear The Tribunal did not consider the validity of the above submissions It merely relied on an earlier award in which it was observed that if the interest realised by the Government were excluded from consideration there would be surplus in favour or the appellant.
The Tribunal held that since the position of the appellant was not worse than what it was at the time of the earlier award, the appellant should extend the benefits of the contributory provident fund to all workmen who are not covered by the Act and that the contributions should be 6.25 per cent not on the basic wages but on the total wages.
Allowing the appeal, ^ HELD: (1) The Tribunal has treated the whole matter in a very perfunctory manner.
The main question for consideration by the Tribunal was the financial capacity of the Board.
It has made no effort at all to analyse the balance sheet of the appellant to show the actual results of his working.
It has made no effort to work out the financial implications of its order.
It has not made it clear what exactly are the total wages.
This Court in the case of Gramophone Company.
although it was a case of ordinary commercial concern, calculated the actual burden to protect the stability of the industry and to see that the imposition of the burden does not result in loss to the employer.
43 (2) The appellant is not an ordinary commercial concern.
It is a public service institution.
lt is not expected to make any profits.
It is expected to extend the supply of electricity to unserved areas without reference to considerations of loss that might be incurred is a result of such extension.
Section 59 of the provides that as far as practicable The Board shall carry on its operations so as not to incur loss.
section 64 enables the State Government to advance loans to the Board.
section 65 authorises the Board to borrow.
section 66 authorises the State Government to guarantee loans raised by the Board.
section 67 lays down the manner in which the profits have to be distributed.
section 68 imposes obligation on the Board to make a credit to the depreciation reserve in the prescribed manner.
[46 A C].
The assessment by the Tribunal that the interest should not be taken into account in working out the profits is not borne out by the provisions of the statute.
The Tribunal did not look into the Act at all.
Whether in view of the statutory obligations laid on the appellant under the aforesaid sections whether the same considerations which apply in the case of private commercial concerns could be applied to the Board while analysing the capacity to bear the additional burden is rather a difficult question.
We do not express any view on that question.
However various sums payable under section 67 have to be deducted before the profits could be ascertained and with regard to depreciation reserve, the provision of section 68 may have to be taken into account.
[47 C E].
The matter was remanded back to the Tribunal to be disposed of in the light of the observations made in the judgment.
|
N: Petition for Special Leave to Appeal (Crl) No. 840 of 1975.
From the judgment and order dated 1st August, 1975 of the Andhra Pradesh High Court at Hyderabad in Criminal Writ Petition No. 4168 of 1975.
R. K. Garg section C. Agarwala V. J. Francis and Ram Panjwani, for the petitioners.
P. Ram Reddy and P. P. Rao for the respondent.
ORDER OF THE COURT The young petitioners held to be murderers by the Court and sentenced to death, having regard to the blood curdling ruthlessness of the guilt, crossed over from the jurisdiction of courts to the clemency zone of the President under Art 72.
This last chance to live appeal for mercy by men who mercilessly killed, allegedly 74 driven by the humanist urge for catalysing social justice through terrorist technology, found no compassionate response.
The refusal of the President to commute the death sentence rushed the petitioners back to the High Court to save their life through the Court 's writ.
Rejection by that Court has compelled them to seek judicial sanctuary in the Supreme Court as the final scene of the Fifth Act of the tragic drama is drawing near.
Shri Garg has grounded his arguments on two socio legal basics.
A politically motivated offence committed by the two frustrated men who were disenchanted by the die hard injustice of massive suffering and suppression, to shock and shake the custodians of the status quo ante, stands on a separate footing from the common run of crimes and the root humanity of their ruthless inhumanity, though pertinent, was blindly brushed aside by the President.
Thereby he excluded a crucially conscientious consideration from an essentially compassionate jurisdiction which rendered the rejection of commutation illegal and unconscionable.
Assuming a measure of validity in this socio poilitical submission, can the Court even the Supreme Court rush in where the Constitution has made the President the repository of a benignant life or death power, non justiciable without breaching the dykes of article 72 (or article 151, if it be the Governor) and non accountable except to the good conscience of the top Executive Justice is not always channeled through a Judge and what is out of bounds for and not enforceable through regular courts does not, ipso jure become arbitrary or unjust.
In our Constitutional order any system of jurisprudence the Judicature is a great instrumentality but not 'a brooding omnipotence in the sky '.
Shri Garg, undaunted by this inhibitive doctrine, insisted that the dynamics of power in a democratic polity must be governed by the rule of law, 'basic feature ' of the Constitution.
True, where law ends, tyranny begins.
Counsel 's contention is that the President 's 'mercy ' power is subject to this paramount obligation to reckon all relevant, and reject all irrelevant factors in reaching his verdict of death or life.
Here, urged Shri Garg, two vital digits have been overlooked that political offenders from Bhagat Singh to the Spanish five (whose execution recently quaked world public opinion) were not common criminals and, secondly, that there has been obliviousness to the growing great trend against death penalty as a legal barbarity now gleaned in pronouncements of this Court and the penal reform currently before Parliament.
The force of the twin submissions, together with a third noticed in Ediga Anamma [1974]3SCR329 viz., the secred, yet secular commandment "thou shall not kill" need not be under rated to undo their argumentative potency in this forum.
What is powerful as pre legislative campaign or post legislative reform, what is high ethics and noble humanism on Sunday pulpit and Political platform and what is sure to dawn tomorrow but is struggling to be born today all these are on the law moulding matrix but not law now and here.
We are not prophets of the Advent but pragmatic technicians using the tools and the know how handed down to Courts by the legislature.
Judges may have a creative role and do activist engineering 75 but obedient to the text of the Constitution.
Such a perspective informs our appraisal of both the contentions enumerated by him as nine, but condensed by us into two.
Patriots and others seeking of accomplish political goals or to attack the political order may commit acts which under municipal laws may be crimes but are designated in other jurisdictions like extradition laws and sometimes for purposes of reprieve as a class called political offences.
But the Penal Code which, by oath of office, we enforce, makes no such classification and in the cold stare of our criminal system, murder is murder.
Moreover, the capital punishment was imposed by a court in this case as early as 1972 and upheld right through.
As Judges, we cannot re write the law whatever our views of urgent reforms, as citizens, may be.
And the sentence of death having been awarded by the Court, the judicial frontiers have been crossed and, however regrettable and irrevocable, taking of human life by the States ' coercive apparatus, may be, our sympathies have no jural relevance.
So the new and expanding trend towards abolition of capital penalty, while true, cannot help the hangman 's rope in this case.
The surviving point about the assail on the exercise of the 'clemency ' power of President demands closer examination.
A constitutional order built on the founding faith of the rule of law may posit wide powers in high functionaries and validly exclude judge power from eating these forbidden fruits.
article 72 (and article 161) designedly and benignantly vest in the highest executive the humane and vast jurisdiction to remit, reprieve, respite, commute and pardon criminals on whom judicial sentences may have been imposed.
Historically, it is a sovereign power; politically, it is a residuary power; humanistically, it is in aid of intangible justice where imponderable factors operate for the well being of the community, beyond the blinkered court process.
In Nanavati(1) is Court half explored the area of 'mercy ' power but switched on to a different question without pronouncing on the Court 's review of Presidential exercise of commutation or respite power.
Sinha.
C.J. speaking for the Court, observed: Pardon is one of the many prerogatives which have been recognised since time immemorial as being vested in the sovereign" wherever the sovereignty might lie.
Whether the sovereign happened to be an absolute monarch or a popular republic or a constitutional king or queen, sovereignty has always been associated with the source power the power to appoint or dismiss public servants, the power to declare war and conclude peace, the power to legislate and the power to adjudicate upon all kinds of the disputes." (p. 516) x x x x 1) ; 76 The Rule of law, in contradiction to the rule of man, includes within its wide connotation the absence of arbitrary power, submission to the ordinary law of the land, and the equal protection of the laws.
As a result of the historical process aforesaid" the absolute and arbitrary power of the monarch came to be canalised into three distinct wings of the Government".
(p. 517) "We have thus briefly set out the history of the genesis and development of the Royal Prerogative of Mercy because Mr. Seervai has strongly emphasised that the Royal Prerogative of Mercy is wide and absolute, and can be exercised at any time.
Very elaborate arguments were addressed by him before us on this aspect of the matter and several English and American decisions were cited.
In fact we apprehend that entering into an elaborate discussion about the scope and effect of the said larger power, in the light of relevant judicial decisions, is likely to create confusion and to distract attention from the essential features of the very narrow point that falls to be considered in the present case.
" (p.519) It is apparent from these observations that the question of justiciability has not been affirmed or negatived in the aforesaid decision.
No power in a republic is irresponsible or irresponsive, the people in the last resort being the repositories and beneficiaries of public power.
But two limitations exist in our constitutional system.
The Court cannot intervene everywhere as an omniscient, omnipotent or omnipresent being.
And when the Constitution, as here, has empowered the nation 's highest Executive, excluding, by implication, Judicial review, it is officious encroachment, at once procedurally ultra vires and upsetting comity of high instrumentalities, for this Court to be a super power unlimited.
The second limitation conditions all public power.
whether a court oversees or No.
That trust consists in the purity of public authorities.
All power, however, majestic the dignitary wielding it, shall be exercised in good faith, with intelligent and informed care and honestly for the public weal.
Counsel 's contention that equality is denied in the matter of sentence where some get the benefit of clemency while others do not, has no foundation nor is there any trace of despotism involved in this matter in the case before us.
The court has deliberately awarded death sentence.
The President is expected to, and we are sure will, consider all facts and circumstances bearing on the just discharge of his high duty.
When the President is the custodian of the power, the Court makes an almost extreme presumption in favour of bona fide exercise.
We have not been shown any demonstrable reason or glaring ground to consider the refusal of commutation in the present case as motivated by malignity or degraded by abuse of power.
We therefore cannot find our way to interfere with what the President has done.
77 We must however sound a note of caution.
Absolute arbitrary, law unto oneself malafide execution of public power, if gruesomely established, the Supreme Court may not be silent or impotent.
Assuming as proved the case of a President gripped by communal frenzy and directing commutation of all the penalties where the convict belongs to a certain community and refusing outright where the convict belongs to a different community, there may be, as Shri Garg urged, a dilemma for the Court.
Assuming the Governor in exercise of his power under article 161 refusing to consider cases of commutation where the prisoner is above 40 years of age as a rule of thumb or arbitrarily out of personal vendatta rejecting the claim of clemency of a condemned prisoner, is the Court helpless ? This large interrogation is highly hypothetical and whether the remedy is in Court or by impeachment in Parliament or by rising resentment in public opinion,, it is not for us to examine now.
Enough unto the day is the evil thereof.
Before parting with this special leave petition which we reject we visualize the contingency of the petitioners invoking the merciful jurisdiction of the President or Governor.
as the case may be, setting out various factors with which the Court may not be concerned while imposing judicial sentence but may still have persuasive value before the concerned Executive.
The rejection of one clemency petition does not exhaust the power of the President or the Governor.
The circumstances pressed before us about the political nature of the offence, the undoubted decline in capital punishment in most countries of the world, the prospective change in the law bearing on that penalty in the new Penal Code Bill, the later declaration of law in tune with modern penology with the correctional and rehabilitative bias emphasized by this Court in Ediga Anamma (supra), the circumstances that the Damocle 's sword of death sentence had been hanging over the head of the convicts for around 4 years and like factors may, perhaps,, be urged before the President.
Over the centuries, society has moved away from the crueller forms of inflicting legal death and almost a revolutionary change in penology has taken place in England since, in 1801 AD a boy of 13 years old was hanged for stealing a spoon.
Not raw ferocity but warm humanity is the real heart of law.
A recent publication states with graphic grimness, " The man sits in a cage of steel and concrete under a single bright light that burns around the clock.
He has been tried by a jury of his peers, judged and sentenced to die.
He has killed and now society, through the anonymous machinery of the state, will kill him.
He has been brought here to keep that appointment with death." (The Life We Take A case against the Death Penalty by Trevor Thomas Friends Committee on Legislation, California) Our reflections on hanging,, our philosophy for mercy and our observations about death sentence being abolished in country after country and the irrevocable harm of a wrong execution these great facts cannot deflect us from our constitutional duty not to interfere where we have no jurisdiction.
We accordingly dismiss the special leave petition.
V.P.S. Petition dismissed.
| IN-Abs | The petitioners were found guilty of murder by the court and sentenced to death, Their petition to the President of India for commuting the death sentence was rejected, Thereupon, they filed a writ petition in the High Court to quash the order of the President on the ground that he had not taken into account two factors, namely, (1) the offences were 'political '; and (2) the prevailing trends against death sentence.
The High Court dismissed the petition, Dismissing the petition for special leave to this Court.
^ HELD: (1) Assuming that the offences are political offences, under the Indian Penal Code, murder is murder and judges cannot re write, the law whatever their views on death sentence, as citizens, may be, and interfere where they have no jurisdiction, [75 B C; 77 H], (2) All power however majestic the dignitary wielding it may be, shall be exercised in good faith with intelligent and informed care and honestly for the public weal.
But, when the Constitution has empowered the nation 's highest Executive as the repository of the clemency power, the Court cannot intervene and judicial review is excluded by implication.
Since, the contention, in this case, that equality is denied in the matter of sentence because some get the benefit of clemency while others do not, has no foundation.
nor is there any trace of despotism involved, it is not necessary to examine in whom the remedy lies if arbitrary exercise of public power is definitely established a particular case.
[76 E H].
The rejection, however, of one clemency petition does not exhaust the power of the President or the Governor.
Therefore, the petitioners may urge the circumstances pressed before this Court for clemency again before the President.] [77 D E].
|
Civil Appeal No. 63 of 1971.
Appeal by Special Leave from the Judgment and order dated the 19th February 1970 of the Andhra Pradesh High Court in R.C. No. 50 of 1966.
section T. Desai and K. Rajendre Choudhary, for the Appellant G. C. Sharma and section P. Nayar, for the Respondent.
The Judgment of the Court was delivered by GUPTA, J.
This appeal by special leave is directed against an order of the High Court of Andhra Pradesh at Hyderabad answering in the negative and in favour of the revenue the following question referred to it under sec.
66(1) of the Indian Income Tax Act, 192 (hereinafter referred to as the Act).
"Whether the Assessee is entitled to registration under Section 26A of the Income Tax Act, 1922 for the assessment year 1961 62.
" The assessee is a firm.
The instrument of partnership was executed on January S, 1959 but the application for registration under sec.
26A remained undisposed of until the assessment for the year 1961 62 was taken up.
The instrument shows that three persons, Mandyala Narayana, Mandyala Venkatramaiah, Mandyala Srinivasulu and a minor, Mandyala Jaganmohan who was admitted to the benefits of the partnership, held the following shares: Narayana 31 per cent, Venkatramaiah 23 per cent, Srinivasulu 23 per cent, and minor Jaganmohan 23 per cent: Clause 2 of the instrument which sets out the 133 shares of the partners add that the profits of the above partnership A business shall be divided and enjoyed according to the shares specified above.
" There is no clause in the instrument specifying the proportion in which the three adult partners were to share the losses, if any.
Having set out all the terms of agreement, the instrument closes with clause 9 which states: "We (the partners) are bound to act according to the above mentioned stipulations and also according to the provisions of the Indian Partnership Act. " The High Court was of the view that unless the instrument of partnership specified the shares of the partners not only in the profits hut also in the losses, the firm would not be entitled to registration under sec.
26A, and negatived the contention raised on behalf of the assessee that clause 9 of the instrument indicated how losses were to be apportioned between the partners.
The correctness of this decision is challenged by the appellant firm.
It is not that a firm to be able to trade must be registered under sec.
26A. A firm, registered or unregistered, is an assessee under the Act and can do business as such.
However, registration under sec.
26A "confers on the partners a benefit", as would appear from the provisions of sec.
23 (5) of the Act, "to which they would not have been entitled but for section 26A, and such a right being a creature of the statute, can be claimed only in accordance with the statute which confers it, and a person who seeks relief under section 26A must bring himself strictly within its terms before he can claim the benefit of it": Rao Bahadur Ravulu Subba Rao and others vs Commissioner of Income tax, Madras.(1) The question in this case is whether in the absence of a specific statement in the instrument as to the proportion in which the partners were to share the losses, the requirement of sec.
26A can be said to have been satisfied.
Sec 26A reads: "26A. (1) Application may be made to the Income tax officer on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners for registration for the purposes of this Act and of any other enactment for the time being in force relating to income tax or super tax.
(2) The application shall be made by such person or persons, and at such times and shall contain such particulars shall be in such form, and be verified in such manner, as may be prescribed; and it shall be dealt with by the Income tax officer in such manner as may be prescribed.
" The required particulars are specified in rules 2 and 3 of the Rules framed under the Act and the form of application including the Schedule annexed to rule 3.
Paragraph 3 of the Form requires the partners to ` 'certify that the profits (or loss if any) " of the relevant period were or will (1) 134 be, as the case is, '`divided or credited, as shown in Section 8 of the Schedule".
In Section 8 of the Schedule are to be recorded the "particulars of the apportionment of the income, profits or gains (or loss) of the business, profession or vocation in the previous year between the partners who in that previous year were entitled to share in such income, profits or gains (or loss)".
Note (2) appended to this Schedule states that if any partner is entitled to share in profits but is not liable to bear a similar proportion of any losses, this fact should be indicated.
It is clear therefore that the application for registration which has to be made in the prescribed form must include particulars of the apportionment of the loss, if any.
It does not appear to have been considered in this case whether the application for registration made by the firm conforms to the prescribed rules; the dispute is confined to the question whether sec.
26A requires the instrument of partnership to specify the individual shares of the partners in the profits as well as the losses of the business.
Section 23(5) of the Act provides different procedures in the assessment of a registered firm and a firm that is unregistered.
Without going into details, in the case of a registered firm the share of each partner in the firm 's profits is added to his other income and he is assessed on his total income which includes his share of the profits and the tax payable by him is determined accordingly.
There is a proviso which lays down that "if such share of any partner is a loss it shall be set off against his other income or carried forward and set off in accordance with the provisions of section 24".
Thus, the loss, if any, affects the assessment proceeding and therefore the Income tax officer has to know what are the respective shares of the partners in the losses before allowing the firm to be registered.
It is not disputed that the Income tax officer must be in a position to ascertain how losses are to be apportioned; the question is whether it is a condition for registration under sec.
26A that the instrument of partnership must specify the respective shares of the partners in the losses.
According to the appellant sec.
26A has no such requirement.
The appellant contends that sec.
26A does not require specification of the shares in losses in the instrument of partnership and it is sufficient if the proportion in which the losses are to be shared is otherwise ascertainable, and that, assuming the section did so require, clause 9 of the instrument satisfies that requirement.
The contention that clause 9 specifies the respective shares of the partners in the losses is obviously untenable.
This clause says that the partners are "bound to act according to the provisions of the Indian Partnership Act"; that they are in any case, and it is not clear which provision of the Partnership Act indicated the proportion in which the partners were to bear the losses in this case.
Counsel for the appellant refers to sec.
13(b) of the Partnership Act in this connection.
12(b) reads: "Subject to contract between the partners (a) x x x x (b) the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm :" 135 We shall refer to sec.
13(b) in more detail when we consider the other contention of the appellant, but assuming that this provision has any relevance to the facts of this case, which it has not, bringing in by implication sec.
13(b) from a general statement that the partners are to act in accordance with the Partnership Act does not amount to specification of the partners ' shares in the losses, and the instrument of partnership, it must therefore be held, fails to comply with sec.
26A of the Act, were this a requirement of that section.
The other contention of the appellant is that it is not essential for registration under sec.
26A of the Act that the shares of the partners in the losses must be specified in the partnership deed.
In support of this contention reliance is placed mainly on two decisions, one of the Mysore High Court: R. Sannappa and Sons vs Commissioner of Income tax, Mysore (1) and the other of the Allahabad High Court: Hiralal Jagannath Prasad vs Commissioner of Income tax, U.P. (2) on behalf of the revenue it is claimed on the authority of a decision of the Gujarat High Court, Thacker & Co. vs Commissioner of Income tax, Gujarat (3), that the shares in the profits and losses have both to be specifically stated in the instrument of.
partnership in order to comply with the conditions laid down in sec.
26A to obtain registration.
The view taken by the Gujarat High Court appears to have been followed by the Kerala High Court in the following cases among others: C. T. Palu & Sons vs Commissioner of Income tax, Kerala (4) and Commissioner of Income tax, Kerala vs Ithappiri & George (5), There is thus a conflict of opinion in the High Courts on the point.
It will not be necessary, however, for the purpose of this appeal to consider at any length the conflicting views of the different High Courts and decide which view is correct according to us because on the facts of the case the appeal is bound to fail on any view.
It is not, and it cannot be, disputed that the Income tax officer before allowing the application for registration must be in a position to ascertain the shares of the partners in the losses even if sec.
26A did not require the shares in the losses to be specified in the instrument of partnership.
Counsel for the appellant argues that clause 9 of the instrument refers to sec.
13(b) of the Partnership Act by implication and, accordingly, in the absence of any contrary indication, it must be held that the partners are liable to share the losses equally.
The argument is not based on a correct appreciation of the scope of sec.
13(b) and the facts of the case.
13(b), it seems plain to us, makes the partners liable to contribute equally to the losses only when they are entitled to share equally in the profits.
In this case the shares of the partners are not equal.
In the absence of any indication to the contrary, where the partners have agreed to share the profits in certain proportions, the presumption is that the losses are also to be shared in like proportions.
Jessel M. R. states the principle in In re Albion Life Assurance Society (G) as follows: (1) (2) (3)[1966] (4) (5) (6) 16 Ch.
83 (87).
10 L1276SCI/75 136 "It is said, as a general proposition of law, that in ordinary mercantile partnerships where there is a community of profits in a definite proportion, the fair inference is that losses are to be shared in the same proportion.
" In the case before us the partners having unequal shares in the profits, there can be no presumption that the losses are to be equally shared between them Sec.
13(b) of the reproduces the provisions of the repealed sec.
253(2) of the .
In K. Pitchiah Chettiar vs G.Subramaniam Chettiar(1), Ramesam J. explained the scope of sec.
253 (2) of the : "Section 253(2) of the lays down that all partners are entitled to share equally in the profits of the partnership business, and must contribute equally towards the losses sustained by the partnership.
As I read the section, it lays down two presumptions with which the Court should start.
The two presumption are clubbed in one sub section.
The first is, if no specific contract is proved, the shares of the partners must be presumed to be equal.
In the present case the plaintiff alleged unequal shares which were not denied by the defendants.
So the parties being agreed on their pleadings as to the shares possessed by them in the profits, there is no scope for the application of this first presumption.
The second presumption is that where the partners are to participate in the profits in certain shares they should also participate in the losses in similar shares.
Now the section says that both should be in equal shares but implies that if unequal shares are admitted by the partners as to profits that applies equally to losses.
In the absence of a special agreement, that this should be the presumption with which one should start is merely a matter of common sense and in India one has only to rely on section 114 of the Evidence Act for such a principle.
" The law stated here in the context of sec.
253(2) of the Contract Act, 1872 applies equally to sec.
13(b) of the Partnership Act, 1932: the two provisions are in identical terms.
On the facts of the present case, and having regard to the scope of sec.
13(b), the section has plainly no application.
(1) I. L. R. (28).
137 The other rule that where the shares in the profits are unequal, the A losses must be shared in the same proportions as the profits if there is no agreement as to how the losses are to be apportioned, does not also apply to this case.
In this case even if the adult partners bear the losses in proportion to their respective shares in the profits, the amount of loss in the minor 's share would still remain undistributed.
Will the partners between them bear this loss equally, or to the extent of their own individual shares ? To this the instrument of partnership does not even suggest an answer.
There is therefore no means of ascertaining in this case how the losses are to be apportioned.
For the reasons stated above, the appeal fails and is dismissed with costs.
P.H.P.Appeal dismissed.
| IN-Abs | The appellant assessee is a firm, having three Partners and one minor admitted to the benefits of the partnership.
One of the partners has 31% share and the remaining two partners and the minor have 23% share each in the profit of the firm but the partnership deed is silent about their shares in the losses.
Clauses 9 of the partnership deed provides that the partners are bound to act according to the provisions of the Indian Partnership Act.
The firm applied for registration under section 26A of the Income Tax Act, 1922 which was refused by the Income Tax officer.
The High Court in a reference under section 66(1) held that unless the instrument r of partnership specified the shares of the partners not only in the profits but also in the losses, the firm would not be entitled to registration under section 26A.
The High Court negatived the contention of the assessee that clause 9 of the instrument indicated how losses were to be apportioned between the partners.
On appeal by special leave it was contended by the appellant: (1) section 26A does not require that the instrument of partnership must specify the respective shares of the partners in the losses and it is sufficient if the proportion in which the losses are to be shared is otherwise ascertainable.
(2) Assuming that section 26A does require mentioning the proportion of losses in the instrument of partnership, clause 9 of the instrument read with s 13(b) of the Partnership Act satisfies that requirement.
Dismissing the appeal, ^ HELD: (1) A firm whether registered or unregistered is an assessee under the Act and can do business as such.
However, registration under section 6A confers on the partners a benefit to which they would not have been entitled but for section 26A and such a right being a creature of a statute can be claimed only in accordance with the statute which confers it and the person who seeks relief under section 26A must bring himself strictly within its terms before he can claim the benefit of it.
[133D E] Rao Bahadur Revulu Subba Rao and others vs Commissioner of Income Tax, Madras, , relied on.
(2) In the case of a registered firm the share of each partner in the profit or loss is added to or set off against, as the case may be, to the other income of the partner.
Thus, the loss, if any, affects the assessment proceedings and.
therefore, Income Tax officer has to know what are the respective shares of the partners in the loss before allowing the firm to be registered.
[134 C D] (3) There is a conflict of opinion amongst the High Courts whether it is essential for registration under section 26A that the shares of the partners must be specified in the partnership deed.
It is not necessary to decide for the purpose of this appeal which of the conflicting views is correct because in the present case the appeal is bound to fail on any view.
It is not disputed and cannot be disputed that the Income Tax Officer before allowing the application for 132 registration must be in a position to ascertain the shares of the partners in the losses.
even if section 26A did not require this to be specified in the instrument of partnership.
[135E F] (4) The contention that clause 9 brings in by implication section 13 (b) of the Partnership Act and thus specifies the shares of the partners in the losses is untenable.
section 13(b) makes the partners liable to contribute equally to the losses only when they are entitled to share equally in the profits.
ID this case the shares of the partners are not equal.
The case of K. Pitchiah Chettiar.
vs G. Subramaniam Chettiar I.L.R. and In re Albion Life Assurance Society, 16 Ch.
83, 87, applied.
[135 G H] The law stated in these cases in the context of section 253(2) of the contract Act applies equally to section 13(b) of the Partnership Act which is in identical terms.
In the absence of any indication to the Contrary, where the partners have agreed to share the profits in certain proportions, the presumption is that the losses are also to be shared in like proportions.
The other rule that where the shares in the profits are unequal the losses must be shared in the same proportions as profits in the absence of an agreement as to how the losses are to be apportioned, also does not apply to this case since there is a minor admitted to the benefits of the partnership.
Even if the adult partner bear the losses in proportion to their respective shares in the profits, the amount of loss in the minor 's share would still remain undistributed.
Whether the partners between themselves will bear this loss equally or to the extent of their own individual shares, is not even suggested in the instrument of Partnership.
TD There is, therefore, no means of ascertaining in this ease how the losses are to be apportioned.
[136 H, 137A C]
|
Civil Appeal No. 899 of 1968.
Appeal by special leave from the judgment and order dated the 15th February, 1967 of the Assam and Nagaland High Court in C. Rule No. 231 of 1965.
Naunit Lal, for the appellants.
Sukumar Ghose, for the respondent.
The Judgment of the Court was delivered by KRISHNA IYER, J.
Was this virtually valstudinarian appeal by the Sate against an old and perhaps, by now, superannuated emyloyee necessary? Litigation by the State means laying out public resources, in a country of much poverty and scarce resources, and only if the demanding justice of a case calls for it should an appeal, otherwise of inconsequence, be carried to the highest Court.
In the present instance, a veterinary assistant, the respondent herein, was suspended in 1960 followed by disciplinary proceedings.
An enquiry officer, appointed by the Director of Animal Husbandry and Veterinary Department, conducted the proceedings, submitted his report of findings adverse to the respondent, whereupon a show cause notice indicating the penalty of dismissal was issued.
The 'delinquent ' pleaded innocence by his explanatory statement and the Director, on a study of the case in the light of the explanation offered, directed reinstatement in a cryptic order which runs thus: 129 ORDER No. 81 DATED 11 12 62 Shri J. N. Roy Biswas, Manager, East Harinagar Live stock Farm (Cachar) who was placed under suspension vide this office order No. 42 dated 23 12 60, is re instated in the same post of Manager, at East Harinagar Livestock Farm with effect from the date the reports for duty.
Sd/ G. K. Mehra, Director of Animal Husbandry & Vety.
Department, Assam, Gauhati." Memo No. PI 918/26822 Dated Gauhati, the 13th Dec. '62.
Copy forwarded to: 1.
Shri J. N. Roy Biswas, Manager, East Harinagar Livestock Farm (under suspension) C/o Brahmachari Maharaj Shri Dawarikanath, Ramkrishna Seva Samity, Chatribari, Gauhati, for information and necessary action.
The findings and orders of the proceeding will follow.
2 , . .
3 The findings and orders together with the regularisation of the period of suspension of Shri J. N. Roy Biswas with effect from 5 1 61 to the date of his reporting for duty at East Harinagar Livestock Farm will be communicated separately.
The date of joining of Shri Biswas may be in formed to this office separately.
Sd/ B. K. Das for Director of Animal Hy. & Vety.
lt is noteworthy that no reasoned findings were recorded.
That particular officer retired and his successor wrote to the Joint Secretary to Government that from the materials of the case the 'delinquent ' r merited punishment and the proceedings be re opened.
This was done and as the de novo recording of evidence progressed the respondent moved the High Court under article 226 for a writ of prohibition as, in his submission, there was no power to re open a case concluded by exoneration and reinstatement and the illegal vexation of a second enquiry should be arrested.
This grievance was held good by the High Court which granted the relief sought.
What is the conspectus of circumstances ? A small veterinary official, a long enquiry for mis conduct, a final direction cancelling suspension and reinstating him, the likelihood of the man having retired (15 years have gone by) and nothing on record to substantiate any fatal infirmity in the earlier enquiry or dereliction of duty by the disciplinary authority except that a reasoned record of findings was to be forthcoming, but did not, because he had retired in the mean while.
No action against the retired Director for this alleged omission was felt justified and perhaps was not warranted but with persistent 130 litigative zeal Government has come in appeal to this Court against the petty official.
Had he misappropriated Government money he should have been punished expeditiously.
But having been exculpated after enquiry, the State could go at him by re opening the proceedings only if the rules vested some such revisory power.
None such has been shown to exist although one wonders why a rule vesting such a residuary power of a supervisory nature to be exercised in the event .
of a subordinate disciplinary authority not having handled a delinquent adequately or rightly is brought to the attention of Government has not been made.
No rule of double jeopardy bars but absence of power under a rule inhibits a second inquiry by the Disciplinary authority after the delinquent had once been absolved.
The appeal must fail and is dismissed with costs.
We may however make it clear that no government servant can urge that if for some technical or other good ground, procedural or other, the first enquiry or punishment or exoneration is found bad in law that a second enquiry cannot be launched.
It can be; but once a disciplinary case has closed and the official re instated, presumably on full exoneration.
a chagrined Government cannot re start the exercise in the absence of specific power to review or revise, vested by rules ill some authority.
The basics of the rule of law cannot be breached without legal provision or other vitiating factor invalidating the earlier enquiry.
For the present, this is theoretical because no such deadly defect is apparent on the record.
P.B.R. Appeal dismissed.
| IN-Abs | The respondent, a Government servant, was suspended from service in 1960.
on receipt of the findings of the Inquiry officer, a show cause notice was issued.
The appointing authority exonerated the respondent but did not make a reasoned order.
Later, however, the case WAS reopened.
As the de novo recording of evidence progressed the respondent moved the High Court contending that there was no power in the Government to re open a case which had already been concluded by exoneration and re instatement.
The High Court granted the relief .
Dismissing the appeal of the sate, ^ HELD.
Had the Government servant misappropriated government money he should have been punished expeditiously.
But having been exculpated after enquiry, the State could go at him by re opening the proceedings only if the rules vested some such revisory power No rule of double jeopardy bars the reopening of the case.
But once a disciplinary case has closed and the official re instated the government cannot restart the exercise in the absence of specific power to review or revise vested by rules in some authority.
The basics of the rule of law cannot be breached without a legal provision or other vitiating factor invalidating earlier enquiry.
|
ivil Appeal Nos. 1461 to 1468 of 1974.
From the Judgment and order dated the 14th April, 1974 of the Disciplinary Committee of the Bar Council of India New Delhi in D.C. Appeals Nos 15 to 19 and 21, 22 and 25 of 1973.
50 V. section Desai, Vimal Dave, Miss Kailahs Mehta for the Appellants.
Respondents appeared in person in CAs.
1461 and 1467 1468.
Sakuddin F. Bootwala and Mrs. Urmila Sirur for Respondents in CAs.
1462 1464 V. N. Ganpule for Respondent in C.A. 1465.
D. V. Patel and Mrs. K. Hingorani for the Bar Council of India.
section K. Sinha for the Bihar State Bar Council.
The Judgment of the Court was delivered by KRISHNA IYER, J.
These appeals have filled us as much with deep sorrow as with pained surprise.
I he story of the alleged 'profession misconduct ' and the insensitivity of the disciplinary authority to aberrant professional conduct have been the source of our distress, as we will presently explain, after unfurling the factual canvas first.
The first chapter of the litigation in this Court related of the standing, of the State Bar Council to appal to this Court, under s.38 of the advocates Act, 1961 (the Act, for short) against appeallate decision of the Disciplinary Tribunal appointed by the Bar Council of India.
This Court upheld the competence to appeal, thus leading us to the present stage of disposing of the eight cases on merits.
The epileptic episodes what other epithet can adequately express tile solicitation circus dramatised by the witnesses as practised by the panel of advocate respondents before us? make us blush in the narration.
For, after all do we not all together belong" to the 'inner republic of bencher and bar '? The putative delinquents are lawyers practising in the criminal courts in Bombay City.
Their profession ordains a high level of ethics as much in the means as in the ends.
Justice cannot be attained without the stream being pellucid throughout its course and that is of great public concern, not merely professional care.
Briefly expressed, these practitioners, according to testimony; recorded by the State Disciplinary Tribunal, positioned themselves at the entrance to the Magistrates Courts, watchful of the arrival of potential litigants.
At sight, they rushed towards the clients ill an ugly scrimmage to snatch the briefs, to lay claim to the engagements even by physical fight, to undercut fees, and by this unedifying exhibition, sometimes carried even into the Bar Library, solicited and secured work for themselves.
If these charges were true, any member of the Bar with elementary ethics in his bosom would be outraged at his brethren 's conduct and yet, in reversal of the State Disciplinary Committee 's finding, the appellate Tribunal at the national level appears to have entered a verdict, based on a three point formula, that this conduct, even if true, was after all an attempt to solicit practice and did not cross the borderline of misconduct? The Bar Council of the State OF Maharashtra (the appellant before us) and the Bar Council of India which is a party respondent, have expressed consternation at this view of the law of professional misconduct and we share this alarm Were this view right, it is difficult to call the legal profession noble.
Were this 51 understanding of deviant behaviour sound, there is little to distinguish between railway porters and legal practitioners although we do not mean to hurt the former and have mentioned a past practice, to drive home our present point? We do not wish to dilate further on the evidence in so far as it concerns each of the respondent advocates in view of certain developments which we will presently notice.
There are eight cases but we are relieved from dissecting the evidence against most of them for reasons which we will hopefully and shortly state.
The Bar Council of Maharashtra, by its resolution No. 29 dated August 8, 1964 considered the complaint received from the High Court against one Kelawala and 15 other Advocates among whom are those charged with professional misconduct and covered by the present appeals, under s.35(1) of the Act, and presumably having reason to believe that the professional misconduct alleged required a further probe referred the case to its disciplinary committee.
This procedure is in due compliance with s.35(1) of ' the Act and, although the respondent in C.A. 1467/74 (A. K. Doshi) has contended that the resolution of the Bar Council does not ex facie disclose that it had reason to believe that the advocates involved were guilty of professional misconduct, we see no merit in it The requirement of 'reason to believe ' cannot be converted into a formalised procedural road block, it being essentially a barrier against frivolous enquiries.
It is implicit in the resolution of the Bar Council, when it says that it has considered the complaint and decided to refer the matter to the disciplinary committee, that it had reason to believe, as prescribed by the statute Such blanket reference to the disciplinary body, so far as we are concerned, related to the respondent in C.A. 1461/74 (Dhabolkar), C.A. 1462/74 (Bhagtani), C.A. 1463/74 (Talati), C.A. 1464/74 (Kelawala), C.A. 1465/74 (Dixit), C.A. 1466/74 (Mandalia), C.A. 1467/74 (Doshi) and C.A. 1468/74 (Raisinghani).
All the cases were tried together as a unified proceeding and disposed of by a common judgment by the Disciplinary Committee, a methodology conducive to confusion and prejudice as we will explain later in this judgment.
The respondents in the various appeals before us were found guilty 'of conduct which seriously lowers the reputation of the Bar in the eyes of the public ' and they were suspended from practising as Advocates for a period of three years.
Appeals were carried to the Bar Council of India and" in accordance with the statutory provision, they were referred to the Disciplinary Committee appointed by it under section 37(2) of the Act.
The Appellate Disciplinary Committee heard the appeals and absolved them of professional misconduct.
Aggrieved by this verdict of reversal, the Bar Council of Maharashtra has appealed to this Court.
The initial hurdle of locus standi has been surmounted as stated earlier, we have been addressed arguments on the merits by Shri V. section Desai on behalf of the appellant.
He has canvassed the correctness of the finding of fact in each case although with varying degrees of diffidence, but turned his forensic fusillade on the somewhat startling concept of professional misconduct adopted by that disciplinary Tribunal 52 We will proceed to deal with each appeal separately so far as the factual foundation for the charges is concerned but discuss the legal question later as it affects not merely the advocates ranged as respondents but the Bar in India and the public in the country.
The profound regret of these cases lies not only in the appellate disciplinary tribunal 's subversive view of the law of professional conduct that attempted solicitation by snatching briefs and catching clients is or no ethical moment, or contravention of the relevant provisions, but also in the naive innocence of fair and speedy procedure displayed by the State Disciplinary Tribunal in clubbing together various charges levelled against 16 advocates in one common trial, mixing up the evidence against many, recording omnibus testimony slipshodly, not maintaining a record of each day 's proceedings, examining witnesses in the absence of some respondents, taking eight years to finish a trial involving depositions of four witnesses and the crowning piece, omission to consider the evidence against each alleged delinquent individually in the semi penal proceedings.
True, a statutory tribunal may ordinarily regulate its procedure without too much rigidity, subject to ' the rules of natural justice, but large scale disregard of well known norm of fair process makes us wonder whether some at least of the respondents have not been handicapped and whether justice may not be a casualty if the tribunal is not alerted about its processual responsibilities.
We have some observations to make about the Tribunals at the State and at the appellate levels in the further stages of this judgment.
However, we find it convenient to dispose of the appeals on the evidence, on the assumption that if, in fact, there have been snatching and fighting and like solicitation exercises indulged in by any of the respondents, such conduct is in gross breach of professional behaviour and invites punishment.
A case by case disposal is desirable and so we begin with Dabholkar (respondent in C.A. 1461/74) who appeared in person to plead in defence.
The evidence against him is far from satisfactory and suffers from generalised imputation of misconduct against a group of guilty lawyers.
To dissect and pick out is an erroneous process, except where individualised activities are clearly deposed to.
Moreover, the only witness who implicates him swears: 'I have not seen him actually snatching away the papers.
I did not hear the talk Mr. Dabholkar had with the persons '.
Moreover, he was a senior public prosecutor.
We also record the fact that he expressed distress as the arguments moved on.
Apart from the weak and mixed evidence against him, there is the circumstance that he is around 68 years old.
With a ring of truth he submitted that he was too old to continue his practice in the profession and had resolved to retire into the sequestered vale of life.
He frankly admitted that even apart from the evidence, if there were any sins of the past, he would not Pursue the path of professional impropriety hereafter having decided virtually to step out of the Bar.
except for a limited Purpose.
He had just four cases left with him which he desired to complete.
having received fees.
He further represented that he did not intend to accent any new briefs or appear in any Court except to the little extent that the Bombay Paints & Allied Products.
53 Limited (Chembur, Bombay), a large company which occasionally A engaged him in small cases chose to brief him.
We are inclined to take him at his word, particularly because he has put himself out of harm 's way by a clear assurance about his future plans.
On the evidence, we exonerate him from professional misconduct and otherwise we record him solemn statement to the Court.
Shri Bhagthani, respondent in C.A. 1462/74, has not engaged counsel, nor appeared in person, but as we examined the evidence, assisted by Shri Desai, we found precious little against him.
That extinguishes the charge.
No need, therefore, arises for punishing him or reversing the appellate Tribunal 's acquittal.
The respondent in C.A. 1463/74 is Talati.
He has been found 'not guilty ' in appeal but, as we perused the evidence, it became fairly clear that some acts of misconduct had been made out, although the evidence suffered from omnibus implication.
His counsel, Mr. Zakuriddin F. Bootwala, however made a submission which has moved us into showing some consideration for this respondent.
Shri Zaki represented that his client had stood the vexatious misfortune of a long, protracted, litigation before the two tribunals and a later round in this Court when the question of locus standi of the State Bar Council was gone into.
He was in poor circumstances and had suffered considerably on this score.
Further, he has given an undertaking expressing unqualified regret for his deviant behaviour and has prayed for the clemency of the Court, promising to turn a new leaf of proper professional conduct, if he were permitted to practice.
Taking note of the compassionate conspectus of circumstances attendant on his case and in view of the tender of unconditional regret which expiates, in part, his guilt, we allow the appeal, but reduce the period of suspension inflicted by way of punishment by the Maharashtra Tribunal from three years to a period upto December 31 this year (1975) .
In short, we find him guilty and reluctantly restore the verdict of the original tribunal, but reduce the punishment to suspension from practice, as aforesaid.
The respondent in C.A. 1464/74 is Kelawala.
His counsel, Mr. Zaki, submitted that this practitioner had become purblind and was ready to give an undertaking to the Court that he would no longer practice in the profession.
While there is some evidence against him, an overall view of the testimony, does not persuade us to take a serious view of the case against him.
Moreover, being old and near blind and having undertaken to withdraw from the profession for ever, it is but fair that he spends the evening years left to him without the stigma of gross misconduct.
In this view, we do not disturb the finding of the Disciplinary Committee of the Bar Council of India hut record the undertaking filed by Shri Zaki that his client Kelawala will not practice the profession of law any longer.
H The respondent in C.A. 1465/74 is Dixit for whom Shri Gannule appeared.
Shri Desai, for the appellant, took us through the evidence 54 against this lawyer but fairly agreed that the evidence was, by any standard, inadequate to bring home the guilty of misconduct.
We readily hold him rightly absolved from professional misconduct.
The respondent in C.A. 1466/74 is Mandalia.
He did not appear in person or through counsel.
The reason is fairly obvious.
The evidence is so little that it is not possible nor proper to pick out with precision and assurance any particular 'soliciting ' act to infer guilt.
Shri Desai, for the appellant, was fair enough to accede to this position.
His exculpation cannot, therefore, be interfered with.
The only contesting respondent is Doshi C.A. 1467/74.
He contests his guilt and pursues his plea with righteous persistence and challenges the evidence and its credibility projecting his grievance about processual improprieties.
We will consider both these facts of his legitimate criticism despite his cantankerous arguments which we have heard with forbearance, remembering that a party arguing his own case may, perhaps, not be able to discipline himself to observe the minimal decorum that advocacy in Court obligates.
The respondent displayed, as the proceedings in this Court ran on, his art of irritating interruptions, his exercises in popping up and down heedless of the Court 's admonition, and his skill in remaining references to what was not on record.
The fine art of advocacy suffers mayhem when irrelevant men indelicately brush with it.
The State Tribunal 's records reveal that Shri Doshi had not spared their patience or sense of pertinence.
Having said all this, we are bound to examine the evidence against him fairly.
Such a scrutiny shows that the best witness Shri Shertukde, the President of the Bar Association and otherwise a respected Member of the Bar, has not involved him in any malpractice.
Even Shri Pathare, the only one to rope him in, merely gives omnibus testimony ambivalent in places and unspecific about some, including Doshi.
There is little else brought home with clarity against loquacious Doshi.
To convict him out of the vague; lips of Pathare may perhaps be a credulous folly.
The grouping of a number of advocates in a sort of mass trial has prejudiced Shri Doshi, a consequence which could and should have been avoided.
He had other grievances of denial of fair opportunity which`we could not verify for want of a daily diary or order sheet.
We are satisfied by a perusal of the record that this respondent has had an impressive background of social service.
commendable testimonials of his legal skills from competent persons and some law practice in various Courts and consultancy work for social welfare institutions which are apt to dissuade him from the disreputable bouts in the 'pathological ' area of the Esplanade Police Courts in Bombay.
Even assuming that this overzealous gentleman had exceeded the strict bounds of propriety, we are not satisfied that the charge of professional misconduct, as laid has been brought home to him.
What we have observed about his conduct in this Court must serve as a sufficient admonition to wean him away from improper conduct.
We do not interfere with the exculpation secured by him before the appellate Tribunal hopeful that he will canalize his professional energies in a more disciplined way to be useful to himself and.
more 55 importantly, to his unsolicited ' clientele.
After all, even a sinner has A a future and given better court manners and less turbulent bellicosity, Shri Doshi appears to have a fair professional weather ahead in the City.
We hold him unblemished so far as the vice of solicitation is concerned, but caution him to refine himself in advocacy.
Shri Raisinghani is tho respondent in C.A. 1468/74.
Shri V. section Desai took us though the evidence against him and although he is 65 years old, the evidence shows that he has physically fought two rival advocates in the course of snatching the briefs from clients, entering the Esplanade criminal courts.
One of these fights resulted in his trousers being torn and the other assault by him was on Mr. Mandalia one of the respondents in these appeals.
Shri Mandalia had filed a complaint against Raisinghani but in the criminal court they lived down their earlier skirmish and compounded the case.
Be that as it may, we find that Shri Raisinghani is not merely an old man but a refugee from Pakistan who, leaving his properties there has migrated to Ahmedabad with his family.
Apparently he is in penurious environs and stay in the refugee colony in Bombay, incidentally attending to his claims to the properties left behind in Pakistan and acquiring some evacuee property in lieu of what he has lost.
Staying in Kalyan Refugee Camp this lawyer, afflicted with distress and dotage, is also attending the Magistrate 's Court to make a living.
This commiserative social milieu may not absolve him of the misconduct which, we are satisfied, the testimony in the case, has established.
Even so, Shree Raisinghani has appeared in person and has given an undertaking expressing remorse, praying to be shown clemency and assuring that, economic pressure notwithstanding, he will not go anywhere near professional pollution in the last years of his practice at the Bar.
We are inclined to take a sympathetic view of his septuagenarian situation, record his apology and assurance, restore the verdict of guilt by the State Disciplinary Committee but reduce the punitive part of it to a period of suspension until December 31, this year (1975).
Now to the legal issue bearing on canons of professional conduct.
The rule of law cannot be built on the ruins of democracy, for where law ends tyranny begins.
If such be the keynote thought for the very survival of our Republic, the integral bond between the lawyer and the public is unbreakable.
And the vital role of the lawyer depends upon his probity and professional life style.
Be it remembered that the central function of the legal profession is to promote the administration of justice.
If the practice of law is thus a public utility of great implications and a monopoly is statutorily granted by the nation, it obligates the lawyer to observe scrupulously those norms which make him worthy of the confidence of the community in him as a vehicle of justice social justice.
The Bar cannot behave with doubtful scruples or strive to thrive on litigation.
Canons of conduct cannot be crystalised into rigid rules but felt by the collective conscience of the practitioners as right: "It must be a conscience alive to the proprieties and the improprieties incident to the discharge of a sacred public L 1276 SCI/75 56 trust.
lt must be a conscience governed by the rejection of self interest and selfish ambition.
It must be a conscience propelled by a consuming desire to play a leading role in the fair and impartial administration of Justice, to the end that public confidence may be kept undiminished at all times in the belief that we shall always seek truth and justice in the 13 preservation of the rule of law.
It must be a conscience not shaped by rigid rules of doubtful validity, but answerable only to a moral code which would drive irresponsible judges from the profession.
Without such a conscience, there should be no judge(1) and, we, may add, no lawyer.
Such is the high standard set for professional conduct as expounded by courts in this country and elsewhere.
These background observations will serve to size up the grave misapprehension of the law of professional ethics by the tribunal appoint ed by the Bar Council of India.
The disciplinary body, acquitting everyone on non violation of bounds of propriety argued.
"Rule 36 (of the Bar Council of India on Standards of Professional Conduct and Etiquette) is as follows: An Advocate shall not solicit work or advertise either directly, or indirectly whether by circular, advertisements, touts, personal communications, interviews not warranted by personal relations, furnishing newspaper comments or procuring his photograph to be published in connection with cases in which he has been engaged or concerned. " .
Hence in order to be amendable to disciplinary jurisdiction, the Advocates must have (1) solicited work (2) from a particular person (3) with respect to a case.
Unless all the three elements are satisfied, it cannot be said that an Advocate has acted beyond the standard of professional conduct and etiquette.
It has been stated that the conduct of the Advocate concerned did not conform to the highest standards of the legal profession.
It is not that every body must conform to the highest standards of the legal profession.
It is enough if an Advocate conforms to the standards of professional con duct and etiquette as referred to in the rules".
* * * * "He (witness Mantri) says further that 7 Advocates who are personally present today I have seen each of them standing either on the first floor, near the lift or on the first floor either near the lift or in the lobbies of the (1) Hastings, Hon.
John section, "Judicial Ethics as it Relates to Participation in Money Making Activities" Conference on Judicial Ethics, p. 8, The School of Law, University of Chicago (1964).
57 Esplanade Court and trying to solicit work from the persons A coming to the Esplanade Court.
This mere attempt to solicit is nothing." "In order to be within the mischief of rule 36, not merely canvassing is enough, but canvassing must be for a case With the person who had not till then engaged a lawyer.
There is nothing to show either of these things: none of the persons who might have been subjected to these solicitations as they are stated, have been examined to prove the case.
Hence this evidence does not establish anything within rule 36.".
All that is necessary for us to see is whether the three items referred to have been complied with and we find that they have not been complied with because we do not know what was the nature of the communication, we do not know in connection with which case the solicitation took place and with whom the conversation took place.
Hence Mr. Shertukade 's evidence is not sufficient for the purpose of taking any disciplinary action under rule 36.
* * * * * "Mr. Krishnarao V. Pathumdi is the first witness in this case (case of Raisinghani).
He says: "I had seen Kelawala, Mr. Baria; Mr. Raisinghani, Mr. Bhagtani approaching the people visiting the Court and soliciting work from them".
This we have already slated is far below the requirement required to be proved under rule 36.
He says that he had seen Mr. Raisinghani approaching people and soliciting work.
He did not ascertain the names of the persons who approached because it was not his business.
But as stated above, is evidence does not establish the three elements required to be proved under rule 36 because we do not know what was the personal communication between him and the persons solicited.
We do not know whether it related to a case or not." .
Then the next witness is Mr. Sitaram Gajanan Shertukade.
In cross examination by Mr. Rai singhani he says: "I have seen Mr. Raisinghani accosting people.
I have seen Mr. Raisinghani snatching the papers from the hands of the litigating public.
I have seen this more than 10 times.
The litigating public from whom the papers were snatched did not say anything that there was a fight between Mr. Raisinghani and other lawyer over the papers which were snatched.
I did not contact those persons from whom the papers were snatched nor talked to them so he was not concerned with this Therefore his evidence cannot be sufficient (Emphasis, ours) 58 We may, illustratively, quote an excerpt from the evidence of the Bar Association President and one time Bar Council Member Shri Shertukade to show the injury to the profile of the profession the curious view of the disciplinary tribunal has inflicted: "I have seen Mr. Raisinghani accosting people.
I have seen Mr. Raisinghani snatching the papers from the hands of litigating public.
I have seen this more than 10 times There was a fight between Mr. Rasinghani and Mr. Baria.
made oral complaint to the C.P.M.
I do not remember who was present at that time.
In that fight Mr. Raisinghani s pant was torn.
There was assault by Mr. Raisinghani on Mr. Mandalia and I had advised Mr. Mandalia to file a complaint against Mr. Raisinghani.
Mr. Mandalia did file a case against Mr. Raisinghani but it was compounded.
" How can a disciplinary authority, aware of its accountability to the Indian Bar, functioning as the stern monitor holding the punitive mace to preserve professional purity and promote public commitment and appreciative of what is disgraceful, dishonourable and unbecoming judged by the standards of conduct set for this noble calling and deviations damaging to its public image, find its way to hold such horrendous misbehaviour as snatching, catching, fighting, and under cutting as not outraging the canons of conduct without exposing itself to the charge of dereliction of public duty on the trisection of r. 36 and blind to the 'law for lawyers '? It has been universally understood, wherever there is an organised bar assisting in administering justice, that an attorney solicitor, barrister or advocate will be suspended or disbarred for soliciting legal business.
And the 'snatching ' species of solicitation are more revolting than ambulance chasing ', advertising and the like.
If the learned profession is not a money making trade or a scramble for porterage but a branch of the administration of justice, the view of the appellate disciplinary tribunal is indefensible and deleterious.
We, as a legal fraternity, must and shall live up to the second and live down the first.
by observance of high standards and dedication to the dynamic rule of law in a developing country.
It is unfortunate that the Maharashtra tribunal has slurred over vital procedural guidelines.
Professional misconduct prescribed by section 35 of the Act has to be understood in the setting of a calling to which Lincoln, Gandhi, Lenin and a galaxy of great men belonged.
The high moral tone and the considerable public service the bar is associated with and its key role in the developmental and dispute processing activities and, above all, in the building up of a just society and constitutional order.
has earned for it a monopoly to practise law and an autonomy to regulate its own internal discipline.
This heavy public trust should not be forfeited by legalising or licensing fights for briefs affrays in the rush towards clients, undercutting and wrangling among members.
Indeed, we were scandalized when one of the respondents cited a decision under the Suppression of Immoral Traffic Act to prove 59 what is 'soliciting '.
The odious attempt to equate by implication the standards for the two professions was given up after we severely frowned on it.
But the disciplinary tribunal 's view that an attempt to solicit did not matter, that professional misconduct rested solely on r. 36 of the rules framed under section 49(c) and that r. 36 was made up of three components, shows how an orientation course in canons of conduct and etiquette in the socio ethical setting of the lawyer, the public and professional responsibility may be an educative asset to disciplinary tribunals and Bar Councils which appoint tribunals and regulate professional conduct by rules.
Cicero called the law 'a noble profession ', but Frederick the Great described lawyers as 'leeches '.
We agree that r. 36, fairly construed, sets out wholesome rules of professional conduct although the canons of ethics existed even prior to r. 36 and the dissection of the said rule; the way it has been done by the disciplinary tribunal, disfigures it.
It is also clear that r. 36 is not the only nidus of professional ethics.
Indeed, the State tribunal has, from a processual angle, fallen far short of norms like proper numbering of witnesses and exhibits, indexing and avoidance of mixing up of all cases together, default in examination of the respondents consideration, separately, of the circumstances of each delinquent for convicting and sentencing purposes.
More attention to the specificity in recording evidence against each deviant instead of testimonial clubbing together of all the respondents, would have made the proceedings clearer fairer and in keeping with court methodology, without over judicialised formalities.
Indeed the consolidation of 16 cases and trying them all jointly although the charges were different episodes, were obviously violative of fair trial.
And 8 years for an enquiry so simple and brief: We express the hope that improvement of this branch of law relating to disciplinary proceedings will receive better attention from the Bar Council and the tribunal members.
What prophylactic prescription can ensure fundamentally fair hearing or due process better than by choosing persons of sense and sensibility familiar with the basics of trial procedure and conscientious about avoidance of prejudice and delay ? Rules may regulate, but men apply them.
Both are important.
The appellate disciplinary tribunal was wholly wrong in applying r. 36 which was promulgated only in 1965 while the alleged misconduct took place earlier.
What this tribunal forgot was that the legal profession in India has been with us even before the British and coming to decades of this century, the provisions of r. 35 of the section 10 of the Bar Councils Act and other enactments regulating the conduct of legal practitioners have not turned on the splitting up of the text of any rule but on the broad canons of ethics and high tone of behaviour well established by case law and long accepted by the soul of the bar.
Professional ethics were born with the organised bar, even as moral norms arose with civilised society.
The exercise in discovering the 'three elements ' of r. 36 was as unserviceable as it was as supererogatory.
60 The ruling in In the matter of 'P ' an Advocate(1); In re: Shri M. Advocate of Supreme Court of India(2); In the matter of an Advocate(3); Govt.
Pleader vs Siddick(4) were cited before us and no judge, nor lawyer will be in doubt, even without study of case law, that snatching briefs by standing at the door of the court house and in fighting for this purpose is too dishonourable, disgraceful and unbecoming to be approved even for other professions.
Imagine two or three medical men manhandling a patient to claim him as a client The law has suffered at the hands of the appellate tribunal.
Lest there should be lingering doubts we hold that the canons of ethics and propriety for the legal profession totally taboo conduct by way of soliciting, advertising, scrambling and other obnoxious practices, subtle or clumsy, for betterment of legal business.
Law is no trade, briefs no merchandise and so the leaven of commercial competition or procurement should not vulgarise the legal profession.
Canon 27 of Professional Ethics of the American Bar Association states: "It is unprofessional to solicit professional employment by circulars, advertisements, through touters or by personal communications or interviews not warranted by personal relations.
" We wish to put beyond cavil the new call to the lawyer in the economic order.
In the days ahead, legal aid to the poor and the weak, public interest litigation and other rule of law responsibilities will demand a whole new range of responses from the bar or organised social groups with lawyer members.
Indeed, the hope of democracy is the dynamism of the new frontiersmen of the law in this developing area and what we have observed against solicitation and alleged profit ' making vices are distant from such free service to the community in the Jural sector as part of the profession 's tryst with the People of India.
It is a misfortune that a disciplinary body of a dimensionally great and growing public utility profession has lost its vision, blinkered by r. 36 (as misconstrued and trisected by it).
For the practice of Law with expanding activist horizons, professional ethics cannot be contain ed in a Bar Council rule nor in traditional cant in the books but in new canons of conscience which will command the members of the calling of justice to obey.
rules of morality and utility, clear in the crystallized case law and concrete when tested on the qualms of high norms (1) (1964)1 section C. R. 697.
(2) ; (3) I. L. R. (4) 61 simple enough in given situations, though involved when expressed in a single sentence.
We but touch upon this call to the calling of law, as more is not necessary in the facts of these cases.
The law has thus been set right, the delinquents identified and dealt with, based on individualised deserts and the appeals are disposed of in the trust that standards and sanctions befitting the national Bar will be maintained in such dignified and deterrent a manner that public confidence in this arm of the justice system is neither shaken nor shocked.
Parties will bear their costs throughout.
| IN-Abs | The rule of law cannot be built on the ruins of democracy for where law ends tyranny begins.
If such be the keynote thought for the very survival of our Republic, the integral bond between the lawyer and the public is unbreakable.
And the vital role of the lawyer depends upon his probity and professional life style.
Be it remembered that the central function of the legal profession is to promote the administration of justice.
If the practice of law is thus a public utility of great implications and a monopoly is statutorily granted by the nation, it obligates the lawyer to observe scrupulously those norms which make him worthy of the confidence of the community in him as a vehicle of justice social justice.
The Bar cannot behave with doubtful scruples or strive to thrive on litigation.
Canons of conduct cannot be crystalised into rigid rules but felt by the collective conscience of the practitioners as right.
[55 F H].
Justice cannot be attained without the stream being pellucid throughout its course and that is of great public concern, not merely professional care.
[50 F].
The respondents, who were lawyers practising in criminal courts, were charged with professional misconduct under section 35(1) of the , in that they positioned themselves at the entrance to the Magistrates ' Courts, watchful of the arrival of potential litigants and at sight, rushed towards the clients in an ugly scrimmage to snatch the briefs.
to lay claim to the engagements even by physical fight to undercut fees, and by this unedifying exhibition sometimes carried even into the Bar Library, solicited and secured work for themselves.
The Bar Council of Maharashtra considered The complaint received from the High Court against the lawyers and referred the matter to its Disciplinary Committee for further probe.
The Disciplinary Committee of the State Bar Council held the respondents guilty of professional misconduct and suspended them from practising as advocates for a period of there years.
On appeal, the Disciplinary Committee of the Bar Council of India held that under r. 36 of the rules framed under section 49(c) of the in order to be amenable to the disciplinary jurisdiction the advocates must have (i) solicited work (ii) from a particular person and (iii) with respect to a case.
It held that unless the three elements were satisfied it could not be said that an advocate had acted beyond the standard or professional conduct and etiquette.
It therefore, absolved all the respondents of the charge cf professional misconduct.
The State Bar Council has come in appeal to this Court.
^ HELD: Rule 36 of the rules framed under section 49(c) of the , fairly construed, sets out wholesome rules of professional conduct and the dissection of the said rule, the way it has been done by the Disciplinary Tribunal, disfigure it.
[59 C].
(1) The canons of ethics and propriety far the legal profession totally taboo conduct by way of soliciting, advertising.
scrambling and other obnoxious practices, subtle or clumsy for betterment of legal business.
Law is no trade, briefs no merchandise and so the leaven of commercial competition or procurement should not vulgarise the legal profession.
[60 C] 49 (2)(a) The procedure adopted by the State Bar Council in referring the cases to its Disciplinary Committee is in due compliance with section 35(1) of the .
[51 C D].
(b) The contention that the resolution of the Bar Council did not ex facie disclose that it had reason to believe that the advocates were guilty of professional misconduct had no merit.
The requirement of "reason to believe" cannot be converted into a formalised procedural road block, it being essentially a barrier against frivolous enquiries.
lt is implicit in the resolution Of the Bar Council, when it says that it has considered the complaint and decided to refer the matter to the Disciplinary Committee, that it had reason to believe as prescribed by the statute.
[51 D E].
(3) The State Tribunal has, from a processual angle, fallen far short of norms like proper numbering of witnesses and exhibits, indexing and avoidance of mixing up of all cases together, default in examination of the respondents, consideration separately of the circumstances of each delinquent for convicting and sentencing purposes.
More attention to the specificity in recording evidence against each deviant instead of testimonial clubbing together on all the respondents, could have made the proceedings clearer, fairer and in keeping with court methodology without over judicialised formalities.
The consolidation of all cases and trying them all jointly, although the charges there different episodes, obviously violative of fair trial.
[59 D F].
(4) (a) The profound regret of these cases lies not only in the appellate Disciplinary Tribunal 's subversive view of the law of professional conduct that attempted solicitation by snatching briefs and catching clients is of no ethical moment, or contravention of the relevant provisions, but also in the naive innocence of fair and speedy procedure displayed by the State Disciplinary Tribunal in clubbing together various charges levelled against the advocates in one common trial, mixing up the evidence against many, recording omnibus testimony slipshodly, not maintaining a record of each day`s proceedings, examining witnesses in the absence of some respondents taking eight years to finish in trial involving depositions of four witnesses and omission to consider the evidence against each alleged delinquent individually in the semi penal proceeding.
True, a statutory Tribunal may ordinarily regulate its procedure without too much rigidity, subject to the rules of natural justice, but large scale disregard of well known norms of fair process makes one wonder whether some at least of the respondents had not been handicapped and whether justice may not be a casualty if the Tribunal is not alerted about its processual responsibilities.
[52 B D] (b) The Appellate Tribunal was wholly wrong in applying r. 36 which was promulgated only in 1965 while the alleged misconduct took place earlier.
What this Tribunal forgot was that the legal profession in India has been with us even before the British and coming to decades of this century, the provisions of section 35 of the , section 10 of the Bar Councils Act and other enactments regulating the conduct of legal practitioners have not turned on the splitting up of the text of any rule but on the broad canons of ethics and high tone of behaviour well established by case law and long accepted by the soul of the bar.
Professional ethics were bourn with the organised bar, even as moral norms arose with civilised society.
The exercise in discovering the three elements of r. 36 was as unserviceable as it was supererogatory.
[59 G H].
(c) It is a misfortune that a disciplinary body of a dimensionally get and growing public utility profession has lost its vision, blinkered by, r. 36 (as misconstrued and trisected by it.) [60 G].
|
Civil Appeal Nos.
1819 1821 of 1970.
Appeals by Special Leave from the Judgment and Order dated the 8/9th July 1969 of the High Court at Bombay in Income Tax Reference No. 29 of 1963.
G.C. Sharma, O.P. Dua, Annoop Sharma and P.K. Mukherjee for the Appellants.
S.T. Desai, P.L. Juneja and S.P. Nayar for the Respondent.
The Judgment of the Court was delivered by CHANDRACHUD, J.
The appellant, Surjit Lal Chhabda, had three sources of income.
He had a share in the profits of two partnership firms, he received interest from Bank accounts and he received rent from an immovable property called "Kathoke Lodge".
These were his self acquired properties and until the assessment year 1956 57, he used to be assessed as an individual in respect of the income thereof.
On January 26, 1956 he made a sworn declaration before a Presidency Magistrate in Bombay that he had thrown the property Kathoke Lodge into the 'family hotchpot ' in order to impress that property with the character of joint family property and that he would be holding that property as the Karta of the joint Hindu family consisting of himself, his wife and one child.
That child was an unmarried daughter.
In the assessment proceedings for 1957 58, the appellant contended that since he had abandoned all separate claims to Kathoke Lodge, 167 the income which he received from that property should be assessed in the status of a Hindu Undivided Family.
The income tax authorities and the Income tax Appellate Tribunal rejected that contention for varying reasons.
The Income tax Officer held that in the absence of a nucleus of joint family property, there was nothing with which the appellant could mingle his separate property and secondly, that there could not be a Hindu undivided family without there being undivided family property.
The appellant carried the matter in appeal to the Appellant Assistant Commissioner who differed from the Income tax Officer on both the points but dismissed the appeal on two other grounds.
The A.A.C. held that even after the declaration, the appellant was dealing with the income of Kathoke Lodge in the same way as before which showed that the declaration was not acted upon and secondly, that even assuming that the property was thrown into the common stock and was therefore joint family property, the income from that property could still be taxed in the appellant 's hands as he was the sole male member of the family.
The Tribunal accepted the declaration as genuine and differed from the A.A.C. 's finding that it was not acted upon.
The appellant, according to the Tribunal, was the Karta of the joint Hindu family and it was irrelevant as to how he dealt with the joint family income.
The Tribunal however held that the appellant had invested his separate property with the character of joint family property, he being a sole surviving coparcener continued to have the same absolute and unrestricted interest in the property as before and therefore, in law, the property had to be treated as his separate property.
The appellant moved the Tribunal for referring five questions to the High Court while the respondent applied for the reference of one other question.
The Tribunal referred the following question only for the opinion of the Bombay High Court under section 66(1) of the Income tax Act, 1922: "Whether, on the facts and in the circumstances of the case, the income from property known as 'Kathoke Lodge ' was to be assessed separately as the income of the Hindu undivided family of which the assessee was karta?" In the High Court, it was contended on behalf of the appellant that it is open to a male member of a joint Hindu family to convert his self acquired property into joint family property by throwing it into the common hotchpot; that for effectuating this purpose it is neither necessary that there should be an ancestral or joint family nucleus nor that there should be more than one male in the joint family; and since Kathoke Lodge was impressed with the character of joint family property, its income belonged to the joint Hindu family of which the appellant was the Karta, the other members being his wife and unmarried daughter.
On the other hand, the Department contended that it was contrary to the basic concept of a Hindu Undivided Family that a single male along with females could form a joint Hindu family; that though a joint Hindu family could include a wife and unmarried daughters, a 168 sole male member could not constitute a joint Hindu family along with females; and that it was necessary for the formation of a joint Hindu family that there should be more than one male capable of claiming partition of the joint family property.
In the alternative, it was urged by the Department that a single male could form a joint Hindu family along with a coparcener 's widow who is capable of making an adoption to her deceased husband but not with his own wife and unmarried daughter.
The argument that the existence of ancestral or joint family property was an essential pre requisite to throwing the self acquired property into the common stock was raised but was not pressed in the High Court.
On these contentions, the real controversy before the High Court was whether a single male can form a joint Hindu family with his wife and unmarried daughter; if yes, whether the Karta of such a family can impress his self acquired property with the character of joint family property by throwing it into the family hotchpot; and, lastly, whether the income of such property can be assessed as the income of the joint family.
The High Court did not enter into these questions and made its task simple by saying: "Several authorities were referred to on either side in support of their respective contentions.
We do not, however, propose in deciding this reference to go into the larger question as to whether the property of the assessee, which was originally self acquired property, assumed the character of a Hindu undivided family property, as to what are the incidents of a Hindu undivided family property and under what circumstances can separate property become Hindu undivided family property.
Some of these questions have been directly answered in the authorities which were cited before us. "The question referred is confined to the 'income ' from Kathoke Lodge.
We would, therefore, without going into these larger questions, prefer to rest our decision on the short point whether the income from the property known as Kathoke Lodge after the declaration was the income of a Hindu undivided family and in this respect whether the principle laid down by the Privy Council in Kalyanji 's case was correctly applied.
" The High Court assumed for the purposes of argument that there need not be more than one male member for forming a joint Hindu family as a taxable unit and that a joint Hindu family could lawfully consist of a single male member, his wife and unmarried daughter.
On these assumptions the High Court concluded that Kathoke Lodge, from the date of the declaration by which it was thrown into the common stock, was the Property of the Hindu undivided family.
It, however, held: "But the assessee has no son and therefore no undivided family.
His ownership of the property and its income in fact remains the same as before.
The fact of the existence of a wife or of a wife and daughter would make no difference 169 to his ownership of that property.
His position as a member of the joint family after the declaration would be the same as that of a sole surviving coparcener, but it is now settled law that a person who for the time being is the sole surviving coparcener is entitled to dispose of the coparcenary property as if it were his separate property.
That is the position which the assessee held so far as his property is concerned.
So far as the income is concerned, he has the complete power of disposal over the income and, even assuming that he is the karta of a joint Hindu family, there is no one who can question his spending, i.e., whether or not it is for legal necessity or other justifiable purpose.
If then, his right to the income remains under his personal law the same as it was before he made the declaration, the question arises whether under the Income tax Act it must be held to be the income of the karta of the Hindu undivided family.
That is precisely the question which the Privy Council answered against the assessee in Kalyanji 's case. .In our opinion, therefore, the assessee 's case would fall squarely within the principle enunciated by their Lord ships of the Privy Council in Kalyanji 's case and upon that view the income in the hands of the assessee would be liable to be assessed as his individual income.
" The Privy Council decision on which the High Court relies is Kalyanji Vithaldas vs Commissioner of Income tax.(1) The judgment of the High Court is reported in Before examining the validity of the High Court 's reliance on Kalyanji 's case and the correctness of its conclusion that the instant case falls within the ratio of that decision, it is necessary to have regard to the principles of Hindu Law governing joint families.
The High Court did not examine those principles, calling them "larger questions", and preferred wholly to rely on, so to say, the magic touch of Kalyanji 's case.
It assumed that a joint family may consist of a single male, a wife and daughter which means that it assumed that the appellant was a member of a joint Hindu family consisting of himself, his wife and daughter.
However, in the very next breath the High Court concluded: "But the assessee has no son and therefore no undivided family." An examination of fundamentals might have saved the High Court from the inconsistency that a single male can constitute a "joint family" with his wife and daughter but if that male has no son, there can be no "undivided family".
In the first place, joint family and undivided family are synonymous terms.
Secondly, when one says that a joint Hindu family consists of a single male, his wife and daughter, one implies necessarily that there is no son.
If there were a son, there would be two males.
For our limited purpose, fundamentals do not any more require a study of Sastric texts, digests and commentaries because judicial decisions rendered over the last century and more have given a legalistic form to what was in a large measure a mingling of religious and 170 moral edicts with rules of positive laws.
Hindu law today, apart from the piecemeal codification of some of its branches like the laws of marriage, succession, minority, guardianship, adoption and maintenance is Judge made law, though that does not detract from the juristic weight of Smritis like the Yajnavalkya Smriti nor from the profundity of Vijnaneshwara 's Commentary on it, the critique bearing the humble title of 'Mitakshara '.
The appellant is governed by the Mitakshara school of Hindu law but that is not of any particular consequence for the purposes of this appeal.
The differences between the Mitakshara and Dayabhaga schools on the birth right of coparceners and the rules of inheritance have no bearing on the issues arising in this appeal, particularly on the question whether a single male can constitute a joint or undivided family with his wife and unmarried daughter.
A joint Hindu family under the Dayabhaga is, like a Mitakshara family, normally joint in food, worship and estate.
In both systems, the property of joint family may consist of ancestral property, joint acquisitions and of self acquisitions thrown into the common stock(1).
In fact, whatever be the school of Hindu law by which a person is governed, the basic concept of Hindu undivided family in the sense of who can be its members is just the same.
Section 2(9) of the Income tax Act, 1922 defines a "person" to include inter alia a "Hindu undivided family".
Under sections 3 and 55 of that Act, a Hindu undivided family is a taxable unit for the purposes of income tax and super tax.
The expression 'Hindu undivided family ' finds reference in these and other provisions of the Act but that expression is not defined in the Act.
The reason of the omission evidently is that the expression has a well known connotation under the Hindu Law and being aware of it, the legislature did not want to define the expression separately in the Act.
Therefore, the expression 'Hindu undivided family must be construed in the sense in which it is under stood under the Hindu law(1).
There is no substance in the contention of the respondent that in the absence of an antecedent history of jointness, appellant cannot constitute a joint Hindu family with his wife and unmarried daughter.
The lack of such history was never before pleaded and not only does it find no support from the record but such an assumption ignores the plain truth that the joint and undivided family is the normal condition of Hindu society.
The presumption therefore is that the members of a Hindu family are living in a state of union, unless the contrary is established.(3) The strength of the presumption may vary from case to case depending upon the degree of relationship of the members and the farther one goes from the founder of the family, the 171 weaker may be the presumption.
But, generally speaking, the normal state of every Hindu family is joint and in the absence of proof of division, such is the legal presumption.
Thus, a man who separates from his father or brothers may, nevertheless continue to be joint with the members of his own branch.
He becomes the head of a new joint family, if he has a family, and if he obtains property on partition with his father and brothers, that property becomes the ancestral property of his branch, qua him and his male issue.
It is true that the appellant cannot constitute a coparcenary with his wife and unmarried daughter but under the Income tax Act a Hindu undivided family, not a coparcenary, is a taxable unit.
A Hindu coparcenary is a much narrower body than the joint family.
It includes only those persons who acquire by birth an interest in the joint or coparcenary property and these are the sons, grandsons and great grandsons of the holder of the joint property for the time being, that is to say, the three generations next to the holder in unbroken male descent.
Since under the Mitakshara Law, the right to joint family property by birth is vested in the male issue only, females who come in only as heirs to obstructed heritage (sapratibandha days), cannot be coparceners.
But we are concerned under the Income tax Act with the question whether the appellant 's wife and unmarried daughter can with him be members of a Hindu undivided family and not of a coparcenary.
In the words of Sir George Rankin who delivered the opinion of the Judicial Committee in Kalyanji 's case : "The phrase `Hindu undivided family ' is used in the statute with reference, not to one school only of Hindu law, but to all schools; and their Lordships think it a mistake in method to begin by pasting over the wider phrase of the Act the words `Hindu co parcenary ', all the more that it is not possible to say on the face of the Act that no female can be a member." (p. 95).
Outside the limits of coparcenary, there is a fringe of persons, males and females, who constitute an undivided or joint family.
There is no limit to the number of persons who can compose it nor to their remoteness from the common ancestor and to their relationship with one another.
A joint Hindu family consists of persons lineally descended from a common ancestor and includes their wives and unmarried daughters.
The daughter, on marriage, ceases to be a member of her father 's family and becomes a member of her husband 's family.
The joint Hindu family is thus a larger body consisting of a group of persons who are united by the tie of sapindaship arising by birth, marriage or adoption.
"The fundamental principle of the Hindu joint family is the sapindaship.
Without that it is impossible to form a joint Hindu family.
With it as long as a family is living together, it is almost impossible not to form a joint Hindu family.
It is the family relation, the sapinda relation, which distinguishes the joint family, and is of its very essence.
"(1) 172 The joint Hindu family, with all its incidents, is thus a creature of law and cannot be created by act of parties, except to the extent to which a stranger may be affiliated to the family by adoption.
But the absence of an antecedent history of jointness between the appellant and his ancestors is no impediment to the appellant, his wife and unmarried daughter forming a joint Hindu family.
The appellant 's wife became his sapinda on her marriage with him.
The daughter too, on her birth, became a sapinda and until she leaves the family by marriage, the tie of sapindaship will bind her to the family of her birth.
As said by Golapchandra Sarkar Sastri in his "Hindu Law" (Eighth Ed., p. 240), "Those that are called by nature to live together, continue to do so" and form a joint Hindu family.
The appellant is not by contract seeking to introduce in his family strangers not bound to the family by the tie of sapindaship.
The wife and unmarried daughter are members of his family.
He is not by agreement making them so.
And as a Hindu male, he himself can be the stock of a fresh descent so as to be able to constitute an undivided family with his wife and daughter.
That it does not take more than one male to form a joint Hindu family with females is well established.
In Gowli Buddanna vs Commissioner of Income tax, Mysore, Bangalore(1), one Buddappa, his wife, his two unmarried daughters and his adopted son Buddanna were members of a Hindu undivided family.
On Buddappa 's death a question arose whether the adopted son who was the sole surviving coparcener could form a joint Hindu family with his mother and sisters and could accordingly be assessed in the status of a manager of the Hindu undivided family.
Speaking for the Court, Shah J. observed : "The plea that there must be at least two male members to form a Hindu undivided family as a taxable entity also has no force.
The expression `Hindu undivided family ' in the Income tax Act is used in the sense in which a Hindu joint family is understood under the personal law of Hindus.
Under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and apparently the Income tax Act does not indicate that a Hindu undivided family as an assessable entity must consist of at least two male members.
" In N. V. Narendranath vs Commissioner of Wealth tax, Andhra Pradesh, Hyderabad(2), the appellant filed returns for Wealth Tax in the status of a Hindu undivided family which at the material time consisted of himself, his wife and two minor daughters.
The claim to be assessed in the status of a Hindu undivided family rested on the circumstance that the wealth returned consisted of ancestral property received or deemed to have been received by the appellant on partition with his father and brothers.
The High Court held that as the appellant 's family did not have any other male coparcener, the assets must 173 be held to belong to him as an individual and not to the Hindu undivided family.
That decision was set aside by this Court on the ground that a joint Hindu family could consist under the Hindu law of a single male member, his wife and daughters and that it was not necessary that the assessable unit should consist of at least two male members.
In both of these cases, Gowli Buddanna 's and Narendranath 's the assessee was a member of a pre existing joint family and had, in one case on the death of his father and in the other on partition, become the sole surviving coparcener.
But the decision in those cases did not rest on the consideration that there was an antecedent history of jointness.
The alternative argument in Gowli Buddanna 's case (p. 266) was an independent argument uncorrelated to the pre existence of a joint family.
The passage which we have extracted from the judgment of Shah J. in that case shows that the decision of this Court did not proceed from any such consideration.
The Court held in terms categorical that the Hindu undivided family as an assessable entity need not consist of at least two male members.
The same is true of the decision in Narendranath 's case (see p. 886).
Thus the contention of the Department that in the absence of a pre existing joint family the appellant cannot constitute a Hindu undivided family with his wife and unmarried daughter must fail.
The view of the High Court that the appellant has "no son and therefore no undivided family" is plainly unsound and must also be rejected.
Accordingly, the question whether the income of the Kathoke Lodge can be assessed in the hands of the appellant as a Karta or manager of the joint family must be decided on the basis that the appellant, his wife and unmarried daughter are members of a Hindu undivided family.
By the declaration of January 26, 1956, the appellant threw Kathoke Lodge into the family hotchpot abandoning all separate claims to that property.
The genuineness of that declaration was accepted by the Tribunal.
The High Court too decided the reference on the footing that the appellant had thrown the property into the common hotchpot and that `after the declaration, the property . would be property of a Hindu undivided family in the hands of the assessee" (p. 471).
Learned counsel for the Department attempted to raise a new contention before us that there is no such thing under the Hindu law as impressing separate property with the character of joint, family property, that the only doctrine known in this behalf to Hindu law is the doctrine of blending and since, prior to the declaration the family hotchpot in the instant case was empty, there was nothing with which the Kathoke Lodge or its income could be blended and therefore, the declaration is ineffective to convert that property into joint family property.
Learned counsel for the appellant cited several decisions of the High Courts to controvert the Department 's contention.
But apart from the merits of the point we ruled that the contention was not open to the Department.
The statement of case framed by the Tribunal shows that such a contention was not raised before the Tribunal.
The Commissioner of Income tax himself asked for the reference of a question to the High 174 Court for its opinion.
That question concerns the point whether having regard to the conduct of the appellant his self acquired property could be said to be impressed with the character of joint family property.
The question did not cover the contention raised before us on behalf of the Department.
But above all, though an argument was raised in the High Court on behalf of the Department that for the operation of the doctrine of blending it was essential that there should exist not only a coparcenary but also a coparcenary property, learned counsel who appeared for the Department in the High Court "did not, after some discussion, press that there should necessarily be coparcenary property.
" This was not a concession on a question of law in the sense as to what the true legal position was.
What the Department 's counsel stated in the High Court was that he did not want to press the particular point.
In our opinion, it is not open to the Department to take before us a contention which in the first place does not arise out of the reference and which the Department 's counsel in the High Court raised but did not press.
Having examined the true nature of an undivided family under the Hindu law and in view of the findings of the Tribunal and the High Court on the second aspect, two points emerge clear : Firstly that the appellant constituted a Hindu undivided family with his wife and unmarried daughter and secondly that Kathoke Lodge which was the appellant 's separate property was thrown by him in the family hotchpot.
It remains now to consider whether the income of Kathoke Lodge must be assessed in the hands of the appellant as an individual or whether it can be assessed in his status as manager of the Hindu undivided family.
Since the conclusion reached by the High Court that the income of Kathoke Lodge cannot be assessed in the appellant 's status as a manager of the Hindu undivided family is based wholly on the decision in Kalyanji 's case and since that decision also loomed large in the arguments before us, it is necessary to examine it closely.
The relevant facts of that case are these : One Sicka had two sons, Moolji and Purshottom.
From his first wife, Moolji had two sons, Kanji and Sewdas both of whom were married but neither of whom had a son.
From his second wife, Moolji had a son Mohan Das.
Kanji had a wife and a daughter while Sewdas had a wife but no issue.
Moolji, Kanji and Sewdas separated from one another in about 1919.
In the same year Moolji made gifts of capital to Kanji and Sewdas.
Moolji continued to live jointly with his second wife and the son Mohan Das born of her.
Purshottom had a wife, a son and a daughter.
There was another family of which the head was one Vithaldas.
He had three sons, Kalyanji, Chaturbhuj and Champsi.
Kalyanji had a wife, three sons and a daughter while Chaturbhuj had a wife and daughters.
Moolji and Purshottom, the two sons of Sicka, who had already separated from each other started in 1912 a business called Moolji Sicka and Company in partnership with Kalyanji, the son of Vithaldas.
175 The three partners employed their self acquired properties for the purpose of that business.
In course of time, Moolji 's sons Kanji and Sewdas, and Vithaldas ' sons Chaturbhuj and Champsi were taken into the partnership with the result that by 1930 the partnership came to consist of seven partners : Moolji, his sons Kanji and Sewdas; Moolji 's brother Purshottom; and Vithaldas 's sons Kalyanji, Chaturbhuj and Champsi.
The interest of Kanji and Sewdas in the firm was a gift from their father Moolji and that of Chaturbhuj a gift from his brother Kalyanji.
Those of the partners whose interest in the firm was separate property were not shown to have thrown that property or the receipts therefrom into the common stock.
The Privy Council had six appeals before it which were filed by the partners of the firm except Chapsi.
The appeals related to the assessment year 1931 32.
The controversy was whether the partners should each be assessed to super tax upon his share of the profits as an individual or whether the six shares should each be assessed as income of a Hindu undivided family.
Three partners out of the six, namely, Moolji, Purshotom and Kalyanji, were each members of a Hindu undivided family.
Each of these three partners had a son or sons from whom he was not divided.
But the income which these partners received from the firm was their separate and self acquired property.
Since the income was not thrown into the common stock, the Privy Council held that it could not be regarded as the income of the respective joint families.
The fourth partner Chaturbhuj had no son.
His interest in the firm was obtained from his brother Kalyanji and therefore the income which he received from his share in the profits of the firm was a self acquired and not ancestral property.
The Privy Council observed that even if Chaturbhuj were to have a son, that son would have taken by birth no interest in the income which fell to Chaturbhuj 's share and therefore the income was assessable in the hands of Chaturbhuj as his separate income and not that of the joint Hindu family.
According to the Privy Council, in none of the cases of these four partners was the result affected by the fact that any partner had a wife and a daughter or a wife and more than one daughter.
If the mere existence of a son did not make a father 's self acquired property joint family property, it was untenable that the existence of a wife or a daughter could do so.
In the case of the remaining two partners, Kanji and Sewdas, their interest in the firm was obtained under a gift from their father.
The Privy Council assumed, without deciding the question, that such an interest was ancestral property in the hands of the sons so that if either Kanji or Sewdas had a son, the son would have taken interest in the property by birth.
But neither Kanji nor Sewdas had a son.
Kanji 's family consisted of himself, his wife and daughter while Sewdas 's family consisted of himself and his wife.
The Privy Council held that the wife and daughter may be entitled to be maintained out of a person 's separate as well as joint family property but the mere existence of a wife or daughter did not make ancestral property joint.
176 The crucial facts in Kalyanji 's case on which the ultimate decision rested are these : (i) In regard to three partners, Moolji, Purshottom and Kalyanji, though each of them was the head of his joint family which included in every case a son or sons, the income which each received from the firm was his separate and self acquired property which was not thrown into the common stock.
(ii) In regard to Chaturbhuj, though he had no son, that fact was irrelevant because his interest in the firm was his self acquired or separate property in which the son could have taken no interest by birth.
(iii) And in regard to Kanji and Sewdas, even if their interest in the firm was assumed to be ancestral property, the income which they received from the firm was their separate property as neither of them had a son who could take interest in the ancestral property by birth.
The appeals of the six partners before the Privy Council fall into two classes.
Those of Moolji, Purshottom, Kalyanji and Chaturbhuj fall in one class while those of Kanji and Sewdas fall in another class.
There is a point of distinction between the cases of the four partners falling within the first class on one hand and that of the appellant on the other.
But the point of distinction is not that Moolji, Purshottom and Kalyanji had a son or sons and the appellant has none, because though the three partners were heads of their respective joint families which included in every case a son or sons, the income which each received from the firm was his separate and self acquired property which was not thrown into the common stock.
The mere existence of a son or sons in a joint Hindu family does not make the father 's separate or self acquired property joint family property.
Though Chaturbhuj had no son that fact would not by itself bring his case on par with the appellant 's because Chaturbhuj 's interest in the firm was his separate property which also was not thrown in the common stock.
If the mere fact that Moolji, Purshottom and Kalyanji had each a son or sons did not make their separate property joint family property, the mere existence of a wife or daughter could not bring about that result in Chaturbhuj 's case.
As contrasted with the cases of these four partners, Kathoke Lodge which was once the separate property of the appellant was thrown by him in the common stock, which raises the question whether that circumstance is sufficient to justify the assessment of the income from that property in the appellant 's status as the manager of the joint family.
On this point the cases of Kanji and Sewdas furnish a near parallel.
They did not have to throw their interest in the firm in the common stock because that interest was, on assumption, their ancestral property.
But even though the property was ancestral, the income which they received from it was treated as their separate property as neither of them had a son who could take interest in the ancestral property by birth.
Applying that analogy, even if Kathoke Lodge were to be an ancestral asset, its income would still have to be treated as the appellant 's separate property as he has no son who could take interest in that property by birth.
On this reasoning, the effect of the appellant throwing Kathoke Lodge into the family hotchpot could not be more telling than if that property was his ancestral property.
177 But then it is urged by the learned counsel for the appellant that the Privy Council was in error in its decision on the nature of income received by Kanji and Sewdas from what was assumed to be ancestral property and therefore the decision on that aspect of the matter ought not to be followed in determining the true nature of the income received by the appellant from Kathoke Lodge.
This submission is founded on the disapproval by this Court of certain observations made by the Privy Council in Kalyanji 's case.
The Privy Council, in its judgment in Kalyanji 's case, referred in passing to "Laxminarayan 's case" and observed that "The Bombay High Court on the other hand, in Lakshminarayan 's case having held that the assessee his wife and mother were a Hindi undivided family, arrived too readily at the conclusion that the income was the income of the family".
The decision of the Bombay High Court which the Privy Council had in mind is Commissioner of Income tax, Bombay vs Gomedalli Lakshminarayan There is a fundamental distinction between Lakshminarayan 's case and Kalyanji 's case which, with respect the Privy Council failed to notice.
In Lakshminarayan 's case the joint Hindu family consisted of a father, his wife, their son and the son 's wife.
The property of the joint family was ancestral in the hands of the father and the son 's had acquired by birth an interest therein.
(See the Judgment of Rangnekar J. at p. 369).
There was a subsisting undivided family during the father 's life time and that undivided family did not come to an end on the father 's death.
The same undivided family continued after the death of the father, with the son, his mother and his wife as its members.
The effect of the father 's death was merely this that the son, instead of the father, became the manager of the joint family.
The income from ancestral property was the income of the joint family during the father 's life time and after his death it continued to be the income of the self same joint family.
The only change that had come about was that one link in the chain was snapped by death.
But the death of a member of a joint Hindu family does not ordinarily disrupt the joint family.
The Bombay High Court therefore held that the income of the ancestral property should be assessed in the son 's status as a manager of the undivided family and not in his individual capacity.
When Lakshminarayan 's case came up before the Privy Council in appeal(1), it regarded itself as bound by the interpretation put in Kalyanji 's case on the expression "Hindu undivided family" as employed in section 55 of the Indian Income tax Act and observed that the facts of the case were not materially different from the facts of Kalyanji 's case.
The Privy Council therefore answered the question by holding that "the income received by right of survivorship by the sole surviving male member of a Hindu undivided family can be taxed in the hands of such male member as his own individual income for the purposes of assessment to super tax under Sec.
55 of the Indian Income Tax Act, 1922".
The decision of the Privy Council in Lakshminarayan 's case and the observations made by it in Kalyanji 's case regarding the view taken 178 by the Bombay High Court in Lakshminarayan 's case were expressly disapproved by this Court at least in two cases.
In Gowli Buddanna 's case(1), after discussing the decisions in Kalyanji 's case and Lakshminarayan 's case this Court observed : "It may however be recalled that in Kalyanji Vithaldas 's case income assessed to tax belonged separately to four out of six partners; of the remaining two it was from an ancestral source but the fact that each such partner had a wife or daughter did not make that income from an ancestral source income of the undivided family of the partner, his wife and daughter.
In Gomedalli Lakshminarayan 's case the property from which income accrued belonged to a Hindu undivided family and the effect of the death of the father who was a manager was merely to invest the rights of a manager upon the son.
The income from the property was and continued to remain the income of the undivided family.
This distinction which had a vital bearing on the issue falling to be determined was not given effect to by the Judicial Committee in A. P. Swamy Gomedalli 's case.
" In Narendranath 's(2) case too this Court disapproved of the Privy Council decision in Lakshminarayan 's case and pointed out that the Privy Council had failed to notice the distinction between the facts of Kalyanji 's case and those of Lakshminarayan 's case in observing that the Bombay High Court "arrived too readily at the conclusion that the income was the income of the family".
The appellant 's counsel is thus right in his submission that the observations made by the Privy Council in Kalyanji 's case as regards the correctness of the Bombay view in Lakshminarayan 's case is not good law.
In fact, the decision of the Privy Council in appeal from the judgment of the Bombay High Court in Lakshminarayan 's case has itself been disapproved by this Court.
But that does not affect the correctness of the Privy Council decision in Kalyanji 's case itself as regards the nature of the income received by the six partners from the firm.
That part of the judgment in Kalyanji 's case has never been doubted and is open to no exception.
For the matter of that, the error of the Privy Council 's decision in Lakshminarayan 's case consisted in overlooking the factual distinction between that case and Kalyanji 's case, as a result of which the ratio of Kalyanji 's case came to be wrongly applied to Lakshminarayan 's case.
The ratio of Kalyanji 's case would therefore apply to the instant case, the parallel being furnished by the cases of Kanji and Sewdas.
But a word of explanation is necessary in the interests of clarity.
The reason why the cases of Kanji and Sewdas furnish a close parallel is the very reason for which their cases were held by this Court to be distinguishable from Lakshminarayan 's case.
In Lakshminarayan 's case the property was ancestral in the hands of the father, the son had acquired an interest by birth therein, there was a subsisting Hindu un 179 divided family during the life time of the father and since that family did not come to an end on the death of the father, the Bombay High Court had rightly held that the income continued to be income of the joint family and was liable to super tax as such income.
In regard to Moolji, Purshottom, Kalyanji and Chaturbhuj no such question arose as their interest in the firm was their separate property which was not thrown into the common stock.
As regards Kanji and Sewdas, they were divided from their father Moolji at least since 1919 in which year Moolji made gifts of capital to them.
Kanji joined the firm in 1919 and Sewdas in 1930.
The assessment year in reference to which the dispute arose was 1931 32.
Thus the gifted property of which the income was to be charged to super tax was not the ancestral or joint family property of a subsisting Hindu undivided family consisting of Moolji, Kanji and Sewdas.
Were it so, the case would have fallen within the ratio of the judgment of the Bombay High Court in Lakshminarayan 's case.
As in the cases of Kanji and Sewdas, so here, the property of which the income is to be brought to tax was not the joint family property of a subsisting Hindu undivided family which had devolved on a sole surviving coparcener.
In that latter class of cases the view has been consistently taken, except for the decision of the Privy Council in Lakshminarayan 's case, that property of a joint family does not cease to belong to the family merely because the family is represented by a single coparcener who possesses rights which an owner of property may possess.
The decision of the Privy Council in Attorney General of Ceylon vs A. R. Arunachalam Chettiar and Others(1), the decisions of this Court in the cases of Gowli Buddanna and Narendranath and the decision of the Bombay High Court in Lakshminarayan 's case fall within that class and are not to be confused with cases like the one on hand, which fall within the rule in Kalyanji 's case.
In Arunachalam Chettiar 's case, a father and son constituted a joint Hindu family along with females including the widow of a pre deceased son.
On the death of the son in 1934 the father became the sole surviving coparcener.
By a Ceylonese Ordinance, property passing on the death of a member of a Hindu undivided family was exempt from payment of Estate Duty.
On the death of the father a question arose whether, in view of the ordinance, his estate was liable to Estate Duty.
The Privy Council held that the father was at his death a member of a Hindu undivided family, the same undivided family of which his son, when alive was a member, and of which the continuity was preserved after the father 's death by adoptions made by the widows who were members of the family.
In Gowli Buddanna 's case, there was a subsisting Hindu undivided family between a father, his wife, two unmarried daughters and an adopted son.
In respect of the income from dealings of the family, the father was assessed during his life time in the status of a manager of the Hindu undivided family.
After the death of the father the adopted son contended that he should be assessed as an individual.
This contention was rejected uniformly at all stages.
After examining various authorities including Kalyanji 's case, Lakshminaryan 's case and Arunachalam 's case, this Court held that property which belongs to a Hindu undivided family does not cease to belong 180 to it because of the temporary reduction of the coparcenary unit to a single individual, who possesses rights which an owner of property may possess.
A similar view was taken by this Court in Narendranath 's case which raised a question under the Wealth Tax Act.
Narendranath 's family consisted, at the material time, of his wife and two minor daughters.
Since the wealth returned consisted of ancestral property received by him on partition with his father and brothers, it was held by this Court that his status was that of a Hindu undivided family and not that of an individual.
While dealing with the question whether the assets which came to Narendranath 's share on partition ceased to bear the character of joint family properties and became his individual property, this Court observed : "In this connection, a distinction must be drawn between two classes of cases where an assessee is sought to be assessed in respect of ancestral property held by him : (1) where property not originally joint is received by the assessee and the question has to be asked whether it has acquired the character of a joint family property in the hands of the assessee and (2) where the property already impressed with the character of joint family property comes into the hands of the assessee as a single coparcener and the question required to be considered is whether it has retained the character of joint family property in the hands of the assessee or is converted into absolute property of the assessee." After referring to Kalyanji 's case and noticing the observation of the Judicial Committee that income from an ancestral source does not necessarily become the income of the undivided family consisting of a man, his wife and daughter, this Court held : "Different considerations would be applicable, where property already impressed with the character of joint family property comes into the hands of a single coparcener.
The question to be asked in such a case is whether the property retains the character of joint family property or whether it sheds the character of joint family property and becomes the absolute property of the single coparcener.
" In the result the Court concluded that the case fell within the rule in Gowli Buddanna 's case.
There are thus two classes of cases, each requiring a different approach.
In cases falling within the rule in Gowli Buddanna 's case, the question to ask is whether property which belonged to a subsisting undivided family ceases to have that character merely because the family is represented by a sole surviving coparcener who possesses rights which an owner of property may possess.
For the matter of that, the same question has to be asked in cases where the family, for the time being, consists of widows of deceased coparceners as in Commissioner of Income tax, Madras vs Rm.
Veerappa Chettiar(1), so long as the property which was originally of the joint Hindu family 181 remains in the hands of the widows of the members of the family and is not divided amongst them.
In cases falling within the rule in Kalyanji 's case, the question to ask is whether property which did not belong to a subsisting undivided family has truly acquired the character of joint family property in the hands of the assessee.
In this class of cases, the composition of the family is a matter of great relevance for, though a joint Hindu family may consist of a man, his wife and daughter, the mere existence of a wife and daughter will not justify the assessment of income from the joint family property in the status of the head as a manager of the joint family.
The appellant 's case falls within the rule in Kalyanji 's case since the property, before it came into his hands, was not impressed with the character of joint family property.
It is of great relevance that he has no son and his joint family consists, for the time being, of himself, his wife and daughter.
Once it is realised that there are two distinct classes of cases which require a different approach, there would be no difficulty in understanding the implications of the apparently conflicting tests evolved as guides for deciding the two classes of cases.
In Kalyanji 's case the Privy Council observed: "In an extra legal sense, and even for some purposes of legal theory, ancestral property may perhaps be described, and usefully described, as family property; but it does not follow that in the eye of the Hindu law it belongs save in certain circumstances, to the family as distinct from the individual.
By reason of its origin a man 's property may be liable to be divested wholly or in part on the happening of a particular event, or may be answerable for particular obligations, or may pass at his death in a particular way; but if, in spite of all such facts, his personal law regards him as the owner, the property as his property and the income therefrom as his income, it is chargeable to income tax as his, i.e., as the income of an individual.
In their Lordships ' view it would not be in consonance with ordinary notions or with a correct interpretation of the law of the Mitakshara, to hold that property which a man has obtained from his father belongs to a Hindu undivided family by reason of having a wife and daughters.
" On the other hand, in Arunachalam 's case which falls within the rule in Gowli Buddanna 's case, the Privy Council observed: "But though it may be correct to speak of him (the sole surviving coparcener) as the 'owner ', yet it is still correct to describe that which he owns as the joint family property.
For his ownership is such that upon the adoption of a son it assumes a different quality: it is such too, that female members of the family (whose members may increase) have a right to maintenance out of it and in some circumstances to a charge for maintenance upon it.
And these are incidents which arise, notwithstanding his so called ownership, just because the property has been and has not ceased to be 182 joint family property. it would not appear reasonable to impart to the legislature the intention to discriminate, so long as the family itself subsists, between property in the hands of a single coparcener and that in the hands of two or more coparceners.
" Holding that it was an irrelevant consideration that a single coparcener could alienate the property in a manner not open to one of several coparceners, the Privy Council said: "Let it be assumed that his power of alienation is unassailable: that means no more than that he has in the circumstances the power to alienate joint family property.
That is what it is until he alienates it, and, if he does not alienate it, that is what it remains.
The fatal flaw in the argument of the appellant appeared to be that, having labelled the surviving coparcener 'owner ', he then attributed to his ownership such a congeries of rights that the property could no longer be called 'joint family property '.
The family, a body fluctuating in numbers and comprised of male and female members, may equally well be said to be owners of the property, but owners whose ownership is qualified by the powers of the coparceners.
There is in fact nothing to be gained by the use of the word 'owner ' in this connection.
It is only by analysing the nature of the rights of the members of the undivided family, both those in being and those yet to be born, that it can be determined whether the family property can properly be described as 'joint property ' of the undivided family.
" These two sets of tests, both evolved by the Privy Council govern two distinct sets of cases and there is no inconsistency between the two tests.
The test evolved in Kalyanji 's case, not in Arunachalam 's or Gowli Buddanna 's case, has to be applied to the instant case.
Kathoke Lodge was not an asset of a pre existing joint family of which the appellant was a member.
It became an item of joint family property for the first time when the appellant threw what was his separate property into the family hotchpot.
The appellant has no son.
His wife and unmarried daughter were entitled to be maintained by him from out of the income of Kathoke Lodge while it was his separate property.
Their rights in that property are not enlarged for the reason that the property was thrown into the family hotchpot.
Not being coparceners of the appellant, they have neither a right by birth in the property nor the right to demand its partition nor indeed the right to restrain the appellant from alienating the property for any purpose whatsoever.
Their prior right to be maintained out of the income of Kathoke Lodge remains what it was even after the property was thrown into the family hotchpot: the right of maintenance, neither more nor less.
Thus, Kathoke Lodge may be usefully described as the property of the family after it was thrown into the common stock but it does not follow that in the eye of Hindu Law it belongs to the family, as it would have, if the property were to devolve on the appellant as a sole surviving coparcener.
183 The property which the appellant has put into the common stock may change its legal incidents on the birth of a son but until that event happens the property, in the eye of Hindu Law, is really his.
He can deal with it as a full owner, unrestrained by considerations of legal necessity or benefit of the estate.
He may sell it, mortgage it or make a gift of it.
Even a son born or adopted after the alienation shall have to take the family hotchpot as he finds it.
A son born, begotten or adopted after the alienation has no right to challenge the alienation.
Since the personal law of the appellant regards him as the owner of Kathoke Lodge and the income therefrom as his income even after the property was thrown into the family hotchpot, the income would be chargeable to income tax as his individual income and not that of the family.
For these reasons, we dismiss the appeal but there will be no order as to costs.
P.H.P. Appeal dismissed.
| IN-Abs | The appellant Surjit Lal was the owner of an immovable property called "Kathoke Lodge".
He used to derive rent income from the said property in addition to deriving income under other heads.
In 1956, he made a declaration throwing the said property into the family hotchpotch.
The family consisted of himself his wife and an unmarried daughter.
The appellant contended before the Income Tax Officer that the rent income derived from the said property should be assessed in the status of a Hindu Undivided Family.
The Income Tax Officer held: 1.
In the absence of a nucleus of joint family property there was nothing with which the appellant could mingle his separate property.
There could not be a Hindu Undivided family without there being Undivided family property.
An appeal filed before the Appellate Assistant Commissioner was dismissed but on the following grounds: (1) After the declaration the appellant was dealing with the income of the property in the same way as before and, therefore, the declaration was not acted upon.
(2) Even assuming that the property was thrown into the common stock and was therefore joint family property, the income from that property could still be taxed in the appellant 's hands as he was the sole male member of the family.
The matter was further taken to the Income Tax Appellate Tribunal by the appellant.
The Tribunal accepted the declaration as genuine and differed from the A.A.C. that it was not acted upon.
The Tribunal however, held that though the appellant had invested his separate property with the character of joint family property, he being a sole surviving coparcener continued to have the same absolute and unrestricted interest in the property as before and, therefore, in law, the property had to be treated as his separate property.
Thereafter the Tribunal referred the question of law to the High Court.
Before the High Court it was contended by the appellant that it is open to a male member of a joint Hindu Family to convert his self acquire property into joint family property by throwing it into the common hotchpotch, and that it was not necessary that there should be an ancestral nucleus or that there should be more than one male in the joint family.
On the other hand, the department contended that it was contrary to the basic concept of a Hindu undivided family that a single male alongwith females could form a joint Hindu family and that it was necessary for the formation of a joint Hindu family that there should be more than one male entitled to claim partition of the joint family property.
165 The High Court did not go into the larger question and assumed for the purpose of argument that there need not be more than one male member for forming a joint Hindu family as a taxable unit.
The High Court held that since the assessee had no son, there was no undivided family.
According to the High Court, the case of the appellant fell within the ratio laid down by the Privy Council in Kalyanji 's case and that since under the personal law, the right to the income remained as it was before the appellant made the declaration, the income from Kathoke Lodge was liable to be assessed as the appellant 's individual income.
Dismissing an appeal by Special Leave, ^ HELD: (1) Even in the absence of an antecedent history of jointness, the appellant could constitute a joint Hindu Family with his wife and unmarried daughter.
True that the appellant could not constitute a coparcenary with his wife and unmarried daughter but under the Income Tax Act a Hindu undivided family, not a coparcenary is taxable unit.
A Hindu coparcenary is a much narrower body than the joint family.
[170F, 171B] (2) The joint family with all its incidents, is a creature of law and cannot be created by act of parties except to the extent to which a stranger may be affiliated to the family by adoption.
The appellant, however, was not by contract seeking to introduce in his family strangers not bound to the family by the tie of a sapindaship.
That it does not take more than one male to form a joint Hindu family with females, is well established.
[172A & G] (3) The contention of the Department that since prior to the declaration.
the family hotchpotch in the instant case was empty and there was nothing with which the property or its income could be blended and therefore, the declaration is ineffective to convert that property into joint family property was not raised before the Tribunal, and the same was not pressed in the High Court.
It was, therefore, not open to the department to take before this Court a contention which in the first place does not arise out of the reference and which the department 's counsel in the High Court raised but did not press.
[173G H, 174A C] (4) The cases of Kanji and Sewdas in Kalyanji 's case furnish a near parallel to the present case.
Though the property in their hands was assumed to be ancestral, income which Kanji and Sewdas received from it was treated as their separate property, as neither of them had a son who could take interest in the ancestral property by birth.
Applying that analogy, even if Kathoke lodge were to be an ancestral asset, its income would still have to be treated as the appellant 's separate property as he had no son who could take interest in that property by birth.
The ratio of Kalyanji 's case would, therefore, apply to the instant case.
The reason why the case of Kanji and Sewdas furnished a close parallel is the very reason for which their cases were held by this Court to be distinguishable from Lakshmi Narain 's case.
In Lakshmi Narain 's case the property was ancestral in the hands of the father, the son had acquired an interest by birth therein there was a subsisting Hindu Undivided family during the lifetime of the father and since that family did not come to an end on the death of the father, the Bombay High Court rightly held that the income continued to be the income of the joint family and was liable to be taxed as such.
The property of a joint family does not cease to belong to the family merely because the family is represented by a single coparcener who possesses rights which an owner of property may possess.
[176 D G, 177A, 178, G H, 179A] (5) There are thus two classes of cases each requiring a different approach.
In cases where the property belongs to a subsisting undivided family the property does not cease to have that character merely because the family is represented by a sole surviving coparcener who possesses rights which an owner of property may possess, or for that matter even if the family for the time being consists only of widows of deceased coparceners.
In cases where the property did not belong to a subsisting undivided family, whether any property has acquired the 166 character of joint family property has acquired the character of joint family property in the hands of an assessee depends on the composition of the family.
A joint Hindu family can consist of a man, his wife and daughter but the mere existence of a wife or daughter will not justify the assessment of income from the joint family property in the status of the head as a manager of the joint family.
Once it is realised that there are two distinct classes of cases which require a different approach there would be no difficulty in understanding the implications of the apparently conflicting tests evolved as guides for deciding the two classes of cases.
Kathoke Lodge was not an asset of a pre existing joint family.
It became an item of joint family property for the first time when the appellant threw what was his separate property into the family hotchpotch.
The appellant had no son.
His wife and unmarried daughter were entitled to be maintained by him from out of the income of Kathoke Lodge while it was his separate property.
Their rights in that property are not enlarged for the reason that the property was thrown into the family hotchpotch.
Not being co parceners of the appellant, they have neither a right by birth in the property nor the right to demand partition nor indeed the right to restrain the appellant from alienating the property for any purpose whatsoever.
The property which the appellant has put into the common stock may change its legal incidence on the birth of a son but until that event happens, the property in the eyes of Hindu Law is really his.
He can deal with it as a full owner, unrestrained by considerations of legal necessity or benefit of the estate.
He may sell it mortgage it or make a gift of it.
Even a son born or adopted after the alienation shall have to take the family hotchpotch as he finds it.
[180 G, H, 181 A D, 182 E H, 183A] (7) Since the personal law of the appellant regards him as the owner of Kathoke lodge and the income therefrom as his income even after the property was thrown into the family hotchpotch, the income would be chargeable to income tax as his individual income and not that of the family.
[183B C]
|
Civil Appeal No. 85 of 1954.
Appeal under Article 133(1)(c) of the Constitution from the Judgment and Decree dated the 6th November, 1950, of the High Court of Judicature at Allahabad in F.A. No. 141 of 1949.
section Ramaswamy Iyer (K. R. Choudhry, with him) for the appellant.
M. C. Setalvad Attorney Generalfor India (C. P. Lal, with him) for the respondent.
April 21.
The Judgment of the Court was delivered by IMAM J.
This is an appeal against the decision of the Allahabad High Court affirming the decision of the Civil Judge of Allahabad.
The appellant was appointed to the United Provinces Civil (Executive) Service in 1940 and in due course was confirmed.
He was posted to various stations and in 1944 he was posted to Lakhimpur Kheri, where he joined in July, 1944.
On the 23rd August, 1944, the Deputy Commissioner of Lakhimpur Kheri received a telegram from Government informing him that the appellant was suspended forthwith pending inquiry into his conduct and that a copy of the telegram was forwarded to the appellant for information.
On the 26th August, 1944, the Deputy Commissioner wrote to the appellant that he was required to appear before the Commissioner of the Lucknow Division on the 28th August, 1944, to answer the charges, a copy of which would be forwarded to him.
He further in.
formed the appellant that he could treat his case under rule 55 of the Civil Services (Classification Control and Appeal) Rules of 1930, published in the United Provinces Gazette of June 28, 1930.
The appellant was further informed that in view of his suspension his leave application was cancelled.
On the 28th August, 1944, the appellant appeared before the Commissioner at Lucknow and protested against the procedure adopted by him for the inquiry.
The Commis 394 sioner having completed the inquiry on the 1st September, 1944, submitted his report to Government.
The Commissioner, however, recommenced the inquiry on September 11, 1944, and after completing the inquiry submitted the papers to Government on the 30th September, 1944.
The Government of the United Provinces by an order dated the 25th November, 1944, dismissed the appellant from the United Provinces Civil (Executive) Service.
This order was served on the appellant on the 1st December, 1944, and he submitted a memorial to the Governor on August 7, 1945, which was rejected on the 28th May, 1947.
During the period of suspension the appellant was paid subsistence allowance at the rate of one fourth of his salary which was then Rs. 310 per month.
The appellant gave notice under section 80 of the Code of Civil Procedure of his intention to bring a suit and on the 2nd January, 1948, he filed his suit.
He asked for a declaration that the order of dismissal was wrongful, illegal, void and inoperative and that he still continued to be a member of the Civil Service entitled to full pay with all increments as they fell due.
He prayed for a decree for recovery of arrears of salary amounting to Rs. 16,810 8 0 less subsistence allowance already drawn from August 24, 1944, to December 31, 1947.
In the alternative he prayed for a declaration that the order of dismissal was wrongful and that a decree to the extent of Rs. 1,20,000 with interest by way of damages may be passed in his favour.
He paid the requisite court fee on the valuation of Rs. 1,20,000.
This alternative claim was deleted from the plaint as a result of an amendment, having regard to a subsequent decision of the Privy Council* which held that a person illegally dismissed from Government service could only get a declaration that the order was inoperative and that he still continued to be a member of the Service.
The appellant asked for refund of the extra court fee paid which was rejected by the Civil Judge by a separate order.
The Civil Judge, however, decreed High Commissioner for India and High Commissioner for Pakistan vs 1.
M. Lal, [1948] L.R. 75 I.A. 225.
395 the appellant 's suit in part declaring that the order dismissing him from service was illegal and that he still continued to be a member of the United Provinces Civil (Executive) Service.
The Civil Judge, however, declined to pass a decree for arrears of salary.
Against the decision of the Civil Judge the appellant appealed to the High Court and his appeal was dismissed.
The respondent did not appeal against the decision of the Civil Judge or file a cross objection.
The appeal in the High Court proceeded on the basis that the order of dismissal made against the appellant was illegal and that it was rightly declared that he continued to be a member of the service of the United Provinces Civil (Executive) Service.
The only two questions which were considered and decided by the High Court were as to whether the appellant was entitled to a decree for arrears of salary and a refund of the excess court fee paid by him.
Both these questions were decided against the appellant by the High Court which subsequently gave him a certificate for leave to appeal to this court.
It may be stated at once that in view of the decision of this court in The State of Bihar vs Abdul Majid(1) there can be no question now that the appellant had the right to institute a suit for recovery of arrears of salary as he was dismissed illegally.
It is unnecessary, therefore, to refer to the elaborate discussion of the law in this respect to be found in the judgment of the learned Judges of the High Court.
When this appeal came on for hearing before this court and the appellant had been heard the Attorney General in the course of his argument bad contended that the order of suspension of August 1944 subsisted although the order of dismissal had been declared illegal by the Civil Judge and all that the appellant was entitled to was subsistence allowance and not salary so long as the order of suspension remained effective.
This plea was not taken in the written statement filed in the trial court, nor was there any issue framed in this respect.
The Attorney General (1) , 396 asked for time to file an additional written statement on behalf of the respondent.
This court allowed time for the respondent to do so and the appellant was also given time to reply to any additional written statement filed on behalf of the respondent.
The respondent filed the additional written statement and the appellant filed his reply to it.
Thereafter the appeal came on for bearing again and the learned Advocate for the appellant made his submissions on the additional written statement and the Attorney General replied to the same.
So far as the payment of excess court fee is concerned, the learned Advocate for the appellant did not urge this point in his opening argument but urged it in reply after the Attorney General bad concluded his argument.
Apart from the question as to whether the Advocate can be allowed to urge a point like this in reply when no submission had been made by him in his opening, it seems there is no merit in the submission made by the Advocate.
The court fee had been paid on Rs. 1,20,000 which was claimed as damages.
At the time the suit was instituted the law as then understood permitted such a claim to be made.
The decision of the Privy Council, however, made it clear that no such claim could be mad e and all that a Government servant could ask for was a declaration that the order of dismissal was illegal and that he still continued to be a member of the Civil Service.
The decision of the Privy Council clarifying the position could not be a ground for refund of court fee when at the time it was paid it was in accordance with the law as then understood.
Indeed the appellant did not appeal or file an application against the order of the Civil Judge refusing to pass an order of refund.
In the High Court he did not ask for this relief on the basis of any statutory provision.
He invoked the inherent powers of the High Court.
The Court Fees Act contains certain provisions for refund of court fee paid by a party but admittedly the present case is not covered by any of those provisions.
It seems, therefore, that the High Court in the circumstances of the present case rightly refused 397 to order a refund of the excess court fee paid by the appellant.
It also does not appear that the Civil Judge acted illegally in refusing to order a refund.
On the additional written statement filed in this court by the respondent a question has arisen whether the order of suspension was valid and during the period it was in force the appellant could recover arrears of salary.
The learned Advocate for the appellant contended that an order of suspension is a penalty under rule 49 of the Classification Rules and it was against all sense of natural justice to impose a penalty upon a Government servant pending an in quiry against him under rule 55 of the said rules.
An order imposing the penalty of suspension was an appealable order under rule 56 of the Classification Rules and under rule 59 of the said rules, an appellate authority was bound to consider whether the facts on which the penalty was imposed had been established and whether those facts disclosed sufficient grounds for imposing such a penalty.
Rule 54 of the Fundamental Rules authorises a revising or an appellate authority, when it finds that the Penalty of suspension was unjustified or not wholly justified, to make an order granting to the Government servant his full pay and any allowance to which he was entitled if he was honourably acquitted and in other cases such proportion of pay and allowances as it may prescribe.
The penalty of suspension, it was urged, involved serious loss in the matter of salary and allowances and to impose this penalty pending an inquiry was to prejudge the case against a Government servant and in effect to make his right of appeal a meaningless remedy.
It was pointed out that in some of the rules framed by a Government or quasiGovernment authority the penalty of suspension pending an inquiry was specifically provided for, such as rule 95 of the Bihar and Orissa Service Code re ferred to in Abdul Majid 's case and rule 1711 of the Indian Railway Establishment Code.
On behalf of the appellant reference was also made to certain decisions to the effect that as between master and servant, the master had no power of suspension unless 398 there was an express term to that effect in the contract between them.
The Attorney General conceded that apart from the Classification Rules and the Fundamental Rules he was not aware of any other rules under which the penalty of suspension could be imposed upon a Government servant.
He also conceded that under the Classification Rules an order of suspension was a penalty.
He further conceded that as between master and servant the former had no power of suspension unless the terms of the contract between them permitted it or a statute or a rule provided for it but this principle, he said, did not apply to a person in the service of the Crown in India.
He, however, contended that under rule 49 of the Classification Rules a penalty of suspension could be imposed pending an inquiry.
There was nothing in the rule itself which enjoined that a penalty could only be imposed at the conclusion of an inquiry.
The penalty could be imposed for good and sufficient reasons which may be based on materials already existing pending an inquiry.
After the inquiry there may be the imposition of a severer penalty or a definite period of suspension may be fixed or there may be cancellation of the order of suspension.
No doubt there was a right of appeal against an order imposing a penalty of suspension pending an inquiry but the provisions of rule 54 of the Fundamental Rules did not necessarily lead to the conclusion that the penalty of suspension could only be imposed after an inquiry.
Clause (a) of the said rule might contemplate a case where the penalty had been imposed after an inquiry but clause (b) could cover a case where the penalty had been imposed pending an inquiry.
In the present case, he said, there was no contravention of any principle of natural justice as the appellant had an opportunity of explaining the accusation made against him.
The letter of the Commissioner of Lucknow Division with its annexure, marked Exhibit A in the trial court, clearly showed that the Deputy Commissioner, Lakhimpur Kheri had recorded statements of persons with ref erence to three cases and the appellant saw him in 399 connection therewith.
He admitted the facts but tried to explain them.
He, however, declined to give his statement in writing.
The order of suspension made against him was based on materials of which he was fully aware.
In the alternative the Attorney General urged that in the year 1944 the appellant was a member of the Civil Service of the Crown in India holding office during the pleasure of the Crown.
There was, therefore, inherent power in the Crown and its representative to pass an order of suspension against the appellant pending an inquiry.
The Classification Rules and Fundamental Rules were merely directions for general guidance and they did not constitute a contract between the Crown and its servants.
For this proposition he referred to the observations of Lord Hobhouse in the case of Shenton vs Smith(1).
He also relied upon the following observations of Lord Roche in the case of B. Venkata Rao vs Secretary of State for India in Council (2) .
"Section 96 B in express terms states that office is held during pleasure.
There is, therefore, no need for the implication of this term and no room for its exclusion.
The argument for a limited and special kind of employment during pleasure but with an added contractual term that the rules are to be observed is at once too artificial and too far reaching to commend itself for acceptance.
The rules are manifold in number and most minute in particularity, and are all capable of change. . . . . .
Incon venience is not a final consideration in a matter of construction, but it is at least worthy of consideration and it can hardly be doubted that the suggested procedure of control by the Courts over Government in the most detailed work of managing its services would cause not merely inconvenience but confusion".
In the courts below the principal question for consideration was whether the appellant could recover arrears of salary having been illegally dismissed.
It was not pleaded that the order of suspension was (1) (2) L.R. 64 I.A. 55.
51 400 valid and during the period it was in force the appellant could not recover arrears of salary and no specific issue was framed in this respect.
If the decision of this court in Abdul Majid 's case had been available to the courts below, they would have held that the appellant was entitled to recover arrears of salary when he had been illegally dismissed and they would have bad further to decide whether the order of suspension was valid and during the period it was in force the appellant could recover arrears of salary.
On the additional written statement filed by the respondent in this court, the submissions of the Advocate for the appellant and the Attorney General would require examination and it might have been necessary to consider whether the case should not be remanded to the court of trial.
It is unnecessary, however, to record a decision on these submissions having regard to the attitude adopted by the Advocate for the appellant.
He objected to the case being remanded as such a course would involve the appellant in heavy expenditure and harassment.
The appellant preferred to give up his claim for arrears of salary less subsistence allowance paid to him from the date of the order of suspension until the date of the order of dismissal.
He, however contended that the order of suspension continued to be in force only until the 25th November, 1944, the date of the order, of dismissal.
On that date the order of suspension ceased to exist and the appellant was entitled to recover arrears of salary from the 25th November, 1944, to the 31st December, 1947, inclusive.
The Attorney General strongly contended that it continued to be in force and that it was not at all affected by the declaration of the Civil judge that the order of dismissal was illegal.
In view of that decision the order of dismissal must be regarded as a nullity and non existent in the eye of law.
The inquiry, the outcome of which was the order of dismissal, had not therefore ended.
It could only end with a valid order which would replace the order of suspension Until that happened the accusation against the appellant remained and the inquiry had not ended.
He referred to the case of M. Gopal Krishna Naidu vs 401 State of Madhya Pradesh(1).
On behalf of the appellant reliance was placed on the case of Provincial Government, Central Provinces and Berar through Collector, Amraoti vs Shamshul Hussain Siraj Hussain(2).
The order of suspension made against the appellant was clearly one made pending an inquiry.
It certainly was not a penalty imposed after an enquiry.
As the result of the inquiry an order of dismissal by way of penalty had been passed against the appellant.
With that order, the order of suspension lapsed.
The order of dismissal replaced the order of suspension which then ceased to exist.
That clearly was the position between the Government of the United Provinces and the appellant.
The subsequent declaration by a Civil Court that the order of dismissal was illegal could not revive an order of suspension which did not exist.
The case referred to by the Attorney General is not directly in point and that decision does not conflict with the case relied upon by the appellant.
The appellant is, therefore, entitled to recover arrears of salary from the 25th of November, 1944, to 31st December, 1947.
The appeal is accordingly allowed in part with costs throughout and the decree of the courts below is set; aside.
The plaintiff 's suit is decreed for arrears of salary from the 25th of November, 1944, to the 31st of December, 1947, inclusive.
The appellant had claimed Rs. 16,810 8 0 less subsistence allowance already drawn as arrears of pay from the 24th of August, 1944, to the 31st December, 1947.
As his claim for arrears of salary from the 24th of August, 1944, to the 25th of November, 1944, is given up, the total salary payable to him during this period less subsistence allowance already drawn, must be deducted from the sum of Rs. 16, 810 8 0.
The judgment of the High Court as well as the additional written statement filed by the respondent in this court show that subsequent to the decree passed by the Civil Judge the appellant was treated as under suspension until he was dismissed by a fresh order of (1) A.I.R. 1952 Nag.
(2) I.L R. ; A.I.R. (36) 402 dismissal and that he has been paid subsistence allowance for the entire period.
Such subsistence allowance as has been paid to the appellant from the 25th of November, 1944, to the 31st December, 1947 inclusive, must, therefore, be credited to the respondent and the same must be adjusted against the salary claimed by the appellant.
A decree will accordingly be prepared stating the amount recoverable by the appellant.
The appellant was permitted to appeal in forma pauperism As he has succeeded in the appeal, the Registrar shall calculate the amount of court fee which would have been paid by the appellant if he had not been allowed to appeal as a pauper and incorporate it in the decree.
The court fee shall be paid by the appellant and the same will be recoverable by the Government of India from him and shall be the first charge on the amount decreed to him.
Under Rule 7 of Order XIV of the Rules of this Court., the appellant will be allowed the fees paid by him to his Advocates, in the taxation of costs.
| IN-Abs | The appellant, a member of the United Provinces Civil (Executive) Service, was suspended from service with effect from the 24th August, 1944, pending an enquiry into his conduct.
As a result of enquiry and report by the Commissioner, the Government passed an order on the 25th November, 1944, dismissing the appellant from service, which order was served on the appellant on the 1st December, 1944.
The appellant instituted a suit for a declaration that the order of dismissal passed against him was wrongful, illegal and inoperative, and that he continued to be in service and 'was entitled to a decree for recovery of arrears of his salary.
The plaint included an alternative prayer for a declaration that the order of dismissal was 50 392 wrongful and for a decree for Rs. 1,20,000/ by way of damages being passed in his favour.
The requisite court fee on the valuation of Rs. 1,20,000/ was paid.
The claim for damages was later on abandoned in view of the decision of the Privy Council in High Commissioner for India and High Commissioner for Pakistan vs I.M. Lal(1) and consequential amendments were made in the plaint.
The Civil Judge granted a declaration that the order of dismissal was illegal and that the appellant continued to be in service in spite of that order.
But he declined to grant a decree for arrears of salary on the ground that a suit therefor was not maintainable.
A prayer for the refund of the additional court fee paid in respect of the claim for damages was also refused.
The respondent did not appeal against the decision that the order of dismissal was illegal.
But the appellant took the matter in appeal to the High Court which, affirming the decision of the Civil Judge, negatived his claim for arrears of salary and also refused refund of court fee.
Leave was, however, granted to appeal to the Supreme Court.
In view of the decision of the Supreme Court in the case of The State of Bihar vs Abdul Majid(2), the respondent did not dispute the right of the appellant to recover arrears of pay.
But he sought to support the decision on the ground that the order of dismissal dated the 25th November, 1944, having been declared to be illegal and void, the order of suspension dated the 24th August, 1944, became revived and that that would bar the claim for arrears of salary.
Held that the order of suspension made against the appellant being one pending an enquiry, it lapsed with the order of dismissal and the subsequent declaration by the Civil Court that the order of dismissal was illegal could not revive an order which had ceased to exist.
The question whether the order of suspension dated the 24th August, 1944, was valid and whether it was passed after due enquiry, would be material only with reference to the claim for salary for the period between the 24th August, 1944 and the 1st December, 1944, and as the appellant did not press the claim for that period there was no need to direct an enquiry on that point.
Held further that the claim for refund of extra court fee could not be granted inasmuch as the decision of the Privy Council clarifying the position could not be a ground for the refund of excess court fee when at the time it was paid it was in accordance with the law as it then stood.
The State of Bihar vs Abdul Majid ([1954] S.C.R. 786), Shenton vs Smith ([1896] A.C. 229), B. Venkata Rao vs Secretary of State for India in Council (L.R. 64 I.A. 55), M. Gopal Krishna Naidu vs State of Madhya Pradesh (A.I.R. , Provincial Government, Central Provinces and Berar through Collector, Amraoti vs Shamshul Hussain Siraj Hussain (I.L.R. , referred to.
(1) [1948] L.R. 75 I.A. 225.
(2) 393
|
Civil Appeal No. 1297 of 1970.
Appeal by special leave from the Award dated the 10th October 1969 of the Additional Industrial Tribunal, Delhi in I.D. No.174 of 1968.
M. K. Ramamurthi, K. R. Nagaraja, section K. Mehta, A. K. Jain and C. K. Srivastava, for the Appellant.
A. K. Sen, M. C. Bhandare.
Dr. Anand Prakash, P. P. Rao, P. H. Parekh and Mrs. Sunanda Bhandare, for Respondent No. 1.
The Judgment of P. N. Bhagwati and P. K. Goswami, JJ. was delivered by Bhagwati, J. A. Alagiriswami, J. gave a dissenting opinion.
BHAGWATI J.
Here, in this case, once again arises the question as to what is an 'industry ' within the meaning of the .
This question has continually baffled and perplexed the Courts in our country.
There have been various judicial ventures in this rather volatile area of the law.
The Act gives a definition of 'industry ' in section 2(j) but this definition is not very vocal and it has defined analysis, so that judicial effort has been ultimately reduced merely to evolving tests by reference to characteristics regarded as essential for constituting an activity as an 'industry '.
The decided cases show that these tests have not been uniform; they have been guided more by an empirical rather than a strictly analytical approach.
Sometimes these tests have been liberally conceived, sometimes narrowly.
The latest exposition is to be found in the judgment of a Bench of six Judges of this Court 141 in Safdarjung Hospital vs K. section Sethi.(1) But while applying the tests indicated in this decision, it is necessary to remember that the is a legislation intended to bring about peace and harmony between management and labour in an 'industry ' so that production does not suffer and at the same time, labour is not exploited and discontented and, therefore, the tests must be so applied as to give the widest possible connotation to the term 'industry '.
Whenever a question arises whether a particular concern is an 'industry ', the approach must be broad and liberal and not rigid or doctrinaire.
We cannot forget that it is a social welfare legislation we are interpreting and we must place such an interpretation as would advance the subject and purpose of the legislation and give full meaning and effect to it in the achievement of its avowed social objective.
With these prefatory observations, we proceed to state the facts giving rise to the appeal.
The Indian Standards Institution (hereinafter referred to as 'the Institution ') is a Society registered under the .
The workmen of the Institution represented by the Indian Standards Institution Employees ' Union (hereinafter referred to as 'the Union ') made certain demands which were not accepted by the management and a dispute accordingly arose between the management and the workmen.
The dispute was taken in conciliation but the Conciliation officer was unable to bring about settlement and he made, what is commonly known as "failure report" to the Lt. Governor of Delhi.
The Lt. Governor thereupon by an order dated 28 9 1968, referred the dispute for adjudication to the Industrial Tribunal under sections 10(1) (d) and 12(5) of the Act.
The order of the Lt. Governor set out the demands which were to form the subject matter of adjudication by the Industrial Tribunal.
The Union representing the workmen filed a statement of claim in support of these demands.
The management opposed the demands on merits but in addition to the defence on merits, they raised a preliminary objection which, if well founded, would strike at the very root of the jurisdiction of the Industrial Tribunal to entertain the reference.
The preliminary objection was that the institution was not a industry within the meaning of section 2(j) of the Act and, therefore, the dispute between the management of the Institution and its workmen was not an 'industrial dispute ' as defined in sec.
2(k) and the Lt. Governor had no jurisdiction to refer it for adjudication under the provisions of the Act.
Issue No. 1 arising out of this preliminary objection was in the following terms: "Is Indian Standards Institute an industry or not", and this issue was directed to be tried as a preliminary issue.
The Industrial Tribunal proceeded to examine the legal position for the purpose of determining when a particular activity can be regarded as an industry within the meaning of section 2(j) of the Act.
It observed that there were five tests laid down by the decisions of this Court in Madras Gymkhana Club Employees Union vs The Management of the Madras Gymkhana Club(2) and Cricket Club of India Ltd. vs The (1) ; (2) [1968] 1. section C. R. 742.
142 Bombay Labour Union & Anr.(1) which were required to be satisfied before an activity could be held to be an "industry" and they were as follows: "1.
When the operation undertaken rests upon cooperation between employers and employees with a view to production and distribution of material goods or material services; 2.
It must bear the definite character of trade or business or manufacture or calling or must be capable of being described as an Undertaking analogous to business or trade resulting in material goods or material services; 3.
The activity to be considered as an 'industry ' must not be casual but must be distinctly systematic; 4.
The work for which labour of workmen is required, must be productive and workmen must be following an employment calling, or industrial avocation; and 5.
When private individuals are the employers, the industry is run with capital and with a view to profits.
(These two circumstances may not exist when Government or Local Authority enters upon business, trade, manufacture or an undertaking analogous to trade).
" On an application of these tests, the Industrial Tribunal found that the Institution satisfied the first four tests and this indeed was not disputed, but so far as the fifth test was concerned, it was not satisfied since capital was undoubtedly employed in the institution but the institution was not run with a view to profit.
The profit motive was ruled out by the objectives of the Institution and as the profit motive was lacking, the Institution could not be held to be an 'industry '.
The Industrial Tribunal accordingly, by an order dated 10th October, 1969, held that the reference of the dispute between the management of the Institution and its workmen was outside the power of the Lt. Governor and the Industrial Tribunal had no jurisdiction to entertain the reference or to adjudicate upon it.
The workmen were obviously aggrieved by this older made by the Industrial Tribunal since it closed the doors of industrial adjudication and left the workmen without any remedy to redress their grievances and hence they preferred the present appeal against the order of the Industrial Tribunal with special leave obtained from this Court.
The , as its long title and preamble show, has been enacted to make provision for investigation and settlement of industrial disputes.
It is only an 'industrial dispute ' which can be referred for adjudication under sections 10(1) (d) and 12(5) of the Act.
That is a 'industrial dispute ' is to be found in s 2(k) which defines an industrial dispute to mean "any dispute or difference between employers and employers, or between employers and workmen or between workmen and workmen, which is connected with the employment or non employment or the terms of employment or with the conditions (1) ; 143 Of labour, of any person.
" This definition, of course, does not in so many terms, refer to 'industry '.
But, on the grammar of the expression itself an industrial dispute must necessarily be a dispute in an industry and moreover the expressions 'employer ' and 'workman ' used in the definition of 'industrial dispute ' carry the requirement of 'industry ' in that definition by virtue of their own definitions in sections 2(g) and 2(s).
It is therefore, necessary to examine what is the concept of an 'industry ' within the meaning of the Act.
Now, the word 'industry ' is defined in section 2(j) and that section reads: " 'industry ' means any business, trade, undertaking, manufacture or calling of employers, and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen;" This definition is in two parts.
The first part says that it means any business, trade, undertaking, manufacture or calling of employers and then it goes on to say in the second part that it includes ally calling, service, employment handicraft, or industrial occupation or avocation of workmen.
This Court had occasion to consider this definition in r the case of State of Bombay vs The Hospital Mazdoor Sabha(1) where this Court sought to expand the concept, of 'industry ' by a process of judicial interpretation to meet the changing requirements of modern currents of socio economic thought.
It was pointed out by this Court that "section 2(j) does not define 'industry ' in the usual manner by prescribing what it means: the first clause of the definition gives the statutory meaning of 'industry ' and the second clause deliberately refers to several other items of industry and brings them in the definition in an inclusive way.
" But this interpretation of the definition was disapproved by a larger bench of this Court in Management of Safdarjung Hospital vs K. section Sethi (supra).
We shall immediately proceed to examine that decision, as that is the decision which presently holds the field and must ultimately govern the determination of the present case.
But before we do so, we must refer to another decision of this Court which came a little before Safdarjung Hospital case (supra).
That is the decision in Secretary, Madras Gymkhana Club Employee.
Union vs Management of the Gymkhana (supra).
While dealing with the definition of 'industry ' in this case, it was pointed out by this Court that "denotation of the term 'industry ' is to be found in the first part relating to employers and the full connotation of the term is intended to include the second part relating to workmen" and it was concluded: "If the activity can be described as an industry with reference to the occupation of the employers, the ambit of the industry, under the force of the second part, takes in the different kinds of activity of the employees mentioned in the second part.
But the second part standing alone cannot define 'industry '.
By the inclusive part of the definition the labour force employed in an industry is made an integral part of the industry for purpose of industrial disputes although industry is (1) ; 144 ordinarily something which employers create or undertake.
" We may point out that the concept underlying the observation that "industry is ordinarily something which employers create or undertake" is gradually yielding place to the modern concept which regards industry as a joint venture undertaken by employers and workmen an enterprise which belongs equally to both.
But we need not dwell on this any longer, as it is not of immediate concern to us in this case.
It is sufficient to point out that the interpretation of the definition of 'industry ' given in Madras Gymkhana case (supra) struck a slightly different note from what it was understood to mean in the State of Bombay vs Hospital Mazdoor Sabha case (supra).
But again in Safdarjung Hospital case (supra) this Court found it necessary to qualify what it had said in the Madras Gymkhana case (supra) in regard to the meaning of 'industry ' and after referring to the definition of industry in section 4 of the Common wealth Conciliation and Arbitration Act, 1909 1970 this Court observed: "Although the two definitions are worded differently the purport of both is the same.
It is not necessary to view our definition in two parts.
The definition read as a whole denotes a collective enterprise in which employers and employees are associated.
It does not exist either by employers alone or by employees alone.
It exists only when there is a relationship between employers and employees, the former engaged in business, trade, undertaking, manufacture or calling of employers and the latter engaged in any calling service, employment, handicraft or industrial occupation or avocation.
There must, therefore, be an enterprise in which the employers follow their avocations as detailed in the definition and employ workmen.
The definition no doubt seeks to define 'industry ' with reference to employers ' occupation but include the employees, for without the two there can be no industry.
An industry is only to be found when there are employers and employees, the former relying upon the services of the latter to fulfil their own occupations.
This Court then proceeded to add that "every case of employment is not necessarily productive of an industry.
Domestic employment.
administrative services of public officials, service in aid of occupations of professional men, also disclose relationship of employers and employees but they cannot be regarded as in the course of industry".
A workman can be regarded as one employed in an industry only "if he is following one of the vocations mentioned in conjunction with his employers engaged in the vocations mentioned in relation to the employers".
Thus, a basic requirement of 'industry ' is that the employers must be "carrying on any business, trade, undertaking, manufacture or calling of employers.
If they are not, there is no industry as such.
" Now, what these expressions mean has been discussed in a large number of cases decided by this Court.
These cases have all been reviewed in the Madras Gymkhana case.
We are, however, not directly concerned with any of these expressions except 'undertaking ', for the case of the workmen is not that the management of the Institution is 145 carrying on any business, trade, manufacture or calling but It rests on a very limited ground, namely, that the management of the Institution is carrying on an undertaking.
It, therefore, becomes necessary to inquire what is the meaning and scope of the term 'undertaking ' as used in the definition in section 2(j).
Now, according to its dictionary meaning as given by Webster, "undertaking" means "anything undertaken; any business, work or B. project which one engages in or attempts.
an enterprise".
It is a term of very wide denotation.
But all decisions of this Court are agreed that an under taking to be within the definition in section 2(j) must be read subject to a limitation, namely, that it must be analogous to trade or business.
That was the view expressed in the Hospital Mazdoor Sabha case (supra) vide page 879 of the Report and the same view was reiterated in the Safdarjung Hospital case (supra) vide page 187 of the Report.
But the question is: when can an undertaking be said to be analogous to trade or business: what are the attributes or characteristics which it must possess in common with trade or business in order to be regarded as analogous to trade or business ? That is a question which is not very easy to decide, but there are decisions of this Court which afford guidance in dealing with this question.
This Court pointed out in the Hospital Mazdoor Sabha case (supra) that in order that an undertaking should be analogous to trade or business, it is not necessary that it should possess the two essential features associated with the conventional notion of trade or business namely, profit motive and investment of capital.
Gajendragadkar, J., (as he then was), speaking on behalf of the Court observed: "It is not disputed that under section 2(j) an activity can and must be regarded as an industry even though in carrying it out profit motive may be absent.
It is also common ground that the absence of investment of any capital would not make a material difference to the applicability of section 2(j).
Thus, two of the important attributes conventionally associated with trade or business are not necessarily predicated in interpreting section 2(j)".
This view was neither overruled nor departed from in the Safdarjung Hospital case (supra).
On the contrary, the decision 1 in Safdarjung Hospital case reaffirmed this view and gave it the seal of approval of a bench of six judges of this Court.
This Court speaking through Hidayatullah, C.J., pointed out in that case.
"It is not necessary that there must be a profit motive, but the enterprise must be analogous to trade or business in a commercial sense It is an erroneous assumption that an economic activity must be related to capital and profit making alone.
An economic activity can exist with out the presence of both".
The learned Chief Justice, after referring to the observations of Isaacs and Rich, JJ.
in Federated Municipal and Shire Council Employees of Australia vs Melbourne Corporation(1) stated that these observations "indicate that in those activities in which Government takes to industrial ventures, the notion of profit making and the absence of capital in the true sense of the word are irrelevant".
It is, therefore, clear that, according to the decisions of this Court and on this point the decision in Safdarjung Hospital case (supra) does (1) ; 146 not make any departure from that in the Hospital Mazdoor Sabha case (supra) profit motive and capital investment are not essential requisites for an undertaking within the meaning of the definition in section 2(j).
There can be such an undertaking without the presence of both or either of those attributes or features.
What then are the attributes or features which make an under taking analogous to trade or business so as to attract the applicability of s.2(j).
It is difficult to enumerate these possible attributes or features definitely or exhaustively.
Indeed, it would not be prudent to do so.
So infinitely varied and many sided is human activity and with the incredible growth and progress in all branches of knowledge and ever widening areas of experience at all levels, it is becoming so diversified and expanding in so many directions hitherto unthought of, that no rigid and doctrinaire approach can be adopted in considering this question.
Such an approach would fail to measure up to the needs of the growing welfare state which is constantly engaged in undertaking new and varied activities as part of its social welfare policy.
The concept of industry, which is intended to be a convenient and effective tool in the hands of industrial adjudication for bringing about industrial peace and harmony, would lose its capacity for adjustment and change.
It would be petrified and robbed of its dynamic content.
The Court should, therefore, as far as possible avoid formulating or adopting generalisations and hesitate to cast the concept of industry in a narrow rigid mould which would not permit of expansion as and when necessity arises.
Only some working principles may be evolved which would furnish guidance in determining what are the attributes or characteristics which would ordinarily indicate that an undertaking is analogous to trade or business.
What can fairly be regarded as a sufficiently elastic or flexible working principle for this purpose has been discussed in a number of decisions of this Court, of which we may refer only to three, namely, the Hospital Mazdoor Sabha case (supra), The Madras Gymkhana case (supra) and the Safdarjung Hospital case (supra).
Though the language used in these decisions to state the working principle is not uniform and there are minor variations in the formulation according as one aspect is more emphasised than the other, the working principle laid down is basically the same.
Gajendragadkar, J., (as he then was) speaking on behalf of the Court in the Hospital Mazdoor Sabha case (supra) stated the working principle in these terms: " .
as a working principle it may be stated that an activity systematically or habitually undertaken for the production or distribution of goods or for the rendering of material services to the community at large or a part of such community with the help of employees is an undertaking.
Such an activity generally involves the co operation of the employer and the employees; and its object is the satisfaction of material human needs.
It must be organised or arranged in a manner in which trade or business is generally organised or arranged.
It must not be casual nor must it be for oneself nor for pleasure.
Thus the manner in which the activity in 147 question is organised or arranged, the condition of the co operation between employer and the employee necessary for its success and its object to render material service to the community can be regarded as some of the features which are distinctive of activities to which section 2(j) applies.
" It was the same working principle which was pithly expressed by this Court through Hidayatullah, J., (as he then was) in the Madras Gymkhana case (supra) where it was stated: " before the work engaged in can be described as an industry, it must bear the definite character of 'trade ' or 'business ' or 'manufacture ' or 'calling ' or must be capable of being described as an undertaking resulting in material goods or material services".
This last proposition taken from the judgment in the Madras Gymkhana case (supra) was in so many terms accepted as valid in the Safdarjung Hospital case (supra): vide page 189 of the Report.
This Court speaking through Hidayatullah, C.J., pointed out in the Safdarjung Hospital case (supra) at pages 186 and 187 of the Report: "But in the collocation of the terms and their definitions these terms have a definite economic content of a particular type and on the authorities of this Court have been uniformly accepted as excluding professions and are only concerned with the production distribution and consumption of wealth and the production and availability of material services.
industry has thus been accepted to mean only trade and business, manufacture, or undertaking analogous to trade or business for the production of material goods or wealth and material services.
" What is meant by 'material ' services in this context was explained by the learned Chief Justice in these words. "Material services are not services which depend wholly or largely upon the contribution of professional knowledge, skill or dexterity for the production of a result.
Such services being given individually and by individuals are services no doubt but not material services.
Even an establishment where manly such operate cannot be said to convert their professional services into material services Material services involve an activity carried on through cooperation between employers and employees to provide the community with the use of something such as electric power, water, transportation mail delivery, telephones and the like.
In providing these services there may be employment of trained men and even professional men, but the emphasis is not on what these men do but upon the productivity of a service organised as an industry and commercially valuable.
Thus the services of professional men involving benefit to individuals according to their needs, such as doctors, teachers, lawyers, solicitors etc. are easily distinguishable from an activity such as transport service.
The latter is of a commercial character in which something is brought into existence quite apart from 148 the benefit to particular individuals.
It is the production of this something which is described as the production of material services.
" The learned Chief Justice then proceeded to explain why professions must be held to be outside the ambit of industry.
This is what he said: "A profession ordinarily is an occupation requiring intellectual skill, often coupled with manual skill.
Thus a teacher uses purely intellectual skill while a painter uses both.
In any event, they are not engaged in an occupation ill.
which employers and employees co operate in the production or sale of commodities or arrangement for their production or sale or distribution and their services cannot be described as material services.
" It was for this reason, observed the learned Chief Justice, that the establishment of a solicitor was held not to be an industry "because there the services rendered by the employees were in aid of professional men and not productive of material goods or wealth or material services(1) The learned Chief Justice pointed out that in the University of Delhi & Anr.
v Ramnath(2) the University was also held to be outside the ambit of industry for the same reason.
The learned Chief Justice then summarised the working principle the broad test or criterion for determining what is an undertaking analogous to trade or business in these terms: "It, therefore, follows that before an industrial dispute can be raised between employers and their employees or between employers and employers or between employees and employees in relation to the employment or non employment or the terms of employment or with the conditions of labour of any person, there must be first established relationship of employers and employees associating together, the former following a trade, business, manufacture, undertaking or calling of employers in the production of material goods and material services and the latter following any calling, service, employment, handicraft, or industrial occupation or avocation of workmen in aid of the employers ' enterprise.
It is not necessary that there must be a profit motive but the enterprise must be analogous to trade or business in a commercial sense.", and after referring to the observations of Isaacs and Rich, JJ in Federated Municipal and Shire Council Employees of Australia v Melbourne Corporation (supra) pointed out that these observations showed that "industrial disputes occur in operations in which employers and employees associate to provide what people want and desire, in other words, where there is production of material goods or material services." (emphasis added).
(1) National Union of Commercial Employers vs M. R. Meher, [1962] Supp.
3 section C. R 157.
(2) ; 149 It would thus be seen that the broad test for determining when an undertaking can be said to be analogous to trade or business laid down in the Safdarjung Hospital case (supra) was the same as in the Hospital Mazdoor Sabha case (supra).
The Safdarjung Hospital case did not make any real departure the enunciation of this test It is only in the application of this test to the case of hospitals that the Safdarjung Hospital case took a different view and observed that the judgment in the Hospital Mazdoor Sabha case (supra) had taken "an extreme view of the matter which was not justified".
There was also one other ground on which the decision in the Safdarjung Hospital case disapproved of the view taken in the Hospital Mazdoor Sabha case and that ground was that the decision in the Hospital Mazdoor Sabha case proceeded on an erroneous basis that an activity, in order to be an undertaking analogous to trade or business, need not be an economic activity and applied a wrong test, namely, 'can such activity be carried on by private individuals or group of individuals? ' It would, therefore, seem that, in view of the decision in Safdarjung Hospital case, this last test applied in the Hospital Mazdoor Sabha case must be rejected as irrelevant and it must be held that an activity, in order to be recognised as an undertaking analogous to trade or business, must be an economic activity in the sense that it is productive of material goods or material services.
To summarize, an activity can be regarded as an 'industry ' within the meaning of section 2(j) only if there is relationship of employer and employees and the former is engaged in 'business, trade, undertaking, manufacture or calling of employers ' and the latter, 'in any calling service, employment, handicraft or industrial occupation or avocation ' Though 'undertaking ' is a word of large import and it means anything undertaken or any project or enterprise, in the context in which it occurs, it must be read as meaning in undertaking analogous to trade or business.
In order that an activity may be regarded as an undertaking analogous to trade or business, it must be "organised or arranged in a manner in which trade or business is generally organised or arranged".
It must not be casual nor must it be for oneself nor for pleasure.
And it must rest on co operation between employer and employees who associate together with a view to production, sale or distribution of material goods or material services.
It is entirely irrelevant whether or not there is profit motive or investment of capital in such activity.
Even without these two features an activity can be an undertaking analogous to trade or business.
It is also immaterial "that its objects are charitable or that it does not make profits or even where profits are made, they are not distributed amongst the members",(1) or that its activity is subsidised by the Government.
Again it is not necessary that "the employer must always be a private individual.
The Act, in terms, contemplates cases of industrial disputes where the Government or a local authority or a public utility service may be employer . "(2) It also makes no difference that the material services rendered by the undertaking are in public interest (1) Management of FICCI vs Workmen, [1972] 2 section C. R. 353 at 376.
(2) Madras Gymkhana case, p. 756 of the Report.
150 The concept of public interest in a modern welfare State, where new social values are fast emerging and old dying out, is indeed so wide and so broad and comprehensive is its spectrum and range that many activities which admittedly fall within the category of 'industry ' are clearly designed to subserve public interest.
In fact, whenever any industry is carried on by the Government, it would be in public interest, for the Government can act only in public interest Whether an activity is carried on in public interest or not can, therefore, never be a criterion for determining its character as an industry.
Having thus examined the legal concept, of industry as expounded in the decisions of this Court, we may now proceed to consider whether the activity of the Institution can be characterised as an industry in the light of the broad test discussed by us.
The Institution owes its genesis to the Government of India Resolution No. 1 STD(4)/45 dated 3rd September 1916.
Prior to this Resolution, British and American standards were generally adopted for our country.
But due to diversity of raw materials available in our country and the processes employed for manufacture, it was increasingly felt that the British and other standards were not always suitable for adoption in our country and it was necessary to establish a central standards organisation for fixing Indian standards.
The Government of India, therefore, passed this Resolution for setting up an organisation to be called the Indian Standards Institution with its headquarters at New Delhi.
Pursuant to this Resolution, the Institution was registered and establish under the .
Clause (3) of the Memorandum of Association sets out objects of the Institution and, so far as material, they are as follows: "(a) To prepare and promote the general adoption of standards on national and international basis relating to structures, commodities, materials, practices, operations, matters and things, and, from time to time, to revise, alter and amend the same.
(b) To promote standardization, quality control and simplification in industry and commerce.
(c ) . . (d)To co ordinate the efforts of producers and users for the improvement of materials, products, appliances, processes and methods.
(e) To provide for the registration of standardization marks applicable to products, commodities, etc., for which it issues standards to be branded on or applied to those products, commodities, etc., which conform to standards set.
(f) To provide or arrange facilities for the examination and testing of commodities, processes and practices,, and for any investigations or research that may be necessary.
(g). . (h). . (i). . 151 (j) To communicate, information to members on all A matters connected with standardization and to print, publish, issue and circulate such periodicals, books, circulars, leaflets and other publications as may seem conducive to any of the objects of the Institution".
The income and property of the Institution, however derived, are directed by cls.
(6) and (7) of the Memorandum of Association to be applied towards the promotion of the objects as set forth in the Memorandum of Association and no portion of the income or property is divisible or distributable amongst the members, either during the active life of the Institution or on its winding up or dissolution.
The Rules and Regulations of the Institution make various provisions in regard to the mechanics of the functioning of the Institution.
Rule 2 lays down that there shall be two categories of members, namely, subscribing members and committee members and their rights and privileges are enumerated in Rule 5.
Rule 7 vests the.
management of the affairs of the Institution in a general Council and its composition is laid down in Rule 8 and its functions, in Rule 11.
Rule 15 provides for the constitution of the Executive Committee and it lays down that the Executive Committee shall have the powers to manage the day to day affairs of the Institution, including administration of ISI (Certification Marks)) Act, 1952 in conformity with policies laid down by the General Council.
The Institution can have different branches as may be decided upon by the General Council under Rule 18.
Rule 19 says that a division shall constitute the main section of the technical activities of the Institution and Rule 20 declares that the work of a division shall be controlled by a Division Council.
What shall be the constitution of a Division Council is laid down in Rule 22 and that Rule provides that a Division Council shall be constituted from the representatives of the respective interests of users, manufacturers and other persons or bodies concerned in or associated with the industries included in the Division.
Rule 26 deals with Sectional Committees and it says that the Sectional Committee shall be appointed by a Division Council or if necessary, by Executive Committee for the preparation of a particular standard or group of standards and the Sectional Committee shall be composed of representatives of such interests as, in the opinion of the Division Council or Executive Committee, are concerned with the standards referred to the Committee.
It emphasises that on the Sectional Committee all interests shall be adequately represented including scientists and technicians, but consumer interest shall, as far as possible, predominate.
G Now, at this stage it would be convenient to explain what are standards and why they are necessary to be established.
Standards are technical documents describing constructional, operational and technological requirements of a material, a product or a process for a given purpose.
They furnish such details as materials to be used dimensions and sizes to be adopted, performance to be expected, and quality to be achieved; they also give methods of tests for comparing and judging quality of goods produced by the manufacturer.
Standards may be of any one or more of the following five categories: (a) 11 1276SCI/75 152 Dimensional Standards which secure interchangeability and eliminate unnecessary variety of types for the same or similar purposes; (b) Performance and quality Standards which ensure that the final article will be fit for the job it is designed to do; (c) Standard Methods of Tests which enable materials or products intended for the same purpose to be compared uniformly; (d) Standard Technical Terms and Symbols which provide a common, easily understood technical language for the industry, and (e) Standard Codes of Practice which set out the most efficient methods of installation, use and maintenance of equipment and recommend methods of technical operations.
These are necessary ill order to meet the challenges posed by the fast developing industry economy of the country and mass production of economic goods and services.
The manufacturer should be able to produce goods of specified quality so that he can win the confidence and good will of the consumer and build up internal and external markets for high products.
He should also be able to increase his productivity, produce goods at minimum cost and achieve overall economy by best utilisation of human and material resources at its disposal.
Standards which are based on the consolidated results of science, technology and experience, furnish guidance to the manufacturer in this behalf and confer economic benefits for the development of industry and smooth flow of commerce.
The procedure for preparing standards is laid down in Rule 29 of the Rules and Regulations of the Institution.
The underlying principles for the preparation of standards are that they shall be in accordance with the needs of the industry and fulfil a generally recognised want, that the interests of both producers and consumers shall be considered and that periodic review shall be undertaken.
The work of standardisation on any specific subject can be undertaken only when the Division Council concerned is satisfied, as a result of its own deliberations or of an investigation and consultation with the producer and consumer interests, that the necessity for standardisation has been established.
When the subject has been so investigated and the need established the Division Council concerned would refer the work to an appropriate Sectional Committee and the Sectional Committee would then explore and study the subject and prepare a draft of the proposed standard.
The draft standard would then be issued in draft form for a period to be determined by the Sectional Committee but not less than three months and widely circulated amongst those likely to be interested for the purpose of securing critical review and suggestions for improvement which, is found desirable, would be incorporated in the draft.
This procedure for circulation can, in an appropriate case, be curtailed or dispensed with by the Division Council.
The consideration of the comments received as a result of the circulation of the draft standard would be undertaken by the Sectional Committee and the final draft prepared after verification in the appropriate laboratories where necessary.
The standard so finalised by the Sectional Committee would then be referred to the Division Council concerned for adoption and on such adoption by the Division Council, it would be published as an Indian Standard.
The Institution thus prepares and publishes Indian Standards on different subjects and some of these Indian Standards are also revised 153 so as to keep abreast with the latest developments in manufacturing and testing techniques and to improve the quality of goods.
The Annual Report of the Institution for 1967 68 shows that the number of Indian standards in force on 31st March, 1968 was 4564 and during that year 159 existing Indian standards were revised.
The activity of the Institution in regard to preparation and publication of Indian standards has continued to increase over the years and, according to the Annual Report of the Institution for 1973 74, the number of Indian standards in force on 31st March, 1974 was 7760 and during that year, as many as 243 existing Indian standards were subjected to revision.
Indian standards thus published, whether new or revised, are sold by the sales service of the Institution at its headquarters and at the various branch offices and as the Annual Report for 1973 74 shows, the proceeds from the sales of Indian standards have steadily increased from year to year and reached the figure of Rs. 16,24,170/ during the year 1973 74.
The Institution also acts as a sole selling agent for sale of overseas standards on commission basis and from this activity, the Institution derives a large income, which during the year 1973 74 amounted to as much as Rs. 3,20,700/ .
The Institution also carries on another activity which is the direct outcome of preparation and publication of Indian standards and that activity is the result of implementation of the Indian Standards Institution (Certification Marks) Act, 1952 (hereinafter referred to as the Certification Marks Act) .
Section 2, cl.
(1) defines 'standard mark ' to mean the Indian Standards Institution Certification Mark F. specified by the Indian Standards Institution to represent a particular Indian standard.
Sub section (1) of section 5 imposes a prohibition that no person shall use, in relation to any article.
Or process, or in the title of any patent, or in any trade mark or design, the Standard Mark or any colourable imitation thereof, except under a licence granted under the Act and another prohibition is imposed by sub section
(2) of section 5 that no person shall, notwithstanding that he has been granted a licence, use in relation to any article or process the Standard Mark or any colourable imitation thereof, unless such article or process conforms to the Indian Standard.
Since the Standard Mark is intended to represent a particular Indian Standard, obviously no one can be allowed to use the Standard Mark or any colourable imitation thereof, except under a licence granted by the Institution, for it is only through the machinery of a licence that the Institution would be able to exercise a check on the person concerned and ensure that the article manufactured or process employed by him conforms to the Indian Standards and that the Standard Mark is not abused by him and it does not become an instrument of deception.
It is for this purpose that section 8 confers power on the Institution to appoint inspectors for inspecting whether any article or process in relation to which the Standard Mark has been used conforms to the Indian Standard or whether the Standard Mark has been improperly used in relation to any article or process, with or without licence.
154 The Central Government has, in exercise of the power conferred under section 20 of the Certification Marks Act, made the Indian standards Institution (Certification Marks) Rules, 1955.
Rule 4 requires that the design of the Standard Mark in relation to each Indian Standard together with the verbal description of the design of the Standard Mark and the title of the Indian Standard shall be published by the Institution.
Rule S provides for the making of an application for grant of a licence .
Rule 7 stipulates for the holding of a preliminary inquiry by the Institution before granting a licence and Rule 8 lays down when a licence may be granted or renewed.
Under Rule 6, the fees and expenses leviable in respect of grant or renewal of licence and in respect of all matters in relation to such licence are left to be prescribed in the Regulations.
Regulation 7 of the Indian Standards Institution provides that every application for the grant of a licence shall be accompanied by 9a fee of Rs. 100/ and every application for a renewal of such licence shall be accompanied by a fee of Rs. 50/ and in addition to this application fee, there shall be paid by every licensee an annual licence fee of Rs. 200/ and a marking fee proportionate to the quantum of the annual production of the article or process in respect of which the licence has been granted.
Regulation 9 requires every licensee to institute and maintain to the satisfaction of the Institution a system of control to keep up the quality of his production or process by means of a scheme of inspection and testing attached to the licence and Rule 10 confers power on an Inspector to enter upon the premises of a licensee with a view to ascertaining that the Standard Mark is used in accordance with the terms and conditions imposed by the Institution and that the scheme of routine inspection and testing specified by the Institution is being correctly followed.
It will, therefore, be seen that the Standard Mark is the most authentic representation to the consumer that the article or process in respect of which it is used conforms to the relevant Indian Standard and Indian Standard thus becomes meaningful and advantageous by reason of the use of the Standard Mark.
But no one can use the Standard Mark without a licence from the Institution and even if there is a licence, the Standard Mark cannot be used in relation to an article or process unless such article or process conforms to the relevant Indian Standard.
The issue of licences for use of Standard Marks under the Certification Marks scheme is, therefore, a very important activity of the Institution complementary as well as supplementary to preparation and publication of Indian Standards.
The Certification Marks scheme has been making considerable progress from year to year and while, according to the Annual Report of the Institution for 1967 68, the total number of licences issued since the inception of the scheme upto 31st March, 1968 was 1665 and the annual value of goods covered under the scheme was approximately Rs. 3800 million.
the total number of licences granted upto 31st March, 1974 increased to 3784 and the annual value of goods covered under the scheme rose to approximately Rs. 5000 million during the year 1973 74 as per the figures contained in the Annual Report for that year, the total income from certification marking does not appear to have been shown separately in the Annual Report of the Institution for the year 155 1967 68, but according to the Annual Report for 1973 74, it was Rs. 5.2 million during that year.
The Annual Reports of the institution clearly reveal that from year to year the total number of licences granted by the Institution is steadily increasing and so is the total income from certification marking.
The Institution has also several laboratories for the purpose of carrying out testing operations.
It has a well equipped library at the Headquarters and there are also laboratories at the branch offices where testing of different articles is carried out.
The testing work carried out in these laboratories has shown a consistent rise over the years and while during the year 1967 68 the number of samples received for testing was 3853 and the value of testing work done was Rs. 3,96,468, the number of samples received during 1973 74 was 12726 and the value of testing working done during that year was Rs. 8,76,847.58.
The samples tested at the laboratories are not only those submitted by the manufacturers, distributors and consumers, but also those taken by the Inspectors for the purpose of ascertaining whether any article or process in relation to which the Standard Mark is used conforms to the Indian Standard or whether the Standard Mark has been improperly used in relation to any article or process.
The laboratories are also used in connection with the preparation of Indian Standards as contemplated in cl.
(f) of Rule 29 of the Rules and Regulations of the Institution.
Then, the Institution maintains libraries at the Headquarters and at the branch offices which render useful services to the subscribing members, the Committee members, the Staff members and others.
The library at the Headquarters, which is open to visitors, has complete sets of overseas standards and specifications and related indices.
It has also classified subject catalogues for consultation and retrieval of information on standardization.
It also prepares and circulates for the benefit of its users a monthly list of current published information on standardization.
It has also brought out fortyone bibilographies at the request of technical staff and Committee members and also published an important bibliography, namely, 'World List of Standards on Paper Products '.
Quite often, technical enquiries are received from the industry and the necessary information is supplied by the libraries of the Institution.
The libraries also disseminate technical information on national and overseas standards, specifications and other allied subjects.
The Institution is also bringing out regularly ISI bulletin, Standards Monthly Additions and miscellaneous publications such as Annual Report, Handbook of ISI publications, brochures, leaflets and a large number of advertisements.
These publications are distributed amongst the members and are also sold to non members and they are intended to publicise the activities of the Institution, promote widespread implementation of Indian Standards, propagate the Certification Marks scheme, create awareness about the importance of standardization and quality control and further the standardization movement in the country.
The Institution is also making concerted efforts for furthering standardization movement among different sectors of economy 156 through out the country through different media of publicity and for that purpose it contributes articles, reviews and write ups on different aspects of standardization and other activities in newspaper journals, souvenire, reference publications etc.
and holds inter alia radio broadcasts, press conferences, exhibitions, seminars, conferences and conventions.
It is clear from the resume of the activities of the Institution given above.
that the undertaking of the Institution answers the broad test laid down in the Safdarjung Hospital case (supra) and explained by us in the earlier part of the judgment and must be held to be an industry within the meaning of section 2(j).
The activities of the Institution arc carried on in a systematic manner and are organised or arranged in a manner in which trade or business is ordinarily organised or arranged.
The Institution derives large income from its activities, which was about Rs. 4.5 million in 1967 68 and rose to about Rs. 10.2 million in 1973 74, a bulk of the income being accounted for by sale proceeds of Indian Standards and Certification Marking Fees.
The object of the activities of the Institution is to render material services to a part of the community, namely, manufacturers, distributors and consumers.
Standards set the recognised level of good quality, corner stone for building domestic and export markets and developing good will and prestige for the manufacturer: they provide the framework for mass production, increase in productivity simplification in production process and enhancement in labour efficiency the make for dimensional interchangeability by setting national and also international patterns of interrelated sizes: they incorporate results of the latest developments in research and technology: they increase consumer confidence and goodwill bringing wide markets and quick turn over with savings for the buyer and they bring more profits and lower costs by optimum utilization of scarce resources.
The brochure on "Standards for Textiles" points out that amongst various advantages which accrue from the application of standards in the day to day manufacturing programmes are increased efficiency, less waste of manpower and material, higher productivity through longer runs in the factory, simplified buying, costing and cataloguing and stabilizing and promoting exports by sending goods of uniform quality abroad.
The Certification Marking Scheme involving issue of licences for use of Standard Marks, maintenance of laboratories and libraries, bringing out various publications, such as ISI bulletin, Standards Monthly Additions and other brochures and leaflets and publicity through different kinds of media, which constitute the other activities of the Institution apart from preparation and publication of Standards, are intended to promote implementation of Standards, create consciousness about the importance of standardisation and quality control amongst different sectors of the economy and further inplant standardization activity, with a view to helping the manufacturer, to step up production and lower manufacturing cost, increasing labour efficiency by simplifying production processes and ensure dependable and quality goods, increase consumer confidence and goodwill and achieve greater turnover and increased profits by maximum utilization of human and material resources, the distributor, to add to his turnover and to his reputation by marketing uniform quality of goods of high standard 157 assured by compliance with the Standards and the consumer, to benefit from lower prices, higher quality and more safety in short, get value for the money spent by him.
The Institution renders what are termed `extension services ' to industries which opt for them and these extension services are made available in three district phases, namely, Pilot Study, Systematic Development and Evaluation.
If this is not rendering of material services to a section of the community, we fail to see what other activity can be so regarded.
There is also cooperation between the management of the Institution and the employees who are associated together for rendering these material services.
It is true that the Standards are prepared by Sectional Committees which are composed of representatives of all concerned, including scientists and technicians, with consumer interest playing a dominant role and they are not exclusively the result of the work carried out by the employees, but the participation of the employees is not altogether absent.
Not only do the employees who are technicians participate in the work relating to various aspects of preparation of Standards but the draft standards are also verified in the laboratories of the Institution which are operated by the employees.
Moreover, the distribution and sale of Standards prepared and published by the Institution is being made through the employees.
The certificate Marketing scheme, maintenance of laboratories and libraries, publication of ISI bulletin, Standard Monthly Additions and other magazines, journals and leaflets and publicity of the activities of the Institution are all carried on with the help of the employees.
There are a large number of employees of the Institution belonging to Grades II, III and IV, apart from officers in Grade I. Some of the employees in Grade II are technical people closely associated with the technical activities of the Institution.
There can, therefore, be no doubt that the activities of the Institution fall within the category of undertaking analogous to trade or business and must be regarded as an `industry ' within the meaning of section 2(j).
This view which we are taking receives support from an earlier decision or this Court in the Ahmedabad Textile Industry Research Association vs The State of Bombay & Ors.(1) There the question was whether the activity of the appellant Association, which was a textile research institute established for the purpose of carrying on research and other scientific work in connection with the textile trade or industry and other trade and industries allied there with or necessary thereto, was an 'industry ' for the purpose of the Act.
This Court analysed the activity of the appellant Association and pointed out that it is an "activity systematically undertaken; its object is to render material services to a part of the community (namely, member mills) the material services being the discovery of processes of manufacture etc.
with a view to secure greater efficiency, rationalisation and reduction of costs of the member mills.
it is being carried on with help of employees (namley, technical personnel) who have no rights in the results of the research carried on by them as employees of the association; it is organised or arranged in a manner in which a trade or business is generally organised: it postulates cooperation between (1) 158 employers (namely, the association) and the employees (namely, the technical personnel and others) which is necessary for its success, for the employers provide monies for carrying on the activities of the association and its object clearly is to render material services to a part of the community by discovery of process of manufacture etc.
with a view to secure greater efficiency, rationalisation and reduction of costs.
" It was observed by this Court that the undertaking as a whole is "in the nature of business or trade organised with the object of discovering ways and means by which the member mills may obtain larger profits in connection with their industries," and on this view, the Court held that "the appellant association is carrying on an activity which clearly comes within the meaning of the word `industry ' in section 2(j)".
This case bears a very close analogy to the present case and indeed, some of the observations made by this Court ill that case particularly those underlined by us aptly describe the nature of the activities of the Institution and the reasoning on which the decision in this case is based is equally applicable in the decision of the present case.
There is also one other decision of this Court which amply supports the view we are taking and that is the decision in the Management of the FICCI vs Workmen (supra).
The question which arose in that case was whether the Federation of Indian Chambers of Commerce and Industry, for short referred to as FICCI was an industry within the meaning of section 2(j).
This Court reviewed most of the earlier decisions on the subject and after summarising the broad test for determining what is an industry, proceeded to analyse the activities of FICCI and pointed out that "the Federation carries on systematic activities to assist its members and other businessmen and industrialists and even non members, as for instance, in giving them the right to subscribe to their bulletin; in taking up their cases and solving their difficulties and in obtaining concessions and facilities for them from the Government.
These activities are business activities and material services, which are not necessarily confined to the illustrations given by Hidayatullah, C.J., in the Gymkhana case by way of illustration only, rendered to businessmen, traders and industrialists who are members of the constituents of the Federation.
There can in our view be no doubt that the Federation is an industry within the meaning of section 2(j) of the Act.
" This decision is also very apposite and helpful and leaves no doubt that the activities of the Institution in the present case are an 'industry ' so as to attract the beneficent provisions of the Act.
We, therefore, allow the appeal, set aside the order passed by the Industrial Tribunal and direct the Industrial Tribunal to proceed with the Reference before it on merits on the basis that the activities of the Institution constitute an 'industry ' within the meaning of section 2(j) of the Act.
The respondents will pay to the appellants costs of the appeal as also costs of the hearing before the Industrial Tribunal.
ALAGIRISWAMI, J.
I am sorry I find myself unable to agree with my learned brother Bhagwati J.
The facts of the case have been 159 elaborately set out in his judgment and it is unnecessary to repeat them.
It would be necessary, however, to refer to one or two other facts which have not been mentioned in their proper place.
After the very clear decision by this Court in its judgment in Gymkhana Club Union vs Management(l) and its endorsement in its judgment in Safdarjung Hospital vs K. section Sethi(2) the decision in State of Bombay vs
The Hospital Mazdoor Sabha(3) has become irrelevant.
The Gymkhana Club case has laid down that any trade, business, undertaking, manufacture or calling of employers is an industry and once the existence of an industry viewed from the angle of what the employer is doing is established, all who render service and fall within the definition of 'workman ' come within the fold, of industry, irrespective of what they do.
It was also pointed out that the word 'undertaking ', though elastic, must take its colour from other expressions used in the definition of `industry ', and must be defined as any business or any work or project resulting in material goods or material services and which one engages in or attempts as an enterprise analogous to business or trade.
It also pointed out that the test adopted in Hospital Mazdoor case (supra) namely, could the activities be carried on by a private individual or group of individuals for the purpose of holding that running a Government hospital was an industry must be held to have taken an extreme view of what is an industry and that this test is not enlightening.
With regard to local bodies it was pointed out that they are political sub divisions and agencies for the exercise of governmental functions, but if they indulge in municipal trading or business or have to assume the calling of employers they are employers whether they carry on or not business commercially for purposes of gain or profit.
It was finally held that before the work engaged in can be described as an industry, it must bear the definite character of `trade ' or `business ' or `manufacture ' or `calling ' or must be capable of being described as an undertaking resulting in material goods or material services and the word 'undertaking ' was defined as "any business or any work or project which one engages in or attempts as an enterprise analogous to business or trade. ' These ideas were crystallised in the judgment in Safdarjang Hospital case and for facility of reference I may quote the first conclusion in the headnote.
"The definition of industry in section 2(j) of the is in two parts.
But it must be read as a whole.
So read it denotes a collective enterprise to which employers and employees are associated.
It does not exist either by employers alone or by employees alone.
It exists only when there is a relationship between employers and employees, the former engaged in business, trade, under taking, manufacture or calling of employers and the latter engaged in any calling, service, employment, handicraft or industrial occupation or avocation.
But every case of em (1) [1968]1 section C. R. 742.
(2) [1971] I section C. R. 177.
(3) ; 160 ployment is not necessarily productive of an industry.
A workman is to be regarded as one employed in an industry only if he is following one of the vocations mentioned in relation to the employers, namely, any business, trade, under taking, manufacture or calling of employers.
In the collocation of the terms and their definitions these terms have a definite economic content of a particular type and on the authorities of this Court have been uniformly accepted as excluding professions and are only concerned with the production, distribution and consumption of wealth and the production and availability of material services.
Industry has thus been accepted to mean only trade and business, manufacture, or undertaking analogous to trade or business for the production of material goods or wealth and material services.
Material services involve an activity carried on through co operation between employers and employees to provide the community with the use of something such as electric power, water, transportation, mail delivery, telephones and the like.
In providing these services there may be employment of trained men and even professional men, but the emphasis is knot on what they do but upon the productivity of a service organised as an industry and commercially valuable, in which, something is brought into existence quite apart from the benefit to particular individuals; and it is the production of this something which is described as the production of material services.
Thus, the services of professional men involving benefit to individuals according to their needs, such as doctors, teachers, lawyers, solicitors, etc. are easily distinguishable from an activity such as transport service.
They are not engaged in an occupation in which employers and employees cooperate in the production or sale of commodities or arrangement for the production or sale or distribution and their services cannot be described as material services and are outside the ambit of industry.
It, therefore, follows that before an industrial dispute can be raised between employers and employers or between employers and employees or between employees and employees in relation to the employment or non employment or the terms of employment or with the conditions of labour of any person, there must first be established a relationship of employers and employees associating together, the former following a trade, business, manufacture, undertaking or calling of employers in the production of material goods and material services and the latter following any calling, service, employment, handicraft or industrial occupation or avocation of workmen in aid of the employers ' enterprise.
It is not necessary that there must be profit motive, but the enterprise must be analogous to trade or business in a commercial sense.
" It criticised the decision in Hospital Mazdoor case in words which have been summarised in headnote 2 as follows: .
161 "The decision in State of Bombay vs Hospital Mazdoor Sabha holding that a Government hospital was an industry took an extreme view of the matter and cannot be justified, because: (a) it was erroneously held that the second part of the definition of 'industry ' was an extension of the first part, whereas, they are only the two aspects of the occupation of employers and employees in an industry; (b) it was assumed that economic activity is always related to capital or profit making and since an enterprise could be an industry without capital or profit making it was held that even economic activity was not necessary; and (c) it was held that since a hospital could be run a business proposition and for profit by private individuals or groups of individuals a hospital run by Government without profit must also bear the same character.
This test was wrongly evolved from the observations in Federated Municipal and Shire Council Employees of Australia vs Melbourne Corporation, ; , which only indicate that in those activities in which Government take to industrial ventures the motive of profit making and absence of capital are irrelevant.
The observations, on the contrary show that industrial disputes occur only in operations in which employers and employees associate to provide what people want and desire, that is, in the production of material goods or services, and not the 'satisfaction of material human needs '." and also pointed out that if a hospital, nursing home or dispensary is run as a business in a commercial way there may be found elements of an industry there.
Applying these tests it was held that the Safdarjung Hospital was not embarked on an economic activity which could be said to be analogous to trade or business, that there was no evidence that it was more than a place where persons could get treated, that it was a part of the functions of Government and the Hospital was run as a Department of Government and that it could not, therefore, be said to be an industry.
The Tuberculosis Hospital was held to be not an industry because it was wholly charitable and a research institute, the dominant purpose of the Hospital being research and training and as research and training could not be given without beds in a hospital, the hospital was run.
The Kurji Holy Family Hospital was held not to be an industry on the ground that it objects were entirely charitable, that it carried on work of training, research and treatment and that its income was mostly from donations and distribution of surplus as profit was prohibited.
The idea behind these decisions could be crystallised thus: Even where a trade, business, undertaking, manufacture or calling of employers results in production of material goods or rendering of material services, such an undertaking engaged in trade, business, manufacture or calling of employers will not be an industry if it is run on charitable principles or is run by Government or local body as part of its duty.
In other words whenever an undertaking is engaged in activity which is not done with a view to exploit it in a trading or 162 commercial sense but for public interest and without any profit motive or in the form of social service or in the form of activity intended to benefit the general public it will not be an industry.
The Indian Standards Institution was set up by a Resolution of the Government of India and registered under the .
My learned brother Bhagwati J. has set out the Memorandum of Association, the rules and regulations of the Institution and explained what the standards established by the Institution are as also its role in the implementation of Indian Standards Institution (Certification Marks) Act, 1952.
It is unnecessary to set out all of them at length.
A bare scrutiny of the objects of the Institution would show that they are concerned with broad public interest of the country as a whole and no part of the objects of the Institution has anything to do with serving any private interest.
The standards are prepared by committees in which all interests are adequately represented, including scientists and technicians but consumer interest has, as far as possible, to predominate.
As pointed out by my learned brother, the Standard Mark is the most authentic representation to the consumer that the article or process in respect of which it is used conforms to the relevant Indian Standard and Indian Standard thus becomes meaningful and advantageous by reason of the use of the Standard Mark.
The existence of laboratories and libraries are incidental and in furtherance of the specifications of standards and the application of the Standard Marks.
The Institution has no capital, it does not distribute profits and even when it is wound up the assets would not go to any private individual.
It is not run with a profit motive.
It is thus not an enterprise analogous to business or trade.
In fact one can go further and say that its activity is only a manifestation of governmental activity.
Instead of itself performing these duties the Government have set up the Institution in effect for the purpose of discharging duties which the Government itself has to do in the service of the general public.
What the Institution does it thus to render material services.
It is in recognition of the role which the Institution plays as an instrument of Government that it had made a contribution of 40 lakhs and odd out of the income of 73 lakhs of the Institution in the year 1973 74.
Thus the material service which the Institution renders is really a subsidised service and it is rendered in public interest.
It is an Institution interested and engaged in service to the public.
Its activities do not go to swell coffers of anybody.
Applying therefore the tests which have been evolved and applied in the Gymkhana Club case and the Safdarjung Hospital case it is obvious that the Institution is not engaged in an industry.
The judgments of this Court in Management of FICCI vs Workmen and Ahmedabad Textile Industry Research Association vs The State of Bombay & Ors. are not relevant because in the case of the Federation it was intended to benefit the members of the commercial community and not the public in general.
The Ahmedabad Textile Industry Research Association activities were in the nature of business or trade organised with the object of discovering ways and means by 163 which the member mills may obtain larger profits in connection with their industries.
The activities of the Indian Standards Institution are not intended to benefit any class of businessmen or to enable them to increase their income.
It is a public service institution and therefore must be held not an industry.
I would, therefore, dismiss the appeal ORDER In view of the decision of the majority, the appeal is allowed and the Industrial Tribunal should proceed with the Reference before it on the merits.
The respondents will pay to the appellants costs of the appeal as also costs of the hearing before the Industrial Tribunal.
| IN-Abs | The workmen of the Indian Standards Institution, a registered society, under the made certain demands which were not accepted by the management and the dispute arising therefrom was taken in conciliation.
Unable to settle it, the Conciliation Officer made a "Failure report" to the Lt. Governor, who referred the dispute for adjudication to the Industrial Tribunal sections 10(1) (d) and 12(5) of the Act.
Opposing the claim of the workmen on merits, the management raised before the Tribunal, a preliminary objection that the Institution was not an "Industry" within the meaning of Section 2(j) of the Act and, therefore, the dispute between the management and its workmen was not an "Industrial dispute" as defined in section 2 (k) and the Lt. Governor had no jurisdiction to refer it for adjudication under the provisions of the Act.
The Tribunal applying the five tests laid down by the Supreme Court in "Gymkhana Club 's case" and "The Cricket Club 's case" found that though capital was employed in the Institution, it was not run with a profit motive and so the fifth test was not satisfied.
So viewing, the Tribunal held that (a) the Institution was not an "industry", (b) that the reference was outside the power of the Lt. Governor and (e) that its jurisdiction to entertain the reference and adjudicate upon it was ousted.
Allowing the appeal by special leave against the order of the Industrial Tribunal.
(Alagiriswami, J. dissenting), the Court ^ HELD: (Per Bhagwati and P. K. Goswami, JJ.) (i) The definition of an "industrial dispute" in section 2(k) does not in so many words refer to "industry".
But on the grammar of the expression itself an "industrial dispute" must necessarily be a dispute in an industry and moreover the expressions "employer" and "workman" used in the definition of "industrial dispute" carry the requirement of industry in that definition by virtue of their own definitions in sections 2(g) and 2(s).
[143A B] (ii) According to the dictionary meaning an "undertaking" means "anything undertaken; any business or work or project which one engages in or attempts: an enterprise".
It is a term of very wide connotation.
But an "undertaking" to be within the definition in section 2(j) of the Act must be read subject to a limitation viz., that it must be analogous to trade or business.
In order that an undertaking should be analogous to trade or business, profit motive and capital investment are not essential requisites.
There can be such an under taking without the presence of both or either of these attributes or features.
No rigid and doctrinaire approach can be adopted in considering the question 139 as to what are the attribute or features which make an undertaking analogous to trade or business.
Such an approach would fail to measure up to the needs of the growing welfare State which is constantly engaged in undertaking new and varied activities as part of its social welfare policy.
The concept of industry which is intended to be a convenient and effective tool in the hands of industrial adjudication for bringing about industrial peace and harmony.
would lose its capacity for adjustment and change.
It would be petrified and robbed of its dynamic content.
[145 B, D, 146A, C, D] (iii) An activity can be regarded as an "industry" within the meaning of section 2(j) only if there is relationship of employer and employees and the former is engaged in "business, trade undertaking, manufacture or calling of employers" and the latter "in any calling, service employment, handicraft or industrial occupation or avocation", Though "undertaking" is a word of large import and it means anything undertaken or any project or enterprise, in the Context in which it occurs, it must be read as meaning an undertaking analogous to trade or business.
In order that an activity may be regarded as an undertaking analogous to trade or business, it must be "organised or arranged in a manner in which trade or business is generally organised or arranged".
It must not be casual nor must it be for oneself nor for pleasure.
And it must rest on co operation with a view to production, sale or distribution of material goods or material services.
It is entirely irrelevant whether or not there is profit motive or investment of capital in such activity.
Even without these two features, an activity can be an undertaking analogous to trade or business.
It is also immaterial "that its objects are charitable or it does not make profits or even where profits are made, they are not distributed amongst its members", or that its activity is subsidised by the Government.
Again it is not necessary that "the employer must always be a private individual.
The Act, in terms, contemplates cases of industrial disputes, where the Government or a local authority or a public utility service may be the employer.
It also makes no difference that the material services rendered by the undertaking are in public interest.
The concept of public interest in a modern welfare State, where new social values are fast emerging and old dying out, is indeed so wide and so broad and comprehensive in its spectrum and range that many activities which admittedly fall within the category of "industry" are clearly designed to subserve public interest.
In fact, whenever any industry is carried on by the Government, it would be in public interest, for the Government can act only in public interest.
Whether an activity is carried on in public interest or not can, therefore, never be a criterion for determining its character as an industry.
[149D H,150A B] State of Bombay vs Hospital Mazdoor Sabha, ; ; Management of Safdarjung Hospital vs K. section Sethi ; , followed.
Federated Municipal and Shire Council Employees of Australia vs Melbourne Corporation ; Secretary, Madras Gymkhana Club Employees Union vs The Management of the Madras Gymkhana Club [1968] 1 S.C.R. 742; National Union of Commercial Employees vs M. R. Meher [1962] Supp. 3 S.C.R. 157; University of Delhi & Anr.
vs Ramnath, [1964] 2 S.C.R. 703; Cricket Club of India Ltd. vs The Bombay Labour Union & Anr.
; , discussed.
HELD (Per Alagiriswami, J. contra): Even when a trade, business, undertaking, manufacture or calling of employers results in production of material goods or rendering of material services, such an undertaking engaged in trade.
business, manufacture or calling of employers will not be an "industry, if it is run on charitable principles or is run by Government or local body as part of its duty.
In other words, whenever an undertaking is engaged in activity which is not done with a view to exploit it in a trading or commercial sense, but for public interest and without any profit motive or in the form of social service or in the form of activity intended to benefit the general public, it will not be an industry.
[161 G H. 162A] 140 HELD FURTHER (Per Bhagwati and Goswami, JJ ) (iv) The activities of the Indian Standards Institution fall within the category of undertaking analogous to trade or business and constitute an "industry" within the meaning of section 2(j) of the .
[157 E] Ahmadabad Textile Industry Research Association vs The State of Bombay and others; , Management of Safdarjung Hospital vs K. section Sethi, ; , Management of F.I.C.C.I. vs Its Workmen, , followed.
Per contra (Alagiriswami, J ) The Institution has no capital, it does not distribute profits and even when it is wound up, the assets would not go to any private individual.
It is not run with a profit motive.
It is thus not an enterprise analogous to business or trade.
In fact, its activity is only a manifestation of Government activity.
Instead of itself performing these duties, which the Government itself has to do in the service of the general public.
What the Institution does is to render material services.
The material service which the Institution renders is really a subsidised service and it is rendered in public interest.
It is an institution interested and engaged in service to the public.
Its activities do not go to swell the coffers of any body.
Applying the tests evolved and applied in the.
Gymkhana Club 's case and the Safdarjung 's case, it is obvious that the institution is not engaged in any industry.
The activities of the Indian Standards Institution are not intended to benefit any class of businessmen or to enable them to increase their income.
It is a public service institution and, therefore, is not an industry.
[162D F, 163 A]
|
Civil Appeal No. 897 of 1968.
Appeal by Special Leave from the Judgment & order dated the 24th July, 1967 of the Delhi High Court in L.P.A. No. 54 of 1967.
G. L. Sanghi and Girish Chandra for the Appellants.
section section Javali (Amicas Cariae) for the Respondent.
The Judgment of the Court was delivered by KRISHNA IYER, J.
The respondent imported Auto Cycle Pedals under the guise of motor vehicle parts for which he had secured the relevant licence.
These two articles are different from the point of view or the law controlling imports.
As laid down in Ganga Setty 's case(1) by the Court, it is primarily for the Import Control Authority to determine the head or entry under which any particular commodity falls.
Or course, if a construction adopted by the authority regarding the concerned entry were perverse, or grossly irrational, then the court could and would undoubtedly interfere.
In the present case the High Court has held that the view of the Customs officials could not be considered perverse and has declined to set aside the impugned order on that score.
Even at this stage it is appropriate to quote the order under challenge which runs: "M/s. The Security and Finance Ltd., Delhi imported from U.K. the above mentioned goods for which they did not possess a valid Import licence issued under Serial No. 301/Pt.
IV of Import Trade Control Schedule.
The importation was therefore considered as unauthorised.
The importers were therefore in this Custom Memo No. S24C 1276/55A dated 30 9 55 called upon to show cause why the goods should not be confiscated and penal action take under section 167(8) Sea Customs Act read with Section 3(2) of the Import & Exports (Control) Act.
In reply to the said show cause Memo, the Clearing Agents of the importers produced a licence for Motor Vehicles parts, and claimed release of the goods against the said licence.
They further stated that similar consignment has been released in the past against similar licence.
Furthermore, no public Notice has been issued to the effect that Auto Cycle Pedals will not be allowed clearance against Motor Vehicle Parts licence.
The arguments so advanced are not accept able.
The importers did no, avail of the personal hearing offered to them in the said show cause memo.
ORDER The importation of the above goods without proper licence is prohibited under sections 3(2) and 4 of the Import & Export (Control) Act of 1947 and Notification issued thereunder.
I accordingly confiscate the goods (1) A.I.R. 1863 S.C. 1319 89 under section 167(8) Sea Customs Act.
In lieu of confiscation I gave an option under section 183 ibid to the importers to clear the goods on payment of a fine of Rs. 22,600/ (rupees twenty two thousand six hundred only).
Customs duty and other charges as leviable on the goods will have to be paid in addition before these could be cleared out of customs control.
Dated 14 11 55.
Sd/ Dy.
Collector of Customs" Even so, the Court quashed the latter limit of the order under challenge which had imposed penalty in lieu of confiscation and, on top or it, directed payment of the import duty ordinarily leviable for the auto cycle pedals imported.
The only ground which led to this fatal consequence was that the authorities, acting under s 183 of the (Act VIII of 1878) (for short, the Act), had no further power to direct the importer petitioner i.e., the respondent, to pay excess duty which represents the difference between what is leviable for motor vehicles spares and auto cycle pedals Aggrieved by this view of the limitation on the powers of the Collector of Customs the appellant i.e, the Union of India, has come up this Court, after securing special leave to appeal.
The respondent was not represented by counsel and since the point involved was one of law and the amount involved not inconsiderable, we requested Shri Javali, Advocate, to serve as amicus curiae.
He has argued the case with ability and we record our appreciation of his services to the Court.
Indeed, but for his close scrutiny of the order of the Deputy Collector of Customs we would not have perceived the mix up and other defects he highlighted in his submissions.
We have already stated that a fine, in lieu of confiscation, had been imposed by the Collector of Customs.
This he did, under section 183 of the Act, but not content with that imposition he also directed the payment of the full duty on the goods imported as condition precedent to the clearing of the goods out of the 'customs control '.
Does the order under section 183 preclude him from levying duty under section 20? This is the short issue before us.
A close study of the scheme of the relevant provisions, powers and levies discloses a clear dichotomy which has escaped the attention of the High Court.
Import/export duty is an obligation cast by section 20 of the Act.
It is a tax, not a penalty; it is an innocent levy once the exigible event occurs.
it is not a punitive impost for a contravention of the law.
Confiscation.
penalty and fine provided for under sections 167 (item 8) and 183 are of the species of punishment for violation of the scheme of prohibition and control.
Once this distinction and duality are remembered, the interpretative process simplifies itself.
Admittedly, the respondent imported pedals uncovered by any licence.
Two legal consequences followed.
The importation attracted duty which any importer, licit or illicit, had to pay the moment 90 customs barrier was crossed.
Secondly, the commission of the offence of importing pedals without a licence caught the offender in the coils of section 167, entry 8, inviting the jurisdiction of the authority prescribed under section 182 to confiscate the goods or, alternatively, to impose a fine in lieu of confiscation, under section 183, of course, if confiscation is resorted to, the title vests in the State, as provided in section 184.
Import duty has to be paid inevitably in these cases, by the importer.
Confiscation or fine in lieu thereof is an infliction on the offender or circle of offenders falling within section 167, Entry 8.
Some times, the burden in both the cases, falls on the same person.
At other times, they may fall on different persons.
In some cases the importer as well as the confiscate may be identified and so the duty and the penalty may be imposed validly.
In other cases it may be difficult to get at the actual person who imported or was concerned in the offence of importation contrary to the prohibition or restriction clamped down by the law.
In that event, only confiscation and, alternatively, fine, may be imposed.
Viewed in this perspective, the answer to the question that arises for decision is simple.
In the present case, as held by the High Court, the respondent did import auto cycle pedals outside the permit or licence.
He is therefore liable to pay import duty normally leviable from pedal importers.
He his admittedly transgressed the provisions of Entry 8 of section 167 by importing goods not covered by the licence and therefore comes within the penal complex set out in sections 182, 183 ; and 184.
In the present case, the Deputy Collector, the competent authority, has chosen to give the owner of the goods, the respondent, option to pay, in lieu of confiscation, a fine.
He has not confiscated the goods and, therefore, section 184 is not operational in this context.
In short, the obligation under section 20 is independent of the liability under section 183.
The order, dual in character, although clubbed together in a single document, is therefore valid in entirety.
Even so, the confusion has been caused by the Deputy Collector failing to keep distinct the two powers and the two liabilities and thereby leading to avoidable jumbling.
Shri Javali rightly exposed the order impugned to the actinic light of criticism by pointing out that this rolled up order suffers from several infirmities, apart from its unspeaking brevity.
The Deputy Collector does not state that he is levying duty on the importer qua importer under section 20.
He does grievously err in the first breath confiscating the goods (in which case the title vests in Government under section 184) and in the very next directing payment of fine in lieu of confiscation.
Both cannot co exist.
Moreover, he forgets that section 167, entry 8, empowers, apart from confiscation of the offending goods, a penalty also which is independent of the fine in section 183, in lieu of confiscation.
This confused and laconic order only highlights the need for some orientation course in law for officers who are called upon to exercise judicial powers and write reasoned orders.
91 However, we are prepared to gather from the order under attack two levies imposed in exercise of two distinct powers, as earlier explained.
The import duty has been made a condition for the clearance of the goods.
This is right and it is impossible to say that the said payment is not justified by section 20.
Likewise, the authority, when it imposed a fine, was exercising its power under section 183.
We can readily see that he did not mean to confiscate the goods.
He only proposed to confiscate and proceeded to fix a fine in lieu thereof.
Non felicitous and inept expressions used in the order are perhaps apt lo mislead, but the intendment is clear that what was done was not confiscation but giving an option to pay a quantified fine in place of confiscation.
The order was a composite one, when read in the sense we have explained, and is quite legal.
Therefore we reach the conclusion that the appellant is entitled to win and the High Court was in error.
The line of reasoning which has appealed to us is echoed in a decision of the Madras High Court reported as Collector of Customs vs section Mehra(1).
Ramachandra Iyer, C.J., speaking for the Bench, has explained the legal position clearly and we agree with it.
Two decisions of this Court were referred to before the High Court and, indeed, the decision of the High Court proceeded on the footing that those two decisions concluded the matter.
The Madras decision distinguishes and for right reasons, if we may say so with respect those two rulings of this Court.
They do not apply to the facts of the situation before us.
On the other hand, both those cases deal with quantities of gold seized from persons as smuggled goods.
How they were imported, who were involved in the import, and who could, therefore, be made liable for import duty, were left blank in those two cases.
Therefore, the conditions imposed by the customs authorities for payment of import duty could not be supported.
We will go into a little more detail to explain those two decisions and their non applicability to the point we are discussing.
We may state that neither of them decides that once a find in lieu of confiscation is imposed, the power to levy duty under section 20 is deprived if.
It is not as if the authorities could not exercise both`the powers, where the facts attracted both section 20 and sections 182 to 184.
In Shewpujanrai Indrasanrai Ltd. vs The Collector of Customs(2) this Court had to consider an order passed by the Collector under the in respect of smuggled gold.
An option to pay a fine of Rs. 10,00,000/ was ordered but the Collector tied it up with ` two conditions for the release of the 'confiscated gold '.
One was the production of a permit from the Reserve Bank of India in respect of the gold and the other was the payment of proper customs duties in respect of the gold.
Both the conditions were held to be illegal by this Court.
It was conceded in that case by the learned Solicitor General that there was no provision in the Foreign Exchange Regulation Act or the under which the Reserve Bank could give permission in respect of smuggled gold with retrospective effect.
What (1) A.I.R. 1964 Mad, 504.
(2) ; 92 is more, if it could, there would be no offence under section 167, entry 8, and the order of confiscation itself would be bad.
As to the second condition of payment of customs duty, there was no finding by what.
means the gold was smuggled by sea or by land and therefore ii was difficult to see how section 88 which was sought to be pressed into service could be of any help.
Indeed, the decision of the Bombay High Court in Hormasji Elavia vs The Union of India(1) had been brought to the notice of the learned Judges, where customs duty was held payable under section 88 of the , but it was distinguished on the score that in that case the goods had been tracked down as smuggled through the port of Kantiajal without payment of any duty and, in those circumstances, it was held that section 88 applied.
the manner of import, once identified the power to levy duty could be exercised under the appropriate Act.
Therefore, Shewpujanrai (supra) is no authority for the proposition that import duty cannot be levied once fine in lieu of confiscation is imposed.
The later decision in Amba Lal vs Union of India(1) also is of No. assistance.
That also related to smuggled gold.
The Collector of Customs imposed conditions for the release, in that case, of the confiscated gold.
Though the order was struck down on a concession by the learned Additional Solicitor General, on the facts as disclosed in that case, the contraband goods.
were recovered by search from the appellant 's house, but the authorities could not establish by any evidence that the seized articles were imported into India after the customs barrier was put up for the first time between India and Pakistan.
It is obvious, therefore, that import duty could not be levied from tale person from whom the seizure was effected.
The case before us stands clearly on a different footing and the order imposing fine in lieu of confiscation and also levying import duly is good.
We allow the appeal but.
in the circumstances of the case.
there will be no order as to costs S.R. Appeal allowed.
(1) Cr.
1296 of 1953 decided on 18 8 1953.
| IN-Abs | The respondent company imported auto cycle parts under the guise of motor vehicle parts, for which only he had a valid license under the Import laws.
In respect of certain consignments of imports from U.K the customs authorities by a single order dt.
14 11 1955 passed the following: (i) acting under section 167(8) of the Customs Act it gave an option to the respondent to pay fine in lieu of confiscation of the goods under section 182 and (ii) acting under sections 183 and 20 of the Customs Act to pay the differential duty between auto parts and the motor parts.
The respondent challenged this order before the High Court on the ground that once the power under section 183 has been exercised the authorities had no further power to levy the differential duty.
The High Court while quashing the order imposing penalty in lieu of confiscation directed payment of the import duty ordinarily livable for the auto cycle pedals imported.
Against this view of the limitation on the powers of the Collector, the Union came by way of special leave, while allowing the appeal the Court, ^ HELD: (1) It is primarily for the Import Control Authority to determine the head or entry under which any particular commodity falls.
Of course if a construction adopted by the authority regarding the concerned entry were per verse, or grossly irrational, then the Court could or would undoubtedly interfere.
[88 D]. "Ganga Setty 's case; , followed".
(ii) The scheme of the Sea Customs Act reveals that Import/export duty is an obligation/cast by section 20 of the Act.
It is a tax, not a penalty; it is an innocent levy once the eligible event occurs: it is not a punitive import for a contravention of the law.
Confiscation, penalty and fine provided for under sections 167 (Item 8) and 183 are of the species of punishment for violation of the scheme of prohibition and control [89 G].
(iii) Two legal consequences followed the importation of pedals, uncovered by any license viz. (1) the importation attracted duty which any importer licit or illicit had to pay the moment customs barrier was crossed and (ii) the commission of the offence of importing pedals without a licence trapping the respondent in the coils of section 167, entry 8 inviting the jurisdiction of the authorities to exercise their powers under sections 182 or 183.
[89 H, 90 A].
(iv) The order dual in character, although clubbed together in a single document is valid and it does not preclude the authorities levying duty under section 20, since obligation under section 20 is independent of the liability u/s 183.
Non felicitous and inept expressions used in the order are perhaps apt to mislaid, but the intendment is clear that what was done, was not confiscation, but giving an option to pay a quantified fine in a places of confiscation The order was a composite one, and is quite legal.
[90 D, 91 B D].
7 L 1276SCI/75 88 Collector of customs vs H. section Mehra A.I.R. 1964 Mad. 504: Shewpujanrai Indrasanrai Ltd. vs The Collector of Customs, ; referred to
|
Civil Appeal No. 862 of 1968.
Appeal by special leave from the Judgment and order dated the 6th December, 1964 of the Punjab & Haryana High Court in Civil Writ No.587 of 1964.
G. L. Sanghi and Girish Chandra for the Appellants.
section N. Anand for the Respondents.
79 The Judgment of the Court was delivered by GUPTA, J.
This appeal by special leave arises out of a proceeding under the (hereinafter referred to as the Act).
The only question for determination in the appeal is whether the deletion of rule 30 of the Displaced Persons (Compensation and Rehabilitation) Rules, 1955 (hereinafter referred to as the Rules) with effect from August .
13, 1963 made any difference to the rights of the parties concerned in this case.
The question arises on the following facts.
Shop No. 2 in Tripri township in Patiala which is a government built property was allotted in 1950 to the first respondent Khillu Ram jointly with one Tara Chand and his son by the Custodian of Evacuee Property.
In 1951 both Tara Chand and his son Left Tripri to settle elsewhere and the second respondent Teju Mal applied for allotment of their share in the shop to him.
By his order dated November 11, 1959 the Managing officer, Tripri and Rajpura, held that Teju Mal and Khillu Ram were in possession of the shop as allottees respectively of 2/3 and 1/3 shares therein.
Aggrieved by the order of the Managing officer, the first respondent Khillu Ram preferred an appeal to the Settlement officer, Jullundur, who by his order dated February 12, 1962 set aside the order of the Managing officer and remanded the case for a fresh decision under rule 30 of the Rules.
Rule 30 is in these terms: " Payment of compensation where an acquired evacuee property which is an allotable property is in occupation of more than one person.
If more persons than one holding verified claims are in occupation of any acquired evacuee property which is an allotable property, the property shall be offered to the person whose gross compensation is the biggest and the other persons may be allotted such other acquired evacuee property which is allotable as may be available :" This rule has a proviso and an explanation none of which is relevant for the present purpose.
After remand the case was transferred to the Assistant Settlement officer who found that the gross compensation payable to the first respondent was higher than that of the rival claimant, Teju Mal and in terms of rule 30 allotted the entire shop to the first respondent by his order dated November 27, 1962.
A revision petition against this order made by Teju Mal was dismissed by the Deputy Chief Settlement Officer on September 5, 1963.
In the meantime, as stated already, rule 30 had been abrogated with effect from August 13, 1963.
Teju Mal then moved the Central Government under sec.
33 of the Act.
Teju Mal 's application under sec.
33 was heard on February 25, 1964.
The effect of deletion of rule 30 was that the properties which were in the occupation of more than one person were to be put to sale.
The Joint Secretary to the Government of India who heard the application under sec.
33 held that the case should be governed by the Rules as amended in 1963 excluding rule 30, and accordingly by his order dated February 80 26, 1964 he set aside the order allotting the shop to the first respondent Khillu Ram and directed the property in question to be put to sale.
The first respondent filed a writ petition in the Punjab High Court for quashing the order passed under sec.
The Punjab High Court held that the subsequent deletion of rule 30 did not affect the existing rights of the first respondent and quashed the order of the Central Government made under sec.
The correctness of this ` order is challenged in the appeal before us which has been preferred by the Union of India and several other authorities concerned with the administration of the .
The only submission made by Mr. Sanghi appearing for the appellants is that rule 30 was a rule of procedure and its deletion in 1963 affected only the mode of proceeding by which the rival claims of Khillu Ram and Teju Mal was to be decided.
It was argued that amendment of the Rules in 1963 deleting rule 30 being procedural in character would affect the proceeding between the two respondents then pending, and their rights, it was submitted, should therefore be decided on the footing as if Rule 30 had never been in force.
We are unable to accept this submission.
The Act provides for the payment of compensation and rehabilitation grants to displaced persons and matters connected therewith.
Under the Act a displaced person has a right to get compensation in the form and manner prescribed by the Act and the Rules framed thereunder.
Rule 30 is in Chapter V of the Rules which deals with payment of compensation by transfer of acquired Evacuee Properties.
Though the shop in question is a government built property and not an acquired evacuee property, rule 43 in Chapter VI of the Rules which provides for payment of compensation by transfer of government built property says that the "pro visions of rules 25 to 34 shall, so far as may be, apply to the transfer of any Government built property or Government plot under this Chapter".
Rule 30 prescribes that where the property is in the occupation of more persons than one, it shall be offered to the person whose gross compensation is the highest.
Clearly rule 30 deals not with the form of procedure but with a substantive right conferred by the Act on displaced persons.
Mr. Sanghi described this rule as only a mode or manner of payment of compensation.
This may be so, but the form and manner in which compensation is payable is also part of the right to get compensation.
Rule 30 is not an instrument or machinery for asserting the right conferred by the Act; it does not regulate the procedure for settlement of disputes concerning that right.
Therefore, the deletion of the rule in 1963 cannot affect pending actions.
The rights of Khillu Ram and Teju Mal must be governed by rule 30 which was in force in 1959 when the dispute arose and was decided by the Managing officer.
A full Bench of the Punjab and Haryana High Court in Pt.
Dev Raj vs Union of India & ors.(1) considering the same question which arises for determination in this appeal, held that "a displaced person has a right to the determination of his claim for compensation and its satisfaction in the 1) A. I. R. 81 prescribed manner and this is a substantive right", that so far as rule 30 is concerned "the right which a displaced person claims under this rule . cannot be adversely affected or taken away unless it is expressly stated in the amending provision, or the language of the Act This, in our opinion, is a correct statement of the law.
Neither by express words nor by implication the amendment of the Rules in 1963 deleting rule 30 has been made retrospective in operation.
For these reasons the appeal fails and is dismissed but without any order as to costs.
V.P.S. Appeal dismissed.
| IN-Abs | Rule 30 of the Displaced Persons (Compensation and Rehabilitation) Rules, 1955, prescribes that where property is in the occupation of more persons than one, it shall be offered to the person whose gross compensation is the highest.
A particular property was allotted under this rule to the first respondent.
A revision petition by the rival claimant, was dismissed ill September, 1963.
But on August 13, 1963, the rule had been abrogated.
The effect of the deletion was that a property in the occupation of more than one person was to be put to sale.
In an application under section 33 of the , by the rival claimant, the appellant held that the case should be governed by the rules as amended, that is, excluding r. 30, and set aside the order allotting the premises to the first respondent.
A writ petition filed by the first respondent in the High Court was allowed.
In appeal to this court, the appellant contended that the rule was one of procedure and its deletion affected only the mode of proceeding by which the rival claim was to be decided.
Dismissing the appeal, ^ HELD: The rights of the two rival claimants must be governed by r. 30 which was in force when the dispute arose and was decided by the authorities under the Act.
[80 G H].
(a) Rule 30 deals, not with form of procedure, but with the substantive right conferred by the Act on displaced persons.
The Act provides for the payment of compensation and rehabilitation grants to displaced persons and matters connected therewith.
Rule 30 is in Chapter V of the Rules which deals with payment of compensation by transfer of acquired evacuee properties.
Assuming that the rule is only a mode or manner of payment of compensation, the form and manner in which compensation is payable is also a part of the right to get compensation.
The rule is not an instrument of machinery for asserting a right conferred by the A t. it does not regulate the procedure for settlement of disputes concerning that right.
Therefore, the deletion of the rule in 1963 cannot affect pending actions, [80 D G].
(b) Neither by express words nor by implication the amendment of the rules in 1963 deleting r. 30 has been made retrospective in operation.
[81 A B].
Dev Raj vs Union of India & ors.
, A.I.R. 1974 Pun 65, approved.
|
Civil Appeal No. 1257 of 1975.
Appeal by Special Leave from the Judgment and order dated the 5th May 1972 of the Allahabad High Court in Civil Misc.
Writ Petition No. 5546 of 1971.
M. Natesan and N. H. Hingorani, for the Appellant.
Govind Das and Girish Chandra, for the Respondents.
The Judgment of the Court were delivered by UNTWALIA, J.
The appellant in this appeal by special leave is a registered partnership firm and is carrying on business of manufacturing a number of milk products including Condensed Milk and Condensed Skimmed Milk.
By the Finance Act, 1969 item 1B was added to the First Schedule of The Central Excise and Salt Act, 1944.
hereinafter called the Excise Act, levying 10% ad valorem duty on "prepared or preserved foods put up in unit containers and ordinarily intended for sale including preparations of . milk . " In exercise of the powers of the Central Government under sub rule (1) of Rule 8 of the Central Excise Rules, 1944 and in supersession of the earlier notifications the Central Government issued Notification No. G.S.R. 339 dated the 1st March, 1970 exempting prepared or preserved foods falling under Item No. 1B of the first Schedule of the Excise Act other than those specified in the Schedule annexed to the notification from the whole of the duty of excise leviable thereon.
In the Schedule is mentioned as items 12 and 13: "12.
Milk powder but excluding such powder specially prepared for feeding of infants;" ""13.Condenced milk, whether sweetened or not;" Thus preparations of milk leviable to excise duty under the Excise Act became exempt from the levy of the duty.
But from that exemption were excluded certain milk preparations mentioned in items 12 and 13.
on and from the 1st March, 1970 the Excise authorities levied excise duty on condensed milk and condensed skimmed milk manufactured by the petitioner treating both of them as included in Item 13 of the Exemption Notification dated the 1st March, 1970.
For sometime the petitioner paid excise duty not only on condensed milk but also on condensed skimmed milk.
Later he objected to the payment of such duty on the latter product on the ground that condensed skimmed milk fell within the Exemption Notification and not within the excluded Item 13 of that notification.
The authorities did not accept his stand to be correct and issued two notices dated 4 8 1971 and 7 8 1971 demanding a sum of Rs. 1,048/ and Rs. 3.064/ respectively as duty payable on condensed skimmed milk manufactured by the petitioner during certain periods.
The petitioner filed a writ application in the Allahabad High Court to challenge the (demand of excise duty on condensed skimmed milk.
A Bench of the High Court took the view that condensed skimmed milk was also condensed milk covered by the excluded Item 13 of the Exemption Notification dated the 1 st March, 1970.
It, therefore, dismissed the writ application.
Hence this appeal.
95 It is well established by several authorities of this Court that for the purpose of levy of excise duty or any other similar tax the description of goods as popularly and commonly understood has to be taken as the description of the same goods in the relevant provisions of the Statute or the Rules.
In this case there are materials to show that condensed milk and condensed skimmed milk are two different items of milk preparations.
In common parlance milk means the full cream milk as milked from the cattle.
It becomes skimmed milk when cream i.e. fat is extracted from milk.
Thereafter the skimmed milk which also can be called a form of preparation of milk is known as such.
It becomes easy to digest and is used in preparation of other milk products, which are different from the milk products prepared from full cream milk.
In the Hand Book on Self Removal Procedure under The Central Excise Rules, 1944, 3rd edition published in June, 1972 by the Central Board of Excise and Customs is to be found Instruction 8(b) to say: "Every assessee is also required to maintain a daily account of important raw materials in Form IV (Annexure II) and also to submit a quarterly return in form RT5 (Annexure III) under Rule 55 of Central Excise Rules, 1944.
One or two important raw materials, which have been prescribed for most of the excisable goods under Self Re moval Procedure, are shown in Annexure IV.
The assessees may maintain daily account and submit quarterly RT5 return only in respect of these specified raw materials.
" In Annexure IV are to be found Items 13 and 14 respectively in these terms: "13.
Milk powder but excluding such powder specially pre pared for feeding of infants" ""14.
Condensed milk whether sweetened or not.
" In column 4, under the heading "names of important raw materials" against item No. 13 is mentioned "whole fresh milk/skimmed milk as the case may be" and against item 14 are found the words "fresh milk/and sugar".
It would be noticed that the description in Items 13 and 14 of Annexure IV. is identical to that of items 12 and 13 in the list of excluded items from the Exemption Notification.
Yet in item milk powder in Annexure IV as against the names of important raw materials, both "whole fresh milk" and "skimmed milk" are mentioned.
But as against condensed milk only "fresh milk" is mentioned.
Such a handling of the description of the milk products and preparations does indicate that the Central Government when it mentioned condensed milk in item 13 of the notification dated the 1st March, 1970 it meant to exclude from exemption only condensed milk of full cream milk and not the condensed skimmed milk prepared from skimmed milk.
The milk preparation condensed skimmed milk prepared from skimmed milk fell within the Exemption Notification and not within excluded item 13.
96 Some support, although a feeble one, can be lent to the above view with reference to Rule 42 of The Prevention of Food Adulteration Rules, 1955.
In clause (B) of the said Rules are mentioned the forms of label to be put on condensed milk and the four types of labels are: (1) Full Cream Milk (unsweetened) (2) Condensed Full Cream Milk (Sweetened) (3) Condensed Machine Skimmed Milk or Condensed Skimmed Milk (unsweetened) (4) Condensed Machine Skimmed Milk or Condensed Skimmed Milk (sweetened) " In Item 13 of the notification when the Government added the words "whether sweetened or not" it did mean to classify the condensed milk of sweetened or unsweetened variety but did not intend to include in item 13 condensed skimmed milk whether sweetened or unsweetened.
Learned counsel for the respondents pointed out that the petitioner had obtained a licence for manufacture of condensed milk only under he Excise Act.
It did not obtain a licence for manufacture of condensed skimmed milk.
Counsel, therefore, submitted that for the purpose of the levy of the excise duty both would be on the same footing.
Learned counsel for the appellant submitted in reply that if excise duty was not leviable on condensed skimmed milk then no licence was required for its manufacture.
The position of law seems to be this.
Under section 6 of the Excise Act no person can engage in the production or manufacture of any specified goods included in the First Schedule of the Act except under the authority and in accordance with the terms and conditions of a licence granted under the Act.
It will have been seen, therefore, that since skimmed milk or condensed skimmed milk will be a milk preparation within the meaning of item 1B of the First Schedule, a licence to manufacture such milk would be required.
If any goods specified in the First Schedule are exempted from the levy of excise duty by the Central Government in exercise of their power under Rule 8(1) of the Central Excise Rules that cannot affect the provision or taking licence for the manufacture of the said goods.
But in this case we are not concerned to find out whether the petitioner was manufacturing condensed skimmed milk without a licence and if so, whether it was committing any offence.
But even assuming that the petitioner had a manufacturing licence under section 6 of the Act only for manufacture of condensed milk that by itself will not take condensed skimmed milk out of the Exemption Notification and include it in the excluded item 13.
For the purpose of levy of excise duty therefore condensed skimmed milk remains included in the Exemption Notification.
Learned counsel also drew our attention to the form of price list of the petitioner showing separate prices for "Condensed milk (full 97 cream)" and "Condensed milk (Skimmed)". 'that again is of no help for the determination of the point at issue.
Unless and until skimmed milk is included in item 13 of the Exemption Notification of the 1st March 1970 it remains an item of goods exempted from levy of excise duty.
For the reasons stated above we allow this appeal, set aside the judgment and order of the High Court and direct the respondents B. not to enforce their demand of excise duty made in the two notices dated 4 8 1971 and 7 8 1971.
In the circumstances we shall make no order as to costs.
V.P.S. Appeal allowed.
| IN-Abs | By virtue of a Notification dated March 1, 1970, issued by the Central Government under r. 8(1) of the Central Excise Rules.
1944, preparations of milk, leviable to excise duty under the Excise Act, 1944, became exempt from the levy.
but from that exemption were excluded certain milk preparations, namely, items 12 and l 3 of the Schedule annexed to the Notification.
They refer to 'milk powder, but excluding such powder specially prepared for feeding of infants '.
and 'condensed milk, whether sweetened or not ', respectively.
The appellant challenged the levy of excise duty on condensed skimmed milk, which he manufactured, on the ground, that it fell within the exemption Notification and not within item 13 of the excluded items.
The High Court dismissed the writ petition holding that condensed skimmed milk was also condensed milk.
Allowing the appeal to this Court, ^ HELD: (1) For the purpose of levy of excise duty or any other similar tax the description of goods as popularly and commonly understood has to be taken as the description of the same goods in the relevant provisions of the statute or the rules.
In common parlance milk means the full cream milk and it becomes skimmed milk when cream is extracted from it.
[95 A B].
(2) In the present case, there are materials to show that the Government itself treated 'Condensed milk ' and 'Condensed skimmed milk ' as different milk preparations, [95 H].
(a) In Annexure IV to the Hand Book of Self Removal Procedure under central Excise Rules, 1944, published in June 1972 by the Central Board of Excise, are items 13 and.
14 corresponding to items 12 and 13 of the Schedule to the exemption Notification.
Against each item certain important raw materials are mentioned of which the assessee has to maintain accounts.
Against milk powder, the raw materials shown are both fresh milk and skimmed milk, while, against condensed milk only fresh milk is mentioned.
[95 G H].
(b) Further, r. 42 of the Prevention of Food Adulteration Rules, 1955, prescribes various forms of labels to be put on tins of condensed milk and they also refer to condensed full cream milk and condensed skimmed milk separately.
[96, A D].
(3) The fact that the appellant had a manufacturing licence only for the manufacture of condensed milk while he was in fact manufacturing condensed skimmed milk will not take ' condensed skimmed milk out of the exemption notification and include it in the excluded item Under section 6 of the Act a licence would be required for the manufacture of condensed skimmed milk and the appellant by manufacturing condensed skimmed milk without a licence, may be committing an offence.
But, if condensed milk is exempt from the levy of excise duty by the Central Government in exercise of its power under r. 8(1), the exemption cannot be affected by the provision for taking a licence for its manufacture.
[96 F H].
(4) The fact that the appellant was showing separate prices in the list of prices for condensed milk (full cream) and condensed milk (skimmed) would not help in the determination of the question.
Unless and until skimmed milk is included in item 13 of the exemption Notification, it remains an item of goods exempt from the levy of excise duty.
[97 A Bl. 94
|
Civil Appeal No. 1266 of 1975.
Appeal by special leave from the Judgment and order dated 3rd March, 1971 of the Madras High Court in Writ Petition No. 583 of 1971.
K. section Ramamurthi, A. T. M. Sampath and E. C. Agarwala, for the Appellant.
B. Sen and Vineet Kumar for Respondent No. 2.
The Judgment of the Court was delivered by KRISHNA IYER, J.
A single fundamental flaw in the order of the Appellate Tribunal (under the ), constrains us to allow this Appeal challenging the High Court 's refusal to interfere with the grant of the permit in favour of Respondent No. 2.
Many applicants for one permit for a "short route" pressed their claims before the Regional Transport Authority which evaluated the relevant merits and awarded the permit to Applicant No. 6, who is the Appellant before us.
On appeal, Applicant No. 3, who is respondent No. 2 before us, succeeded.
Whereupon a Writ Petition was filed without success and the disappointed appellant has come to this Court by special leave.
The system of marks, under the Rules framed under the Act by the Tamil Nadu Government, prescribes the various qualifications for applicants for permits for passenger transport under the , Rule 155 A crystallises these considerations and describes them as guiding principles for the grant of stage carriage permits.
The rule itself emphasizes what is obvious, that the paramount consideration of the interest of the public, as enshrined in Section 47 (1), must given full weight while awarding permits.
That means to say that the various factors set out in rule 155 A are subject to Section 47(1).
This is clarified by sub rule (4) of Rule 155 A, which runs thus: "After marks have been awarded under sub rule (3), the applicants shall be ranked according to the total marks obtained by them and the applications shall be disposed of in accordance with the provisions of sub section (1) of Section 47".
There is no doubt that bus transport is calculated to benefit the public and it is in the fitness of things that the interest of the travelling public is highlighted while evaluating the relevant worth of the various claimants.
There are two circumstances which require to be stressed because they have been overlooked by the appellate tribunal in its disposal of the comparative merits of the rival claimants.
Sub rule (5)(i) of Rule 155 A states that preference shall, other things being equal, be given in the disposal of applications in respect of short routes. .to persons who have not held any permit for a stage carriage.
Among the considerations which must weigh with the authorities entrusted with the power to grant permits, is business or technical experience in the 216 field of motor vehicles operation.
Rule 155 A in Item (D), sub rule (3) specifically states "two marks shall be awarded to the applicants who have business or technical experience in the road transport service as defined in clause (a) of Section 68 A of any class of transport vehicles for a period of ten years or more".
Having regard to the marking system as adumbrated in rule 155 A, a broad sheet was apparently prepared and the appellant before us (Applicant No. 6) secured 4 marks as against the second respondent (Applicant No. 3) who got 3.10 marks.
Ordinarily, therefore, the applicant who got higher marks should have won the battle.
Moreover, in a short route, as in this case, the rule contemplates preference being given to a new entrant, of course, other things being equal.
In this case, therefore, the appellant before us, being admittedly a new entrant, was entitled to preference, the route being a short one, other things being equal.
The short question that, therefore, fell before the Appellate Authority was as to whether other things were equal.
This aspect attracted the attention of the Appellate Authority, but its consideration unfortunately was unsatisfactory.
The Appellate Tribunal observed that though the Applicant No. 6 had secured higher marks than Applicant No. 3: "I am inclined, having regard to the public interest in the matter of passenger transport service, to agree with the appellant 's contention that the respondent 's experience as lorry operator cannot be equated with the appellant 's experience in bus operation.
" This view, according to him, is tenable under Section 47 (1) since this matter involves grant of bus permit.
"The fact that the appellants are bus operators, must necessarily over ride the fact of the respondent being a lorry operator.
Though the route in question is a short route and there is a new entrant like the respondent, the respondent cannot automatically be preferred in the absence of other things being equal, in accordance with clause 5(1) of Rule 155 A".
The error that has crept into the order of the Appellate Tribunal consists in thinking that the rules or guidelines could be discarded in the name of Section 47(1).
Actually, Rule 155 A is in implementation of Section 47(1), but is not exhaustive of all the considerations that will prevail in a given situation.
Therefore, it is that there is jurisdiction given to the Tribunal to take note of other considerations in public interest flowing out of Section 47(1).
Not that the sub rules of Rule 155 A can be discarded, but that they may be supplemented or outweighed.
Not that, in the name of public interest, something opposed to the sub rules of Rule 155 A can be done but that, within the combined framework of Section 47(1) and rule 155 A, there is scope for play of the jurisdiction of the Tribunal to promote public interest.
Viewed in this perspective the Appellate Tribunal has actually contravened Rule 155(3)(D).
That provision expressly accords two marks for applicants who have a certain experience in road transport service. 'Road transport service ' is defined in clause (a) of Section 68 A and this definition is specifically incorporated in Rule 155 A (3) (D).
It follows that the rule makes no distinction between the type of transport vehicle in which experience has been gained whether it be a passenger transport or a lorry transport.
The view taken by the appellate tribunal 217 that because the permit is for passenger transport, lorry service experience, even if it falls under Rule 155 A (3) (D), can be ignored, is therefore, illegal.
A relevant factor has thus been wrongly excluded.
Connected with the same flaw is what we have earlier indicated namely, that the Appellate Tribunal has held that the new entrant (Applicant No. 6) need not be given the preference he is eligible for under Rule 155 A (5) because other things are not equal.
According to him, other things not equal because Applicant No. 6 has lorry transport experience while Applicant No. 3 has bus transport experience.
We have already explained that this is a fallacy.
In this view, the preference that flows in favour of applicant No. 6 under Rule 155 A (5) should not have been denied to him for the reasons set out by the Tribunal.
For these reasons, the order of the Appellate Tribunal is liable to be quashed.
The well worn ground that mat material consideration, if ignored, makes the order vulnerable, applied.
Moreover, these is an apparent mis construction of the relevant rule by the Appellate Tribunal, as we have explained above.
This does not mean that this Court will award the permit to one party or the other.
That is the function of the statutory body created under the .
Moreover, as Mr. Sen, appearing for the second respondent, has rightly pointed out, his client had many other grounds to urge before the Appellate Tribunal to establish his superiority, which have not been adverted to by the Appellate Tribunal because on one ground he succeeded.
It is only fair, therefore, that the case is remanded to the Appellate Tribunal for being heard de novo wherein both sides (no other applicant will be heard), will be entitled to urge their respective claims, for the single permit that is available to be awarded.
The only point that remains to be decided is as to what is to happen for bus operation during the period the Appeal is to be heard and the further proceedings which may follow.
We direct that the second respondent be allowed to ply the bus as he is doing it now until disposal of the appeal by the Appellate Tribunal.
It is represented by Mr. Ramamurthy, appearing for the Appellant, that his client had been plying the bus on the route on and earlier occasion till the High Court dismissed the Writ Petition.
If there had been any period when both operators had been plying their buses on the route during the course of this litigation, especially at the time the Writ Petition was pending in the High Court, it will be open to the Appellate Tribunal to allow thee Appellant before us (Applicant No. 6) also to ply his bus on the same route.
With these directions, we allow the Appeal and direct the Appellate Tribunal to dispose of the motor vehicles Appeal No. 542 of 1970.
Parties will bear their own costs throughout.
P.H.P. case remanded.
| IN-Abs | Many applicants for one permit for a short route pressed their claims before the Regional Transport Authority under the .
The Transport Authority evaluated the relevant merits and awarded the permit to the appellant.
The system of marks under the Rules framed under the Act by the Tamil Nadu Government, prescribes various qualifications for applicants for permits for passenger transport under the Act.
The rule emphasises that the paramount consideration of the interest of the public as enshrined in section 47(1) must be given full weight while awarding permits.
One of the rules provides that preference shall, other things being equal, be given in respect of the routes to persons who have not held any permit for stage carriage.
One of the considerations which must weigh with the authorities is the business of technical experience in the field of motor operation.
The appellant secured 4 marks as against 3.1 marks secured by respondent No. 1.
In addition, the appellant was entitled to a preference for being a new entrant since the route was a short one.
The Appellate Tribunal reversed the order of the Transport Authorities and granted the permit to respondent No. 2 and set aside the permit granted in favour of the appellant on the ground of public interest in the matter of passenger transport service and held that the appellant 's experience as lorry operator cannot be equated with respondent No. 2 's experience in Bus operation.
This view was taken by the Tribunal following section 47(1).
The appellant filed a Writ Petition in the High Court which was rejected.
On appeal by Special Leave, ^ HELD: (1) The rules or guidelines could not be discarded in the name of section 47(1).
The Rules made are really in implementation of section 47(1) but is not exhaustive of all the considerations that would prevail in a given situation.
The jurisdiction is given to the Tribunal to take note of other considerations in public interest flowing out of section 47(1).
The Rules, are, however, not to be discarded but they can be supplemented or outweighed.
In the name of public interest something opposed to the Rules cannot be done.
The Appellate Tribunal has actually contravened rule 155(3) which accords 2 marks for applicants who have a certain experience in road transport service.
Road Transport Service is defined by section 68A(a) and it makes no distinction between the type of transport vehicles in which experience has been gained whether it be of passenger transport or a lorry transport.
The distinction made between passenger transport and lorry service experience by the Tribunal is illegal.
A relevant factor has thus been wrongly excluded.
The order of the Appellate Tribunal is liable to be quashed on the well worn ground that material consideration if ignored makes the order vulnerable.
More over, there is an apparent mis construction of the relevant rule.
The respondent No. 1 stated that there were many other grounds which he could have urged before the Tribunal but which have not been adverted to by the Tribunal because he could have urged before the Tribunal but which have not been adverted to by the Tribunal because respondent No. 2 succeeded on one ground.
It is, therefore, fair that the case should be remanded to the Appellate Tribunal for being heard de novo.
[216 E H, 217A E] 215
|
Civil Appeal No. 852 of 1968.
Appeal by Special Leave from the Judgment and Order dated the 9th August, 1967 of the Punjab & Haryana High Court in L.P. A. No. 199/67.
Naunit Lal and R. N. Sachthey for the Appellants.
Madan Bhatia for Respondent.
The Judgment of the Court was delivered by GUPTA, J.
The respondent Jiwan Singh who is a displaced person from Pakistan was allotted 55.80 standard acres of land in village Neza Dali Kalan in Sirsa Tehsil of Hissar District in lieu of the land left by 211 him in Pakistan.
The second appellant, Collector Surplus Area, Sirsa, in determining the surplus area under the Punjab Security of Land Tenures Act, 1953 (hereinafter referred to as the Act) left only 100 ordinary acres with the respondent as his permissible area and declared the rest of the land measuring 78.57 ordinary acres, equivalent to 25.99 standard acres, as surplus.
Permissible Area as defined in sec.
2(3) of the Act is as follows: "Permissible area" in relation to a land owner or a tenant, means thirty standard acres and where such thirty standard acres on being converted into ordinary acres exceed sixty acres, such sixty acres: Provided that (i) no area under an orchard at the commencement of this Act, shall be taken into account in computing the permissible area: (ii) for a displaced person (a) who has been allotted land in excess of fifty standard acres, the permissible area shall be fifty standard acres or one hundred ordinary acres, as the case may be.
(b) who has been allotted land in excess of thirty standard acres, but less than fifty standard acres, the permissible area shall be equal to his allotted area.
(c) who has been allotted land less than thirty standard acres, the permissible area shall be thirty standard acres, including any other land or part thereof, if any, that he owns in addition.
" There is an explanation to this definition which is not relevant for the present purpose.
Surplus Area would be the area in excess of the permissible area.
According to the respondent the surplus area in his case cannot exceed 5.80 standard acres in view of the proviso (ii) (a) to sec.
2(3), and being aggrieved by the order of the Collector preferred an appeal to the Commissioner.
The Commissioner remanded the case to the Collector for a fresh determination of the respondent 's surplus area observing that in the case of a displaced person if the allotment was in standard acres, 50 standard acres would be the permissible area and if the allotment was in ordinary acres the permissible area would be 100 ordinary acres.
On remand the Collector upheld his own previous order and the appeal taken by the respondent from this order was dismissed by the Commissioner.
The respondent filed a revision petition before the Financial Commissioner, Punjab, who also upheld the order of the Collector and dismissed the petition.
The respondent thereafter filed a writ petition in Punjab and Haryana High Court which was allowed.
The learned Judge who heard the writ petition held following a full Bench decision of the same High Court, Khan Chand vs State of Punjab, (1) that it was "not legitimate for the authority to treat as surplus 212 area anything more than 5.80 standard acres of the petitioner 's land".
The Letters Patent appeal preferred against the decision of the learned single Judge by the State of Haryana and the Collector Surplus Area, Sirsa, was dismissed.
The correctness of the High Court 's decision is challenged before us in this appeal by special leave.
The case turns on the true meaning of proviso (ii) (a) to sec.
Counsel for the appellants submits that this provision means that the permissible area in the case of displaced persons who were allotted land in excess of 50 standard acres can be determined either in terms of standard acres or in terms of ordinary acres, as the authority concerned chooses.
Counsel contends that the words "as the case may be" refer to the discretion of the authority in this matter.
We do not find it possible to accept this contention.
There is no specific provision in the Act giving a discretion to the Collector or any other authority under the Act to determine the permissible area for a displaced person was in standard acres or in ordinary acres.
On a plain reading proviso (ii) (a) seems to indicate that where the land allotted to a displaced person was in standard acres and its area exceeded 50 standard acres, the permissible area would be 50 standard acres, and where the land was allotted not in standard acres the permissible area would be 100 ordinary acres.
The nature of the original allotment whether it was in standard acres or in ordinary acres seems to be the determining factor.
The Full Bench decision of the Punjab and Haryana High Court, Khan Chand vs State of Punjab (supra), on which the Judgment under appeal relies, reads proviso (ii) (a) to mean: "For a displaced person who has been allotted land in excess of 50 standard acres or in excess of 100 ordinary acres the permissible area shall be 50 standard acres or 100 ordinary acres, as the case may be.
" We agree that this is the correct meaning to be given to this provisions; it is only construed this way that the words "as the case may be" acquire a significance, otherwise they would be mere surplusage.
Clauses (b) and (c) of proviso (ii) lend assurance to this construction.
Clauses (b) deals with the case of a displaced person who has been allotted land in excess of thirty standard acres but less than fifty standard acres and provides that the permissible and in his case shall be equal to his allotted area.
Clause (c) fixes the permissible area for a displaced person who has been allotted land less than thirty standard acres providing that it shall be thirty standard acres including any other land or part thereof, if any, that he owns in addition.
Clauses (b) and (c) both deal with cases where the original allotment was in standard acres, and there is nothing in either of them sanctioning the conversion of the permissible area in standard acres into ordinary acres, though perhaps any other land which a displaced person whose case in covered by clause (c) might own in addition to the 30 standard acres allotted to him may be in ordinary acres requiring conversion of such land into standard acres to determine the permissible area in standard acres in his case as provided in clause (c).
But this does not mean that the permissible area in cases covered by clauses (b) and (c) can also be fixed 213 in ordinary acres.
Proviso (ii) to sec.
2(3) appears to group displaced persons into two categories, those who were allotted land in standard acres and those whose allotment was in ordinary acres.
Clause (a) deals with both these categories and limits the permissible area of those who were allotted land in standard acres at 50 standard acres and those who were allotted land in ordinary acres at 100 ordinary acres; clauses (b) and (c) deal only with those who were allotted land in standard acres.
Those whose allotment was in ordinary acres, their permissible area is fixed at 100 such acres, but those who were allotted land in standard acres, in their case the permissible area varies as provided in clauses (a), (b) and (c) though the measure in each case would be in standard acres.
This appears to be the scheme.
In defining "Permissible area" sec.
2(3) of the Act provides differently for land owners and tenants covered by the substantive part of the definition, and displaced persons mentioned in proviso (ii), and also makes a distinction between displaced persons inter se as provided in the different clauses of the proviso.
In the course of argument questions were raised about the logical basis for such differentiation, but the policy of the Act being clear we have to interpret the provision as we find it; if there is any anomaly in the policy itself, it is for the legislature to remove that defect.
In this case the land allotted to the respondent being admittedly 55.80 standard acres, the permissible area for him would be 50 standard acres under clause (a) and that being so, the High Court was right in holding that it was not legitimate for the authority to treat as surplus area anything more than 5.80 standard acres.
The appeal is accordingly dismissed but in the circumstances of the case without any order as to costs.
S.R. Appeal dismissed.
| IN-Abs | The respondent, a displaced person from Pakistan was allotted 55 80 Standard Acres of land in lieu of the land left by him in Pakistan.
While determining the surplus area, the appellant State interpreting the phrase "as the case may be" in proviso (ii)(a) to Section 2(3) of the Punjab Security of Land Tenures Act, 1953, left with the respondent 100 ordinary acres equivalent to 29.81 Standard Acres and treated 25.99 standard acres equivalent to 78.57 ordinary acres as surplus.
The respondent preferred an appeal contending that the surplus should be 5.80 standard acres on a true interpretation of the proviso, which failed.
The revision before the Financial Commissioner met with the same fate.
The contention of the respondent was upheld by the High Court while allowing the Writ Petition filed by him.
The Letters Patent Appeal filed by the State was dismissed.
On an appeal by special leave, the Court, while dismissing it, ^ HELD: (i) The contention that the words "as the case may be" in proviso (ii)(a) to section 2(3), gives a discretion to the authorities to determine the permissible area either in standard or in ordinary acres is not correct.
[212 B C] (ii) On a plain reading, proviso (ii)(a) indicates that where the land allotted to a displaced person was in standard acres and its area exceeded 50 standard acres, the permissible area would be 50 standard acres, and where the land was allotted not in standard acres, the permissible area would be 100 ordinary acres.
The nature of the original allotment whether it was in standard acres or in ordinary acres is the determinating factor.
[212 C D] (iii) The meaning given to proviso (ii)(a) by the Full Bench of the Punjab & Haryana High Court, in Khan Chand vs State of Punjab A.I.R. 1966 Punjab 423, is correct It is only construed this way that the words "as the case may be" acquire a significance, otherwise they would be mere surplusage.
[212 D E] Khan Chand vs State of Punjab, A.I.R. 1966 Punjab 423, approved.
|
ivil Appeals Nos.
518 to 530 of 1970.
Appeals by Special Leave from the Judgment and order dated the 21st May, 1969 of the Punjab and Haryana High Court in L.P.As.
Nos. 286, 327, 340, 368, 374, 375, 376, 377, 378, 379, 380, 502 and 511 of 1968.
O.P. Sharma (In all appeals) V. C. Mahajan (In C.A. 518) Kapil Sibal (In C.As. 529 530) and N. section Das Bahl (In C. A. 519 528 for the Appellants.
M. N. Phadke, Mrs. Archana Kumar, M. R. Agnihotri and P. C. Bhartari for Respondents in C.A. 526.
K. P. Bhandari (In CA 521) M. R. Agnihotri (In CA 522) K.J.John (in Cas.
524, 527 and 528), and P. C. Bhartari (In all appeals) for the Respondents.
section K. Mehta, K. R. Nagaraja, M. Qamaruddin, P. N. Puri and K. L. Mehta for Respondents (In CA. 530).
The Judgment of the Court was delivered by UNTWALIA, J.
In these 13 appeals by special leave the appellants are (1) the State of Punjab, (2) Union of India.
Respondent No. 1 in Civil Appeal No. 519 of 1970 and the sole respondent in each of the remaining 12 appeals are the concerned Government servants.
The said 13 Government servants alongwith two more filed 15 writ petitions to challenge order dated the October 28, 1966 made by the Government of the erstwhile undivided State of Punjab.
Their writ applications were allowed by a learned single Judge of the High Court of Punjab and Haryana at Chandigarh.
15 Letters Patent Appeals were filed by the appellants.
They have been dismissed by a 118 Division Bench of the High Court.
13 appeals have been brought to this Court and not the other two.
Since the Division Bench of High Court has disposed of all the 15 Letters Patent appeals by a common judgment, to avoid confusion in the statement of facts we think it better to state in a chart form the number of the Civil Appeal the corresponding number of the L.P.A. and the name of the Government servant concerned.
Civil Appeals of 1970 L. P. As of Names of the Govt.
servants 1968 518 . . . . 286 Balbir Singh 519 . . . 327 Bhagwan Singh 520 . . . 340 Surmukh Singh 521 . . .
368 Dasaundi Ram 522 . . . 374 Jagdish Singh 523 . . . 375 R. R. Bhanot 524 . . . 376 Surat Singh 525 . . . 377 Shamsher Singh 526 . . . 378 Bakhatawar Singh 527 . . . 379 Jodh Singh 528. . . .380
Kartar Singh 529. . . .502
Gurcharan Singh 530 . . . 511 Gurbux Singh nil . . . 289 Devdutta nil . . . 328 Sushil Kumar Khallar At the outset it may be stated that the respondent in Civil Appeal No. 521 Dasaundi Ram is dead and that appeal has abated on that account.
Bhagwan Singh, respondent in Civil Appeal No. 519 does not seem to be in service any longer and no body has appeared in this Court on his behalf.
Out of the remaining 11 respondents, we were informed at the Bar, that the 7 respondents in Civil Appeals 522 to 527 and 529 have since retired from service.
Only 4 of the respondents in Civil Appeals 518, 520, 528 and 530 are still in service.
Respondents Balbir Singh, Surmukh Singh, Dasaundi Ram, Jagdish Singh, Surat Singh, Kartar Singh and Gurbux Singh were promoted and appointed on officiating basis as Sub Divisional Officers in the Punjab Public Works Department (Buildings and Roads Branch) on various dates between 30 7 1960 to 10 5 1963.
Respondents R. R. Bhanot, Jodh Singh and Gurcharan Singh were so appointed between dates 17 12 1957 and 10 12 1959.
Respondents Shamsher Singh and Bhakhtawar Singh were promoted on 22 10 1956 and 1 3 1956 respectively.
Respondent Kartar Singh was working as planning Assistant cum Draftsman while the other respondents were Overseers before they were appointed as officiating Sub Divisional Officers.
By the impugned order dated October 28, 1966 the then Government of the erstwhile Punjab State reverted them to their original rank.
The orders of their reversion were challenged by the said respondents on the ground that they were governed by the Punjab Service of Engineers, Buildings and Roads Branch (Recruitment and Conditions of Service) Rules, 1942 (for brevity, the 1942 Rules).
They claimed that they 119 had become automatically confirmed as members of the service under the said Rules and could not be reverted without complying with the provisions of Article 311(2) of the Constitution of India and the other statutory Rules relating to disciplinary matters.
This was the only point which succeeded before the learned single Judge and he allowed all the writ applications, it appears, without fully appreciating, the distinction of facts of the various cases for the acceptance of this ground.
Respondent Bhagwan Singh was appointed as temporary Assistant Engineer on completion of his six months training period with effect from December 3, 1960.
His service was terminated by the then Punjab Government by order dated October 28, 1966 on the ground of his having been found unsuitable for appointment to P.S.E. Class II (B & R Branch).
Bhagwan Singh also relied upon 1942 Rules before the learned single Judge and succeeded.
The Division Bench has very carefully and elaborately considered the application of the 1942 Rules to the cases of the respondents.
It has disagreed with the single Judge 's view.
After copiously quoting from the 1942 Rules, the High Court in appeal has referred to the Punjab Service of Engineers Class I P.W.D. (Buildings and Roads Branch) Rules 1960 (for brevity, the 1960 Rules) regulating the recruitment and conditions of service of persons appointed to the P.S.E. Class I service.
The 1960 Rules came into force on and from March 18, 1960.
It had repealed the 1942 Rules by Rule 24 with a saving clause in the proviso appended thereto.
The High Court then referred to the Punjab Service of Engineers, Class II P.W.D. (Buildings and Roads Branch) Rules, 1965 (for brevity, Class II 1965 Rules).
The said Rules came into force from February 19, 1965.
The stand on behalf of the State of Punjab in the High Court was : (1) that the 1942 Rules did not govern the cases of the respondents as the said Rules applied to class I service consisting of Assistant Executive Engineers and officers of higher ranks only; (2) that the respondents had to be taken in P.S.E. Class II service in accordance with Rule 6(5) (b) of Class II 1965 Rules read with paragraph 1 (d) of Appendix 'G ' of the said Rules, in consultation with the Punjab Public Service Commission; (3) that since the Commission did not find them suitable for being admitted to that service, they were reverted to their substantive rank in accordance with the terms and conditions of their service and not by way of punishment.
The High Court made a comparative study of 1942 Rules, 1960 Rules and Class II 1965 Rules and came to the conclusion that the officiating Sub Divisional officers, as the respondents were, not being Assistant Executive Engineers, were not governed by the 1942 Rules.
None of them had claimed that he was holding the rank of Assistant Executive Engineer in any capacity.
The view of the learned single Judge that the Sub Divisional Engineers were included in the category of Assistant Executive Engineers did not find favour with the Bench.
The Bench further pointed out that the respondents should be divided into three categories: (a) those who were promoted subsequently to the 9 L1276SCI/75 120 repeal of the 1942 Rules, (b) those who were promoted with him three years preceding such repeal and (c) those who were promoted more than three years prior to such repeal.
The respondents promoted on dates between 30.7.1960 and 10.5.1963 fell within the first category.
Obviously they could not claim the protection on the basis of 1942 Rules.
The three respondents who were appointed as officiating Sub Divisional officers between 17 12 1957 and 10 12 1959 fell within the second category.
The High Court rightly held that they had not completed the maximum period of three years probation to acquire the substantive posts of Sub Divisional officers fixed under Rule 12(3) of 1942 Rules, even assuming that they could take advantage of the same.
Respondents Shamsher Singh and Bakhatawar Singh had been promoted in the year 1956 and fell within the third category.
The Division Bench pointed out that in their case the difficulty in the application of the 1942 Rules was that they were promoted in the erstwhile Patiala and East Punjab States Union.
It could not be shown that there were any statutory Rules governing their conditions of service and appointments as Sub Divisional Officers.
Since on the date of the impugned order dated 28.10.1966 they had put in more than 10 years of service as officiating Sub Divisional officers, their case was considered to be a hard one.
But for the purpose of the law they could not be given the advantage of the 1942 Rules and obviously so.
It is plain that the case of none of the respondents was covered by the 1942 Rules.
All the respondents had to be absorbed and admitted to P.S.E. Class II service in accordance with Class II 1965 Rules and that required the approval of the Public Service Commission.
Since Commission did not find them suitable, they had to be reverted to their substantive ranks.
On a consideration of a large number of authorities the High Court has rightly come to the conclusion that their reversion was not hit.
On account of the non compliance with the provisions of Article 311(2) of the Constitution or any Rules governing the disciplinary action.
The reversion was not by way of punishment.
This aspect of the matter is now squarely covered by the decision of this Court in Shamsher Singh & Anr.
vs State of Punjab(1) (vide page 837).
A few new points were urged on behalf of the respondents in the Letters Patent appeals.
They were not allowed to be raised except the one which eventually succeeded and the Letters Patent appeals were allowed on the basis of that point.
The decision of the High Court as respects the application of the 1942 Rules to the cases of the respondents and the order of reversion not being hit by the alleged non compliance with Article 311(2) of the Constitution could not be seriously challenged before us.
We agree with the view expressed by the Division Bench.
It is not necessary to repeat all that has been said by the High Court in that regard.
We now proceed to consider the only substantial question which falls for determination in these appeals.
(1) ; 121 The erstwhile State of Punjab was re organized by the , Central Act XXXI of 1966, hereinafter called he Act.
On the appointed day i.e. On 1 11 1966 the former State of Punjab ceased to exist and the successor States of Punjab, Haryana, Union Territory of Chandigarh and the Transferred Territory came into being.
All the respondents except respondent Bhagwan Singh came to be allocated to the new State of Punjab.
Bhagwan Singh was allocated to Haryana and then to Himachal Pradesh.
The High Court took the view that the impugned orders were communicated to the respondents concerned on or after 1.11.1966 and hence they "remained ineffective and still born by reason of their not having been communicated to the respondents before 1.11.1966.
" Though this point had been taken in the writ petitions, it does not seem to have been pressed before the learned single Judge.
The Division Bench treating it as a pure question of law allowed it to be raised in the Letters Patent appeals and ultimately dismissed the appeals by holding in favour of the appellants that since the impugned orders were communicated to them after coming into force of the new successor States they could not affect their status and position which they held on 1.11.1966.
The factual position in relation to the point at issue is like this.
The erstwhile State of Punjab was under the President 's Rule before its re organization.
The order in the name of the President of India .
authenticated by Secretary to Government of Punjab, P.W.D. B&R/ P.H. Branches recited "The President of India, in consultation with the Punjab Public Service Commission, does not consider the following officiating Sub Divisional officers of Punjab, P.W.D. B & R Branch, suitable for appointment to P.S.E. Class II (B & R Branch) and accordingly they are reverted as indicated below with immediate effect.
" The list contains the names of 20 officers including the 'names of 12 respondents other than respondent Bhagwan Singh.
An Issue Book was shown to us at the time of the hearing of these appeals by the State counsel indicating that the Government order aforesaid was forwarded to the Accountant General Punjab, Simla and to the Chief Engineer Punjab P.W.D. & R Branch, Patiala, for information and necessary action.
The Chief Engineer as it appears from the statement in the counters filed on behalf of the State communicated the order to the officers concerned as per his Memo No. 8E/47/Re org/11670 710 dated 30.10.1966.
The respondents, however, seem to have received the orders on or after 1.11.1966.
The question for consideration is whether the view of the High Court that the orders being administrative in nature were not laws within the meaning of the Act and hence were not saved by section 88 is correct and whether r ' they remained ineffective and inoperative because they not communicated to the respondents before 1.11.1966.
Under the Act certain territories were carved out from the appoint ed day from the then existing State of Punjab.
Under sections 3 and 4 were formed the State of Haryana and the Union Territory of Chandigarh.
The territories mentioned in section 5 were added to the then Union territory of Himachal Pradesh.
The balance was to 122 remain in the State of Punjab under section 6.
Sections 3 to 6 occur in Part II of the Act.
Part III deals with the representation in the Legislatures and allocation of sitting members etc.
Part IV concerns the making of the existing High Court as the common High Court for Punjab, Haryana and Chandigarh.
Part V is headed "Authorisation of Expenditure and Distribution of Revenue.
" Part VI deals with 'Apportionment of Assets and Liabilities.
" Part VII makes provisions as to certain Corporations.
Part VIII relates to Bhakra Nangal and Beas Projects.
We are concerned with some of the sections of Part IX headed Provisions as to services and Part X making Legal and miscellaneous provisions.
Section 81 in Part IX contains provisions relating to All India Services.
Section 82 (1) is important and reads as follows: "Every person who immediately before the appointed day is serving in connection with the affairs of the existing State of Punjab shall, on and from that day, provisionally continue to serve in connection with the affairs of the State of Punjab unless he is required, by general or special order of the Central Government, to serve provisionally in connection with the affairs of any other successor State." According to the provision aforesaid all the respondents provisionally continued to serve in connection with the affairs of the State of Punjab and eventually also all of them (except Bhagwan Singh) continued to serve with that State.
We shall now read section 83 on which great reliance was placed on behalf of the respondents: "Every person who immediately before the appointed day is holding or discharging the duties of any post or office in connection with the affairs of the existing State of Punjab ill any area which on that day falls within any of the successor States shall continue to hold the same post or office in that successor State and shall be deemed, on and from that day, to have been duly appointed to the post or office by the Government of, or other appropriate authority in, that successor State: Provided that nothing in this section shall be deemed to prevent a competent authority on or after the appointed day from passing in relation to such person any order affecting his continuance in such post or office.
" Section 88 occurring in Part X provides: "The provisions of Part II shall not be deemed to have effected any change in the territories to which any law in force immediately before the appointed day extends or applies, and territorial references in any such law to the State of Punjab shall, unless otherwise provided by a competent Legislature or other competent authority, be construed as meaning the territories within that State immediately before the appointed day.
" 123 Law is defined in clause (g) of section 2 of the Act to say: "law" includes any enactment, ordinance, regulation, order, bye law, rule, scheme, notification or other instrument having, immediately before the appointed day, the force of law in the Whole or in any part of the existing State of Punjab; We agree with the High Court that the impugned orders in question were not law within the meaning of section 2(g) and hence were, in terms, not saved by section 88.
We think the High Court is right when it says: "Section 88 appears to have been introduced as a matter of abundant caution.
In my opinion, mere splitting up of the territories of Punjab into four successor States would not ipso facto result in the abrogation or repeal of the laws which were immediately in force before the appointed day in those territories.
There is nothing in the 1966 Act, not l even in Section 88, which expressly or by necessary intendment repeals the law which were in force immediately be fore the appointed day in the territories of the former Punjab.
Those laws derived their force de hors the 1966 Act.
The first part of Section 88 is merely clarificatory of any doubts which might arise as a result of the reorganisation of Punjab, while the latter part of this section is merely an adaptative provision, to the effect, that the territorial references in any such law to the State of Punjab shall continue to mean the territories within that State immediately before the appointed day.
Thus, read as a whole Section 88 merly dispels doubts as to the continuity of the laws which .
were in force before the appointed day in the former State of Punjab, until the competent legislature or authority of the successor States effects any change in those laws.
" If this could be the position in the continuance of the law in the successor States, on what principles one can say that the administrative order made by the erstwhile State of Punjab automatically lapsed and came to an end on and from the appointed day on the coming into existence of the successor States.
Is it possible to take the view that the Legislature when it made so many provisions in the Act in its various parts in regard to the matters already referred to, did not think it appropriate to make a provision for the continuance of the effect of the administrative orders passed by the Government of the erstwhile State of Punjab until the Governments of the successor States modified or changed it ? or, is it? as a matter of law and propriety, reasonable to think that the Legislature did not consider it necessary at all to make such an express provision, as the continuance of the effect of such orders was to obvious even without such a provision ? In our Judgment when there is no change of sovereignty and it is merely an adjustment of territories by the reorganization of a particular State, The administrative orders made by the Government of the erstwhile 124 State continue to be in force and effective and binding on the successor States until and unless they are modified, changed or repudiated by the Governments of the successor States.
No other view is possible to be taken.
The other view will merely bring about chaos ill the administration of the new States.
We find no principle in support of the stand that administrative orders made by the Government r of the erstwhile State automatically lapsed and were rendered ineffective on the coming into existence of the new successor States.
On behalf of the respondents reliance was placed upon the decision of this Court in Rajvi Amar Singh vs The State of Rajasthan(1) and ' Rajkumar Narsingh Pratap Singh Deo vs State of Orissa and another(2) Bose, J. delivering the judgment of the Court in the former ease had: said at page 1018: "Now it is well established that when one State if absorb ed in another, whether by accession, conquest, merger or integration, all contracts of service between the prior Government and its servants automatically terminate and thereafter those who elect to serve in the new State and are taken on by it, serve on such terms and conditions as the new State may choose to impose.
This is nothing more, (though on a more exalted scale), than an application of the principle that underlines the law of Master and Servant when there is a change of masters." The said principle is not applicable to the case on hand as it is not a case of absorption of one State in another by accession, conquest merger or integration.
It would be chaotic in this principle were to be applied to the case of re organization of States in the same country.
In the case of Raj Kumar N. P. Singh Deo (supra) a question arose as to whether the sanad granted by the ruler of Dhenkanal who was an absolute monarch and which State after independence of India came to be merged in the State of Orissa was a purely executive act or a law within the meaning of Article 372 of the Constitutional.
This Court decided that this was purely an executive act.
The Orissa Government had discontinued the payment of the allowance under the sanad to the grantee.
The action was upheld on the ground that the executive act of the ruler of another sovereign State could not be binding on the Orissa Government and that Government had full authority to discontinue the payment of the allowance.
Indirectly the said decision of this Court supports the view which we have ex pressed above.
We are, therefore, of the opinion that the impugned orders passed by the Government of the erstwhile State of Punjab continued to be the orders of the Governments of the concerned successor States until and unless they were modified, changed or repudiated by them Nothing of the kind was done by the new State of Punjab; rather, by treating that order as valid and adopting it as its own, the new State of Punjab resisted the writ applications and pursued the matter in the Letters Patent appeals and up to this Court in these appeals.
(1) (2) ; ; 125 On the facts and in the circumstances of these cases we do not agree with the High Court that the communication of the orders was on or after 1 11 1966 when they were actually received by the officers concerned.
Following the ratio of the decision of a Bench of 4 Judges of this Court, in the case of State of Punjab vs Khemi Ram(1) we hold that the orders were communicated either on 29 10 1966 or surely on 30 10 1966.
The earlier decisions of this Court have been considered by Shelat, J. in the decision aforesaid.
In Bachillar Singh vs The State of Punjab(2) no formal order of the Government had even been drawn up, much less communicated, and, therefore, it was held that it was neither an order of the Government nor was the order communicated.
What is the meaning of communication of the order in a given case did not fall for decision before this Court in the case of Bachittar Singh.
In the case of State of Punjab vs Amar Singh Harika(3) the order of dismissal passed on 3rd June, 1949 was actually communicated to the officer concerned on 2/3rd January, 1953.
But before the said date the said officer had come to know on 28th May 1951 about the dismissal order.
This date was taken to be the date of communication.
Shelat, J. has considered the earlier cases of this Court including the one in S '.
Pratap Singh vs The State of Punjab(4) a paragraph 16 of the judgment the law laid down is: "lt will be seen that in all the decisions cited before us it was the communication of the impugned order which was held to be essential and not its actual receipt by the officer concerned and such communication was held to be necessary because till the order is issued and actually sent out to the person concerned the authority making such order would be in a position to change its mind and modify it if it thought fit.
But once such an order is sent out, it goes out of the control of such an authority, and therefore there would be no chance whatsoever of its changing its mind or modifying it.
In our view, once an order is issued and it is sent out to the concerned government servant, it must be held to have been communicated to him, no matter when he actually received it." Applying the principle of law aforesaid we find in this case that the orders went out of the control of the authority which had passed that order on 29 10 1966 when copies of the orders were forwarded to the Accountant General and the Chief Engineer.
In any event, we think that the orders were despatched from the office of the Chief Engineer on 3 10 1966.
It is one thing to say that in the case of dismissal or the like the order becomes effective only after it is received by the officer concerned and a different thing to say that an order has no effect at all before it is communicated in the sense of receipt of the order by the concerned officer.
In the sense we have said above the (1) A. I. R. (2) [1962] 3 Suppl.
section C. R. 713.
(3) A. I. R. (4) ; 126 orders were communicated to all the respondents before 1 11 1966.
They became effective as soon as they were sent out.
And for the purposes of section 83 of the Act the respondents must be deemed to be holding the posts to which they were reverted on 1 11 1966.
Reliance was placed on behalf of the respondents upon the decision of a learned single Judge of the Punjab & Haryana High Court in the case of Shil Saran Dass Sood vs The State of Punjab and others(1) wherein it was held that there is no provision in the Act where under the proceedings for disciplinary action against a public servant, who is allotted to a State other than one in which the proceedings are pending, could be continued by the Inquiry officer already appointed nor could such Inquiry officer submit his report to the corresponding authority in the State to which the public servant is allocated.
We wish to point out that the proposition of law enunciated in such a bald manner is not correct.
The Inquiry officer may not be competent to continue the enquiry and submit the report for different reasons.
But it is not correct to say that: "the Inquiry officer appointed by the Commissioner, Ambala Division, prior to the re organisation of the State, cannot be taken to be the Inquiry officer appointed by the Commissioner, Jullundur Division, after November 1, 1966 as there is no provision in the where under the proceedings for disciplinary action against a public servant, who is allocated to a State other than the one in which the proceedings are pending, could be continued by the Inquiry officer already appointed nor could such Inquiry officer submit his report to the corresponding authority in the State to which the public servant is allocated.
" Shorn of the complications of other facts if the Inquiry officer was appointed by the Commissioner of a Division which was a part of the undivided State and on reorganisation becomes a part of the new State, the disciplinary proceeding started earlier can undoubtedly be continued and concluded without a fresh order of starting a disciplinary proceeding.
We therefore, hold that the view taken by the High Court that the orders were still born and ineffective because They were received by the respondents on or after 1 11 1966 is not correct.
After careful consideration we have arrived at the conclusion that.
the impugned orders of reversion dated October 28, 1966 were valid.
About 9 years have passed since then and some complications have arisen during this period.
Admittedly, after the High Court judgment all the respondents were officiating in the higher posts.
At the time of the hearing of these appeals, we were given to understand at the Bar that none of the respondents was reverted pursuant to the impugned order We asked the parties to ascertain the correct position and file their statements.
On behalf of the Government we have been inform (1) 72 Punjab Law Reporter 950. 127 ed that they will not claim any refund of the salaries paid to the respondents for the period they have worked as officiating Sub Divisional officers in the Department.
But they claimed that the respondents were not working as such after the reversion order and before the High Court Judgment and hence they are entitled to get back the difference.
Of salary paid to the respondents for the period they have not worked as Sub Divisional officers and had worked only as overseers and Draftsmen in their substantive posts.
The difference of salary for the intervening period between the order of reversion and the High Court Judgment was paid to them subject to the furnishing of the bank guarantee.
On the other hand, it is claimed on behalf of the respondents that even during those periods they were working as S.D.O. or had gone on leave while continuing in such posts.
In the circumstances justice requires that the Government should not claim any refund of any part of the salary paid to the respondents until today.
Partly in view of their understanding and partly because of the requirement of justice, we direct the Government not to do so.
The final result of the appeals is as follows: Civil Appeal No. 521/1970 is dismissed as abated on account of the death of the respondent.
The respondent of Civil Appeal No 519, it is admitted on all hands, is no longer in service.
This appeal is, therefore, dismissed as infructuous.
The remaining 11 appeals are allowed, the judgments and orders of the High Court both of the single Judge and the Division Bench are set aside.
But this is subject to the directions given above in regard to the salary paid to the respondents so far.
There will be no order as to costs in any of the appeals.
| IN-Abs | The respondents in the above 13 appeals by Special leave alongwith 2 others filed 15 Writ Petitions in the High Court of Punjab and Haryana challenging.
the order dated 28 10 1966 made by the Government of the erstwhile undivided State of Punjab reverting the respondents to their substantive ranks.
The respondents were promoted and appointed as S.D.Os.
on officiating basis in the Punjab Public Works Department on the various dates between the 1st March, 1956 and 10th May, 1963.
The erstwhile State of Punjab was reorganised by the .
On 1st November, 1966 the former State of Punjab ceased to exist and the successor States of Punjab, Haryana, Union territory of Chandigarh and the transferred territory came into being.
According to section 82 of the every person who immediately before the appointed day was serving in connection with the affairs of the existing State of Punjab would on and from that day provisionally continue to serve in connection with the affairs of the State of Punjab unless he is required by general or special order of the Central Government to serve provisionally in connection with the affairs of any other successor State.
Section 83 provides that every person who immediately before the appointed day is holding or discharging the duties of any post or office in connection with the affairs of the existing State of Punjab in any area which on that day falls within any of the successor State shall continue to hold the same post or office in that successor State and shall be deemed on and from that day to have been duly appointed to the post or office by the Government or other appropriate authority in the successor State.
Sec 88 provides that the law applicable in the territory will continue to apply after reorganisation unless otherwise provided by a competent legislature.
Section 2(g) of the Act defines law as including any enactment, ordinance, regulation, order, by law, rule, scheme, notification or other instrument, having the force of law.
The impugned orders of reversion were communicated to the respondents after 1st November, 1966.
The orders were passed by the Government in consultation with the Punjab Public Service Commission before 1st November, 1966.
The Chief Engineer sent the said orders on 30 10 1966.
The orders were however received after 1st November, 1966.
Before the learned Single Judge of the High Court.
the respondents contended that they were governed by the Punjab Service of Engineers, Buildings and Roads Branch (Recruitment and Conditions of Service) Rules 1942, under which they became automatically confirmed as members of the service and could not be reverted without complying with the provisions of Article 311 of the Constitution.
The learned Single Judge allowed the Writ Petitions on that ground.
On an appeal before the Divisional Bench by the appellants, the Division Bench divided the respondents into three categories.
(1) those who were promoted after 1942 Rules were repealed: (2) those who were promoted within 3 years preceding the repeal of ]942 Rules: and (3) those who were 116 promoted more than three years prior to such repeal.
In the case of first category, the High Court held that the 1942 Rules did not apply.
In the case of the second category the Division Bench held that they were not entitled to get the benefits of 1942 Rules since they had not completed the period of 3 years probation to acquire the substantive post in accordance with the 1942 Rules.
Regarding those respondents who fell in the third category, the Division Bench held that they were promoted in the erstwhile Patiala and East Punjab States where the similar rules did not exist and could not be given the advantage of 1942 Rules.
The Division Bench held that Punjab Service of Engineers Class II 1965 Rules were applicable and therefore before the respondents could be absorbed and admitted to Class II service approval of the Public Service Commission was required.
In the present case, since the Commission did not find them suitable they had to he reverted to their substantive ranks.
On a consideration of large number of authorities the Division Bench came to the conclusion that the reversion of the respondents was not hit by article 311(2) of the Constitution since the reversion was not by way of punishment.
The Division Bench, however, held that the impugned orders were communicated to the respondents after 1 11 1966 and hence they remained ineffective and still born by reason of their not having been communicated to the respondents before 1st November, 1966.
The Division Bench, therefore, dismissed the appeals filed by the appellants.
In appeals by Special leave, the appellants contended that the decision of the Division Bench that the orders of reversion remained ineffective and still born was erroneous.
^ HELD: 1.
The Division Bench rightly held that the orders of reversion were not hit by article 311(2) of the Constitution.
This aspect of the matter is now clearly covered by the decision of this Court in the case of Shamsher Singh vs The State of Punjab ; This part of the judgment of the Division Bench was not seriously disputed.
[120 E F] 2.
The impugned orders were not law within the meaning of section 2 (g) and were, therefore not saved by section 88.
S.88 was introduced as a matter of abundant caution.
The law which was in force before the appointed day in the former State of Punjab were bound to continue until competent Legislature or authority of the successor States effect any change in those laws.
If this could be the position in the continuance of the law in the successor States on what principles one can say that the administrative orders made by the erstwhile State of Punjab automatically lapsed and came to an end on and from the appointed day on the coming into existence of the successor States.
When there is no change of sovereignty and it is merely an adjustment of territories by the reorganisation of a particular State, the administrative orders made by the Government of the erstwhile State continue to be in force and effective and binding on the successor States until and unless they are modified changed or repudiated by the Governments of the successor States.
No other view is possible to be taken.
The other view will merely bring about chaos in the administration of the new States.
The principles laid down by this Court in following cases: (1) Rajvi Amar Singh v The State of Rajasthan and (2) Rajkumar Narsingh Pratap Singh Deo v State of Orissa and Another ; are not applicable to the present case as this is not a case of absorption of one State in another by succession, conquest, merger or integration.
It would be chaotic if these principles were to be applied to the case of reorganization of States in the same country.
[123H, 124A D] 4.
On the facts and circumstances of this case the successor State far from repudiating or modifying the orders of reversion adopted those orders as their own.
The High Court was wrong in holding that the orders were communicated on or after 1st November, 1966 when they were actually received by the 117 officers concerned.
Following the judgment of this Court in the case of State of Punjab vs Khemi Ram, A.I.R. 1970 S.C. 214, it was held that the orders were communicated either on 29 10 1966 or surely on 30 10 1966.
The judgment of this Court in the case of Bachiter Singh vs The State of Punjab, ; , distinguished.
[125A C] 5.
It is one thing to say that in the case of dismissal or the like the order becomes effective only after it is received by the officer concerned and a different thing to say that an order has no effect at all before it is communicated in the sense of receipt of the order by the officer concerned.
The orders in the present case became effective as soon as they were sent out and for the purpose of section 83 of the Act the respondents must be deemed to be holding the posts to which they were reverted on 1st November, 1966.
[125 G H 126A] 6 .
About 9 years have passed after the impugned orders of reversion were passed.
After the High Court judgement, all the respondents were officiating in the higher posts.
After the reversion orders were passed and before the High Court judgment was delivered the respondents were not working in the higher posts.
The appellant, therefore, claimed the difference of salary paid to the respondents during this period when they were not working as S.D.Os.
The respondents contended that even during this period they were either working as S.D.Os or had gone on leave while continuing in such posts.
In the circumstances justice requires that the Government should not claim any refund of any part of the salary paid to the respondents up to date.
[126G H, 127A C]
|
N: Criminal Appeal No. 277 of 1974.
Appeal by Special Leave from the Judgment and order dated the 22nd February, 1974 of the Allahabad High Court Lucknow Bench in Criminal Appeal No. 498 of 1973 and Capital Sentence No. 13 of 1973.
A. N. Mulla and N. section Das Behal for the appellant.
O. P. Rana for the respondent.
The Judgment of the Court was delivered by BHAGWATI, J.
This appeal, by special leave, is limited only to the question of sentence.
The appellant has been sentenced to death for an offence under section 302 of the Penal Code.
The question is: Should the extreme penalty of death be commuted to one of life imprisonment? To answer the question it is necessary to state a few facts.
The appellant and a few others were tried in the Court of the Sessions Judge, Unnao for offences under section 148 and section 302 read with section 149 of the Indian Penal Code.
The learned Sessions Judge, on an appreciation of the evidence, found that the appellant, Sheo Dayal, Mihi Lal, Dularey and Mewa Lal had formed an unlawful assembly and in pursuance of its common object, the appellant had intentionally caused the death of one Ram Kumar by by inflicting on him a severe injury with a bank severing his head from the body and then carried away the head in an angaucha in a most brutal and inhuman fashion.
On this finding, the learned Sessions Judge convicted the appellant, Sheo Dayal, Mihi Lal, Dularey and Mewa Lal of offences under section 148 and section 302 read with section 149 and sentenced each of them to rigorous imprisonment for one fear for the former offence and to death for the latter.
The appellant, Sheo Dayal, Mihi Lal, Dularey and Mewa Lal preferred an appeal to the High Court against the order of conviction and sentence recorded against them and their case was also referred to the High Court for confirmation of the death sentence.
The High Court agreed with the findings reached by the learned Sessions Judge and confirmed the conviction of Sheo Dayal, Mini Lal, Dularey and Mewa Lal under section 148 and section 302 read with section 149, but reduced their sentence to one of life imprisonment for the offence under section 302 read with section 149 and so far as the appellant was concerned, the conviction was converted to one under section 302 and the sentence of death was maintained.
The appellant thereupon preferred an application for special leave and on that application, special leave was granted by this Court limited only to the question of sentence.
Now, there can be no doubt that the crime committed by the appellant was a most reprehensible and heinous crime which dis 276 closed brutality and callousness to human life and no extenuating circumstances could be pointed out on behalf of the appellant which would assuage the conscience of the Court and persuade it not to inflict the extreme penalty of death on the appellant.
The only circumstance on which reliance could be placed on behalf of the appellant for mitigating the rigour of the punishment to be inflicted on him was his tender age at the time of the commission of the offence.
The record of the case shows that the appellant was about sixteen years of age at the time when he committed this brutal crime.
The question is : whether this could be regarded as a valid circumstance for invoking the clemency of penal justice? The legislative history in regard to the subject of capital punishment shows that there has been significant change in thinking and approach since India became free.
Prior to the amendment of section 367(5) of the Code of Criminal Procedure by Act 26 of 1955, the normal rule was to impose sentence of death on a person convicted for murder and, if a lesser sentence was to be imposed, the Court was required to record reasons in writing.
But by Act 26 of 1955 this provision in section 367(5) was omitted, with the result that the Court became free to award either death sentence or life imprisonment and no longer was death sentence the rule and life imprisonment the exception.
Then again a further progress was made in the same direction by section 354(3) of the Criminal Procedure Code, 1973.
That section provides that when the conviction is for an offence punishable with death or, in the alternative, with imprisonment for life or imprisonment for a term of years, the judgment shall state the reasons for the sentence awarded, and, in the case of sentence or death, the special reasons for such sentence.
It will be seen that the unmistakable shift in the legislative emphasis is that for murder, life imprisonment should be the rule and capital punishment the exception to be resorted to only for special reasons.
It is only where, in view of the peculiar facts and circumstances, there are special reasons that death sentence may be awarded : otherwise life sentence should be the ordinary rule.
This legislative provision in the new Code of Criminal Procedure clearly shows, as pointed out by Krishna Iyer, J., in E. Anamma vs State of Andhra Pradesh(1), "that the disturbed conscience of the State on the vexed question of legal threat to life by way of death sentence has sought to express itself legislatively, the stream of tendency being towards cautious, partial abolition and a retreat from total retention.
" The seminal trends in current sociological thinking and penal strategy, tampered as they are by humanistic attitude and deep concern for the worth of the human person frown upon death penalty and regard it as cruel and savage punishment to be inflicted only in exceptional cases.
It is against this background of legislative thinking which reflects the social mood and realities and the direction of the penal and processual laws that we have to consider whether the tender age of an accused is a factor contraindicative of death penalty.
277 The Law Commission, in the 35th Report made by it on capital punishment fully considered whether the Indian Penal Code should specify the minimum age of the offender who can be sentenced to death, and after examining the position under the Children 's Acts of various States it expressed the following opinion : "We feel that, having regard to the need for uniformity, to the views expressed on the subject, and to the consideration that a person under 18 can be regarded as intellectually immature, there is a fairly strong case for adopting the age of 18 as the minimum for death sentence.
we are aware that cases will occasionally arise where a person under 18 is found guilty of a reprehensible killing, or, conversely, a person above 18 is found to be immature and not deserving of the highest punishment.
A line has, however, to be drawn somewhere and we think that 18 can be adopted without undue risk.
We, therefore recommend that a person who is under the age of 18 years at the time of the commission of the offence should not be sentenced to death.
A provision to that effect can be conveniently inserted in the Indian Penal Code as section 558.
" The Law Commission in its 42nd Report on the Indian Penal Code agreed with this recommendation of the previous Law Commission vide paragraph 3.34 of the 42nd Report of the Law Commission.
The Central Government appears to have accepted this recommendation and a provision to that effect is to be found in the Indian Penal Code (Amendment) Bill, 1972.
This being the current sociological and juristic thinking on the subject, it would be legitimate for the Court to refuse to impose death sentence on an accused convicted of murder if it finds that at the time of commission of the offence he was under 18 years of age.
Krishna Iyer, J., also pointed out in E. Anamma vs State of Andhra Pradesh (supra) that "where the murderer is too young the elemency of penal justice helps him", and a murderer who is below 18 years age at the time of the commission of the offence would certainly be "too young".
The appellant in the present case was, as pointed out above, just around 16 years of age at the time when he committed the offence and, therefore, in the light of the above discussion he would be entitled to the elemency of penal justice and it would not be appropriate to impose the extreme penalty of death on him.
We accordingly commute the sentence of death imposed on the appellant and convert it to one of life imprisonment.
P.B.R. Appeal allowed and sentence reduced.
| IN-Abs | The legislative history in regard to the subject of capital punishment shows that there has been a significant change in thinking and approach Since India became free.
Prior to the amendment of section 367(5) of the Code of Criminal Procedure by Act 26 of 1955, the normal rule was to impose sentence of death on a person convicted for murder and if a lesser sentence was to be imposed, the Court was required to record reasons in writing.
But by Act 26 of 1955, this provision in section 367(5) was omitted with the result that the Court became free to award either death sentence or life imprisonment, and no longer was death sentence the rule and life imprisonment the exception.
Then again a further progress was made in the same direction by section 354(3) of the Criminal Procedure Code, 1973.
That section provides that when the conviction is for an offence punishable with death or in the alternative with imprisonment for life or imprisonment for a term of years, the judgment shall state the reasons for the sentence awarded and, in the case of sentence of death, the special reasons for such sentence.
The unmistakable shift in the legislative emphasis is that for murder, life imprisonment should be the rule and capital punishment the exception to be resorted to only for special reasons.
It is only where, in view of the peculiar facts and circumstances, there are special reasons that the death sentence may be awarded: otherwise life sentence offence would certinly be "too young." [277G; E, F] The seminal trends in current sociological thinking and penal strategy tempered as they are by humanistic attitude and deep concern for the worth of the human person, frown upon death penalty and regard it as cruel and savage punishment to be inflicted only in exceptional cases.
[276G] In the instant case the appellant was charged with an offence of murder by severing the head of the deceased from the body and then carrying it away in a most brutal and inhuman manner.
The trial court convicted and sentenced him to death.
Both the conviction and sentence were upheld by the High Court.
On the question of sentence, Allowing the appeal to this Court, ^ HELD: The appellant was just around 16 years of age at the time when he committed the offence and, therefore, he would be entitled to the clemency of penal justice.
It would not be appropriate to impose the extreme penalty of death.
Taking into account the current sociological and juristic thinking as could be seen from the recommendation of the Law Commission which appears to have been incorporated in the Indian Penal Code (Amendment) Bill 1972, it would be legitimate for the Court to refuse to impose death sentence on an accused convicted of murder, if it finds that at the time of the commission of the offence the appellant was under 18 years of age.
A murderer who is below 18 years of age at the time of commission of the offence would certainly be "too young." [277G; E, F] E. Anamma vs State of Andhra Pradesh, A.I.R. 1974 S.C. 799, followed.
|
N: Petitions for Special leave to appeal (Crl) Nos.
918 919 of 1975.
From the Judgment and Order dated the 30th May, 1975 of the High Court at New Delhi in Criminal Appeal No. 140 of 1971.
Frank Anthony and K. C. Dua, for the petitioner (In S.L.P. 918/75) C. L. Sahu, for the petitioner (In S.L.P. 919/75) B. P. Maheshwari and Suresh Sethi, for respondent (In both the petitions) The Judgment of the Court was delivered by BHAGWATI, J.
There are two special leave petitions which are being disposed of by us by judgment after hearing both sides.
There 261 is only one question of law which arises for determination and since it lies in a very narrow compass and is concluded against the petitioner by the language of the new statutory enactment in section 29(2) of the , we thought that it would be a futile exercise to grant special leave and then hear the appeals and hence we decided to hear these two special leave petitions after issuing notice to the respondents so that the question of law arising for consideration can be finally determined by a pronouncement of this Court.
The petitioner in Special Leave Petition No. 918 of 1975, hereinafter referred to as Mangu Ram, was at all material times a partner in the firm of M/s Ram Pershad Gondamal, which is the petitioner in Special Leave Petition No. 919 of 1975.
The firm of M/s Ram Pershad Gondamal owned a shop in Kharibaoli, Delhi where it sold inter alia Phool Gulab.
On 8th August, 1969, the Food Inspector of the Municipal Corporation of Delhi purchased two samples of Phool Gulab from the shop of the firm of M/s Ram Pershad Gondamal for analysis after complying with the procedure prescribed by law and each sample was divided into three parts, out of which one part was sent to the Public Analyst for analysis, the other was retained by the Food Inspector and the third was handed over to Mangu Ram who sold the samples on behalf of the firm of M/s Ram Pershad Gondamal.
The first sample was marked O. P. K. 169 and the second was marked O. P. K. 170.
It was found from the report of the analysis made by the By the Public Analyst that both samples O. P. K. 169 and O. P. K. 170 were adulterated and hence the Municipal Corporation Delhi filed two complaints, one in respect of each sample, against Mangu Ram and the firm of M/s Ram Pershad Gondamal in the Court of the Judicial Magistrate, 1st Class Delhi for an offence under section 7 read with section 15 of the .
These two complaints were consolidated and tried together by the learned Judicial Magistrate.
During the course of the trial, on an application made by Mangu Ram and the firm of M/s Ram Pershad Gondamal, one part of each of the two samples lying with them was sent by the learned Judicial Magistrate to the Director, Central Food Laboratory for analysis as required by section 13, sub section
(2) of the Act.
The Director Central Food Laboratory, analysed the two samples sent to him, and issued a certificate in respect of each of them showing the result of the analysis.
The certificate in respect of sample O. P. K. 169 showed the presence of Tartrazine Indigo Carmine which was then a non permitted Coal Tar dye, but subsequently permitted by reason of amendment of rule 29 of the Prevention of Food Adulteration Rules 1955, while the certificate in respect of sample O. P. K. 170 revealed the presence of Rhodamine B, which was at all times a non permitted coal tar dye.
The learned Judicial Magistrate, in view of those certificates of the Director, Central Food Laboratory, came to the conclusion that both the samples sold by Mangu Ram on behalf of the firm of M/s Ram Pershad Gondamal were adulterated, but since Phool Gulab of these two samples was purchased by the firm of M/s Ram Pershad Gondamal from M/s Venkateshwara & Co, which was a large manufacturing concern and hence presumably a licensed manufacturer, the learned Judicial Magistrates held that Mangu Ram and the firm of 262 M/s Ram Pershad Gondamal were entitled to the benefit of section 19, sub section
(2) of the Act and accordingly acquitted them by an order dated 18th March, 1971.
The Municipal Corporation of Delhi, being aggrieved by the order of acquittal, made an application to the High Court of Delhi under section 417, sub section
(3) of the Code of Criminal Procedure, 1898 for special leave to appeal from the order of acquittal.
Sub section
(4) of section 417 required that the application for special leave should be made before the expiry of sixty days from the date of the order of acquittal and, therefore, after excluding the time taken in obtaining certified copy of the order of acquittal, the application for special leave should have been filed on 25th August, 1971, but it came to be filed two days late, namely, on 27th August, 1971.
The Municipal Corporation of Delhi therefore, made an application for condonation of delay by invoking section 5 of the and pleaded that there was sufficient cause which prevented it from making the application for special leave within time.
The High Court, by an order dated 3rd November, 1971, condoned the delay as there was in its opinion sufficient cause for not making the application for special leave within the time prescribed by sub section
(4) of section 417 and, taking the view that this was a fit case which deserved the exercise of discretion under sub section
(3) of section 417, the High Court granted special leave to the Municipal Corporation of Delhi to appeal against the order of acquittal.
The appeal was thereafter heard by a Division Bench of the High Court.
The High Court took the view that there was no evidence on record to show that M/s Venkateshwara & Co. from whom Phool Gulab was purchased by the firm of M/s Ram Pershad Gondamal was a licensed manufacturer, nor was there any written warranty in the prescribed form obtained by the firm of M/s Ram Pershad Gondamal from M/s Venkateshwara & Co. and hence the defence under section 19 sub section
(2) was not available to Mangu Ram and the firm of M/s Ram Pershad Gondamal.
Since the certificates issued by the Director, Central Food Laboratory showed unmistakably the presence of non permitted coal tar dye in both the samples, there was no doubt, said the High Court, that the two samples were adulterated and in this view the High Court set aside the acquittal of Mangu Ram and the firm of M/s Ram Pershad Gondamal and convicted them of the offence under section 7 read with section 16 of the Act for selling adulterated samples of Phool Gulab to the Food Inspector.
The sentence imposed for the offence in respect of sample O. P. K. 169 was only a sentence of fine since coal tar dye found in that sample subsequently came to be permitted by the amendment of Rule 29, but so far as the offence in respect of sample O. P. K. 170 was concerned, Mangu Ram was sentenced to suffer six months rigorous imprisonment and to pay a fine of Rs. 1,000/ or in default to suffer rigorous imprisonment for a further period of three months, while the firm of M/s Ram Pershad Gondamal was sentenced to pay a fine of Rs. 1000/ .
Mangu Ram and the firm of M/s Ram Pershed Gondamal thereupon filed the present petitions for special leave to appeal against the order of conviction and sentence passed against them.
263 There was nothing that could be said on behalf of Mangu Ram and the firm of M/s Ram Pershad Gondamal on the merits of the conviction and sentence since the certificates of the Director, Central Food Laboratory clearly showed the presence of non permitted coal tar dye in both the samples and it was impossible to contend that the two samples were not adulterated.
The only argument which could be advanced on their behalf was and that was the only argument pressed before us that the time limit of sixty days prescribed in sub section
(4) of section 417 for the making of an application for special leave under sub section
(3) of that section was a mandatory and inexorable time limit which could not be relieved against or relaxed and it excluded the applicability of section 5 of the .
It was urged that having regard to the clear and specific language of sub section
(4) of section 417 which left no scope for doubt or ambiguity, the High Court was statutorily obliged to reject an application for special leave made after the expiry of sixty days from the date of the order of acquittal and it had no jurisdiction to extend this time limit of sixty days by resort to section 5 of the .
This contention was sought to be supported before by reference to a decision of this Court in Kaushalya Rani 's vs Gopal Singh(1), Now, prima facie, it might seem at first blush that the decision in Kaushalya Rani 's case(1) is directly applicable in the present case and clinches the decision of the issue in favour of Mangu Ram and the firm of M/s Ram Pershad Gondamal.
But a closer scrutiny will reveal that it is not so.
The decision in Kaushalya Rani 's case (1) is clearly distinguishable from the present case.
The question which arose for consideration in Kaushalya Rani 's case(1) was apparently the same as in the present case, namely, whether the time limit of sixty days prescribed in sub section
(4) of section 417 for making an application for special leave under sub section
(3) of that .
section could be extended by invoking section 5 of the Indian Limitation Act, 1908.
This Court held that sub section
(4) of section 417 laid down a special period of limitation for an application by a complainant for special leave to appeal against an order of acquittal and "in that sense, this rule of sixty days bar is a special law, that is to say, a rule of limitation which is specially provided for in the Code itself which does not ordinarily provide for a period of limitation for appeals or applications.
This Court pointed out that since "the special rule of limitations laid down in sub section
(4) of section 417 of the Code is a special law of limitation governing appeals by private prosecutors, there is no difficulty in coming to the conclusion that section 5 of the Limitation Act is wholly out of the way, in view of section 29(2) (b) of the Limitation Act.
" The applicability of section 5 of the Indian Limitation Act, 1908 was the held to be excluded in determining the period of limitation of sixty days prescribed in sub section
(4) of section 417 by reason of section 29(2)(b) of that Act which provided in so many terms that "for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the remaining provisions of this Act" that is sections other than sections 4, 9 to 18 and 22 "shall not apply." Now, there can be no doubt that if the present case were 264 governed by the Indian Limitation Act, 1908, this decision would wholly apply and the Municipal Corporation of Delhi would not be entitled to invoke the aid of section 5 of that Act for the purpose of extending the period of limitation of sixty days prescribed in sub section
(4) of section 417 for an application by a complainant for special leave to appeal against an order of acquittal.
But the Indian Limitation Act, 1908 has clearly no application in the present case, since that Act is repealed by the which came into force with effect from 1st January, 1964 and the present case must, therefore, be decided by reference to the provisions of the .
There is an important departure made by the in so far as the provision contained in section 29, sub section
(2) is concerned Whereas under the Indian.
Limitation Act, 1908 section 29, sub section
(2),cl.
(b) provided that for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law the provisions of the Indian Limitation Act, 1908, other than these contained in sections 4, 9 to 18 and 22, shall not apply and, therefore, the applicability of section 5 was in clear and specific terms excluded, section 29, sub section
(2) of the enacts in so many terms that for the purpose of determining the period of limitation prescribed for any suit, appeal or application by any special or local law the provisions contained in sections 4 to 24, which would include section 5, shall apply in so far as and to the extent to which they are not expressly excluded by such special or local law.
Section 29, sub section
(2), cl.
(b) of the Indian Limitation Act.
1908 specifically excluded the applicability of section 5, while section 29, sub section
(2) of the in clear and unambiguous terms provides for the applicability of section 5 and the ratio of the decision in Kaushalya Rani 's case(1) can, therefore, have no application in cases governed by the , since that decision proceeded on the hypothesis that the applicability of section 5 was excluded by reason of section 29(2) (b) of the Indian Limitation Act, 1908.
Since under the section 5 is specifically made applicable by section 29.
sub section
(2), it can be availed of for the purpose of extending the period of limitation prescribed by a special or local law if the applicant can show that he had sufficient cause for not presenting the application within the period of limitation.
It is only if the special or local law expressly excludes the applicability of section 5, that it would stand displaced.
There, as pointed out by this Court in Kaushalya Rani 's case(1) the time limit of sixty days laid down in sub section
(4) of section 417 is a special law of limitation and we do not find anything in this special law which expressly excludes the applicability of section 5.
It is true that the language of sub section (4) of section 417 is mandatory and compulsive, in that it provides in no uncertain terms that no application for grant of special leave to appeal from an order of acquittal shall be entertained by the High Court after the expiry of sixty days from the date of that order of acquittal.
But that would be the language of every provision prescribing a period of limitation.
It is because a bar against entertainment of an application beyond the period of limitation is created by a special or local law that it becomes necessary to invoke the aid of section 5 in order 265 that the application may be entertained despite such bar.
Mere provision of period of limitation in howsoever peremptory or imperative language is not sufficient to displace the applicability of section 5.
The conclusion is, therefore, irresistible that in a case where an application for special leave to appeal from an order of acquittal is filed after the coming into force of the , section 5 would be available to the applicant and if he can show that he had sufficient cause for not preferring the application within the time limit of sixty days prescribed in sub section
(4) of section 417, the application would not be barred and despite the expiration of the time limit of sixty days, the High Court would have the power to entertain it.
The High Court, in the present case, did not, therefore, act without jurisdiction in holding that the application preferred by the Municipal Corporation of Delhi was not barred by the time limit of sixty days laid down in sub section
(4) of section 417 since the Municipal Corporation of Delhi had sufficient cause for not preferring the application within such time limit.
The order granting special leave was in the circumstances not an order outside the power of the High Court.
We do not, therefore, see any reason to grant special leave to Mangu Ram and the firm of M/s Ram Pershad Gondamal to appeal against the order of the High Court and we accordingly dismiss the petitions for special leave filed by them.
P.B.R. Special Leave Petitions dismissed.
| IN-Abs | The respondent sought special leave to appeal to the High Court under section 417(3) of the Code of Criminal Procedure, 1898 against the acquittal of the petitioner by the trial court.
The application was made beyond the period of limitation but the High Court condoned the delay under section 5 of the .
In their application for special leave to appeal to this Court the petitioners contended that the time limit of 60 days prescribed under section 417(4) was mandatory and as such the High Court had no jurisdiction to extend the time limit by resort to section 5 of the .
Dismissing the special leave petitions, ^ HELD: (1) The order granting special leave was not an order outside the power of the High Court.
In a case where an application for special leave to appeal from an order of acquittal is filed after the coming into force of the , section 5 would be available to the applicant and if he can show that he had sufficient cause for not preferring the application within the time limit of 60 days prescribed in sub section
(4) of section 417, the application would not be barred and despite the expiration of the time limit of sixty days, the High Court would have the power to entertain it.
[265B C] (2) Since under the section 5 is specifically made applicable by section 29(2) it could be availed of for the purpose of extending the period of limitation prescribed by a special or local law if the applicant can show that he had sufficient cause for not presenting the application within the period of limitation.
It is only if the special or local law expressly excludes the applicability of section 5 that it stands displaced.
Section 29(2) (b) of the Limitation Act, 1908 specifically excluded the applicability of section 5 while section 29(2) of the 1963 Act in a clear and unambiguous terms provides for applicability of section 5.
[264F, E] Kaushalya Rani vs Gopal Singh ; , explained.
|
Civil Appeal No. 879 of 1975.
Appeal by special leave from the Judgment and order dated the 4th November, 1974 of the Punjab and Haryana High Court in Civil Writ No. 4346 of 1974.
Hardyal Hardy, section K. Mehta, K. B. Nagaraja, P. N. Puri, M. Qamaruddin and K. Khanna, for the appellant.
O. P. Sharma, for respondent No. 1.
Luxmi Grover and section section Jauhar, for respondent No. 3.
The Judgment of the Court was delivered by GOSWAMI, J.
This appeal by special leave is against the judgment of the Punjab and Haryana High Court summarily dismissing a writ application under article 226 of the Constitution against the order of the State Transport Appellate Tribunal, Punjab.
The appellant is a private limited company carrying on transport business over a long period.
The company was granted 33 stage 219 carriage permits for various routes.
It had a sanctioned fleet of 35 transport vehicles.
On receipt of several reports and complaints from various sources, the State Transport Commissioner issued the following show cause notice to the appellant on March 28, 1974: "Regd.
From: section Balinder Singh, IAS, State Transport Commissioner, Punjab.
To The Managing Director, New Samundri Transport Company (P) Ltd., Ferozepur.
No. 455/JFI(2) dated Chandigarh the 28th March, 1974.
Subject: Departmental Action.
Memorandum A list of prosecutions launched against your company by the Operational Staff is forwarded herewith.
The offences committed are of a very serious nature.
Your company is also short of fleet of fit vehicles.
A copy of the joint report of the Secretary, Regional Transport Authority, Jullundur and Motor Vehicles Inspector, Jullundur relating to the condition of buses of your company is also enclosed.
Due to the shortage of fit vehicles against the sanctioned fleet of 35 buses, number of services are being missed whereby the public is being put to a great inconvenience.
You are, therefore, required to show cause as to why departmental action by way of suspension/cancellation of stage carriage permits under section 60 of the , should not be taken against your Company.
Reply should be sent to this office within 10 days of the receipt of this notice failing which it will be presumed that you have nothing to say.
State Transport Commissioner Punjab".
The appellant says that an explanation was posted to the Commissioner within time under certificate of posting.
According to the Commissioner it was not received.
The District Judge, who is the State Transport Appellate Tribunal, observed in his order that "some mischief appears to have been committed in the office of the respondent with regard to the reply which was sent under postal certificate".
220 We will, however, proceed on the assumption that no explanation was sent by the appellant to the Commissioner.
Even so a manifestly wrong procedure in a departmental action of this nature is obvious on the face of the above notice resulting in violation of the principles of natural justice.
The notice was issued under section 60 of the (briefly the Act) which may be quoted: 60(1)"The transport authority which granted a permit may cancel the permit or may suspend it for such period as it thinks fit (a) on the breach of any condition specified in sub section (3) of section 59, or of any condition contained in the permit, or (b) if the holder of the permit uses or causes or allows a vehicle to be used in any manner not authorised by the permit, or (c) if the holder of the permit ceases to own the vehicle or vehicles covered by the permit, or (d) if the holder of the permit has obtained the permit by fraud or misrepresentation, or (e) if the holder of the permit, not being a private carrier 's permit, fails without reasonable cause to use the vehicle or vehicles for the purposes for which the permit was granted; or (f) if the holder of the permit acquires the citizenship of any foreign country: Provided that no permit shall be cancelled unless an opportunity has been given to the holder of the permit to furnish his explanation".
Sub section (3) of section 60 provides for composition of breach of certain conditions.
Section 59(3) contains the conditions laid down for every permit.
The target of section 60 is the permit that has been issued breach of conditions of which is the subject matter of action under it except in cases covered by section 60(1) (d) and (f).
It is true that for each permit the permit holder is responsible and he is the person who has to submit the explanation.
The proposed penal action has to be particularised with reference to each permit detailing the particular conditions for breach of which action is sought to be taken in connection with a particular permit.
This is the minimum requirement of section 60.
What we find in this case is a kind of bald notice making no reference to any particular permit for cancellation or suspension of which action has been taken.
It is as if all the 33 permits were going to be suspended or cancelled.
It is clear that after receipt of the various reports the Commissioner did not apply his mind to scrutinise the same 221 for the purpose of taking appropriate legal action against any specific permit under section 60 of the Act.
On the other hand taking the reports as they were, which may as well have been general allegations against the permit holder, immediately action was taken for suspension or cancellation of all the permits.
From the list of prosecutions we find only 15 vehicles are involved and most of the cases are of overloading.
Some of the cases relate to non accompaniment with the vehicles of registration certificates and other documents.
In some cases, against certain vehicles, the time schedule was not kept and certain trips were missed.
We are not at all on the merits of these prosecutions.
What is important in a departmental action of this type for violation of conditions of permit is that it must relate to the particular permits appertaining to concerned vehicles.
It is of utmost importance that charges are made with reference to each permit in clear terms in order to enable the permit holder to furnish his explanation.
Proviso to section 60(1) which requires mandatory compliance is nothing short of a reasonable opportunity to the permit holder to furnish his explanation.
Unless, therefore, the breaches of conditions or other allegations are particularised with reference to each permit in the show cause notice, such notice is clearly invalid and no action can be taken under such a notice.
This is exactly what has happened in this case resulting in violation of the principles of natural justice ingrained in the proviso to section 60(1) of the Act.
The High Court, therefore, was not right in not interfering with the order of the authorities cancelling the permits.
In the result the appeal is allowed.
The order of the High Court as well as the orders of the State Transport Appellate Tribunal and the Commissioner are set aside.
We will, however, make no order as to costs.
P.B.R. Appeal allowed.
| IN-Abs | Section 60 of the empowers the State Transport Authority to cancel or suspend a permit granted by it under certain circumstances.
The proviso to the section states that no permit shall be cancelled unless an opportunity has been given to the holder of the permit to furnish his explanation.
On receipt of reports and complaints regarding the appellant, the State Transport Commissioner issued a show cause notice to it without specifying therein the nature of complaints.
Action was taken for cancellation of the permits.
The High Court summarily dismissed the writ petition of the appellant filed under article 226 of the Constitution against the order of the State Transport Appellate Tribunal.
Allowing the appeal to this Court, ^ HELD: (1) The High Court was not right in not interfering with the order of the authority cancelling the permits.
A manifestly wrong procedure in a departmental action of this nature is obvious on the face of the notice resulting in violation of the principles of natural justice.
[221D; 220A] (2) The proposed penal action has to be particularised with reference to each permit detailing the particular conditions for breach of which action is sought to be taken.
Proviso to section 60(1) which requires mandatory compliance is nothing short of a reasonable opportunity to the permit holder to furnish his explanation.
Unless the breaches of conditions or other allegations are particularised with reference to each permit in the show cause notice such notice is clearly invalid and no action can be taken under such a notice.
[220G: 221D]
|
Appeal No. 212 of 1954.
Appeal from the Judgment and Decree dated the 10th day of November 1953 of the High Court of Judicature at Bombay in Appeal No. 8 of 1953 under the Letters Patent, against the decree dated the 23rd day of September 1952 of the said High Court in Appeal No. 67 of 1952 from Original Decree arising out of Order dated the 20th November 1951 of the City Civil Court, Bombay, in Summary Suit No. 233 of 1948.
R.Subramania Iyer and K. R. Choudhry, for the appellant.
H.J. Umrigar, J. B. Dadachanji and Rajinder Narain, for the respondent.
March 7.
The following Judgments were delivered.
DAS J.
The facts leading up to this appeal are few and simple.
Two persons named Mahomedali Habib and Sakerkhanoo Mahomedali Habib used to carry on business as merchants and pucca adatias in bullion and cotton at Bombay under the name and style of Habib & Sons.
In 1948 that firm instituted a suit in the Bombay City Civil Court, being Summary Suit No 233 of 1948, against the present appellant Juga lkishore Saraf, a Hindu inhabitant carrying on business at Bombay, for the recovery of Rs. 7,113 7 0 with interest at 6 per cent.
per annum said to be due by him to the firm in respect of certain transactions in gold and silver effected by the firm as pucca adatias.
On the 7th February,. 1949 when that summary suit was still pending a document was executed whereby it was agreed that the two partners would transfer and Messrs Raw Cotton Company, Limited, (hereinafter called the respondent company) 1372 would accept the transfer of, inter alia, all book and other debts due to them in connection with their business in Bombay and full benefit of all securities for the debts and all other property to which they were entitled in connection with the said business.
The respondent company did not take steps under 0.
XXII, r. 10 of the Code of Civil Procedure to get themselves substituted as plaintiffs in the place and stead of Habib & Sons, the plaintiffs on record, but allowed the suit to be continued in the name of the original plaintiffs.
Evidently, the two partners migrated from India to Pakistan and their properties vested in the Custodian of Evacuee Property.
On the 15th December 1949 a decree was passed in the summary suit for the sum of Rs. 8,018 7 0 for the debt and interest and the sum of Rs. 410 for costs of the suit, aggregating to Rs. 8,428 7 0, and for further interest at 4 per cent.
per annum from the date of the decree until payment.
Habib & Sons being the plaintiffs on record the decree was passed in their favour.
On the 11th December 1950 the Custodian of Evacuee Property, Bombay, informed the respondent company that by an order made on the 2nd August 1950 the Additional Custodian of Evacuee Property had confirmed "the transaction of transfer" of the business of Habib & Sons to the respondent company.
On or about the 25th April, 1951 the respondent company presented before the Bombay City Civil Court a tabular statement purporting to be an application for execution under Order XXI,rule 11 of the Code of Civil Procedure.
In the last column of the tabular statement, under the heading "The mode in which the assistance of the Court is required", the respondent company prayed that the Court "be pleased to declare the Applicants the assignees of the decree as the decrement debt along with other debts bad been transferred by the plaintiffs to the Applicants by a deed of assignment dated the 7th February 1949 which was confirmed by the Custodian of Evacuee Property, Bombay, and order them to be substituted for the plaintiffs".
There was, in that column, no specification of any of the modes in which the assist 1373 ance of the Court might be required as indicated in clause(j)of Order XXI,rule 11 of the Code.
On the 10th May 1951 the Bombay City Civil Court issued a notice under Order XXI, rule 16 of the Code to Habib & Sons, who were the decree holders on record, and Jugalkishore Saraf, who was the defendant judgment debtor, requiring them to show cause why the decree passed in the suit on the 15th December 1949 in favour of the plaintiffs and by them transferred to the respondent company, should not be executed by the said transferees against the said defendant judgment debtor.
The defendant judgment debtor showed cause by filing an affidavit affirmed by him on the 15th June 1951.
Amongst other things, he denied that the document in question had been executed or that the document transferred the decree to the respondent company.
The matter was tried on evidence and the execution of the document was proved by the evidence of an attesting witness which has been accepted by the executing Court.
The executing Court, however, rejected the second contention and made the notice absolute with costs and gave leave to the respondent company to execute the decree against the judgment debtor.
The judgment debtor filed an appeal before the High Court.
The appeal was heard by Dixit, J. Before him the execution of the document was not challenged and nothing further need be said about that.
The only substan tial question raised wag whether the respondent company were the transferees of the decree within the meaning of Order XXI, rule 16.
The learned Judge answered the question in the affirmative on the authority of the decisions of the Bombay High Court in Purmananddas Jivandas vs Vallabdas Wallji(1) and in Chimanlal Hargovinddas vs Ghulamnabi(2) and affirming the order of the executing Court dismissed the appeal.
The judgment debtor preferred a Letters Patent Appeal before the High Court which was dismissed by Chagla, C.J., and Shah, J., following the two earlier decisions mentioned above.
They, however, (1) Bom.
(2) I.L.R. 1374 granted, under article 133 (1) (c) of the Constitution, a certificate of fitness for appeal to this Court.
The principal question urged before us is as to whether the respondent company can claim to be the transferees of the decree within the meaning of Order XXI, rule 16 of the Code of Civil Procedure.
Order XXI, rule 16 of the Code of Civil Procedure, omitting the local amendments which are not material for our present purpose, provides: "16.
Where a decree or, if a decree has been passed jointly in favour of two or more persons, the interest of any decree holder in the decree is transferred by assignment in writing or by operation of law, the transferee may apply for execution of the decree to the Court which passed it; and the decree may be executed in the same manner and subject to the same conditions as if the application were made by such Provided that, where the decree or such interest as aforesaid, has been transferred by assignment, notice of such application shall be given to the transferor and the judgment debtor, and the decree shall not be executed until the Court has heard their objections (if any) to its execution: Provided also that, where a decree for the payment of money against two or more persons has been transferred to one of them, it shall not be executed against the others".
The first thing that strikes the reader is the sequence of events contemplated by this rule.
It postulates, first, that a decree has been passed and, secondly, that decree has been transferred (i) by assignment in writing or (ii) by operation of law.
The cardinal rule of construction of statutes is to read the statute literally, that is by giving to the words used by the legislature their ordinary, natural and grammatical meaning.
If, however, such a reading leads to absurdity and the words are susceptible of another meaning the Court may adopt the same.
But if no ,such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation.
In the present case a literal construction of the rule 1375 leads to no apparent absurdity and, therefore, there can be no compelling reason for departing from that golden rule of construction.
It is quite plain that if .Order XXI, rule 16 is thus construed the respondent company cannot possibly contend that the decree now sought to be executed by them was, after its passing, transferred to them by an assignment in writing within the meaning of that rule, for the document in question was executed on the 7th February 1949 but the decree was passed subsequently on the 15th December 1949.
Whether they can claim to have become the transferees of the decree after it was passed by operation of law within the meaning of this rule or to have otherwise become entitled to the benefit of it is a different matter which will be considered later on.
For the moment it is enough to say that there had been no transfer of the decree to the respondent company by any assignment in writing executed after the decree was passed, as contemplated and required by Order XXI, rule 16.
Indeed, Dixit, J., conceded "If the language of Order XXI, rule 16 is strictly construed, it seems to me that the Respondents have no case".
And so did chagla , C,J.; when he said; ". . and it is perfectly clear that if one were to construe rule 16 strictly there is no assignment of the decree in favour of the first respondent".
The learned Chief Justice, like Dixit, J., however, departed from the rule of strict or literal construction as they felt pressed by the fact that the Bombay High Court had consistently taken the view that there might be an equitable assignment of a decree which would constitute the assignee an assignee for the purpose of rule 16 and that what the Court must consider is not merely a legal assignment but also an assignment which operates in equity.
The equitable principle relied upon by the Bombay High Court is what had been enunciated by Lord Westbury in Holroyd vs Marshall(1) in the following words: (1) ; , 210, 211.
176 1376 "It is quite true that a deed which professes to convey property which is not in existence at the time is as a conveyance void at law, simply because there is nothing to convey.
So in equity a contract which engages to transfer property, which is not in existence, cannot operate as an immediate alienation merely because there is nothing to transfer.
But if a vendor or mortgagor agrees to sell or mortgage property, real or personal, of which he is not possessed at the time, and he receives the consideration for the contract, and afterwards becomes possessed of property answering the description in the contract, there is no doubt that a Court of Equity would compel him to perform the contract, and that the contract would, in equity, transfer the beneficial interest to the mortgagee or purchaser immediately on the property being acquired.
This, of course, assumes that the supposed contract is one of that class of which a Court of Equity would decree the specific performance".
The same principle was thus reaffirmed by Jessel, M.R., in Collyer vs Isaacs(1): "A man can contract to assign property which is to come into existence in the future, and when it has come into existence, equity, treating as done that which ought to be done, fastens upon that property, and the contract to assign thus becomes a complete assignment".
Applying the above principles to the facts of the instant case the High Court came to the conclusion that the document of the 7th February, 1949, on a proper reading of it, constituted an assignment of the decree.
The reasoning, shortly put, is: that on a true construction the document in question amounted to.
a transfer of the decree that was expected to be passed in the pending suit, that as the decree was not in existence at the date of the document it operated as an agreement to transfer the decree when it would be passed, that such an agreement could be enforced by a suit for specific performance as indicated by the (1) L.R. 19 Ch.
D. 312, 351.
1377 Privy Council in Raja Sahib Perhlad vs Budhoo(1), that as soon as a decree was passed equity, treating as done what ought to be done, fastened upon the decree and the agreement for transfer became the transfer of the decree and the transferee became a transferee of the decree within the meaning of Order XXI, rule 16.
It is to be noted that to attract the application of this equitable principle there must be an agreement to transfer the decree to be passed in future.
As soon as the decree is passed equity fastens upon it and, by treating as done what ought to be done, that is by assuming that the transferor has executed a deed transferring the decree to the transferee as in all conscience he should do equity regards the transferee as the beneficial owner of the after acquired decree.
The equitable principle we are considering only implements or effectuates the agreement of the parties.
This equity does not, however, take upon itself the task of making any new agreement for the parties either by filling up the lacunas or gap in their agreement or otherwise.
If, therefore, there is no agreement between the parties to transfer the future decree the equitable principle referred to above can not come into play at all.
In order, therefore, to test the propriety of the application of this equitable principle to the facts of the present case we have to enquire whether there was here any agreement between the parties to transfer the decree to be passed in the then pending suit.
This necessarily leads us to scrutinize the terms of the document in question and ascertain its true meaning and import.
No point has been taken before us that the document of the 7th February 1949 is only an executory agreement and not a deed of transfer.
Indeed, the argument has proceeded before us, as before the Court below, that the document in question is a completed deed of transfer.
This relieves us of the task of closely examining the form of the document.
For our present purpose we have, therefore, only to consider what properties were covered by the document.
The High Court has held that the decree to be 2(1) [1869] 12 M.I.A. 275; 2 B.L.R. 111.
1378 passed was also included in this document.
The reasoning appears to be this: Clause 1 of the document comprised six several items of properties.
Each of these items referred to "the said Indian business".
The Fourth item was "All the book and other debts due to the vendors in connection with the said Indian business and the full benefits of all securities for the debts" and the last and residuary item was "All other property to which the vendors are entitled in connection with the said Indian business".
One of the book debts was the subject matter of the pending suit.
The decree that the plaintiff would obtain in, that suit would, therefore, be property or right "in connection with the said Indian business".
Therefore, as they were transferring all property in connection with their business they must have intended to transfer the future decree also.
Therefore, it must be regarded as covered by the document.
I am unable to accept this line of reasoning.
It cannot be overlooked that there was no mention in that document of any suit or decree to be passed in that suit as one would have expected if the parties really intended to transfer the future decree also.
In this connection it is significant that the residuary item covered "All properties to which the vendors are entitled" and not all properties to which they might in future become entitled.
Reference may also be made to the provisions of the Transfer of Property Act.
Under section 8 of that Act the transfer of property passes to the transferee all the interest which the transferor is then capable of passing in the property and in the legal incidents thereof, and if the property transferred is a debt or actionable claim, also the securities therefore.
It is urged that as the respondent company thus became entitled, by virtue of this document read in the light of section 8, to all the rights and remedies including the right to prosecute the pending suit and to obtain a decree the decree that was eventually passed automatically and immediately upon its.
passing must be taken as having been transferred by this very document.
This argument appears to me to really amount to a begging of the question, The 1379 transfer of the debt passed all the interest which the transferors were then capable of passing in the debt and in the legal incidents thereof.
There was then no decree in existence and, therefore, the transferors could not then pass any interest in the non existing decree.
Therefore, section 8 of the Transfer of Property Act does not assist the respondent company.
Upon the assignment of the debt the respondent company undoubtedly became entitled to get themselves substituted under Order XXII, rule 10 as plaintiffs in the pending suit but they did not choose to do, so and allowed the transferors to continue the suit and a decree to be passed in their favour.
The true position, therefore, is that at the date of the transfer of the debt to the respondent company the transferors could not transfer the decree, because the decree did not exist.
On a true construction of the document the transferors agreed only to transfer, besides the five items of specified properties, "All other properties to which the vendors are entitled", that is to say, all properties to which at the date of the document they were entitled.
At the date of the document they had the right to proceed with the suit and to get such relief as the Court by its decree might award but no decree had yet been passed in that suit, and, therefore, property to which they were then entitled could not include any decree that might in future be passed.
It is significant that there was, in the document, no provision purporting in terms to transfer any future decree.
Section 8 of the Transfer of Property Act does not operate to pass any future property, for that section passes all interest Which the transferor can then, i.e., at the date of the transfer, pass.
There was thus no agreement for transfer and much less a transfer of a future decree by this document.
All that was done by the transferors by that document was to transfer only the properties mentioned in clause 1 together with all legal incidents and remedies.
The properties so transferred included book debts.
A book debt which was made the subject matter of the pending suit did not, for that reason, cease to be a book debt and, therefore, it was also transferred but no 1380 decree to be passed in respect of that book debt was If in terms transferred.
In such a situation there was no room or scope for the application of the equitable principle at all.
The transfer in writing of a property which is the subject matter of a suit without in terms transferring the decree passed or to be passed in the suit in relation to that property does not entitle the transferee to apply for execution of the decree as a transferee of the decree by an assignment in writing within the meaning of Order XXI, r. 16.
See Hansraj Pal vs Mukhraj Kunwar(1) and Vithal vs Mahadeva(2).
In my judgment the decree was not transferred or agreed to be transferred to the respondent company by the document under consideration and the latter cannot claim to be transferees of the decree by an assignment in writing as contemplated by Order XXI, rule 16.
The matter, however, has been argued before us at length on the footing that the decree had been transferred or agreed to be transferred by this document and therefore.
, the equitable principle came into play and that as soon as the decree was passed the respondent company became the transferees of the decree by assignment in writing within the meaning of Order XXI, rule 16.
As considerable legal learning has been brought to bear on the question of the application of the equitable principle and its effect on the prior written agreement and as the different decisions of the High Courts are not easily reconcilable, I consider it right to record my views on that question.
I shall.
, then, assume, for the purposes of this part of the argument, that the document of the 7th February 1949 was a completed deed of transfer covering the decree to be passed in future in the then pending suit.
Under the Transfer of Property Act there can be no transfer of property which is not in existence at the date of the transfer.
Therefore, the purported transfer of the decree that might be passed in future could only operate as a contract to transfer the decree to be performed in future, i.e., after the passing of the (1) All.
(2) [1924) 1381 decree.
The question then arises: What is the effect of the operation of the equitable principle on the decree as and when it is passed? Where there is a contract for the transfer of property which is not in existence at the date of the contract, the intending transferee may, when the property comes into existence, enforce the contract by specific performance, provided the contract is of the kind which is specifically enforceable in equity.
It is only when the transferor voluntarily executes a deed of transfer as in all conscience he should do or is compelled to do so by a decree for specific performance that the legal title of the transferor in that property passes from him to the transferee.
This transfer of title is brought about not by the prior agreement for transfer but by the subsequent deed of transfer.
This process obviously involves delay, trouble and expenses.
To obviate these difficulties equity steps in again to short circuit the process.
Treating as done what ought to be done, that is to say, assuming that the intending transferor has executed a deed of transfer in favour of the intending transferee immediately after the property came into existence, equity fastens upon the after acquired property and treats the beneficial interest therein as transferred to the intending transferee.
The question for consideration is: Is this transfer brought about by the earlier document whereby the property to be acquired in future was transferred or agreed to be transferred? In other words, can it be said, in such a situation, that the after acquired property had been transferred, proporio vigore, by the earlier document? Does that document operate as an assignment in writing within the meaning of Order XXI, rule 16? Learned counsel for the respondent company contends that the answer to these questions must be in the affirmative.
He relies on several cases to which reference may now be made.
In Purmananddas Jivandas vs Vallabdas Wallji (supra) the facts were these.
In May 1859 one died leaving his properties to executors in trust for the appellant.
In August 1868 the executors filed a suit in the Original Side of the Bombay High Court 1382 against Luckmidas Khimji for recovery of money lent to him as manager of Mahajan Wadi.
During the pendency of the suit, the executors on the 11th May 1870 assigned in very wide and general terms all the properties of the testator to the appellant including "all movable property, debts claims and things in action whatsoever vested in them as such executors".
The appellant was not brought on the record but the suit proceeded in the name of the executors.
On the 23rd January 1873 a decree was passed for the plaintiffs on the record, i.e. the executors, for Rs. 31, 272 13 5 which was made a first charge on the Wadi properties.
The appellant thereupon applied for execution of the decree under section 232 of the Code of 1882 (corresponding to our Order XXI, rule 16), as transferee of the decree.
The Chamber Judge dismissed the application.
On appeal Sargent, C. J., and Bayley, J., held that the appellant was competent to maintain the application.
After pointing out that the ssignment was in the most general terms, Sargent, C. J., observed: ". . . . and the effect of this assignment was, in equity, to vest in Purmananddas the whole interest in the decree which was afterwards obtained.
But it has been suggested that Purmananddas is not a transferee of the decree under section 232 of the Civil Procedure Code, because the decree has not been transferred to him "by assignment in writing or by operation of law", and that, therefore, he is not entitled to apply for execution.
There is no doubt that in a Court of equity, in England the decree would be regarded as assigned to Purmananddas, and he would be allowed to proceed in execution in the name of the assignors.
Here there is no distinction between "law" and "equity", and by the expression 'by operation of law ' must be understood the operation of law as administered in these Courts.
We think under the circumstances that we must hold that this decree has been transferred to Purmananddas 'by operation of law ' The last sentence in the above quotation, standing by itself, quite clearly indicates that the learned 1383 Chief Justice was of the view that as the benefit of the decree became available to the appellant by operation of the equitable principle it had to be held that the decree had been transferred to the appellant "by operation of law" rather than by an assignment in writing and that is how it was understood by the reporter who framed the head note.
The learned Chief Justice, however, immediately after that last sentence added: "In the present case the decree has been transferred by an assignment in writing as construed in these Courts".
This sentence prima facie appears to be somewhat in consistent with the sentence immediately preceding and it has given rise to a good deal of comments in later cases.
The learned Chief Justice has not referred to any case in which the Bombay High Court had adopted such a construction.
The case of Ananda Mohon Roy vs Promotha Nath Ganguli(1) follows the decision of the Bombay High Court in Purmananddas Jivandas vs Vatllabdas Wallji (supra).
It should be noted, however, that in this Calcutta case the decree was obtained and the transfer was made on the same day and it was held that though there was no assignment of the decree in so many words the property with all arrears of rent having been assigned to the mortgagee simultaneously with the passing of the decree the assignment passed the decree also.
The case of Chimanlal Hargovinddas vs Ghulamnabi (supra) has been strongly relied upon.
In that case a shop was held by A and B as tenants incommon.
In May 1936 A agreed to sell his half share ,to C.
As per arrangement A filed a partition suit on the 16th January 1937 to recover his share.
The disputes in the suit were referred to arbitration by order of Court and eventually the umpire made his award on the 16th January 1939 declaring that A was entitled to a half share.
A then, on the 7th March, 1939, sold all his rights under the award (which was (1) ; , 177 1384 called a decree) to C by a registered deed.
C did not apply for substitution of his name on the record of the suit.
The Court passed a decree upon the award on the 1st September, 1939.
On the 24th November 1939 C applied for execution of the decree.
It was held that C was entitled to execute the decree under Order XXI, rule 16, for what had been transferred to him was not merely A 's half share in the property but all his rights under the award including the right to take a decree.
In this case, having regard to the terms of the previous agreement and the fact that the parties were treating the award as a decree the intention was quite clear that by the subsequent deed of sale both the award and the decree upon it had been transferred.
It was quite clearly recognised by the Full Bench that if the sale deed transferred only.
A 's half share in the property or only his right to take a decree C could not apply under Order XXI, rule 16.
Reading the three cases relied on by learned counsel for the respondent company it seems to me that they proceeded on the footing that the equitable title related back to the earlier agreement in writing and converted the agreement to transfer the future decree into an assignment in writing of that decree as soon as it was passed.
Some support is sought to be derived by learned counsel for this doctrine of relation back from the above quoted observations of Lord Westbury in Holroyd vs Marshall (supra) "that the contract would, in equity, transfer the beneficial ' interest" and of Jessel, M.R., in Collyer vs Isaacs (supra) that "the contract to assign thus becomes a complete assignment".
I find considerable difficulty in accepting this argument as sound.
In the first place the Lord Chancellor and the Master of the Rolls were not concerned with the question of relation back in the form in which it has arisen before us.
In the next place it must not be overlooked that the equitable principle herein alluded to is not a rule of construction of documents but is a substantive rule which confers the benefit of the after acquired property on the person to whom the transferor had, by his agreement, promised to transfer the same.
Thus, by treating as done that 1385 which ought to be done, equity fastens upon the after acquired property and brings about a transfer of it.
The implication of this principle, to my mind, is clearly that the agreement, by itself and proprio, vigore, does not transfer the property when it is subsequently acquired but that instead of putting the intending transferee to the trouble and expense of going to Court for getting a decree for specific performance directing the promisor to execute a deed of transfer which when executed will transfer the afteracquired property, equity intervenes and places the parties in a position relative to each other in which by the prior agreement they were intended to be placed as if a deed of transfer had been made.
As I apprehend the position, it is by the operation of equity on the subsequent event, namely, the actual acquisition of the property on its coming into existence that the beneficial interest therein is transferred to the promisee.
This transfer, to my mind, is brought about by operation of equity which is something dehors the prior agreement.
It is true that that agreement makes the application of the equitable principle possible or I may even say that it sots the equity in motion but, nevertheless, it is equity alone which denudes the transferor of his interest in the after acquired property and passes it to the intending transferee.
That being the true position, as I think it is, the after acquired property cannot, logically and on principle, be said to have been transferred to the intending transferee by the agreement in writing.
I do not see on what principle this transfer can be said to relate back to the previous agreement.
I am fortified in my view by the observations of Lord Cave in the case of Performing Right Society vs London Theatre of Varie ties(1).
In that case, in 1916 a firm of music publishers, being members of the plaintiff society, assigned by an indenture of assignment to the society the performing right of every song, the right of performance of which they then possessed or should thereafter acquire, to be held by the society for the period of the assignor 's membership.
Subsequently, a certain (1) 1386 song was written, and the copyright in it, together with the right of performance, was assigned by the author to the said firm, but there was no fresh assignment in writing by the firm to the plaintiff society such as was required by section 5(2) of the Copyright Act, 1911.
The defendants, who were music hall proprietors, permitted this song to be publicly sung in their music hall without the consent of the plaintiff society.
The plaintiff society then sued the defendants for infringement of their performing rights and claimed a perpetual injunction.
The defence was that as there was no assignment in writing of the copyright subsequently acquired by the firm to the plaintiff society the latter was not the legal owner and, therefore, was not entitled to a perpetual injunction.
Discussing the nature of the right acquired by the plaintiff society under the indenture of 1916 and its claim to the after acquired copyright secured by the firm and referring to section 5, sub section (2) of the Copyright Act, 1911, Viscount Cave, L.C., observed at p. 13: "There was on the respective dates of the instruments under which the appellants claim no existing copyright in the songs in question, and therefore no owner of any such right; and this being so, neither of those instruments can be held to have been an assignment "signed by the owner of the right within the meaning of the section.
No doubt when a person executes a document purporting to assign property to be afterwards acquired by him, that property on its acquisition passes in equity to the assignee: Holroyd vs Marshall, ; ; Tailby vs Official Receiver, 13 A.C. 523; but how such a subsequent acquisition can be held to relate back, so as to cause an instrument which on its date was not an assignment under the Act to become such an assignment, I am unable to understand.
The appellants have a right in equity to have the performing rights assigned to them and in that sense are equitable owners of those rights; but they are not assignees of the rights within the meaning of the statute.
This contention, therefore, fails", 1387 The above observations, to my mind, completely cover the present case.
On a parity of reasoning the respondent company may have, by operation of equity, become entitled to the benefit of the decree as soon as it was passed but to say that is not to say that there has been a transfer of the decree by the document of the 7th February 1949.
And so it has been held in several cases to which reference may now be made.
In Basroovittil Bhandari vs Ramchandra Kamthi(1) the plaintiff assigned the decree to be passed in the pending suit.
The assignee was not brought on the record under section 372 of the 1882 Code corresponding to Order XXII, rule 10 of the present Code but the suit proceeded in the name of the original plaintiff and a decree was passed in his favour.
The assignee then applied for execution of that decree claiming to be a transferee decree holder under section 232 of the 1882 Code.
That application was dismissed.
White,C.J., observed: "We are asked to hold that in the event which happened in this case the appellant is entitled to be treated as the transferee of a decree from a decree holder for the purposes of section 332, notwithstanding that at the time of the assignment.
there was no decree and no decree holder.
It seems to us that we should not be warranted in applying the doctrine of equity on which the appellant relies, which is stated in Palaniappa vs Lakshmanan, I.L.R. , for the purpose of construing section 232 of the Code.
We think the words "decree holder" must be construed as meaning decree holder in fact and not as including a party who in equity may afterwards become entitled to the rights of the actual decree holder, and that the words of the section relating to a transfer of a decree cannot be construed so as to apply to a case where there was no decree in existence at the time of the agreement".
It is true that the case of Purmananddas Jivandas vs Vallabdas Wallji (supra) was not cited in that case but the case of Palaniappa vs Lakshmanan() which (1) , (2) Mad.
1388 adopted the equitable principle enunciated by Jessel, M.R., in Collyer vs Isaacs (supra) on which that Bombay case bad been founded was brought to the notice of the Court.
In Dost Muhammad vs Altaf HUsain Khan(1) one M instituted a suit for recovery of some immovable property.
During the pendency of the suit M transferred his interest in the property to the respondent.
The respondent did not apply to bring himself on the record and the suit went on in the name of M as the plaintiff.
By a compromise decree M was awarded a portion of the property.
After the decree was passed the respondent applied to execute the decree as the transferee of the decree.
The Munsiff rejected the application but the District Judge reversed his order.
On second appeal Chamier, J., found it impossible to treat the respondent as the transferee of the decree, for the document on which he relied was executed before the decree was passed.
Peer Mahomed Rowthen vs Raruthan Ambalam(2) may also be referred to.
In that case the Madras High Court followed its earlier decision in Basroovittil Bhandari vs Ramchandra Kamthi (supra).
The case of Thakuri Gope V. Mokhtar Ahmad(3) does not carry the matter any further, for it only follows the three earlier cases herein before mentioned.
Mathurapore Zamindary Co. Ltd. vs Bhasaram Mandal(4) represents the view taken by the Calcutta High Court.
In that case Hennessey and his brothers, who were Zamindars, instituted rent suits against their tenants.
Pending those suits Hennessey and his brothers transferred the Zamindari to the appellant company.
The appellant company did not get themselves substituted as plaintiff but allowed the suits to proceed in the names of the original plaintiffs who were the transferors.
Eventually, decrees were passed in favour of Hennessey and his brothers.
The appellant company then applied for execution.
The executing Court and the lower appellate Court held that (1) (2) (3)[1922] C.W.N. (Patna) 256; A.I R. 1922 Pat.
(4) Cal.
1389 the appellant company was not a transferee of the decree.
The appellant company thereupon preferred, this second appeal to the High Court.
it was held that the appellant company could not apply under Order XXI, rule 16, for that rule could not properly cover a case where there was no decree at the date of the assignment of the property and the term "decree holder" could not cover a party who, in equity, might afterwards have become entitled to the rights of the actual decree holder.
The case of Ananda Mohon Roy vs Promotha Nath Ganguli (supra) was explained as being based really on the construction that was put upon the conveyance, namely, that it covered a decree which had been passed "simultaneously with, if not before, the execution of the conveyance".
After pointing out that in Purmananddas Jivandas vs Vallabdas Wallji (supra) the transferor and transferee stood in the position of trustee and cestui que trust and that that circumstance might have attracted the application of the equitable principle the Court could not assent to the broad proposition supposed to have been laid down in that case that the transferee in equity became a transferee of the decree by the prior agreement so as to come under Order XXI, rule 16 and preferred to follow the decision of the Madras High Court in Basroovittil Bhandari vs Ramchandra Kamthi (supra) and the other decisions to which reference has been already made.
In Pandu Joti Kadam vs Savla Piraji Kate(1) one Tuljaram obtained a decree on a mortgage against the appellant Pandu Joti.
Later on, the respondent Savla brought a suit against the appellant Pandu and Tuljaram.
In that suit a decree was passed directing Tuljaram to transfer the mortgage decree ' to Savla.
The respondent Savla thereupon without having obtained, amicably or by execution of his decree, an actual assignment of the mortgage decree sought to execute that decree.
It was held that although Savla had a legal right, by executing his own decree, to compel his judgment debtor Tuljaram to assign to him the mortgage decree obtained by Tuljaram, such (1) 1390 right alone, without an assignment in writing, did not make him a transferee of the mortgage decree so as to be entitled to execute that decree.
Even the Bombay High Court (Fawcett and Madgavkar, JJ.) in Genaram Kapurchand Marwadi vs Hanmantram Surajmal(1) followed the decision of the Madras High Court in Basroovittil Bhandari vs Ramchandra Kamthi (supra).
The question came up for consideration in connection with a plea of limitation.
There in February 1914 the appellant obtained an assignment of the rights of the plaintiff in a pending suit which was thereafter continued by the original plaintiff.
In November 1914 a decree was passed in favour of the original plaintiff.
The appellant made several applications for execution of the decree in 1916, 1917, 1920 and 1921 all of which were dismissed.
In November 1923 the appellant obtained a, fresh assignment in writing from the plaintiff and made a fresh application for execution.
The judgment debtor pleaded that the earlier applications were not in accordance with law and did not keep the decree alive.
It was held that although the appellant was entitled, in equity, to the benefit of the decree he did not, before he actually obtained an assignment of the decree in 1923, become a transferee of the decree by an assignment in writing within Order XXI, rule 16 and, therefore, the applications made by him prior to 1923 were not made in accordance with law and, therefore, the last application was barred by limitation.
This decision clearly proceeded on the ground that Order XXI, rule 16 contemplated only the transfer of a decree after it had been passed.
The case of Abdul Kader vs Daw Yin(2) does not ,assist the respondent company, for in that case the Court took the view that, on its true construction, the deed under consideration in that case actually transferred the decree that bad already been passed.
In Prabashinee Debi vs Rasiklal Banerji(3), Rankin, C.J., considered the previous cases and preferred to (1) ; (2) A.I.R. 1920 Rang.
(3) Cal.
1391 follow the case of Mathurapore Zamindary Co. Ltd. vs Bhasaram Mandal (supra).
The case of Purna Chandra Bhowmik vs Barna Kumari Debi(1) does not, when properly understood, afford any support to the contention of the respondent company.
There the defendant No. 1 had executed a mortgage bond in favour of the plaintiff assigning by way of security the decree that would be passed in a pending suit which he, the defendant No. I had instituted against a third party for recovery of money due on unpaid bills for work done.
After this mortgage a decree was passed in that suit in favour of the defendant No. 1 who bad continued that suit as the plaintiff.
The plaintiff claiming to be the assignee by way of mortgage of that decree instituted this suit against two defendants.
The defendant No. 1 was the plaintiff in the earlier suit who had mortgaged to the plaintiff the decree to be passed in that suit and the defendant No. 2 was a person who claimed to be a transferee of the same decree under a conveyance subsequently executed in his favour by the first defendant.
The judgment debtor under the decree in the first suit was not made a party defendant in this suit.
The first defendant did not contest this suit and it was only contested by the second defendant.
One of the points raised by the contesting defendant was that this subsequent suit which was one for a, pure declaration of title was bad under section 42 of the Specific Relief Act inasmuch as the plaintiff did not pray for consequential relief in the shape of a permanent injunction restraining him, the contesting defendant, from executing the decree.
In repelling that argument as manifestly untenable Mukherjea, J., as he then was, said: "All that the plaintiff could want possibly at the present stage was a declaration that she was an assignee of the decree and if she gets a declaration it would be open to her to apply for execution of the decree under Order XXI, rule 16, of the Code of Civil Procedure.
No other consequential relief by way of (1) I.L.R. 178 178 1392 injunction or otherwise could or should have been prayed for by the plaintiff in the present suit".
It will be noticed that the construction of Order XXI, rule 16, was not in issue at all.
The question was not between the person claiming to be the transferee of the decree and the judgment debtor.
Indeed, the judgment debtor was not a party to this suit at all.
The simple question was whether the suit was maintainable under section 42 by reason of the absence of a prayer for consequential relief.
In view of the facts of that case the observation quoted above appears to me to be a passing one not necessary for the decision of the question then before the Court and not an expression of considered opinion on the meaning, scope and effect of Order XXI, rule 16.
All the cases, except the three cases relied on by learned counsel for the respondent company, quite clearly lay down and I think correctly that Order XXI, rule 16, by the first alternative, contemplates the actual transfer of the decree by an assignment in writing executed after the decree is passed And that while a transfer of or an agreement to transfer a decree that may be passed in future may, in equity, entitle the intending transferee to claim the beneficial interest in the decree after it is passed, such equitable transfer does not relate back to the prior agreement and does not render the transferee a transferee of the decree by an assignment in writing, within the meaning of Order XXI, rule 16.
Learned counsel for the respondent company then contends that even if the respondent company did not, by force of the prior agreement in writing read in the light of the equitable principle alluded to above or of the provisions of the Transfer of Property Act, become the transferees of the decree by an assignment in writing, they, nevertheless, became the transferees of the decree "by operation of law" within the meaning of Order XXI, rule 16.
That phrase has been considered by the different High Courts in numerous cases but the interpretations put upon it are not at all uniform and it is difficult to reconcile all of them.
1393 In this judgment in the present case the executing court expressed the view that the phrase could only mean that the rights had been transferred "on account of devolution of interest on death, etc".
In delivering the judgment in the Letters Patent Appeal, Chagla, C.J., said: "The operation of law contemplated by Order XXI, rule 16 is not any equitable principle but operation by devolution as in the case of death or insolvency".
The learned Chief Justice does not give any reason for the view expressed by him but assumes the law to be so.
The genesis for such assumption is probably traceable to the observations of Sir Robert P. Collier who delivered the judgment of the Privy Council in Abedoonissa Khatoon vs Ameeroonissa Khatoon(1).
The question arose in that case in this way.
One Wahed sued his father Abdool for possession of certain properties.
The trial Court dismissed the suit and Wahed appealed to the High Court.
During the pendency of the appeal Wahed died and his widow Abedoonissa was substituted in the place of Wahed for prosecuting the appeal.
The High Court allowed the appeal and by its decree declared that Wahed was in his lifetime and those who became his heirs were entitled to recover the properties in suit.
Abedoonissa applied for execution of the decree for herself and for one Wajed who was said to be the posthumous son of Wahed born of her womb.
Objection was taken, inter alia, that Wajed was not the legitimate son of Wahed.
This objection was overruled and it was held that Abedoonissa was entitled to execute the decree for herself and as the guardian of Wajed.
Then the judgment debtor Abdool died.
Abdool 's widow Ameeroonissa filed a suit for a declaration that Wajed was not the legitimate son of Wahed and for setting aside the last mentioned order.
Abedoonissa took the point that the matter was concluded by principles of res judicata.
To that Ameeroonissa 's reply was that the proceeding in which the question of the legitimacy of Wajed was decided was wholly incompetent so far as (1) [1876] L.R. 4 I.A. Cal.
1394 Wajed was concerned because, the decree being in favour of Abedoonissa, Wajed was not a transferee of the decree within the meaning of section 208 of Act VIII of 1859 corresponding to Order XXI, rule 16 of the present Code and could not apply for execution and that being so any adjudication on his status in such proceeding was not binding at all.
The question for decision in the suit was whether Wajed was a transferee of the decree within the meaning of section 208 of the Code of 1859.
It was in that connection that Sir Robert P. Collier in delivering the judgment of the Privy Council, after quoting that section, observed: "It appears to their Lordships, in the first place, that,, assuming Wajed to have the interest asserted, the decree was not, in terms of this section, transferred to him, either by assignment, which is not pretended, or by operation of law, from the original decree holder.
No incident bad occurred, on which the law could operate, to transfer any estate from his mother to him.
There had been no death; there bad been no devolution; there had been no succession.
His mother retained what right she had; that right was not transferred to him; if he had a right, it was derived from his father; it appears to their Lordships, therefore, that be is not a transferee of a decree within the terms of this section".
The above observations seem to put upon the phrase by operation of law" an interpretation which, in the language of Chakravartti, J., in his judgment in Sailendra Kumar vs Bank of Calcutta(1) "suggests that it would apply only in cases where certain events, not connected with any act on the part of anybody towards making a transfer, happen and the law, operating on those events, brings about a transfer".
Some of the decisions of certain High Courts to be presently cited seem to assume that their Lordships of the Privy Council were out to give an exhaustive enumeration of the cases of transfer of property by operation of law but I find myself in agreement with Chakravartti, J., that there is no reason for making (1) I.L.R. 1395 such an assumption and treating these observations as the text of a statute.
In Dinendranath Sannyal vs Ramcoomar Ghose(1) Sir Barnes Peacock pointed out the great distinction between a private sale in satisfaction of a decree and a sale in execution of a decree.
One of the principal distinctions so pointed out was: "Under the former the purchaser derives title through the vendor, and cannot acquire a better title than that of the vendor.
Under the latter the purchaser notwithstanding he acquires merely the right, title and interest of the judgment debtor, acquires that title by operation of law adversely to the judgment debtor, and freed from all alienations or incumbrances effected by him subsequently to this attachment of the property sold in execution".
Here the act of the decree holder in seeking execution by attachment and sale and the act of the Court in directing attachment and sale cannot possibly be said to be the happening of an event unconnected with the act of making a transfer such as death or devolution or succession referred to in Abedoonissa 's case (supra) could be said to be.
By the act of applying for execution the decree holder quite clearly desires that the judgment debtor should be stripped of all his right, title and interest in the property attached and sold and the order of the Court has the effect of so denuding the judgment debtor and of passing his right, title and interest to the purchaser of the property at the Court sale.
This transfer 'of property is not by any assignment in writing executed by the transferor in favour of the transferee but is brought about by the operation of the statutory provisions relating to and governing execution of decrees.
Thus this Privy Council decision itself shows that transfers "by operation of law" were not intended by it to be confined to the three cases of death, devolution or succession.
More often than not transfers "by operation of law" will be found to be brought about by the opera (1) [1889] L.R. 8 I.A. 65, 75.
1396 tion of statutory law.
Thus when a person dies testate there is a devolution of his properties to his legal representatives by operation of the law of testamentary succession which is now mainly statutory in this country.
When a person is adjudged insolvent his properties vest in the official assignee and that transfer is brought about by the operation of the insolvency laws which have been codified.
Court sale of property in execution of a decree vests the right, title and interest of the judgment debtor in that property in the auction purchaser thereby effecting a transfer by operation of the law embodied in the Code of Civil Procedure.
Likewise, statutes in some cases provide for the forfeiture of property, e.g. property in relation to which an offence has been committed, namely, illicit liquor or opium, etc., and thereby effect a transfer of such property from the delinquent owner to the State.
It is neither necessary nor profitable to try and enumerate exhaustively the instances of transfer by operation of law.
Suffice it to say that there is DO warrant for confining transfers "by operation of law" to transfers by operation of statutory laws.
When a Hindu or a Mohammaden dies intestate and his heirs succeed to his estate there is a transfer not by any statute but by the operation of their respective personal law.
In order to constitute a transfer of property "by operation of law" all that is necessary is that there must be a passing of one person 's rights in property to another person by the force of some law, statutory or otherwise.
Reference has already been made to the case of Purmananddas Jivandas vs Vallabdas Wallji (supra) where, by applying the equitable principle, Sargent, C.J., upheld the appellant 's right to maintain the application for execution.
In the beginning the learned Chief Justice founded his decision on the ground that the appellant had become the transferee of the decree "by operation of law".
This view appears to me to be logical, for it was by the operation of the equitable principle that the right, title and interest of the transferor in the after acquired decree became the property of the appellant, In other words, 1397 it was equity which operated on the decree as soon as it was passed and passed the interest of the decree , holder to the appellant.
The result of this transmission was to transfer the property from the decree holder to the appellant and this transfer was brought about by the operation of the equitable principle discussed above which is as good as any rule of law.
The actual decision in Purmananddas Jivandas vs Vallabdas Wallji (supra) may well be supported as an in stance of transfer by operation of law and indeed Sargent, C.J., himself first described the transfer in that case as being one by operation of law.
The same remarks apply to the other two cases of Ananda Mohon Roy vs Promotha Nath Ganguli (supra) and Chimanlal Hargovinddas vs Ghulamnabi (Supra) relied on by learned counsel for the respondent company.
In Abdul Kader vs Daw Yin (supra) in July 1928 the plaintiff obtained a decree that a certain sale deed be set aside on payment of a certain sum and for possession of the properties and mesne profits.
In August 1928, i.e., after the passing of the decree the plaintiff executed a deed for the sale of the properties to the appellant who by the terms of the deed was to obtain possession of the properties through Court on payment of the amount mentioned therein.
The plaintiff deposited the necessary amount and applied for execution of the decree but she died shortly thereafter.
Thereupon the appellant applied for execution of the decree.
On a construction of the terms of the sale deed the Court came to the conclusion that the sale deed covered the decree and, therefore, the appellant was a transferee of the decree by assignment in writing.
This was sufficient to dispose of the case but the learned Judges tried to reconcile some of the earlier cases by deducing two propositions: (1) that the words "by operation of law" cannot be invoked so as to make an assignment operative to transfer the decree and the right under it which would upon the true construction of its terms, otherwise, be inoperative in that regard; and (2) that although in certain cases principles of equity may be relied on, e.g., in the case of a transfer 1398 by trustees and a beneficiary, such principles cannot be considered as rendering a transfer valid "by operation of law".
It is difficult to appreciate the implication of the first proposition.
When on a true construction of the deed it actually operates to transfer a decree then in existence, no equitable principle need be invoked, for in that case the transfer is by the deed itself and as such is by an assignment in writing.
It is only when the deed does not effectively transfer the decree because, for instance, the decree is not then in existence, but constitutes only an agreement to transfer the decree after it is passed that the invocation of the equitable principle becomes necessary and it is in those circumstances that equity fastens and operates upon the decree when it is passed and effects a transfer of it.
If, however, the learned Judges meant to say that if on a true construction of the deed it did not cover the decree then the equitable principle would not come into play at all and in that case the principle of transfer by operation of law could not be invoked, no exception need then be taken.
As regards the second proposition which appears to be founded on the observations of Mukherji, J., in Mathurapore Zamindary Co. 's case (supra) I do not see why the equitable principle may be relied on only in the case of a transfer by trustees to cestui que trust.
Indeed, it was applied in the two earlier English cases as between mortgagor and mortgagee and in Performing Right Society vs London Theatre of Varieties (supra) to an indenture of assignment of copyright to be acquired in future made between persons who did not stand in the relationship of trustee and beneficiary.
Nor do I see why, in cases where the equitable principle applies, the transfer should not be regarded as one by operation of law.
In Mahadeo Baburao Halbe vs Anandrao Shankarrao Deshmukh(1) the judgment confined transfers by operation of law to cases of death, devolution or succession for which, as already stated, I see no warrant.
(1) Bom.
1399 The decision in Periakatha Nadar vs Mahalingam(1) is somewhat obscure.
There a receiver appointed in a partnership action filed a suit against a debtor of the firm and obtained a decree.
Thereafter the assets of the firm including the decree were directed to be sold by auction amongst the partners.
This order was made in spite of the objection of the partners.
The decree was purchased by one of the partners who was defendant No. 2.
The purchaser then applied for execution of the decree.
Pandrang Rao, J. said, at p. 544: "It appears to us that the words 'operation of law ' cannot apply to, a case where a person has become the owner of a decree by some transaction inter vivos.
It applies to cases where the decree has been transferred from one to another by way of succession or where there is a bankruptcy or any similar event which has the effect in law of bringing about such a transfer".
If the purchaser of a property in execution sale becomes the transferee of the property by operation of law 1, for one, cannot see why the purchaser of a property at an auction sale held in a partnership action under the order of the Court made in invitum will not be a transferee by operation of law.
If an involuntary execution sale is not a transaction inter vivos why should an auction sale held in a partnership action in the teeth of opposition of the parties be a transaction inter vivos? The learned Judges concluded that as no particular form of assignment was prescribed for transfer, the order of the Court might be treated as an assignment in writing of the decree.
I find it much easier to hold that there was in that case a transfer by operation of law than that the Court acted as the agent of the partners and the order of the Court was the assignment in writing.
The law authorised the Court in a partnership action to order the sale of the partnership assets and consequently the sale passed the interest of all the partners other than the purchasing partner in the decree solely to (1) A.I.R. 1936 Mad.
179 179 1400 the latter.
I do not see why a transfer thus brought about should not, like a transfer effected by a Court sale in execution, be regarded as a transfer by operation of law.
Further, as,I have already said, there is no valid reason for confining transfer by operation of law to succession and bankruptcy or the like.
In G. N. Asundi vs Virappa Andaneppa Manvi(1) a father sued his sons for a declaration of his sole title to a decree previously obtained by the sons against a third party on promissory notes.
The parties came to a compromise and a joint petition signed by the father and the sons was filed in Court in which it was stated that the sons had no objection to surrender all their rights in the decree to the father.
The Court passed a decree in accordance with the compromise.
On an application for execution by the father of the decree on the promissory notes it was held that on its true construction the compromise petition amounted to an assignment of the decree within the meaning of Order XXI rule 16.
So far there can be no difficulty; but the learned Judges went on to say, without, I think, any good reason, that transfer by operation of law was obviously intended to be confined to testamentary and intestate succession, forfeiture, insolvency and the like.
This was only because the Court felt bound to hold that the decision in Abedoonisa 's case had so limited it.
It was also pointed out I think correctly that a decree declaring the title of the decree holder to another decree previously passed in another suit did not effect a transfer of the earlier decree by operation of law and the decree holder under the latter decree did not become the transferee of the earlier decree by operation of law within the meaning of Order XXI, rule 16.
This was also held in a number of cases including Mahadeo Baburao Halbe 's case (supra) and Firm Kushaldas Lekhraj vs Firm Jhamandas Maherchandani(2).
This must follow from the very nature of a declaratory decree.
A declaratory decree does not create or confer any new right but declares a pre existing right.
Therefore, when a (1) I.L.R. (2) A.I.R. 1944 Sind 230.
1401 declaratory decree declares the right of the decree holder to another decree passed in an earlier suit, there is no divesting of interest of one person and ' vesting of it in another.
There is no transfer at all and, therefore, the person in whose favour the declaratory decree is passed does not fall within Order XXI, rule 16, Code of Civil Procedure.
The last case to which reference need be made is that of Maya Debi vs Rajlakshmi Debi(1).
There a Darpatnidar deposited under section 13(4) of the Bengal Patni Taluqa Regulation (VIII of 1819) the arrears of revenue to avoid a putni sale and entered into possession of the putni as he was entitled to do under the above section.
He then filed a suit and obtained a decree for arrears of rent due to the Patnidar from another Darpatnidar.
Subsequently he relinquished possession in favour of the Patnidar by giving a notice to the Patnidar.
The question was whether the Patnidar, after he got back the possession of the putni, could be regarded as the assignee of the decree which had been obtained by the Varpatnidar against another Darpatnidar.
It was held that in view of the provisions of section 13(4) the Patnidar on getting back possession of the putni became the transferee of the decree by operation of law.
It was also held that the notice given by the Darpatnidar to the Patnidar could also be construed as an assignment in writing, The result of the authorities appears to me to be that if by reason of any provision of law, statutory or otherwise, interest in property passes from one person to another there is a transfer of the property by operation of law.
There is no reason that I can see why transfers by operation of law should be regarded as confined to the three cases referred to by the Privy Council in Abedoonissa 's case.
If, therefore, I were able to construe the document of the 7th February 1949 to be a transfer or an agreement to transfer the decree to be passed in future then I would have had no difficulty in holding that by operation of equity the beneficial interest in the decree (1) A.I.R. 1950 Cal.
1. 14O2 was immediately after its passing taken out of the transferors and passed to the respondent company and that the latter had become the transferees of the decree now sought to be executed by operation of law.
As, however, I have held that that document did not cover the decree, there was no room for the application of the equitable principle and the respondent company cannot, therefore, claim to come under Order XXI, rule 16 as transferees by operation of law and cannot maintain the application for execution.
There is another ground on which the right of the respondent company to maintain the application for execution has been sought to be sustained.
This point was not apparently taken before the High Court and we have not had the advantage and benefit of the opinion of the learned Judges of that Court.
Section 146 of the Code of Civil Procedure on which this new point is founded provides as follows: "146.
Proceedings by or against representatives.
Save as otherwise provided by this Code or by any law for the time being in force, where any proceeding may be taken or application made by or against any person, then the proceeding may be taken or the application may be made by or against any person claiming under him".
There are two questions to be considered before the section may be applied, namely, (1) whether the Code otherwise provides and (2) whether the respondent company can be said to be persons claiming under the decree holder.
As regards.
(1) it is said that Order XXI, rule 16 specifically provides for application for execution by a transferee of decree and, therefore, a transferee of decree cannot apply under section 146 and must bring himself within Order XXI, rule 16.
This is really begging the question.
Either the respondent company are transferees of the decree by an assignment in writing or by operation of law, in which case they fall within Order XXI, rule 16, or they are not such transferees, in which event they may avail themselves of the provisions of section 146 if the other condition is fulfilled.
There is nothing in Order XXI, rule 16 which, expressly or by necessary implication 1403 precludes a person, who claims to be entitled to the benefit of a decree under the decree holder but does not answer the description of being the transferee of that decree by assignment in writing or by operation of law, from making an application which the person from whom he claims could have made.
It is said: what, then, is meant by the words "save as otherwise provided by this Code"? The answer is that those words are not meaningless but have effect in some cases.
Take, by way of an illustration, the second proviso to Order XXI, rule 16 which provides that where a decree for payment of money against two or more persons has been transferred to one of them it shall not be executed against the others.
This is a provision which forbids one of the judgment debtors to whom alone the decree for payment of money has been transferred from making an application for execution and, therefore, he cannot apply under section 146 as a person claiming under the decree holder.
As the respondent company do not fall within Order XXI, rule 16 because the document did not cover the decree to be passed in future in the then pending suit that rule cannot be a bar to the respondent company making an application for execution under section 146 if they satisfy the other requirement of that section, namely, that they can, be said to be claiming under the decree holder.
A person may conceivably become entitled to the benefits of a decree without being a transferee of the decree by assignment in writing or by operation of law.
In that situation the person so becoming the owner of the decree may well be regarded as a person claiming under the decree holder and so it has been held in Sitaramaswami vs Lakshmi Narasimha(1), although in the earlier case of Dost Muhammad vs Altaf Husain (supra) it was held otherwise.
The case of Kangati Mahanandi Reddi vs Panikalapati Venkatappa(2) also hold that the provisions of Order XXI, rule 16 did not prevent execution of the decree under section 146.
In that case it was held that the appli (1) Mad. 510.
(2) A.I.R. 1942 Mad. 21, 1404 cant could not execute the decree under Order XXI, rule 16 but he could execute the same under section 146.
The main thing to, ascertain is as to whether the respondent company had any right, title or interest in the decree and whether they can be said to be persons claiming under the decree holder.
I have already held that the document under consideration did not transfer the future decree and, therefore, the equitable principle did not apply and, therefore, the respondent company did not become a transferee of the decree within the meaning of Order XXI, rule 16.
What, then, was the legal position of the respondent company? They had undoubtedly, by the document of the 7th February 1949, obtained a transfer of the debt which was the subject matter of the then pending suit.
This transfer, under the Transfer of Property Act, carried all the legal incidents and the remedies in relation to that debt.
The transferors no longer had any right, title or interest in the subject matter of the suit.
After the transfer it was the respondent company which had the right to continue the suit and obtain a decree if the debt was really outstanding.
They, however, did not bring themselves on the record as the plaintiffs in the place and stead of the transferors but allowed the latter to proceed with the suit.
The transferors, therefore, proceeded with the suit although they had no longer any interest in the debt which was the subject matter of the suit and which had been transferred by them to the respondent Company.
In the premises, in the eye of the law, the position of the transferors, vis a vis the respondent company, was nothing more than that of benamidars for the respondent company and when the decree was passed for the recovery of that debt it was the respondent company who were the real owners of the decree.
As between the respondent company and the transferors the former may well claim a declaration of their title.
Here there is no question of transfer of the decree by the transferors to the respondent company by assignment of the decree in writing or by operation of law and the respondent company cannot apply for execution of the 1405 decree under Order XXI, rule 16.
But the respondent company are, nonetheless, the real owners of the decree because it is passed in relation to and for the recovery of the debt which undoubtedly they acquired by transfer by the document under consideration.
The respondent company were after the transfer, the owners of the debt which was the subject matter of the suit and the legal incidents thereof and consequently were the real owners of the decree.
The respondent company derived their title to the debt by transfer from the transferors and claimed the same under the latter.
When the respondent company be,came the owner of the decree immediately on its passing they must, in relation to the decree, be also regarded as persons claiming under the transferors.
The respondent company would not have become the owner of the decree unless they were the owners of the debt and if they claimed the debt under the trans ferors they must also claim the relative decree under the transferors as accretions, as it were, to their original right as transferees of the debt.
In my opinion, the respondent company are entitled under section 146 to make the application for execution which the original decree holders could do.
In Mathurapore Zamindary Co. Ltd. vs Bhasaram Mandal (supra) Mukherji, J., felt unable to assent to the broad proposition that Courts of execution have to look to equity in considering whether there has been an assignment by operation of law.
I see no cogent reason for taking this view.
If the executing Court can and, after the amendment of Order XXI, rule 16 by the deletion of the words "if that Court thinks fit", must deal with complicated questions relating to transfer of decree by operation of statutory provisions which may be quite abstruse, I do not see why the executing Court may not apply its mind to the simple equitable principle which operates to transfer the beneficial interest in the after acquired decree or to questions arising under section 146.
Section 47 of the Code of Civil Procedure does require that the executing Court alone must determine all questions arising between the 1406 parties or their representatives and relating to the execution,, discharge or satisfaction of the decree and authorises it even to treat the proceedings as a suit.
As the assignees from the plaintiff of the debt which was the entire subject matter of the suit the respondent company were entitled to be brought on the record under Order XXII, rule 10 and must, therefore, be also regarded as a representative of the plaintiff within the meaning of section 47 of the Code.
Learned Counsel for the appellant contends that the application for execution was defective in that although it purported to be an application for execution under Order XXI, rule 1 1, it did not comply with the requirements of that rule in that it did not specify any of the several modes in which the assistance of the Court was required.
The application was undoubtedly defective as the decision in the case of Radha Nath Das vs Produmna Kumar Sarkar(1) and Krishna Govind Patil vs Moolchand Keshavchand Gujar(1) will show but this objection was not taken before the executing Court which could then have returned the application, nor was any objection taken by the appellant at any later stage of the proceedings.
Further, it appears that the respondent company actually presented another tabular statement for execution specifying the mode in which the assistance of the Court was required.
In these circumstances, it is not open to the appellant to contend that the application is not maintainable.
The result, therefore, is that this appeal must be dismissed with costs.
BHAGWATI J.
I agree that the appeal be dismissed with costs.
I would however like to record my own reasons for doing so.
Habib & Sons, a partnership firm which carried on business as merchants and Pukka Adatias in bullion and cotton in Bombay filed a suit against the Appellant in the City Civil Court, Bombay being Summary (1) I.L.R. (2) A.I.R. 1911 Bom.
1407 Suit No. 233 of 1948, to recover a sum of Rs. 7,113 7 0 with interest and costs.
During the pendency of the suit an agreement was arrived at between Habib & Sons and the Respondents on the 7th February, 1949 under which Habib & Sons transferred to the Respondents inter alia. .
Fourthy: All the book and other debts due to the Vendors in connection with the said Indian business and the full benefit of all securities for the debts. . .
Sixthly: All other property to which the Vendors are entitled in connection with the said Indian business".
As consideration for the said transfer the Respondents undertook to pay satisfy, discharge and fulfill all the debts, liabilities contracts and engagements of the vendors in relation to the said Indian business and to indemnify them ' against all proceedings, claims and demands in respect thereof.
The Respondents did not take any steps under Order XXII, rule 10 of the Code of Civil Procedure to bring themselves on the record of the suit as plaintiffs in place and stead of Habib & Sons and a decree was passed in favour of Habib & Sons against the Appellant on the 15th December, 1949 for Rs. 8,428/7/ inclusive of interest and costs with interest on judgment at 4 per cent.
per annum till payment.
Both the partners of Habib & Sons were declared evacuees and by his order dated the 2nd August, 1950 the Custodian of Evacuee Property, Bombay confirmed the transaction of transfer of the business of Habib & Sons to the Respondents as evidenced by the agreement dated the 7th February, 1949.
A communication to that effect was addressed by the Custodian to a Director of the Respondents on the 11th December 1950.
On the 25th April, 1951 the Respondents filed in the City Civil Court, Bombay an application for execution under Order XXI ' rule 11 of the Code of Civil Procedure to execute the decree obtained by Habib & Sons against the Appellant.
That application was by the Respondents as assignees of the decree and the mode in which the assistance of the Court was required was that the Court should declare the Respon 1408 dents the assignees of the decree as the decretal debt along with other debts were transferred by Habib & Sons to them by a deed of assignment dated the 7th February, 1949 which was confirmed by the Custodian of Evacuee Property, Bombay and should order them to be substituted for the plaintiffs.
A notice under Order XXI, rule 16 of the Code of Civil Procedure was issued by the Court on the 10th May, 1951, calling upon Habib & Sons and the Appellant to show cause why the decree passed in favour of Habib & Sons and by them transferred to the Respondents, the assignees of the decree should not be executed by the said transferees against the Appellant.
The Appellant showed cause and contended (1) that the deed of assignment in favour of the Respondents was not executed by Habib & Sons and (2) that the assignee of the subject matter of the suit and not of the decree itself was not entitled to apply for leave under Order XXI, Rule 16 of the Code of Civil Procedure.
The Chamber Summons was adjourned to Court in order to take evidence whether the document in question was executed by Habib & Sons or not.
Evidence was led at the hearing and the Court held the document duly executed by the two partners of Habib & Sons and as such duly proved.
On the question of law the Court followed the decisions in Purmananddas Jiwandas vs Vallabdas Wallji (1) and Chimanlal Hargovinddas vs Gulamnabi(2) and held that the Respondents were entitled to execute the decree under Order XXI, rule 16 of the Code of Civil Procedure.
An appeal was taken by the Appellant to the High Court against this decision of the City Civil Court.
The appeal came for hearing before Dixit, J.
The finding that the deed of assignment was duly proved was not challenged.
But the contention that inasmuch as there was no transfer of the decree itself, but only of the property the Respondents were not entitled to apply to execute the decree was pressed and was negatived by the learned Judge.
The learned Judge observed that if the language of Order XXI, (1) Bom.
(2) I.L.R. 1409 rule 16 was strictly construed it seemed to him that the Respondents had no case.
But he followed the decisions in Purmananddas Jiwandas vs Vallabdas Wallji(1) and Chimanlal Hargovinddas vs Gulamnabi(2) and dismissed the appeal.
A Letters Patent Appeal was filed against this decision of Dixit, J. and it came on for hearing and final disposal before a Division Bench of the High Court constituted by Chagla, C.J. and Shah, J. The Division Bench also were of the opinion that if one were to construe Order XXI, rule 16 strictly there was no assignment of the decree in favour of the respondents.
They however were of the opinion that the High Court had consistently taken the view that there could be an equitable assignment of a decree, which would constitute the assignee an assignee for the purpose of Order XXI, rule 16 and that what the Court must consider was not merely a legal assignment but also an assignment which operated in equity.
They then considered the two Bombay decisions which had been relied upon by the City Civil Court as well as by Dixit, J. and came to the conclusion that the deed of assignment fell within the principle of those two decisions, that it constituted an equitable assignment of the decree which was ultimately passed in favour of Habib & Sons, that the application for execution was maintainable under Order XXI, rule 16 and dismissed the appeal.
The Appellant applied for and obtained the necessary certificate under article 133 (1)(c) of the Constitution.
Order XXI, rule 16 provides for an application for execution by transferee of a decree and runs as under: "Where a decree. . . . . . is transferred by assignment in writing or by operation of law, the transferee may apply for execution of the decree to the Court which passed it; and the decree may be executed in the same manner and subject to the same conditions as if the application were made by such decree holder: (1) Bom.
(2) I.L.R. 1410 Provided that, where the decree I has been transferred by assignment, notice of such application shall be given to the transferor and the judgment debtor, and the decree shall not be executed until the Court has heard their objections (if any) to its execution The transfer contemplated under this rule is either by assignment in writing or by operation of law.
It was not contended by the Appellant at any stage of the proceedings that there was in this case a transfer by operation of law or that the agreement dated the 7th February 1949 was not an assignment of all the rights which Habib & Sons had in connection with the Indian business.
The question therefore that falls to be considered is whether the deed of assignment dated the 7th February 1949 operates as a transfer of the decree by assignment in writing within the meaning of Order XXI, rule 16 of the Code of Civil Procedure.
A strict and narrow construction has been put upon the words "where a decree is transferred by assignment in writing" by the High Court of Madras in Basroovittil Bhandari vs Ramchandra Kamthi(1) and the decisions following it, particularly Kangati Mahanandi Reddi vs Panikalapati Venkatappa & Another(2) and by the High Court of Calcutta in Mathurapore Zamindary Co. Ltd. vs Bhasaram Mandal(1) which is followed in Prabashinee Debi vs Rasiklal Banerji(4).
They have held that the words "decree holder" must be construed ' as meaning decree holder in fact and not as including a party who in equity may afterwards become entitled to the rights of the actual decree holder and that the language of Order XXI, rule 16 (old section 232) cannot be construed so as to apply to a case where there was no decree in existence at the time of the assignment and this position was in effect conceded by Dixit, J. and by the Division Bench when they observed that on a strict construc (1) , (2) A.I R. 1942 Madras 21.
(3) Calcutta 703.
(4) Calcutta 297.
1411 tion of Order XXI, rule 16 there was no assignment of the decree in favour of the Respondents.
A contrary view has however been taken by the High Court of Bombay in Purmananddas Jiwandas V. Vallabdas Wallji(1) and Chimanlal Hargovinddas V. Gulamnabi(2).
These two decisions have applied the equitable principle enunciated by Sir George Jessel, M. R. in Collyer vs Isaacs(1) as under: "The creditor had a mortgage security on existing chattels and also the benefit of what in form was an assignment of non existing chattels which might be afterwards brought on to the premises.
That assignment, in fact, constituted only a contract to give him the after acquired chattels.
A man cannot in equity, any more than at law, assign what has no existence.
A man can contract to assign property which is to come into existence in the future, and when it has come into existence, equity, treating as done that which ought to be done, fastens upon that property, and the contract to assign thus becomes a complete assignment".
The High Court of Calcutta also applied the same principle in Purna Chandra Bhowmik vs Barna Kumari Debi(4) and the High Court of Madras in Kangati Mahanandi Reddi vs Panikalapati Venkatappa and another(5) observed that if the matter were res integra much might perhaps be said for the contention that the assignee under similar circumstances could execute the decree under Order XXI, rule 16.
The decision in Purmananddas Jivandas V. Vallabdas Wallji(1) and the equitable principle enunciated therein was brought to the notice of the learned Judges who decided the case of Mathurapore Zamindary Co. Ltd. vs Bhasaram Mandal(6) but was negatived by them and they relied upon the observations of the Privy Council in dealing with a somewhat similar provision contained in Section 208 of Act VIII of 1859 in the case of Abedoonissa Khatoon vs Ameeroonissa Khatoon(1): (1) Bom. 506.(2) I.L.R. (3) L.R. 19 Ch. D. 342.(4) I.L.R [1939] 2 Calcutta 341.
(5) A.I.R. 1942 Madras 21.(6) Calcutta 703.
(7) (1876) L.R. 4 I.A. 66.
1412 "Their Lordships have further to observe, that they agree with the Chief Justice in the view which he expressed, that this was not a section intended to apply to cases where a serious contest arose with respect to the rights of persons to an equitable interest in a decree".
Rankin, C.J. laid stress upon this aspect of the question and delivered a similar opinion in Prabhashinee Debi vs Rasiklal Banerji(1) at page 299: "There seem to be two possible views of the rule.
One view would be to say that there must be a decree in existence and a transfer in writing of that decree.
That is the strict view a view which the courts in India have taken.
The only other possible view would be to say that, while other cases are within the rule such as cases where a person claims to be entitled in equity under an agreement to the benefit of the decree it is optional with the courts to give effect to the rule according as the case is a clear one or one which requires investigation of complicated facts or difficult questions of law unsuited for discussion on a mere execution application.
In that view, if it were understood that the court had a complete discretion to apply the rule or not, it might be that the rule would be workable; but I do not think that any such discretion as that is intended to be given by the rule" and he fortified himself in his conclusion by relying upon the deletion of the words "if that Court thinks fit the decree may be executed" when the Civil Procedure Code of 1908 was enacted.
Order XXI, rule 16 of the Code of Civil Procedure is a statutory provision for execution by the transferee of a decree and unless and until a person applying for execution establishes his title as the transferee of a decree he cannot claim the benefit of that provision.
He may establish his title by proving that he is a transferee of a decree by assignment in writing or by operation of law.
Section 5 of the Transfer of Property Act defines a "transfer of pro (1) [1931] I.L.R.59 Calcutta 297.
1413 perty" as an act by which the transferor conveys property in present or in future to the transferee or transferees.
A transfer of a decree by assignment in writing may be effected by conveying the decree in present or in future to the transferee.
But even for the transfer to operate in future the decree which is the subject matter of the transfer must be in existence at the date of the transfer.
The words "in present or in future" qualify the word "conveys" and not the word "property" in the section and it has been held that a transfer of property that is not in existence operates as a contract to be performed in the future which may be specifically enforced as soon as the property comes into existence.
As was observed by the Privy Council in Rajah Sahib Perhlad vs Budhoo(1): "But how can there be any transfer, actual or constructive, upon a contract under which the vendor sells that of which he has not possession, and to which he may never establish a title? The bill of sale in such a case can only be evidence of a contract to be performed in future, and upon the happening of a contingency, of which the purchaser may claim a specific performance, if be comes into Court shewing that he has himself done all that he was bound to do".
It is only by the operation of the equitable principle that as soon as the property comes into existence and is capable of being identified, equity taking as done that which ought to be done fastens upon the property and the contract to assign thus becomes a complete equitable assignment.
In the case of a decree to be passed in the future therefore there could be no assignment of the decree unless and until the decree was passed and the agreement to assign fastened on the decree and thus became a complete equitable assignment.
The decree not being in existence at the date of the transfer cannot be said to have been transferred by the assignment in writing and the matter resting merely in a contract to be performed in the future which may be specifically enforced as soon as the decree was passed there would be no transfer (1) 1414 automatically in favour of the "transferee" of the decree when passed.
It would require a further act on the part of the "transferor" to completely effectuate the transfer and if he did not do so the only remedy of the "transferee" would be to sue for specific performance of the contract to transfer.
There would therefore be no legal transfer or assignment of the decree to be passed in future by virtue of the assignment in writing executed before the decree came into existence and the only way in which the transferee could claim that the decree was transferred to him by assignment in writing would be by the operation of the equitable principle above enunciated and the contract to assign having become a complete equitable assignment of the decree.
Is there any warrant for importing this equitable principle while construing the statutory 'Provision enacted in Order XXI, rule 16 of the Code of Civil Procedure? The Code of Civil Procedure does not prescribe any mode in which an assignment in writing has got to be executed in order to effectuate a transfer of a decree.
The only other statutory provision in regard to assignments in writing is to be found in Chapter VIII of the Transfer of Property Act which relates to transfers of actionable claims and an actionable claim has been defined in section 3 of the Act as "a claim to any debt. . . or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognize as affording grounds for relief. . . .
A judgment debt or decree is not an actionable claim for no action is necessary to realise it.
It has already been the subject of an action and is secured by the decree.
A decree to be passed in future also does not come as such within the definition of an actionable claim and an assignment or transfer thereof need not be effected in the manner prescribed by section 130 of the Transfer of Property Act.
If therefore the assignment or transfer of a decree to be passed in the future does not require to be effectuated in the manner prescribed in the statute there would be no objection to the 1415 operation of the equitable principle above enunciated and the contract to assign evidenced by the assignment in writing becoming a complete equitable assignment of the decree when passed.
The assignment in writing of the decree to be passed would thus result in a contract to assign which contract to assign would become a complete equitable assignment on the decree being Passed and would fulfill the requirements of Order XXI, rule 16 in so far as the assignment or the transfer of the decree would in that event be effectuated by an assignment in writing which became a complete equitable assignment of the decree when passed.
There is nothing in the provisions of the Civil Procedure Code or any other law which prevents the operation of this equitable principle and in working out the rights and liabilities of the transferee of a decree on the one hand and the decree holder and the judgment debtor on the other, there is no warrant for reading the words "where a decree. . . . . is transferred by assignment in writing" in the strict and narrow sense,, in which they have been read by the High Court of Madras in Basroovittil Bhandari vs Ramchandra Kamthi(1) and the High Court of Calcutta in Mathurapore Zamindary Co. Ltd. vs Bhasaram Mandal(2) and Prabashinee Debi vs Rasiklal Banerji(3).
It is significant to observe that the High Court of Calcutta in Purna Chandra Bhowmik vs Barna Kumari Debi(1) applied this equitable principle and held that the plaintiff in whose favour the defendant had executed a mortgage bond assigning by way of security the decree that would be passed in a suit instituted by him against a third party for recovery of money due on unpaid bills for work done was entitled to a declaration that be was the assignee of the decree passed in favour of the defendants and was as such entitled to realise the decretal debt either amicably or by execution.
If the plaintiff was thus declared to be the assignee of the decree subsequently passed in favour of the defendant and entitled to realise the decretal amount by execution he could (1) [1907] 17 MI.L.J. 391.
(3) Cal.
(2) Cal.
(4) I.L.R. 181 1416 apply for execution of the decree and avail himself of the provisions of Order XXI, rule 16 as the assignee of the decree which was passed subsequent to the date of the assignment in writing in his favour.
There could be no objection to decide questions involving investigation of complicated facts or difficult questions of law in execution proceedings, as section 47 of the Code of Civil Procedure authorises the Court executing the decree to decide all questions arising therein and relating to execution of the decree and subsection (2) further authorises the executing Court to treat a proceeding under the section as a suit thus obviating the necessity of filing a separate suit for the determination of the same.
The line of decisions of the High Court of Bombay beginning with Purmananddas jivandas vs Vallabdas Wallji(1) and ending with Chimanlal Hargovinddas vs Gulamnabi (2) importing the equitable principle above enunciated therefore appears to me to be more in consonance with law and equity than the strict and narrow 'interpretation put on the words "where a decree. . . . is transferred by assignment in writing" by the High Courts of Madras and Calcutta in the decisions above noted.
Even if an equitable assignment be thus construed as falling within an "assignment in writing" contemplated by Order XXI, rule 16 of the Code of Civil Procedure it would in terms require an assignment of the decree which was to be passed in the future in favour of the assignor.
In the present case, it is impossible to read the deed of assignment dated the 7th February, 1949 as expressly or by necessary implica tion assigning in favour of the Respondent the decree which was going to be passed by the City Civil Court in favour of Habib & Sons.
There is however another aspect of the matter which was not urged before the Courts below in the present case nor does it appear to have been considered in most of the judgments above referred to.
There is no doubt on the authorities that a mere transfer of property as such does not by itself spell out (1) Bom.
(2) I.L R. 1946 Bom.276.
1417 a transfer of a decree which has been passed or may be passed in respect of that property and it would require an assignment of such decree in order to effectuate the transfer (vide Hansraj Pal vs Mukhraji Kunuvar & others(1), Mathurapore Zamindary Co. Ltd. vs Bhasaram Mandal(2), and Kangati Mahanandi Reddi vs Panikalapati Venkatappa & another(3).
Where however the property which is transferred is an actionable claim within the meaning of its definition in section 3 of the Transfer of Property Act the consequences of such transfer would be different.
An actionable claim means a claim to any debt, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognize as affording grounds for relief, and a transfer of an actionable claim when effected by an instrument in writing signed by the transferor is under section 130 of the Act complete and effectual upon the execution of such instrument, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, vest in the transferee, whether such notice of the transfer as is therein provided be given to the debtor or not.
If the book debt or the property which is an actionable claim is thus transferred by an assignment in writing all the rights and remedies of the transferor in respect thereof including the right to prosecute the claim to judgment in a Court of law either in a pending litigation or by institution of a suit for recovery of the same vest in the transferee immediately upon the execution of the assignment as a necessary corollary thereof.
Not only is the actionable claim thus transferred but all the necessary adjuncts or appurtenances thereto are transferred along with the same to the transferee.
Section 8 of the Act provides that unless a different intention is expressed or necessarily implied, a transfer of property passes forthwith to the transferee all the interest which the transferor is then capable of passing in the property and in the legal incidents thereof These incidents include where the property is (1) All. 28.
(2) Cal.
(3) A.I.R. 1942 Mlad.
21. 1418 a debt or other actionable claim, the securities there for. . . . . but not arrears of interest accrued before the transfer.
In cases of transfer of book debts or property coming within the definition of actionable claim there is therefore necessarily involved also a transfer of the transferor 's right in a decree which may be passed in his favour in a pending litigation and the moment a decree is passed in his favour by the court of law, that decree is also automatically transferred in favour of the transferee by virtue of the assignment in Writing already executed by the transferor.
The debt which is the subject matter of the claim is merged in the decree 'and the transferee of the actionable claim becomes entitled by virtue of the assignment in writing in his favour not only to the book debt but also to the decree in which it has merged.
The book debt does not lose its character of a debt by its being merged in the decree and the transferee is without anything more entitled to the benefit of the decree passed by the court of law in favour of the transferor.
It would have been open to the transferee after the execution of the deed of assignment in his favour to take steps under Order XXXII, rule 10 of the Code of Civil Procedure to have himself substituted in the pending litigation as a plaintiff in place and stead of the transferor and prosecute the claim to judgment; but even if he did not do so he is not deprived of the benefit of the decree ultimately passed by the court of law in favour of the transferor, the only disability attaching to his position being that under section 132.
of the Act he would take the actionable claim subject to all the liabilities and equities to which the transferor was subject in respect thereof at the date of the transfer.
The transferee of the actionable claim thus could step into the shoes of the transferor and claim to be the transferee of the decree by virtue of the assignment in writing executed by the transferor in his favour and could therefore claim to execute the decree as transferee under Order XXI, rule 16 of the, Code of Civil Procedure.
This aspect could not be considered by the High 1419 Court of Bombay in Purmananddas Jivandas vs Vallabdas Wallji(1) because the assignment there was executed on the 11th May, 1870, i.e. before the enactment of the Transfer of Property Act in 1882.
The Court therefore applied the equitable principles and came to the conclusion that the equitable assignment which was completed on the passing of the decree was covered by the old section 232 of the Code of Civil Procedure.
It was also not considered by the Full Bench of the High Court of Bombay in Chimanlal Hargovinddas V. Gulamnabi (2) nor by Dixit, J. or by the Division Bench in the present case.
The High Court of Patna in Thakuri Gope and Others vs Mokhtar Ahmad & Another(3), went very near it when it observed that all that was transferred was an actionable claim, but did not work out the consequences thereof and its reason in was deflected by the consideration of the equitable principles and the applicability thereof while construing the provisions of Order XXI, rule 16 of the Code of Civil Procedure.
The High Court of Calcutta in Purna Chandra Bhowmik vs Barna Kumari Debi(4) definitely adopted this position and observed at p. 344: "In my opinion, what was transferred was the claim to a debt and as such would come within the definition of actionable claim as given in section 3 of the Transfer of Property Act.
The mere, fact that the claim was reduced by the Court did not make, in my opinion, any difference".
It no doubt applied the equitable principle also and held that the mortgage.
must be deemed to have attached itself to the decree which was for a definite amount as soon as the decree was passed, but further observed that the plaintiff was entitled to a declaration that she was an assignee of the decree and if she got that declaration it would be open to her to apply for execution of the decree under Order XXI, rule 16 of the Code of Civil Procedure.
I am sure that if this aspect of the question had been properly presented to Dixit, J. or the Division Bench in the (1) Bom.
(3) A.I.R.[1922] Patna 563, (2) I.L.R.[1946] Bom.
(4) I.L.R, , 1420 present case they also would have come to the same conclusion.
Mr. Umrigar, learned counsel for the Respondents, further urged that even if the Respondents were not entitled to the benefit of Order XXI, rule 16 of the Code of Civil Procedure they were the true owners of the debt and the decree which was ultimately passed by the City Civil Court in favour of Habib and Sons by virtue of the deed of assignment dated the 7th February 1949 and that under section 146 of the Code of Civil Procedure execution proceedings could be taken and application for execution could be made by them as persons claiming under Habib & Sons.
The deed of assignment transferred the debt which was the subject matter of the pending litigation in the City Civil Court between Habib & Sons and the Appellant.
Habib & Sons could have taken proceedings in execution and made the application for execu tion of the decree against the Appellant and the Respondents claiming under Habib & Sons by virtue of the deed of assignment were therefore entitled to take the execution proceedings and make the application for execution under Order XXI, rule II of the Code of Civil Procedure.
He also urged that Order XXI, rule 16 of the Code of Civil Procedure did not prohibit such execution proceedings at the instance of the Respondents and for this purpose relied upon the observations of the learned Judges of the High Court of Madras in Kangati Mahanandi Reddi vs Panikalapati Venkatappa & another(1) at page 23: "We are unable to hold that merely because rule 16 has been interpreted as applying only to decrees in existence at the time of the transfer, it prohibits an application by a transferee who obtained the transfer of a decree, a transfer which is legally valid and is embodied in a written deed (as rule 16 requires) before the decree was actually passed.
To permit execution by such a transferee, in our opinion, in no way violates the principles which are embodied in rule 16 or in Order XXI generally.
The appellant here is the (1) A I.R. 1942 Mlad.
1421 true owner of the decree, and he has his written title 'deed, and that is all that the law requires".
It was however urged on behalf of the Appellant that section 146 did not apply because Order XXI, rule 16 was a specific provision in the Code of Civil Procedure which applied when a person other than a decree holder wanted to execute the decree and if the Respondents could not avail themselves of Order XXI, rule 16 of the Code of Civil Procedure they could not avail themselves of section 146 also.
Reliance was placed in support of this contention on a decision of the High Court of Patna in Thakuri Gope and others vs Mokhtar Ahmad and another(1) and another decision of the High Court of Allahabad in Shib Charan Das vs Ram Chander & others(2).
This contention of the Appellant is obviously unsound.
Order XXI, rule 16 provides for execution of a decree at the instance of a, transferee by assignment in writing or by operation of law and enables such transferee to apply for execution of the decree to the Court which passed it.
If a transferee of a decree can avail himself of that provision by establishing that he is such a transferee he must only avail himself of that provision.
But if he fails to establish his title as a transferee by assignment in writing or by operation of law within the meaning of Order XXI, rule 16 of the Code of Civil Procedure there is nothing in the provisions of Order XXI, rule 16 which prohibits him from availing himself of section 146 if the provisions of that section can be availed of by him.
That is the only meaning of the expression "save as otherwise provided by this Code".
If a person does not fall within the four corners of the provision of Order XXI, rule 16 of the Code of Civil Procedure that provision certainly does not apply to him and the words "save as otherwise :provided in this Code" contained in section 146 would not come in the way of his availing himself of section ,146 because Order XXI, rule 16 cannot then be construed as an "otherwise provision" contained in the Code.
I am therefore of the opinion that if the Respondents could not avail themselves of Order XXI, (1) A.I.R. 1922 Patna 663.
(2) A.I.R. 1922 All. 98, 1422 rule 16 of the Code of Civil Procedure they could certainly under the circumstances of the present case take the execution proceedings and make the application for execution of the decree passed by the City Civil Court in favour of Habib & Sons under section 146 of the Civil Procedure Code.
An objection was however taken on behalf of the Appellant during the course of the arguments before us though no such objection was taken in the Courts below, that the application for execution made by the Respondents was defective inasmuch as it was not an application in proper form under Order XXI, rule 11 of the Code of Civil Procedure.
Order XXI, rule 11(2) (j) prescribes that particulars in regard to the mode in which the assistance of the Court was required should be set out there in.
The respondents had in their application for execution filed before the City Civil Court not mentioned any of these particulars but had only stated that the Court should declare them the assignees of the decree as the decretal debt along with other debts were transferred by Habib & Sons to them by the deed of assignment dated the 7th February 1949 which was confirmed by the Custodian of Evacuee Property, Bombay and should order them to be substituted for Habib & Sons.
This was no compliance with the provisions of Order XXI, rule 11(2) (j) and therefore there was no proper application for execution before the Court and the same was liable to be dismissed.
Reliance was placed in support of this contention on a decision of the High Court of Calcutta in Radha Nath Das vs Produmna Kumar Sarkar(1), where it was held dissenting from a decision of the High Court of Bombay in Baijnath Ramchander vs Binjraj Joowarmal Batia & Co. (2) that under Order XXI, rule 16 of the Code of Civil Procedure the ,assignee of a decree cannot make two applications, one for recording the assignment and another for executing the decree.
The assignee of a decree could only make one application for execution under Order XXI, rule 1 1 of the Code of Civil Procedure specifying therein the mode in which the assistance of the Court (1) I.L.R. [1939] 2 Calcutta 325.
(2) I.L.R [1937] Bombay 691.
1423 was required and it was only after such application had been made to the Court which passed the decree that the Court would issue notice under Order XXIL rule 16 to the transferor and the judgment debtor and the decree would not be executed until the Court had heard their objections if any to its execution.
Sen, J. in that case observed at page 327: "It seems to me to be obvious from the wording of the rule that there can be no notice to the transferor or judgment debtor and no hearing of any objection unless and until there is an application for execution.
Tile notice and the entire proceedings under Order XXI, rule 16, originate from an application for execution.
If there is no such application the proceedings are without any foundation.
Order XXI, rule 16, of the Code nowhere provides for an application to record an assignment or for an application for leave to execute a decree by an assignee or for an application for substitution".
This in my opinion correctly sets out the position in law and in so far as the two decisions of the High Court of Bombay in Baijnath Ramchander vs Binjraj Joowarmal Batia & Co.(1) and Krishna Govind Patil vs Moolchand Keshavchand Gujar(2) decide anything to the contrary they are not correct.
The position was clarified by a later decision of the High Court of Bombay in Bhagwant Balajirao and Others vs Rajaram Sajnaji & Others(3) where Rajadhyaksha and Macklin, JJ.
held, following Radha Nath Das vs Produmna Kumar Sarkar(1) that an application made by an assignee of a decree must under Order XXI, rule 16 be for the execution of the decree and not merely for the recognition of the assignment and for leave to execute the decree.
It was urged before the learned Judges that the practice in the High Court of Bombay was to entertain applications of this kind, but they observed that the practice if such a practice prevailed was opposed to the provisions of the Order XXI, rule 16 of the Code of Civil Procedure.
The contention therefore urged on behalf of the Appellant that the (1) I.L.R.[1937] Bom.
(3) A.I.R.[1947] Bom.
(2) A.I.R.[1941] Bom. 302 (F.B.) (4) I.L.R. 182 1424 application for execution in the present case was defective appears to have some foundation.
This defect however was not such as to preclude the Respondents from obtaining the necessary relief.
The application which was filed by them in the City Civil ' Court was headed "application for execution under Order XXI, rule 11 of the Code of Civil Procedure" and the only defect was in the specification of the mode in which the assistance of the Court was required.
The particulars which were required to be filled in column J. were not in accordance with the requirements of Order XXI, rule 11(2) (j) and should have specified one of the modes therein prescribed and certainly a declaration that the respondents were the assignees of the decree and the order for their substitution as the plaintiffs was certainly not one of the prescribed modes which were required to be specified in that column.
The practice which prevailed in the High Court of Bombay as recognised in Baijnath Ramchander vs Binjraj Joowarmal Batia & Co(1) and also in Bhagwant Balajirao and others vs Rajaram Sajnaji & others(3) appears to have been the only justification for making the application in the manner which the respondents did.
That defect however according to the very same decision in Bhagwant Balajirao and others vs Rajaram Sajnaji & others(3) was purely technical and might be allowed to be cured by amendment of the application.
As a matter of fact Order XXI, rule 17 lays down the procedure on receiving applications for execution of a decree and enjoins upon the Court the duty to ascertain whether such of the requirements of rules 11 to 14 as may be applicable to the case have been complied with and if they have not been complied with the Court has to reject the application or allow the defect to be remedied then and there or within a time to be fixed by it.
When the application for execution in the present case was received by the City Civil Court, the Court should have scrutinised the application as required by Order XXI, rule 17(1) and if it was found that the (1) I.L.R. (2) A.I.R. 1947 Bom 157.
1425 requirements of rules 11 to 14 as may be applicable were not complied with as is contended for by the Appellant, the Court should have rejected the application or allowed the defect to be remedied then and there or within a time to be fixed by the Court.
Nothing of the kind was ever done by the City Civil Court nor was any objection in that behalf taken on behalf of the Appellant at any time until the matter came before this Court.
On the 27th March, 1952 however a further application for execution was filed by the Respondents in the City Civil Court specifying in column 'J ' the mode in which the assistance of the Court was required and it was by ordering attachment and sale of the moveable property of the Appellant therein specified.
This further application for execution was a sufficient compliance with the provisions of Order XXI, rule I 1 (2) (j) and was sufficient under the circumstances to cure the defect, if any, in the original application for execution made by the Respondents to the City Civil Court on the 25th April, 1951.
This objection of the Appellant therefore is devoid of any substance and does not avail him.
The appeal accordingly fails and is dismissed with costs.
IMAM J. I have had the advantage of perusing the judgments of my learned brethren.
I agree that the appeal must be dismissed with costs and in the view expressed by them that the respondent should be permitted under the provisions of section 146 of the Code of Civil Procedure to execute the decree passed in favour of Habib & Sons, as one claiming under the latter.
The document under which the respondent claimed to execute the decree was treated as a deed of transfer in the courts below and not merely as an agreement to transfer.
By this document there was a transfer of all the book and other debts due to Habib & Sons in connection with the Indian business and the full benefit of all securities for the debts.
The document, however, neither in terms, nor by any reasonable inter 1426 pretation of its contents purported to transfer any decree which Habib & Sons may obtain in the future.
It seems to me, therefore, that the respondent cannot claim to be a transferee of the decree, which was subsequently obtained by Habib & Sons, by an assignment in writing within the meaning of Order XXI, rule 16 of the Code of Civil Procedure.
Order XXI of the Code of Civil Procedure relates to execution of decrees and orders.
Rule 1 of that Order relates to payments under a decree which has been passed.
Rules 4 to 9 relate to the transfer of an existing decree for execution.
The normal rule is that a decree can be executed only by the person in whose name it stands and rule 10 enables him to do so, while rule 16 of Order XXI, enables the transferee of the decree to execute it in the same manner and subject to the same conditions as an application for execution made by the decree holder.
It seems to me, therefore, that there must be a decree in existence which is transferred before the transferee can benefit from the provisions of rule 16.
The ordinary and natural meaning of the words of rule, 16 can carry no other interpretation and the question of a strict and narrow interpretation of its provisions does not arise.
The position of an assignee, before a decree is passed, is amply safeguarded by the provisions of Order XXII, rule 10, which enables him to obtain the leave of the Court to continue the suit.
Thereafter the decree, if any, would be in his name which he could execute.
I agree with my learned brother Das, J., that the provisions of Order XXI, rule 16 contemplate the actual transfer by an assignment in writing of a decree after it is passed and that while a transfer of or an agree ment to transfer a decree that may be passed in future may, in equity, entitle the intending transferee to claim the beneficial interest in the decree after it is passed, such equitable transfer does not render the transferee a transferee of the decree by assignment in writing within the meaning of Order XXI, rule 16.
In this respect the decisions of the Madras High Court in Basroovittil Bhandari vs Ramchandra Kamthi(1) (1) (1907] , 1427 and of the Calcutta High Court in Mathurapore Zamindary Co. Ltd. vs Bhasaram Mandal(1) and Prabashinee Debi vs Rasiklal Banerji (2) are correct.
As at present advised, I would like to express no opinion as to whether the expression "by operation of law" can be given the interpretation suggested by my learned brother Das, J., as it is unnecessary to do so in the present appeal.
Appeal dismissed.
| IN-Abs | H & S filed a suit against the appellant for recovery of money and during the pendency of the suit a document was executed on the 7th February, 1949, whereby H & S transferred to the respondents all book and other debts due to them together with all securities for the debts and all other property to which they were entitled in connection with their business in Bombay.
One of the book debts was the subject matter of the suit, but there was no mention in that document of the suit or the decree to be passed in the suit.
The respondents did not take any steps under Order XXII, rule 10, of the Code of Civil Procedure to get themselves substituted as plaintiffs in the place of H & S, but allowed the suit to be continued in the name of the original plaintiffs, and on the 15th December, 1949, a decree was passed in favour of H & S against the appellant.
On the 25th April, 1951, the respondents filed in the City Civil Court, Bombay, an application for execution of the decree under Order XXI, rule 11 of the Code, and a notice under Order XXI, rule 16 was issued by the Court calling upon H & S and the appellant to show cause why the decree should not be executed by the transferees, the respondents.
The appellant contended inter alia that as the respondents were only the assignees of the debt which was the subject: matter of the suit and not of the decree itself they were not entitled to execute the decree.
Held, that the respondents as the transferees of the debt which was the subject matter of the suit were entitled to make an application for execution of the decree under section 146 of the Code of Civil Procedure as persons claiming under the decree holder.
The effect of the expression " save as otherwise provided in this Code" contained in section 146 is that a person cannot make an application under section 146 if other provisions of the Code are applicable to it.
Per DAs and IMAM JJ., BHAGWATI J. dissenting.
Order XXI, rule 16, by the first alternative, contemplates the actual transfer by an assignment in writing of a decree after it is passed and while a transfer of or an agreement to transfer a decree that may be passed in future may, in equity, entitle the transferee to claim the beneficial interest in the decree after it is passed, such 1370 equitable transfer does not render the transferee a transferee of the decree by assignment in writing within the meaning of Order XXI, rule 16.
Per DAS J.
The transfer in writing of a property which is the subject matter of a suit without in terms transferring the decree passed or to be passed in the suit does not entitle the transferee to apply for execution of the decree under Order XXI, rule 16, as a transferee of the decree by an assignment in writing.
If by reason of any provision of law, statutory or otherwise, interest in property passes from one person to another, there is a transfer of the property by operation of law.
There is no warrant for confining transfers "by operation of law" to the three cases of death, devolution or succession or to transfers by operation of statutory laws only.
If the document in question could be construed to be a transfer of or an agreement to transfer the decree to be passed in future, then on the decree being passed, by operation of equity, the respondents would become the transferees of the decree by operation of law within the meaning of Order XXI, rule 16.
Per BHAGWATI J. Section 5 of the Transfer of Property Act defines a "transfer of property" as an act by which the transferor conveys property in present or in future to the transferee or transferees.
The words "in present or in future" qualify the word "conveys" and not the word "property" in the section.
A transfer of property that is not in existence operates as a contract to be performed in the future which may be specifically enforced as soon as the property comes into existence.
It is only by the operation of this equitable principle that as soon as the property comes into existence and is capable of being identified, equity taking as done that which ought to be done, fastens upon the property and the contract to assign becomes a complete equitable assignment.
There is nothing in the provisions of the Code of Civil Procedure or any other law which prevents the operation of this equitable principle, and an assignment in writing of a decree to be passed in future would become a complete equitable assignment on the decree being passed and would fall within the "assignment in writing" contemplated by Order XXI, rule 16 of the Code.
A mere transfer of property as such does not by itself spell out a transfer of a decree which has been passed or may be passed in respect of that property and it would require an assignment of such decree in order to effectuate the transfer.
But where the property is an actionable claim within the meaning of the definition in section 3 of the Transfer of Property Act and is transferred by means of an instrument in writing, the transferee could by virtue of section 130 of the Transfer of Property Act step into the shoes of the transferor and claim to be the transferee of the decree and apply for execution of the decree under Order XXI, rule 16 of the Code of Civil Procedure.
Per IMAM J. There must be a decree in existence which is transferred before the transferee can benefit from the provisions 1371 of rule 16.
The ordinary and natural meaning of the words of rule 16 can carry no other interpretation and the question of a strict and narrow interpretation of its provisions does not arise.
Case law reviewed.
|
N: Criminal Appeal No. 300 of 1975.
Appeal by Special Leave from the Judgment and Order dated the 17th March, 1975 of the Calcutta High Court in Govt.
Appeal No. 9 of 1974 and Criminal Revision Nos.
438 and 524 of 1974.
D. Mookherjee and D. N. Mukherjee, for the Appellants.
A. K. Sen and D. N. Gupta, for Respondent No. 2.
The Judgment of the Court was delivered by KRISHNA IYER, J.
Not for dramatic effect but to sting social conscience, we set out the tragic story of this case which is typical of the spreading disease of immoral traffic, to remedy which the Suppression of Immoral Traffic in Women And Girls Act, 1956 (for short, the Act) was enacted by Parliament in a mood of high morality but with such drafting inefficiency that it has pathetically failed to produce any decline in the malady.
The scene is the Isias Bar, 15, Free School Street, Calcutta.
A hall of enchantment extends nocturnal invitation to have a nice time with svelte sylphs.
The entrance fee is but a paltry Rs. 15/ per man and inside is served animating liquor.
Scantily clad female flesh of sweet seventeen or thereabouts flit about or sit on laps, to the heady tune of band music.
They solicit carnal custom, and the willing male victims pay Rs. 30/ , choose whom they fancy, drink together and, taking leave of decencies, indulge in promiscuous sex exercise legally described as operation prostitution.
The stage is busy with many men and girls moving into rooms, lavatories and chambers.
The curtain rises and a raiding party of police and excise officers surprise this arotic company drowned in drink and damsels.
This lacherous drama need not detain us further.
The Act went into action, a prosecution was launched against many under section 7 resulting in conviction and sentence of two persons, the proprietor and the manager of the Isias Bar.
Often times, a bar or restaurant is a euphemism for a brothel and the socialites, unsuspectedly and without smirch, satisfy their sex in these respectably labellel houses patronised by even prestigious dignitaries and opulent businessmen.
An appeal to the High Court substantially failed and the appeal by the State on some counts, partly succeeded.
In this Court, leave was refused regarding the challenge against the guilt and so the findings sustaining the conviction stand; but it is necessary to clarify that ultimately the High Court modified the conviction to an extent and we have to proceed on the footing that the accused, have been found guilty of offenses under section 7(2) (a), section 3(1) but acquitted under section 7(2)(b).
What is most pertinent to the present appeal is that an order was made under section 18(1) read with sec.
18(2) directing "the occupiers of portion of premises Nos. 15 and 15/A, Free School Street commonly known as 'Isias Bar ' to be evicted therefrom within a period of seven days from the 302 date of this order and restore possession thereof to the owner landlord or his agent and we further direct that this premises or any portion thereof shall not be leased out, or otherwise given possession of, to or for the benefit of the person or persons, who were connected with the improper user thereof.
" We had granted special leave limited to the attack on this order for eviction under section 18(2) read with section 18(1).
The area of discussion in these arguments is thus confined to the power to throw out the occupier of the guilty premises on conviction for offences under sections 3(1) and 7(2)(a) on top of the sentence imposed.
An appreciation of the legal tangle can be facilitated by a brief but necessary sketch of the indubitable foundational facts and the basic legal provisions bearing on the orders under section 18.
The court, as earlier mentioned, passed an order, following on the sentence, that since a conviction under sections 3 and 7 had been rendered, there would be a direction evicting the appellants occupiers from the theatre of prostitutional operation, viz., the Isiah Bar.
The Bar is beyond the offending distance of 200 yards of any 'public place ' referred to in sub section
(1) of section 7.
The said sub section itemises premises such as places of public religious worship, educational institutions, hostels, hospitals, nursing homes and such other public places as may be notified by the authority designated.
At the same time it is a proven fact that the appellants have been keeping or managing a brothel within the meaning of section 3(1), and are keepers of a public place knowingly permitting prostitutes for the purposes of their trade to resort to or remain in such public place viz., the Isiah Bar.
Section 18, sub sections
(1) to (4) may be reproduced in extenso before analysing the submissions made by counsel on either side: "18(1).
A magistrate may, on receipt of information from the police or otherwise, that any house, room, place or any portion thereof within a distance of two hundred yards of any public place referred to in sub section (1) of section 7, is being run or used as a brothel by any person, or is being used by prostitutes for carrying on their trade, issue notice on the owner, lessor or landlord of such house, room, place or portion or the agent of the owner, lessor or landlord or on the tenant, lessee, occupier of, or any other person in charge of such house, room, place, or portion, to show cause within seven days of the receipt of the notice why the same should not be attached for improper user thereof; and if, after hearing the person concerned, the magistrate is satisfied that the house, room, place, or portion is being used as a brothel or for carrying on prostitution, then the magistrate may pass orders (a) directing eviction of the occupier within seven days of the passing of the order from the house, room, place, or portion; 303 (b) directing that before letting it out during the period of one year immediately after the passing of the order, the owner, lessor or landlord or the agent of the owner, lessor or landlord shall obtain the previous approval of the magistrate: Provided that, if the magistrate finds that the owner, lessor or landlord as well as the agent of the owner, lessor or landlord, was innocent of the improper user of the house, room, place or portion, he may cause the same to be restored to the owner, lessor or landlord, or the agent of the owner, lessor or landlord, with a direction that the house, room, place or portion shall not be leased out, or otherwise given possession of, to or for the benefit of the person who was allowing the improper user therein.
(2) A court convicting a person of any offence under section 3 or section 7 may pass orders under sub section (1), without further notice to such person or show cause as required in that sub section.
(3) Orders passed by the magistrate or court under sub section (1) or sub section (2) shall not be subject to appeal and shall not be stayed or set aside by the order of any court, civil or criminal, and the said orders shall cease to have validity after the expiry of one year: Provided that where a conviction under section 3 or section 7 is set aside on appeal on the ground that such house, room, place or any portion thereof is not being run or used as a brothel or is not being used by prostitutes for carrying on their trade, any order passed by the trial court under sub section (1) shall also be set aside.
(4) Notwithstanding anything contained in any other law for the time being in force, when a magistrate passes an order under sub section (1), or a court passes an order under sub section (2), any lease or agreement under which the house, room, place or portion is occupied at the time shall become void and inoperative.
" The project of the statute, to the extent we are concerned, may now be set out.
When a magistrate receives information that any brothel is being run within a distance of 200 yards of any public place such as has been mentioned earlier [in sub section
(1) of section 7] he may issue notice to the owner, tenant, occupier or other person in charge of or connected with the brothel to show cause why it should not be attached for improper user.
After a hearing being conducted, the magistrate, if satisfied, may order eviction of the occupier and further direct that the owner or landlord shall not let out the premises for a period of one year after the passing of the order, without his previous approval.
304 In short, the house of ill fame where Mrs. Warren 's Profession is carried on is virtually sealed off by attachment by the magistrate.
However, if the owner satisfies the magistrate of his innocence, it may be restored to him with a direction that it shall not be leased out to the person who had been improperly using it for immoral purposes.
Section 18(1) proprio vigore applies only to brothels within the vicious distance of 200 yards of specified types of public institutions.
No criminal prosecution or conviction is necessary for taking action under section 18(1).
Strictly speaking, this is not a punitive provision but a preventive one.
This power vested in the magistrate is calculated to ensure moral hygiene in the locality which is particularly sensitive.
If one may say so, it is a moral scavenging operation, or a fumigation process whereby the dangerous visitations may be totally inhibited by a legally enforced closure.
So far as we are concerned, the Isiah Bar is not shown to be within the offending distance and section 18(1) cannot therefore apply.
Indeed the Magistrate and the High Court have proceeded to exercise powers under section 18(2) and the entire controversy before us is as to the real import of that provision.
By way of aside, we may say that plausible submissions were urged by Shri D. Mukherjee, supported by the language of section 18(2).
Had the drafting been more careful, and lucid, the argument would have been obviated.
This Court has, more than once, pointed out that lack of legislative simplicity has led to interpretative complexity.
The home truth that legislation is for the people and must, therefore, be plain enough has hardly been realised by our law makers.
Judges, looking at statutes, are forced to play a linguistic game guessing at the general legislative purpose and straining at semantics.
In the present case we have had to reach the conclusion against the appellants by broadening the dimensions of Heyden 's case(1), importing a 'context purpose ' teleological approach.
There are many canons of statutory construction, but the golden rule is that there are no golden rules if we may use Shavian language.
We must emphasize once more that legislative draftsmen and legislators must not confuse each other but start talking to their real audience the people, by writing law in unmistakable and simple language.
Back to section 18(2).
Once a court convicts a person under section 3 or section 7 as in this case, it may pass orders under sub section (1) of section 18 without further notice to such person to show cause as required in that sub section.
Shri Mukherjee 's submission is that this power of eviction is conditioned by the limitations of section 18(1).
Orders under sub section
(1) of section 18 can, admittedly, be passed only if the brothel is within 200 yards ' distance.
Since, in this case, the place is beyond that distance, Shri Mukherjee argues that sub section
(2) cannot apply.
The words 'pass orders under sub section ' creates ambiguity which we have sought to dispel by trying to advance the remedy and suppress the evil through the interpretative methodology.
305 Shri A. K. Sen has explained and we think rightly that section 3 punishes persons who keep brothels.
Sub section
(3) of section 3 lays down that notwithstanding any other law 'any lease . under which such premises . are held or occupied at the time of the commission of the offence, shall become void and inoperative with effect from the date of the said conviction '.
It is plain therefore that the consequence of a conviction under section 3 is the invalidation of the lease of the premises where the brothel is run.
The logical consequence must be that the occupier must be thrown out of the prostitutional premises.
This is achieved by exercise of the power under section 18(2).
Section 7(1) punishes prostitution in premises within a distance of 200 yards of specified sensitive places set out therein.
Section 7(2) works out a dichotomy: sub section
(2)(a) punishes the keeper of any public place who knowingly permits prostitutes to resort to such place (that is, any public place).
No question of distance arises here but sub section 2(b) specifically mentions, as an ingredient of the offence, that the premises must be such as are referred to in sub section
(1) (that is, within 200 yards distance).
A person convicted either under sub section
(1) or under sub section
(2) (a) or (b) section 7 will be covered by section 18(2) because the latter provision empowers the court to pass orders under section 18(1) if there is a conviction under section 7, regardless of whether it falls under sub section
(2) (a) or (b) of that section.
Moreover, if we have regard to the wholesome purpose of cleansing houses of ill fame, it can be achieved only by a broader construction of section 18(2).
This Court in Sub Div.
Magistrate vs Ram Kali(1) held that section 18(1) deals with one class and section 18(2) relates to another class.
Section 18(1) is a summary procedure for closing down obnoxious places of prostitution, without going through the detailed process of a criminal prosecution.
It is a quick acting defensive mechanism, calculated to extinguish the brothel and promote immediate moral sanitation, having regard to the social susceptibility of places like shrines, schools, hostels, hospitals and the like, Section 18(2) on the other hand, operates only where persons have been convicted of offences under section 3 or section 7.
Thus the place is found to be put to prostitutional use, in a criminal trial.
It stands to reason that if the purpose of extirpating the commercial vice from that venue were to be successful, the occupier must be expelled therefrom.
This is precisely what has been done in the present case.
Section 18(2) operates not merely on places within the offending distance of 200 yards but in all places where the activity of prostitution has been conducted.
A close reading of section 18(2) indicates that the orders under sub section
(1), referred to therein, do not, wholesale, import the substantive paragraph of section 18(1), but only the evicting orders contained in section 18(2), clauses (a) and (b).
What is, by a process of abbreviation, imported into section 18(2) is the decretal part of section 18(1) to the extent it is written into section 18(1), (a) and (b).
There is some clumsiness 306 about the drafting, as we have already stated.
Even so, if the purpose is carried to the meaning that we assign, the section fulfils the social cause.
We are in the International Women 's Year a circumstance meaningful socially, but not relevant legally.
Even so, it is time to tighten up this statute and we may permit ourselves a few concluding observations, hopefully.
Maybe, there are other provisions of the Act which have contributed to its dismal failure in the field and the legislature must, in the International Year of Women, protect the virtue of the weaker sex from the purchasing power of the takers of virginity who sip every flower and change every hour.
No nation, with all its boasts, and all its hopes, can ever morally be clean till all its women are really free free to live without sale of their young flesh to lascivious wealth or commerciailsing their luscious figures.
India, to redeem this 'gender justice ' and to prescribe prostitution whereby rich men buy poor women through houses of vice, has salved its social conscience by enacting the Act.
But the law is so ill drafted and lacunose that few who follow "the most ancient Profession in the World" have been frightened into virtue and the customers of wine cum women are catered to respectably in bars, hotels and night clubs in sophisticated and subtle ways, especially in our cities.
We dismiss the appeal, upholding the power of the magistrate to order eviction when there is a conviction under section 3 or section 7 confident that public power vested in a public functionary for public benefit shall be used whenever conditions necessary for the exercise are present, so that a comprehensive social purpose of moral clean up of public places is accomplished.
V.P.S. Appeal dismissed.
| IN-Abs | The appellants were keepers of a public place namely, a bar.
They were convicted under section 3(1) of the Suppression of Immoral Traffia in Women and Girls Act.
1956, for keeping or managing a brothel in the bar, and under section 7(2)(a) for knowingly permitting prostitutes for the purpose of their trade to resort to or remain in the bar.
There was also a direction under section 18(1) read with section 18(2) of the Act evicting, the appellants from the bar.
It was contended that the order of eviction was bad, because the bar was not within 200 yds.
of any public institution of the type referred to in section 18(1).
^ HELD : The Magistrate has power to order eviction when there is a conviction either under section 3 or section 7.
[306 E] Under section 18(1), when a Magistrate receives information that a brothel is being run within a distance of 200 yds.
from certain specified types of public institutions, he may order the eviction of the occupier after hearing him.
Under section 18(2).
once a court convicts a person under section 3 or section 7, it may pass orders under section 18(1) without further notice to such person to show cause as required in that sub section.
A close reading of section 18(2), however indicates that the orders under sub section (1) referred to therein do not wholesale import the substantive paragraph of section 18(1) but only the eviction orders contained therein.
F H] (a) The consequence of a conviction under section 3 is the invalidation of any lease of the premises where the brothel is run.
The logical consquence must be that the occupier must be thrown out of such premises.
This is achieved by the exercise of the power under section 18(2).
[305 B] (b) Section 7(1) punishes prostitution in premises within a distance of 200 yds.
of specified places.
Section 7(2)(b) punishes the person who permits the use of premises in his occupation for prostitution, and it is an ingredient of the offence that the premises must be within 200 yards distance of the specified places; but section 7(2)(a) punishes the keeper of any public place who knwingly permits prostitutes to resort to such place for their trade.
No question of distance arises with respect to such a conviction.
But section 18(2) empowers the court to pass orders under section 18(1) if there is a conviction under section 7 regardless of whether it falls under section 7(2)(a) or (b).
[305 C E] Therefore, section 18(2) operates not merely on places within the offendin distance of 200 yds.
but in all places where the activity of prostitution had been conducted.
[305 G] (c) To dispel the ambiguity in section 18(2) it must be interpreted in such a way as to advance the remedy and suppress the evil.
If the purpose of extirpating the commercial vice from a place were to be successful the occupier must be expelled from there.
[304 H] Sub Div.
Magistrate vs Ram Kali, [1968] 1 S.C.R. 205 and Heyden 's ; , case referred to. 301
|
N: Criminal Appeal No. 172 of 1971.
Appeal by Special Leave from the Judgment and Order dated the 7 5 70 of the Calcutta High Court in Criminal Revision No. 370 of 1970.
M. M. Kshatriaya and G. section Chatterjee for the Appellant.
A. K. Sen, Mrs. Leila Seth, Mrs. Anjana Sen and O. P. Khaitan for respondent.
The Judgment of the Court was delivered by KHANNA, J.
This appeal by special leave is by the State of West Bengal against the judgment of the Calcutta High Court whereby the High Court in a revision petition under section 439 of the Code of Criminal Procedure quashed the charges framed by the Presidency Magistrate against Raj Kumar Agarwalla respondent.
The prosecution case is that on November 8, 1967 Shankerlal representing himself to be a broker of foreign machinery parts went to Ram Avtar Prasad complainant and told him that he (Shanker Lal) could arrange for a transaction of sale of foreign goods which would result in good profit to the complainant.
The complainant agreed to the proposal and wanted to see the seller of the foreign goods in question.
On the following day Shanker Lal came with another man named Pandey and told Ram Avtar complainant that Pandey was an agent of Shri Hanuman Agency and would supply the foreign goods known as washer plates.
Pandey showed Ram Avtar the samples of those washer plates.
One of those samples was kept by Ram Avtar.
A day after that Shanker Lal brought one Saheb Jaman Khan alongwith him to Ram Avtar and introduced Saheb Jaman Khan as agent of M/s. Ashoke Trading Corporation of Indore.
Ram Avtar then agreed to purchase 200 pieces of the washer plates at the rate of Rs. 38/ per piece.
Formal order, it was then agreed, would be sent through Shanker Lal.
279 On November 15, 1967 Shanker Lal handed over the said formal order to Ram Avtar and stated that the goods would be supplied on the following day.
Ram Avtar was also told that this transaction would fetch him a profit of Rs. 3200/ .
On November 16, 1967 Ram Avtar lodged a report with the police against Shanker Lal after his suspicion had been aroused.
Later on that day Shanker Lal and Raj Kumar Agarwalla came to the shop of Ram Avtar with washer plates in a taxi.
Price of the said goods was then demanded from Ram Avtar.
Shanker Lal and Raj Kumar Agarwalla were thereupon arrested by the police.
It appears that the police did not submit any charge sheet on the basis of the report which had been lodged by Ram Avtar and the accused were discharged.
Subsequently, the proceedings were set in motion against Raj Kumar Agarwalla, Shanker Lal and Saheb Jaman Khan.
Charge under sections 420, 468 and 471 Indian Penal Code read with section 120B Indian Penal Code was framed against all the three accused.
Another charge under section 420 read with section 511 Indian Penal Code was framed against Raj Kumar Agarwalla and Shanker Lal.
Raj Kumar Agarwalla thereafter filed a revision petition in the High Court for quashing the charge against him.
The revision petition was allowed by the High Court on the ground that so far as Raj Kumar Agawalla was concerned, no case had been made out against him.
Charges framed against him were consequently quashed.
We have heard Mr. Kshatriya on behalf of the appellant State, and are of the view that there is no cogent ground for interference with the judgment of the High Court.
The report which was lodged by Ram Avtar in the very nature of things made no mention of the name of Raj Kumar Agarwalla respondent because it is the case of the prosecution itself that Raj Kumar appeared on the scene only subsequent to the lodging of the report.
The part which is attributed to Raj Kumar is that he was present along with Shanker Lal, when the latter brought washer plates in a taxi and demanded the price of the washer plates from Ram Avtar.
That circumstance, as pointed out by the High Court, would hardly warrant an inference that Raj Kumar respondent too was a party to any conspiracy to defraud or cheat Ram Avtar.
We find no infirmity in the judgment of the High Court as might induce us to interfere.
The appeal fails and is dismissed.
V.P.S. Appeal dismissed.
| IN-Abs | The complainant lodged a complaint to the police of a conspiracy to cheat and defraud him.
That report did not mention the respondent 's name, because, it was the case of the prosecution itself that the respondent appeared on the scene only subsequent to the lodging of the report.
The part attributed to him was that he was present along with the person complained against when the latter came to the complainant to demand money.
That circumstance alone would not warrant the inference that the respondent was also a party to any conspiracy to defraud or cheat the complainant.
The High Court was, therefore, right in quashing the charges framed against the respondent.
[279E F] ^
|
Civil Appeal No. 1562 of 1970.
Appeal by special leave from the Judgment and Order dated the 29th July, 1970 of the Rajasthan High Court in D.B. Civil Special Appeal No. 172 of 1970.
D. V. Patel, section M. Jain, for the appellant.
Miss Maya Rao for the respondent.
The Judgment of the Court was delivered by GOSWAMI, J.
This appeal by special leave is against the judgment of the Division Bench of the Rajasthan High Court by which an appeal against the judgment of a single Bench was summarily rejected.
In answer to a notification of March 29, 1950, issued by the State of Rajasthan inviting tenders for mining rights for mica on certain terms and conditions, the appellant submitted its tender which was accepted on December 30, 1950 and a notification in that behalf was made by the State Government on February 6, 1951, granting the mining lease for mica for block No. 6 (except sidries mine) in Bhilwara District on payment of the tendered amount of Rs. 1,55,000.
223 The lease was for a period of 20 years with an option of renewal of the lease for another 20 years as per conditions prescribed in the Mineral Concession Rules, 1949 (briefly the Rules).
A premium of Rs. 1,55,000 was deposited by the appellant and possession was also handed over to it on March 15, 1951.
The area originally was 6021 acres but later on a dam, by the name of Meza Dam, was constructed over some parts of the original area and the appellant was left to work on 2924 acres.
It is stated that the appellant spent Rs. 5,65,000 between 1951 and 1955.
It is also common case that no lease was executed within six months of the acceptance of the tender as required.
On June 19, 1955, the Director of Mines and Geology, Rajasthan, sent a notice to the appellant intimating that the orders sanctioning the lease stood revoked with effect from June 6, 1955.
The appellant was asked by this notice to show cause why further action to take immediate possession of the area should not be taken.
It may be noted that in this notice exception was taken for the appellant not executing the lease within the requisite period of six months which, it was mentioned, expired on August 27, 1953.
The appellant submitted a review application against the order of the State Government cancelling the mine lease on February 23, 1957.
It appears, meanwhile, the State Government proposed to grant a lease to the appellant and the latter did not press the review application.
Thereafter some correspondence took place between the appellant and the State Government regarding execution of the lease, its terms and conditions and the like.
A reference was also made by the appellant to the Central Government on March 12, 1963, to direct the State Government to sanction the lease.
On May 15, 1965, the Mining Engineer, Rajasthan, sent a notice to the appellant to deposit the dead rent amounting to Rs. 1,27,616.36 for the period 1 4 1960 to 14 9 1965 on pain of legal action.
The appellant preferred a revision application to the Government of India against this order.
The Government of India by its order of March 19, 1966, set aside the order of May 15, 1965, demanding Rs. 1,27,616.36 as dead rent for block No. 6.
This order is significant in more than one way.
It is clearly stated in the order that the conditions under the Mineral Concession Rules 1949 under which mining or prospecting operation is allowed to be undertaken do not provide for payment of premium by the lessee except with the prior approval of the Central Government.
It was also pointed out in the order that no such approval was secured by the State Government before accepting the premium of Rs. 1,55,000 from the appellant.
It was, therefore, pointed out that the acceptance of the premium was illegal.
It was further held that the State Government was entitled to charge only royalty in the present case and it could charge dead rent or royalty, whichever was higher, only after execution of a formal lease.
Then came the State Government 's impugned order of November 9, 1967, addressed to the appellant.
There was reference in the above order to the fact that the appellant "approached the Central Government in revision.
The Central Government have held that the permissive permission 224 of this block to you is not even as a licensee under the Mineral Concession Rules 1949.
Government, therefore, do not want that the possession of this area should remain with you any longer.
Government is, therefore, pleased to order that you should vacate the aforesaid block No. 6 with in a month from the date of the receipt of this note, failing which such action shall be taken as may be deemed proper".
It may be mentioned that the Central Government in the order referred to above in the extract also observed "this licence was not within the meaning of Mineral Concession Rules 1949 but was governed by the General law, e.g. the Easement Act".
(See Central Government letter dated March 19, 1966.) The appellant after receipt of the order of November 9, 1967, instituted an application under article 226 of the Constitution in the High Court of Rajasthan (being Writ Petition No. 691 of 1967) praying for a writ of certiorari to quash the aforesaid order, to restrain the State from revoking the licence and dispossessing the appellant from the mining area absolutely or in the alternative, till compensation along with refund of the premium of Rs. 1,55,000 and the dead rent realised in excess of royalty were paid by the State.
As a last alternative it prayed for a direction to the State to grant the lease of the balance area of 3628 acres or such other area to which the appellant was entitled in law.
The learned single Judge of the High Court dismissed the writ application as infructuous in view of the offer made by the State in its application of April 20, 1970, repeated through the learned Advocate General.
The learned Advocate General submitted before the High Court that the State Government "was still prepared to pay them compensation in order to revoke the licence granted in favour of the petitioner".
In the aforesaid application of April 20, 1970, the State Government was prepared to pay compensation to the appellant at the rate of Rs. 7750 per annum for the unexpired period of 20 years ending on March 14, 1971.
The learned single Judge while dismissing the application observed that if the petitioner thought that the compensation was inadequate he could agitate the matter in court.
The appellant 's appeal thereafter to the Division Bench was summarily dismissed and leave to appeal to this Court was also rejected.
Hence this appeal by special leave.
We have heard the learned counsel for both the parties.
In view of the fact that the period of the purported lease already expired on March 14, 1971, there is no question of a writ for granting the lease.
Since a proper lease had not been executed, for whatever reasons, there was no question also of exercise of an option of renewal 225 of lease.
The only question that survives is whether the State Government could realise premium in a lawful manner under the Mineral Concession Rules.
We do not find any provision in the Rules authorising realisation of premium as done in this case.
Rule 41 of the Rules of 1949 applicable at the relevant time provides for conditions of the lease.
These conditions specifically mention royalty, dead rent and surface rent, but not premium.
Again proviso to rule 41(1)(iii) states that the lessee shall be liable to pay the dead rent or royalty in respect of each mineral whichever be higher in amount, but not both.
Under subsection (3) of section 41, a mining lease may contain any other special conditions, subject to the prior approval of the Central Government.
The Central Government, is, therefore, right in holding that the realisation of the premium of Rs. 1,55,000 was illegal, particularly because there was no prior approval under sub section (3) of rule 41 of the Rules.
When in this case grant of the mining lease was envisaged under definite statutory rules made in exercise of power, conferred under section 5 of the Mines & Minerals (Regulation and Development) Act, 1948, the State Government was under legal obligation to act in accordance with these rules.
It could not exercise a power in the matter of grant of mining lease unknown to these Rules.
The State Government could not impose terms and conditions according to its own whims ignoring or disregarding the statutory rules which are binding on it.
The appellant is, therefore, entitled to a refund of Rs. 1,21,930.71 which is due to the appellant out of the illegally realised premium of Rs. 1,55,000 allowing the sum of Rs. 33,069.29 already received by the appellant from the Government on account of compensation.
The appellant 's counsel made a statement in court that since the appellant had already vacated the area it will not of its own make any further claim for compensation or under any other heads but reserves its right to raise all possible defences against any action that may be instituted by the State against the appellant in the matter of the grant of mining for mica in the area.
Subject to the reservation of the above right, the appeal is partly allowed to the extent that the State Government is directed to refund Rs. 1,21,930.71 as mentioned above.
The appellant is entitled to its costs in this Court.
V.P.S. Appeal allowed in part.
| IN-Abs | The appellant 's tender for mining rights for mica was accepted in 1951.
The appellant deposited the premium demanded and took possession of the land.
The lease was for a period of twenty years but no lease was executed.
In 1967, the State Government directed that the appellant should vacate the land within a month from the date of the receipt of their order.
The appellant challenged the order under article 226.
but the High Court dismissed the petition.
Allowing the appeal to this Court, ^ HELD: (1) In view of the facts, that the period of the purported lease had already expired, and no proper lease had been executed, there was no question of issuing a writ for granting the lease, or the appellant exercising an option to renew the lease.
[224H] (2) The appellant, however, was entitled to a refund of the illegally realised premium deducting the sum received on account of compensation for the unexpired period.
The State Government was under a legal obligation to act in accordance with the statutory rules applicable, namely, the Mineral Concession Rules, 1949, made in exercise of the power conferred under section 5 of the Mines and Minerals (Regulation and Development) Act, 1948 when granting a lease.
It could not impose terms and conditions according to its own whims ignoring or disregarding statutory rules which are binding on it, and could not exercise a power unknown to the rules.
There is no provision in the rules authorising the realisation of premium.
Rule 41, providing for conditions of the lease, specifically mentions royalty, dead rent and surface rent but not premium.
Under r. 41(3) a mining lease may contain any other special conditions subject to the prior approval of the Central Government; but no such prior approval was given in the present case, for the realisation of the premium.
[225A F]
|
Civil Appeal No. 1785 of 1970.
From the Judgment and Order dated 25 9 69 of the Calcutta High Court in Appeal No.146 of 1967.
section V. Gupte, section B. Mukherjee, P. C. Bhartari, J. B. Dadachanji and Dilip Sinha for the Appellant.
A. K. Sen, R. C. Nag, O. P. Khaitan, B. P. Maheshwari, Suresh Sethi and R. section Agarwal for Respondents.
The Judgment of the Court was delivered by GOSWAMI, J.
This appeal by certificate is against the common judgment of the Calcutta High Court in respect of respondents ' application for winding up and appellant 's stay application relating to the Hind Overseas Private Limited, a private limited company (briefly the company).
The question that is raised in this appeal relates to the scope of section 433(f) of the (briefly the Act) and in particular whether the principles applicable in the case of dissolution of partnership could be involved in the case of the company.
The allegations in the winding up petition before the High Court are as follows: The company was incorporated under the Act in August 1956.
The nominal capital of the company is Rs. 5,00,000/ divided into 2,500 Equity shares of Rs. 100/ each and 2,500 unclassified shares of Rs. 100/ each, the entire nominal capital has been issued and fully paid up.
The petitioners (respondents herein), Raghunath Prasad Jhunjhunwalla and his son, Phoolchand Jhunjhunwalla (hereinafter to be described as R.P.J. and P.C.J. respectively), and the members of their family hold 1875 shares in the company and the remaining 3125 shares are held by one V. D. Jhunjhunwalla and the members of his family.
In or about the month May, 1956, R.P.J. and V. D. Jhunjhunwalla (briefly V.D.J.) who was then carrying on business under the name and style of 'Chimanram Motilal ' with his cousin, one Mahabir Prasad Jhunjhunwalla (for brevity M.P.J.) agreed to start a new business of iron and steel in co partnership and for that purpose an account was 230 opened in the name of 'Raghunath Prasad Jhunjhunwalla Ke Sir Khata ' in the books of 'Chimanram Motilal '.
It was further agreed between the parties that R.P.J. would have six annas share and V.D.J. along with M.P.J. ten annas share in the said proposed partnership business.
Before the said proposed business could be started, V.D.J., however, changed his mind and some time in the month of June 1956, he suggested to R.P.J. that a limited company be formed, inter alia, to carry on the business in iron and steel and the shares in the company would be held by R.P.J., V.D.J. and M.P.J. and the members of their respective families in the same proportion as mentioned above.
V.D.J. further agreed to provide for and arrange along with M.P.J. the entire finance that may be necessary for the purpose of the business of the company and R.P.J. and his group would generally look after the day to day business of the company under the general control and supervision of V.D.J. It is stated in the petition that R.P.J. in view of the relationship between the parties and having trust and confidence in V.D.J. agreed to the said suggestions and accordingly the company was formed on or about August 9, 1956, under the provisions of the Act.
One Anil Chandra Dutta, an employee and nominee of V.D.J. along with R.P.J. became the subscribers to the Memorandum of Association of the company and also became its first directors.
After its incorporation, the company carried on for some time the business of controlled stockists of iron and steel and since the end o the year 1958 the company carried on the business of the manufacture and supply of railway sleepers in execution of Government contracts.
On or about August 23, 1956, V.D.J. and M.P.J. were co opted as directors of the company.
On or about November 23, 1957, Anil Chandra Dutta resigned from the Board of Directors and P.C.J. was co opted as a Director in this place.
R.P.J. was appointed as Director in charge of the company on November 23, 1957 at a monthly remuneration of Rs. 1000/ .
This remuneration was subsequently increased to Rs. 1250/ per month with effect from October 1, 1961 and he was also granted further allowance of Rs. 250.00 per month on account of maintenance of guest house.
His monthly remuneration was again increased to Rs. 2000.00 with effect from September, 1964.
The monthly remuneration of P.C.J. was initially fixed at Rs. 750.00 per month with effect from October 1, 1961 and was subsequently increased to Rs. 1500.00 from September 1, 1964.
Following a family partition between V.D.J. and M.P.J. about the year 1958, the shares of the latter were transferred in the name of the wife of V.D.J. M.P.J. also resigned from the Board of Directors on or about January 31, 1959.
Since that date and until October 1965, the Board of Directors of the company consisted of R.P.J., P.C.J. and V.D.J. In or about the month of October, 1965, V.D.J. got his son, Vinode Kumar Jhunjhunwalla, appointed as the Technical Director of the company.
Since the year 1958 and until February 26, 1965, the entire business of the company has been the manufacture and supply of 231 railway sleepers in execution of Government contracts.
The business of the company during this period had been always managed by R.P.J., P.C.J. under the general supervision and guidance of V.D.J. and the business policy was always dictated by V.D.J. The Cashier, Manager cum Engineer, Munim, and Cash Peon and other important Officers and employees were always appointed by V.D.J. of his own choice and on his terms.
R.P.J. has been acting as the Director in charge throughout since his appointment at a Board meeting held on November 23, 1957.
V.D.J. asked for and received daily reports of the working of the factory and of the business of the company from R.P.J. and gave detailed instructions even relating to the daily administration.
From 1959 onwards the factory commenced its regular production of railway sleepers and made substantial profits between 1960 and 1965 except in the year 1961 when there was some loss.
It is alleged that after trying to take wrongfully and illegally full control and management of the affairs of the company in order to oust R.P.J. group, V.D.J. ultimately succeeded in getting hold of Directors ' Minute Books and the Minute Books of the General Meetings of the company.
V.D.J. with the help of the members of his group, wrongfully and illegally took away the keys and the other statutory books and documents of the company from the registered office and refused R.P.J. group any access to them, R.P.J. was also assaulted by an employee of the company at the instance of V.D.J. and there were some criminal proceedings against R.P.J. and P.C.J. V.D.J. as a Director called a meeting of the Board on May 27, 1966, by Notice dated May 24, 1966.
R.P.J. 's solicitors on May 27, 1966, sent a notice to the company and V.D.J. calling upon them to desist from holding the meeting which was called with a view to oust the R.P.J. group completely from the control and management of the affairs of the company.
V.D.J. group did not pay any heed to the Solicitors ' letter and passed various resolutions in the Board 's meeting held on May 27, 1966, whereby the previous resolutions of the Board were countermanded and cancelled and R.P.J. was deprived of his all lawful authority and powers as a Director including the right to operate the banking account of the company.
R.P.J. was purported to be removed from the office of the Director in charge of the company.
V.D.J. group caused an advertisement to be published in the Vishwamitra on or about May 20, 1966, intimating the cancellation of powers in favour of R.P.J. V.D.J. taking advantage of the majority holding of shares by himself and the members of group, caused to be issued through certain shareholders belonging, to his group a requisition dated May 28, 1966, for calling an Extra ordinary general meeting with a view to remove R.P.J. and P.C.J. as directors of the company and to appoint other persons belonging to their group in their places instead.
The explanatory statement to that Notice alleged that there was a loss of about Rs. 8 lakhs in the year 1965.
It is further alleged that V.D.J. with the help of goondas and armed guard took possession of the company 's factory and ousted R.P.J. and P.C.J. therefrom.
It is also alleged that the liabilities of the company would exceed its assets and the same was not commercially 232 solvent.
That serious disputes and differences had arisen among the shareholders of the company and there was a complete deadlock in the management of its affairs.
There was also complete loss of confidence of one group in the other.
Lastly it is averred that the company was in substance a partnership and it could not carry on its business any more and the circumstances would justify the dissolution of the company had it been a partnership.
The above are the allegations in the winding up petition which came up for admission before the learned Company Judge.
There was a counter affidavit filed by V.D.J. in opposing the prayers.
We may only note paragraph 14 of his counter affidavit "The respondent, Raghunath Prasad Jhunjhunwalla was an employee of the firm of Messrs Kamlapati Motilal of Kanpur of which I am the Managing Partner.
Having gained confidence as such employee the said Raghunath Prasad Jhunjhunwalla was taken in as a Director of the Company and entrusted with the powers of management of the Company.
The respondents had no money to subscribe for the shares of the Company and moneys were procured by me to enable them to subscribe for the share of the Company.
The applicants on their own admission were in charge of the management of the affairs of the Company.
While in such management they have mismanaged the affairs of the Company and misappropriated the funds and assets of the company as would appear from the statements made in my affidavit affirmed on June 16, 1966. " The only point which appears to have been canvassed before the learned Company Judge and later before the appellate court was that the company was formed as a result of mutual trust and confidence and the company was in substance a partnership and, therefore, the principles of partnership would be attracted.
The same arguments are pressed into service by the respondents before us.
If it were a partnership, says Mr. Sen on behalf of the respondents, on the facts and circumstances disclosed in the petition dissolution would have been ordered by the court under section 44(g) of the Partnership Act.
A case for winding up has been, therefore, prima facie, made out by the respondents on these allegations.
It is submitted that the learned Company Judge committed an error of law in dismissing the winding up petition without admitting it and in allowing the stay petition of the company (appellant herein) and that the Division Bench in the Letters Patent Appeal was right in setting aside the order of the Company Judge.
According to the learned Company Judge the principle of dissolution of partnership applies to companies either on the ground of complete deadlock or on the ground of domestic or family companies.
A complete deadlock, according to the learned Judge, is where the Board has two real members or the ratio of shareholding is equal.
In the domestic or family companies, says the learned Judge, courts have 233 applied the dissolution of partnership principle where shareholdings are more or less equal and there is ousting not only from management but from benefits as shareholders.
Lack of probity has to result in prejudice to company 's business, affecting rights of complaining parties as shareholders and not as directors.
The learned Judge relied on an English case [In re Cuthbert Cooper & Sons Limited(1)] which illustrates that if a deadlock can be resolved by the articles there is no deadlock to bring in winding up and if there are alternative remedies the company should not be wound up.
The learned Judge was also unable to hold that the substratum of the company was gone.
The learned Judge concluded as follows: "As I have indicated these charges and counter charges raise disputed questions of fact between two contesting parties for power.
The petitioners desire that they should be in power and the respondents would go on financing.
This was said to be the heart of the matter by counsel for the respondents.
This comment is not without foundation.
I am unable to hold that there is any mismanagement or misapplication either as regards shareholders or as regards directors.
Directors ' disputes are not grounds for winding up on the facts and circumstances of the present case".
According to the learned Judge the case of In re Yenidje Tobacco Company Limited (2) and the cases following it have established that in applying the principles of dissolution of partnership to companies the following factors were important: (1) Equal share holding.
(2) Complete deadlock in the administration of the company.
(3) Lack of probity and mismanagement in the conduct of affairs of the company.
The learned Company Judge held that the principle in Yenidje 's case (supra) was not attracted in this case.
On the other hand, according to the appellate court the principles in Yenidje 's case were to the effect that "if a private company could be fairly called a partnership in the guise of a private company then the things which might be a ground for dissolution of a partnership will apply also in the case of a private company" and that "in this connection deadlock is not material".
The appellate court then described the circumstances which according to Lindley justify the dissolution of the partnership: (1) if the partnership agreement is wilfully or persistently violated; 234 (2) if one partner so behaves in matters relating to the partnership business that the other partners find it impossible to carry on business in partnership with him; (3) if some partners are in effect excluded from the concern; (4) if the misconduct of one or more partners is such that the mutual confidence which must subsist in a partnership is destroyed; (5) if there is a state of animosity which precludes all reasonable hope of reconciliation and friendly cooperation; (6) if it is impossible for the partners to place that confidence in each other which each has a right to expect, provided that the impossibility has not been caused by the persons seeking to take advantage of if Having noted the above, the appellate court held that conditions (2), (3) and (4) were unquestionably fulfilled in this case and, therefore, allowed the application and rejected the stay application.
Before we proceed further we may refer to a recent decision of the House of Lords in Ebrahimi and Westbourne Galleries Ltd. and Others (1) (briefly Ebrahimi 's case) wherein after reviewing all the earlier cases it was held as follows: "The foundation of it all lies in the words 'just and equitable ' and, if there is any respect in which some of the cases may be open to criticism, it is that the Courts may sometimes have been too timorous in giving them full force.
The words are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own; that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligation inter se which are not necessarily submerged in the company structure.
That structure is defined by the and by the articles of association by which shareholders agree to be bound.
In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small.
The 'just and equitable provision does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it.
It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations: considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, 235 to insist on legal rights, or to exercise them in a particular way. "The superimposition of equitable considerations requires something more, which typically may include one, or probably more, of the following elements: (i) an association formed or continued on the basis of a personal relationship, involving mutual confidence this element will often be found where a pre existing partnership has been converted into a limited company; (ii) an agreement, or understanding, that all, or some (for there may be 'sleeping ' members), of the shareholders shall participate in the conduct of the business; (iii)restriction upon the transfer of the members ' interest in the company so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere.
" The respondents have laid great emphasis on the ratio of the above decision.
It is true that section 222(f) of the English Companies Act, 1948 which the House of Lords was considering corresponds to section 433(f) of the Act.
In the above decision the House of Lords had to deal with a private limited company consisting of three members, the petitioner therein, being one of the three.
Lord Wilberforce delivering his reasoned speech has himself noted that "It is a fact of cardinal importance that since about 1945 the business had been carried on by the appellant and Mr. Nazar as partners, equally sharing the management and the profits".
It was also noticed that "the company made good profits, all of which were distributed as directors ' remuneration.
No dividends have ever been paid, before or after the petition was presented." In Ebrahimi 's case (supra) the company which was first formed by the two erstwhile partners, Ebrahimi and Nazar, was joined by Nazar 's son, George Nazar, as the third director and each of the two original shareholders transferred to him 100 shares so that at all material times Ebrahimi held 400 shares, Nazar 400 shares and George Nazar 200 shares.
The Nazars, father and son, thus had a majority of the votes in general meeting.
Until the dispute all the three remained directors.
Later on an ordinary resolution was passed by the company in general meeting by the votes of Nazar and George Nazar removing Ebrahimi from the office of director.
That led to the petition for winding up before the court.
The following features are found in Ebrahimi 's case: (1) There was a prior partnership between the only two members who later on formed the company.
236 (2) Both the shareholders were directors sharing the profits equally as remuneration and no dividends were declared.
(3) One of the shareholders ' son acquired shares from his father and from the second shareholder, Ebrahimi, and joined the company as the third shareholder director with two hundred shares (one hundred from each).
(4) After that, there was a complete ouster of Ebrahimi from the management by the votes of the other two directors, father and son.
(5) Although Ebrahimi was a partner, Nazar had made it perfectly clear that he did not regard Ebrahimi as a partner but regarded him as an employee in repudiation of Ebrahimi 's status as well as of the relationship.
(6) Ebrahimi through ceasing to be a director lost his right to share in the profits through directors ' remuneration retaining only the chance of receiving dividends as a minority shareholder.
Bearing in mind the above features in the case, the House of Lords allowed the petition for winding up by reversing the judgment of the court of appeal and restoring the order of Plowman, J. None of the parties questions the principles as such adumbrated by the House of Lords in Ebrahimi 's case (supra) or even those in the earlier Yenidje 's case (supra) and indeed these are sound principles depending upon the nature, composition and character of the company, The principles, good as they are, their application in a given case or in all cases, generally, creates problems and difficulties.
The respondents ' counsel is well cognizant of this difficult aspect and, therefore, rests his argument on the footing that the company is in substance a partnership and necessarily, therefore, according to him, the principles of partnership should be attracted.
Before we come to the facts of the present case, we have to deal with the principles of the Yenidje 's case (supra) which were the cornerstone of the arguments on behalf of both the parties before the Company Judge as well as the appellate court.
Ebrahimi 's case (supra) was not available to the parties at that stage.
Yenidje 's case (supra) has acquired celebrity and in application of the ratio of that case varying shades and colour have been sought to be given from time to time in England and appropriate to occasions and to facts and circumstances of cases coming before the courts.
It is not necessary for us to go over the labyrinth of cases wherein the Yenidje 's principle was applied and it will be sufficient to gather the ratio from the words of Lord Cozens Hardy M.R. expressed in the decision itself.
The learned Master of Rolls posed the question thus in that case: "I think it right to consider what is the precise position of a private company such as this and in what respects it can be fairly called a partnership in the guise of a private company.
" 237 This was a company of the two shareholders and two directors who had earlier traded separately but amalgamated their businesses and formed a private limited company.
The constitution of the company was such that under its articles of association for any case of difference or dispute between the directors there was a provision for arbitration.
In fact in one of such disputes a reference was made to arbitration which resulted in an award to which one of the two shareholders declined to give effect.
It was proved in that case that the two directors were not on speaking terms, that the so called meetings of the board of directors had been almost a farce or comedy, the directors would not speak to each other on the board, and some third person had to convey communications between them which ought to go directly from one to the other.
Under the above situation it was observed by the learned Master of Rolls as follows: "Is it possible to say that it is not just and equitable that that state of things should not be allowed to continue, and that the Court should not intervene and say this is not what the parties contemplated by the arrangement into which they entered ?" * * * * * "Certainly, having regard to the fact that the only two directors will not speak to each other, and no business which deserves the name of business in the affairs of the company can be carried on, I think the company should not be allowed to continue.
I have treated it as a partnership, and under the Partnership Act of course the application for a dissolution would take the form of an action; but this is not a partnership strictly, it is not a case in which it can be dissolved by action.
But ought not precisely the same principles to apply to a case like this where in substance it is a partnership in the form or the guise of a private company ? It is a private company, and there is no way to put an end to the state of things which now exists except by means of a compulsory order.
It has been urged upon us that the just and equitable clause has. been held. not to apply except where the substratum of the company has gone or where there is a complete deadlock.
Those are the two instances which are given, but I should be very sorry, so far as my individual opinion goes, to hold that they are strictly the limits of the 'just and equitable ' clause as found in the Companies Act".
* * * * * "If ever there was a case of deadlock I think it exists here; but, whether it exists or not, I think the circumstances are such that we ought to apply, if necessary, the analogy of the partnership law and to say that this company is now in a state which could not have been contemplated by the parties when the company formed and which ought to be terminated as soon as possible".
238 It is clear that although Yenidje 's case (supra) was a case of a complete deadlock, that was not stated to be the sole basis for a conclusion to wind up the company.
The House of Lords in Ebrahmi 's case (supra) approved the decision in Yenidje 's case (supra).
We may also point out that the House of Lords did not approve of the undue emphasis put on the contractual rights arising from the articles over the equitable principles, derived from partnership law in re Cuthbert Cooper & Sons Limited (supra).
We may also refer to the Privy Council decision in Loch and Another and John Blackwood Limited(1), wherein section 127 of the Companies Act, 1910, of Barbados, identical with section 433(f) of the Act was considered.
Lord Shaw of Dunfermline quoted in the judgment a passage from the case of Baird vs Lees(2), which is as follows : "I have no intention of attempting a definition of the circumstances which amount to a `just and equitable ' cause.
But I think I may say this.
A shareholder puts his money into a company on certain conditions.
The first of them is that the business in which he invests shall be limited to certain definite objects.
The second is that it shall be carried on by certain persons elected in a specified way.
And the third is that the business shall be conducted in accordance with certain principles of commercial administration defined in the statute, which provide some guarantee of commercial probity and efficiency.
If shareholders find that these conditions or some of them are deliberately and consistently violated and set aside by the action of a member and official of the company who wields an overwhelming voting power, and if the result of that is that, for the extrication of their rights as shareholders they are deprived of the ordinary facilities which compliance with the Companies Acts would provide them with, then there does arise, in my opinion, a situation in which it may be just and equitable for the Court to wind up the company".
We may also refer to another decision of the Privy Council in D. Davis & Co. Ltd. vs Brunswick (Australia), Ltd. and others(3) which was from the decision of the Full Court of the Supreme Court of New South Wales.
Section 84(e) of the New South Wales Companies Act (1899) also provides for winding up, inter alia, on just and equitable ground.
In dealing with that clause, the Privy Council observed as follows : "The position of the Court in determining whether it is just and equitable to wind up the company requires a fair consideration of all the circumstances connected with the formation and the carrying on of the Company during the short period which had elapsed since 12th May, 1930; and the 239 common misfortune which had befallen the two shareholders in the Company does not, in their Lordships view, involve the consequence that the ultimate desires and hopes of the ordinary, shareholders should be disregarded merely because there is a strong interest in favour of liquidation naturally felt by the holders of the preference shares".
* * * * * "Nor on the other hand can any general rule be laid down as to the nature of the circumstances which have to be borne in mind in considering whether the case comes within the phrase".
This Court had to deal with the `just and equitable ' clause under section 162(vi) of the Indian Companies Act, 1913, in Rajahmundry Electric supply Corporation Ltd. vs A Nageswara Rao and others(1) and the Court quoted with approved the following passage in Loch 's case (supra) : "It is undoubtedly true that at the foundation of applications for winding up, on the `just and equitable ' rule, there must lie a justifiable lack of confidence in the conduct and management of the company 's affairs.
But this lack of confidence must be grounded on conduct of the directors, not in regard to their private life or affairs, but in regard to the company 's business.
Furthermore the lack of confidence must spring not from dissatisfaction at being outvoted on the business affairs or on what is called the domestic policy of the company.
On the other hand, wherever the lack of confidence is rested on a lack of probity in the conduct of the company 's affairs, then the former is justified by the latter, and it is under the statute just and equitable that the company is wound up".
Again in Mohan Lal & Anr.
vs Grain Chamber Ltd. Muzaffarnagar & Ors.,(2) this Court had held that "Primarily the circumstances existing at the date of the petition must be taken into consideration for determining whether a case is made out for holding that it is just and equitable that the company should be wound up" (See also Rajahmundry Electric Supply Corporation 's case (supra) and section P. Jain vs Kalinga Tubes Ltd.(3).
Keeping the ratio of Ebrahimi 's case in the forefront of his argument Mr. Sen submits that in the present case also there was a definite understanding and agreement between the two family groups for equal status and equal participation in management and, therefore, exclusion of the respondents from the directorship is burial of mutual trust and denial of that relationship on which alone the company was formed and hence there is a prima facie case for admitting the petition.
240 Although the Indian Companies Act is modelled on the English Companies Act, the Indian law is developing on its own lines.
Our law is also making significant progress of its own as and when necessary.
Where the words used in both the Acts are identical, the English decisions may throw good light and reasons may be persuasive.
But as the Privy Council observed long ago in Ramanandi Kuer vs Kalawati Kuer(1) "It has often been pointed out by this Board that where there is a positive enactment of the Indian legislature, the proper course is to examine the language of that statute and to ascertain its proper meaning uninfluenced by any considerations derived from the previous state of the law or of the English law upon which it may have been founded.
" If it was true in the twenties it is more apposite now that the background, conditions and circumstances of the Indian society, the needs and requirements of our country call for a somewhat different treatment.
We will have to adjust and adapt, limit or extend, the principles derived from English decisions, entitled as they are to great respect, suiting the conditions of our society and the country in general always, however, with one primary consideration in view that the general interests of the shareholders may not be readily sacrificed at the altar of squabbles of directors of powerful groups for power to manage the company.
When more than one family or several friends and relations together form a company and there is no right as such agreed upon for active participation of members who are sought to be excluded from management, the principles of dissolution of partnership cannot be liberally invoked.
Besides, it is only when share holding is more or less equal and there is a case of complete deadlock in the company on account of lack of probity in the management of the company and there is no hope or possibility of smooth and efficient continuance of the company as a commercial concern, there may arise a case for winding up on the just and equitable ground.
In a given case the principles of dissolution of partnership may apply squarely if the apparent structure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership.
On the allegations and submissions in the present case, we are not prepared to extend these principles to the present company.
The principle of `just and equitable ' clause baffles a precise definition.
It must rest with the judicial discretion of the court depending upon the facts and circumstances of each case.
These are necessarily equitable considerations and may, in a given case be superimposed on law.
Whether it would be so done in a particular case cannot be put in the strait jacket of an inflexible formula.
In an application of this type allegations in the petition are of primary importance.
A prima facie case has to be made out before the court can take any action in the matter.
Even admission of a petition which will lead to advertisement of the winding up proceedings 241 is likely to cause immense injury to the company if ultimately the application has to be dismissed.
The interest of the applicant alone is not of predominant consideration.
The interests of the shareholders of the company as a whole apart from those of other interests have to be kept in mind at the time of consideration as to whether the application should be admitted on the allegations mentioned in the petition.
The question that is raised in this appeal is as to what is the scope of section 433(f) of the Act.
Section 483 provides for the circumstances in which a company may be wound up by the court.
There are six recipes in this section and we are concerned with the sixth, namely, that a company may be wound up by the court if the court is of the opinion that it is just and equitable that the company should be wound up.
Section 222(f) of the English Companies Act, 1948 is in terms identical with the Indian counter part, section 433 (f).
It is now well established that the sixth clause namely, 'just and equitable ' is not to be read as being ejusdem generis with the preceding five clauses.
While the five earlier clauses prescribe definite conditions to be fulfilled for the one or the other to be attracted in a given case, the just and equitable clause leaves the entire matter to the wide and wise judicial discretion of the court.
The only limitations are the force and content of the words themselves, 'just and equitable '.
Since, however, the matter cannot be left so uncertain and indefinite, the courts in England for long have developed a rule derived from the history and extent of the equity jurisdiction itself and also born out of recognition of equitable considerations generally.
This is particularly so as section 35(6) of the English Partnership Act, 1890 also contains, inter alia, an analogous provision for the dissolution of partnership by the court.
Section 44(g) of the Indian Partnership Act also contains the words 'just and equitable '.
Section 433(f) under which this application has been made has to be read with section 443(2) of the Act.
Under the latter provision where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company would up instead of pursuing that other remedy.
Again under sections 397 and 398 of the Act there are preventive provisions in the Act as a safeguard against oppression in management.
These provisions also indicate that relief under section 433(f) based on the just and equitable clause is in the nature of a last resort when other remedies are not efficacious enough to protect the general interests of the company.
Coming to the present case we find that the company was formed first with R.P.J. and Anil Chandra Dutta.
Anil Chandra Dutta was admittedly an employee of V.D.J. and it is also claimed that even R.P.J. was an employee of a company in which V.D.J. was a managing partner.
Although the entire finance was to be arranged by V.D.J., it appears the company was started by the above two persons 242 with V.D.J. remaining in the background.
Anil Chandra Dutta soon resigned and other people came in and in 1965 66 there were 19 shareholders, nine headed by R.P.J. and ten headed by V.D.J., clearly showing two family groups R.P.J. group had 1875 shares and V.D.J. group had 3125 shares.
V.D.J. stood guarantee for bank overdraft to the tune of Rs. 47 lakhs and as the learned Company Judge has noted the stake of the appellant in the company was about Rs. 63 lakhs as opposed to the stake of the respondents amounting to Rs. 1.87 lakhs.
It is, therefore, clear that R.P.J. group 's interest in the company was not of the same magnitude as that of the appellants.
The learned Company Judge put the picture as follows: "The entire affidavit evidence brings in the forefront two broad features.
First, that there are disputes between the petitioners and the respondents regarding appointment of Vinode Kumar Jhunjhunwalla and Hariram Modi.
It is said on behalf of the petitioners that these appointments in breach of articles and in breach of the provisions of the Companies Act are adequate grounds for winding up.
It is, on the other hand said by the respondents that the allegations of breach of articles and provisions of the Act are denied and these are the subject matter of remedy by suit and are not the subject matter of winding up.
The other feature is that the respondents charge the petitioners with misappropriation.
The petitioners also charge the respondents with having utilised the funds of the company.
" Is this company, in substance a partnership or in the image of a partnership as claimed ? We may now address to this aspect strenuously emphasised by Mr. Sen. It as in Ebrahimi 's case (supra) there had been an earlier partnership and the partners later on formed into a company, the matter would have stood on a different footing.
In the present case, however, we do not find any special features which would unquestionably lead to the conclusion that the company is in substance a partnership.
On the other hand the following aspects are noteworthy: Assuming partnership had been contemplated, the idea was deliberately abandoned.
The company was started with one Anil Chandra Dutta who was no relation of the two families but was an employee of V.D.J. This would negative the idea of partnership which connotes equal status amongst the partners.
While it is true that a director may work in the company on remuneration, R.P.J., however, served like an employee on monthly salary not on his own initiative enjoying an equal partner 's freedom and prestige but directly under the supervision and control of V.D.J. acknowledging a status definitely of a subordinate character.
The voluntary financial involvement of a large stake by V.D.J. carefully sought to be protected against erosion of his interests by constant vigil on the day to day working does not fit in with the concept of a partnership.
All the above features do not enable us to accept the submission of the respondents that the company in this case is in substance a partnership.
243 In the present case there is yet another important feature against the respondents.
Serious trouble apparently arose on or about May 23, 1966, when a Board meeting was notified.
Prior to that even though something might, perhaps, be brewing inside, but nothing came to the surface although the respondents alleged that V.D.J 's son, Vinode Kumar Jhunjhunwalla, had been sent to the States at company 's expense and was later on, after completion of education, appointed as Technical Director and that all these were illegal actions.
It is significant that R.P.J. group was present in the meeting when these resolutions were passed and they made no grievance at the time about the same.
The petition for winding up was filled on June 7, 1966 and the foundation for it was laid in the solicitors ' letter to the appellants on May 27, 1966.
That may be said to be nucleus of the dispute so far as the records show.
It is not a proper principle to encourage hasty petitions of this nature without first attempting to sort out the dispute and controversy between the members in the domestic forum in conformity with the articles of association.
There must be materials to show when 'just and equitable ' clause is invoked, that it is just and equitable not only to the persons applying for winding up but also to the company and to all its shareholders.
The company court will have to keep in mind the position of the company as a whole and the interests of the shareholders and see that they do not suffer in a fight for power that ensues between two groups.
The cases of small companies stand on a different footing from a company like the present with nineteen shareholders, although apparently arrayed in two groups.
It is not, prima facie, established on the allegations that the company cannot run smoothly in the best interest of the general shareholders, including the R.P.J. group, after exit of the quondam directors.
The conclusion of the Division Bench that the company is in substance a partnership venture was based on the following principal reasons: (1) The original idea was to start a partnership venture and that idea was given ultimately the shape of a private company (2) The Sir Khata account shows that the starting on a partnership venture the parties set up a private company.
(3) The shareholding shows division amongst two family groups.
(4) There was no denial by the appellants of a specific averment of the respondents that the company was in substance a partnership.
(5) The respondents were all along functioning as working partners and the respondent, V.D.J. was the financial partner.
We will examine each of these reasons.
244 With regard to the first reason, the solicitors ' letter of May 27, 1966, which is the nucleus of the subsequent winding up petition filed in court is of great significance and the improvement in the version later in the petition will lose its importance.
It was stated in the solicitors ' letter that "some time in May 1956 it was agreed between our client Shri R. P. Jhunjhunwalla and Shri V. D. Jhunjhunwalla and Shri Mahabir Prasad Jhunjhunwalla to do some type of business in partnership, Shri V. D. Jhunjhunwalla suggested that a limited company should be formed in which our client could hold shares to the extent of /6/ annas and Shri V. D. Jhunjhunwalla and Shri Mahabir Prasad Jhunjhunwalla to the extent of annas /10/ and that our client would manage the business of such company as and when it was formed and that the requisite finance for the working of the company would be made by Shri V. D. Jhunjhunwalla and Shri Mahabir Prasad Jhunjhunwalla.
" There is nothing in the above paragraph which is the corner stone of the plea of partnership in substance that there was any active contemplation about forming of a partnership.
Reference to 'some type of business of partnership ' is very casual in the above extract.
On the other hand, it is more reasonable to conclude that although there might have been discussion about the advantages and disadvantages of partnership vis a vis a private limited company, no time was lost in deciding to form a company.
If this is the only basis of agreement between the parties to sustain the claim, we are unable to accept the same.
Regarding the second reason, the Sir Khata account which has been heavily relied upon to found an agreement or understanding is wholly misconceived.
It merely shows that a joint account was, for the time being opened for the purpose of the formation of the company and the account was closed on such formation.
It does not indicate any understanding as to the right of management of the company by any group of shareholders.
Thirdly, because the shareholding is between two family groups, it cannot be said that the company thereby takes the image of partnership.
On the other hand, the fact that after discussion, the parties deliberately abandoned the idea of forming a partnership would go to show that there was no intention to carry on business as partners.
Fourthly, after going through the correspondence it is not possible to say that there was no denial of the averment by the respondents that the company was in substance a partnership.
Apart from anything else it is enough to point out that in the letter of V.D.J. dated June 3, 1963, the allegations have been clearly denied.
It is, therefore, a very weak reason to reckon.
With regard to the last reason, it appears that the respondents themselves took the position in their petition that R.P.J. was managing the affairs of the company under daily supervision and control of V.D.J. Whether this position is accepted by the appellants or not, their statement in that respect gives no indication of their right to manage the business as a working partner as claimed.
Besides, working on remuneration by a director is not an unknown feature even in company business and we have already adverted to the status in 245 which he worked.
Nothing, therefore, turns on this feature.
All the above reasons, therefore, fail to convince us that the conclusion of the Division Bench that the company is in substance a partnership, is correct.
We should observe, that nothing observed by us in this appeal may be taken as expression of any opinion on the merits of the allegations and counter allegations of the parties.
In the result the appeal is allowed with costs.
The judgment of the Division Bench is set aside.
The winding up petition stands dismissed and the stay petition of the appellant is allowed.
S.R. Appeal allowed.
| IN-Abs | Under section 433(f) of the , a company may be wound up by the Court, if the Court is of opinion that it is just and equitable that the company should be wound up.
Section 44(g) of the Partnership Act also speaks of the "just and equitable clause".
One RPJ agreed with VDJ and MPJ who are carrying on the business under the name and style of "Chimanram Motilal" to start a new business of iron and steel in co partnership and for that purpose, an account was opened in the name of "Raghunath Prasad Jhunjhunwalla Ka Sir Khata" in the books of "Chimanram Motilal".
It was agreed that RPJ should have 3/8th share and VDJ with MPJ should have 5/8th share of the proposed business.
Before the said proposed business could be started, at the suggestion of VDJ, actually a limited company was formed in August,.
1956 under the with the understanding that (i) VDJ with MPJ should finance the entire business.
(ii) the share in the company should be held by RPJ, VDJ and MPJ and the members of their respective families in the proportion of 3/8th and 5/8th as agreed to before and (iii) that RPJ and his group would generally look after the day to day business of the company under the general control and supervision of VDJ.
The nominal capital of the company was Rs. 5 lacs divided into 2500 equity shares of Rs. 100/ each.
RPJ and another ACD, an employee and nominee of VDJ, became the subscribers to the Memorandum of Association of the company and also became its first directors.
On 23 8 1956, VDJ and MPJ were appointed as directors of the company.
On 23 11 1957, ACD resigned and PCJ (son of RPJ) was opted in his place.
RPJ was appointed a director in charge of the company and both RPJ and PCJ were paid monthly remunerations.
Following a family partition between VDJ and MPJ in the year 1958, the shares of MPJ were transferred in the name of the wife of VDJ and MPJ resigned from the Board of Directors on 21 1 1959.
Since that date till October, 1965 the Board of Directors were RPJ.
PCJ and VDJ, when VDJ got his son VKJ appointed as Technical Director of the company.
Though the business of the company was managed by RPJ and PCJ, the business policy, the appointment of staff, general supervision of the work of the business etc., were in the hands of VDJ.
From 1959 onwards the factory commenced its regular production and substantial profits were made between 1960 and 1965 except in the year 1961 when there was some loss.
Finding that there has been a mismanagement of affairs of RPJ and PCJ to the tune of Rs. 8 lacs the VDJ group who were holding the major shares numbering, 3125, in order to safeguard their interest and the business, called the Board 's meeting on 27 5 1966 and the Board countermanded all the previous resolutions and thus took away all the powers of RPJ.
The extraordinary general meeting called on 28 5 1966 resolved to remove RPJ and PCJ as directors of the company and to appoint persons belonging to VDJ 's group as directors.
This led to the filing of an application for winding up under section 433(f) of the by RPJ before the company Judge of the Calcutta High Court contending that the company was in the nature of a 227 partnership and is liable to be wound up in view of the loss of confidence between the two groups/members and on the alleged ouster of RPJ group.
The Petition for winding up was dismissed by the company Judge inasmuch as (i) the substratum of the company was not gone; (ii) the deadlock could be resolved by the articles; (iii) there were alternative remedies open: and (iv) lack of probity did not result in prejudice to the company 's business affecting petitioner 's rights as share holder, but only affected his right as director.
The appellate Bench, however, allowed the appeal of the respondent RPJ and ordered the winding up of the company in the facts and circumstances of the case, viz., impossibility of carrying on business by RPJ as a partner, the exclusion of RPJ from the partnership concern and loss of mutual confidence between RPJ and VDJ group.
Dismissing the appeal by certificate, the Court, ^ HELD: (1) In an application under section 433, the company Court will have to keep in mind the position of the company as a whole and the interests of the shareholders and see that they do not suffer in a fight for power that ensues between the two groups.
The court should see that a prima facie case has been made out before it is admitted on the allegations in the petition.
Even admission of a petition which will lead to advertisement of the winding up proceedings us likely to cause immense injury to the company if ultimately the application has to be dismissed.
The interest of the applicant alone is not of predominant consideration.
It is not proper principle to encourage hasty petitions under section 433 without first attempting to sort out the dispute and controversy between the members in the domestic forum in conformity with the articles of association.
There must be materials to show when "just and equitable clause" is involved, that it is just and equitable not only to the persons applying for winding up but also to the company and to all its shareholders.
[243 C D, 240 H, 241 A] (2) Section 433 of the is modelled on the English .
The Indian law is developing on its own lines and making progress of its own circle.
The courts will have to adjust and adapt limit or extend the principles derived from English decisions entitled as they are to great respect, suiting the conditions of our society and the country in general, always, however, with one primary consideration in view that the general interests of the shareholders may not be readily sacrificed at the altar of squabbles of directors of powerful groups for powerful to manage the company.
[240A, C D] Ramanandi Kuer vs Kalawati Kuer, , applied.
(3) Section 433 of the , provides six recipes so that the company may be wound up by the court.
Under section 433(f) which is identical in terms with section 222(f) of the English Act of 1948, a company may be wound up by the court if the court is of opinion that it is just and equitable that the company should be wound up.
It is now well established that the sixth clause, viz., "just and equitable" is not to be read as being "ejusdem generis" with the preceding five clauses.
The just and equitable clause leaves the entire matter to the wide and wise judicial discretion of the court.
The only limitations are force and the content of the words themselves "just and equitable".
Section 44(g) of the Indian Partnership Act also contains the words "just and equitable".
[241 B E] Section 433(f) is to be read with section 443(2) of the Act, which provides that where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.
Again under section 307 and 398 of the Act there are preventive provisions in the Act as a safeguard against oppression in management.
These provisions also indicate that relief under section 433(f) based on the "just and equitable" clause is in the nature of a last resort when other remedies are not efficacious enough to protect the general interests of the company.
[241 E G] 228 Madan Lal and another vs Groin Chambers Ltd., Muzaffar Nagar and others; , and section P. Jain vs Kalinga Tubes Ltd. ; , followed.
(4) In applying the principles of dissolution of partnership to companies, the following factors must be present: Equal shareholding; complete deadlock in the administration of the company; lack of probity and mismanagement in the conduct of affairs of the company [In re Yenidje Tobacco Co. Ltd. The just and equitable clause cannot be invoked if a deadlock can be resolved by the articles and if there are alternate remedies.
(In re Cuthbert Cooper and Sons Ltd., 1937 Ch.
If there is no justifiable lack of confidence grounded on the conduct of the directors in the conduct of management of the companies affairs (Rajahmundry Electric Supply Corporation These are sound principles depending upon the nature, composition and character of the company.
The principles are good as they are their application in a given case or in all cases, generally creates problems and difficulties.
[233D E; 236 D] (5) The principle of "just and equitable" clause baffles a precise definition.
It must rest with the judicial discretion of the court depending upon the facts and circumstances of each case.
When more than one family or several friends and relations together form a company and there is no right as such agreed upon for active participation of members who are sought to be excluded from management the principles of dissolution of partnership cannot be liberally invoked.
Besides, it is only when shareholding is more or less equal and there is a case of complete deadlock in the company on account of lack of probity in the management of the company and there is no hope or possibility of smooth and efficient continuance of the company as a commercial concern, there may arise a case for winding up on the "just and equitable" ground.
In a given case the principles of dissolution of partnership may apply squarely if the apparent structure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership.
These are necessarily equitable considerations and may in a given case be superimposed on law.
Whether it would be so done in a particular case cannot be put in the strict jacket of an inflexible formula.
[247G, D F] In re Cathbert Cooper & Sons Limited, [1937] Ch. 392; and In re Yenidje Tobacco Company Limited, , discussed.
In re Ebrahimi and Westbourane Galleries Ltd. , discussed and considered.
Lackh and another vs John Blackwood Limited ; , quoted with approval.
Baird vs Lees.
and D. Davis & Co. Ltd. vs Brunswick (Australia) Ltd. and others A.I.R. 1938 PC 114, referred to.
Rajahmundry Electric Supply Corporation Ltd. vs A. Nageswara Rao and others[1955] 2 SCR [1066], Mohan Lal & Anr.
vs Grain Chamber Ltd., Muzaffarnagar and others.
; and S.P. Jain vs Kalinga Tubes Ltd., , followed.
(6) In the present case, assuming partnership had been contemplated the idea was deliberately abandoned; the company was started with one ACD who had no relation with MCJ group or the VDJ group but an employee of VDJ, which would negative the idea of partnership which connotes equal status among the partners; While it is true that a director may work in the company on remuneration.
RPJ however served like an employee on monthly salary not on his own initiative enjoying an equal partner 's freedom and prestige but directly under the supervision and control of VDJ acknowledging a status definitely of a subordinate character; The voluntary financial involvement of a large stake by VDJ carefully thought to be protected against erosion of his interests by constant vigil on the day to day working does not fit in with the 229 concept of a partnership; Even the account was being opened for the purpose of the formation of the company and the account was closed on such formation.
The shareholding is between the two family groups, it cannot be said that the company thereby takes the image of partnership.
On the other hand, the fact that after discussion, the parties deliberately abandoned the idea of farming a partnership would go to show that there was no intention to carry on business as partners.
[242E H] There are no special features which would unquestionably lead to the conclusion that the company is in substance a partnership and the principle of "just and equitable clause" cannot be therefore, extended.
[242 H, 245A]
|
Civil Appeals Nos. 106 and 107 of 1975.
Appeals by Special Leave from the Judgment and Order dated 18 10 74 of the Orissa High Court in O.J.C. Nos. 851 and 850 of 1972 respectively.
section V. Gupte (In CA 107/75) and Vinoo Bhagat for the Appellant.
G. Rath, Advocate General, and B. Parthasarthi for Respondent No. 1 (In CA 106/75 and Respondent in CA 107/75).
The Judgment of the Court was delivered by GOSWAMI, J.
This judgment will govern both the above mentioned appeals.
We may take the facts briefly from Civil Appeal No. 107 of 1975.
The Orissa Textile Mills Limited is a public limited company (briefly the company) and is engaged in manufacture of textile articles.
It is located at Choudwar in the District of Cuttack (Orissa).
On May 12, 1960, the company (described in the agreement as Consumer) entered into an agreement with the State of Orissa (described in the agreement as the Supplier) for supply of electric power.
The contract was for a period of five years from the date of supply of electric power, namely, February 1, 1963 and it was thereafter to so continue unless and until the same was determined by either party giving to the other six calendar months ' notice in writing of the intention to terminate the agreement.
It is common ground that the agreement has not been terminated.
It may be appropriate at this stage to refer to a few clauses in the agreement.
Clause 12 provides for charges to be paid by the consumer as well as about maximum demand.
Clause 13 reads as follows: "The tariff and conditions of supply mentioned in this Agreement shall be subject to any revision that may be made by the Supplier from time to time".
309 Clause 22 deals with extra charge regarding domestic lighting, fans, domestic power and street lighting, etc.
in the colony of the Mills.
Clause 23 reads as follows: "Any dispute or difference arising between the Consumer and the Supplier or their respective Electrical Engineers as to the supply of electrical energy hereunder or the pressure thereof or as to the interpretation of this Agreement or the right of the Supplier or the consumer respectively to determine the same or any other question, matter or thing arising hereunder shall be referred to a single arbitrator who shall be mutually agreed upon by both parties.
The arbitrator 's decision thereon shall be final and the provisions of the Arbitration Act of 1940 (X of 1940) or of any other statutory modification thereof for the time being in force shall apply to any such reference".
On April 1, 1962, the Orissa State Electricty Board (briefly the Board) was constituted by the State Government under section 5 of the (briefly the Act).
Under section 60(1) of the Act "all debts and obligations incurred, all contracts entered into and all matters and things engaged to be done by, with or for the State Government for any of the purposes of this Act before the first constitution of the Board shall be deemed to have been incurred, entered into or engaged to be done by, with or for the Board. " By this section, therefore, the Board assumed all obligations of the State Government in respect of matters to which the Act applied.
It is common ground that the contract entered between the company and the State Government is binding on both.
The Board decided to levy a surcharge of 10 per cent on the power tariff then in force with effect from July 1, 1972, and a Press Note was issued accordingly.
The material portion of the Press Note may be extracted: "The Orissa State Electricity Board has decided to levy a general and uniform surcharge of 10 per cent on the power tariff now in force except on the following categories of consumers who will pay the existing tariff: (1) Power Intensive Industries which are governed by Special Agreements.
(2) Domestic power and lighting.
In respect of irrigation loads (pumping and agriculture) the power tariff will be Re. 0.16p (sixteen paise) per unit (Kwh) with a rebate of Re. 0.01p (one paise) per unit 'KwhP ' for timely payment.
The above levy of surcharge of 10 per cent is also applicable to the power supply to the Hindustan Steel Ltd., Rourkela and Kalinga Iron Works, Barbil.
310 The levy of 10 per cent surcharge will be on demand charges, unit charges, maximum and minimum charges and reservation charges.
* * * * The levy of surcharge and revised tariff for irrigation loads has become necessary for improving the Board 's overall financial return and enabling it to undertake larger developmental programmes like rural electrification.
* * * * It appears that the second purpose in the above Press Note with reference to "larger developmental programmes like rural electrification" was omitted by a revised Press Note.
The company unsuccessfully challenged the levy of the surcharge by an application under article 226 of the Constitution in the Orissa High Court.
Several contentions were raised in the petition before the High Court.
The surcharge was, inter alia, challenged as being violative of article 14 of the Constitution.
This objection was repelled by the High Court and the learned counsel appearing on behalf of the company was unable to press the same before us in view of the Presidential suspension of that article during the emergency.
Some other grounds, including that clause 13 is ultra vires the Act, were taken before the High Court but have not been pressed before us.
Mr. Gupte, the learned counsel appearing on behalf of the appellants, submits as follows: (1) The Board has no power to levy a surcharge under the provisions of the Act.
(2) Clause 13 of the agreement cannot take in the levy of surcharge.
It is, therefore, not a matter for reference to arbitration under clause 23 of the agreement.
(3) Assuming it has power under the Act or under clause 13 to levy a surcharge, the Board in exempting certain categories and imposing surcharge upon the appellants is guilty of discrimination which is impermissible under section 49 of the Act and clause (2) of Schedule I to the agreement.
With regard to his first contention Mr. Gupte submits that surcharge is unknown to the provisions in the Act and the Board has no power under the Act to levy a surcharge.
It is not possible to accede to the submission that the demand of surcharge cannot be included in the revision of rates of tariff.
The word surcharge is not defined in the Act, but etymologically, inter alia, surcharge stands for an additional or extra charge or payment (see Shorter Oxford English Dictionary).
Surcharge is thus a 311 superadded charge, a charge over and above the usual or current dues.
Although, therefore, in the present case it is in the form of a surcharge, it is in substance an addition to the stipulated rates of tariff.
The nomenclature, therefore, does not alter the position.
Enhancement of the rates by way of surcharge is well within the power of the Board to fix or revise the rates of tariff under the provisions of the Act.
The first submission of counsel is, therefore, of no avail.
Before we deal with the second submission of counsel, we may refer to a recent decision of this Court in M/s Titagarh Paper Mills Ltd. vs Orissa State Electricity Board and Another(1) (briefly the Titagarh 's case) to which one of us was a party.
This Court following the decision in the Indian Aluminium Company vs Kerala State Electricity Board(2) with regard to the scope of sections 49 and 59 of the Act held in the Titagarh 's case (supra) as follows: ". neither section 49 nor section 59 confers any authority on the Board to enhance the rates for supply of electricity where they are fixed under a stipulation made in an agreement.
The Board has no authority under either of these two sections to override a contractual stipulation and enhance unilaterally the rates for the supply of electricity".
It is clear from the above decision that an agreement entered in exercise of the power conferred by the statute, such as under section 49(3) of the Act, cannot be set at naught by unilateral exercise of power by the Board under the Act to enhance the rates agreed upon between the parties in the absence of any provision in that behalf in the agreement itself.
In the Indian Aluminium Company 's case (supra) there was no provision in the agreement with regard to the revision of tariff, such as we find in clause 13 of the present agreement.
This Court, therefore, had not to consider in that case about the effect of a clause like clause 13.
In the Titagarh 's case (supra), however, this Court had to take into consideration clause 13 of the agreement therein which is the identical clause in the present case.
Sub sections (1) and (2) of section 49 empower the Board to fix uniform rates of tariff.
Sub section (3) of section 49 on the other hand reserves to the Board the power of fixing different tariffs having regard to certain factors mentioned therein.
Section 49(3) contemplates what are known as 'special agreements '.
Power under section 49(1) and (2) cannot be invoked during the subsistence of special agreements providing for stipulation of rates of tariff in absence of any reservation therein.
Exercise of power under section 49(1) and (2) as also under section 59 will remain suspended during the currency of the special agreements between the parties and no unilateral enhancement of rates is permissible under law.
There is only a pro tempore ban on revision of rates during the subsistence of statutory special agreements entered in conformity with section 49(3) of the Act.
312 Mr. Gupte, however, submits that since there have been special agreements between the parties the stipulated rates could not be increased by adding the surcharge in question.
This argument proceeds on a wrong assumption that surcharge is absolutely different from rates of tariff.
Besides the submission fails to take count of clause 13 of the agreement with regard to revision of rates.
The ratio of the Indian Aluminium Company 's case (supra) will be available on all fours only where there is nothing in the special agreement with regard to revision of rates during the subsistence of the agreement.
With regard to the second submission, which overlaps to some extent with the first, Mr. Gupte points out that revision of tariff under clause 13 cannot include levy of surcharge which is distinct from tariff.
He also draws our attention to the various clauses in the Press Note where both the expressions 'surcharge and tariff ' are freely used.
On the other hand, the learned Advocate General submits that the import of surcharge depends upon the nature of the original charge.
If the surcharge is appended to a tariff it partakes of the character of tariff.
When the Press Note introduces the surcharge in addition to tariff rates, not much can be made of for use of the two words separately.
We have already noted the meaning of the word 'surcharge ' while dealing with the first submission of the learned counsel.
We may only add that this Court in Titagarh 's case (supra) put the matter beyond controversy in the following words: "Now, the effect of the levy of coal surcharge would be to enhance the rates for the supply of electricity stipulated under the agreement".
Besides in the Titagarh 's case (supra) this Court further observed as follows: "Questions such as: whether the Board has power under clause (13) of the agreement to levy any coal surcharge at all when no such power was conferred on it by the Act, whether the action of the Board in levying the coal surcharge on the appellant under clause (13) of the agreement was arbitrary and unreasonable or whether it was based on extraneous and irrelevant considerations and whether, on the facts and circumstances of the case, the Board was justified under clause (13) of the agreement to levy the coal surcharge on the appellant, are plainly questions arising under the agreement and they are covered by the arbitration provision contained in clause (23) of the agreement.
All the contentions raised by the appellant against the claim to justify the levy of the coal surcharge by reference to clause (13) of the agreement would, therefore, seem to be covered by the arbitration agreement and there is no reason why the appellant should not pursue the remedy of arbitration which it has solemnly accepted under clause (23) of the agreement and instead invoke the extraordinary 313 jurisdiction of the High Court under Article 226 of the Constitution to determine questions which really form the subject matter of the arbitration agreement.
" Although this Court was dealing with the coal surcharge in the above decision, there is no distinction in principle between the coal surcharge or a surcharge simpliciter and the ratio of the above decision will be applicable in this case.
The second submission of the learned counsel, therefore, fails and the point is squarely covered by the above decision.
The matter is, therefore, covered by the arbitration clause 23 of the agreement.
With regard to the last submission regarding discrimination founded upon section 49 of the Act and clause (2) of the Schedule I to the agreement, Mr. Gupte relied upon sub section (4) of section 49 which provides that in fixing the tariff and terms and conditions for the supply of electricity, the Board shall not show undue preference to any person.
He also draws our attention to clause (2) of the conditions of supply in the First Schedule to the agreement to the effect that "the Department shall not be entitled to discriminate between different consumers in fixing the charges for the supply of energy".
The agreement is entered under the provisions of section 49(3) of the Act.
If we read section 49 as a whole we find that under sub section (1) of that section, the Board in supplying electricity to any person not being a licensee "may for the purposes of such supply frame uniform tariffs".
However, under sub section (2) of that section in fixing the uniform tariffs the Board shall have regard to the various factors under four heads (a), (b), (c) and (d).
Then comes sub section (3) which preserves the power of the Board, "if it considers it necessary or expedient to fix different tariffs for the supply of electricity to any person not being a licensee having regard to the geographical position of any area, the nature of the supply and purpose for which supply is required and any other relevant factors".
Mr. Gupte submits that there is no reason why the power intensive industries, which are governed by special agreements, should have been exempted from the levy of surcharge in the Press Note.
He further points out that there are eight industries referred to in paragraph 20 of the Special Leave Petition which have not been subjected to the aforesaid 10 per cent surcharge even though the rates of electricity charged per unit in their case are less than those of the Orissa Textile Mills.
It is enough to point out that the industries referred to in the Special Leave Petition were covered by special agreements and we are not even told whether these special agreements had a similar clause like clause 13 in the present case.
This Court has held that special agreements entered under section 49(3) cannot be given a go by while exercising the power of revision of rates under section 49 read with section 59.
That being the position, the objection on the score of discrimination loses all importance.
The totality of the provisions under section 49 does not give any scope for the plea of discrimination raised in this case and in view of clause 13 in the agreement itself.
314 We can appreciate the handicap of counsel in advancing his arguments under the head of discrimination having lost the protective amulet of article 14 of the Constitution under the Presidential embargo during the emergency.
A plea of discrimination which is available when article 14 is in free play is not at par with the interdict of 'undue favour ' under section 49 of the Act.
Apart from this, when law makes it obligatory for certain special agreements to continue in full force during their currency stultifying the power of the Board to revise the rates during the period, no ground of discrimination can be made out on the score of exempting such industries as are governed by special agreements.
Although the Press Note in the instant case did not recite any provisions of the Act under which the same was issued, mere omission to do so does not disentitle the Board to reply upon clause 13 of the agreement for a claim to revision of the rates, although in the form of a surcharge in this case.
We, therefore, do not give any significance to the omission in the Press Note to refer to clause 13 or to any other provision of the Act.
The matter is, therefore, covered by the arbitration clause 23 of the agreement.
It is not for this Court to speculate what answers the Arbitrator will enter with regard to the disputed questions that may be raised before him.
We are not to be understood as expressing any opinion on the merits of the dispute or difference between the parties with regard to the surcharge.
It is then submitted that this Court should not use its discretion in favour of arbitration in a matter where it is a pure question of law as to the power of the Board to levy a surcharge.
This submission would have great force if the sole question involved were the scope and ambit of the power of the Board under sections 49 and 59 of the Act to levy a surcharge, as it was sought to be initially argued.
The question in that event may not have been within the content of clause 23 of the agreement.
But all questions of law, one of which may be interpretation of the agreement, need not necessarily be withdrawn from the domestic forum because the court has discretion under section 34 of the Arbitration Act or under article 226 of the Constitution and that the court is better posted to decide such questions.
The arbitration clause 23 is a clause of wide amplitude taking in its sweep even interpretation of the agreement and necessarily, therefore, of clause 13 therein.
We are, therefore, unable to accede to the submission that we should exercise our discretion to withhold the matter from arbitration and deal with it ourselves.
We, therefore, find no justification in interfering with the conclusion of the High Court in dismising the writ application.
In the result the appeals fail and are dismissed.
We will, however, make no order as to costs.
P.B.R. Appeals dismissed.
| IN-Abs | Under cl. 13 of the agreement between the parties the tariff and conditions of supply of electricity were subject to any revision that may be made by the supplier from time to time.
Clause 23 states that any dispute or difference arising between the consumer and the supplier shall be referred to an arbitrator.
The respondent issued a press note deciding to levy a surchage of 10 per cent on certain categories of customers, which included the appellants.
The appellants challenged the levy but the High Court dismissed their writ petitions.
On appeal to this Court it was contended that (1) the Board had no power under the Act to levy a surcharge, (2) cl.
13 of the Agreement could not take in the levy of surcharge and as such it is not a matter for reference to arbitration under cl. 23 of the agreement and (3) in exempting certain categories and imposing surcharge upon the appellants the Board was guilty of discrimination, which is impermissible under section 49 of the Act and cl. 2 of Schedule I to the Agreement.
Dismissing the appeals, ^ HELD: (1) Enhancement of the rates by way of surcharge is well within the power of the Board to fix or revise the rates of tariff under the provisions of the Act.
The word "surcharge" is not defined in the Act.
Etymologically it stands for an additional or extra charge or payment, and in the present case it is in substance an addition to the stipulated rate of tariff.
[311 A B; 310H] (2) (i) It is only where there is nothing in a special agreement with regard to revision of rates during the subsistence of the agreement that the existence of the special agreements prevents any increase of the rates stipulated in the special agreements by adding the surcharge.
In the present case cl. 13 of the agreement provides for revision of rates and the surcharge is not absolutely different from rates of tariff because the effect of the levy of surcharge would be to enhance the rate of supply of electricity stipulated under the agreement.
[312 A B] M/s.
Titagarh Paper Mills Ltd. vs Orissa State Electricity Board and Another, , followed.
Indian Aluminium Company vs Kerala State Electricity Board, ; , explained.
Therefore, the matter in dispute is covered by the arbitration clause of the Agreement.
[313 B] (ii) Although the press note did not recite any provision of the Act, mere omission to do so did not disentitle the Board to rely upon clause 13 for a claim to revision of the rates.
[314 C] (iii) This is not a fit case for the Court in its discretion, to withhold the matter from arbitration and itself deal with it merely because the Court has discretion to do so under section 34 of the Arbitration Act or under article 226 of the 308 Constitution and that the Court is better posted to decide such questions.
The arbitration clause is of wide amplitude, taking in its sweep even interpretation of the agreement and necessarily, therefore, of cl. 13.
[314 F] (3) The totality of the provisions under section 49 does not give any scope for the plea of discrimination raised in this case and in view of cl. 13 of the agreement itself.
As regards the various industries which have not been subjected to the charge, it is not known whether there is a similar provision like cl. 13 in the agreements.
[313 G H] When the law makes it obligatory for certain special agreements to continue in full force during their currency stultifying the power of the Board to revise the rates during the period, no ground of discrimination can be made out on the score of exempting such industries as are governed by special agreements.
[314 B] M/s.
Titagarh Paper Mills Ltd. vs Orissa State Electricity Board and Another, , applied.
|
Civil Appeal No. 721 of 1974.
Appeal by Special Leave from the Judgment and Order dated the 25th August 1972 of the Bombay High Court in Spl.
Civil Appln.
No. 1831 of 1968.
V. M. Tarkunde, Sharad Manohar, V. N. Ganpule and P. C. Kapoor for the Appellant.
M. N. Shroff for Respondents 1 3.
K. K. Singhvi, R. K. Garg, E. C. Agarwal and V. J. Francis for Respondent No. 4.
The Judgment of the Court was delivered by UNTWALIA, J.
The only point which falls for our determination in this appeal by special leave is whether clause 7(1)(a) of the Bombay Police Officers (Combined Cadre) Conditions of Service Order, 1954 hereinafter called the Order, made by the Government of Bombay in exercise of the powers conferred by clause (b) of Section 5 of the Bombay Police Act, 1951 is constitutionally invalid being violative of Articles 14 and 16 of the Constitution of India as has been held by the Bombay High Court in the Writ Petition filed by respondent no.4.
In the Province or the State of Bombay, there were two separate police forces the Mofussil police force governed by the Bombay District Police Act, 1890 and the City Police of Bombay governed by the 317 City of Bombay Police Act, 1902.
Some steps for inter mixing and inter transfer of officers of one force to the other were taken by making some provisions in Bombay Act XVI of 1949 called the Police Forces (Control and Direction) Act, 1949.
The Bombay Police Act of 1951 repealed the earlier Acts.
Under the Order which came into force on and from the 1st August, 1954, provision was made in clause 4 empowering the State Government whenever it thought fit to order the transfer of any police officer belonging to the combined cadre from Greater Bombay to any District and vice versa.
The combined cadre was sought to be formed under clause 3 of the Order.
Two separate lists of the officers in accordance with their respective seniority were, however, maintained even under clause 3 of the Order.
Previously there was one Police Training School at Nasik where cadets for training were sent.
The period of their training was 18 months.
On passing out the training the cadets were appointed to the posts of Sub Inspectors of Police.
Some were appointed to the District Police Force and some were sent to the Police Force of Greater Bombay.
In the year 1939 due to certain exigencies of administration such as introduction of the scheme of Prohibition and the impending second World War more Sub Inspectors were needed to be appointed for Greater Bombay.
A new Training School was opened at Naigaum a part of Greater Bombay.
This new Training School remained in existence for about a decade from the 1st of May, 1939 to 1st of June, 1949.
The period of training was reduced from 18 months to a much shorter period varying from 3 to 8 months.
Thus cadets of particular batches after completion of training for a shorter period were straightaway appointed as Sub Inspectors of Police in Greater Bombay.
This went on for a period of about 10 years as already stated.
On the other hand, almost invariably, the training period at Nasik School remained of 18 months.
On the general principle of fixation of seniority, the two seniority lists which were maintained separately even under the Order, were maintained on the basis of their passing out the training and in order of merit obtained at the passing examination.
But since after the formation of the combined cadre under the Order transfers were to be made under clause 4, a difficulty was felt in the matter of fixation of seniority vis a vis the officer who had been appointed after completion of full training period and the one who had been appointed on the training of a shorter period.
To avoid this anomaly and difficulty, a provision was made in clause 7 of the Order thus: "7.
(1) When an officer who was in service immediately before the formation of the Combined Cadre is transferred under clause 4, his seniority among Police Officers of equivalent ranks in Greater Bombay or in the Districts, as the case may be shall be determined in the case of an officer who was appointed to a post either in Greater Bombay or in the Districts after a course of training at a Police Training School, (a) if the training commenced on any date between the period from Ist May 1939 to 1st June 1949 (both inclusive) with reference to the date on which training commenced; 318 (b) in other cases, with reference to successful completion of such a course and inter se the place occupied in the results of the examination held at the end of such a course.
" Respondent No. 4 was a Police Officer appointed in the year 1948 after a short training period at Naigaum School.
He challenged by a writ application the vires of the entire Order on certain grounds.
He prayed for a direction to respondents 1 to 3 for not giving affect to the Order and for re fixation of seniority.
There was some dispute as to the seniority of a police officer appointed in a regular manner and the one appointed to the police force from the Excise Department.
The High Court allowed the writ application in part, declared clause 7(1)(a) of the Order as constitutionally invalid and also directed the adjustment of places of seniority as between the police officers who came by regular appointments and those who came from the Excise Department.
Some officers of the Department were impleaded as respondents in the writ application in their respective capacity.
The two such officers made parties in the writ application were respondents 4 and 5 of the Mofussil Police Force.
Respondents 6 and 7 therein were police officers who had come from the Excise Department.
Appellants 1 and 2 in the present appeal are two other police officers of the Mofussil Police Force and appellant No. 3 is a Police officer who came from the Excise Department.
He was respondent 6 in the writ application.
The order of the High Court made against appellant No. 3 could not be assailed before us.
Appellant No. 3, is not, therefore, entitled to any relief in this appeal.
So far the case of appellants 1 and 2 is concerned, it must be noted that the High Court has declared clause 7(1) (a) of the Order void being violative of Articles 14 and 16 of the Constitution on three grounds: (1) That the Government had reduced the period of training at Naigaum School as against the resolution dated April 6, 1940 providing for the establishment of a Training School at Naigaum.
(2) That according to the said clause of the Order the commencement of the training period of the Mofussil officer was to be taken for determination of his seniority whereas in case of the officer belonging to the Greater Bombay Police Force, the date of his appointment was to be taken and in the opinion of the High Court, this was clearly discriminatory.
(3) That in case of a cadet whose period of training had been extended on account of his failure at the examination the impugned clause gave an advantage even to such a bad officer.
In our opinion, none of the grounds forming the basis of the judgment of the High Court is sustainable.
The attack on Rule 7(1)(a) was not specifically made in the writ application as originally presented 319 by respondent No. 4.
He laid the foundation for the attack in his re joinder application.
A counter affidavit thereafter was filed by the State stating the facts which led to the framing of clause 7(1)(a).
Respondent No. 4 filed a further rejoinder.
It was not disputed, rather, admitted on all hands that at Naigaum School the training period was much shorter than the period of 18 months which continued at Nasik.
If during the period of 10 years cadets on the basis of a shorter period of training were appointed to the Bombay Police Force without any specific order of the Government (although it must not be the case) it might have affected the validity of their appointment but not the fact that they had been so appointed on a shorter period of training.
The High Court has committed an error in the interpretation of the provision contained in clause 7(1) (a) of the Order.
On transfer of any police officer from Greater Bombay to the District and vice versa, if his training had commenced on any date between the period of 1st May, 1939 to Ist June, 1949, then his seniority was to be determined vis a vis the police officer of the force to which he was transferred with reference to the dates on which their training commenced.
It is not that in one case it will be the date of commencement of the training and in the other it will be the date of appointment, as seems to have been wrongly thought by the High Court.
To explain, we may take an example.
Suppose a Sub Inspector A whose training had menced say on Ist April, 1947 resulting in his appointment on Ist on Ist November, 1947 was transferred to the Mofussil where, let us suppose again, a police officer B was there whose training had commenced say on lst April, 1947 resulting in his appointment on 1st October, 1948 then in such a case B will be senior to A because his training commenced earlier even though he was appointed later.
But if there be an officer, suppose C, in the Mofussil whose training commenced say on 1st April, 1947 resulting in his appointment on 1st December, 1948, then he cannot be senior to A by taking 1st June, 1947 as the date of commencement of his training and comparing with 1st November, 1947 the date of appointment of A.
This interpretation of the rule which we have put was accepted to be the correct interpretation on all hands including the Government.
Learned counsel for respondent No. 4, however, submitted that the impugned seniority list had not been prepared by the Government on such an interpretation of clause 7(1)(a), but the list prepared is on the basis of the interpretation given by the High Court.
On behalf of the State we were informed that it was not so.
We have no doubt in our mind that even if there be any mistake or discrepancy in the seniority list which is found to be not in conformity with the interpretation put by us to clause 7(1)(a), then that mistake or discrepancy will have to be removed sooner than later and the seniority list will be set at right accordingly.
Ordinarily and generally the method of fixation of seniority as provided in sub clause (b) of clause 7(1)(a) of the Order was the correct and proper method to be followed.
But because of the special situation of appointment of some police officers during the period of 320 10 years on a shorter period of training a departure was made as provided in sub clause (a).
A cadet who received his full training for 18 months at Nasik for no fault of his was appointed later than a cadet who started training later at Naigaum but was appointed earlier than the former.
There was nothing wrong, illegal or unreasonable in making a provision in sub clause (a) that in such a situation the commencement of the period of training will be taken as the date for the purposes of fixation of seniority.
There was a reasonable and rational nexus between the object and the rule.
It was for the rule making authority to decide and to choose in such a situation either the date of commencement of the training or the date of appointment.
Taking the former date in the special circumstances seems to be reasonable and justified.
Such a provision cannot be said to be violative of Articles 14 and 16 of the Constitution.
The third ground for declaring clause 7(1)(a) ultra vires given by the High Court theoretically was correct but materials were placed before us from the various affidavits to show that hardly there was such a case which had got the advantage of the clause even after failure in the examination.
There was one such case of hardship of not passing out the examination in time due to reasons beyond the control of the cadet.
Clause 7(1)(a), in our opinion, was not meant to give any undue advantage to a non deserving police officer who failed to pass the training examination at the proper time.
No specific instance was brought to our notice where such advantage had been accorded.
For the reasons stated above, the appeal of appellants 1 and 2 is allowed and that of appellant No. 3 is dismissed.
It is held that clause 7(1)(a), of the order is constitutionally valid and not discriminatory.
The directions given to respondents 1 and 3 to set right the seniority list by the High Court on the basis of the alleged invalidity of clause 7(1)(a) of the order is set aside.
In the circumstances, we shall make no order as to costs.
S.R. Appeal allowed in part.
| IN-Abs | Appointments to the posts of sub inspectors (either to the Distt.
Police Force or the Police Force of Greater Bombay) in the State of Bombay, prior to 1st of May 1939, were after a training of 18 months at the Police Training School at Nasik.
Between the period 1st May 1939 and 1st of June 1949, a new training school at Naigaum a part of Greater Bombay was started wherein the period of training varied from 3 to 8 months and after the short training the cadets were appointed straight away as Sub Inspectors of Police in Greater Bombay.
Separate seniority lists were maintained for the Distt.
force and the city force.
The Nasik school continued to exist side by side with 18 months training.
On the general principle of fixation of seniority when the combined cadre service order came into force w.e.f. 1 8 54 the two seniority lists were maintained on the basis of their passing out the training and in order of merit obtained at the passing examination.
After the formation, when transfers were to be made, a difficulty arose in fixing the inter se seniority of the officers appointed after full 18 months training and one appointed after training for a shorter period and to avoid anomaly and hardship a provision was made in clause 7 whereby for the purpose of seniority (i) in the case of officers whose training commenced on any date from 1 5 39 to 1 6 1949, the date of commencement of the training was taken and (ii) in other cases, the dote of successful completion of such a course and inter se the place occupied in the results of the examination held at the end of such a course was taken.
When the constitutionality of Clause 7(1)(a) was challenged, the High Court of Bombay declared Clause 7(1)(a) of the order void, being violative of Articles 14 and 16 of the Constitution on three grounds: (1) That the Government had reduced the period of training at Naigaum School as against the resolution dated April 6, 1940 providing for the establishment of a Training School at Naigaum.
(2) That according to the said clause of the Order the commencement of the training period of the Mofussil officer was to be taken for determination of his seniority whereas in case of the officer belonging to the Greater Bombay Police Force, the date of his appointment was to be taken and in the opinion of the High Court, this was clearly discriminatory.
(3) That in case of a cadet whose period of training had been extended on account of his failure at the examination the impugned clause gave an advantage even to such a bad officer.
Dismissing the appeal appellant No. 3 and allowing the appeal of appellants Nos. 1 and 2.
the Court ^ HELD: (i) The High Court has committed an error in the interpretation of the provision contained in clause 7(1) (a) of the Bombay Police Officers (Combined Cadre) Conditions of Service Order.
On transfer of any police officer from Greater Bombay to the District and vice versa, if his training had com 316 menced on any date between the period of 1st May 1939 to 1st June 1949 then his seniority was to be determined vis a vis the police officer of the force to which he was transferred with reference to the dates on which their training commenced.
It is not that in one case it will be the date of commencement of the training and in the other it will be date of appointment.
[319 C D].
(ii) Ordinarily and generally method of fixation of seniority as provided in sub clause (b) of clause 7(1)(a) of the order was the correct and proper method to be followed.
But because of the special situation of appointment of some police officers during the period of 10 years on a shorter period of training, a departure was made as provided in clause (a).
There was nothing wrong, illegal or unreasonable in making a provision in sub clause (a) that in such a situation the commencement of the period of training will be taken as the date for the purposes of fixation of seniority.
There was a reasonable nexus between the object and the rule.
[319 H, 320 A B] (iii) It was for the rule making authority to decide and to choose in such a situation either the date of commencement of the training or the date of appointment.
Taking the former date in the special circumstances is reasonable and justified.
Such a provision is not violative of article 14 and 16 of the Constitution.
[320 B C] (iv) To hold clause 7(1) as ultra vires on the ground that it gives any advantage even to such a bad officer whose period of training had been extended on account of his failure in the examination may be theoretically correct.
Clause 7(1)(a) was not meant to give any undue advantage to a non deserving police officer who failed to pass the training examination at the proper time.
[320 C D] (v) Clause 7(1)(a) of the order is constitutionally valid and not discriminatory.
[320 E]
|
ition No. 461 of 1971.
Under article 32 of the Constitution of India AND Civil Appeals Nos. 506 510, 842 844, & 1710 1713 of 1971 From the Judgment and order dated the 12 3 1970 and 27 4 1971 of the Andhra Pradesh High Court in W.P. Nos.
360 364 of 1970, 4365 4366/69, 2704/71 and 295, 297 298, 301/70 respectively.
AND Civil Appeals Nos. 2319 to 2354 of 1972 From the Judgment and order dated the 24 2 1971 of The Madras High Court in Writ Petitions Nos. 1794, 2544, 2563, 2570.
733 2598, 2600, 2634, 2635, 2636, 2642, 2643, 2644, 2764, 2795, 2806.
2807, 3409, 3459, 3679, 3698 and 3699 of 1969, and 161, 162, 307, 308, 1071, 1512, 1514, 1779, 2279, 2282, 2283, 2285, 3164, 3534 and 3535 of 1970 respectively.
A. V. Koteswara Rao and K. Rajendra Chowdhary for the Petitioners (In W.P. No. 461/71).
B. Sen, G. section Rama Rao for the Appellants (in CAs.
506510 and 1710 to 1713/71).
Naunit Lal, K. Srinivasamurthy and Lalita Kohli for the Appellants (In CAs.
2319 2354/72) and for Respondents (In CAs: Nos.
506 to 510 and 842 to 844/71).
Gopalaratnam and A. T. M. Sampath for the Respondents (In CAs.
2328, 2332, 2343 and 2337/72).
B. Sen section Gopalakrishnan (Mrs.) for Respondents (In CAs.
2323 2327, 2331, 2335 36, 2342 and 2344 47/72).
The Judgment of the Court was delivered by MATHEW, J.
We first take up for consideration Civil Appeals Nos.
506 510 of 1971.
The appellants in these appeals filed writ petitions before the Andhra Pradesh High Court questioning the validity of notices issued by the 2nd respondent therein under the Emergency Risks (Goods) insurance Act (Act 62 of 1962) and the Emergency Risks (Factories) Insurance Act (Act 63 of 1962) (hereinafter referred to as the Acts, collectively and individually as 'the Goods Act ' and 'the Factories Act ' respectively).
The impugned notices stated that the appellants had evaded payments of emergency risks insurance premia in respect of goods or factories, is the case may be, by undervaluing the goods or factories for the purpose of insuring them under the Acts.
A learned Single Judge of the High Court allowed the writ petitions on the ground that, after the expiry of the Acts, there could be no authorized officer to determine the quantum of the evaded premia on the basis of the correct value of the goods or factories.
Appeals were filed against the orders, and a Division Bench of the Court, by a common judgment, held that the liability to pay the evaded premia arose during the currency of the Acts and that the extent of the liability could be ascertained by authorized officer even after the expiry of the Acts and allowed the appeals.
These appeals are directed against the common judgment.
The President of India, after the Chinese aggression in October, 1962, proclaimed an Emergency under Article 352 of the Constitution on 26 10 1962.
The proclamation was revoked by the President on 10 1 1968.
The Acts came into force with effect from 1 1 1963.
The Acts were in substance similar to War Risks Insurance Acts which were in force in the United Kingdom during the Second World 734 War.
It was realised after the Chinese aggression that it was necessary to make provision, if possible on war footing, for reinstating the factories damaged or ruined by enemy action and for reimbursing the loss or damage of goods and continue the commercial and economic activity with a view to stabilize the economy of the country.
In view of the magnitude of the task, no private agency in the field of insurance could have undertaken it.
By the Acts, the Central Government undertook the task of insuring factories and goods against loss damage sustained by enemy action.
The Acts in substance provided for compulsory insurance against emergency risks of every person carrying on business as a seller or supplier of goods in respect of the insurable goods, which were from time to time owned or deemed to have been owned by him in the course of such business, if the insurable value of such goods lying in one and the same city or district exceeded Rs. 30,000/ and of all factories falling within the purview of the Factories, 1948.
The schemes framed under the Acts provided for procedural matters relating to the mode of valuation of the insurable goods and assets, receipt of applications for the issue of policies, payment of premium, the terms and conditions attaching to such policies and settlement of claims and other matters.
The provisions of the two Acts were more or less similar.
We would now refer to certain provisions of the 'Factories.
Act '.
Under section 1(3) of that Act, it was provided that the Act would remain in force during the period of operation of the proclamation of emergency issued on 26 10 1962 and for such further period as the Central Government might declare to be the period of emergency for the purpose of the Act.
It was also provided in that section that the expiry of the Act shall not affect anything done or omitted to be done before such expiry and section 6 of the , shall apply upon the expiry of the Act as if it were repealed by a Central Act.
Section 2(f) of that Act defined 'insurable value ' of property as the value of the property as ascertained for the purpose of insurance under the Act.
Section 2(j) defined 'quarter ' as meaning a period of three months commencing on the first day of January, April, July or October and section 2(i) defined 'emergency risks '.
Section 3 of that Act empowered the Central Government to put into operation a scheme called the "Emergency Risk (Factories) Insurance Scheme", where by the Central Government would undertake, in relation to factories, the liability of insuring property against emergency risks.
Under section 3(3) (a), the liability of the Central Government as insurer did not extend to more than 80 per cent of the insurable value of the property insurable.
Under section 3(3) (c), the premium under a policy was payable at a rate not exceeding 3 per cent per annum of the sum insured as may be specified in the scheme.
Section 3(7) enjoined that every scheme shall be laid before each House of Parliament for a total period of thirty days.
735 Section 5(1) said that while a scheme was in operation, every owner of a factory shall take out a policy of insurance against emergency risk, issued in accordance with the scheme, for a sum not less than the insurable value of the property, and, if any owner of factory failed to fulfil the obligation under section 5(1) and failed to pay the premium on the policy which was subsequently due, he was liable to be convicted of an offence under section 5(4), punishable with fine and, that would be without prejudice to any other penalty or liability incurred in consequence of the failure.
Section 6 placed restrictions on carrying on certain insurance business.
By section 7, the Central Government was authorised to create an "Emergency Risks (Factories) Insurance Fund".
The Central Government was authorized, under section 8, to require the owner or occupier to furnish any document or information to a person authorized by it.
Section 11 provided that where any person had failed to insure as or to the full amount, required by the Act, and had thereby evaded the payment by way of premium of any money which would have had to pay but for such failure, an officer authorized in that behalf by the Central Government might determine the amount the payment of which had been so evaded.
The amount so determined shall be payable by such person and shall be recoverable from him as provided in sub section (2) of section 11.
And sub section (2) stated that any installment of premium due on a policy of insurance issued under the scheme and any amount determined as payable under sub section (1) shall be recoverable as an arrear of land revenue and shall be a first charge on the property in respect of which the default was made.
Section 11(3) stated that a person against whom a determination is made under sub section (1) could, within the period specified in the scheme, appeal against such determination to the Central Government, whose decision therein shall be final.
Now we will note a few relevant provisions of the Emergency Risk (Factories) Insurance Scheme.
The Scheme was put into operation with effect from 1 1 1963.
In clause 6 of the Scheme it was provided that an application for insurance should be made in the form set out in Part A or Part of the First Schedule thereto according as the application was for the original or supplementary policy, and that it should be made to the government agent or such other officer of the government agent as might be authorized by that agent in this behalf and the application must be accompanied by a treasury challan evidencing the payment of the requisite premium into the Government treasury.
Clause 7 pertained to the method of valuation of insurable property.
It laid down that the insurable value of the property shall be ascertained in accordance with the principles mentioned therein.
Clause 8 fixed the rate of premium to be 25 paise for every 100 rupees or any part thereof in respect of the quarter ending 31 3 1963.
Clause 9 related to issue of policy and verification of previous policies.
Clause 12 mentioned the date from which the policies would be effective.
736 Clause 13(1) provided that where any person had failed to pay any premium due from him or to insure as, or to the full amount, required by the Act and had thereby evaded the payment by way of premium of any money which he would have had to pay but for such failure, the amount evaded shall be determined in accordance with the Third Schedule; and sub clause (2) provided for appeal against the determination.
Sub clause (3) of clause 13 stated that where the amount determined under the provisions of sub clause (1) or sub clause (2) was fully recovered, the government agent shall, as soon as possible after such recovery, send the requisite application forms to the defaulter for completion and return, and a policy or supplementary policy in respect of the property concerned according as the recovery was in respect of non insurance or under insurance shall be issued by the government agent on receipt of the application correctly filled in, the said policy being made out so as to take effect from the date the amount was fully recovered.
Clause 16 declared that the insured person shall bear 20 per cent of the loss or damage.
It also declared that if the total value of the property insured exceeded the sum insured, the insured person shall be considered as his own insurer for the excess as well as for 20 per cent of the sum insured.
The First Schedule to the Scheme contained forms of applications for a policy or supplementary policy and other matters.
The Second Schedule gave a model form of the policy to be Issued.
According to the Third Schedule, the authorized officer, when he k had reason to believe that the owner or occupier of any property insurable under the Act had failed to pay any premium and had thereby evaded the payment by way of premium of any money which he would have had to pay but for such failure, the officer may serve on such owner or occupier a notice requiring him to show cause why he failed to insure the property or to full amount as required by the Act and further to produce before the officer on such date any document or other evidence in support of his case.
The officer, after providing him an opportunity of being heard shall assess the insurable value of the property and the amount of premium, the payment of which had been evaded.
The Schedule made provisions for appeal to the Central Government.
The provisions of the Scheme framed under the 'Goods Act ' were practically the same.
The appellants challenged the finding of the High Court that the liability to pay the evaded premia arose during the currency of the Acts and contended that the liability itself was dependent on the ascertainment by the authorized officer of the insurable value of the factory or goods in accordance with the Third Schedule and that until the extent of the liability was so ascertained, there could be no liability and so, section of the was not attracted.
In other words, the contention was that until the liability of the insured was determined by the authorized officer by ascertaining the correct 737 insurable value in accordance with the provisions of the Third Schedule no liability to pay the evaded premia arose and therefore, no liability was incurred before the expiry of the Acts which could be enforced under the provisions of section 6 of the after their expiry.
It is clear from the provisions of the Acts that the duty to take out insurance policy for the full insurable value of the factory of goods was mandatory and that the failure to do so was an offence.
Besides, in the case of failure to insure for the full insurable value, provisions were made for recovery of the relative premia.
To effectuate this purpose, the procedure for determination of the insurable value of the factory or goods and of the premia evaded was also provided.
There is no compulsion in a voluntary insurance that the cover should be made for the entire insurable value of the property.
The premium collected in a voluntary insurance is related to the quantum of the risk undertaken in the light of the insurable value suggested by the insured.
Generally, in a voluntary insurance, the premium is paid in consideration of the cover provided.
In other words, premium is paid in order to enable the insurer to indemnify the insured against loss or damage on account of the risk specified.
The scheme of insurance envisaged by the Acts was different.
There was no element of consensus on the fundamental terms of insurance in the scheme.
The liability to take insurance policy for the full insurable value of the factory or goods was compulsory.
The terms and conditions of the policy to be taken were governed solely by the provisions of the Acts and the Schemes.
It is a mistake to assume that the rights and liabilities of the parties in this statutory scheme were similar to those of a voluntary contract of insurance.
If the liability to take the insurance policy for the full insurable value was absolute and if the terms and conditions of insurance were settled by the terms of the statutes and the Schemes read with the Schedules, there is no merit in the contention of counsel for the appellants that the obligation of the President as insurer was same as that of an insurer in a contract of voluntary insurance.
The liability to pay premia ill case of under valuation was not dependent upon the subsequent determination of the full insurable value of the factory or goods insured.
If the factory or goods was under valued, when the insurance policy was taken, the liability to pay premia on the basis of the full insurable value arose at the time when the policy was taken.
That liability was not dependent upon the ascertainment of the full insurable value by the authorized officer in accordance with the Third Schedule.
In Ekambarappa vs Excess Profits Tax officer(ll) this Court held that the liability for excess profits tax arose at the close of the accounting year and was not dependent upon its ascertainment by an order of assessment.
In the same way, the liability to pay the premia on the basis of the full insurable value of the factory or goods insured was incurred Acts and the schemes were in operation. 'The (1) ; 738 liability to pay premia on the basis of the full insurable value of the factory or goods is one thing; the quantification of the amount is another.
But it was argued that if a policy was taken not for the full in surable value, the authorized officer should have ascertained the cor rect insurable value within the quarter and a supplementary policy should have been issued on the basis of the full insurable value, also within the quarter, so that the liability to pay premia on the basis of the full insurable value might arise.
In other words, the argument was that the liability to pay premia on the basis of the full insurable value in case of under insurance was conditioned by the capacity on the part of the insurer to issue a supplementary policy within the quarter undertaking to indemnify the insured on the basis of the correct value against emergency risks, and, as the insurer ceased to have the capacity after the expiry of the quarter, and a fortiort after the expiry of the Acts, to issue a supplementary policy undertaking the liability to indemnify against loss arising out of emergency risk, on the basis of the full insured value, the obligation to pay premia on the full insurance value ceased, as, after the expiry of the Acts, there could no longer be any emergency risk.
We do not think that the argument is correct.
As we said, the obligation to insure for full insurable value of the factory or goods was an obligation which was not dependent upon the corresponding liability of the insurer to indemnify.
If the owner of factory or goods failed to take insurance policy at the time he ought to have taken it and pay the premia, the liability of the insured to pay the premia could be enforced under clause 13 or 14 respectively of the Schemes under the 'Goods Act ' or the 'Factories Act '.
In such a case there would be no obligation on the part of the President to indemnify the insured in case of loss or damage on account of emergency risk the insured did not take out the policy of insurance.
The obligation to issue the policy or supplementary policy, as the case may be, would arise only after payment or recovery of the evaded premia, and even then, the liability of the insurer under the policy or supplementary policy would be from the date of payment or recovery of the evaded premia.
The fact, therefore, that no supplementary policy was issued before the expiry of the Acts is no answer for not fulfilling the obligation of the insured to pay the premia in accordance with the correct insurable value of the factory or goods as determined under the Third Schedule to the Schemes.
Therefore, if under 6.
S of the 'Factories Act ' or under section 7 of the 'Goods Act ', the liability to pay the premia on the full insurable value was incurred before 'he expiry of the Act, section 6 of the would enable the ascertainment of the extent of liability for the evaded premia by an officer who was authorized when the Act was in force or by an officer authorised after the expiry of the Act.
The principle behind section 6 of the is that all the provisions of the Acts would continue in force for purposes of enforcing the liability incurred when the Acts were in force and any investigation, legal proceeding, remedy, may be instituted, continued or enforced as if the Acts had not expired.
739 The Third Schedule to the Schemes provides for the method of ascertaining the liability in case of under insurance.
The provisions of the Third Schedule show that the officer has to give an opportunity to the insured to show cause why he should not be made to pay the premia on the basis of correct value of the factory or goods under valued.
It was contended for the petitioner in Writ Petition No. 461 of 971 that the provisions of the Acts contravened Articles 14, 19 and Article 19 is not available to the petitioner for challenging the validity of the provisions of the Acts as these Acts were passed during the currency of the proclamation of emergency under Article 352.
No doubt, when the proclamation of emergency was revoked in 1968, the provisions of the Acts became liable to be challenged on the ground that they violated Article 19(1); but the liability incured for acts or omissions during the currency of the proclamation of emergency cannot be nullified even if it be assumed that the provisions of the Acts were violative of Article 19.
In other words, liability crated by an act or omission when the Acts were in operation during the currency of the proclamation of emergency cannot be challenged even after the revocation of the proclamation on the ground that the provisions of the Acts violated Article 19.
This, we think, is the principle laid down by this Court after reading Article 358 of the constitution in Makhan Singh vs State of Punjab(1).
We also think that the procedure for ascertaining the correct in surable value of the factory or goods is reasonable, having regard to the provisions of the Third Schedule in that behalf and cannot, therefore, violate Article 19(1)(f) or (g).
The writ petitioner has not shown how the provisions of the Acts violated Article 14.
And, as regards the contention of the petitioner that the provisions of the Acts violated Article 31(1), we do not think that the petitioner was deprived of any property without the authority of law.
he petitioner has not succeeded in showing law the law which deprived him of his property could be challenged on the ground that it was violative of any of the provisions in of the Constitution; We dismiss Writ Petition No. 461 of 1971 and Civil Appeals Nos.
506 510, 842 844 and 1710 1713 of 1971 and allow Civil Appeals Nos.
2319 2364 of 1972 without any order as to costs.
P.H.P Appeals partly allowed.
| IN-Abs | The President of India after the Chinese aggression in 1962, proclaimed emergency under Article 352 of the Constitution.
The Parliament passed the Emergency Risks (Goods,) Insurance Act, 1962 and the Emergency Risks (Factories) Insurance Act, 1962, which came into force from 1 1 1963.
It was realised after the Chinese aggression that it was necessary to make provision for reinstating the factories damaged or ruined by enemy action and for reimbursing the less or damage of goods and continue the commercial and economic activity with a view to stabilize the economy of the country.
The Acts, therefore, provided for compulsory insurance of factories and goods against loss or damage sustained by enemy action.
The Acts further provided that if any person failed to insure the goods or factories or insured for a lesser value than what was required by the Acts and thereby evaded the payment by way of permium such amounts would be payable by such person.
Proclamation of Emergency was revoked by the President on 10 9 1968.
After the expiry of the acts, notices were issued to the appellants stating that they evaded payment of Emergency Risk Insurance Premia in respect of goods or factories by undervaluing the goods or factories.
The appellant filed a writ petition, in the High Court challenging the said notices which were allowed by a learned Single Judge on the ground that after P the expiry of the Acts there could be no authorised officer to determine the quantum, of the evaded premia on the basis, of the correct value of the goods or factories.
In an appeal the Division Bench of the High Court held that the liability to pay the evaded premia arose during the currency of the Acts and that the extent of the liability could be ascertained by an authorised officer even after the expiry of the Acts.
In the present appellant filed said judgment of the Division Bench is challenged.
G The appellants contended: 1.
That the liability to pay the evaded premia was dependent on the ascertainment by the authorised officer of the insurable value of the factory or goods and that until the extent of the liability was so ascertained there can be no liability and, therefore, section 6 of the General Clauses Act was not attracted.
The provisions of the Acts contravened the Articles 14, 19 and 31 of the Constitution.
732 ^ HELD: (1) The duty to take out insurance policy for the full insurable value of the factory or goods was mandatory and that the failure to do so was an offence.
To effectuate this purpose the procedure for determination of the insurable value of the factory or goods and of the premium evaded was provided.
The scheme of the insurance envisaged by the Acts was different from a voluntary insurance.
There was no element of consensus on the fundamental terms of insurance.
The liability to take insurance policy for the full insurable value of the factory or goods was compulsory.
Terms and conditions of the policy to be taken were governed solely by the provisions of the Acts and the schemes.
The liability to pay premia in case of under valuation was not dependent on the subsequent determination of the full insurable value of the factory or goods insured.
The decision in the case of Ekambarappa vs Excess Profits Tax officer holding that the liability for excess profits tax arose at the close of the accounting year and was not dependent upon its ascertainment by order of assessment is approved.
[737 B, C, D, F,G] (2) The argument that the liability to pay premia on the basis of the full insurable value in case of under insurance was conditioned by the capacity on the part of the insurer to issue a supplementary policy negatived.
The obligation to insure for full insurable value was obligation which was not dependent upon corresponding liability of the insurer to indemnity.
[738 B E] (3) Since the liability to pay the premia on the full insurable value was incurred before the expiry of the Act, section 6 of the General Clauses Act would enable the ascertainment of the extent of liability for evaded premia by an officer who was authorised when the Act was in force or by an officer authorised after the expiry of the Act.
The principle behind section 6 of the General Clauses Act is that all the provisions, of the Acts would continue ill force for purposes of enforcing the liability incurred when the Acts were in force and any investigation, legal proceeding, remedy, may be instituted, continued or enforced as if the Acts had not expired.
[738 G H] (4) Article 19 is not available to the petitioner as these Acts were passed during the proclamation of Emergency under Article 352.
The liability incurred being acts or omissions during the currency of the proclamation of emergency f cannot be nullified even if it be assumed that provisions of the Acts were violative of Article 19.
The procedure for ascertaining correct insurable value of the factory or goods is reasonable having regard to the previsions of Third Schedule in that behalf and cannot, therefore, violate Article 19(1)(f) or (g).
[739 B, D E] (5) The petitioners were not deprived of any property without the authority of law.
There is, therefore.
no violation of Article 31(1).
The`provisions are not violative of any provisions in Part III of the Constitution.
[739 F)
|
N: Criminal Appeal No. 154 of 1975.
Appeal by Special Leave from the Judgment and order dated the 18th February 1975 of the Madhya Pradesh High Court at Jabalpur in Criminal Appeal No. 789 of 1972.
Sarju Prasad and section N. Prasad for the Appellant.
Ram Panjwani, Dy.
Advocate General, M.P., H. section Parihar and I. N. Shroff for the Respondent.
The Judgment of the Court was delivered by GOSWAMI, J.
To adjust the duration of imprisonment to the gravity of a particular offence is not always an easy task.
Sentencing involves an element of guessing but often settles down to practice obtaining in a particular court with inevitable differences arising in the context of the times and events in the light of social imperatives.
It is always a 714 matter of judicial discretion subject to any mandatory minimum prescribed by law.
Hegel in his 'Philosophy of Right ' pithily put the difficulty as follows: "Reason cannot determine, nor can the concept provide any principle whose application could decide whether justice requires for an offence (i) a corporal punishment of forty lashes or thirty nine, or (ii) a fine of five dollars or four dollars ninety three, four, etc., cents, or (iii) imprisonment of a year or three hundred and sixty four, three, etc., days, or a year and one, two, or three days.
And yet injustice is done at once if there is one lash too many, or one dollar or one cent, one week in prison or one day, too many or too few".
The present appeal by special leave being limited to sentence we are to consider about the appropriate deserts for the appellant in this case.
The appellant was a Circle organizer in the Tribal Welfare Department at Lohandiguda in the State of Madhya Pradesh.
He was entrusted with the distribution of stipends to Adivasi students of the Tribal Welfare Department School.
He misappropriated a sum of Rs. 500/ meant for four students and also forged certain entries in the bills.
He was convicted under section 409 and section 467 IPC by the Sessions Judge and sentenced for each head of charge to con current four years ' rigorous imprisonment and also to a fine of Rs. 500/ , in default to rigorous imprisonment for six months.
The High Court on appeal maintained the conviction but reduced the sentence to two years ' rigorous imprisonment maintaining the fine.
From a perusal of the judgment of the High Court which is the only document in the paper book in addition to the special leave petition, it is not very clear about the offence of forgery committee by the accused.
We would, however, say nothing more than that.
In judging the adequacy of a sentence the nature of the offence, the. circumstances of its commission, the age and character of the offender, injury to individuals or to society, effect of the punishment on the offender, eye to correction and reformation of the offender, are some amongst many other factors which would be ordinarily taken into consideration by courts.
Trial courts in this country already over burdened with work have hardly any time to set apart for sentencing reflection.
This aspect is missed or deliberately ignored by accused lest a possible plea for reduction of sentence may be considered as weakening his defence.
In a good system of administration of criminal justice pre sentence investigation may be of great sociological value.
Through out the world humanitarianism is permeating into penology and the courts are expected to discharge their appropriate roles.
715 The appellant is a youngman of about 30 years.
He is an educated person who was employed in Government service.
But for the forgery he could have been tried in the court of a first class Magistrate for the offence under section 409 IPC and in that case the maximum sentence of imprisonment would have been two years ' rigorous imprisonment on the face of the High Court 's judgment, as noticed above, the part played by the appellant in the forgery is rather a little obscure.
The appellant is sure to lose his employment under the Government.
There is already indignity heaped upon him on account of conviction.
He has the opportunity to commit such offence as a Government servant in the future.
Any sentence of imprisonment imposed upon him will be a deterrent to others similarly disposed in such unlawful pursuits.
The appellant was refused bail in this Court and he is said to have served about nine months in prison.
While we do not minimise the seriousness of the offences, having regard to the circumstances mentioned above, we are of opinion that it will meet the ends of justice in this case if we order, which we do, that the appellant 's sentence be reduced to one year 's rigorous imprisonment only and in addition to a fine of Rs. 500 only, in default rigorous imprisonment for six months.
The appeal is partly allowed with modification of the sentence as ordered.
P.H.P. Appeal partly allowed.
| IN-Abs | The appellant was a Circle organizer in the Tribal Welfare Department.
He was entrusted with the distribution of stipends to adivasi students of the Tribal Welfare Department School.
He misappropriated a sum of Rs. 500/ .
meant for 4 students and also forged certain entries in the bills.
He was convicted under section 409 and section 467 of I.P.C. by the Sessions Judge and ` sentenced to 4 years rigorous imprisonment and a fine of Rs. 500/ .
The High Court on appeal maintained the conviction but reduced the sentence to 2 years rigorous imprisonment and a fine of Rs. 500/ .
on an appeal by Special leave limited only to the question of sentence.
^ HELD: 1. To adjust the duration of imprisonment to the gravity of a particular offence is not always an easy task.
It is always a matter of judicial discretion subject to any mandatory minimum prescribed by law.
In judging the adequacy of a sentence, the nature of the offence, the circumstances of its commission, the age and character of the offender, injury to individuals or to Society, effect of the punishment on the offender, eye to correction or reformation of the offender, are some amongst many other factors which would be ordinarily taken into consideration by courts.
[713GH, 714 FG] 2.
Trial Courts in this country already over burdened with work have hardly any time to set apart for sentencing reflection.
In a good system of administration of criminal justice pre sentence investigation may be of great sociological value.
Throughout the world humanitarianism is permeating into penology and the courts are expected to discharge their appropriate roles.
[714 GH] 3.
Without minimising the seriousness of the offence, having regard to the circumstances of the case, the sentence was reduced from 2 years to one year [715 C]
|
N: Criminal Appeal No. 191 of 1971.
(Appeal by special leave from the judgment and order of the Bombay High Court dated 25 2 1972 in criminal appeal No. 683 of 1971.) M/s. M. K. Ramamurthi & Co. for the appellant.
M. N. Shroff and Vineet Kumar, for the respondents.
The Judgment of the Court was delivered by BEG, J.
The allegations, on questions of fact raised in the appeal now before us, were quite unusual.
The judgment of a Division Bench of the High Court of Bombay in Criminal Appeal No. 683 of 1971, in respect of coaccused Syed Ali Naki Hade Hasan, who was acquitted on 25 2 1972, shows the nature of the allegations made by the prosecutor 688 in this case.
On those allegations, it became necessary to consider whether the accused, who had been put on trial together with six others, was actually in possession of a Hotel.
The appellant claimed to be the owner of a hotel of which Jagannath, complainant, was said to be the manager.
The case of the Manager was that he had been forcefully dispossessed by the accused and that certain properties belonging to him and others, including some money, were mis appropriated by the accused.
Therefore, the appellant and five others were charged under Section 395 Indian Penal Code as well as under Section 452 read with Section 34 I.P.C.
According to the accused, Shri Jagannath and his brother, the complainant, were only licensees.
However, these are questions relating to the merits of a case in which the Trial Court had acquitted accused numbers 3 to 8 and the High Court acquitted accused No. 2.
The appeal of the only remaining accused, accused No. 1, who is the appellant before us by special leave was, however, rejected in limine by the High Court without giving any reasons for the rejection.
There is a whole catena of cases which have come up here from the Bombay High Court in which this Court has consistently disapproved of the practice followed by the Bombay High Court of not giving reasons when exercising its power of summary dismissal of criminal s appeals which lie both on questions of fact and law.
In other High Courts, such appeals are automatically admitted.
In any case, it is not possible for this Court to exercise its powers satisfactorily without giving an appellant, who may have an arguable case, an opportunity of first presenting his case to the High Court and getting a decision from it.
The power of a summary rejection of a criminal 1st appeal, even though it is exercisable under the provisions of Section 421 Criminal Procedure Code, should, in our opinion, be only exercised when the Court is satisfied, from a perusal of the judgment as well as the record, that there is absolutely no reasonable possibility of its success for the reasons mentioned in the order.
In a case such as the one now before us, it cannot be said that there are no such arguable points that, after the High Court had an opportunity of fully considering both sides of the case, it must necessarily dismiss the appeal.
At least, in such cases, where there are arguable points, the High Court should give its grounds and reasons in support of its decision to reject summarily on some absolutely clinching ground.
This Court has laid down the duty upon the High Court to record reasons.
(See: Mushtak Hussein vs The State of Bombay (13; Krishna Vithu Surosha vs State of Maharashtra (2); Mustaq Ahmed Mohmed Hussain & Anr.
vs The State of Gujarat(3); Kapurchand Kesrimal Jain vs The State of Maharashtra(4) .
It is difficult to believe that judgments of this Court have neither come to the knowledge of the Bombay High Court nor were cited on behalf of the appellant.
In any case, the law having been declared by this Court, it is the duty of the Bombay High Court to act in accord (1) (2) ; (3) ; (4) 689 ance with Article 141 of the Constitution and to apply it by giving proper reasons to justify whatever be its view.
Accordingly, we allow the appeal and set aside the order of the High Court rejecting the appeal summarily and order that the case will be treated as admitted for regular hearing of both sides by the Bombay High Court, and disposed of in accordance with the law.
,, P.H.P. Appeal allowed.
| IN-Abs | The appellant an owner of a hotel was prosecuted along with five others for forcibly dispossessing the complainant who was the Manager of the Hotel and further for misappropriating certain properties including some money belonging to the complainant.
According to the appellant, the complainant was merely a licensee.
The Trial Court acquitted accused Nos. 3 to 6 and convicted accused No. 1 and 2.
The High Court admitted the appeal of accused No. 2 and acquitted him.
The appeal of the appellant accused No. 1 was, however, rejected by the High Court it limine without giving any reasons for the rejection.
On an appeal by Special Leave, ^ HELD: 1.
There is a whole catena of cases which have come up to this Court from the Bombay High Court in which this Court has consistently disapproved of the practice followed by the Bombay High Court of not giving reasons when exercising its power of summary dismissal of criminal appeals which lie both on questions of fact and law.
In other High Courts such appeals are automatically admitted.
The power of summary rejection under section 421 of the Criminal Procedure Code should be only exercised when the Court is satisfied from a, perusal of the judgment as well as the record that there is absolutely no reasonable possibility of its success for reasons to be mentioned in the order of dismissal.
In the present case, it cannot be said that there are no arguable points.
It is difficult to believe that the judgments of this court have neither come to the knowledge of the Bombay High Court nor were cited on behalf of ' the appellant In any case, the law having been declared by this Court, it is the duty of the Bombay High Court to act in accordance with Article 141 of the constitution and to apply it by giving proper reasons to justify whatever be its view.
The judgment of the Bombay High Court was set aside and it was directed that the case should, be treated as admitted for regular hearing in she Bombay High Court and should be disposed of in accordance with law.
[688 C, E, F, G, 689 AB] F
|
Civil Appeal No. 20 of 1955.
Appeal from the Judgment and Order dated the ' 29th day of September 1954 of the High Court of Judicature at Madras in Original Side Appeal No. 113 of 1954 arising out of the order dated the 9th day of August 1954 of the said High Court in its Ordinary Original Civil Jurisdiction in Application No. 3542 of 1954.
376 C. K. Daphtary, Solicitor General for India (H. J. Umrigar, Mohan Kumaramangalam and Rajinder Narain, with him) for the appellants.
B. H. Dhebar and P. G. Gokhale for respondent No. 1.
Samarendra Nath Mukherjee and B. N. Ghose for respondent No. 2.
N. P. Engineer, (B. Moropant and V.J. Taraporewala, with him) for respondent No. 3. 1955.
April 20.
The Judgment of the Court was delivered by BHAGWATI J.
This appeal with a certificate under article 133 (1) (c) of the Constitution is directed against the judgment of the High Court of Judicature at Madras dismissing the appeal of the Appellants and refusing to set aside a sale effected by Respondent 2 of certain properties belonging to the Madras Electric Tramways (1904) Ltd. hereinafter called the Company, above the ground at Vepery, Madras and Mylapore, including the machinery cars, etc.
and buildings as scrap to Respondent 3 in his capacity as the Receiver of the trustees of the debenture holders of the Company.
The Appellants are the Secretary and President respectively of the Madras Tramways Workers Association (Registered No. 1253) a Trade Union registered under the Trade Unions Act.
The workmen employed by the Company are entitled under the award of the Special Industrial Tribunal, Madras in I. D. No. 9 of 1953 published in the Fort St. George Gazette, dated the 8th July, 1953 being G. 0.
Ms. No. 3024/53 to a payment of nearly Rs. 7,00,000 out of which the workers belonging to the Madras Tramways Workers Association alone would be entitled nearly to a sum of Rs. 4,35,000 and are thus the major creditors of the Company.
The Company was incorporated in England with its principal office situated at No. 1, Rundalls Road, Vepery, Madras 7 and was running the Tramway Service in Madras with licence issued to it by the Government under the Tramways Act.
It had issued 377 1300 First Debentures of CIOO each and the debenture holders had appointed the Beawer Trust Ltd., England as trustees.
By an Indenture made in England on the 13th October 1924 the Company charged by way of first charge in favour of the trustees all its undertaking properties and assets for the time being both present and future including its uncalled capital with the payment of all moneys for the time being owing on the security of the debentures and such charge was to rank as a floating charge.
By two subsequent deeds made at Madras dated the 26th March, 1925 and 6th July, 1950 certain immovable properties belonging to the company were mortgaged in favour of the said trustees.
The said Trustees appointed Respondent 2, the Managing Director of the Company and day to day management of the Tramway Service and of the business of the Compay, as their Receiver.
He took possession as such Receiver,, from the midnight of 11th April, 1953 of all the assets of the Company including moneys in the bank to the credit of the Company and after that date the Tramways Service was suspended and still remains suspended.
One J. B. Beardsell, one of the Directors of the Company filed O. P. No. 419 of 1953 as the duly constituted Attorney of the Company for winding up the Company on the ground that it was unable to pay its debts and that it bad ceased to carry on its business.
An order for the winding up of the Company was made by the Court on the 20th January, 1954 and the Official Receiver, High Court, Madras, was appointed the Official Liquidator.
Since all the assets including the moneys of the Company were in possession of Respondent 2, the Official Receiver was unable to take charge of anything except the records of the Company.
Soon after the order for winding up the Respondent 2 advertised in the newspapers on the 23rd January, 1954 for the sale of the properties and assets of the Company.
At the end of the conditions of sale he stated in paragraph 7 that "the sales are for the time being subject to the approval of the High Court 378 at Madras and it will be for the undersigned to obtain such approval for accepted offers free of all costs to the purchaser".
At the time of the order of winding up, two suits were pending in the High Court, C.S. No. 191 of 1952 filed by the Company against the State of Madras for Rs. 1,33,204 9 0 and interest thereon being electric charges alleged to have been collected by the State of Madras in excess of those payable by the Company and paid by the company under protest and C.S. No. 368 of 1953 filed by the State of Madras against the Company for the recovery of Rs. 9,26,123 2 3 with interest thereon, being the difference alleged to be due in respect of the electric charges under the old rates and the revised rates applicable to the Company.
During the pendency of the said suits Respondent 2 gave an undertaking in Application No. 4533 of 1953 in Civil Suit No. 368 of 1953 that he would not without the orders of the High Court dispose of any of the assets of the Company which were in his possession till the disposal of the suit C.S. No. 368 of 1953.
The two suits aforesaid were tried together and were disposed of by a common judgment on the 16th March 1954.
On the 16th July 1954 Respondent 2 agreed to sell and Respondent 3 agreed to buy the movable properties of the Company the particulars of which were set out in the agreement entered into on that date, for a price of Rs. 4,01,658 of which half was paid on the signing of the agreement and the other half was agreed to be paid out of the proceeds of sale to be made by the purchasers of the assets as scrap.
On the 23rd July 1954 the Official Receiver, High Court, Madras (Respondent 5 herein) filed an application No. 3542 of 1954 for setting aside the said sale of the assets of the Company on the grounds, inter alia, that it was prejudicial to the interests of the General body of unsecured creditors, that the same had been concluded with undue haste and without adequate publicity and in violation of Respondent 2 's said undertaking to the Court.
It also asked for an injunction restraining the Respondent 2 from 379 handing over and the Respondent 3 from either taking over or breaking up the assets purchased by him pending, the disposal of the said application.
This application was based on a report of the Official Receiver in which after setting out the relevant facts he submitted that even though under section 229 of the Indian Companies Act the Company which was admittedly insolvent was governed by rules prevailing with regard to the respective rights of the secured and unsecured creditors and to debts provable and valuation of annuities governing the administration in insolvency and secured creditors generally stood outside the liquidation and were entitled to have the remedy of realising the security and proving before him for the deficiency, if the properties of the Company could be sold for a price higher than the amount due to the Trustees of the debenture holders there was a possibility of a surplus coming into his bands for the benefit of the unsecured creditors.
If the Respondent 2 proved before him for any deficiency due to the secured creditors, it would certainly affect the rights of unsecured creditors, and moreover though the secured creditors might realise the security, it will be in the interests of the unsecured creditors to see that a fair and proper price was obtained.
He therefore submitted that in the interests of the unsecured creditors it was just and necessary to have a fair valuation ascertained and an enquiry held to ascertain whether the sale by the Respondent 2 in favour of Respondent 3 was bona fide and for a proper price.
Respondent 2 filed an affidavit in reply in August 1954 contending inter alia, (1) that the offer by the Respondent 3 was the highest, that he had received and that this had been accepted bona fide, (2) that in the advertisement the condition as to the previous sanction of the Court was inserted because of the undertaking that be had given to the Court in C.S. No. 368 of 1953 and that this undertaking lapsed with the dismissal of the said suit on the 16th March 1954, (3) that he had been advised by the Solicitors in England for the debenture trustees that it was unnecessary for him to obtain 380 the sanction of the Court and that he had been instructed not to apply for such sanction and (4) that the sale was bona fide and he had secured as good a price as could be obtained.
By its judgment and order dated the 9th August 1954 Mr. Justice Balakrishna Ayyar (in Chambers) dismissed the said application with costs.
The learned Judge held that the question whether Respondent 2 had violated the undertaking given by him was not germane to the application before him, that undoubtedly the Respondent 2 did give wide publicity of his intention to sell the assets of the Company, that it could not be said that the sale was sub rosa on the ground of want of wide publicity to the intended sale of the Company 's assets and that the Respondent 3 's offer was the best offer received by the Respondent 2 looking both to the abstract of offers appended to the affidavit of the Respondent 2 in the said application, and looking to the other offers pointed out to him by Respondent 5.
The learned Judge further referred to the offer of the Corporation of Madras and said that the said Corporation had not made any firm offer at all and that the offer of one A. Chettiar of Rs. 4,25,000 made on 5th August 1954 during the hearing of the application was an offer made by a person who did not appear to him to be of a man of sound financial status.
The learned Judge in his judgment also recorded the fact that during the hearing of the application the Respondent 3 offered to sell to the Madras Municipal Corporation the entire assets he had purchased at the same price which he paid for it but the Corporation were not prepared to accept the offer.
The Respondent 5 accepted the said judgment and decision and did not prefer any appeal against the same.
But the Appellants who were not parties to the proceedings applied for and obtained from the High Court leave to appeal from the said decision.
This appeal also was dismissed by the High Court with costs on the 24th September 1954.
The High Court differed from the finding of the Trial Court and held that due publicity had not been given to the 381 intended sale and observed that if the matter rested merely on a decision of that point they would have allowed the appeal and set aside the sale.
They how ' ever held that in the absence of fraud or want of bona fides on the part of the seller along with that of the buyer the sale in favour of the Respondent 3 could not be set aside.
The High Court further considered the question whether the said sale was void as being without the leave of the Court in view of section 232 of the Indian Companies Act and answered that question in the negative.
The High Court further held that a secured creditor had a right to realise his security without seeking the assistance of the court and remaining outside the winding up.
Being aggrieved by the said judgment and decree of the High Court the Appellants applied for leave to appeal to this Court and such leave was granted by the High Court on the 24th September 1954.
The bona fides of the Respondent 2 in the matter of the sale were not challenged either in the Courts below or before us and there were concurrent findings of fact that the price obtained by Respondent 2 was the best price available under the circumstances.
It was however urged by the learned Solicitor General for the Appellants: (I) that the High Court, having found that due publicity had not been given to the intended sale, ought not to have allowed the Respondent 3 at that stage to raise the question as to whether the Court had any power or jurisdiction to set aside the sale except on the ground that it was vitiated by fraud or for want of bona fides and (2) that the sale by Respondent 2 being a sale held without leave of the winding up Court was void under section 232(1) of the Indian Companies Act.
The High Court bad allowed the Respondent 3 to raise the question even at that late stage inasmuch as it was a pure question of law and the learned Solicitor General therefore rightly did not press the first contention before us.
The main argument centered round the second contention, viz., whether the sale effected by the Respondent 2 without leave of the winding up Court was void and hence liable to be set aside.
382 The decision of this question turns upon the true construction of section 232 of the Indian Companies 'Act, which runs as under: "(I) Where any company is being wound up by or subject to the supervision of the Court, any attachment, distress or execution put in force without leave of the Court against the estate or effects or any sale held without leave of the Court of any of the properties of the company after the commencement of the winding up shall be void.
(2) Nothing in this section applies to proceedings by the Government".
It may be noted that the words "or any sale held without leave of the Court of any of the properties" underlined above were inserted by Act XXII of 1936.
Before this amendment section 232(1) was almost in identical terms with section 228(1) of the English Companies Act of 1948.
Two other sections of the Indian Companies Act may be noted in this context, viz. section 171:"When a winding up order has been made or a provisional liquidator has been appointed no suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the Court, and subject to such terms as the Court may impose." and Section 229: "In the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and to debts provable and to the valuation of annuities and future and contingent liabilities as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent; and all persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company may come in under the winding up, and make such claims against the company as they respectively are entitled to by virtue of this section;" which correspond respectively to sections 231 and 317 of the English Companies Act of 1948.
383 The position of a secured creditor in the winding up of a company has been thus stated by Lord Wrenbury in Food Controller vs Cork(1): "The phrase 'outside the winding up ' is an intelligible phrase if used, as it often is, with reference to a secured creditor, say a mortgagee.
The mortgagee of a company in liquidation is in a position to say "the mortgaged property is to the extent of the mortgage my property.
It is immaterial to me whether my mortgage is in winding up or not.
I remain outside the winding up ' and shall enforce my rights as mortgagee".
This is to be contrasted with the case in which such a creditor prefers to assert his right, not as a mortgagee, but as a creditor.
He may say 'I will prove in respect of my debt '.
If so, he comes into the winding up".
It is also summarised in Palmer 's Company Precedents Vol.
II, page 415: "Sometimes the mortgagee sells, with or without the concurrence of the liquidator, in exercise of a power of sale vested in him by the mortgage.
It is not necessary to obtain liberty to exercise the power of sale, although orders giving such liberty have sometimes been made".
The secured creditor is thus outside the winding up and can realise his security without the leave of the winding up Court, though if he files a suit or takes other legal proceedings for the realisation of his security he is bound under section 231 (corresponding with section 171 of the Indian Companies Act) to obtain the leave of, the winding up Court before he can do so although such leave would almost automatically be granted.
Section 231 has been read together with section 228(1) and the attachment, sequestration, distress or execution referred to in the latter have reference to proceedings taken through the Court and if the creditor has resort to those proceedings he cannot put them in force against the estate or effects of the Company after the commencement of the winding up without the leave of the winding up Court.
The (1) 1923 Appeal Cases 647.
49 384 provisions in section 317 are also supplementary to the provisions of section 231 and emphasise the position of the secured creditor as one outside the winding up, the secured creditor being, in regard to the exercise of those rights and privileges, in the same position as he would be under the Bankruptcy Act.
The corresponding provisions of the Indian Companies Act have been almost bodily incorporated from those of the English Companies Act and if there was nothing more, the position of the secured creditor here also would be the same as that obtaining in England and he would also be outside the winding up and a sale by him without the intervention of the Court would be valid and could not be challenged as void under section 232(1) of the Indian Companies Act.
It was however urged that the addition of the words "or any sale held without leave of the Court of any of the properties" had changed the position of the secured creditor and even though the secured creditor realised the security without the intervention of the Court such sale, if effected by him without the leave of the winding up Court, was void.
It was pointed out that these words did not find their place in the corresponding section 228(1) of the English Companies Act and therefore even though any attachment, distress or execution put in force without leave of the Court against the estate or effects of the company after the commencement of the winding up was void under the terms of the section 232(1) as it originally stood, the words "or any sale held without leave of the Court of any of the properties" of the company were wide enough to include not only a sale held through the intervention of the Court but also a sale effected by the secured creditor without the intervention of the Court whether the sale was by private treaty or by public auction.
It was contended on the other hand on behalf of the contesting Respondent, Respondent 3, that the amendment was made in order to get over the decision of the Allahabad High Court in Kayastha Trading and Banking Corporation Ltd. vs 385 Sat Narain Singh(1) and that in any event on a true construction of section 232(1) as amended the words "any sale held" had reference in the context only to sales held by or effected through the intervention of the Court and not sales effected by the secured creditor without the intervention of the Court.
The decision of the Allahabad High Court above referred to had held on a construction of section 232(1) as it then stood, that an execution was not put in force merely when the property of the judgment debtor was sold in pursuance thereof, but it was put in force when the property was attached and hence where the property of an insolvent company was attached prior to the date of the commencement of the winding up but was actually sold subsequent to such date, the sale was not void and could be upheld.
There was an earlier decision of the Patna High Court in Baldeo Narain Singh vs The, United India Bank Ltd.(1) in which a contrary decision had been reached exactly under similar circumstances.
It is well known that this conflict was resolved and the decision of the Allahabad High Court was got over by inserting this amendment by Act XXII of 1936.
The statement of objects and reasons is certainly not admissible as an aid to the construction of a statute.
But it can be referred to for the limited purpose of ascertaining the conditions prevailing at the time which actuated the sponsor of the Bill to introduce the same and the extent and urgency of the evil which he sought to remedy.
State of West Bengal vs Subodh Gopal Bose and Others(3).
The amendment of section 232(1) inserted by Act XXII of 1936 was designed to prevent such sales as were upheld by the decision of the Allahabad High Court in Kayastha Trading and Banking Corporation Ltd. vs Sat Narain Singh(1) and it would be permissible to refer to that portion of the statement of objects and reasons for the purpose of ascertaining the extent and urgency of the evil which was sought to be remedied by introducing the amendment.
It follows therefore that the (1) Allahabad 433 (2) [1915] 38 Indian Cases 91.
(3) ; , 628.
386 amendment could not have been intended to bring within the sweep of the general words "or any sale held without the leave of the Court of any of the properties" sales effected by the secured creditor outside the winding up.
Even apart from this intendment there are certain canons of construction which also tend to support the same conclusion.
Prior to the amendment the law was well settled both in England and in India that the secured creditor was outside the winding up and he could realise his security without the intervention of the Court by effecting a sale of the mortgaged premises by private treaty or by public auction.
It was only when the intervention of the Court was sought either by putting in force any attachment, distress or execution within the meaning of section 232(1) as it stood before the amendment or proceeding with or commencing a suit or other legal proceedings against the company within the meaning of section 171 that leave of the Court was necessary and if no such leave was obtained the remedy could not be availed of by the secured creditor.
The sale of the mortgaged premises was also brought by the amendment on a par with the attachment, distress or execution put in force at the instance of the secured creditor and having regard to the context such sale could only be construed to be a sale held through the intervention of the Court and not one effected by the secured creditor outside the winding up and without the intervention of the Court.
It is a well recognised rule of construction that "when two or more words which are susceptible of analogous meaning are coupled together noscunter a sociis, they are understood to be used in their cognate sense.
They take, as it were, their colour from each other.
, that is.
, the more general is restricted to a sense analogous to the less general.
(Maxwell on Interpretation of Statutes, Tenth Edition, p. 332).
The Judicial Committee of the Privy Council also expressed itself in similar terms in Angus Robertson & Others vs George Day(1): (1) , 69. 387 "It is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them".
Having regard therefore to the context in which these words "any sale held without leave of the Court of any of the properties" have been used in juxtaposition with "any attachment, distress or execution put into force without leave of the Court against the estate or effects" it would be a legitimate construction to be put upon them that they refer only to sales held through the intervention of the Court and not to sales effected by the secured creditor outside the winding up and without the intervention of the Court.
There is also a presumption against implicit alteration of law and that is enunciated by Maxwell on Interpretation of Statutes, 10th Edition, at page 81 in the following terms: "One of these presumptions is that the legislature does not intend to make any substantial alteration in the law beyond what it explicitly declares, either in express terms or by clear implication, or, in other words, beyond the immediate scope and object of the statute.
In all general matters outside those limits the law remains undisturbed.
It is in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights, or depart from the general system of law, without expressing its intention with irresistible clearness. . . . .
This passage from Maxwell was approved of by Their Lordships of the Privy Council in Murugian, P. vs Jainudeen, C. L.(1) and Their Lordships agreed that the law was correctly stated in the passage just cited.
To the same effect are also the observations of the Court of Appeal in National Assistance Board vs Wilkinson(1) where it was held that the Statute is not to be taken as affecting a fundamental alteration in the general law unless it uses words pointing unmistakably to that conclusion.
In that case at page 658 Lord Goddard, C.J. observed: (1) [1954] 3 Weekly Law Reports 682, 687, (2) 388 "But it may be presumed that the legislature does not intend to make a substantial alteration in the law beyond what it expressly declares.
In Minet vs Leman(1), Sir John Romilly, M. R. stated as a principle of construction which could not be disputed that 'the general words of the Act are not to be so construed as to alter the previous policy of the law, unless no sense or meaning can be applied to those words consistently with the intention of preserving the existing policy untouched ' ".
If the construction sought to be put upon the words "or any sale held without leave of the Court of any of the properties" by the Appellants were accepted it would effect a fundamental alteration in the law as it stood before the amendment was inserted in section 232(1) by Act XXII of 1936.
Whereas before the amendment the secured creditor stood outside the winding up and could if the mortgage deed so provided, realise his security without the intervention of the Court by effecting a sale either by private treaty or by public auction, no such sale could be effected by him after the amendment and that was certainly a fundamental alteration in the law which could not be effected unless one found words used which pointed unmistakably to that conclusion or unless such intention was expressed with irresistible clearness.
Having regard to the circumstances under which the amendment was inserted in section 232(1) by Act XXII of 1936 and also having regard to the context we are not prepared to hold that the Legislature in inserting that amendment intended to effect a fundamental alteration in law with irresistible clearness.
Such a great and sudden change of policy could not be attributed to the Legislature and it would be legitimate therefore to adopt the narrower interpretation of those words of the amendment rather than an interpretation which would have the contrary effect.
(Vide the observations of the Privy Council in Vasudeva Mudaliar & Others vs Srinivasa Pillai & another(1).
(1) ; (2) (19O7) I.L.R. 30 Madras 426, 433, 389 It may be observed in this connection that section 171 enacts a general provision with regard to suits or other legal proceedings to be proceeded with or commenced against the company after a winding up order has been made and lays down that no suit or other legal proceedings shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court may impose.
This general provision is supplemented by the supplemental provisions to be found respectively in sections 229 and 232(1) of the Act.
Section 229 speaks of the application of insolvency rules in winding up of insolvent companies and section 232(1) speaks of the avoidance of certain attachments, executions, etc., put into force without the leave of the Court against the estate and effects of the company and also of any sale held without the leave of the Court of any of the properties of the company after the commencement of the winding up.
Section 229 recognises the position of the secured creditor generally as outside the winding up but enables him in the event of his desiring to take the benefit of the winding up proceedings to prove his debt, to value the same and share in the distribution pro rata of the assets of the company just in the same way as he would be able to do in the case of insolvency under the Presidency Towns Insolvency Act or the Provincial Insolvency Act.
Section 232(1) also has reference to legal proceedings in much the same way as legal proceedings envisaged by section 171 of the Act and the attachment, distress or execution put in force or the sale held are all of them legal proceedings which can only be resorted to through the intervention of the Court.
The word "held" in connection with the sales contemplated within the terms of the amended section also lends support to this conclusion and this conclusion is further fortified by the terms of section 232(2) which says that nothing in this section applies to proceedings by the Government, thus in effect indicating that what are referred to in section 232(1) are proceedings within the meaning of that term as used in section 171 of the Act.
390 The Federal Court also put a similar construction on the provisions of section 171 read with section 232(1) of the Act in The Governor General in Council vs Shiromani Sugar Mills Ltd. (In Liquidation)(1) "Section 171 must, in our judgment, be construed with reference to other sections of the Act and the general scheme of administration of the assets of a company in liquidation laid down by the Act.
In particular, we would refer to section 232.
Section 232 appears to us to be supplementary to section 171 by providing that any creditor (other than Government) who goes ahead, notwithstanding a winding up order or in ignorance of it, with any attachment, distress, execution or sale, without the previous leave of the Court, will find that such steps are void.
The ref erence to "distress" indicates that leave of the Court is required for more than the initiation of original proceedings in the nature of a suit in an ordinary Court of law.
Moreover, the scheme of the application of the company 's property in the pari passu satisfaction of its liabilities, envisaged in section 211 and other sections of the Act, cannot be made to work in co ordination, unless all creditors (except such secured creditors as are "outside the winding up" in the sense indicated by Lord Wrenbury in his speech in Food Controller V. Cork(1) at page 671) are subjected as to their actions against the property of the company to the control of the Court.
Accordingly, in our judgment, no narrow construction should be placed upon the words "or other legal proceeding" in section 171. 'In our judgment, the words can and should be held to cover distress and execution proceedings in the ordinary Courts.
In our view, such proceedings are other legal proceedings against the company, as contrasted with ordinary suits against the company".
We are therefore of the opinion that the sale effected by Respondent 2 as the Receiver of the Trustees of the debenture holders on the 16th July 1954 was valid and binding on all parties concerned and could not be challenged as it was sought to be done by the (1) , 55.
(2) 391 Official Receiver.
The position was rightly summed up by the High Court as under: "We thus reach the position that no leave of Court was needed before the Receiver appointed by the mortgagee debenture holders exercised the power of sale and that as there is no allegation of want of bona fides or recklessness or fraud against the Receiver in exercising such a power, it would follow that the sale held by the Receiver is valid and effectual to convey title to the purchaser and that such a sale cannot be avoided on the ground either of want of due notice given by the Receiver before effecting the sale or on the ground of undervalue".
The result therefore is that the appeal fails and must be dismissed with costs of the contesting Respondent 3.
The other Respondents who have appeared before us will bear and pay their own costs of the appeal.
| IN-Abs | The secured creditor is outside the winding up and can realism his security without the leave of the winding up Court, though if he files a suit or takes other legal proceedings for the realisation of his security he is bound under section 171 of the Indian Companies Act to obtain the leave of the winding up Court before he can do so although such leave would almost automatically be granted.
375 It is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them.
It is also a well recognized rule of construction that the legislature does not intend to make a substantial alteration in the law beyond what it explicitly declares either in express words or by clear implication and that the general words of the Act are not to be so construed as to alter the previous policy of the law, unless no sense or meaning can be applied to those words consistently with the intention of preserving the existing policy untouched.
Held therefore that having regard to the context in which the words "any sale held without leave of the Court of any of the properties" added in section 232(1) by the amending Act XXII of 1936 have been used in juxtaposition with "any attachment, distress or execution put into force without leave of the Court against the estate or effects" it would be a legitimate construction to be put upon them that they refer only to sales held through the intervention of the Court and not to sales effected by the secured creditor outside the winding up and without the intervention of the Court, and that the amendment was not intended to bring within the sweep of the general words sales effected by the secured creditor outside the winding up.
Held accordingly that in the present case the sale effected by respondent No. 2 as the receiver of the trustees of the debenture holders in July 1954 was valid and binding on all parties concerned and could not be challenged as it was sought to be done by the Official Receiver.
Food Controller vs Cork(1923 A.C. 647), Kayastha Trading and Banking Corporation Ltd. vs Sat Narain Singh ([1921] I.L.R. 43 All. 433), Baldeo Narain Singh vs The United India Bank Ltd. ([1915] , State of West Bengal vs Subodh Gopal Bose and others ; , Angus Robertson and others vs George Day , Murugian, P. vs Jainudeen, C. L. ([1954] 3 W.L.R. 682), National Assistance Board vs Wilkinson ([1952] 2 Q.B. 648), Vasudeva Mudaliar and others vs Srinivasa Pillai and another ([1907] I.L.R. and The Governor General in Council vs Shiromoni Sugar Mills Ltd. (In Liquidation) (1946 F.C.R. 40), referred to.
|
he levy of luxury tax is within the competence of the State legislature, the said legislature would be well within its competence to enact a law for recovery of an amount which though already refunded to a party, partakes of the nature of a luxury tax in the light of that law.
[707 C] & CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.
1689 1690 and 1692 1705 of 1972.
From the Judgment and order dated the 15th October, 1970 of the Kerala High Court at Ernakulam in O.P. Nos. 934 and 944 and W.A. 693 Nos. 15, 17, 18, 20, 22, 24, 27, 31, 32, 51 55 of 1965 and W.A. No. 170 of 1965 respectively.
T. section Krishnamurthy Iyer, C. K. Viswanatha Iyer and T. A. Rama chandran for the Appellants in C.As.
1689, 1962 and in C.As.
1694 to 1705 of 1972 C. K. Viswanatha Iyer and T. A. Ramachandran for the appellants in C.As.
1690 and 1693.
D. V. Patel and K. R. Nambiar for Respondents in all the appeals.
The Judgment of the Court was delivered by KHANNA, J.
Whether the provisions of the Luxury Tax on Tobacco (Validation) Act, 1964 (Act 9 of 1964) (hereinafter referred to as the Act) enacted by the State Legislature of Kerala are void on the grounds that (1) the State Legislature lacked the legislative competence to enac that Act, and (2) the provisions of the Act contravened article 301 of the Constitution and were not protected by article 304 is the main question which arises for determination in these 16 civil appeals Nos.
1689, 1690 and 1692 to 1705 filed on certificate against the judgment of the Kerala High Court.
A Division Bench of the High Court has up held the validity of the Act.
We may set out the chequered history giving rise to civil appeals 1689 and 1692.
Learned counsel for the parties are agreed that it is not necessary to set out the facts of the other cases and that the decision in the above two appeals would also govern those other cases.
The appellants were dealers in tobacco and tobacco preparations in Mattancherry in erstwhile Cochin State.
In 1909 Cochin Tobacco Act (Act 7 of 1084 M.E.) was enacted by the Maharaja of Cochin.
Section 4 p of that Act prohibited the transport, import or export, sale and cultivation of tobacco, except as permitted by the Act and the rules framed thereunder.
In pursuance of the power given by that Act the Diwan of Cochin made rules relating to matters specified in the Act.
Under the rules it became necessary to obtain a licence for cultivation of tobacco plant.
Drying, curing, manufacturing and the storing of tobacco cultivated in the State was to be done under the supervision of an Excise officer in licenced manufacturing yards and store houses.
The system which was in force for the collection of tobacco revenue up to August 1950 was to auction what were called A class and class shops.
In addition, there were class shops, the licence for which was granted either on the recommendation of or in consultation with class licensees.
A somewhat similar law was in operation in the erstwhile Travancore State.
On April 1, 1950 after the Constitution had come in force and Travancore Cochin had become a Part State Finance Act (No. 25 of 1950) extended the Central Excises and Salt Act (No. 1 of 1944) to Part State of Travancore Cochin by section 11 thereof.
Section p 13 (2) of the Finance Act provided that "if immediately before the 1st lay of April 1950, there is in force in any State other than Jammu and Kashmir a law corresponding to, but other than, an Act referred to in r sub sections (1) or (2) of section 11, such law is hereby repealed with effect from the said date. ".
In consequence of this provision in 3 L 159SCI/176 694 Finance Act, 1950, the rules which were in force on April 1, 1950 were changed in the Cochin area by notification dated August 3, 1950 and the system of auction sales of A class and class shops was done away with and instead graded licence fees were introduced for various classes of licensees, including class licensees.
Similar change was made for the Travancore area.
Notification dated January 25, 1951 was issued in this context.
A class licensees under the new rules were called stockists, class licensees were wholesale sellers and class licensees were retailers.
A class licensees were to pay a specified minimum fee for a fixed maximum quantity of tobacco and tobacco goods possessed by them and an additional fee for an additional quantity.
The fee was to be levied only in respect of the tobacco imported into the State The State of Travancore Cochin collected licence fee from the appellants for the period from August 17, 1950 to December 31, 1957.
In 1956 the appellants, who were A class licensees, filed writ petitions in Kerala High Court for refund of the licence fee collected from them on the ground that the Cochin and Travancore Tobacco Acts stood repealed by the Finance Act of 1950 because of the extension of the Central Excises and Salt Act to Part State of Travancore Cochin.
The petitions were opposed on behalf of the State and it was contended that the Cochin Act or the similar Travancore Act did not stand repealed from April 1, 1950.
It was urged that the State was competent to frame new rules under the Cochin Tobacco Act and the corresponding Travancore Act.
It was further stated that the tax in question could be validly levied under entry 60 or 62 of List II of the Seventh Schedule to the Constitution.
The High Court dismissed the petitions holding that the laws under which the new rules were framed were in force and were valid under entry 62 of List II of the Seventh Schedule.
The 13: appellants then came up in appeal to this Court.
It was held by this Court in its judgment dated January 24, 1962 reported in (1962) Supp.
2 SCR 741 that the Cochin Tobacco Act of 1084 and the rules framed thereunder as also similar provisions in Travancore, requiring licences to be taken out for storage and sale of tobacco and for payment of licence fee in respect thereof were law corresponding to the provisions of the and hence stood repealed on April 1, 1950 by virtue of section 13(2) of the Finance Act, 1950.
It was further held that as the parent Acts, namely, the Cochin Tobacco Act and corresponding Travancore Act had stood repealed, the new rules framed in August 1950 and January 1951 under those Acts for the respective areas of Cochin and Travancore for the issue of licences and payment of fee therefore for storage of tobacco were invalid ab initio.
After the above decision of this Court the appellants made a demand to the respondent State that the amounts of Rs. 1,14,750 collected by the State from them by way of licence fee under the invalid rules might be refunded to them.
The respondent State refunded.
73,500 to the appellants on April 29, 1963.
On July 10, 1963 the appellants filed original petition No. 1268 of 1963 in the Kerala High Court for issue of a writ to the respondent State to pay the balance amount of Rs 41.250 which along with interest came to Rs. 52,800 to the appellants.
During the pendency of the above petition on December 16, 695 1963 the Governor of Kerala promulgated ordinance No. 1 of 1963 which was later replaced by Kerala Luxury Tax on Tobacco (Validation) Act of 1964 (Act of 1964).
This Act received the assent of the President on March 3, 1964.
Original petition No. 1268 of 1963 was thereupon amended with a view to challenge the validity of the above mentioned Act.
In the meanwhile, on January 21, 1964 demand was made in view of the ordinance by the State Government calling upon the appellants to pay the amount of Rs. 73,500 which had been refunded to them by the State Government.
Original petition No. 934 of 1964 was filed by the appellants in the Kerala High Court to challenge the validity of demand notice dated January 21, 1964 as also the vires of the Act.
At this stage it may be appropriate to refer to the relevant provisions of the Act.
The preamble of the Act reads as under: "PREAMBLE: WHEREAS it is expedient to provide for the levy of a luxury tax on tobacco for the period beginning with the 17th day of August, 1950 and ending on the 31st day of December 1957, and the validation of the levy and collection of fees for licences for the vend and stocking of tobacco for the aforesaid period: BE it enacted in the Fifteenth Year of the Republic of India as follows: " Section 2(ii) of the Act defines tobacco to include leaf of the tobacco plant, snuff, cigars, cigarettes, beedies, beedi tobacco, tobacco powder and other preparations or admixtures of tobacco.
Section 3 is the charging section and provides that "for the period beginning with the 17th day of August 1950 and ending on the 31st day of December, 1957, every person vending or stocking tobacco within any area to which this Act extends shall be liable and shall be deemed always to have been liable to pay a luxury tax on such tobacco in the form of a fee for licence for the vend and stocking of the tobacco, at such rates as may be prescribed, not exceeding the rates specified in the Schedule".
Section 4(1) of the Act gives power to the State Government to make rules by publication in the gazette to carry out the purposes of the Act.
According to sub section (3) of section 4 of the Act, 'the rules and notifications specified below purported to have been issued under the Tobacco Act of 1087 (Travancor Act 1 of 1087) or the Cochin Tobacco Act, VII of 1084, as the case may be, in so far as they relate or purport to relate to the levy and collection of fees for licences for the vend and stocking of tobacco, shall be deemed to be rules issued under this section and shall be deemed to have been in force at all material times.
" Along the rules and notifications specified in subsection (3) of section 4 are rules published on August 3, 1950 and January 25, 1951.
Sections 5 and 6 read as under: "5.
Validation Notwithstanding any judgment, decree or order of any court, all fees for licences for the vend or stocking of tobacco levied or collected or purported to have been 696 levied or collected under any of the rules or notifications specified in sub section (3) or section 4 for the period beginning with the 17th day of August, 1950 and ending on the 31st day of December, 1957, shall be deemed to have been validly levied or collected in accordance with law as if this Act were in force on and from the 17th day of August, 1950 and the fees for licences were a luxury tax on tobacco levied under the provisions of this Act, and accordingly, (a) no suit or other proceeding shall be maintained or continued in any court for the refund of any fees paid or purported to have been paid under any of the said rules or notifications; and (b) no court small enforce a decree or order directing the refund of any fees paid or purported to have been paid under any of the said rules or notifications.
Recovery of licence fees refunded Where any amount paid or purported to have been paid as a fee for licence under any of the rules or notifications specified in sub section (3) of section 4 has been refunded after the 24th day of January, 1962, and such amount would not have been liable to be refunded if this Act had been in force on date of the refund, the person to whom the refund was made shall pay the amount so refunded to the credit of the Government in any Government treasury on or before the 16th day of April, 1964, and, where such amount is not so paid, the amount may be recovered from him as an arrear of land revenue under the Revenue Recovery Act for the time being in force.
" According to the appellants, the label given to the tax imposed by the charging section was only a cloak to disguise its real nature of being an excise duty.
The State Legislature, as such, was stated to be in competent to levey excise duty on tobacco.
It was also stated that the provisions of the Act were violative of the provisions of article 301 of the Constitution.
In the meanwhile, a single Judge of the High Court dismissed on July 20, 1964 original petition No. 1268 of 1963 which had been filed by the appellants.
The appellants thereupon filed appeal before a Division Bench of the High Court against the judgment of the learned single Judge.
The learned Judges of the Division Bench allowed original petition No. 963 of 1964 and quashed demand notice dated January 21 1964 issued by the State asking for refund of Rs.73,500.
The High Court relied upon a decision of this Court in the case of Kalyani Stores vs state of Orissa(1) and held that in the absence of any production or manufacture of tobacco inside the appellant State it was not competent for the State Legislature to impose a take on tobacco imported from outside the State.
The provisions of Act 9 of 1964 were held to violate article 301 of the Constitution and not protected by article 304.
The learned Judges also set aside the judgment (1) ; 697 Of the single Judge and allowed the appeals against that judgment in original petition No. 1268 of 1963.
The State of Kerala thereafter came up in appeal to this Court.
As per judgment dated July 30, 1969 reported in (1970)1 SCR 700 this Court held that the High Court had not correctly appreciated the import of the decision in Kalyani Stores (supra).
It was held that only such restrictions or impediments which directly and immediately impeded the free flow of trade, commerce and intercourse fell within the prohibition imposed by article 301.
This Court further observed that unless the High Court first came to the finding whether or not there was the infringement of the guarantee under article 301 of the Constitution, the further question as to whether the statute was saved under article 304 (b) did not arise.
The case was accordingly sent back to the High Court with the direction to take further affidavits in the matter.
The Court left it open to the parties to argue as to whether the levy in question was in substance a duty of excise and as such whether it was not competent for the State Legislature to enact the provisions in question.
After remand affidavits were filed on behalf of the appellants and the respondent State.
The learned Judges of the High Court as per judgment under appeal gave the following findings: "(1) The levy being in respect of goods produced out side the State, it cannot be, and is not, an excise duty falling within entry 84 of the Union List.
(2) The tax is on tobacco, an article of luxury, consumed within the taxing territory, levied on the occasion of its stocking and vending by the importers into the taxing territory.
It clearly answers the description of luxury tax falling within entry 62 of the State List.
(3) There being no competing internal goods, the mere fact that the levy is only on imported goods can only have, like any other tax, the economic effect of reducing the demand by reason of increasing the price.
The consequent diminution in the quantity of goods imported into the taxing territory is too remote an effect to be a direct impediment to the free flow of trade offending article 301 of the constitution.
(4) However, the payment of the tax in the shape of a licence fee being a condition precedent to bringing the goods into the taxing territory, there would appear to be a direct impediment on the free flow of goods and therefore of trade into that territory notwithstanding that the taxable event is not the movement of the goods but the stocking after completing their journey and reaching their destination, the levy in advance being only for convenience of collection.
(5) Even assuming that the levy offends article 301, it is saved by article 304(b) being a reasonable tax levied in the 698 public interest, the condition in the proviso thereto being satisfied by the assent of the President in view of article 255.
(6) The guarantee in article 301 and the saving in article 304(b) being in respect of both inter State and inter State trade, the fact that the taxing territory is only a part of the State is of no consequence.
" On behalf of the appellants, their learned counsel Mr. Krishnamurthy Iyer has at the outset contended that the question as to whether the levy of the licence fee upon the appellants constitutes excise duty is concluded by the decision of this Court of January 24, 1962 and the same operates as res judicata.
As against that, Mr. Patel on behalf of the respondent State submits that the question decided by this Court on January 24, 1962 was different from that which arises in these appeals and that the said decision does not operate as res judicata.
The above submission of Mr. Patel, in our opinion, is wellfounded.
What was decided by this Court in its judgment dated January 24, 1962 was that the Cochin Tobacco Act r and the similar Travancore Act taken along with the rules framed under those Acts by the respective Diwans were in substance law corresponding to the .
The Cochin Tobacco Act and the similar Travancore Act, it was further held, stood repealed on April 1, 1950 by virtue of section 13(2) of the Finance Act, 1950.
So far as the rules are concerned which were issued on August 3, 1950 and January 25, 1951, this Court held that as the parent Acts under which those rules were issued stood repealed on April 1, 1950, there would be no power in the State Government thereafter to frame new rules in August 1950 and January 1951 for there would be no law to support the new rules.
The above question does not arise for determination in these appeals before us.
What we are concerned with is the constitutional validity of the Kerala Act 9 of 1964.
This Act was enacted subsequent to the above decision of this Court rendered on January 24, 1962.
No question relating to the validity of the above mentioned Act in the very nature of things could arise at the time of the earlier decision in 1962.
We, therefore, are of the view that the judgment dated January 24, 1962 of this Court does not operate as res judicate regarding the points of controversy with which we are concerned in these appeals.
It has next been argued on behalf of the appellants that the levy for the licence fee for stocking and vending of tobacco, even though described as luxury tax in charging section 3 of the Act, is in reality and substance an excise duty on tobacco.
Excise duty on tobacco under entry 84 of List I of the Seventh Schedule to the Constitution can only be levied by Parliament and, as such, according to the learned counsel for the appellants, the State Legislature was not competent to enact the impugned Act 9 of 1964.
This; contention.
in our opinion, is equally devoid of force.
Excise 699 duty, it is now well settled, is a tax on articles produced or manufactured in the taxing country.
Generally speaking, the tax is on the manufacturer or the producer, yet laws are to be found which impose a duty of excise at stages subsequent to the manufacture or production [see p. 750 51 of the judgment of this Court delivered on January 24, 1962 in the case between these very parties, reported in (1962) Supp.
2 SCR 741].
The fact that the levy of excise duty is in the form of licence fee would not detract from the fact that the levy relates to excise duty.
It is, however, essential that such levy should be linked with production or manufacture of the excisable article.
The recovery of licence fee in such an event would be one of the modes of levy of the excise duty.
Where, however, the levy imposed or tax has no nexus with the manufacture or production of an article, the impost or tax cannot be regarded to be one in the nature of excise duty.
In the light of what has been stated above, we may now turn to the provisions of the impugned Act 9 of 1964.
The charging section 3 of this Act creates a liability for payment of luxury tax on the stocking and vending of tobacco.
There is no provision of this Act which is concerned with production or manufacture of tobacco or which links the tax under its provisions with the manufacture or production of tobacco.
The same is the position of the rules issued on August 3, 1950 and January 25, 1951 and Mr. Krishnamurthy Iyer on behalf of the appellants has frankly conceded that those rules are in no way concerned with the production or manufacture of tobacco.
It would, therefore follow that the levy of tax contemplated by the provisions of section 3 of the Act has nothing to do with the manufacture or production of tobacco and, as such, cannot be deemed to be in the nature of excise duty.
Argument that the provisions of the Act fall under entry 84 of List I of the Seventh Schedule to the Constitution must, therefore, be held to be bereft of force.
The next argument which has been advanced on behalf of the appellants is that the tax on the vending and stocking of tobacco cannot be considered to be luxury tax, as contemplated by entry 62 of List II of the Seventh Schedule to the Constitution.
According to that entry, the State Legislatures can make laws in respect of "taxes on luxuries, including taxes on entertainments, amusements, betting and gambling".
Question, therefore, arises as to whether tobacco can be considered to be an article of luxury.
The word "luxury" in the above context has not been used in the sense of something pertaining to the exclusive preserve of the rich.
The fact that the use of an article is popular among the poor sections of the population would not detract from its description or nature of being an article of luxury.
The connotation of the word "luxury" is something which conduces enjoyment over and above the necessaries of life.
It denotes something which is superfluous and not indispensable and to which we take with a view to enjoy, amuse or entertain ourselves.
An expenditure on something which is in excess of what is 700 required for economic and personal well being would be expenditure on Luxury although the expenditure may be of a nature which is incurred by a large number of people, including those not economically well off.
According to Encyclopaedia Britanica, luxury tax is "a tax on commodities or services that are considered to be luxuries rather than necessities.
Modern examples are taxes levied on the purchase of jewellery, perfume and tobacco".
It has further been n said: "In the 19th and 20th centuries increased taxes have been placed on private expenditure upon alcohol, tobacco, entertainment and automobiles.
Such expenditure is superfluous in the sense that a large part of it may be said to be in excess of what is required for economic efficiency and personal well being, although the expenditure affects large numbers of people." In Re The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938(1) Gwyer CJ.
while dealing with excise duty described spirits, beer and tobacco as articles of luxuries.
It is no doubt true that for those who have been lured by the charms and blandishments of Lady Nicotine there are few things which are so soothing to the distraught nerves and so entertaining as tobacco and its manifold preparations.
One of them has gone to the extent of saying that he who doth not smoke hath either known no great griefs, or refuseth himself the softest consolation, next to that which comes from heaven (Bulwer Lytton, What will He do with It ?).
Charles Lamb in "A Farewell to Tobacco" observes: "For thy sake, tobacco, I would do anything but die".
The fact all the same remains that the use of tobacco has been found to have deleterious effect upon health and a tax on tobacco has been recognized as a tax in the nature of a luxury tax.
One of the earliest indictments of tobacco is in Robert Burton 's Anatomy of Melancholy wherein he says: "It 's a plague, a mischief, a violent purger of goods, lands, health, hellish, devilish, and damned tobacco, the ruin and overthrow of body and soul.
" Another indictment is from James I of England (Counterblaste to Tobacco) when it is said: "A custom (smoking) loathsome to the eye, harmful to the brain, dangerous to the lungs, and in the black stinking fume thereof, nearest resembling the horrible Stygian smoke of the pit that is bottomless." The taxation of the objects or procedures of luxurious consumption has aimed at two purposes, on the surface contradictory: the suppressing or limiting of this consumption and the deriving of a public (1) 701 income from it.
On closer inspection a good deal of this contradiction vanishes when it is seen that prohibition and taxation of luxury tend equally to fix certain levels and standards of living, as against economic and social progress, which is tending to "level" such differences (see page 634 of the Encyclopaedia of the Social Sciences Volumes IX X, 14th Printing).
It may be added that there is nothing static about what constitutes an article of luxury.
The Luxuries of yesterday can well become the necessities of today.
Likewise, what constitutes necessity for citizens of one country or for those living in a particular climate may well be looked upon as an item of luxury for the nationals of another country or for those living in a different climate.
A number of factors may have to be taken into account in adjudging a commodity as an article of luxury.
Any difficulty which may arise in borderline case would not be faced when we are dealing with an article like tobacco, which has been recognised to be an article of luxury and is harmful to health.
The learned Judges of the High Court were of the opinion that the levy of tax in question was violative of article 301 of the constitution, according to which subject to the provisions of Part XIII, trade, commerce and intercourse throughout the territory of India shall be free.
The learned Judges in this connection took the view that the levy of tax as a condition preceding to the entry of goods into a place directly impeded the flow of trade to that place.
The conclusion arrived at by the High Court in this respect, in our opinion, was correct and sound.
The appellants were A class licensees.
According to rule 16 of the rules issued on January 25, 1951, A class licensees shall be entitled to purchase tobacco from any dealer within or without the State without any quantitative restriction.
This class of licensees could sell only to other A class licensees or class licensees.
It was also mentioned in that rule that the licence fee would be realised only for the quantities brought in from outside.
Perusal of the rules shows that it was imperative for the A class licensees to pay the licence fee in advance before they could bring tobacco within the taxable territory.
We agree with the learned Judges of the High Court that such levy directly impedes the free flow of trade and as such is violative of article 301 of the Constitution.
The next question which arises for consideration is whether the levy of tax is protected by article 304(b) of the Constitution.
Article 3041b) reads as under `"304.
Notwithstanding anything in article 301 or article 303, the Legislature of a State may by law (a) . . . . . (b) impose such reasonable restrictions on the freedom of trade.
commerce or intercourse with or within that State as may be required in the public interest; 702 Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.
" We may observe that the requirement of the proviso regarding the sanction of the President has been satisfied.
It is no doubt true that the assent of the President was given subsequent to the passing of the Bill by the legislature but that fact would not affect the validity of the impugned Act in view of the provisions of article 255 of the Constitution.
Clause (b) of article 304 empowers the Legislature of a State notwithstanding anything in article 301 or article 303 but subject to the sanction of the President to impose reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest.
Article 302 confers power upon Parliament to impose by law such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest.
Perusal of article 302 and article 304 shows that while Parliament can impose restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest, so far as the State Legislatures are concerned, restrictions must satisfy two requirements, firstly, they must be in the public interest and, secondly the restrictions should be reasonable.
Shall J. speaking for the majority of the Constitution Bench in the case of State of Madras vs N. K. Nataraja Mudaliar(1) observed that the exercise of the power to tax may normally be presumed to be in the public interest.
The above observations though made in the context of article 302 have equal relevance under article 304.
Not much argument is needed to show that the power to tax is essential for the maintenance of any governmental system.
Taxes are levied usually for the obvious purpose of raising revenue.
Taxation is also resorted to as a form of regulation.
In the words of Justice Stone, "every tax is in some measure regulatory" Sonzinky vs United State(2)1.
According to Roy Blough, the taxing power "becomes an instrument available to government for accomplishing objectives other than raising revenues" [The Federal Taxing Process, page 410 (Quoted on page 263 of American Constitutional Law by Trsolini and Shapiro, 3rd Ed.].
To some extent every tax imposes an economic impediment to the activity taxed as compared with others not taxed, but that fact by itself would not make it unreasonable.
It is well settled that when power is conferred upon the legislature to levy tax, that power must be widely construed; it must include the power to impose a tax and select the articles or commodities for the exercise of such power; it must likewise include the power to fix the rate and prescribe the machinery for the recovery of tax.
This power also gives jurisdiction to the legislature to make such provisions as, in its (1) ; (2) ; (1937) 703 Opinion, would be necessary to prevent the evasion of the tax.
As observed by Chief Justice Marshall in M 'Culloch vs Maryland (1), "the power of taxing the people and their property is essential to the very existence of Government, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the Government may choose to carry it".
There can also be no doubt that the law of taxation in the ultimate analysis is the result of the balancing of several complex considerations.
The legislatures have a wide discretion in the matter.
In considering the question as to whether the restriction is reasonable in public interest, the court will have to balance the importance of freedom of trade as against the requirement of public interest.
Article 304(b) necessarily postulates that considerations of public interest may require and justify the imposition of restrictions C` on the freedom of trade provided they are reasonable.
In determining the reasonableness of the restriction, we shall have to bear in mind the importance of freedom of trade and the requirement of public interest.
It is a question of weighing one relevant consideration against another in the context of the larger public interest [see Khyerban Tea Co. Ltd. vs State of Madras(2)].
We agree with Mr. Krishnamurthy Iyer that the onus of showing that the restrictions on the freedom of trade, commerce or intercourse in the public interest are reasonable, is upon the State.
It is also true that no effort was made in the affidavit filed on behalf of the State in this case to show as to how the restrictions were reasonable, but that fact would not necessarily lead the court to hold that the restrictions are unreasonable.
If the court on consideration of the totality of facts finds that the restrictions are reasonable, the court would uphold the same in spite of lack of details in the affidavit filed on behalf of the State.
In judging the question of reasonableness of restriction in the present case, we must bear in mind that the levy of luxury tax relates to tobacco, the consumption of which involves health hazard.
Regulation of the sale and stocking of an article like tobacco which has a health hazard and is considered to be an article of luxury by imposing a licence fee for the same, in our opinion, is a permissible restriction in public interest within article 304(b) of the Constitution.
The material on record shows that except for cultivation of tobacco on experimental basis, no tobacco is grown in the area with which we are concerned.
The levy of luxury tax is bound to result in raising the price of tobacco in the area of erstwhile States of Travancore and Cochin.
Once of the likely effects of the enhancement of the price of a commodity entailing health hazards is to lower its consumption.
The fact that there is no commercial production of tobacco in the area with which we are concerned would show that there is no discrimination between tobacco brought from outside that area and the locally grown tobacco because in fact there is no tobacco of the latter category, except that grown on experimental basis.
4 Ed.579, 607.
(2) [1964] 5 S.C.R.9 75.
704 Argument has been advanced on behalf of the appellants that the provisions of the Act do not apply to the entire State of Kerala but apply only to those areas which were parts of erstwhile States of Travancore and Cochin.
The restriction of the operation of the Act to only a part of the area of the State would show, it is urged, that the restriction is unreasonable.
This contention, in our opinion, is not well founded.
The fact that the operation of the Act is confined to a particular area and does not extend to the entire State is due to historical reasons.
The object of the Act was to validate the recoveries already made.
In the case of Nazeeria Motor Service etc.
vs State of Andhra Pradesh & Anr.(1), the appellants, who were motor transport operators, challenged the increase in surcharge of the fares and freights imposed by the Andhra Pradesh Motor Vehicles (Taxation of Passengers and Goods) Amendment and Validation S Act, 1961.
It was urged that the Act fell within the mischief of article 301 of the Constitution and was not protected by article 304(b) and article 19(1)(f) of the Constitution.
Contention was also advanced that the provisions of the said Act were violative of article 14 of the Constitution.
In support of the above contentions, reference was made to the fact that the Act had been made applicable to the Andhra area and had not been made applicable to the Telengana area.
Some other grounds were also relied upon to challenge the validity of the Act.
This Court upheld the validity of the Act and repelled the contentions.
No doubt this Court referred to the circumstance that the levy of tax was confined only to the Andhra area and was not operative in the Telengana area in the context of the argument that the Act was violative of article 14 of the Constitution, the fact all the same remains that one of the grounds advanced with a view to assail the validity of the Act was that its provisions were not applicable to the Telengana area.
We are unable to accede to the submission that this Court lost sight of the fact that the Act was not applicable to the Telengana area in holding that its provisions were protected by article 304(b) of the Constitution.
It is also true that the levy of tax relates only to the period from August 17, 1950 to December 31, 1957, but that too was due to the historical reason that the licence fee had been realised only during that period and the object of the impugned Act was to validate the recovery already made.
Argument has also been advanced by Mr. Krishnamurthy Iyer that the impugned Act is a colourable piece of legislation because what is sought to be done is to validate the levy made under provisions of law which were found to have been repealed.
It is further pointed out that those provisions of law were found by this Court to be similar to the provisions of the Central Execises and Salt Act and as such, those provisions were beyond the competence of a State Legislature.
Any levy made under those provisions cannot, according to the learned counsel, be validated by the State Legislature.
The above argument has a seeming plausibility, but, on deeper examination, we find it to be not tenable.
It is no doubt true, as stated by (1) ; 705 this Court in the case of Jaora Sugar Mills (P) Ltd. vs State of Madhya Pradesh & Ors. (1) that when an Act passed by a State Legislature is invalid on the ground that the State Legislature did not have legislative competence to deal with the topics covered by it, in that event even Parliament cannot validate such an Act, because the effect of such attempted validation, in substance, would be to confer legislative competence on the State Legislature in regard to a field or topic which, by the relevant provisions of the schedules to the Constitution, is outside its jurisdiction.
Where a topic is not included within the relevant List dealing with the legislative competence of the State Legislature, Parliament, by making a law cannot attempt to confer such legislative competence on the State Legislatures.
The above principle would, however, have no application where, as in the present case, what is sought to be done is to validate the recovery of licence fee for stocking and vending of tobacco.
The impugned provisions under which that levy is sought to be made with a retrospective effect have nothing to do, as already pointed out above, with production and manufacture of tobacco.
The levy is sought to be made as luxury tax which is within the competence of the State Legislature and not as excise duty which is beyond the legislative competence of the State Legislature.
If the levy in question can be justified under a provision which is within the legislative competence of the State Legislature, the levy shall be held to be validly imposed and cannot be considered to be impermissible.
Where a challenge to the validity of a legal enactment is made on the ground that it is a colourable piece of legislation, what has to be proved to the satisfaction of the court is that though the Act ostensibly is within the legislative competence of the legislature in question, in substance and reality it covers field which is outside its legislative competence.
In the present case we find that in enacting the impugned provisions, the State Legislature, as already pointed out above, has exercised a power of levying luxury tax in the shape of licence fee on the vend and stocking of tobacco.
The enactment of a law for levying luxury tax is unquestionably within the legislative competence of the State Legislature in view of entry 62 in List II of the Seventh Schedule to the Constitution.
As such, it cannot be said that the impugned Act is a colourable piece of legislation.
In the case of Jaora Sugar Mills (P) Ltd. access was levied under the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1958 on sugarcane.
This Court in the earlier case of Diamond Sugar Mills(2) had held that such a levy was not valid.
Following the above decision the Madhya Pradesh High Court struck down section 23 which was the charging section of the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1958.
There were similar Acts in several other States which suffered from the same infirmity and to meet that situation, Parliament passed the .
The Act made valid by section 3 all the assessments and collections made before its commencement under the various State Acts and laid down that all the provisions of the (1) (2) ; 706 State Acts as well as the relevant notifications, rules, etc., made under the State Acts would be treated as part of section 3.
It was further provided that the said section shall be deemed to have existed at all material times when the cess was imposed, assessed and collected under the State Acts.
The appellant, a sugar factory, was asked to pay the cess for the years 1959 60 and 1960 61.
The appellant challenged the levy.
The High Court having dismissed the petition, the appellant came to this Court.
Among the various contentions which were advanced on behalf of the appellant in the case were: (1) What the validation of the Act had done was to attempt to cure the legislative incompetence of the State Legislatures by validating State Acts which were invalid on the ground of absence of legislative competence in the respective State Legislatures; (2) Parliament lrad passed the Act in question not for the purpose of levying a cess of its own, but for the purpose of enabling the respective States to retain the amounts which they had illegally collected.
The Act was, therefore, a colourable piece of legislation; and (3) The Act had not been passed for the purposes of the Union of India and the recoveries of cesses which were retrospectively authorised by it were not likely to go into the Consolidated Fund of India.
The Constitution Bench of this Court speaking through Gajendragadkar CJ.
repelled all the above contentions.
It was held by this Court that if collections are made under statutory provision which are invalid because they deal with a topic outside the legislative competence of the State Legislature, the Parliament can in exercise of its undoubted legislative competence, pass a law retrospectively validating the said collections by converting their character into collections made under its own statute operating retrospectively.
So far as the present case is concerned, we have already pointed out above that it was within the competence of the State Legislature to make a law in respect of luxury tax and to recover that tax in the shape of licence fee for vend and stocking of tobacco.
The State Legislature has sought to validate the recovery of the amounts already made by treating those amounts as luxury tax.
The fact that the validation of the levy entailed converting the character of the collection from an impermissible excise duty into permissible luxury tax would not render it unconstitutional.
The only conditions are that the levy should be of a nature which can answer to the description of luxury tax and that the State Legislature should be competent to enact a law for recovery of luxury tax.
Both these conditions as stated above are satisfied.
As regards the power of the legislature to give retrospective operation to a tax legislation, we may also refer to the case of Rai Ramkrishna & Ors.
vs State of Bihar(1) wherein it was held that where the legislature can make a valid law, it can provide not only for the prospective operation of the material provisions of the said law but can also provide for the retrospective operation of the said provisions.
The legislative power was held to include the subsidiary or the auxiliary power to validate law which had been found to be `H invalid.
It was also observed that in judging the reasonableness of the retrospective operation of law for the purpose of article 304(b), (1) ; 707 The test of length of time covered by the retrospective operation could nob by itself be treated as decisive.
Again, in the case of Epari Chinna Krishna Moorthy, Proprietor, Epari Chinna Moorthy & Sons, Berhampur, Orissa vs State of Orissa(1) the Constitution Bench of this Court repelled the argument that a legislation should be held to be invalid because its retrospective operation might operate harshly in some cases.
As a result of the above, we would hold that the impugned provisions are protected by article 304(b) of the Constitution.
Lastly, it has been argued that section 6 of the impugned Act is invalid because it provides for payment of an amount which had been refunded in pursuance of the order of this Court.
Section 6 is thus stated to be an encroachment by the legislature upon a judicial field.
This contention, in our opinion, is bereft of force.
If a provision regarding the levy of luxury tax is within the competence of the State Legislature, the said Legislature would be well within its competence to enact a law for recovery of an amount which, though already refunded to a party, partakes of the nature of luxury tax in the light of that law.
If an amount can answer to the description of luxury tax, there would be no legal impediment to recovering the same as luxury tax, even though initially it was recovered or sought to be recovered as something different from luxury tax.
As a result of the above, we dismiss these appeals, but, in the circumstances, leave the parties to bear their own costs.
P.B.R Appeals dismissed.
| IN-Abs | The Finance Act 1950 extended the Central Excise and Salt Act, 1944 to the Part State of ' Travancore Cochin and repealed the Cochin Tobacco Act, 1909 and the Tobacco Act (Travancore Act I of 1087).
Thereafter a system of licensing was introduced by which the licensees were required to pay a specified fee in respect of tobacco imported into the State.
The appellants challenged unsuccessfully in the High Court the collection of the licence fee for the period between August 1950 and December 1957.
The Act and rules having been declared by this Court as invalid ab initio, the State refunded a portion of the licence fee collected.
but the appellants filed writ petitions claiming refund of the remainder of the licence fee paid by them.
During the pendency of the writ petitions the Kerala Luxury Tax on Tobacco (Validation) Act of 1964 (Act 9 of 1964) was passed by the State legislature to provide for the levy of a luxury tax on tobacco and validate the levy and collection of fees for licences for the vend and stocking of tobacco for the period between August 17, 1950 and December 31, 1957 and it received the assent of the President.
The appellants then challenged the validity of the 1964 Act, but the State on the other hand demanded payment of the part of the fee earlier refunded to the parties The validity of the demand notice was questioned by the appellants on the question of validity of the 1964 Act, the High Court held that (1) the levy being in respect of goods produced outside the State, was not an excise duty falling within Entry 84 of the Union List; (2) the tax clearly answers the description of luxury tax falling within entry 62 of State, List; (3) however, the payment of the tax being a condition precedent to the bringing of the goods into the taxing territory, it was a direct impediment on the free flow of goods, and (4) even so, it is saved by Article 304(b) being n reason able tax levied in public interest.
Dismissing the appeals, ^ HELD.
(1) The judgment of this Court in A. B. Abdullkadir & ors.
vs The State of Kerala & Anr.
[1962] Supp. 2 S.C.R. 741 does not operate as res.
judicata regarding the points in controversy in these appeals.
What was held in that case was that the Cochin Tobacco Act and the similar Travancore Act taken along with the rules framed under those Acts were in substance law corresponding to the Central Excise and Salt Act.
The Cochin Tobacco Act and the similar Travancore Act stood repealed on April 1, 1950 and there would be no power in the State Government thereafter to frame new rules in August 1950 and January 1951 for there would be no law to support the new rules.
In the instant case what is questioned is the constitutional validity of Act 9 of 1964 which was enacted subsequent to the above decision of this Court.
[698 C G] (2)(a) The argument that the provisions of the Act fell under Entry 84 of List I of the Seventh Schedule is bereft of force.
The liability to pay the tax is on stocking and vending of tobacco.
There is no provision in the Act which is concerned with production or manufacture of tobacco or which links the tax under its provisions with the manufacture or production of tobacco.
[699 D E] 691 (b) Excise duty is a tax on articles produced or manufactured in the taxing country.
Generally speaking, the tax is on the manufacturer or producer, yet laws are to be found which impose a duty of excise at stages subsequent to the manufacture or production.
[698H, 699A] A. B. Abdulkadir & Ors vs The State of Kerala & Anr.
[1962] Supp. 2 S.C.R. 741 referred to.
(c) Where, however, the levy imposed or tax has no nexus with the manufacture or production of an article, the impost or tax cannot be regarded to be B one in the nature of excise duty.
[699 B C] (3) The word `luxury ' has not been used in the sense of something pertaining to the exclusive preserve of ' the rich.
The connotation of the word `luxury ' is something which conduces enjoyment over and above the necessaries of life.
There is nothing static about what constitutes an article of luxury.
The luxuries of yesterday could well become the necessities of today.
Likewise, what constitutes necessity for citizens of one country or for those living in a particular climate may well be looked upon as an items of luxury for the nationals of another country or for those living in a different climate.
A number of factors may have to be taken into account in adjudging the commodity as an article of luxury.
[699 G, 701B] (4) (a) The High Court was right in its view that the levy of tax was violative of Article 301 of the Constitution.
But while the Parliament can impose restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest, so far as the State legislatures are concerned, restrictions must satisfy two requirements, firstly they must be in public interest, and secondly, the restrictions should be reasonable.
State of Madras vs N. K. Nataraja Mudaliar ; referred to, (b) To some extent every tax imposes an economic impediment to the activity taxed as compared with others not taxed.
But that fact by itself would, not make it unreasonable.
The law of taxation in the ultimate analysis is the result of ' the balancing of several complex considerations.
The legislatures have a wide discretion in the matter.
[702G, 703 AB] (c) In considering the question whether the restriction is reasonable in public interest the Court will have to balance the importance of freedom of trade as against the requirement of public interest.
[703 B] Khyerban Tea Co. Ltd. vs State of Madras [1964] S S.C.R. 975 referred to.
(d) The onus of showing that the restrictions on the freedom of trade, commerce or intercourse in the public interest are reasonable is upon the State.
[703D] In the present case the levy of luxury tax relates to tobacco the consumption of which is a health hazard.
Regulation of the sale and stocking of such an article and treating it as an article of luxury by imposing a licence fee is a permissible restriction in public interest within article 304(b) of the Constition.
[703 F] (e) The fact that the operation of the Act was confined to a particular area, and did not extend to the entire State was due to historical reasons.
The object of the Act was to validate the recoveries already made.
[704 B] Nazeeria Motor Service etc.
vs State of Andhra Pradesh (f) The levy of tax is protected by Article 304(b) of the Constitution as the requirement of the proviso regarding the sanction of the President has been satisfied.
Though the assent of the President was given subsequent to the 692 passing or the Bill by the State Legislature, that fact would not affect the validity of the impugned Act in view of the provisions of Article 255 of the Constitution.
[702 AB] (5)(a) Where a topic is not included within the relevant List dealing with the legislative competence of the State Legislature, Parliament, by making a law cannot attempt to confer such legislative competence on the State legislatures This principle would, however, have no application where what is sought to be done is to validate the recovery of licence fee for stocking and vending of tobacco.
The impugned provisions have nothing to do with the production and manufacture of tobacco.
The levy is sought to be made as luxury to which is within the competence of State legislature and not as excise duty which is beyond the legislative competence of the State legislature.
If the levy in question could be justified under a provision which is within the legislative competent of the State legislature, the levy shall be held to be validly imposed and cannot be considered to be impermissible.
[705 B D] (b) The impugned Act cannot be said to be a colourable piece of legislation.
Where a challenge to the validity of a legal enactment is made on the ground that it is a colourable piece of legislation what is to be proved is that though the Act ostensibly is within the legislative competence of the legislature in substance and reality it covers a field which is outside its legislative competence.
In the present case, in enacting the impugned provisions the Slate legislature has exercised power of levying luxury tax in the shape of licence fee on the vend and stocking of tobacco.
The enactment of a law for levying luxury tax is unquestionably within the legislative competence of the State legislature in view of Entry 62 in List II of the Seventh Schedule to the Constitution.
[705 E F] Jaora Sugar Mills (P) Ltd. vs State of Madhya Pradesh & ORS.
and Diamond Sugar Mills Ltd. & Anr.
vs The State of Uttar Pradesh & Anr.
; distinguished.
(c) The State legislature has sought to validate the recovery of the amounts already made by treating those amounts as luxury tax.
The fact that the validation of the levy entailed converting the character of the collection from an impermissible excise duty into permissible luxury tax would not make it an Inconstitutional.
The only conditions are that the levy should be of a nature which can answer to the description of luxury tax and that the State legislature should be competent to enact a law for recovery of luxury tax.
Both these conditions are satisfied.
[706 FG] (6)(a) Where the State legislature can make valid law it can provide not only for the prospective operation of the material provisions of the law but can also provide for the retrospective operation of the provisions.
[706 G] (b) In judging the reasonableness of the retrospective operation of law for the purpose of Article 304(b), the test of length of time covered by the retrospective operation could not by itself be treated as decisive.
[706H, 707A] (c) It is not correct to say that the legislation should be held to be invalid because its retrospective operation might operate harshly in some cases.
[707A] Rai Ramkrishna & Ors.
vs State of Bihar [1964] 1 S.C.R. 897 and Epari Chinnaa Krishna Moorthy, Proprietor, Epari Chinna Moorthy & Sons.
Berhampur, Orissa vs State of Orissa [964] 7 S.C.R. 185 applied.
|
Civil Appeal Nos.
1306, 1310, 1370 1380 and 1422 to 1424 of 1975.
Appeals by special leave from the judgment and orders dated the 9th July 1975 of the Punjab & Haryana High Court at Chandigarh in Civil Writ Petitions Nos. 733, 595, 725, 681, 720, 723, 726, 728, 777, 780, 781, 833, 892, 884, 885 and 887 of 1975 respectively.
M. C. Bhandare, (In 1306) and Mrs. section Bhandare for the appellants in C.As.
1306, 1370 1980 and 1422 1424 of 1975.
F. section Nariman, A. K. Srivastava and B. P. Singh for the appellants in C.A. 1310.
A. K. Sen, (In CA 1306), Dr. L. M. Singhvi, (In 1310), K. K. Jain, Bishamber Lal, section K. Gupta and P. Dayal for the Respondent No. 2 in all the appeals.
L. N. Sinha, Sol.
General (In CAs.
1306 and 1310) and R. N. Sachthey for Respondent No. 1 in all the appeals.
Several connected Writ Petitions were disposed of by the High Court of Punjab & Haryarna by a common Judgment and this judgment will govern all the cases which had been heard together by us.
Civil Appeal No. 1306/1975 is by M/s Northern India Iron & Steel Co. Ltd. and arises out of Writ Petition No. 733/1975.
We may state a few necessary facts of this case; those of the other cases being more or less similar.
The appellant owns a factory and manufactures alloy steel and steel castings.
It is a large consumer of electricity supplied by the Board.
As per the contract between the appellant and the board be total connected load of the installation in question is 8687, 649 Kilowatts and its contract demand is the same.
At the ratio of one K.V. to 0.85 KW, the corresponding K.V. Of the contract demand works to 10,221 K.V.
The appellant was allotted 1,06,590 units on daily basis as its power quota by the Board.
There was shortage of electric energy in the State of Haryana.
The State Government, there are, issued orders and directions for maintaining the supply and securing the equitable distribution of the energy.
Orders were issued by the State Government under section 679 228 of the Indian Electricity Act, 1910 hereinafter called the 1910 A Act, restricting considerably the supply of electric energy by the Board lo the large industrial consumers as a result of which power cut was introduced.
It is not necessary to give the facts and figures of the amount of power cut, suffice it to say that at the relevant time there were substantial power cuts and the appellant was not able to get supply of energy according to demand as per the quantity mentioned in the contract.
In these circumstances a dispute arose between the parties as to whether the Board was entitled to get any demand charge, if so to what extent, and whether the State could demand any duty on such charge.
Under Section 49 of the hereinafter called the 1948 Act, the Board may supply electricity to any person not being a licensee upon such terms and conditions as the Board thinks fit and may for the purposes of such supply frame uniform tariffs of course, the power of the Board is subject to the other provisions of the Act and regulations, if any made in this behalf There are two well known systems of tariffs one is the flat rate system and the other is known as the two part tariff system.
Under the former a flat rate is charged on unit of energy consumed.
The letter system is meant for big consumers of electricity and it comprised of (1) demand charges to cover investment, installation and the standing charges to some extent and (2) energy charges for the actual amount of energy consumed.
The Board has framed in exercise of its power under section 49 of the 1948 Act certain terms and conditions and procedure in regard to supply of electricity to its consumers.
They are applicable in the cases of the appellants also.
Demand Charge has been defined in clause 1(h) thus: "Demand charge" shall mean the amount chargeable per month in respect of Board 's readiness to serve the con summer irrespective of whether he consumes any energy or not, and is based upon the connected load, the maximum demand or the contract demand, as the case may be and as prescribed in the relevant schedule of tariff.
And in sub clause (1) "Energy Charge" has been defined thus: "Energy charge" shall mean the charge for energy actually taken by the consumer and is applicable to the units consumed by him in any month.
This is in addition to any demand charge, if applicable.
A schedule of tariff for supply of energy which is amended from time to time has been framed by the Board.
Such schedule of tariff for steel furnace power supply mentions in item 2 the character of service.
Clause 3 provides for tariff and clause 4 deals with the demand assessment.
The two part tariff mentioned in clause 3 in case of the appellant was "Demand Charges Rs. 12/ per KVA per month PLUS Energy charges Rs. 7.00 passe per Kwh".
There was some surcharge on the above rates.
The relevant Sub clauses of clause 4 i.e., Demand Assessment may now be quoted here: 680 "(a) The demand for any month shall be defined as the highest average load measured in Kilovolt amperes during any consecutive minutes period of the month.
(b) The monthly demand charges shall be based on (1) the actual maximum demand during the month or (ii) 65%% of the contract demand or (iii) 75% of the highest maximum demand during the preceding eleven months or (iv) 100 KVA whichever is the highest.
For the first 11 months from the commencement of Supply alternative (iii) shall not be applicable.
(c) The contract demand means the maximum K.W. KVA for the supply of which the Board undertakes to provide facilities from time to time.
NOTE In case the consumer exceeds his contract demand in any month by more than 71/2% a surcharge of 25 % will be levied on the SOP/Monthly minimum charges (industrial, Factory lighting and colony supply).
(d) If in any case the maximum demand is being measured in KW the same shall be converted into KVA by the use of actual power factor and KVA tariff applied for working out the demand charges.
(e) In case the supply has been given on restricted hours basis then a reduction of 30% in demand charges will be given if supply is for 12 hours or less, occasional break downs or shut downs if any, on the part of the supplier, shall, however, not entitle a consumer to any reductions.
(f) Force Majeure: In the event of lock out, fire or and other circumstances considered by the supplier to be beyond the control of the consumer the consumer shall be entitled to a proportionate reduction of demand charges/minimum charges provided he serves at least 3 days notice on the supplier for shut down of not less than 15 days duration.
It appears from the judgment of the High Court that some reduction (perhaps upto 60%) was given by the Board in the demand charges because of the inability of the Board to supply energy as per the requirement of the appellant consumers due to power cuts imposed by the Government.
But the appellant seems to have taken the stand that either there should be no demand charge at all when the Board was not in a position to supply electric energy as per is requirement or there should be a proportionate reduction of the demand charge.
Hence it filed a Writ petition.
The High Court has noted the reduction made by the Board and has held that the Board is entitled to the demand charge.
It has, however, not been 681 decided as to what should be the basis for and in what proportion the demand charges be reduced.
The stand of the appellant as respects the charge of duty by the State Government under the Punjab Electricity (Duty) Act, 1958 hereinafter called the Duty Act, was that no duty could be levied on the demand charge.
The High Court has repelled this contention.
The two questions which fall our determination in these appeals are: (1) Whether on the facts and in the circumstances of the cases the Board is entitled to claim any demand charge; if so, to what extent? (2) Whether any duty is leviable on the demand charge; if so, to what extent ? An argument was advanced before us in the first instance by counsel for the appellants with reference to the definition of the demand change in clause 1(h) of the terms and conditions of supply framed by the Board that since the Board was not ready to serve the consumer and the consumer was ready to consume maximum electric energy the former was not entitled to ask for any demand charge.
This argument, in the beginning was combated with equal force, if not more, on behalf of the Board and it was asserted that the Board was entitled to assess and claim the full demand charge as per clause 4 of the tariff irrespective of the fact whether it was in a position to supply the energy according to the demand of the consumer or not.
Such an extreme stand on either side appeared to us a bit puzzling and leading to inequitable results.
The difficulty was not easy to solve.
If we were to hold that for the Board 's inability to supply a fraction of the consumer 's demand as per the contract it could claim only the energy charge and not the demand charge, it would have been very hard and injurious to the Board and the consumer would have unjustifiably got the supply at a very cheap rate If on the other hand, we were to say that the consumer was liable to pay the entire demand charge as per the method of assessment provided in clause 4 of the tariff even when for no fault of it, it could get only a fraction of its demand fulfilled, resulting in its not being able to run the industry to its full capacity, it would be liable to pay a huge amount per month, and this will not only be uneconomical but would seriously affect its economic structure.
But we were happy to find that a just, equitable and legal solution of the difficulty was provided during the course of the argument on either side and that is with reference to sub clause (f) of clause 4 of the tariff.
It is, therefore, not necessary to resolve the extreme stand taken on either side.
Under clause 4(f) the consumer is entitled to a proportionate reduction of demand charges in the event of lock out, fire or any other circumstances considered by the supplier beyond the control of the 682 consumer; that is to say, if the consumer is not able to consume any part of the electric energy due to any circumstance beyond its control and which is considered by the Board to be so, then it shall get a proportionate reduction in the demand charge.
The circumstance of power cut which disabled the Board to give the full supply to the appellant because of the Government order under section 228 of the 1910 Act, undoubtedly would be a circumstance which disabled the consumer from consuming electricity as per the contract.
And this was circumstance which was beyond its control and could not be considered otherwise by the Board.
It entitled the consumer to a proportionate reduction of the demand charges.
This interpretation of subclause (f) of clause 4 of the tariff was accepted to be the correct, legal and equitable interpretation on all hands.
In our opinion it is so.
In a circumstance like this, it is plain, the obligation of the consumer to serve at least 3 days notice on the supplier as per the latter part of sub clause (f) was not attracted, as the requirement of notice was only in the case of shut down of not less than 15 days duration.
We are, therefore, of the view that the inability of the Board to supply electric energy due to power cut or any other circumstance beyond its control as per the demand of the consumer according to the contract will be reflected in and considered as a circumstance beyond the control of the consumer which prevented it from consuming electricity as per the contract and to the extent it wanted to consume.
The monthly demand charge for a particular month will have to be assessed in accordance with sub clause (b) of clause 4 of the tariff and therefore from a proportionate reduction will have to be made as per sub clause (f).
We hope, in the light of the judgment, there will be no difficulty in working out the figures of the proportionate reduction in any of the cases and for any period.
In case of any difference or dispute as to the quantum of the demand charge or the proportionate reduction, parties will be at liberty to pursue their remedy as may be available to them in accordance with law.
Coming to the question of duty, we have no hesitation in an out right rejection of the extreme contention put forward on behalf of the appellants that no duty is leviable at all on the demand charge.
But it is clear, and this was fairly conceded to by the Solicitor General appearing for the State of Haryana, that the amount of duty payable will be on the actual amount of demand charge realisable from the consumer after the proportionate reduction under clause 4(f) of the tariff.
Section 3 of the Duty Act says that there shall be levied and paid to the State Government on the energy supplied by the Board to a consumer a duty to be called the "electricity duty", computed at the rates indicated in the various clauses of sub section (1) of section 3.
The expression used in the various clauses is "where the energy is supplied" to a particular type of consumer, then the rate of duty will be as specified therein.
On the basis of the said expression the argument put forward on behalf of the appellant was that the duty could be levied only on the energy charges for the actual amount of energy 683 supplied.
Such an argument is too obviously wrong to be accepted.
Reading the clauses as a whole it would be seen that the duty is chargeable on the price of energy supplied in a month.
The price of energy in a two part tariff system would mean and include the energy charge as also the demand charge.
This is made further, clear by the manner of calculation provided in Rule 3 of the Punjab Electricity (Duty) Rules, 1958.
Sub rule (1) says: "The duty under clause (iii) and (iv) of sub section (1) of section 3 of the Act shall be calculated on the price of the energy recoverable at the net rate of the Board which will include the demand charge when the Supply is governed by a two part tariff.
" It is therefore, manifest that the duty under the Duty Act is chargeable not only on the energy charge but also on the demand charge when the supply is governed by two part tariff and it is chargeable on the actual amount of demand charge realisable from the consumer For the reasons stated above, we allow these appeals in part to the extent indicated above.
In the circumstances we shall make no order as to costs in any of the appeals.
P.B.R. Appeals partly allowed.
| IN-Abs | The State Electricity Board had framed, in exercise of its power under section 49 of the , certain terms and conditions and, the procedure in regard to supply of electricity to its.
consumers.
For big consumers the system of tariff is the two part tariff system comprising of (1) Demand charge and (ii) Energy charge.
A "Demand charge" means the amount chargeable per month in respect of the Electricity Board 's readiness to serve the consumer irrespective of whether he consumes any energy or not and is based upon certain factors.
"Energy charge" means the charge for energy actually taken by the consumer and is applicable to the units consumed by him in any Month.
This was in addition to any demand charge, if applicable.
A schedule of tariff of energy was framed by the Board.
4(b) mentions how the monthly demand charge shall be calculated and sub clause (f) of this clause states that in the event of lock out, fire or any other circumstances considered by the supper to be beyond the control of the consumer, the consumer shall be entitled to a proportionate reduction of demand charges/minimum charges.
As a result of shortage of electricity the State Electricity Board considerably restricted the supply to large industrial concerns.
Because of this the Board allowed some reduction in the demand charges.
The appellant, who was a bulk consumer of electricity, could not get the full quantity as per the contract between the parties.
The appellant, therefore, filed a writ petition that there should be either no demand charge at all.
when the Board was not in a position to supply electric energy, or there should be a proportionate reduction of the demand charge.
The High Count noted the reduction made by the Board and held that the Board was entitled to the demand charge.
It did Dot, however decide as to what should be the basis for and in what proportion the demand char o should be reduced.
The appellant also contended that no duty was lovable on the demand charge, under the Punjab Electricity (Duty) Act, 1958 but only on the energy charge, for the actual amount of energy supplied but the High Court rejected this contention.
Allowing the appeal in part on the first contention, ^ HELD: (1) The circumstance of power cut which disabled the Board to give the full supply to the appellant would be a circumstance which disabled the consumer from consuming electricity as per the contract and this was a circumstance which was beyond it control and could not be considered otherwise by the Board.
It entitled the consumer to a proportionate reduction of the demand charge.
In a circumstance like this the obligation of the consumer o serve at least 3 days ' notice on the supplier as per the later part of sub clause (f) was not attracted as the requirement of the notice was only in the case of shut down of not less than 15 days ' duration [682 A, B, C] Therefore, the inability of the Board to supply electric energy due to power cut as per the demand of the consumer according to the contract will be reflected in and considered as n circumstance beyond the control of the consumer which prevented him from consuming electricity as per the contract to the extent it wanted to consume.
[682, D] 2 L159SCT/76 678 (2) A reading of the clauses of the Schedule of tariff as a whole makes it clear that the duty under the Punjab Act is chargeable on the price of energy supplied in a month.
Therefore, the duty is chargeable not only on the energy charge but also on the demand charge.
It is, however, chargeable on the actual amount of demand charge realizable from the consumer.
|
Civil Appeal No. 947 of 1975.
Appeal by Special Leave from the Judgment and order dated the 2nd April, 1971 of the Punjab and Haryana High Court in Civil Writ No. 1039 of 1974.
Kapil Sibal and section K. Gambhir for the appellant.
section K. Nandy for the respondent.
The Judgment of the Court was delivered by FAZAL ALI, J.
What appears to have been a clear case of refusal of admission to the appellant or the cancellation of his candidature at the proper time has been completely bungled and destroyed by the inherent inconsistency and seemingly contradictory stand taken by the respondent and lack of proper vigilance on the part of the Head of the Department of Law.
The facts of the present case lie within a very narrow compass and only two short points of law have been raised before us by Mr. Kapil Sibbal learned counsel for the appellant.
The appellant was a teacher in the Government High School, Dumarkha in the District of Jind (Haryana).
The University of Kurukshetra was running law classes for three years Course and had extended the facility to persons who were in service to attend the evening classes and complete the three years course in that manner.
The appellant decided to take the benefit of the facility given by the Kurukshetra University and joined the LL.B. Part I classes some time in the year 1971.
According to the University statute a student of the Faculty of Law was given the option to clear certain subjects in which he may have failed at one of the examinations before completing the three years course.
The students were to appear in six papers each year.
In April 1972 the petitioner appeared in the annual examination of Part I but failed in three subjects, namely, Legal Theory, Comparative Law and Constitutional Law of India Subsequently he was promoted to Part II which he joined in the year 1972.
Under the University Statute the appellant was to appear in part II Examination in April 1973.
On April 26, 1973 the appellant applied for his Roll number to the University in order to reappear in the subjects in which he had failed and to clear them but he was refused permission and according to the appellant without any reasons.
The annual examination for Part II was to be held on May 19, 1973 and the appellant approached the University for granting him provisional permission to 724 appear subject to his getting the permission from his employer to attend the Law Faculty.
In between it appears that the appellant had been prosecuted for offence under sections 376, 366 and 363 I.P.C. and was suspended during the period when the case was going on against him.
The appellant was, however, acquitted and was reinstated by his employer on August 22, 1972.
It would thus appear that on May 18, 1973 as also on April 25, 1973 when he had applied for his Roll Number to clear the subjects, the stigma of criminal case had been completely removed.
To start the thread the appellant as mentioned already approached the University on May 18, 1973 and wrote a letter to the University authorities giving an undertaking that if he was not able to get the requisite permission from his employer to join the Law Classes, he would abide by any order that the University may pass.
It appears that on the basis of this undertaking he was allowed to appear at the Part II Examination on May 19, 1973.
On June 20, 1973 the appellant wrote to the University authorities that the condition on which he was to get the permission was not at all necessary and that his results may now be announced.
On June 26, 1973 the respondent informed the appellant that since his percentage was short in Part I his candidature stood cancelled.
Thereafter there were series of correspondence between the appellant and the University authorities but the appellant was refused admission to LL.B. Part III Class.
The appellant then filed an appeal to the Vice Chancellor of the University on September 26, 1973 which was also rejected on November 3, 1973.
Thereafter the appellant approached the High Court of Punjab and Haryana for a writ of certiorari to quash the order of the respondent canceling the candidature of the appellant but the High Court after issuing notice to the other side and persuing the application form rejected the petition in limine.
Hence this appeal by the appellant by special leave to this Court.
The sheet anchor of the case of the respondent was that the appellant had been involved in a criminal case` and therefore the Head of Institution could not give the certificate in the prescribed form that the appellant bore a good moral character.
Subsequently it was said that as the appellant was short of the requisite percentage in LL.B. Part I he could not insist on his being admitted to the Part II Examination; and lastly the stand taken by the respondent was that the Evening Law Classes were held to benefit the members of the Services and it was incumbent on the appellant to have obtained permission of his superior officers and as he did not do so, the University was well within its rights in refusing him permission to appear at the Part II Examination or in admitting him to Part III Law course.
A long counter affidavit has been filed by the respondent of which some paragraphs are extracted below : 4.
Para 4 of the writ petition is rebutted.
The petitioner was involved in a case under sections 363 and 366 of the Indian Penal Code.
As a result, he was suspended.
He remained under suspension till August 23, 1972, when he 725 was reinstated.
Consequently, he attended the lectures in Part I. So far as Part II is concerned, the petitioner didn 't attend the requisite number of lectures.
According to the notice displayed on the notice board of the Department of Laws on January 24, 1973, the petitioner was falling short of attendance by 48 lectures upto December, 1972.
There after, another notice was displayed on the notice board on r April 16, 1973, according to which the petitioner was falling short of attendance by 46 lectures.
As such, the averment in the writ petition that he attended his lectures according to the rules is absolutely false.
Vide letter dated November 17, 1972, the Headmaster, Government High School, Dumarkha (District Jind) made an inquiry from the University regarding the petitioner 's result in the LL.B. Part I Examination.
The intimation was sent by the University vide their letter dated November 17, 1972.
Thereafter, a letter dated January 1, 1973, was received in the University from the District Education officer stating inter alia that "it may also be pointed out that Shri Siri Krishan, Teacher was reinstated on 23 3 1972 and there after he is attending his duties in School.
I am amazed to learn that he is declared by your Law Department to be attending classes in LL.B. Part II simultaneously".
"A copy of this letter is appended as Annexure 'R.1 ' to this affidavit.
A perusal of this letter would show that the petitioner had not been granted permission by his employer to attend the law classes at the University.
Furthermore, the approximate distance between his station of posting and the University is more than ' fifty miles.
Keeping m view the fact that he was posted in the interior of District Jind, it is impossible that the petitioner could have attended the requisite number of lectures.
Evidently, the petitioner was himself aware of the fact that he had not attended the re quisite number of lectures.
It is also incorrect to suggest that the petitioner 's name could be sent for the examination only if he had completed and required minimum attendance of lectures.
The examination forms are always sent in December.
Rule 2(b) of Ordinance 10 of the Kurukshetra University Calendar, Volume I, provides as under inter alia: "B. that he has attended regular course of study for the prescribed number of academic years.
Certificate (b) will be provisional and can be withdrawn at any time before.
the examination if the applicant fails to attend the prescribed course of lectures before the end of his term.
" 5 L159SCI/76 726 The petitioner 's examination form was, as such, sent provisionally and could be withdrawn at any time in case of his failure to attend the requisite percentage of lectures." 23.
(i) In reply to sub para (i) of the writ petition, it is submitted that the cancellation of the candidature of the petitioner for LL.B. Part II was not based on any extraneous considerations.
Under the rules of the University every student is required to attend the prescribed course of lectures delivered to the class in each of the subjects offered.
, I Mr. Sri Krishan was short of attendance which was duly notified on the notice board of the Department of Law twice; once on January 24, 1973 and again on April 16, 1973.
The admission of the petitioner to Law course in the University was under dispute as a result of a complaint from the District Education officer, Jind.
The petitioner came to the Magistrate on May 18, 1973, with an application that pending final decision of his case, he may be allowed to sit `` in the examination provisionally at his own risk and responsibility.
In this application, the petitioner did not mention that he was also falling short in lectures as notified by the Head of the Department of Law.
Since the office was closed at that time and the examination was to start at 8.00 a.m.
On May 19, 1973, the candidate was allowed to appear in the examination provisionally at his own risk and responsibility.
(viii) In reply to sub para (viii) of the writ petition, it is submitted that in the admission notice printed at page 75 in the Hand Book of Information for the session 1971 72 to which the application for admission to the Department forms a part, mentions that LL.B. Classes in the evening were for employed persons only.
It was, therefore, implied that the applicant while seeking admission in this class would obtain the approval of his employers.
This approval became particularly necessary because of the constant complaints of ill serious nature from the employers (the Government) of the petitioner who insisted that he must obtain such permission.
It may be recalled that the petitioner in his undertaking to the Registrar on May 18, 1973 promised to produce the required permission.
" It will be seen from the above affidavit that the stand taken by the respondent is by no means consistent.
It may be mentioned that at one stage the University takes the stand that it was a case of shortage of , percentage and therefore the appellant was refused admission to appear at Part II Examination.
Later on this stand is given up and the respondent averred that as the appellant did not get the permission of his superior officers and since the University was moved by the District Education Officer to cancel the candidature of the appellant the impugned order was passed by the University.
It was also argued by Mr. section K. Nandy counsel for the respondent that the appellant knew fully well that his percentage was short and in spite of that be fraudulently suppressed this fact from the University authorities 727 when he was allowed to appear in the LL.B. Part I Examination in April 1972.
Mr. Sibbal learned counsel for the appellant submitted two points before us.
In the first place it was argued that once the appellant was allowed to appear at L.L.B. Part II Examination held on May 19, 1973 his candidature could not be withdrawn for any reason whatsoever, in view of the mandatory provisions of clause 2(b) of the Kurukshetra University Calendar Vol.
I, ordinance X under which the candidature could be withdrawn before the candidate took the examination.
Secondly it was argued that the order of the University was mala fide because the real reason for cancelling the candidature of the appellant was the insistence of the District Education officer that the appellant should not have been admitted to the Law Faculty unless he had obtained the permission of his superior officers.
In order to appreciate the first contention it may be necessary to extract the relevant portions of the statute contained in Kurukshetra University Calendar Volume I, ordinance X. Clause 2 of this ordinance runs as follows: "2.
The following certificates, signed by the Principal of the College/Head of the Department concerned, shall be required from each applicant: (a) that the candidate has satisfied him by the production of the certificate of a competent authority that he has passed the examinations which qualified him for admission to the examination; and (b) that he has attended a regular course of study for the prescribed number of academic years.
Certificate (b) will be provisional and can be withdrawn at any time before the examination if the applicant fails to attend the prescribed course of lectures before the end of his term." The last part of this statute clearly shows that the University could withdraw the certificate if the applicant had failed to attend the prescribed course of lectures.
But this could be done only before the examination.
It is, therefore, manifest that once the appellant was allowed to take the examination, rightly or wrongly, then the statute which empowers the University to withdraw the candidature of the applicant has worked itself out and the applicant cannot be refused admission subsequently for any infirmity which should have been looked into before giving the applicant permission to appear.
It was, however, submitted by Mr. Nandy learned counsel for the respondent that the names of the candidates who were short of percentage were displayed on the Notice Board of the College and the appellant was fully aware of the same and yet he did not draw the attention of the University authorities when he applied for admission to appear in LL.B. Part II Examination.
Thus the appellant was guilty of committing serious fraud and was not entitled to any indulgence from this Court.
It appears from the averments made in the counter affidavit that according to the procedure prevalent in the College the admission forms are forwarded by the Head of the Department in December preceding 728 the year when the Examination is held.
In the instant case the admission form of the appellant must have been forwarded in December 1971 whereas the examination was to take place in April/May 1972.
It is obvious that during this period of four to five months it was the duty of the University authorities to scrutinise the form in order to find out whether it was in order.
Equally it was the duty of the Head of the Department of Law before submitting the form to the University to see that the form complied with all the requirements of law.
If neither the Head of the Department nor the University authorities took care to scrutinise the admission form, then the question of the appellant committing a fraud did not arise.
It is well settled that where a person on whom fraud is committed is in a position to discover the truth by due diligence, fraud is not proved.
It was neither a case of suggestio falsi, or suppressio veri.
The appellant never wrote to the University authorities that he had attended the prescribed number of lectures.
There was ample time and opportunity for the University authorities to have found out the defect.
In these circumstances, therefore, if the University authorities acquiesced in the infirmities which the admission form contained and allowed the appellant to appear in Part I Examination in April 1972, then by force of the University Statute the University had no power to withdraw the candidature of the appellant.
A somewhat similar situation arose in Premji Bhai Ganesh Bhai Kshatriya vs Vice Chancellor, Ravishankar University, Raipur and others(ii) where a Division Bench of the High Court of Madhya Pradesh observed as follows: "From the provisions of ordinance Nos. 19 and 48 it is clear that the scrutiny as to the requisite attendance of the candidates is required to be made before the admission cards are issued.
Once the admission cards are issued permitting the candidates to take their examination, there is no provision in Ordinance No. 19 or ordinance No. 48 which would enable the Vice Chancellor to withdraw the permission.
The discretion having been clearly exercised in favour of the petitioner by permitting him to appear at the examination, it was not open to the Vice Chancellor to withdraw that permission subsequently and to withhold his result.
" We find ourselves in complete agreement with the reasons given by the Madhya Pradesh High Court and the view of law taken by the learned Judges.
In these circumstances, therefore, once the appellant was allowed to appear at the Examination in May 1973, the respondent had no jurisdiction to cancel his candidature for that examination.
This was not a case where on the undertaking given by a candidate for fulfilment of a specified condition a provisional admission was given by the University to appear at the examination which could be withdrawn at any moment on the non fulfilment of the aforesaid condition.
If this was the situation then the candidate himself would have contracted out of the statute which was for his benefit and the statute (1) A.T.R. 1967 M. P. 194,197.
729 therefore would not have stood in the way of the University authorities in cancelling the candidature of the appellant.
As regards the second point that the order was passed mala fide, it is difficult to find any evidence of mala fide in this case.
The order suffers from yet another infirmity.
The annexures filed by the appellant and the respondent as also the allegations made in the counter affidavit clearly show that there were series of parleys and correspondence between the District Education officer and the respondent in the course of which the respondent was being persuaded, to the extent of compulsion, to withdraw the candidature of the appellant because he had not obtained the permission of his superior officers.
Mr. Nandy appearing for the respondent has not been able to show any provision in the statutes of the University which required that the candidates attending the evening law classes who are in service should first get the prior permission of their superior officers.
We have also perused the University Statute placed before us by counsel for the appellant and we do not find any provision which could have afforded justification for the respondent to cancel the candidature of the appellant on the ground that he had not obtained the previous permission of his superior officers.
Mr. Nandy counsel for the respondent placed great reliance on the letter written by the appellant to the respondent wherein he undertook to file the requisite permission or to abide by any other order that may be passed by the University authorities.
This letter was obviously written because the appellant was very anxious to appeal in Part II Examination and the letter was written in terrorem and in complete ignorance of his legal rights.
The appellant did not know that there was any provision in the University Statute which required that he should obtain the permission of his superior officers.
But as the respondent was bent on prohibiting him from taking the examination he had no alternative but to write a letter per force.
It is well settled that any admission made in ignorance of legal rights or under duress cannot bind the maker of the admission.
In these circumstances we are clearly of the opinion that the letter written by the appellant does not put him out of court.
If only the University authorities would have exercised proper diligence and care by scrutinising the admission form when it was sent by the Head of the Department to the University as Ear back as December 1971 they could have detected the defects or infirmities from which the form suffered according to the University Statute.
The Head of the Department of Law was also guilty of dereliction of duty in not scrutinising the admission form of the appellant before he forwarded the same to the University.
Moreover, the stand taken by the respondent that as the appellant did not get the requisite permission from his superior officers, therefore he was not allowed to appear at the examination, does not merit consideration, because the impugned order does not mention this ground at all and it was not open to the respondent to have refused admission to the appellant to LL.B. Part III or for that matter to refuse permission to appear at the examination on a ground which was not mentioned in the impugned order.
730 Having gone into the circumstances mentioned above, we are of the view that the impugned order suffers from errors of law patent on the face of the record, and in any event this was not a case which should have been dismissed by the High Court in limine.
The appeal is accordingly allowed and the order of the University dated June 26, 1973, is hereby quashed by a writ of certiorari.
The respondent is directed to declare the result of LL.B. Part II Examination in which the appellant had appeared on May 19, 1973 and also to give him an opportunity to appear in the three subjects in which he had failed in LL.B. Part I Examination, at the next examination which may be held by the University.
In the peculiar circumstances of this case, however, we leave the parties to bear their own costs.
P.B.R. Appeal allowed.
| IN-Abs | Under the statutes of the respondent University persons in service could take the three year degree course in law by attending the evening classes.
A candidate who had failed in some of the papers of one year could clear those papers before completing the three year course.
Under cl. 2(b) of Ordinance X contained in the University Calendar Volume I, a candidate should submit to the University an application seeking permission to appear for an examination which should be signed by the Principal of the College or the head of the department concerned certifying that the candidate had attended a regular course of study for the prescribed number of academic years.
But, this certificate is provisional and could be withdrawn at any time before the examination if the applicant failed to attend the prescribed course of lectures before the end of his term.
The appellant, a Government servant, joined the LL.B.
I year class of the University.
He failed in three papers, but was promoted to the second year.
Before appearing in the second examination, however, he wrote to the University stating that if he was not able to get the requisite permission from his employer to join the law classes he would abide by any order that the University might pass.
The appellant, however, wrote to the University later that this condition was not at all necessary and requested that his result in Part II might be announced.
In reply the University wrote to the appellant that since his percentage of marks in Part I was short, his candidature for Part II examination stood cancelled.
Having failed in his appeal to the Vice Chancellor, he moved the High Court which dismissed his writ petition in limine.
Allowing the appeal to this Court, ^ HELD: The impugned order of the university suffers from errors of law patent on the face of ' the record.
This was not a case which should have been dismissed by the High Court in limine.
[730 A] (1) The last part of cl. 2(b) clearly shows that the University could with draw the certificate if the applicant had failed to attend the prescribed course of lectures.
But, this could be done only before the examination.
Once an applicant was allowed to take the examination, the statute which empowers the University to withdraw the candidature of the applicant has worked itself out and the applicant cannot be refused admission subsequently for any infirmity which should have been looked into before giving permission to appear.
[727 E F] (2) It was the duty of the University to scrutinise the form for admission to the examination in order to find out whether it was in order.
It was also the duty of the head of the department of law, before submitting the form to the University, to see that the form complied with all the requirements of law.
Ff neither took care to scrutinise the admission form, then the question of the appellant committing a fraud did not arise.
Where a person on whom fraud is committed is in a position to discover the truth by due diligence, fraud is not proved. ' It was neither a case of suggestion, falsi nor of suppressio [728 A C] 723 Premji Bhai Ganesh Bhai Kshatriya vs Vice Chancellor, Ravishankar University, Raipur and others,, A.I.R. 1967 M.P. 194, 197, approved.
(3)(a) There is no provision of the University statutes which could have afforded jurisdiction to it to cancel the candiditure of the appellant on the ground that he had not obtained the previous permission of his superior officers.
The impugned order did not mention this ground at all.
[728G, 729 BC] (b) The undertaking given by the appellant that he would get the requisite permission of the employer did not put him out of court.
It was written because he was anxious to appear in Part II examination and was written in terrorem and in complete ignorance of his legal rights.
Any admissions made in ignorance of legal rights or under duress cannot bind the maker of the . admission.
[729 DE]
|
N: Criminal Appeal No. 1 34 Of 1975.
Appeal by Special Leave from the Judgment and order dated the 11th December 1974 of the Madhya Pradesh High Court in Criminal Revision No. 729 of 1970.
S.S. Khanduja for the Appellant.
Ram Panjwani, Dy.
Advocate Genl.
(M.P.), H. section Parihar and K. N. Shroff, for the Respondent.
The Judgment of the Court was delivered by GOSWAMI, J.
In this appeal by special leave the only point that arises for consideration is whether the appeal filed by the State of Madhya Pradesh in the High Court against the order of acquittal of the appellant under section 465 read with section 471 or the Indian Penal Code was competent under the law.
The accused (appellant) secured an appointment of Senior operator Trainee in the Bhilai Steel Project by submitting two forged certificates.
The first certificate was regarding his passing the Bachelor of Science examination with Mathematics,` Physics and Chemistry in 2nd Division from the University of Sagar.
The second document was an attested copy of his Matriculation certificate in proof of age where his date of birth was shown as `August 21, 1941. ' ,, The minimum educational qualification for the post was that the candidate must be a Science Graduate of a recognised University with any two of the three subjects Mathematics, Physics and Chemistry and the age limit was prescribed between 18 to 23 years as on 1 10 1963.
The accused who registered himself as a Science Graduate in the Employment Exchange, Bhilai, was sponsored for the above mentioned post on January 28, 1964.
He was ultimately selected for the post placing reliance on the aforesaid two certificates and the joined the appointment.
That, as it transpired, prosecution was launched against the accused on the complaint of the Superintendent of Police, Delhi Special police establishment, Jabalpur, and a case was registered against him under sections 182, 471 and 420 IPC.
Indue course a charge sheet was submitted against the accused and he was tried under section 465/471 and section ,420 IPC.
According to the prosecution the accused was 'born on August 21, 1936 and he had not passed his B.Sc. ' ' examination at all and after tendering the forged certificates procured the employment.
The accused was tried by the Special Magistrate, First Class, Jabalpur, for offences under Section 465 read with section 471 and under section 420 IPC.
The trial court acquitted the accused under section 465 read with section 471 IPC and convicted him under section 420 IPC and sentenced him to rigorous imprisonment for one 755 year and to pay a fine of Rs. 500/ .
The learned Additional Sessions A Judge on appeal maintained the conviction but reduced the sentence to six months ' rigorous imprisonment maintaining the fine.
The State of Madhya Pradesh preferred an appeal to the High Court against the acquittal of the accused under section 465 read with section 471 ' IPC.
The accused also preferred a revision application against his conviction under section 420 IPC.
Both the matters were heard together and by a common judgment the High Court dismissed the revision application of the accused and allowed the State 's appeal and convicted the accused under section 465 read with section 471 and sentenced him to rigorous imprisonment for one year.
Hence this appeal by special leave.
It is submitted on behalf of the appellant that the appeal to the High Court was not competent in view of the provisions of section 417(2) of the Criminal Procedure Code It is admitted that this case is governed by the old Criminal Procedure Code, 1898.
We may, therefore, at once read section 417, Criminal Procedure Code, so far it is relevant for our purpose: "417(1) Subject to the provisions of sub section (5), the State Government may, in any case, direct the Public Prosecutor to present an appeal to the High Court from an original or appellate order of acquittal passed by any Court other than a High Court.
(2) If such an order of acquittal is passed in any case in which the offence has been lnvestigated by the Delhi Special Police Establishment constituted under the the Central Government may also direct the Public Prosecutor to present an appeal to the High Court from the order of acquittal".
* * * * Section 417, Criminal Procedure Code, prior to the Amendment Act XXVI of 1955 provided for presentation of appeals by the public prosecutor on the direction of the State Government.
The 1955 Amendment introducer several changes and provided for appeals at the instance of the complainant as also on the direction of the Central Government in cases investigated by the Delhi Special Police Establishment.
Furthe changes were introduced in the matter of appeals against acquittal under section 378 of the Code of Criminal Procedure, 1973, with which we are not concerned in this appeal in view of the repeal provisions under section 484(1), Cr.
The Delhi Special Police Establishment (briefly the Establishment), a central police force, is constituted under the (Act XXV of 1946) (briefly the Delhi Act).
Under section 2 of the Act, the Central Government may constitute a special police force, called the Delhi Special Police Establishment, for investigation of certain offences or class of offences as notified under section 3 of the Delhi Act.
Under section 756 4 of the Act the Superintendence of the Delhi Special Police Establishment vests in the Central Government and administration of the Special Police Establishment vests in an officer appointed by the Central Government who exercises powers exercisable by an Inspector General of Police as the Central Government may specify.
Under section 5 the powers and the jurisdiction of the Establishment can be extended by the Central Government to, other areas in a State although not a Union Territory.
Once there is an extension of the powers and jurisdiction of the members of the Establishment, the members thereof while discharging such functions are deemed to be members of the Police force of the area and are vested with the powers, functions and privileges and are subject to the liabilities of a police officer belonging to that force.
The police officer also subject to the orders of the Central Government exercises the powers of the officer incharge of a police station in the extended area.
Under section 6 consent of the State Government is necessary to enable the officer of the Establishment to exercise powers and jurisdiction in any area in the State not being a Union Territory or railway area.
Investigation under the Delhi Act is, therefore, a central investigation and the officers concerned are under the superintendence of the officer appointed by the Central Government.
The superintendence of the Establishment is also under the Central Government.
The Central Government, therefore, is concerned with the investigation of the cases by the Establishment and its ultimate result.
It is in that background that in 1955 section 417 was amended by adding subsection (2) to the section to provide for appeal against acquittal in cases investigated by the Establishment also on the direction of the Central Government.
In view of the provisions of the Delhi Act it was necessary to introduce sub section (2) in section 417 so that this Central Agency which is solely and intimately connected with the investigation of the specified offences may also approach the Central Government for direction to appeal in appropriate cases.
This, however, does not bar the jurisdiction of the State Government also to direct presentation of appeals when it is moved by the Establishment.
The establishment can move either the Central Government or the State Government.
It will be purely a matter of procedure whether it moves the State Government directly or through the Central Government or in a given case moves the Central Government alone.
It will again be a matter of procedure when the Central Government decides to appeal it requests the State Government to do the needful through the public prosecutor appointed under the Code.
The word 'also ' in sub section (2) of section 417 is very significant.
This word seems not to bar the jurisdiction of the State government to direct the public prosecutor to present an appeal even in cases investigated by the Establishment.
Sub section (1) of section 417 is in general terms and would take in its purview all types of cases since the expression used in that sub section is "in any case".
We do not see any limitation on the power of the State Government to direct institution of appeal with regard to any particular type of 757 cases, Sub section ' (1) of section 417 being in general terms is as A such of wider amplitude.
Sub section (2) advisedly uses the word 'also ' when power is given to the Central Government in addition to direct the public prosecutor to appeal.
In the present case we find from the documents produced before us that the move was made by the Superintendent, Delhi Special Police Establishment, by requesting the Secretary, Law Department of the Government of Madhya Pradesh and the decision was taken by the State Government as it appears from the letter of the Under Secretary dated January 28, 1969, to the Advocate General, Madhya Pradesh.
The appeal was thereafter` filed in the name of the State of Madhya Pradesh.
No objection, therefore, can be taken about the competency of the appeal being filed by the State of Madhya Pradesh in this case.
As a matter of procedure it will be even permissible for the appeal against acquittal to be filed by the public prosecutor under the direction of the State Government or the Central Government without impleading either as a party.
The objection of the appellant is, therefore, devoid of substance.
We may mention that no such objection was even taken in the High Court.
In the result the appeal fails and is dismissed.
S.R. Appeal dismissed.
| IN-Abs | 'K ' was charged and tried for the offences under Ss. 465 r/w 471, for using a forged B.Sc.
Certificate and a Date of Birth Certificate Convicted under section 420 I.P.C. by the trial court and sentenced to Rigorous Imprisonment for one year and to pay a fine of Rs. 500/ .
On an appeal the conviction was maintained, but the sentence was altered to one of six months Rigorous Imprisonment.
On an appeal by the State and the Revision by 'K ', the revision petition was dismissed and the appeal allowed convicting him under Sections 465 & 471 Indian Penal Code and sentenced to one year Rigorous Imprisonment.
D On an appeal by special leave, on the question of competency of the state appeal under section 417(2) of the Criminal Procedure Code 1898, in a case investigated by the Delhi Special Police Establishment, while dismissing the appeal, the Court ^ HELD: (i) Under section 5 of the (Act XXV of 1946) the powers and the jurisdiction of the Government to other areas in a state, although not a Union Territory.
Once there is an extension of the powers and jurisdiction of the members of the Establishment, the members thereof while discharging such functions are deemed to be members of the Police force of the area and are vested with such powers functions and privileges and are subject to the liabilities of a police officer belonging to that force.
[756 BC] (ii) Investigation under the Delhi Act is a central investigation and the Central Government is concerned with the investigation of the cases by the Establishment and its ultimate result.
It is in that background that in 1955 section 417 Cr P.C. was amended adding sub section (2) in the section to provide for appeal against acquittal.
[756 CE] (iii) This, however, does not bar the jurisdiction of the State Government also to direct presentation of appeals when it is moved by the Establishment The Establishment can move either the Central Government or the State Government.
It will be purely a matter of procedure.
[756 E] (iv) The word "also" in sub section (2) of section 417 of the Criminal Procedure Code does not bar the jurisdiction of the State Government to direct the public prosecutor to present an appeal even in cases investigated by the Establishment.
Sub section (1) of section 417 is in general terms and would take in its purview all types of cases, since the expression used in that section is "in any case".
[756 G Hl (v) There is no limitation on the power of the State Government to direct institution of appeal with regard to any particular type of cases.
Sub section (1) of section 417 being in general terms is as such of wider amplitude Sub section (2) advisedly uses the word "also" when power is given to the Central Government is addition to direct the public prosecutor to appeal.
[756H, 757A] 754
|
RISDICTION: Criminal Appeal N4.
133 of 1971.
Appeal by special leave from the judgment and order dated the 15 2 1971 of the Borrrbay High Court in Criminal Appeal No. 1354 (lf 1 969.
section K. Gambhir and 5.
M. Sikka for the appellant.
M. C. Bhandare and M. N. Shroff for Respondent.
The Judgment of the Court was delivered by BEG, J.
The appellant before us by special leave was charged as follows by the Presidency Magistrate of Bombay: "I.B. P. Saptarshi, Presidency Magistrate 6th Court, Mazaagaon, Bombay, do hereby charge you: Karnal Singh S/o Uttam Singh as follows: "That you on or about the 20th day of February, 1968 at Bombay along with one Balwant Singh s/o Uttam Singh who has absconded, at 171, Kazi Sayyed Street, being entrusted with certain property to wit M/Lorry No. 7372 valued at Rs. 52,000/ belonging to the complainant Shankar Dhondiba Sutar as driver committed criminal breach of trust in respect of the said property and aided and abetted to the absconding accused in commission of the said offence and thereby committed an offence punishable under Sec.
408 r.w. 114 of the Indian Penal Code and within my cognizance.
And I hereby direct that you be tried by me on the said charge".
The prosecution evidence in the case was: one Shankar Dhondiba Sutar a member of the Ex Servicemen Transport Cooperative Society Ltd., Bombay, had purchased the Truck No.
MRS 7372 after taking a loan of Rs. 50,000/ from the Society out of which he had paid up Rs. 43,000/ .
He had entrusted Balwant Singh Uttam Singh, the brother of the appellant, with the truck.
He had a contract with Balwant Singh Uttam Singh under which he used to get a net income of Rs. 2000/ to Rs. 2200/ p.m. from Balwantsingh Uttamsingh who was running the truck and seemed to be incurring all necessary expenses of it.
This amount was paid regularly upto December, 1967.
Thereafter, Balwantsingh Uttamsingh, the driver, avoided meeting the purchaser of the truck and was said to be absconding.
On 4 3 1968, the truck met with an accident and Balwantsingh Uttamsingh is said to have sent information of it to section D. Sutar.
On 9 3 1968, according to Sutar, Balwantsingh him self went to Sutar.
And, when the owner asked him to take him to the truck, it is alleged that he did not comply with this request.
749 As Shankar Dhondiba Sutar had not paid up the whole amount due for the truck which he had borrowed from the Society, the owner of the truck, as entered in the Insurance papers, was the Society itself.
section D. Sutar stated that he found the truck at Thana Katha where he also found the appellant before us, Karnalsingh Uttamsingh, who had been, apparently, driving the truck.
The First Information Report was lodged on 20 4 1968 at 12.30 p.m. by section D. Sutar.
It is against Balwantsingh Uttamsingh and makes no allegations against the present appellant.
It is said that Balwant Singh Uttarnsingh had met section D. Sutar again on 12 3 1968 and told him that he would turn up again.
Vazir Singh Gaya Singh, PW 2, the Secretary of the Bombay Ex Servicemen Transport Co. deposed that section D. Sutar was a shareholder in the Company and proved the terms of his contract with Balwantsingh.
He also made no complaint whatsoever against the present appellant.
All that he said was that the truck was seen near Kashali Bridge and the present accused was its driver.
Sub Inspector Ramesh Damodar, PW 3, stated that, on 13 5 1968, Vazir Singh, PW 2, and a police constable brought the truck to Pydhonie Police Station and that it was being driven by the present appellant at that time.
This is all the evidence against the appellant.
The only question that the appellant was asked by the learned Magistrate under Section 342 Criminal Procedure Code and the appellant 's reply are: "Q.
What do you wish to say with reference to the evidence given and recorded against you? A.
I do not know whether M/Lorry No. MRS 7372 was handed over to the complainant on sale purchase agreement and that the complainant had paid Rs. 43,000/ towards the instalment.
I do not know whether the price was fixed at Rs. 50,000/ .
Balwant Singh is my brother but I do not know if the complainant had given lorry in his possession in his capacity as a driver.
I do not know whether Balwant Singh left with M/Lorry in Dec. 1967.
I do not know anything about Balwant Singh not meeting the complainant thereafter.
Mangal Singh told me that this lorry had met with an accident and that I should invest the amount over repair, and after the amount is recovered from the plying of the lorry, the lorry would be returned to him.
It is true that Vazir Singh and one P.C. had told me to take the lorry at the Pydhonie Police Stn.
I was the driver on the said vehicle at that time.
I do not know where is my brother at present.
He meets me at times.
I have not spoken to him about the case.
I want to lead defence witness".
He led some evidence in defence.
Mangaldas Purshottam, D.W. 1, stated that,one Kartar Singh the driver of the truck had sent him a Trunk Call from Jalan that the truck in question had met with an accident on 4 3 1968 and that he gave this message to section D. Sutar.
As the accident was serious and the damage was considerable 750 section D. Sutar was unable to meet with the money required to repair it.
According to Vazir Singh, PW 2, the claim against Insurance Co. was of Rs.,11000/ .
According to Mangaldas, DW 1, the complainant had agreed that the appellant should repair the truck and deduct its expenses out of the income he could make from plying the truck on hire.
He proved Exhibit 1 dated 12 3 1968 containing a writing, signed by section D. Sutar.
It has been translated as follows: "Ext. '1 ' Dated 12 3 1968.
National India Roadways, "I, shankar Dhondiba give you in writing today that my Lorry No. MRS 7372 which had met with an accident, I am bound to pay total costs whatever comes to of its reparation".
Sd./ Shankar Dhondiba Sutar".
This was put to section D. Sutar in cross examination.
He admitted his signature under the writing and gave no explanation about it.
It is significant that it was executed on the very day on which, according to an admission of section D. Sutar, Balwant Singh also saw section D. Sutar.
Perhaps the defence has also yet come out with the whole truth.
It is, however, quite inconceivable that section D. Sutar would be completely unconcerned as to what had happen to the truck if he had not entrusted it to somebody other than Balwantsingh Uttamsingh for repairs to it.
The matter seems to have been report ed to the police only as a result of some quarrel or differences between parties.
Moreover, nobody would repair the truck without being paid for it.
The explanation given by the appellant was, on the face of it, quite reasonable and credible.
It was not merely supported by Mangaldas Purshottarn, D.W.l, whose cross examination did not elicit anything to show that he was unreliable but also, indirectly, by Ashok Jugannath, DW2, the Superintendent of the Commonwealth Insurance Co. `who proved the bills supplied to the Company on the strength of which the Insurance Co. had paid Rs. 6078.35.
It was, therefore, clear that somebody had got the truck repaired and realised the amounts to be paid for repairs from the Insurance Company.
The beneficiary of the contract of insurance was the Bombay Ex Servicemen Transport Co. of which section D. Sutar was a member.
Apparently, the amount had been realised by somebody on behalf of this Company.
The bills could have been given by the appellant.
In the absence of any proof as to who else could have or had repaired the truck the version of the appellant could not be said to be quite unbelievable.
751 A remarkable part of the case is that the Trying Magistrate had A convicted the appellant under Section 411 Indian Penal Code and sentenced him to six months rigorous imprisonment and to pay a fine of Rs., 500/ when he was not even charged with this offence.
, The High Court had maintained this conviction and the sentence and had not even mentioned the defects in the trial.
There was neither a charge under Section 411 I.P.C. nor was the appellant asked to explain his Possession of the truck although he did account for it.
The appellant 's explanation appeared quite plausible.
It may have been difficult to hold that the appellant could not have been prejudiced by the omission to frame a charge or by the manner in which he was put one omnibus question under Section 342 Criminal Procedure Code without giving him an intimation of the offence of which he was likely to be convicted, if these questions had been seriously raised.
However, as these questions do not appear to have been argued in the High Court and were`not even raised in the grounds of appeal in this Court, we will not consider them further.
We think that this appeal is bound to succeed on the view of the facts we have taken above.
The presumption from recent possession of stolen property is an optional presumption of fact under Section 114 Indian Evidence Act.
It is open to the Court to convict an appellant by using the presumption where the circumstances indicate that no other reasonable hypothesis except the guilty knowledge of the appellant is open to the prosecution.
In the case before us, the appellant had given a fairly acceptable explanations.
The prosecution had been unable to repel the effect of it.
The owner of the truck, section D. Sutar, had made admissions which indicated that the prosecution case of an unlawful possession on the part of the appellant was not likely.
It is more likely that the appellant had been entrusted with the truck in order that he might repair it and realise the costs.
However, we express no opinion on this aspect of the matter as the sentence of such a contract may involve a civil liability.
All we need say is that the explanation which the appellant had given was good enough to raise serious doubts about the sustainability of a charge under Section 411 Indian Penal Code on the strength of what was laid down in Otto George Gfeller vs The King(1), the appellant was entitled to an acquittal.
It was held there (at p. 215): "The appellant did not have to prove his story but if his story broke down the jury might convict.
In other words, the jury might think that the explanation given was one which could not reasonably be true, attributing a reticence or an incuriosity or a guilelessness to the appellant beyond anything that could fairly be supposed".
In that case, the question had to go before the Jury and the charge was found to be defective.
The principle of benefit of doubt, on questions of fact, applies whether the verdict is of a Jury or the finding is to be given by a Judge or a Magistrate.
The principle laid down in Gfeller 's case (supra) (at p. 214) was: 752 ". that upon the prosecution establishing that the accused were in possession of goods recently stolen they may in the absence of any explanation by the accused of the way in which the goods came into their possession which might reasonably be true find them guilty, but that if an explanation were given which the jury think right reasonably be true, and which is consistent with innocence although they were not convinced of its truth the prisoners were entitled to be acquitted inasmuch as the prosecution would have failed to discharge the duty cast upon it of satisfying the jury beyond reasonable doubt of the guilt.
Of the accused" Consequently, we allow this appeal and set aside the conviction and sentence of the appellant.
His bail bonds are discharged.
S.R. Appeal allowed.
| IN-Abs | On 4 3 1968, the date of the accident.
Karnal Singh, the accused was driving the truck No. MRS 7372.
purchased out of the loan advanced by the ex serviceman Co operative Society to one Sutar who entrusted the vehicle to Balwant Singh, the brother of the appellant, a co accused, under a contract for hire against a monthly payment of Rs. 2000 2200, after incurring all expenses over the truck.
The payment was regular up to December, 1967, and, thereafter, Balwant Singh avoided Sutar.
Though Balwant Singh met Sutar on 9 3 1968 and 12 3 1968 ie.
after the date of accident and promised to meet him later, The actually absconded resulting in the lodging of a First Information Report by Sutar on 20 4 1968 at 12.30 p.m. against Balwant Singh Uttam Singh for taking appropriate action under section 408, I.P.C. Since Balwant Singh was absconding and the vehicle was found in the possession of Karnal Singh, the police apprehended him and filed the charge sheet.
The Presidency Magistrate, 6th Court, Mazagaon, Bombay, charged the appellant under section 408 read with section 114 of the Indian Penal Code, but, actually convicted him and sentenced him to six months R.I. and a fine of Rs. 500/ under section 411 Indian Penal Code without appreciating the effect of either the value of Exhibit Dl dated 12 3 1968 written by Sutar indicating that he was agreeable to pay the total costs of the repair of the damaged vehicle, with the admission of its execution by Sutar in cross examination and failure to explain these or of the explanation given by the accused in his 342 statement to how he came into possession of the lorry for repairing it.
The High Court mainfained the conviction and the sentence.
Allowing the appeal by special leave, the Court, F ^ HELD.
(1) the presumption from recent possession of stolen property is an optional Prescription of fact under section 114 of the Indian Evidence Act.
It is open to the Court to convict the appellant by using the presumption when the circumstances indicate that no other reasonable hypothesis except the guilty knowledge of the appellant is open to the prosecution.
[751 D] (2) In the instant case, there was no mention of the appellant 's name in the F.I.R. there was no change under s 411, I.P.C. against him and he was not asked to explain it possession of the truck, but still he did explain it.
The appellant 's answer to the omnibus question under section 342, Criminal Procedure Code, without giving him an intimation of the offence of which he was likely to be convicted, on the face of it, was quite reasonable and credible.
The prosecution had been unable to repel the effect of this fairly acceptable explanation.
The explanation which the appellant had given was good enough to raise serious doubts about the susceptibility of a charge under section 411, Indian Penal Code.
The principle of benefit of doubt on questions of fact applies whether the verdict is of a Jury or the finding is to be given by a Judge or a Magistrate.[751,AB.E H] Otto George Gfeller vs The king, AIR 1943 PC 211 @ 214
|
Civil Appeals Nos.
2070 to 2074 of 1970.
From the Judgment and order dated 4th day of May 1970 of the Bangalore High Court in Writ Petitions Nos.
3958, 4035/68, 18 and 19 of 1969.
V.S.Desai, P. C. Bhartari, J. B. Dadachanji, o. c. Mathur and R. Narain for the appellant.
A. K. Sen and section S.Javali and B.P.Singh for Respondent No. 1.
section N. Prasad and section P. Naydt for Respondent Union of India.
The Judgment of the Court was delivered by RAY, C.J.
These appeals are by certificate from the judgment of the High Court of Mysore dated 4 May, 1970.
The several respondent Co operative Societies filed writ petitions in the High Court for quashing orders dated 11 September 11 1968 passed by the Government of India.
The impeached orders granted exemption, partially or wholly, to the appellant under clause 5(3) of the Sugar Cane Control Order, 1966 (hereinafter referred to as the 1966 Control Order) 742 from the payment of additional cane price fixed by the Price Fixation Authority under clause 5(4) of the 1566 Control order.
The High Court quashed the orders challenged by the respondents.
The use and supply of sugarcane is controlled under the provisions of the .
The Government of India promulgated the Sugar Cane Control order on 27 August 1955.
The 1955 Control Order empowered the Government, inter alia, to fix the minimum price payable by the manufacturer of sugar to the grower of sugarcane.
The Government was competent to fix different prices depending on the areas and qualities of sugarcane or on the basis of recovery of sugar from sugarcane.
In 1966 the Sugar Cane Control (Additional Powers) Act, 1962 came in existence.
In pursuance of powers conferred by the 1962 Act the Central Government amended the 1955 Control order by introducing clause 3A providing for payment of additional price for sugarcane purchased by producers of sugar during each of the four successive years beginning from 1 November 1958.
The 1955 Control order was repealed and replaced by the Sugar cane Control order, 1966 to which reference has already been made.
The 1966 Control order saved all orders made and actions taken under the repealed order.
Under clause 6 of the 1966 Control order the Government was competent to denote an area where sugarcane is grown is a reserved area for a factory.
The sugarcane grown in that area is required to be sold to the factory allotted.
The Central Government determines the quantity of sugarcane to be supplied by the growers in the reserved area and the quantity of sugarcane which the factory requires for crushing during any year.
The growers are required to enter into agreements with the factory to supply sugarcane of the quantity fixed under the provisions of the 1966 Control order.
Restrictions are placed on the growers from using sugarcane grown by them for other purposes.
The Government thus controls all aspects of the use of sugarcane grown hl the reserved area.
It can prohibit or restrict or otherwise regulate export of sugarcane from any area except under and in accordance with a permit issued in that behalf.
Clause 3 of the 1966 Control order provides for fixation of minimum price of sugarcane payable by manufacturers of sugar to the growers.
In determining the minimum price, the Government is required to take into account (a) cost of production of sugarcane, (b) return to the grower from alternative crops and the general trend of prices of agricultural commodities; (c) the availability of sugar to the Consumer at a fair price; (d) the price at which sugar produced from sugarcane is sold by producers of sugar; and (e) the recovery of sugar from sugarcane.
Clause 5 of the 1966 Control order provides for payment of additional price.
Sub clause (1) of clause 5 provides that in respect of sugarcane purchased, by producers of sugar during each of the four successive years beginning from 1 November 1958, the producer is 743 required to pay an additional price in addition to the minimum price A fixed ' under clause 3(1) of the 1966 Control Order.
The additional price is fixed accordance with the provisions of the Schedules to the Order.
On determination of the price, the same is required to be intimate, in writing to the producer of sugar, growers, Cooperative Societies of growers or the local growers association.
Sub clause (5) of clause 5 of the 1966 Control order provides for an appeal to the Government of India from the decision determining additional price.
The relevant provision for purposes of the present appeals is sub.
clause (3) of clause 5 of the. 1966 control order.
Sub clause (3) is as follows : "If the Central Government is satisfied that during any year a factory has made no profit or has made inadequate profit, that Government, may by order in writing, exempt either wholly or partially, any producer of sugar from payment of the additional price due from him under sub clause (1) in respect of sugarcane purchased for that factory during that year.
The appellant in Civil Appeals No. 2070 2074 of 1970 is the factory situate at Hospet manufacturing sugar.
The appellant buys sugarcane from growers in the area reserved for the said factory.
The respondent is a co operative society of growers of sugarcane who k have supplied sugarcane to the appellant factory.
The members of the societies entered into agreement with the appellant factory through the respondent societies for the supply of sugarcane.
The societies advanced monies to the grower members for their agricultural operations.
The societies are recognised both by the Government of India and the appellant factory for the purpose of the 1966 Control order.
The minimum price fixed by the Government of India for the seasons subsequent to 1958 59 was said by the sugarcane growers to be inadequate.
The growers felt that the factories manufacturing sugar were making profits from the sale of sugar and that the minimum price fixed by the Government for supply of sugarcane did not bear any rational relation to the market price or to the profits made by the producers of sugar.
The growers experienced impact of in crease in the cost of growing sugarcane and the restrictions placed by the Government preventing them from selling sugarcane to persons or at prices of their choice.
The growers were also prevented from converting sugarcane to "gur" except in accordance with the terms of a license to be obtained.
In partial redress of the hardship caused to the sugarcane growers Parliament introduced clause 3A to the Sugar Cane Control (Additional Powers) Act, 1962 for fixation of additional prices for sugarcane for four successive years commencing 1 November, 1958.
The provision was thereafter incorporated in the 1966 Control Order.
The relevant Authority under the 1966 Control order on 3 July, 1968 fixed the additional price payable by the appellant to the cane 744 growers for sugarcane supplied during the seasons 1960 61 and 1961 62 at Rs. 4.16 and Rs. 6.09 respectively per metric ton.
This was made payable in addition to the payments made by the factory to the growers during the said seasons.
No appeal was preferred either by the appellant factory or by the respondent Cooperative Societies under clause 5 of the 1966 Control order.
The additional price faced by the Authority thereby became final.
The appellant, however, did not pay the additional price.
The respondent received copies of communication dated 11 September 1968 sent by the Government of India to the appellant exempting it, from making payment of the aforesaid additional price.
It appears that the said order was made pursuant to applications made on behalf of the appellant on or about 11 July 1968 seeking exemption on the ground that the appellant had made inadequate profits.
The Government communication dated 11 September 1968 stated that it was satisfied that the profits made by the appellant were inadequate.
The Government wholly exempted the appellant from paying the additional price form the season 1961 62 and reduced the additional price for the season 1960 61 from 4.16 to 0.70 NP per metric ton.
The respondent challenged the validity of the order of the Government granting exemption wholly or partially to the appellant.
The High Court accepted the contention of the respondent on the ground that the impugned order was violative of principles of natural justice, because the Government failed to afford any opportunity to the growers to be heard in the matter.
The respondent contended that the power of exemption affected the right of growers to get additional price for sugarcane supplied by them and that the Central Government was required to exercise the power judicially and in conformity with the principles of natural justice.
Two questions arise for determination in these appeals.
First, whether in view of the 1966 Control order opportunity should have been given to the respondent when the Government wanted to grant exemption, wholly or partially, to the appellant from paying additional price.
Second, whether the High Court was right in giving direction to the Government to consider giving of an opportunity to the respondent.
The appellant sugar factory contends that the cane growers were not required to be heard when the Government grantee exemption to the factories from payment of additional price.
The respondent cane growers contend to the contrary.
Clause 5 of the 1966 Control order relates to additional price for sugarcane.
Clause 5 (1) of the order speaks of payment of additional price found due in accordance, with the provisions of the Schedule.
Clause S(3) of the 1966 Control order speaks of exemption from payment of additional price.
Clause 5(4) speaks of appointment by the Central Government of persons for determining the additional price under clause 5(1) of the 1966 Control order.
Clause 745 5(5) states that any producer of sugar or grower of sugarcane or growers ' cooperative society who feels aggrieved by any decision of the person or authority referred to in sub clause (4) may appeal to he Central Government.
In the background of these provisions, the appellant contends that the power to grant exemption is where the Government is satisfied that in any year a factory has made no profit or has made inadequate profit and the same should be determined from the balance sheet and profit and loss accounts of a company and there is no obligation to hear any party.
It is also said by the appellant that the determination of additional price and the exemption from payment of the additional price are separate matters independent of each other.
The appellant further contended that right to additional price could not vest in the cane growers until the manner of payment had been decided upon by the Central Government under clause 5(6) of the 1966 Control order, These contentions are unacceptable.
The provision for granting exemption is part of the procedure prescribed by clause $ of the 1966 Control order.
The power to grant exemption cannot be said to be independent of the provisions under clause 5 of the order.
The object of the 1966 Control order is to promote sugar industry and to eliminate unnecessary impediments in the production of sugar.
It also ensures a fair deal to the growers of sugarcane.
The provisions of the Control order are intended to maintain harmony between the growers of sugarcane and the producers of sugar and to enable both of them to share profits reasonably.
Therefore, the power conferred on the Government is required to be exercised having regard to the viewpoints of the growers of sugarcane as well as the producers of sugar.
It is necessary to give opportunity to the growers of sugarcane as well as the producers of sugar to be heard when the Government exercises powers under 1966 Control order for determining the additional price and granting exemption from payment of additional price.
The grant, of exemption from payment of price affects rights and interests of the growers of sugarcane.
The Control order contains elaborate machinery for fixation of additional price having regard to all relevant factors.
The additional price fixation authority afforded opportunity to both the growers of sugarcane as well as the producers of sugar to be heard in the determination of the additional price.
The subsequent order by the Government granting exemption to the factories for payment of additional price takes away rights which had a accrued in favour of the growers of sugarcane.
The manner of payment of additional price under clause S(6) of the 1966 Control order does not affect the right and interest of growers.
ln providing for payment of additional price, the additional price fixation authority takes into account the relevant considerations relating to the conditions of sugarcane growers as well as the promotion of the sugar industry during the relevant period.
The additional price fixation authority ' also considers the conditions and circumstances relating to the appellant factory in determining the additional 746 price payable.
It, is, therefore, necessary for the Government to invite the points of view or objections of the growers on the application made by the factories producing sugar seeking exemption from payment of additional price.
It is equally necessary for the Government to hear the growers of sugarcane in order to satisfy itself as to the bona fide and accuracy of the appellant 's claim for exemption.
The growers should be given an opportunity to show whether the claim by the appellant for exemption from payment of additional price should or should not be granted.
The power to grant exemption to factories from payment of additional price is ultimately connected with the right of sugarcane growers to claim additional price.
The situations in which a duty will arise to act judicially according to natural justice cannot be exhaustively enumerated.
A duty to act judicially will arise in the exercise of a power to deprive a person of legitimate interest or expectation that additional price would be paid.
The factors which power to an exercise of powers judicially are the nature of the interest to be affected, the circumstances in which the power falls to be exercised and the nature of the sanction, if any, involved.
It is clear that the purpose and purport of the 1966 Control order, the scheme of having sugarcane growing areas reserved for factories and in particular, the payment of additional price point to the inescapable conclusion that the sugarcane growers are to be heard not only when additional price is filed but also when any exemption is granted to factories from payment of additional price.
For these reasons, the judgment of the High Court is affirmed.
The appeals are dismissed.
Each party will pay and bear its own costs.
P.H.P. Appeals dismissed.
| IN-Abs | The respondent are co operative societies of growers of sugarcane who supplied sugarcane to the appellant which is a sugar manufacturing factory.
The use and supply of sugarcane is controlled under the provisions of the .
The Sugarcane Control order, 1955 empowers the Government to fix the minimum price payable by the manufacturer of sugar to the grower of sugarcane.
In 1962, the Sugarcane Control (Additional Powers) Act 1962 came into existence.
Pursuant to the Powers conferred by the 1962 Act, the Central Government amended the 1955 Control order by introducing clause 3A providing for payment of additional price for sugarcane purchased by the producers of sugar.
The 1955 Control order was repealed and replaced by the Sugarcane Control order 1966.
The respondent are recognised by the Government of India and the appellant for the purpose of 1966 Control order.
Under the 1966 order the Government was competent to denote an area where sugarcane is grown as a reserved area for factory.
The sugarcane grown in that area is required to be sold to the allotted factory.
The Government controls all aspects of the use of sugarcane grown in the reserved area.
The 1966 order provides for fixation of minimum price of sugarcane payable by manufacturers of sugar to the growers.
In determining the minimum price the Government is required to take into account (i) cost of production of sugarcane, (ii) return to the grower from alternative crops and the general trend of prices Of agricultural commodities; (iii) the availability of sugar to the consumer at a fair price; (iv) the price at which sugar is sold by the producers; and (v) the recovery of sugar from sugarcane.
The 1966 Control order further provides for payment of additional price in addition to the minimum price.
On determination of the price the same ` is required to be intimated in writing to the producers of sugar, growers Co operative Societies of Growers or the local Growers ' Association.
An appeal is provided to the Government of India against the determination of the additional price.
Clause 5(3) of the 1966 Control order provides that if the Central Government is satisfied that during any year a factory has made no profit or has made inadequate profit that Government may exempt either wholly or partially any producer of sugar from payment of the additional price.
The relevant authority under the 1966 Control order fixed additional price payable by the appellants to the respondent.
No appeal was preferred either by the appellant or the respondent.
The appellants did not pay the additional price.
appellant made applications seeking exemption on the ground that the appellants had made inadequate profits.
The Government exempted the appellants from paying whose of the additional price for the year 1961 62 and reduced the additional price for the year 1960 61 without giving any opportunity of being heard to the respondent The respondents challenged the validity of the grant of exemption by filing a writ petition in the High Court.
The High Court allowed the said writ petition on the ground that the order of the Central Government was violative of principles of natural justice, since no opportunity was given to the respondents to be heard in the matter.
741 Dismissing the appeal by certificate, ^ HELD: (1) Clause 5(1) provides for the payment of additional price and II clause 5(3) provides for exemption from the payment of additional price.
Clause 5(5) provides for filing an appeal to the Central Government by any person feeling aggrieved by the decision of the fixation of additional price.
The power to grant exemption cannot be said to be independent of the provisions of clause 5 of tho order.
The object of 1966 control order is to promote sugar industry and to eliminate unnecessary impediments in The production of sugar.
It also ensures a fair deal to the growers of the sugarcane.
The provisions of the control order are intended to maintain harmony between the Growers of sugarcane and the producers of sugar and to enable both of them to share profits reasonably.
is necessary to give opportunity to be heard both to the growers of the sugarcane as well as the producers of sugar when the Government exercises powers under 1966 Control order for determining the additional price and granting exemption from payment of additional price.
[744 H, 745 A E] (2) The grant of exemption from payment of price affects rights and interests of the growers of sugarcane.
The order of exemption takes away rights which had accrued in favour of the growers of sugarcane.
It is, therefore necessary for the Government to consider the points of view or objections of the growers on the application made by the factories producing sugar seeking exemption from payment of additional price.
[745F, G, 746A] (3) The situations in which a duty will arise to act judicially according to.
natural justice cannot be exhaustively enumerated.
A duty to act judicially will arise in the exercise of power to deprive a person of legitimate interest or expectation that additional price would be paid.
The factors which point to an exercise of power judicially are the nature of interest to be affected.
the circumstances in which the power falls to be exercised and the nature of the sanctions, if any, involved.
[746 C] (4) It is clear that the purpose and purport of the 1966 Control order point to the inescapable conclusion that the sugarcane growers are to be heard not only when additional price is fixed but also when exemption is granted to factories from payment of additional price.
[746 D]
|
N: Criminal Appeal No. 227 of 1972 From the Judgment and order dated the 8th September, 1972 of the Madhya Pradesh High Court in Criminal Appeal No. 927/69.
Mohan Behari Lal for the Appellant.
Ram Panjwani, Dy.
Advocate General for the State of M.P., N. section Parihar and I. N. Shroff for the Respondent.
ORDER CHANDRACHUD, J.
The appellants, Munnu Raja and Chhuttan, were tried by the learned Sessions Judge, Chatarpur on the charge that at about 10 a.m. On April 30, 1969 they committed the murder of one Bahadur Singh.
In support of its case, the prosecution relied upon the evidence of Santosh Singh (P.W. 1 ) and Mst.
Gumni (P.W. 4) who claimed to be eye witnesses and on three dying declarations alleged to have been made by the deceased.
The two eye witnesses were permitted to be cross examined by the Public Prosecutor as they supported the case of the prosecution only partly.
Santosh Singh stated that he saw Chhuttan assaulting Bahadur Singh with a spear but that he did not see Munnu Raja at all.
On the other hand, Mst.
Gumni stated that it was Munnu Raja and not Chhuttan who assaulted the deceased.
Since the two principal witnesses turned hostile, the learned Sessions Judge thought it unsafe to rely on their testimony and, in our opinion, rightly.
The learned Judge was also not impressed by any of the dying declarations with the result that he came to the conclusion that the prosecution had failed to establish its case beyond a reasonable doubt.
In that view of the matter, the appellants were acquitted by the learned Judge.
Being aggrieved by the order of acquittal, the State Government filed an appeal in the High Court of Madhya Pradesh, which was allowed by a Division Bench of that Court by its judgment dated September 8, 1972.
The High Court did not discard the evidence of 766 the eye witnesses but utilised it by way of corroboration to the dying declarations alleged to have been made by the deceased.
Setting aside the order of acquittal, the High Court has convicted the appellants under s: 302 read with section 34 of the Penal Code and has sentenced each of them to imprisonment for life.
The appellants have filed this appeal under section 2(1) of the .
We have heard Mr. Mohan Behari Lal on behalf of the appellants at some length and we have considered each of his submissions care fully.
It is however unnecessary to discuss every one of the points made by him because, basically, the scope of this appeal not for getting that the appellants had a right to file this appeal in this Court lies within a narrow compass.
As we have indicated earlier, no exception can be taken to the view taken by the learned Sessions Judge that it is not safe to place reliance on the testimony of Santosh Singh and Mst.
Gumni.
They resiled from their police statements and it is evident that they have no regard for truth.
Their evidence cannot be used to corroborate the dying declarations either.
We are thus left with the three dying declarations made by Bahadur Singh and since the prosecution has placed great reliance on them, we thought it necessary to hear the learned counsel fully on the facts and circumstances leading to the dying declarations.
In regard to these dying declarations, the judgment of the Sessions Court suffers from a patent infirmity in that it wholly overlooks the earliest of these dying declarations, which was made by the deceased soon after the incident in the house of one Barjor Singh.
The second statement which has been treated by the High Court as a dying declaration is exhibit P 14, being the first information report which was lodged by the deceased at the police station.
The learned Sessions Judge probably assumed that since the statement was recorded as a first information report, it could not be treated as a dying declaration.
In this assumption, he was clearly in error.
After making the statement before the police, Bahadur Singh succumbed to his injuries and therefore the statement can be treated as a dying declaration and is admissible under section 32(1) of the Evidence Act.
The maker of the statement is dead and the statement relates to the cause of his death.
The High Court has held that these statements are essentially true and do not suffer from any infirmity.
It is well settled that though a dying declaration must be approached with caution for the reason that the maker of the statement cannot be subject to cross examination, there is neither a rule of law nor a rule of prudence which has hardened into a rule of law that a dying declaration cannot be acted upon unless it is corroborated: [see Khushal Rao vs State of Bombay].
The High Court, it is true, has held that the evidence of the two eye witnesses corroborated the dying declarations but it did not come to the conclusion that the dying declarations suffered from 767 any infirmity by reason of which it was necessary to look out for corroboration.
It was contended by the learned counsel for the appellants that the oral statement which Bahadur Singh made cannot, in the eye of law, constitute a dying declaration because he did not give a full account of the incident or of the transaction which resulted in his death There is no substance in this contention because in order that the Court may be in a position to assess the evidentiary value of a dying declaration, what is necessary is that the whole of the statement made by the deceased must be laid before the Court, without tampering with its terms or its tenor.
Law does not require that the maker of the dying declaration must cover the whole incident or narrate the case history.
Indeed, quite often, all that the victim may be able to say is that he was beaten by a certain person or persons.
That may either be due to the suddenness of the attack or the conditions of visibility or because the victim is not in a physical condition to recapitulate the entire incident or to narrate it at length.
In fact, many a time, dying declarations which are copiously worded or neatly structured excite suspicion for the reason that they bear traces of tutoring.
It was urged by the learned counsel that after the attack, the deceased was all along accompanied by a large number of persons and one cannot therefore exclude the possibility that he was tutored into involving the appellants falsely.
We see no basis for this submission because not even a suggestion was made to any of the witnesses that the deceased was tutored into making the statement.
The deceased, on his own, did not bear any enmity or hostility to the appellants and had therefore no reason to implicate them falsely.
Indeed, none of the persons who were in the company of the deceased after he was assaulted, is shown to have any particular animus for implicating the appellants falsely.
In regard to the second dying declaration, exhibit P 14, the main objection of the learned counsel is that it was made to the investigating officer himself and ought therefore be treated as suspect.
In support of this submission, reliance was placed on a Judgment of this Court in Balak Ram vs State of U.P.
The error of this argument consists in the assumption that the dying declaration was made to an investigating officer.
The statement, exhibit P.14, was made by Bahadur Singh at the police station by way of a first information report.
It is after the information was recorded, and indeed because of its that the investigation commenced and therefore it is wrong to say that the statement was made to an investigating officer.
The Station House officer who recorded the statement did not possess the capacity of an investigating officer at the time when he recorded the statement.
The judgment on which the counsel relies has therefore no application.
768 We are in full agreement with the High Court that both of these dying declarations are true.
We are further of the opinion that considering the facts and circumstances of the case, these two statements can be accepted without corroboration.
Bahadur Singh was assaulted in broad day light and he knew the appellants.
He did not bear any grudge towards them and had therefore no reason to implicate them falsely.
Those who were in the constant company of Bahadur Singh after the assault, had also no reason to implicate the appellants falsely.
They bore no ill will or malice towards the appellants.
We see no infirmity attaching to the two dying declarations which would make it necessary to look out for corroboration.
We might, however, mention before we close that the High Court ought not to have placed any reliance on the third dying declaration.
exhibit P 2, which is said to have been made by the deceased in the hospital.
The investigating officer who recorded that statement had undoubtedly taken the precaution of keeping a doctor present and it appears that some of the friends and relations of the deceased were also present at the time when the statement was recorded.
But, if the investigating officer thought that Bahadur Singh was in a precarious condition, he ought to have requisitioned the services of a Magistrate for recording the dying declaration.
Investigating officers are naturally interested in the success of the investigation and the practice of the investigating officer himself recording a dying declaration during the course of investigation ought not to be encouraged.
We have therefore excluded from our consideration the dying declaration, exhibit P 2, recorded in the hospital.
The High Court was, therefore, justified in reversing the order of acquittal passed by the Sessions Court and in convicting the appellants of the offence of which they were charged.
In so doing, the High Court did not violate any of the principles governing appeals against acquittal, to which our attention was drawn by the appellants ' counsel from time to time In the result, we confirm the judgment of the High Court and dismiss the appeal.
P.H.P. Appeal dismissed.
| IN-Abs | The appellants were tried by the Sessions Judge on the charge of committing murder of Bahadur Singh.
The prosecution relied on the evidence of two eye witnesses and three dying declarations made by the deceased.
The two eye witnesses supported the prosecution case only partly and were, therefor, permitted to be cross examined by the Public Prosecutor.
The Sessions Judge thought it unsafe to rely on the testimony of the two eye witnesses and was also not impressed by and of the dying declarations.
Consequently he acquitted the appellants.
The High Court in appeal did not discard the evidence of the eye witnesses but utilised it by way of corroboration to the dying declarations.
The High Court set aside the order of acquittal and convicted the appellants under section 30 read with section 34 I.P.C. and sentenced each of them to imprisonment for life.
In an appeal under section 2(1) of the .
^ HELD: 1.
The Sessions Court rightly discarded the evidence of the hostile eye witnesses.
They resiled from their Police, Statements and it is evident that they have no regard for truth.
Their evidence cannot be used to corroborate the dying declarations.
[766 C] 2.
In regard to the dying declarations the Sessions Court wholly overlooked the earliest dying declaration which was made by the deceased soon after the incident.
The second dying declaration was the first information report lodged by the deceased at the Police Station.
The Sessions Judge was clearly in error in holding that the first information report cannot be treated as a dying declamation.
After making the statements before the police the deceased succumbed to his injuries and, therefore, the statement can be treated as a dying declaration, and is admissible under section 32(1) of the Evidence Act, The maker of tho statement is dead and the statement relates to the cause of his death.
[766DF] 3.
It is, well settled that though a dying declaration must be approached with caution for the reason that the maker of the statement cannot be subjected to cross examination, there is neither a rule of law nor a rule of prudence that a dying declaration cannot be acted upon unless it is corroborated.
[766G] 4.
Law does not require that the maker of the dying declaration must cover the whole incident or narrate the case history.
What is necessary is that the whole of the statement made by the deceased must be laid before the court without tampering with its terms or its tenor.
[767 C] 5.
The deceased did not bear any enmity or hostility towards the appellants nor did any other persons who were in the company of the deceased after the assault were shown to have any animus for implicating the appellants false.
[767E] 765 6.
The second dying declaration was not made to the Investigating officer.
It was made by way of First Information Report and it was only after the information was recorded that the investigation commenced.
The High Court was right in relying on the first and second dying declarations.
Considering the facts and circumstances of the case these two dying declarations can be accepted without corroboration.
[767F, 768C] 7.
The High Court ought not to have relied on the third dying declaration which is said to have been made by the deceased in the hospital.
The Investigating officer ought to have requisitioned the services of a Magistrate for re cording that dying declaration, Investigating officers are naturally integrated in the success of the investigation and the practice of the Investigating Officer himself recording a dying declaration during the course of investigation ought not to be encouraged.
[768CD] 8.
The High Court in reversing the order of acquittal passed by the Sessions rt did not violate any of the principles governing appeals against acquittal.
[768E]
|
Civil Appeal No. 360 of 1971.
From the Judgment and order dated the 27/29 1 1965 of the Bombay High Court in Income Tax Reference No. 75 of 1961.
section C. Manchanda, K. J. John and J. B. Dadachanji for the Appellant.
section T. Desai, Girish Chandra and M. N. Shroff for the Respondent.
The Judgment of the Court was delivered by GUPTA, J.
The appellant is a private limited company.
The assessment year is 1955 56 for which the relevant previous year ended on June 30, 1954.
The shareholders of the appellant company arc Mulraj Kersondas, members of his family, allied concerns and nominees only.
In 1944 the appellant purchased the managing agency of the Elphinston Spinning and Weaving Mills Ltd. for Rupees six lakhs and thereafter entered into a separate managing agency agreement with the managed company for a period of seventeen years.
The appellant 's only source of income was this managing agency in the relevant year.
Mulraj and his group also held among themselves 25,000 ordinary and 10,000 preference shares of the Elphinston Spinning and Weaving Mills Ltd. Mulraj entered into an agreement for sale of these shares with K. D. Jalan of Calcutta for a consideration of Rupees forty five lakhs; one of the terms of the agreement was that Mulraj would have the managing agency of the appellant company terminated.
In implementation of this agreement Mulraj wrote to the appellant company on October 21, 1953 asking the company to give up the managing agency on receipt of a sum of Rupees ten lakhs as compensation which he promised to pay.
On the same day the appellant company passed a resolution accepting Mulraj 's offer and 775 wrote to the managed company, Elphinston Spinning and Weaving Mills Ltd., tendering resignation of its office as managing agents.
The resignation was in due course accepted.
The assessee received from Mulraj a sum of Rs. 9,95,000/ as compensation for premature termination of the managing agency, Rs. 5,000/ having been paid by Mulraj as brokerage to one Dhirajlal Maganlal.
The amount received was credited to the Capital Reserve Account in the appellant 's books for the year ending on June 30, 1954 described as "compensation for loss of office".
In the assessment year 1955 56 for which the appellant 's previous year ended on June 30, 1954, the Income tax officer assessed the entire amount of Rupees ten lakhs in the hands of the appellant company under section 10(5A) of the Income Tax Act, 1922.
Section 10(1) of the Income Tax Act, 1922 states that the "tax shall be C payable by an assessee under the head "Profits and gains of business, profession or vocation in respect of the profit or gains of any business, profession or vocation carried on by him." Sub section (5A) was inserted in section 10 by the Finance Act, 1955 with effect from April 1, 1955, the relevant part of which is in these terms: "(5A) Any compensation or other payment due to or received by, (a) a managing agent of an Indian company at or in connection with the termination or modification of his managing agency agreement with the company; (b) a manager of an Indian company at or in connection with the termination of his office or modification of the terms and conditions relating thereto; (c) any person, by whatever name called, managing the whole or substantially the whole affairs of any other company in the taxable territories, at or in connection with the termination of his office or the modification of the terms and conditions relating thereto; (d) any person, by whatever name called, holding an agency in the taxable territories for any part of the activities relating to the business of any other person, at or in connection with the termination of his agency or the modification of the terms and conditions relating thereto; shall be deemed to be profits and gains of a business carried on by the managing agent, manager or other person, as the case may be, and shall be liable to tax accordingly;" The company preferred an appeal to the Appellate Assistant Commissioner against the order of the Income tax officer.
The Appellate Assistant Commissioner allowed the appeal holding that section 10(5A) created a new source of income for which the previous year was not the previous year for the managing agency business which ended on June 30, 1954, that the compensation of Rupees 776 ten lakhs which the appellant received in October, 1953 fell in the financial year 1953 54 which would be the previous year for this income for which the assessment year was 1954 55 which was before sub section (5A) of section 10 was enacted, and the fact that the appellant had entered the amount in its books for the year that ended on June 30, 1954 could not be taken as an exercise of option by the assessee accepting the said year as the previous year in respect of the receipt.
The Appellate Assistant Commissioner further held that if at all the amount was taxable in the assessment year 1955 56, the assessee was entitled to a deduction of Rupees six lakhs paid for acquiring the managing agency.
The Department took an appeal to the Tribunal against the order of the Appellate Assistant Commissioner.
The Tribunal was of opinion that section 10(5A) only regards the compensation received by the managing agent as profits and gains of a business and does not create a fresh source therefore, and as the amount in question in this case was received in the accounting year relevant to the assessment year 1955 56 it was taxable in the assessment year 1955 56.
The Tribunal however agreed with the Appellate Assistant Commissioner that the assessee was entitled to a deduction of Rupees six lakhs which the assessee had paid for acquiring the managing agency, and allowed the appeal partly holding that the assessee was liable to pay tax on the sum of Rs. 3,95,000/ .
At the instance of the parties the Tribunal referred the following two questions to the High Court under section 66(1): "(i) Whether the sum of Rs. 10 lakhs is income assess able in the year 1955 56 by virtue of Section 10 (5A) ? (ii) If the answer is in the affirmative, whether the initial cost of acquisition of the Managing Agency of Rs. 6 lakhs and Rs. 5000/ paid as brokerage on sale are deductible ?" The first question was referred at the instance of the assessee and the second at the instance of the Department.
The High Court overruled the contention of the assessee that the amount in question was income from a new source for which the previous year was 1953 54, and answered the first question in the affirmative and in favour on the revenue.
As regards the second question, the High Court answered it in favour of the assessee and upheld the order of the Tribunal.
In the present appeal brought on a certificate under section 66A(2), the assessee challenges the correctness of the answer given by the High Court to the first question.
"Previous year" is defined in section 2(11) of the Income Tax Act, 1922 and the relevant part of the definition is as follows: "(11) 'Previous year ' means in respect of any separate source of income, profits and gains (a) the twelve months ending on the 31st day of March next preceding the year for which the assessment is to be made, or, if the accounts of the assessee have 777 been made up to a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then at the option of the assessee the year ending on the day to which his accounts have so been made up ;" As stated already, sub section (5A) of section 10 came into force on April 1, 1955.
Therefore, the amount in question, if received by the assessee during the previous year for the assessment year 1955 56, would be taxable under that sub section.
By a legal fiction introduced by sub section (5A) any amount received by a managing agent as compensation for the termination of his managing agency agreement which would otherwise have been a capital receipt is to be deemed as profits and gains of a business carried on by the managing agent.
The appellant contends that sub section (SA) indicates that this deemed income is to be treated as receipt from a New source and, that being, so, the relevant previous year for this income would not necessarily be the year ending on June 30, 1954 which was the previous year for the managing agency business, and the assessee should have been given an opportunity to choose the previous year in respect for the receipt in question; if the financial year 1953 54 is taken as the previous year for this income from a new source, the argument proceeds, then the amount would not be taxable in the assessment year 1955 56.
It is further argued that the amount received as compensation could not be profits and gains of the managing agency business because the business itself was being terminated.
The words of the sub section, according to learned counsel for the appellant, indicate that the receipt is to be treated as income from a new and independent source.
Sub section (5A) states, inter alia, that any compensation or other payment received by a managing agent in connection with the termination of his managing agency agreement shall be deemed to be profits and gains of "a business" carried on by the managing agent.
The use of the indefinite article before the word 'business ', it is submitted, makes it plain that the income is not relatable to the managing agency business but to a new and separate source.
We are unable to accept the contention.
The fiction introduced by sub section (5A) regards the capital receipt as income and does not extend to treating the termination of managing agency itself as a business.
The amount received by the appellant was a payment for the termination of the managing agency business and, as such, the receipt is obviously related to that business.
It is of course true that the amount was not earned in carrying on the business of managing agency, hut it is clear that the source of the receipt was the managing agency business itself.
It cannot therefore be said that the receipt was income from a new and independent source.
In our opinion the High Court was right in holding that in enacting sub section (5A) the legislature was concerned only with providing a head under which the receipt which has been deemed to be income could be brought to tax and was not concerned with creating a new source for that deemed income.
Two decisions cited on behalf of the respondent, one of the Bombay High Court, Commissioner of Income tax, Bombay vs Sir 778 Chunilal vs Mehta & Sons Private Ltd and the other of the Madras High Court, R. V. Lakshmiah Naidu and Co. vs Commissioner of Income Tax, Kerala and Coimbatore, have both held that the compensation paid for the termination of a managing agency business is a payment in relation to the said business, and, therefore, the previous year relevant to that receipt would be the same as the previous year for the managing agency business itself.
In our view these two decisions state the law on the point correctly.
The appeal fails and is dismissed with costs.
S.R. Appeal dismissed.
| IN-Abs | The assessee appellant received in October, 1953, a sum of Rs, 9,95,000/ out of Rs. 10,00,000 compensation for the premature termination of its managing agency business, a sum of Rs. 5,000/ , having been deducted towards brokerage.
The said amount was credited to the Capital Reserve Account in its books for the year ending on June 30, 1954 described as "compensation for loss of office".
In the assessment year 1955 56, for which, the appellant 's previous year ended on June 30, 1954, the Income Tax Officer assessed the entire amount of Rs. 10,00,000 in the hands of the appellant company under section 10 (5A).
The Company preferred an appeal to the Appellate Assistant Commissioner who allowed the appeal holding that (i) section 10(5A) created a new source of income for which the previous year was not the previous year for the managing agency business ending on June 30, 1954; (ii) the compensation of Rs. 10,00,0000 which the assessee received in October, 1953 fell in the financial year 1953 54 ` which would be the previous year for this income for which the assessment year was 1954 55, which was before the enactment of sub section SA of section 10; (iii) the fact that the appellant had entered the amount in its books for the year that ended on June 30, 1954, could not be taken as an exercise of option by the assessee, accepting the said year as the previous year in respect of the receipt; and (iv) if at all the amount was taxable in the assessment year 1955 56, the assessee was entitled to a deduction of Rs. 6,00,000/ paid for acquiring the managing agency.
The appeal preferred by the Department was partly allowed.
Tho Tribunal agreed with the Appellate Assistant Commissioner that the assessee was entitled to a deduction of Rs. which the assessee had paid for acquiring the managing agency business.
The Tribunal however held that Sec. 10 (5A) does not increase a fresh source of income that since tho amount in question was received in the accounting year relevant to the assessment year 1955 56 it was taxable in the assessment year 1955 56; The High Court on a reference under section 66(1) of the Act on the two questions namely (i) Whether the sum of Rs. 10 lakhs is income assessable in the year 1955 56 by virtue of Section 10(5A)? and (ii) If the answer is in the affirmative, whether the initial cost of acquisition of the Mananging Agency of Rs. 6 lakhs and Rs. 5 thousands paid as brokerage on sale are deductible ? agreed with the views of the Tribunal.
On appeal by certificate under section 66A(2) and dismissing the appeal, the Court, ^ HELD: (1) Since sub section 5A of section 10 came into force on April 1, 1955, the amount in question if received by the assessee during the previous year for the assessment year 1955 56, would be taxable under that sub section.
By 774 a legal fiction introduced by the sub section, any amount received by a managing agent as compensation for the termination of his managing agency agreement which would otherwise have been a capital receipt is to be deemed as profit and gains of a business carried on by the managing agent.
The fiction regards the capital receipt as income and does not extend to treating the termination of managing agency itself as a business.
The amount received by the appellant was the payment for the termination of the managing agency business and, as such, the receipt is obviously related to that business.
Though the amount was not earned in carrying on the business of managing agency, yet the source of the receipt was the mananing agency business itself, it is not therefore correct to say that the receipt was income from a new and independent source (2) The High Court was right in holding that in enacting sub section 5A, the Legislature was concerned only with providing a head under which the or receipt which has been deemed to be income could be brought to tax and was not concerned with creating a new source fur that deemed income.
[777G] (3) The compensation paid for the termination of a managing agency business is a payment in relation to the said business and, therefore, the previous year relevant to that receipt would be the same as the previous year for the managing agency business itself.
[778A] Commissioner of Income Tax, Bombay vs Sir Chunilal V. Metha & Sons Private Ltd., ; and R. V. Lakshmiah Naidu and Co. vs Commissioner of Income Tax, Kerala and Coimbatore. , relied on
|
ition No. 469 of 1971.
Under article 32 of the Constitution af India.
V. M. Tarkund, V. N. Ganpule and P. C. Kapoor for the petitioners.
G. L. Sanghi and section P. Nayar for respondents 1 4, respondents S to 16 not represented.
The Judgment of the Court was delivered by BEG, J.
Twenty two petitioners under Article 32 of the Constitution have come to this Court with the following assertion: (1) They are employed as civilian non gazetted Officers holding posts of Chargemen Grade II (Chemists) in high explosives ' Factory, Kirkee, which is one of the 28 ordnance Factories, located all over India, controlled by opposite party No. 2, the Director General of ordnance Factories, with his Head office at Calcutta.
(2) The Factory has four cadres of officers: (i) Gazetted officers; (ii) Non Gazetted officers; (iii) Non Industrial employees; (iv) lndustrial employees.
The petitioners belong to the second cadre which has four grades: (a) Foremen; (b) Assistant Foremen; (c) Chargemen Gr.
I; (d) Chargemen Grade II.
The 3rd cadre of nonindustrial employees has two grades (i) Supervisor 'A ' Grade; and (ii) Supervisor 'B ' grade.
The employees of the 3rd cadre are classified as Class III employees in the general scheme of classification of Govt.
servants who are governed by India ordnance Factories (Recruitment and Conditions of Service of Class II personnel) Rules.
(3) The seniority rules of Gazetted and Non Gazetted officers of the ordnance Factories are laid down in office Memorandum dated 4th January, 1956, amended in 1961 (Annexure 'B ').
(4) The Director General of ordnance Factories, Respondent No. 2, issued an advertisement, dated 14th November, 1962 for direct recruitment to the grade of Foremen, Assistant Foremen, Chargemen Grade I and Ghargemen Grade II.
At the time of this advertisement, all the petitioners, except petitioner No. 12, were already serving as officiating Supervisors of 'A ' Grade of Class IIl: employees.
In answer to the advertisement for appointment to temporary posts with prospects of being "considered for permanent appointment in due course", the petitioners, who possessed the minimum qualification prescribed, applied for direct recruitment which was open to them also.
The petitioners were for interview by a letter issued by the General Manager, High explosives ' I Factory, Kirkee, on 7th February, 1963, but, after the interviews, no letters of appointment were received by the petitioners other than petitioner No. 12.
760 (5) They were promoted between April, 1963, and November, 1963, from their substantive grade of Supervisor 'A ' to Chargemen Grade II by the General Manager of their factory, on short term basis, by virtue of powers delegated to him.
Petitioner No. 12, who was not in service at all before, was appointed a temporary chargemen, Grade II, in April, 1963, as a result of his selection after interview.
Respondents 5 to 16, however, entered ' the ' grade of Chargemen Grade II between 1st December, 1963 and 4th February, 1965, and were also shown as temporary Chargemen Grade II, but, they were not holding any post in the grade of Supervisors.
The respondents were apprentices before entering into the Grade II of Chargemen.
r (6) The promotions of the petitioners were given ' retrospective effect, by an order dated 11th June, 1965, passed by the Director General ordnance Factories.
In December, 1967, however, the petitioners were superseded by others who were alleged to be their juniors.
The petitioners made representations and sent reminders which were not replied to.
Respondents S to 16 were promoted from Chargemen Grade II to the grade of Assistant Foremen by an order of the respondent No. 2 Director General ordnance Factories dated l 7th September, 1971.
This order according to the petitioners amounted to another supersession of the petitioners who were shown as holding permanent posts only as Supervisors of 'A ' grade in 1971.
The petitioners, therefore called to this Court on 14th December, 1971 against the orders dated 17th September, 1971, Which amounted to their supersession.
The petitioners also alleged that as no orders were communicated to them showing that they were considered direct recruits by the ordnance Depot by the Ministry of Defence Production in the Govt of India or anyone on its behalf, they came to know, for the first time, as a result of the replies filed by the respondents to the Writ Petition that they were being treated as direct recruits so that they could only be confirmed when their turn came in the 20% quota of direct recruits and not in the 80% quota of the promotees.
The petitioners, therefore, applied for the amendment of the petition and were permitted by this Court, under an order dated 16th November, 1973, to do so.
They alleged, by means of this amendment that their classification as direct recruits instead of as Promotees was Seniority fanciful, arbitrary, and even capricious".
They also alleged that the seniority list filed in reply to their petition had been kept concealed from them and that it was prepared in utter disregard to statutory rules 10(1) to 10 to (4) contained in S.R.O. 4.
These rules are 10(1) The Director General will prepare a seniority list of all the officers in their own categories according to the following procedure: (i) As between two officers holding a particular class of appointment, in a substantive capacity, seniority in that 761 class of appointment as well as in the officiating appointments held by them in the same rank or different ranks shall be determined with reference to the date of the substantive appointment.
(ii) Subject to the provisions of clause (iii), an officer holding an appointment in a particular class in a substantive capacity will he normally senior to an officer holding an appointment in the same class in a non substantive capacity.
(iii) Seniority of persons holding temporary appointments which are made on agreement or on probationary basis and which are expected to be continued after the expiry of the initial period, will be reckoned vis a vis others holding permanent appointments in the same grade in the ordnance Factories from the date from which the officer concerned have been holding appointments of the same grade continuously.
The seniority so assigned to such per sons shall not be disturbed on their confirmation at a later stage.
Note: This clause applies only to persons recruited through the Union Public Service Commission and to those recruited directly, otherwise than through the Union Public Service Commission prior to 1st April 1947.
(iv) Temporary seniority in a given grade will be reckoned from the date from which the officer concerned has been occupying it continuously, irrespective of whether he has a substantive appointment in some lower grade" The reply of the respondents is that the so called promotion orders, of which the petitioners want to take advantage, were really the result of a mistake or misunderstanding in not realising the actual legal position of the petitioners as direct recruits.
It was pointed out that, in the letters issued calling them for interviews as direct recruits, it was made clear to them that their appointments did not carry with them any decision about their fitness for the post applied for and that they could be considered for any lower post to which they might he so entitled.
In other words, this clearly meant that they were on trial.
It was also pointed out that promotions are only made under Rule 6 of the Indian Ordnance Factories (Recruitment and Conditions of Service of Class III Personnel) Rules, 1956, as amended in 1961 to Chargemen Grade II, on the basis of "a selection list prepared by the appropriate Departmental Promotion Committee".
rt was asserted that, in the minutes of the Departmental Promotions ' Committee held in the month of April 1963, prior to the appointment of petitioners as Chargemen Grade II, the Committee had prescribed a normal minimum qualification of three years ' service in the post of Grade 'A ' for promotion barring exceptional cases of ex apprentices.
It was asserted that, as the Petitioners had not satisfied this condition, they could not be considered for promotion to the posts of Chargemen Grade II.
They did not belong to the class 762 which had any exceptional qualifications.
Hence, their names did not appear in the list of persons to be promoted prepared by the Departmental Promotions ' Committee for the post of Chargemen Grade II.
It was asserted that they were being treated as direct recruits and not promotees despite their wrong description and even wrong orders conveying the impression that they were promotees.
The condition precedent to promotion not having been satisfied they could only be considered as direct recruits and get the appointments reserved for the class of direct recruits as and when their turns arrived in this quota.
It was conceded on behalf of the respondents that much larger number of appointments had been made in the class of direct recruits than the vacancies available.
It was, however, explained that this was due to the sudden and exceptional demands for these appointments as a result of the pressure on our ordnance Factories due to the war with China and other defence requirements.
It was urged that the petitioners could not take advantage of erroneous orders made by the Manager of their ordnance Factory even if the error had been repeated by the Director General Ordnance Factories.
If the petitioners had not satisfied the condition precedent to promotion, they could not get the appointments reserved for the 80% quota of promotees whose work was watched by the Promotions ' Committee so that they could be declared fit for promotion.
The promotions were on the basis of a selection on merit, the tests of which had not been satisfied by the petitioners In fact, the petitioners were considered with others, and were not selected.
It was not necessary to give them opportunities of being heard on comparative merits, as they claimed, just as candidates at an examination are not entitled to any such opportunities as these are not disciplinary proceedings.
Counsel for the petitioners was, in our opinion, not able to meet the objections put forward to petitioners ' claims as promotees.
He could not show that they satisfied the conditions precedent to promotions.
Hence, the so called orders of promotion could not cure the defect.
It was immaterial that the petitioners were wrongly shown as Promotees in their service records or that they had not received intimations or their appointments as direct recruits.
There was a justifiable ground for a distinction between them and the class to which the respondents belonged.
There was no challenge to the fairness of the 20% quota reserved for direct recruits as against that of promotees.
Hence, we do not think that the petitioners can complain of violation of any fundamental rights under Article 16 of the Constitution.
Petitioners cannot also claim any benefit resulting from being treated as persons belonging to the same class as respondents 5 to 16 whose places on the seniority list are questioned by them as 763 amounting to illegal supersessions of the petitioners.
We may mention here that Mr. Sanghi, Counsel appearing for the Union of India, Respondent No. 1, and the Director General ordnance Factory, Respondent No. 2, and other officials, has fairly conceded that so far as the case af Petitioner No. 11 is concerned, it stands on a special footing and that his clients are considering it on that footing.
Counsel for the petitioners has also conceded that so far as 3 of the petitioners are concerned, they have been rightly treated as direct recruits.
We find no error in treating the others also as direct recruits.
It may also be mentioned here that Mr. Sanghi, Counsel for the Union of India and its officials, has stated to the Court that none of the petitioners will be reverted to his substantive post merely on the ground that he was treated as a direct recruit.
The question of inter se seniority is a different matter.
The petitioners have been unable to establish that they have been denied their seniority in violation of any right under Article 16 of the Constitution.
Collector of Central Excise Central Revenue & Ors this Court laid down (at p. 546): "It was for the petitioner to satisfy the Court that he was not given the senior grade although he satisfied all the required conditions of it and that others, who were promoted into it were given unjustifiable preference over him".
As we are not satisfied that the seniority list has been prepared in violation of any rule or principle of justice, we are unable to accept the petition before us.
We therefore, dismiss this petition.
The parties will bear their own costs.
V.P.S Petition dismissed.
| IN-Abs | The Ordinance Factory in which the petitioners were employed hold four cadres.
In the 2nd cadre of non gazetted officers there were four grades Foremen.
Assistant Foremen, Chargemen Grade I and Chargemen Grade II.
The 3rd cadre of non industrial employees had 2 grades Supervisor 'A ' Grade and 'B ' Grade, and were governed by the Indian ordnance Factories (Recruitment and Conditions of Service of Class III Personnel) Rules,1956.
Appointment was on the basis of 20% of the quota for direct recruits and 80% for promotees.
In answer to an advertisement for appointment by direct recruitment to the 4 grades of the 2nd cadre, the petitioners, all of whom except petitioner No. 12, were serving as Supervisors 'A ' Grade, applied.
Petitioner No. 12 was not in service.
They were interviewed but none of the petitioners, except Petitioner No. 12, received orders of appointment.
Petitioner No. 12 was appointed Chargeman Grade II.
Between April, 1963, and November, 1963, The other petitioners were promoted as Chargemen Grade II.
Respondents 5 to 16 who were apprentices, were also promoted as Chargemen Grade II, and were later promoted to the grade of Assistant Foremen.
Treating this order as an order of supersession, the petitioners filed a writ petition under article 32 claiming to be promotees, and seniority on the basis of statutory rules 10(1)(i) to (iv) contained in S.R.O. 4.
Dismissing the petition, ^ HELD.
(I) There was a justifiable ground for distinction between the petitioners, who were direct recruits, and the respondents who were promotees, and hence, there was no violation of article 16.
1762 G] The petitioners were really direct recruits and not promotees despite the wrong description in their service records and even wrong orders conveying the impression that they were promoters.
even though they had not received intimation of their appointment as direct recruits.
Promotions arc only made under section 8 of the Indian ordnance Factories (Recruitment and Conditions of service of Class III Personnel) Rules, 1956, as amended in 1961, to Charge men Grade II, on the basis Of a selection list prepared by the appropriate Departmental Promotion Committee.
The Committee had prescribed a normal minimum qualification of 3 years ' service in the post of Supervisor Grade 'A ' before promotion except in exceptional cases of ex apprentices.
The petitioners did not belong to the class which had any exceptional qualification, and, since they had not satisfied tho 3 years ' condition, they could not be considered for promotion in the 80% quota reserved for promotees, to the post of Chargemen, Grade Ir.
E Hl (2) The petitioners have not established that they have been denied their seniority in violation of any right under article 16 nor that the seniority list had been prepared in violation of any rule or principle of justice.
The question of inter se seniority is also based upon the 4:1 (80%: 20%) ratio and it was for the petitioners to satisfy the Court that they were not given the senior 759 grade although they satisfied all the required conditions, and that others, who A were promoted, were given unjustifiable preference over them.
[763C] Amrit Lal Berry vs Collector of Central Excise Central Revenue & ors., AIK @ 546, followed.
|
N: Criminal Appeal No. 162 of 1971.
Appeal by special leave from the Judgment and order dated the 11th December, 1970 of the Calcutta High Court in Criminal Revision No. 145 of 1969.
N.C. Talukdar, Prodyut Kumar Chatterjee and Sukumar Basu for the Appellant.
G.S. Chatterjee and Sukumar Basu for the Respondents.
783 The Judgment of the Court was delivered by CHANDRACHUD, J.
The appellant, who is a homeopathic practitioner, runs a dispensary at Harrison Road, Calcutta.
In the issue of a Hindi newspaper, "Sanmarg", dated September 14, 1967 he had the following advertisement published: "New Life, New Vigour, New Spirit, New Wave.
If you want a cure, see today well known world famous experienced registered Physician.
Special diseases such as oldness in youth, all sorts of defects in nerves, or weakness laziness are treated with full responsibility, with new methods, new machines of science and electric treatment and are cured permanently. " In behalf of this advertisement, the appellant was prosecuted under section 7 read with section 3 of the Drugs and Magic Remedies (objectionable Advertisements Act 21 of 1954.
The learned Presidency Magistrate, 8th Court, Calcutta convicted the appellant of the aforesaid charge and sentenced him to pay a fine of Rs. 100/ .
The order of conviction and sentence having been confirmed by the High Court of Calcutta, the appellant has filed this appeal by special leave.
The Drugs and Magic Remedies (objectionable Advertisements) Act provides by section 3, in so far as relevant, that no person shall take part in the publication of any advertisement "referring to any drug in terms which suggest or are calculated to lead to the use of that drug" for the maintenance or improvement of the capacity of human beings for sexual pleasure or the diagnosis, cure or treatment E. Of any disease or condition specified in the Schedule to the Act.
Item 14 of the Schedule refers to "Disorders of the nervous system '.
Section 7 of the Act makes it penal to contravene any of the provisions of the Act.
The contention of the appellant was and before us is that the particular advertisement does not refer to any "drug" and therefore the provisions of the Act are not attracted.
For appreciating this contention, it is necessary to refer to section 2(b) of the Act which runs thus: "2.
In this Act, unless the context otherwise requires, (a) * * * * (b) "drug" includes (i) a medicine for the internal or external use of human beings or animals; (ii) any substance intended to be used for or in the diagnosis, cure, mitigation, treatment or prevention of disease in human beings or animals; (iii) any article, other than food, intended to affect or influence in any way the structure or any 784 organic function of the body of human beings or animals; (iv) any article intended for use as a component of any medicine, substance or article, referred to in sub clauses (i), (ii) and (iii)." The learned Magistrate as well as the High Court have taken the view that the advertisement in question; refers to a drug as defined by section 2(b) (ii) above as "machines of science" are a "substance" intended to be used in the diagnosis, cure or treatment of diseases in human beings.
We do not propose to examine the correctness of this view because it seems to us clear that, in any event, the impugn ed part of the advertisement refers to a drug as defined by section 2(b)(iii).
Any article, other than food, which is intended to affect or influence in any way any organic function of the body of a human being is a drug within the meaning of that provision.
The so called "machines of science" or of "electric treatment" whose magically curative properties were advertised by the appellant are Articles intended to influence the organic function of the human body.
Indeed, the very claim of the appellant is that by the use of these machines he could cure nervous diseases amongst other ailments.
That a machine is an "article" requires no great learning either to expound or to understand.
A machine is a tangible thing which can both be seen and felt and as such it answers the description of an 'article ' within the meaning of section 2(b) (iii) of the Act.
The 'Shorter oxford English Dictionary ' (Ed. 1964, Vol.
I, p. 102) says that 'article ' means.
inter alia, "a piece of goods or property".
Webster 's 'New World Dictionary ' defines an 'article ' as a "commodity" and 'commodity ' as "any useful thing" or "any article of commerce".
(See Ed.
1962 pp. 83 and 295).
Putting it simply, a "machine" is a "thing" and is therefore an "article".
Law may not all be commonsense and logic may not be the life of law but commonsense is not taboo in law courts.
A machine is after all intended to be and is conceived as a useful thing and is therefore an "article".
The Statement of objects and Reasons to the Act says that many an advertisement causes the ignorant and the unwary "to resort to quacks who indulge in such advertisements for treatments which cause great harm".
The appellant may not be a quack, so will be assume, but his "machines of science" designed to confer on man kind the blessings of 'New Life, New Vigour, New Spirit, New Wave" are most likely to trap the ignorant and the unwary.
The articles of commerce which he has benefully advertised must, as far as possible and without doing violence to the language of the Act, be brought within the mischief of the Act.
It does no violence either to commonsense or to rules of interpretation to say that a machine is an "article".
In the result, we confirm the judgment of the High Court, though for a different reason, and dismiss this appeal.
P.B.R. Appeal dismissed.
| IN-Abs | Section 3 of the Drugs and Magic Remedies (objectionable Advertisements) Act provides that no person shall take part in the publication of any advertisement referring to any drug in terms which suggest or are calculated to lead to the use of that drug for the maintenance or improvement of the capacity of human beings for sexual pleasure or the diagnosis, cure or treatment of any disease or condition specified in the Schedule to the Act.
Section 7 of the Act makes it penal to contravene any of the provisions of the Act.
The appellant inserted an advertisement in a newspaper to the effect that he would treat diseases "with new methods, new machines of science and electric treatment".
He was prosecuted under section 7 read with section 3 of the Act and was convicted and sentenced.
The High Court confirmed the conviction and sentence.
On appeal to this Court.
it was contended that the particular advertisement did not refer to any "drug" and, therefore, the provisions of the Act were not attracted.
Dismissing the appeal, ^ HELD: "Machines of science" designed to confer on mankind the blessings of "New Life, New Vigour, New Spirit, New Wave" advertised by the appellant are most likely to trap the ignorant and the unwary.
The articles of commerce which the appellant had banefully advertised must be brought within the mischief of the Act.
[784 GH] (1) Any article other than food which is intended to affect or influence in any way any organic function of the body of a human being is a drug within the meaning of that provision.
The so called "machines of science" or of "electric treatment" whose magically curative properties were advertised by the appellant are articles intended to influence the organic function of the human body.
[784C] (2) A machine is a tangible thing which can both be seen and felt and as such, it answers the description of an article within the meaning of section 2(b)(iii) of the Act.
A machine is intended to be and is conceived as a useful thing and is therefore, an "article".
It does no violence either to commonsense or to rules of interpretation to say that a machine is an "article".
[784 D E]
|
vil Appeal No. 139 of 1955.
Appeal under Articles 132 and 133 of the Constitution of India against the Judgment and Order dated the 23rd December 1953 of the High Court of Judicature for the State of Punjab in Civil Writ Application No. 24 of 1953.
N.C. Chatterjee, (B. section Narula, with him) for the appellant.
G.S. Pathak and Veda Vyas, (Ganpat Rai, with them), for respondent No. 5 1955.
September 6.
The Judgment of the Court was delivered by BOSE J.
The proceedings that have given rise to this appeal arise out of an election petition before the Election Tribunal, Delhi.
The appellant Shrimati Sucheta Kripalani together with the contesting respondent Shrimati Manmohini Sahgal and others were candidates for election to the House of the People from the Parliamentary Constituency of New Delhi.
The polling took place on 14th January, 1952, and when the votes were counted on 18th January, 1952, it was found that the appel lant had secured the largest number of votes and that the contesting respondent Manmohini came next.
The appellant was accordingly notified as the returned candidate on 24th January, 1952.
On 6th March, 1952, the appellant filed her return of election expenses.
This was found to be defective, and on 17th April, 1952, the Election Commission published a notification in the Gazette of India disqualifying the appellant under Rule 114(5) of the Representation of the People (Conduct of Elections and Election Petitions) Rules, 1951, on the ground that she bad "failed to lodge the return of election expenses in the manner required" and that she had thereby "incurred the disqualifications under clause (c) of section 7 and section 143 of the Representation of the People Act, 1951".
452 In view of this the appellant submitted a fresh return with an explanation under Rule 114(6) on 30th April, 1952.
This was accepted by the Commission and on 7th May, 1952, it published a notification in the Gazette of India under Rule 114(7) stating that the disqualification had been removed.
In the meanwhile, on 7th April, 1952, the contesting respondent Manmohini filed an election petition praying that the appellant 's election be declared void and that she (the petitioner) be declared to have been duly elected.
It will be noticed that this was before 17th April, 1952, the date on which the Election Commission disqualified the appellant.
The validity of the election was attacked on many grounds.
A number of major corrupt practices were alleged and the return which the appellant had filed on 6th March,1952, of her election expenses was challenged as a minor corrupt practice on two grounds: (1) that the return was false in material particulars and (2) that it was not in accordance with the rules and so was no return at all in the eye of the law.
Particulars of the instances in which the return was challenged as false were then set out.
The appellant filed her written statement in reply on 7th October, 1952.
It will be noticed that this was after she had put in her second return and after the Election Commission had removed the disqualification due to the first return.
Her reply was as follows: (1) That as the disqualification with respect to the return of her election expenses had been removed by the Election Commission under section 144 of the Representation of the People Act, 1951, this question could not be reopened; (2) That a minor corrupt practice which cannot vitiate an election and which is not capable of materially affecting an election is wholly outside the scope of a proper election petition and so no cognisance of it can be taken by the Election Tribunal; (3) That only such matters can be put in issue as are necessary to decide whether the election of the returned candidate is liable to be set aside within the meaning of section 100(2) of the Act, 453 The contesting respondent Manmohini filed a replication on 15th October, 1952.
In it she said: (1)that the Election Commission did not and could not decide whether the return was or was not false in material particulars and so the question was still open.
(This had reference to the first return dated 6th March., 1952.); (2) that in any event "even the revised return is false in material particulars and the objections with regard to the original return also apply exactly with regard to the revised return".
The broad propositions of law raised by points (2) and (3) in the appellant 's written statement were also denied.
Then followed an item by item reply to the allegations made by the appellant in the list which she had appended to her written statement.
That list was a reply to the particulars of false return and corrupt practices furnished by the contesting respondent Manmohini.
It is evident then that Manmohini attacked the second return on exactly the same grounds as the first and, furnished the same particulars.
Now we have spoken of these returns as the first and the second.
But counsel on both sides agreed before us that the first return was in fact no return at all in the eye of the law and that therefore the contesting respondent 's real attack was on the second return which must be regarded as the only return which the law will recognise as a valid return.
It was agreed that there cannot be two returns of expenses: either the one originally filed is amended or it is treated as a nullity so far as it purports to be a return.
In view of this agreement, it is not necessary for us to express any opinion on the matter and we will concentrate our attention on what, for convenience, we will continue to call the second return.
The first point that now arises is whether the decision of the Election Commission to remove the disqualification attaching to the first return precludes an enquiry into the falsity of the second return simply because the respondent Manmohini alleged that the 454 particulars of the falsity are exactly the same as before.
Our answer to that is No.
If the first return is no return in the eye of the law, then the only return we are concerned with is the second and that must be treated in the same way as it would have been if it had been the only return made.
If there had been no other return and this return had been challenged on the grounds now raised, it is clear that the truth of the allegations made would have to be enquired into.
That enquiry cannot be shut out simply because the allegations against the second return happen to be exactly the same in the matter of its falsity as in the case of the first return.
We are therefore of opinion that the jurisdiction of the Tribunal to enquire into these matters was not ousted on that account.
Our reasons for this are these.
Section 76 of the Act requires every candidate to file a return of election expenses in a particular form containing certain prescribed particulars.
The form and particulars are set out in the Rules.
Section 143 prescribes the penalty for failure to observe those requirements.
It is disqualification.
This ensues if there is a "default" in making the return.
It also ensues: "if such a return is found. . upon the trial of an election petition under Part VI. . to be false in any material particular".
That places the matter beyond doubt.
The trial of an election petition is conducted by an Election Tribunal and this section makes it incumbent on the Tribunal to enquire into the falsity of a return when that is a matter raised and placed in issue and the allegations are reasonably connected with other allegations about a major corrupt practice.
The jurisdiction is that of the Tribunal and not of the Election Commission.
The duty of the Election Commission is merely to decide under Rule 114(4) whether any candidate has, among other things, "failed to lodge the return of election expenses. in the manner required by the Act and these rules".
It is a question of form and not of substance.
If 455 0 the return is in proper form no question of falsity can arise unless somebody raises the issue.
If it is raised, the allegations will be made in some other document by some other person and the charges so preferred will be enquired into by the Tribunal.
If the return is not in proper form, disqualification ensues but the Election Commission is invested with the power to remove the disqualification under Rule 114(6).
If it does, the position becomes the same as it would have been had the Election Commission decided that the form was proper in the first instance.
That would still leave the question of falsity for determination by the Tribunal in cases where the issue is properly raised.
Mr. Chatterjee contended on behalf of the appellant that we were not concerned with the second return in this appeal and 0strongly protested against Mr. Pathak being allowed to argue this point.
But that has been the main bone of contention almost from the start.
When the election petition was filed, there was only one return to attack.
The second had not been put in.
Later, when it was put in, the contesting respondent, Manmohini, attacked, both and the appellant herself said that questions about the falsity of the return could not be gone into because of the Election Commission 's order removing the disqualification.
That argument applies as much to the second as to the first return and raises an issue about the respective jurisdictions of the Election Commission and the Election Tribunal on this point.
The Tribunal decided against the appellant on this point and held, as we do, that the Election Commission was not concerned with the issue of fact about the falsity of the return.
The appellant then filed a petition under article 226 to the High Court and questioned the Tribunal 's jurisdiction to enquire into the issue of falsity.
The High Court upheld the Tribunal 's decision and the appellant pursued the matter here both in her grounds of appeal and in her statement of the case.
She cannot at this stage ask us to leave 456 the matter open so that she can come here again and re agitate this question.
We accordingly overrule Mr. Chatterjee 's objection.
The next question argued was whether an Election Tribunal can enquire into a minor corrupt practice if it is of such a nature that, standing by itself, it could not have been made the basis of an election petition because it could not materially affect the result of the election.
We need not go into that because the question is purely academic in this case.
The allegation about the minor corrupt practice does not stand by itself.
There are also allegations about major corrupt practices which require investigation and the minor corrupt practices alleged are reasonably connected with them.
Section 143 of the Act is a complete answer to the question of the Tribunal 's jurisdiction on this point when it is properly seised of the trial of an election petition on other grounds.
Whether it could be properly seised of such a trial if this had been the only allegation, or if the minor corrupt practice alleged was not reasonably connected with the other allegations about major corrupt practices, does not therefore arise.
As the trial is proceeding on the other matters the Tribunal is bound under section 143, now that the issue has been raised, also to enquire into the question of the falsity of the return.
Without such an enquiry it cannot reach the finding which section 143 contemplates.
We need not look into the other sections which were touched upon in the arguments and in the Courts below because section 143 is clear and confers the requisite jurisdiction when a trial is properly in progress.
The appellant has failed on every question of substance that she raised.
There was some vagueness in the Election Tribunal 's order about which of the two returns formed the basis of the enquiry on this point but even if the Tribunal intended to treat the first return as the basis, that did not really affect the substance because exactly the same allegations are made about the second return and the issue of fact would therefore have to be tried in any event.
The appel 457 lant 's whole endeavour was to circumvent such an enquiry and oust the Tribunal 's jurisdiction.
In that she has failed, so she will pay the contesting respondent 's costs throughout.
The appeal fails and is dismissed with costs all through.
| IN-Abs | The provisions of the Representation of the People Act and the Rules framed thereunder assign distinct and different jurisdictions to the Election Commission and an Election Tribunal so far as a Return of election expenses is concerned.
Where there are allegations of major corrupt practices and a Tribunal constituted is in lawful seisin of the dispute, section 143 of the Act gives it the sole jurisdiction and makes it incumbent on it to inquire into the falsity of any particulars mentioned in the return where such falsity is alleged and brought into issue and is reasonably connected with the major corrupt practices.
What the Election Commission has to do under Rule 114(4) is to satisfy itself that the return is in the prescribed form.
It is no part of its function to inquire into the correctness of any particulars mentioned therein.
That question can only arise when some one raises a dispute and brings the matter into issue.
Consequently, in a case where, as in the present, the Election Commission removed the disqualification it had imposed on the returned candidate for lodging a defective return of election expenses on the lodging of a fresh return; Held, that the decision of the Election Commission removing the disqualification attaching to the first return in no way precluded the Tribunal from inquiring into the falsity of the particulars in the second return although they were identical with those challenged in the first return; that the removal of the disqualification only meant that the accepted return was the only valid return, being the first to be correct in form, and the Tribunal had only that return before it, 451
|
Civil Appeals Nos.
2221 2225, and 2524 of 1972.
From the Judgment and orders dated the 18 11 71, 29 3 1972 and 5 2 1972 of the Delhi High Court in L.P. No. 53/71 and Civil Writ Petitions Nos. 612, 640, 643 and 649/71, 281/72 and 1052 of 1971 respectively.
A.K. Sen, Sarjoo Prasad Balram Senghal and C. P. Lal for the Appellants in CAs 2221 2225/72 B. Sen, S.P. Nayar and M.N. Shroff for Respondents 2 3, (In CAs.
2221 2225/72) for Respondents 1 4 in.C.A. 1801).
S.V. Gupte, Mrs. Leila Sait and U. K. Kaithan for Interveners (In CAs.2221 2225/72) and Appellants (In CAs.2524/72).
M. C. Bhandare, Sardar Bahadur Saharya, B. N. Kirpal and V. B. Saharya for the Appellant in CA 1801/72.
The Judgment of the Court was delivered by SARKARIA, J.
Whether the Notification No. SRO 2908, dated December 7, 1957 issued by the Central Government in purported exercise of its powers under section 2 of the Union Territories (Laws) , is ultra vires the Central Government is the principal question that arises in these appeals which will be disposed of by a common judgment.
The question has arisen in these circumstances: Section 2 of the Part States (Laws) Act, 1950, empowered the Central Government to extend by notification in the official Gazette to any Part State, or to any part of such State, with such restrictions and modifications as it thinks fit, any enactment which is in force in a Part A State.
In exercise of this power, the Central Government by a Notification No. SRO 615 dated the 28th April 1951, extended to the then Part State of Delhi, the Bengal Finance (Sales Tax) Act, 1941 (for short, the Bengal Act), with, inter alia, these modifications: "In sub section (2) of Section 6, (a)(b) for the words "add to the Schedule", the words "add to or omit or otherwise amend the Schedule" shall be substituted " For the Schedule of the Bengal Act, this Notification substituted a modified Schedule of goods exempted under section 6.
The relevant items in the modified Schedule were as follows: "8.Fruits, fresh and dried (except when sold in sealed containers) Pepper, tamarind and chillies.Turmeric.
Cloth of such description as may from time to time be specified by notification in the Gazette costing less per yard than Rs. 3/ or such other sum as may be specified.
21A. Knitting wool.
" Section 6 of the Bengal Act after its extension to Delhi, as modified by the said Notification, reads thus : "6(1)No tax shall be payable under this Act on the sale of goods specified in the first column of the Schedule subject to the conditions and exceptions if any set out in the corresponding entry in the second column thereof.
(2) The State Government after giving by Notification in the official Gazette not less than 3 months ' notice of its intention so to do may by like notification 790 add to or omit from or otherwise amend the Schedule and thereupon the Schedule shall be deemed to be amended accordingly." (emphasis supplied)
By a Notification, dated 1 1 1951, in sub section (1) of section 6, the words "the first column of" were omitted and for the words "in the corresponding entry in the second column thereof" the word "therein" was substituted.
By a notification country liquor was included in the Schedule as item No. 40 of exempted goods with effect from 19 1 1952.
On 1 11 1956, as a result of the coming into force of the States Reorganization Act, 1956, and the Constitution (Seventh Amendment) Act, 1956, Part States were abolished.
Part State of Delhi became a Union Territory and the Delhi Legislative Assembly, was also abolished.
In 1956, Part State (Laws) Act, 1950 (hereinafter referred to as Laws Act) also became me , with necessary adaptations.
On 1 12 1956, Parliament passed the Bengal Finance (Sales Tax) (Delhi Amendment) Act 1956 which introduced amendments in different sections of the Bengal Act as applicable to Delhi.
It made only two changes in section 6 Firstly, the word 'Schedule ', wherever it occurred, was replaced by the words "Second Schedule".
Secondly the words "Central Government" were substituted for the words "State Government".
On December 7, 1951, in the Gazette of India Extraordinary there appeared a notifications which reads as below: "S.R.O. 3908 In exercise of the powers conferred by section 2 of the (30 of 1950), the Central Government hereby makes the following amendment in the notification of the Government of India in the Ministry of Home Affairs No. S.R.O. 615, dated the 28th April, 1951 (extending to the Union Territory of Delhi and the Bengal Finance (Sales Tax) Act, 1941, subject to certain modifications) namely : In the said notification, in the modifications to the Bengal Act aforesaid, in item 6 (relating to sub section (2) of section (6), after sub item (a), the following sub item shall be inserted, namely : "(aa) for the words "not less than three months ' notice," the words "such previous notice as it considers reasonable" shall be substituted".
The vires of this notification dated 7 12 1957, is me subject of primary challenge in these appeals (hereinafter it will be referred to as the impugned notification).
791 Item 17 in the Second Schedule of the Bengal Act was amended with effect from December 14, 1957 by Notification No. SRO 3958, as under : "17. All varieties of cotton, woollen, rayon or artificial silk fabric but not including real silk fabrics".
"Conditions subject to which tax shall not be payable: In respect of tobacco cotton fabrics, rayon or artificial silk fabrics and woollen fabrics as defined in item 9, 12, 12A, 12B at the First Schedule to the (I of 1944) included in entries (a) and (c) above, no tax under the Bengal Finance (Sales Tax) Act 1941, shall be payable in the Union Territory of Delhi only if additional duties of excise have been levied on them under the Additional Duties of Excise (Goods of Special Importance) Act 1957".
The aforesaid condition was withdrawn by Notification No. GSR 203, dated 1 4 1958.
By Notification No. GSR 202, dated 1 4 1958, the Central Government withdrew the exemption of country liquor from tax by omitting item No. 40 from the Second Schedule.
By Notification No. GSR 1076 dated 19 9 1959, the Central Government withdrew the exemption from tax of Items, 8, 11, 14 and 21A by omitting them from the Second Schedule with effect from 1 10 1959.
On 1 10 1959, the Bengal (Sales Tax Delhi Amendment) Act, 1959 (Act XX of 1959) came into force whereby Parliament made some amendments in different sections of the Bengal Act but left section 6 untouched.
By a Notification No. GSR 964 dated 16 6 1966, notice was given that item 17 of the Second Schedule would be substituted with effect from 1 7 1966, as follows: "Item 17 All varieties, cotton, woollen, nylon, rayon, pure silk or artificial silk fabrics but excluding Durries, Druggets and carpets".
The proposed amendment was given effect to from 1 7 1966, by Notification No. GSR 1061 dated 29 6 66.
One result of this amendment was that exemption of Durries from tax was withdrawn, while, such exemption was among others, extended to 'pure silk '.
By a Notification GSR 1038, dated 14 7 1970, notice was given that item 17 in the Second Schedule would be substituted with effect from 1 8 1970, as follows: "17.All varieties of cotton fabrics, rayon, or artificial silk fabrics and woollen fabrics but not including Durries, Druggets and carpets".
792 Such substitution of item 17 was made with effect from 1 8 70 by Notification GSR 1119 dated 31 7 1970.
one result of this notification was that the exemption of 'pure silk ' from tax was withdrawn.
The appellants in Civil Appeal No. 2221 of 1972 are dealers in durries.
They feel aggrieved by the Notification GSR 1061 dated 29 6 1966 whereby exemption of Durries from sales tax was withdrawn.
The appellants in Civil Appeals 2222, 2223 and 2225 of 1972 deal in knitting wool.
Their cause of action arose when exemption of knitting wool was withdrawn by Notification dated 19 9 1959, w.e.f. 1 10 1959.
The appellants in Civil Appeals 2524 of 1972 deal inter alia in pure silk.
They are aggrieved by Notification, dated 31 7 1970 by which exemption of 'pure silk ' was withdrawn w.e.f. 1 8 1970.
The appellants in Civil Appeal No. 2224 of 1972 is a Kiryana dealer.
He feels aggrieved by the Notification dated 19 9 1959 whereby items 8, 11 and 14 were deleted from the Second Schedule with effect from 1 10 1959.
The appellants in Civil Appeal No. 1801 of 1972 are licensed vendors of country liquor.
They feel adversely affected by Notification GSR 1076, dated 19 9 1959 whereby exemption of country liquor from tax was withdrawn with effect from 1 10 1959.
Several writ petitions were filed in the High Court to question the validity of the Government action withdrawing the exemptions with notice far less than three months.
A learned Judge of the High Court allowed eight of these petitions by a common judgment recorded in Civil Writ 574 D of 1966, Lachmi Narain vs Union of India and others.
Against that judgment, the Revenue carried appeals under Clause 10 of the. , to a Bench of the High Court.
In the meanwhile more writ petitions (C. Ws.593 to 652, 792 to 806 of 1971) were instituted in which the same question was involved.
The Division Bench, by a common judgment, allowed the appeals and dismissed the writ petitions.
The writ petitioners have now come in appeal to this Court on the basis of a certificate granted by the High Court under Article 133 (1) (a) and (c) of the Constitution.
In the High Court the validity of the withdrawal of the exemptions was challenged on these grounds : (I) The power given by section 2 of the Laws Act to the Central Government to extend enactments in force in a State to a Union Territory with such restrictions and modifications as it thinks fit, could be exercised only to make such modifications in the enactment as were necessary in view of the peculiar local conditions.
The modification in section 6(2) of the BengaI Act made by SRO 3908, dated 793 7 10 1957, was not necessitated by this reason.
It was therefore, ultra vires section 2 of the Laws Act; (2) Such a modification could be made only once when the Bengal Act was extended to Delhi in 1951.
No modification could be made after such extension.
(3) The modification could not change the policy of the legislature reflected in the Bengal Act.
The impugned modification was contrary to it, and (4) The modifications giving notice to withdraw the exemptions and the notifications issued pursuant thereto withdrawing the exemptions from sales tax with respect to Durries, Ghee, (and other items relevant to these petitions) were void as the statutory notice of not less than three months as required by section 6(2) prior to its modification by the impugned notification of 7th December, 1957 had not been given.
Finding on all the four grounds in favour of the writ petitioners, lie learned Single Judge declared "that the purported modification of section 6(2) of the Bengal Finance (Sales Tax) Act 1941 by the Government of India 's notification No. SRO 3908, dated 7th December, 1957, was ineffective and section 6(2) continues to be the same as before as if it was not so modified at all."
In consequence he quashed the Government notifications GSR 964, dated 16 6 1966 and GSR 1061 dated 29 6 1966 because they were not in compliance with the requirement of section 6(2) of the Bengal Act.
The contentions canvassed before the learned Single Judge were repeated before the appellate Bench of the High Court.
The Bench did not pointedly examine the scope of the power of modification given to the Central Government by section 2 of the Laws Act with specific reference to the purpose for which it was conferred and its precise limitations.
It did not squarely dispel the reasoning of the learned Single Judge that the power of modification is an integral part of the power of extension and "cannot therefore be exercised except for the purpose of the extension".
It refused to accept that reasoning with the summary remark "from the extracts quoted by the learned Single Judge from the judgment of the Supreme Court in Re: Delhi Laws Act and from the Judgment in Rajnarain Singh vs The Chairman Patna Administration Committee Patna and Anr, the principle deduced by the learned Judge does not appear to follow.
We are therefore not inclined, as at present advised to support the above observations".
The Bench however hastened to add : "However, since the matter was not argued at great length and the appellants ' Counsel rested his submissions on the other aspects of the case, we would not like to express 794 any definite opinion on the question as to whether the power of making any modifications or restrictions in the Act can only be exercised at the time of extending the Act and that it cannot be done subsequently by the Central Government in exercise of its power."
" Seeking support from the observations of this Court in Raza Buland Sugar Co. Ltd. vs Municipal Board, Rampur,(1) the Bench held that what is mandatory in section 6(2) is the requirement as to the giving of reasonable notice of the Government 's intention t(! amend the second Schedule, for the information of the public, and that "no special significance or sanctity is attached to the span of time of three months provided in subsection (2) of section 6."
The Bench found that since the withdrawals of the exemptions in question, had been made after reasonable notice, the same were not invalid.
However, the main ground on which the decision of the Bench rests is that the infirmity, if any, in the impugned notification dated 7 12 1957, had been cured and rectified when "Parliament while enacting the Amendment Act, 1959 (Act No. '70 of 1959) put its seal of approval to the curtailed period of notice.
As such the curtailed period of notice shall be taken to have been provided by Parliament on the ratio of Supreme Court 's decision in Venkatrao Esajirao limberkar 's case".
Apart from the grounds taken in their writ petitions, the learned Counsel for the appellants have tried to raise before us another ground under the garb of what they styled.
as merely an additional argument".
They now seek to challenge the vires of the Notification SRO 615, dated the 28th April, 1951 in so far as it relates to the insertion in sub section (2) of section 6 of that Act, between the words "add to" and "the Schedule", of the words "or omit or otherwise amend".
It is argued that this insertion was beyond the power of modification conferred on the Central Government by section 2 of the Laws Act.
The point sought to be made out is that if the insertion made by the Notification dated 28 4 1951, in sec.6(2) was ineffective and non est in the eye of law, the Central Government would have no power to "omit" anything from the exempted goods itemised in the Schedule.
It is argued that under section 6(2) sans this insertion, the Central Government was empowered only to "add to" and not "omit" from the exempted items enumerated in the Schedule, and consequently, the withdrawal of the exemptions in question was ultra vires the Central Government.
The entertainment of this Plea at this stage is stoutly opposed by Shri B. Sen, learned Counsel for the Revenue.
We are not inclined to permit the appellants to add to the list of impugned Notifications, now in section appeal.
In their writ petitions, the appellants did not challenge the validity of the Notification dated 28 4 51.
They never raised this point before the learned 795 Single Judge.
Of course, before the appellate Bench, an argument was addressed on this point, but it does not appear to have been pressed.
The Bench noted: "In the present appeal, the Bengal Act as extended by SRO 615, dated the 28th April 1951, did not suffer from any infirmity.
It is conceded by the learned Counsel for the respondent that the Central Government at the time it extended e the Bengal Act, was competent to introduce such modification and restrictions as it thought fit.
The certificate under article 133 of the Constitution was neither sought, nor granted on any ground touching the validity of the Notification, dated 28 4 1951.
In the face of all this, it is now too late for the appellants to commit a volte face.
Accordingly, we decline to entertain this new ground of challenge.
The learned Counsel for the parties have, more or less, reiterated the same contentions which they had advanced in the High Court.
On behalf of the appellants, it is contended that the power of modification conferred on the Central Government by section 2 of the Laws Act is not an unfettered power of delegated legislation but a subsidiary power conferred for the limited purpose of extension and application to a Union Territory, an enactment in force in a State.
It is maintained that only such modifications are permissible in the exercise of that power which are necessary to adapt and adjust such enactment to local conditions.
According to Shri Ashok Sen, the power given by section 2 is a power of conditional legislation which is different from the power of delegated legislation.
It is submitted that it is not a recurring power; it exhausts itself on extension, and in no case this power can be used to change the basic scheme and structure of the enactment or the legislative policy ingrained in it.
The submission is that the impugned notification, dated 7 12 1957, is bad because it has been issued more than 61 years after the extension of Bengal Act, and it attempts to change the re rquirement of section 6(2) as to "not less than three months notice" which P is the essence of the whole provision.
Reference has been made to this Court 's opinion in Re: Delhi Laws Act (supra) and the decision in Raj Narain Singh case (supra).
Shri Ashok Sen further submits that by the amending Act 20 of 1959, parliament did not put its seal of approval on the impugned notification or the changes sought to be made by it in section 6 of the Bengal Act.
It is stressed that the amending Act of 1959, did not touch section 6 at all and therefore it could not be said with any stretch of imagination, that Parliament had referentially or impliedly incorporated or approved the purported change made by the impugned notification, in the Bengal Act.
As against the above, Shri B. Sen, the learned Counsel for the Revenue submits that the impugned notification does not change the essential structure or the policy embodied in section 6(2) of the Bengal Act.
796 According to Counsel, the policy underlying section 6(2) is that reasonable notice of the Government 's intention to add to or omit anything from the Second Schedule must be given by publication in the official Gazette.
It is maintained that the requirement as to "not less than three months ' notice" in the section was not a matter of policy but one of detail or expedience; it was only directory, and the modification made by the impugned notification did not go beyond adjusting and adapting it to the local conditions of Delhi.
Bengal, it is pointed out, is a big, far flung State while the Territory of Delhi is a small, compact area and therefore, it would not be necessary or unreasonable to give a notice of less than three months for every amendment of the Schedule.
Reliance has been placed on this Court 's dictum in Raza Buland Sugar Co. 's case (supra).
It is argued that the power to add or omit from the Second Schedule conferred on the Government is in consonance with the accepted practice of the Legislature; that it is usual for the legislature to leave a discretion to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be levied or rates at which it is to be charged in respect of different classes of goods and the like.
Reference has been made to the observations of this Court in Pt.Benarsi Das Bhanot vs State of Madhya Pradesh in the context of section 6(2) of the Central Provinces and Berar Sales Tax Act 1947.
Shri B. Sen further contends that the power of modification given by section 2 of the Laws Act, does not exhaust itself on first exercise; it can be exercised even subsequently if through oversight or otherwise, at the time of extension of the enactment the Central Government fails to adapt or modify certain provisions of the extended enactment for bringing it in accord with local conditions.
In this connection support has been sought from the observations of Fazal Ali J. at p. 850 of the Report in Re: Delhi Laws Act (supra).
Our attention has also been invited to section 21 of the General Clauses Act which according to Counsel, gives power to the Central Government to add to, amend, vary or rescind any notification etc if the power to do so does not run counter to the policy of the legislature or affect any change in its essential features.
Learned Counsel has further tried to support the reasoning of the appellate Bench of the High Court, that whatever infirmity may have existed in the impugned notification and the modification made there by in section 6(2), it was rectified and cured by Parliament when it passed the Amendment Act 20 of 1959.
It is urged that the Bengal Act together with the modifications made by notifications, dated 28 4 51, and 7 12 1957, must have been before Parliament when it considered and passed the Amendment Act of 1959.
Our attention has been invited to its preamble which is to the effect: "An Act further to amend the Bengal Finance (Sales Tax) Act, 1941, as in force in the Union Territory of Delhi," and also to the words "as in forcer in the Union Territory of Delhi" in section 2 of the amending Act.
:Reference has been made to this Court 's decisions in Venkatrao Esajirao 's case (supra), and Gwalior Rayon Silk Mfg.(Wvg.) Co. Ltd. The Assistant Commissioner of Sales tax and ors.
797 An alternative argument advanced by Shri B. Sen is that if in section 6(2) the requirement as to "not less than three months ' notice" was mandatory and a matter of legislative policy, then the exemptions from tax granted to Durries, pure silk etc.after the issue o the impugned notification must be treated non est and void ab initio, inasmuch as the amendments of the Second Schedule whereby those exemptions were granted, were made without complying with the requirement of not less than three months ' notice".
It is argued that if this requirement was a sine qua non for amendment of the Second Schedule, it could not be treated mandatory in one situation and directory in another.
If it was mandatory then compliance with it would be absolutely necessary both for granting an exemption and withdrawing an exemption from tax.
In this view of the matter, according to Shri B. Sen, the withdrawal of the exemption through the impugned notification was a mere formality; the notifications simply declared the withdrawal of something which did not exist in the eye of law.
Appellants cannot therefore have any cause of grievance if the invalid and still born exemptions were withdrawn by the questioned notifications.
In reply to this last argument, learned Counsel for the appellants submit that this ground of defence was not pleaded by the Revenue in its affidavit before the learned Single Judge.
This, according to the Counsel, was a question of fact which required evidence for its determination, and was therefore required to be pleaded.
Since the Respondents did not do so, they should not have been allowed to take it for the first time at the time of arguments.
Even otherwise proceeds the argument the Respondents are not competent to take this stand which is violative of the basic canon of natural justice, according to which no party can be allowed to take advantage of its own wrong.
It is stressed that the object of the requirement of not less than three months ' notice, was to afford an opportunity to persons likely to be adversely affected to raise objections against the proposed withdrawal or curtailment of an exemption from tax.
That being the case, only the persons aggrieved could have the necessary locus standi to complain of a non compliance with this requirement.
In Re: Delhi Laws (supra) this Court inter alia examined the constitutional validity of section 2 of the Laws Act in the light of general principles relating to the nature, scope and limits of delegated legislation.
Section 2 as it then stood, was as follows: "The Central Government may, by notification in the official Gazette, extend to any Part State (other than Coorg and the Andaman and Nicobar Islands) or to any part of such State with such restrictions and modifications as it thinks fit any enactment which is in force in a Part A State at the date of the notification and provision may be made in any enactment so extended for the repeal or amendments of any corresponding law (other than a Central Act) which is for the time being applicable to that Part State.
" The Court by a majority held that the first part of this section which empowers the Central Government to extend to any Part State or to any part of such State with such modifications and restrictions as it 798 thinks fit any enactment which is in force in a Part A State, is intra vires, and that the latter part of this section which empowers the Central Government to make provision in any enactment extended to a Part State, for repeal or amendment of any law (other than a Central Act) which is for the time being applicable to that Part State, is ultra vires.
Consequent upon this opinion, the latter part of the section was deleted by section 3 of the Repealing and Amending Act, 195 (Act XLVIlI of 1952) with effect from 2 8 1951.
The majority opinion in upholding the validity of the first portion of section 2 of the Laws Act drew a good deal from the observations of the Privy Council in Queen vs Burah wherein it was said: "If what has been done is legislation within the general scope of the affirmative words which give the power and if it violates no express condition or restrictions by which that power is limited. it is not for any court of justice to enquire further or to enlarge constructively those conditions and restrictions".
"Where plenary powers of legislation exist as to particular subjects, whether in an Imperial or in a Provincial Legislature, they may (in their Lordships judgment) be well exercised, either absolutely or conditionally.
Legislation conditional on the use of particular powers, or on the exercise of a limited discretion, entrusted by the legislature to persons in whom it places confidence, is no uncommon thing; and, in any circumstances it may be highly convenient." (emphasis supplies)
Before proceeding further, it will be proper to say a few words in regard to the argument that the power conferred by section 2 of the Laws Act is a power of conditional legislation and not a power of delegated legislation.
In our opinion, no useful purpose will be served to pursue this line of argument because the distinction propounded between the two categories of legislative powers makes no difference, in principle.
In either case, the person to whom the power is entrusted can do nothing beyond the limits which circumscribe the power; he has to act to use the words of Lord Selborne "within the general scope of the affirmative words which give the power" and without violating any "express conditions or restrictions by which that power is limited".
There is no magic in a name.
Whether you call it the power of "conditional legislation" as Privy Council called it in Burah 's case (supra) or 'ancillary legislation ' as the Federal Court termed it in Choitram vs Commissioner of Income tax, Bihar or 'subsidiary legislation ' as Kania C.J. styled, it or whether you camouflage it under the veiling name of 'administrative or quasi legislative power ' as Professor Cushman and other authorities have done it necessary for 799 bringing into operation and effect an enactment, the fact remains that it has a content, howsoever small and restricted of the law making power itself.
There is ample authority in support of the proposition that the power to extend and carry into operation an enactment with necessary modifications and adaptations is in truth and reality in the nature of a power of delegated legislation.
In Re: Delhi Laws Act (supra) S.R. Das J. said that on strict analysis it was "nothing but a delegation of a fractional legislative power".
Anglin J. in Grays case regarded this what is called conditional legislation ' as "a very common instance of limited delegation.
More or less to the same effect is the view taken by Evatt J. of Australia in Dignams case.
Prof. Kennedy (vide his treatise 'Constitution of Canada ', 2nd Edn.p. 463), is also of opinion that 'conditional legislation ' is "a form of delegation".
We do not want to multiply authorities nor wish to carry this academic discussion to a final conclusion because it is not necessary for solution of the problem in hand.
In the instant case, the precise question with which we are faced is whether the purported substitution of the words "such previous notice as is considers reasonable" for the words "not less than three months notice" in section 6(2) by the impugned notification dated 7th December, 1957, was in excess of the power of 'modification ' conferred on the Central Government by section 2 of the Laws Act.
This question has to be answered in the light of the principles enunciated by this Court in Re: Delhi Laws Act relating to the nature and scope of this power.
Out of the majority who upheld the validity of this provision of section 2 of the Laws Act, with which we are concerned, Fazal Ali J. explained the scope of the words "much modifications as it thinks fit" in section 2, thus: "These are not unfamiliar words and they are often used by careful draftsmen to enable laws which are applicable to one place or object to be so adapted as to apply to another.
The power of introducing necessary restrictions and modifications is incidental to the power to apply or adapt the law, and in the context in which the provision as to modification occurs it cannot bear the sinister sense attributed to it.
The modifications are to be made within the framework of the Act and they cannot be such as to affect its identity or structure or the essential purposes to be served by it.
The power to modify certainly involves a discretion to make suitable changes, but it would be useless to give an authority the power to adapt a law without giving it the power to make suitable changes."
Vivian Bose J. also observed in a similar strain, at p. 1124; 800 "The power to "restrict and modify" does not import the power to make essential changes.
It is confined to alterations of a minor character such as are necessary to make an Act intended for one area applicable to another and to bring it into harmony with laws already in being in the State, or to delete portions which are meant solely for another area.
To alter the essential character of an Act or to change it in material particulars is to legislate, and that, namely, the power to legislate, all authorities are agreed, cannot be delegated by a legislature which is not unfettered."
Mukherjea J. was of the view that the "essential legislative function" which consists in the determination or choosing of the legislative policy and of formally enacting that policy into a "binding rule of conduct" cannot be delegated.
Dealing with the construction of the words "restrictions" and "modification" in the Laws Act, the learned Judge said" at pages 1004 10O6: "The word "restrictions" . connotes limitation imposed on a particular provision so as to restrain its application or limit its scope, it does not by any means involve any change in the principle.
It seems to me that in the context and used alongwith the word "restriction" the word " 'modification" has been employed also in a cognate sense, and it does not involve any material or substantial alteration.
The dictionary meaning of the expression "to modify" is to "tone down" or to "soften true rigidity, of the thing" or "to make partial changes without any radical alteration".
It would be quite reasonable to hold that the word "modification" in section 7 of the Delhi Laws Act (which is almost identical with the present section 2, Laws Act) means and signifies changes of such character as are necessary to make the statute which is sought to be extended able to the local conditions of the province.
I do not think that the executive Government is entitled to change the whole nature or policy underlying any particular Act or to take different portions from different statutes and prepare what has been described before us as "amalgam" of several laws.
these things would be beyond the scope of the section itself." (emphasis supplied).
S.R. Das J. (as he then was) delineated the scope of the power of "modification" given under section 7 of the (for short the Delhi Act) at p. 1089 as follows: "It may well be argued that the intention of section 7 of the was that the permissible modifications were to be such as would, after modification, leave the general character of the enactment intact.
One of the meanings of the word "modify" is given in the oxford Dictionary Vol.I, page 1269 as "to alter without radical transformation".
If this meaning is given to the word "modification" in section 7 of the then the modifications contemplated 801 thereby were nothing more than adaptations which were included in the expressions mutatis mutandis and the "restrictions, limitations or proviso" mentioned in the several instances of conditional legislation referred to by the Privy Council (in Burah 's case).
It is to be noted that the language of s.7 of the Delhi Act was substantially the same as that of the first portion of section 2 of the Part C State Laws Act, as it then stood.
What Das J. said about the scope of "restrictions and modifications" in the context of section 7 of the Delhi Act substantially applies to the ambit and meaning of these words occurring in section 2 of the Laws Act.
Again, in Rajnarainsingh 's case (supra), Vivian Bose J. speaking for the Court, summed up the majority view in regard to the nature and scope of delegated legislation in Re: Delhi Laws (supra), thus: "In our opinion the majority view was that an executive authority can be authorised to modify either existing or future laws but not in any essential feature.
Exactly what constitutes an essential feature cannot be enunciated in general terms, and there was some divergence of view about this in the former case, but this much is clear from the opinions set out above: it cannot include a change of policy".
Bearing in mind the principles and the scope and meaning of the expression "restrictions and modifications" explained in , let us now have a close look at section 2.
It will be clear that the primary power bestowed by the section on the Central Government, is one of extension, that is, bringing into operation and effect, in a Union Territory, an enactment already in force in a State.
The discretion conferred by the Section to make 'restrictions and modifications ' in the enactment sought to be extended, is not a separate and independent power.
It is an integral constituent of the powers of extension.
It cannot be exercised apart from the power of extension.
This is indubitably clear from the preposition "with" which immediately precedes the phrase "such restrictions and modifications" and conjoins it to the principal clause of the section which gives the power of extension.
According to the Shorter Oxford Dictionary, one meaning of the word "with", (which accords here with the context), is "part of the same whole".
The power given by section 2 exhausts itself on extension of the enactment; it cannot be exercised repeatedly or subsequently to such extension.
It can be exercised only once, simultaneously with the extension of the enactment.
This is one dimension of the statutory limits which circumscribe the power.
The second is that the power cannot be used for a purpose other than that of extension.
In the exercise of this power, only such "restrictions and modifications" can be validly engrafted in the enactment sought to be extended, which are necessary to bring it into operation and effect in the Union Territory.
"Modifications" which are not necessary for, or ancillary and subservient to the purpose 802 of extension, are not permissible.
And, only such "modifications" can be legitimately necessary for such purpose as are required to adjust, adapt and make the enactment suitable to the peculiar local conditions of the Union Territory for carrying it into operation and effect.
In the context of the section, the words "restrictions and modifications" do not cover such alterations as involve a change in any essential feature, of the enactment or the legislative policy built into it.
This is the third dimension of the limits that circumscribe the power.
It is true that the word "such restrictions and modifications as it thinks fit", if construed literally and in isolation, appear to give unfettered power of amending and modifying the enactment sought to be extended.
Such a wide construction must be eschewed lest the very validity of the section becomes vulnerable on account of the vice of excessive delegation.
Moreover, such a construction would be repugnant to the context and the content of the section, read as a whole, and the statutory limits and conditions attaching to the exercise of the power.
We must, therefore, confine the scope of the words "restrictions and modifications" to alterations of such a character which keep the inbuilt policy, essence and substance of the enactment sought to be extended, intact, and introduce only such peripheral or insubstantial changes which are appropriate and necessary to adapt and adjust it to the local conditions of the Union Territory.
The impugned notification, dated 7 12 1957, transgresses the limits which circumscribe the scope and exercise of the power conferred by section 2 of the Laws Act, at least, in two respects.
Firstly, the power has not been exercised contemporaneously with the extension or for the purposes of the extension of the Bengal Act to Delhi.
The power given by section 2 of the Laws Act had exhausted itself when the Bengal Act was extended, with some alterations, to Delhi by Notification dated 28 4 1951.
The impugned notification has been issued on 7 12 1957, more than 6 1/2 years after the extension.
There is nothing in the opinion of this Court rendered in Re: (supra) to support Mr. B. Sen 's contention that the power given by section 2 could be validly exercised within one year after the extension.
What appears in the opinion of Fazl Ali J. at page 850, is merely a quotation from the report of the Committee on Minister 's Powers which considered the propriety of the legislative practice of inserting a "Removal of Difficulty Clause" in Acts of British Parliament, empowering the executive to modify the Act itself so far as necessary for bringing it into operation.
This device was adversely commented upon.
While some critics conceded that this device is "partly a draftsman 's insurance policy, in case he has overlooked something" (e.g. Sir Thomas Carr, page 44 of his book "Concerning English Administrative Law"), others frowned upon it, and nicknamed it as "Henry VIII Clause" after the British Monarch who was a notorious personification of absolute despotism.
It was in this perspective that the Committee on Minister 's Powers examined this practice and recommended: 803 ". first, that the adoption of such a clause ought on each occasion when it is, on the initiative of the Minister in charge of the Bill, proposed to Parliament to be justified by him upto the essential.
It can only be essential for the limited purpose of bringing an Act into operation and it should accordingly be in most precise language restricted to those purely machinery arrangements vitally requisite for that purpose; and the clause should always contain a maximum time limit of one year after which the power should lapse".
It may be seen that the time limit of one year within which the power under a Henry VIII Clause should be exercisable, was only a recommendation, and is not an inherent attribute of such power.
In one sense, the power of extension cum modification given under section 2 of the Laws Act and the power of modification and adaptation conferred under a usual 'Henry VIII Clause, ' are kindred powers of fractional legislation, delegated by the legislature within narrow circumscribed limits.
But there is one significant difference between the two.
While the power under section 2 can be exercised only once when the Act is extended, that under a 'Henry VIII Clause ' can be invoked, if there is nothing to the contrary in the clause more than once, on the arising of a difficulty when the Act is operative.
That is to say, the power under such a Clause can be exercised whenever a difficulty arises in the working of the Act after its enforcement, subject of course to the time limit, if any, for its exercise specified in the statute.
Thus, anything said in Re: (supra), in regard to the time limit for the exercise of power under a 'Henry VIII Clause ', does not hold good in the case of the power given by section 2 of the Laws Act.
Fazl Ali J., did not say anything indicating that the power in question can be exercised within one year of the extension.
On the contrary, the learned Judge expressed in unequivocal terms, at page 849: "Once the Act became operative any defect in its provision cannot be removed until amending legislation is passed." Secondly, the alteration sought to be introduced by this Notification (7 12 1957) in section 6(2), goes beyond the scope of the 'restrictions and modifications ' permissible under section 2 of the Laws Act; it purports to change the essential features of sub section
(2) of section 6.
and the legislative policy inherent therein.
Section 6(2), as it stood immediately before the impugned notification, requires the State Government to give by Notification in the Official Gazette "not less than 3 months notice" of its intention to add to or omit from or otherwise amend the Second Schedule.
The primary key to the problem whether a statutory provision is mandatory or directory, is the intention of the law maker as expressed in the law, itself.
The reason behind the provision may be a further aid to the ascertainment of that intention.
If the legislative intent is expressed clearly and strongly in imperative words, such as the use of 'must ' instead of "shall", that will itself be sufficient to hold 804 the provision to be mandatory, and it will not be necessary to pursue the enquiry further.
If the provision is couched in prohibitive or negative language, it can rarely be directory, the use of peremptory language in a negative form is per se indicative of the intent that the provision is to be mandatory (Crawford, the Construction of Statutes pp.523 24).
Here the language of sub section (2) of section 6 is emphatically prohibitive, it commands the Government in unambiguous negative terms that the period of the requisite notice must not be less than three months.
In fixing this period of notice in mandatory terms, the legislature had, it seems taken into consideration several factors.
According to the scheme of the Bengal Act, the tax is quantified and assessed on the quarterly turnover.
The period of not less than three months notice conforms to that scheme and is intended to ensure that imposition of a new burden or exemption from tax causes least dislocation and inconvenience to the dealer in collecting the tax for the Government, keeping accounts and filing a proper return, and to the Revenue in assessing and collecting the same.
Another object of this provision is that the public at large and the purchasers on whom the incidence of the tax really falls, should have adequate notice of taxable items.
The third object seems to be that the dealers and others likely to be affected by an amendment of the Second Schedule may get sufficient time and opportunity for making representations, objections or suggestions in respect of the intended amendment.
The dealers have also been ensured adequate time to arrange their sales adjust their affairs and to get themselves registered or get their licenses amended and brought in accord with the new imposition or exemption.
Taking into consideration all these matters, the legislature has in its judgment solemnly incorporated in the statute, fixed the period of the requisite notice as "not less than three months" and willed this obligation to be absolute.
The span of notice was thus the essence of the legislative mandate.
The necessity of notice and the span of notice both are integral to the scheme of the provision.
The sub section cannot therefore be split up into essential and non essential components, the whole of it being mandatory.
The rule in Raza Buland Sugar Co. 's case (supra) has therefore no application.
Thus section 6(2) embodies a determination of legislative policy and its formulation as an absolute rule of conduct which could be diluted, changed or amended only by the legislature in the exercise of its essential legislative function which could not, as held in Re: (supra) and Rajnarainsingh 's case (supra) be delegated to the Government.
For these reasons we are of opinion that the learned single Judge of the High Court was right in holding that the impugned notification was outside the authority of the Central Government as a delegate under section 2 of the Laws Act.
Before proceeding further, we may mention here in passing that the point for decision in Benarsi Das Bhanot 's case (supra) relied on by the Division Bench of the High Court, was different from the one 805 before us.
There, the constitutional validity of section 6(2) of the Central Provinces and Berar Sales Tax Act, 1947, was questioned on the ground of excessive delegation.
In the instant case the validity of section 6(2) of the Bengal Act, as such is not being impeached.
There is yet another facet of the matter.
By the impugned notification, the Central Government did not directly seek to amend section 6(2).
Perhaps it was not sure of its competence to do so more than 6 1/2 years after the extension of Bengal Act to Delhi.
It therefore chose to amend section 6(2) indirectly through the amendment of its earlier notification dated 28 4 51, which was only a vehicle or instrument meant for extension of the Bengal Act to Delhi.
On such extension, the notification had exhausted its purpose and had spent its force.
It had lost its utility altogether as an instrument for modification of the Bengal Act.
Therefore, the issue of the impugned notification which purported to amend section 6(2) through the medium of a "dead" notification, was an exercise in futility.
In any case, an amendment which was not directly permissible could not be indirectly smuggled in through the back door.
We now turn to the main ground on which the judgment of the appellate Bench of the High Court rests.
The question is, was the invalidity from which the impugned notification, dated 7 12 1957, suffered cured by the Amendment Act of 1959 ? The Bench seems to think that by passing this Amendment Act, Parliament had put its seal of approval on the Bengal Act as it stood extended and amended by the Notifications of 1957 and 1957.
We find no basis for this surmise.
This Amendment Act leaves section 6(2) untouched; it does not even indirectly, refer to the impugned notification or the amendment purportedly made by it in section 6(2).
Nor does it re enact or validate what was sought to be achieved by the impugned Notification.
No indication of referential incorporation or validation of the impugned notification or the amendment sought to be made by it, is available either in the preamble or in any other provision of the Amendment Act.
In Krishna Chandra vs Union of India,(1) relied upon by the learned Counsel for the Respondents, the central issue for consideration was, whether R. 20(2) framed by the Bihar Government under section 15 of the and the second proviso to section 10(2) of the Bihar Land Reforms Act, 1950 were constitutionally valid.
By the combined operation of these statutory provisions, the petitioners therein were called upon to pay certain rent and royalties in respect of mining operations.
Those demands were challenged in Baijnath Kedia vs State of Bihar(2) wherein this Court held that the Bihar legislature had no jurisdiction to enact the second proviso to section 10(2) of the Bihar Act because section 15 of the Central Act, read with section 2 thereof, had appropriated the whole field relating to mining minerals for Parliamentary legislation.
The upshot of that decision was, that the action taken by the 806 Bihar Government in modifying the terms and conditions of the leases which were in existence anterior to the Rules and the levy sought to be made on the strength of the amended Bihar Act and Rule, were unsustainable.
Thereupon the State persuaded Parliament to enact the Validation Act of 1969 with a view to remove the road blocks which resulted in the decision in Kedia 's case (supra).
Section 2 of the Validation Act runs thus: "Validation of certain Bihar State laws and action taken and things done connected therewith.
(1) The laws specified in the Schedule shall be and shall be deemed always to have been, as valid as if the provisions contained therein had been enacted by Parliament.
(2) Notwithstanding any judgment, decree or order of any court, all actions taken, things done, rules made, notification issued or purported to have been taken, done, made or issued and rents or royalties realised under any such laws shall be deemed to have been validly taken, done, made, issued or realised, as the case may be, as if this section had been in force at all material times when such action was taken, things were done, rules were made, notifications were issued, or rents or royalties were realised, and no suit or other proceeding shall be maintained or continued in any court for the refund of rents or royalties realised under any such laws.
(3) For the removal of doubts, it is hereby declared that nothing in sub section (2) shall be construed as preventing any person from claiming refund of any rents or royalties paid by him in excess of the amount due from him under any such laws.
" The precise question before the Court was, whether a statute or a rule earlier declared by the Court to be unconstitutional or otherwise invalid can be retroactive through fresh validating legislation enacted by the competent legislature.
Answering this question in the affirmative, this Court, speaking through Krishna Iyer, J. observed: "where Parliament having power to enact on a topic actually legislates within its competence but, as an abbreviation of drafting, borrows into the statute by reference the words of a State Act not qua State Act but as a convenient shorthand, as against a longhand writing of all the sections into the Central Act, such legislation stands or falls on Parliament 's legislative power, vis a vis the subject viz., mines and minerals.
The distinction between the two legal lines may sometimes be fine but always is real.
807 If Parliament has the power to legislative on the topic, it can make an Act on the topic by any drafting means, including by referential legislation." "Taking a total view of the circumstances of the Validation Act Parliament did more than simply validate an invalid law passed by the Bihar Legislature but did reenact it with retrospective effect in its own right adding an amending Central Act to the statute book.
" The position in the instant case is entirely different.
Here, Parliament despite its presumed awareness of the impugned Notification, has said nothing in the Amending Act of 1959, indicating that it (Parliament) has by 'longhand ' or 'shorthand ' method incorporated, re enacted or validated the impugned notification or the amendment sought to be made thereby, while passing the Amendment Act, 1959.
The appellate Bench was therefore in error in holding that Parliament had validated or re enacted referentially with retrospective effect what was sought to be done by the impugned notification, when it passed the Amending Act, 1959.
The High Court has tried with the aid of this Court 's decision in Venkatrao vs State of Bombay (supra) to spell out the proposition that mere amendment of an Act by a competent legislature, amounts to re enactment of the parent Act.
We find nothing in this Court 's decision in Venkatrao 's case which warrants the enunciation of such a sweeping rule.
All that was decided in Venkatrao 's case was that the assent given by the President to the Amending Act would be deemed to be an assent accorded to the parent Act, also.
The decision in Venkatrao 's case therefore does not advance the case of Shri B. Sen. Shri B. Sen 's alternative argument that the notifications whereby the exemptions from tax have been withdrawn in regard to Durries, pure silk, country liquor etc.
are not assailable because those exemptions were earlier granted without giving three months ' notice, is manifestly unsustainable.
Firstly, so far as fruits, fresh and dried (item 8), Pepper, tamarind and chillies (item 11), Turmeric (item 14), ghee (item 16), and knitting wool, (item 21A) are concerned, they were exempted goods in the Schedule of the Bengal Act, as modified and extended by the Notification, dated 28 4 1951, to Delhi.
No question of giving notice for granting these exemptions therefore arose.
Secondly, the validity of the notifications whereby exemptions were granted to pure silk, liquor etc.after the extension of the Bengal Act to Delhi is not in issue.
This plea was not set up by the Respondents in their affidavits.
Whether or not notice for the requisite period was given before issuing the exemption notifications, was a question of fact depending on evidence.
Thirdly, to allow the Respondents to take their stand on such a plea would be violative of the fundamental principle of natural justice, according to which, a party cannot be allowed to take advantage of its own lapse or wrong.
The statute 808 has imposed a peremptory duty on the Government to issue notice of not less than three months, of its intention to amend the Second Schedule.
It therefore cannot be allowed to urge that since it had disobeyed this mandate on an earlier occasion when it granted the exemptions it can withdraw the exemptions in the same unlawful mode.
Two wrongs never make a right.
Nor could the Respondents derive any authority or validity from section 21 of the General Clauses Act, for the notifications withdrawing the exemptions.
The source from which the power to amend the Second Schedule, comes is section 6(2) of the Bengal Act and not section 21 of the General Clauses Act.
Section 21, as pointed out by this Court in Gopichand vs Delhi Administration(1) embodies only a rule of construction and the nature and extent of its application must be governed by the relevant statute which confers the power to issue the notification.
The power therefore had to be exercised within the limits circumscribed by section 6(2) and for the purpose for which it was conferred.
For all the foregoing reasons, we are of opinion that the impugned notification, dated 7 12 1957, purporting to substitute the words "such previous notice as it considers reasonable" for the words "not less than three months notice" in section 6(2) of the Bengal Act is beyond the powers of the Central Government, conferred on it by section 2 of the Laws Act.
In consequence, the notification dated 1 4 1958, 19 9 1959, 29 6 1966 and 31 7 1970 in so far as they withdrew the exemptions from tax in the case of Durries, pure silk, country liquor, kirayana articles etc.were withdrawn without complying with the mandatory requirement of not less than three months notice enjoined by section 6(2) of the Bengal Act, are also invalid and ineffective.
In the result we allow these appeals, set aside the judgment of the appellate Bench of the High Court and declare the Notification dated 7 12 1957, and the subsequent notifications in so far as they withdrew the exemptions from tax, mentioned above, to be unconstitutional.
In the circumstances of the case, we leave the parties to bear their own costs.
V.P.S. Appeals allowed.
| IN-Abs | Section 2 of the Part States (Laws) Act, 1950, empowered the Central Government to extend by notification in the official gazette, to any Part C State, or to any part of it, with such restrictions and modifications as it thinks fit, any enactment in force in a Part A State.
In 1951, the Central Government, in exercise of this power, extended by a Notification the Bengal Finance (Sales Tax) Act, 1941, to the then Part State of Delhi with certain modifications in section 6.
The section, after such extension with modifications, provided: 6(1) No tax shall be payable under this Act on the sale of goods specified in the first column of the Schedule subject to the conditions etc: and (2) The State Government [Amended as Central Government in 1956] after giving by notification in the official gazette not less than 3 months notice of its intention to do so, may by like notification add to or omit from or otherwise amend the Schedule and thereupon the Schedule shall he amended accordingly A modified Schedule of goods exempted from tax under section 6 was also substituted for the original Schedule in the Bengal Act, by the Notification.
After the passing of the , the Part States (Laws) Act became .
with necessary adaptations.
In 1957, the Central Government issued a Notification in purported exercise of the powers under section 2 of the 1950 Act, amending the 1951 Notification.
By the 1957 Notification an additional modification of section 6 of the Bengal Act was introduced in the 1951 Notification, namely the words "such previous notice as it considers reasonable" were substituted for the words "not less than 3 months ' notice" in section 6(2).
In 1959, Parliament passed the Bengal (Sales Tax) (Delhi Amendment) Act, 1959, making some amendments in various sections of the Bengal Act but left section 6 untouched.
By various notifications, exemption from sales tax was granted to several commodities.
but subsequently, the exemption was withdrawn by other notifications after giving notice of less than 3 months.
Dealers in those commodities, who were aggrieved by the withdrawal of the exemption, challenged the validity of ' the withdrawal.
The High Court dismissed their petitions.
On the main ground that Parliament, while enacting the Amending Act of 1959, had put its seal of approval to the curtailed period of notice in section 6(2) and as such, it should be taken to have keen provided by Parliament itself in the Bengal Act.
786 Allowing the appeals to this Court, ^ HELD: The 1957 Notification purporting to substitute the words "such previous notice as it considers reasonable" for the words 'not less than 3 months ' notice" in section 6(2) of the Bengal Act, is beyond the powers of the Central Government, conferred on it, by section 2 of the ; and in consequence, the various notifications, in so far as they with drew exemptions from tax with respect to the several commodities, are invalid and ineffective, as the exemption was withdrawn without complying with the mandatory requirement of not less than 3 months ' notice enjoined by the section.
[808 D E] (1) (a) The primary power bestowed by section 2 of the , on the Central Government is one of extension, that is, bringing into operation and effect, in a Union Territory, an enactment already in force in a State.
The discretion conferred by the section to make "restrictions and modifications" in the enactment sought to be extended, is not a separate and independent power, which can be exercised apart from the power of extension, but is an integral constituent of the power of extension.
This is made clear by the use of the preposition "with" one meaning of which (which accords with the context) is "part of the same whole".
[801 E F] (b) There are 3 limits on the power given by section 2.
(i) The power exhausts itself on extension of the enactment.
It can be exercised only once, simultaneously with the extension of the enactment, but cannot be exercised repeatedly or subsequently to such extension.
(ii) The power cannot be used for a purpose other than that of extension.
In the exercise of the power, only such restrictions and modifications can be validly engrafted in the enactment sought to be extended, which are necessary to bring it into operation and effect in the Union Territory.
Modifications which are not necessary for, or ancillary and subservient to the purpose of extension, are not permissible.
Only such modifications can be legitimately necessary for such purpose, as are required to adjust, adapt, and make the enactment suitable to the peculiar local conditions of the Union Territory for carrying it into operation and effect.
(iii) The words "restrictions and modifications" do not cover such alterations as involve a change in any essential feature of the enactment or the legislative policy built into it.
[801G H, 802A] (c) If the words "such restrictions and modifications as it thinks fit" are given the wide construction of giving an unfettered power of amending and modifying the enactment sought to be extended, as contended by the respondent, the validity of the section itself becomes vulnerable on account of the vice of excessive delegation.
Moreover.
such a construction would be repugnant to the context and content of the section, read as a whole.
[802 B C] Rajnarain Singh vs The Chairman Patna Administration Committee Patna and Re: Delhi Laws Act; , , referred to.
(2) The 1957 Notification transgresses these limits in two respects : (a) The power has not been exercised contemporaneously with the extension or for the purposes of the extension of the Bengal Act to Delhi but 6.6 years thereafter.
The power of extension with restrictions and modifications had exhausted itself when the Bengal Act was extended to Delhi with some alterations by the 1951 Notification.
[802D E] The power given under section 2 of the 1950 Act, cannot be equated to the "Henry VIII clause" of the Acts of the British Parliament because while the power under section 2 can be exercised only once when the Act is extended, the power under a "Henry VIII clause" can be invoked, if there is nothing contrary in the clause, more than once on the arising of a difficulty when the Act is operative [802F H] Observations of Fazal Ali, J. at p. 850 in Re: Delhi Laws Act case explained.
787 (b) The alteration sought to be introduced in section 6(2) by the 1957 Notification goes beyond the scope of the "restrictions and modifications" permissible under section 2 of the 1950 Act, because, it purports to change the essential features of section 6(2) and the legislative policy inherent therein.
[803F] Section 6(2) before the issue of the 1957 Notification, requiring the Government to give "not less than 3 months ' notice" of its intention to add to or omit from or otherwise amend the Schedule to the 1950 Act, embodies a determination of legislative policy and its formulation as an absolute rule of ' conduct could be diluted, changed or amended only by the legislature, in the exercise of its essential legislative function, which could not be delegated to the Government.
[803G 804E, F, G] (i) The language of the sub section as it stood is emphatically prohibitive and it commands the Government in unambiguous negative terms that the period of the requisite notice must not be less than 3 months, showing that the provision was mandatory and not directory.
[804 A B] (ii) The scheme of the Bengal Act is that the tax is to be quantified and assessed on the quarterly turnover.
and the period of not less than 3 months, notice conforms to the scheme and ensures that the imposition of a new tax of exemption does not cause dislocation or inconvenience either to the dealer or the Revenue.
[804B] (iii) By fixing the period at not less than 3 months, purchasers on whom the incidence of tax really falls have adequate notice of taxable items.
[804 C] (iv) Dealers and others likely to be affected by an amendment of the Schedule get sufficient time to make representations and adjust their affairs.
[804 D] The span of notice was thus the essence of the legislative mandate.
The necessity of notice and the span of notice both are integral to the scheme of the provision and it cannot be split up into essential and non essential components, the whole of it being mandatory.
[804 E F] Raza Buland Sugar Co. Ltd. vs Municipal Board, Rampur, ; , distinguished.
(3)(a) Pt.
Benarsi Das Bhanot vs State of Madhya Pradesh does not assist the respondent.
That was a case where the contention that 5.
6(2) of the C.P. & Bihar Sales Tax Act, 1947, was invalid on the ground of excessive delegation, was rejected, by the Court.
In the present case, it is the validity of a Notification purported to be issued under section 2 of the 1950 Act that is impeached as beyond the powers of modification conferred by the section.
[804H, 805A] (b) In the present case, the Central Government did not directly amend section 6(2).
More than 6 years after the extension of the Act by the 1951 Notification, it amended the sub section indirectly by amending the 1951 Notification.
But on the extension of the Act to Delhi, the 1951 Notification had exhausted its purpose, and the purported amendment, through the medium of such a "dead" Notification is an exercise in utility.
Further, an amendment which was not directly permissible could not be done indirectly.
[805 B, C] (4) The High Court was in error in holding that Parliament had validated or re enacted referentially, with retroactive effect, what was sought to be done by the 1957 Notification when it passed the Amending Act, 1959.
[807C] The Amending Act leaves section 6(2) untouched.
It does not even indirectly refer to the 1957 Notification or the amendment purportedly made by it in section 6(2).
Nor does it re enact or validate what was sought to be achieved by that notification.
No indication of referential incorporation or validation of the 1957 Notification or the amendment sought to be made by it, is available either in the Preamble or in any other provision of the Amending Act.
Parliament despite its presumed awareness of the 1957 Notification, has said nothing in the Amending Act indicating that it has in any manner incorporated, re enacted or 788 validated the 1957 Notification or the amendment sought to be made thereby, while passing the Amending Act, 1959.
[805 E F, 807 B C] Krishna Chandra vs Union of India, A.I.R. 1975 S.C. 1389, referred to, (5) A mere amendment of an Act by a competent legislature does not amount to re enactment of the parent Act.
[807D] Venkatarao Esajirao Limberkar 's case [1970] 1 S.C.R. 317, explained.
(6) The respondent cannot contend that if the withdrawal of exemption without giving 3 months" notice was illegal, then the grant of exemption without giving 3 months ' notice was also void.
[808 A] (a) Some of the goods were granted exemption by the 1951 Notification itself and, hence, there is no question of giving notice for giving those exemptions.
[807 G] (b) The validity of the notifications granting exemptions after the extension of the Act to Delhi is not in issue in the writ petitions.
and whether or not the requisite notice was given before granting exemption is a question of fact depending on evidence.
[807G] (c) To allow the respondent to take such a plea would be violative of the fundamental principle of natural justice, according to which a party cannot be allowed to take advantage of his own lapse or wrong.
[807 H] (7) The respondent cannot also rely on section 21 of the General Clauses Act, because, the source of the power to amend the Schedule to the 1950 Act.
is section 6(2) of the Bengal Act and not section 21 of the General Clauses Act, and the power has to be exercised within the limits of section 6(2) and for the purpose for which it we conferred.
[808 B] Gopichand vs Delhi Administration, [1959] Suppl.
2 S.C.R. 87, referred to.
|
Civil Appeal No. 1102 of 1975.
Appeal by special leave from the judgment and order dated the 18th September 1974 of the Gujarat High Court in Civil Spl.
Appln.
No. 1224 of 1974.
F. section Nariman, V. B. Patel and I. N. Shroff for the appellant.
V. N. Tarkunde, Vimal Dave for the Respondents.
The Judgment of the Court was delivered by BHAGWATI, J.
This appeal, by special leave, raises a short question of construction of certain provisions of the Bombay Industrial Relations Act, 1946 (hereinafter referred to as the Act).
The facts giving rise to the appeal are few and may be briefly stated as follows.
The appellant carries on business of manufacturing cloth in a textile mill situate in the city of Ahmedabad.
The respondent was working as a jobber in the textile mill in the employment of the appellant and, according to the records of the appellant, he was due to superannuate on 7th January, 1971 on reaching the age of 60 years and intimation to that effect was accordingly given to him by the appellant by a notice dated 1st October, 1970 under Standing Order 19.
It appears, however, that the appellant decided to continue the respondent in service for a period of one year after the date superannuation and the appellant accordingly gave a notice dated 820 24th September, 1970 under Standing Order 19 A continuing the service of the respondent for a period of one year and intimating to him that he would be retired on 8th January, 1972.
Thereafter there was another extension of service granted by the appellant by a notice dated 12th January, 1972 issued under Standing Order 19 A and it was intimated to the respondent that he would be retired on 8th January, 1973.
The respondent, by his letter dated 5th January, 1973, requested the appellant on compassionate grounds to grant him further extension of service for a period of two years from 8th January, 1973, but the appellant declined to do so and in the result the service of the respondent came to an end by retirement on 8th January, 1973.
The respondent did not at any time until his retirement on 8th January, 1973 question the correctness of the records of the appellant or challenge the stand of the appellant showing that he had completed the age of 60 years on 7th January, 1971.
It was only after his retirement that the respondent for the first time, by his letter dated 13th February, 1973, gave notice to the appellant that his age was only 56 years on 8th January, 1973 and his retirement was, therefore, null and void and he should be reinstated in service.
This was rightly regarded as a letter of approach by the respondent to the appellant under section 42 sub section
(4) of the Act requesting for a change in respect of the order passed by the appellant under Standing Order 19 retiring the respondent.
The appellant did not send any reply to this letter of approach and no agreement was arrived at between the appellant and the respondent within 15 days of the receipt of the letter of approach by the appellant.
It appears that since there was no favourable response from the appellant, the respondent made an application to the Labour Commissioner on 17th March, 1973 requesting his intervention in the matter.
The Labour Officer of the appellant appeared before the Labour Commissioner pursuant to the notice issued to the appellant and, to quote the words used by the respondent in his application before the Labour Court, "took adjournment for making compromise".
But no compromise was arrived at between the parties and the respondent ultimately on 7th June, 1973 filed an application before the Labour Court under section 79(1) read with section 78(1) (A) (a) (i) of the Act praying that the order passed by the appellant resisted him from service should be treated as null and void and he should be reinstated in service with all benefits.
The appellant resisted the application on various grounds and apart from disputing the claim of the respondent on merits, the appellant raised a preliminary objection that the application was barred by time under section 79(3) (a) of the Act since it was filed more than three months after the arising of the dispute.
The respondent had also filed along with the application under section 78 (1) (A) (a) (i) an application for condonation of delay and to this application, the answer given by the appellant was that the Labour Court had no jurisdiction to condone the delay in filing the application under section 78(1) (A) (a) (i).
The Labour Court took the view that the application of the respondent under section 78(1) (A) (a) (i) was barred under section 79(3) (a) as it was not filed within three months of the arising of the dispute and the Labour Court had no jurisdiction to condone the delay in filing the 821 application and in this view, the Labour Court rejected the application without going into the merits.
The respondent preferred an appeal to the Industrial Court, but the Industrial Court also took the same view and dismissed the appeal.
The respondent thereupon preferred a petition in the High Court under Article 226 of the Constitution and on this petition, the High Court reversed the view taken by the Labour Court and the Industrial Court and held that the application filed by the respondent under section 78 (1) (A) (a) (i) was within three months of the arising of the dispute and hence it could not be said to be barred under section 79(3) (a).
The High Court accordingly set aside the order passed by the Industrial Court and remanded the application to the Labour Court to dispose it of on merits.
This decision of the High Court is impugned in the present appeal brought with special leave obtained from this Court.
The question which arises for determination in this appeal lies in a very narrow compass, but in order to appreciate it, it is necessary to refer to a few relevant sections of the Act.
The first material section to which we must refer is section 42, sub section
(4) which is in the following terms: "42 (4).
Any employee or a representative Union desiring a change in respect of (i) any order passed by the employer under Standing Orders, or (ii) (iii) shall make an application to the Labour Court.
Provided that no such application shall lie unless the employee or a representative Union has in the prescribed manner approached the employer with a request for the change and no agreement has been arrived at in respect of the change within the prescribed period.
" What is the 'prescribed period ' is to be found in r. 53 of the Rules made under the Act.
That rule so far as material reads: "53(1).
Any employee or a representative Union desiring a change in respect of (i) any order passed by the employer concerned under Standing Orders. . shall make an application in writing to the employer.
An application for change in respect of an order passed by the employer under standing orders shall be made within a period of six months from the date of such order.
Where such application is made by an employee it may be made to the employer direct or through the Labour Officer for the local area or the representative of employees concerned.
A copy of the application shall be forwarded to the Commissioner of Labour and in cases where such application is not made through the Labour Officer for the local area to that officer.
822 (2) Where an application has been made by an employee under sub rule (1) the employer and the employee may arrive at an agreement within fifteen days of the receipt of the application by the employer within such further period as may be mutually fixed by the employer and the employee or the Labour Officer for the local area or the representative of employee as the case may be.
(3) Where an application has been made by a representative Union under sub rule (1), the employer and the Representative Union may arrive at an agreement within fifteen days of the receipt of the application by the employer or within such further period as may be mutually agreed upon by the parties.
Then there is section 78 which deals with the powers of the Labour Court and sub section
(1) (A) (a) (i) of that section provides inter alia: "78(1).
A Labour Court shall have power to A. decide (a) disputes regarding (i) the propriety or legality of an order passed by an employer acting or purporting to act under the Standing Orders * * * * Explanation.
A dispute falling under clause (a) of Paragraph A of sub section (1) shall be deemed to have arisen if within the prescribed period under the Proviso to sub section (4) of section 42, no agreement is arrived at in respect of an order, matter or change referred to in the said Proviso." And lastly, sub sections
(1) and (3) (a) of section 79 provide how and within what time proceedings before a Labour Court in respect of a dispute falling under section 78 (A) (a) (i) are to be commenced and they read as follows: "79(1).
Proceedings before a Labour Court in respect of dispute falling under caluse (a) of Paragraph A of sub section (1) of Section 78 shall be commenced on an application made by any of the parties to the dispute. (2) * * * (3) An application in respect of a dispute falling under clause (a) of paragraph A of sub section (1) of section 78 shall be made (a) if it is a dispute falling under sub clause (i) or (ii) of the said clause, within three months of the arising of the dispute;" 823 It will be seen on a combined reading of these provisions that an application to the Labour Court under section 79(1) in respect of a dispute falling under section 78(1) (A) (a) (i) must be made within three months of the arising of the dispute and the dispute would be deemed to have arisen if, within a period of 15 days from the receipt of the letter of approach under section 42, sub section
(4) by the employer or within such further period as may be mutually fixed by the employer and the employee, no agreement is arrived at in respect of the change desired by the employee.
Here in the present case, the letter of approach under section 42 sub section
(4) was sent by the respondent to the appellant on 13th February, 1973 and it may be presumed that it was received by the appellant on the same day.
The period of 15 days calculated from the date of the receipt of the letter of approach by the appellant, therefore, expired on 28th February, 1973 and admittedly until that time no agreement was arrived at between the appellant and the respondent in respect of the change desired by the respondent.
There can, therefore, be no doubt that if nothing further had transpired, the dispute between the parties would be deemed to have arisen at the latest on 1st March, 1973 and the application under section 79, sub section
(1) read with section 78(1) (A) (a) (i) should have been filed within three months from that date, that is, on or before 1st June, 1973 and in the circumstances, the application made by the respondent on 7th June, 1973 would be clearly barred under section 79(3) (a).
Both the Labour Court and the Industrial Court accepted this view and rejected the application of the respondent in limine without examining the merits of the case.
The High Court, however, took a different view and held that by reason of the Labour Officer of the appellant asking for adjournment on or after 17th March, 1973 in order to compromise the dispute between the parties, the period of 15 days was extended by mutual agreement between the parties to some date beyond 17th March, 1973 and the application filed by the respondent on 7th June, 1973 was, therefore, within three months of the arising of the dispute and was accordingly saved from the bar of section 79 (3) (a).
The question is: whether this view taken by the High Court is correct, or it suffers from any infirmity and requires to be set aside ? Now, it is obvious that the view taken by the High Court can be sustained only if it can be shown that, though no settlement in respect of the change desired by the respondent was arrived at within a period of 15 days from the receipt of the letter of approach by the appellant, further period upto some date beyond 7th March, 1973 was mutually fixed between the appellant and the respondent, for then the dispute would be deemed to have arisen on or after that date and in that event, the application filed by the respondent on 7th June, 1973 would be within three months of the arising of the dispute and hence within time.
The appellant submitted that two conditions were required to be satisfied for this purpose: (1) further period for arriving at a settlement must have been fixed before the expiration of the initial period of 15 days, and (2) it must have been 824 mutually fixed between the appellant and the respondent.
The respondent conceded that the second was a necessary condition, but so far as the first condition was concerned, the respondent contended that it was not necessary that the further period should have been fixed before the expiration of the initial period of 15 days.
It was sufficient to attract the applicability of the provision, said the respondent, even if the further period was fixed after the expiration of the initial period of 15 days, so long as that was done before the period of three months expired and the application of the respondent became barred under section 79(3) (a).
We think there is great force in the contention of the respondent.
We do not find anything in rule 53(2) which provides that further period should be mutually fixed by the employer and the employee before the expiration of the initial period of 15 days from the receipt of the letter of approach by the employer.
The words used by the rule making authority are "within 15 days of the receipt of the application by the employer or within such further period as may be mutually fixed between the employer and the employee" and these words are sufficiently wide to cover a situation where further period is mutually fixed after the expiration of the initial period of 15 days.
There is really no warrant for reading in the words used by the rule making authority any restriction that further period must be mutually fixed before the expiration of the initial period of 15 days.
It must be remembered that the object of this provision is that, as far as possible, the employer and the employee should arrive at an agreement in respect of the change desired by the employee and it is only where an agreement is not possible that the employee should be allowed to approach the Labour Court.
The provisions of the Act are intended to bring about settlement of disputes between the employer and the employees and so far as the methodology or mechanics of the resolution of such disputes is concerned, the greatest importance is attached by the legislature to settlement by negotiations.
It is only where settlement through negotiations fails that other modes of resolution of disputes are provided by the legislature in the different provisions of the Act.
It is in the light of this philosophy underlying the provisions of the Act and this policy and principle to promote, as far as possible, settlement by negotiation and avoid adjudication, that the words used by the rule making authority in rule 53(2) must be construed and if that is done, there can be little doubt that further period may be mutually fixed between the employer and the employee even after the initial period of 15 days has expired.
It is quite possible that even after the expiration of the initial period of 15 days, the employer and the employee may come together and arrive at a settlement.
Why should that be discouraged by compelling the employee to file an application under section 78(1) (A) (a) (i) within three months of the expiration of the initial period of 15 days, on pain of his application becoming time barred.
Such an interpretation would not advance the object and purpose of the Act.
The employer and the employee may very well agree, even after the expiration of the initial period of 15 days, that they will try to negotiate a settlement and that would impliedly mean that during the time fixed by them for such negotiations, the employee should not rush to the Labour Court.
It is only when such period mutually 825 fixed by them expires without any settlement having been arrived at that a dispute can be deemed to arise, for adjudication of which the employee may approach the Labour Court under section 78(1) (A) (a) (i).
We are, therefore, of the view that further period for arriving at a settlement can be mutually fixed by the employer and the employee even after the expiration of the initial period of 15 days and where such is the case, the dispute would be deemed to arise on the expiration of such further period, if within that time no settlement is arrived at between the parties.
We should of course make it clear that prima facie it seems to us that such further period cannot be mutually fixed after three months have elapsed from the expiration of the initial period of 15 days and the application of the employee under section 78(1)(A)(a)(i) has already become barred under section 79(3)(a).
It would, therefore, seem clear that if, as a result of what transpired before the Labour Commissioner, further period for arriving at a settlement in respect of the change desired by the respondent was mutually fixed between the appellant and the respondent, the dispute would not be deemed to have arisen till the expiration of such further period and in that event, the application made by the respondent on 7th June, 1973 would be within time.
The question, however, is whether it can be said at all that further period was mutually fixed by the appellant and the respondent before the Labour Commissioner.
We do not think this question can be answered in favour of the respondent.
If we look at the application of the respondent, we do not find in it anything even remotely suggesting that further period for arriving at a settlement was mutually agreed upon between the appellant and the respondent.
In the first place, there must be a specific period agreed upon between the parties.
Here we do not find any averment of a specific period.
Even if we construe the application of the respondent most liberally, the utmost we can extract from it is that adjournment must have been granted by the Labour Commissioner to the Labour Officer for the purpose of arriving at a settlement upto a specific date and that would indicate a specific period.
The difficulty, however, still remains that there is no averment that such specific period was mutually fixed by the parties.
The only averment made in the application of the respondent is that at the hearing before the Labour Commissioner, the Labour Officer of the appellant "took adjournment to make a compromise", but ultimately no compromise was arrived at.
It is not even stated in the application that the respondent consented to the adjournment, so that the application for adjournment by the appellant and the consent to the adjournment by the respondent could be construed as an agreement mutually fixing further period for arriving at a settlement.
There being absolutely no averment of further period being mutually fixed between the parties, it is difficult to see how the case of the respondent could be brought within the latter part of rule 53(2).
It was never the case of the respondent that further period was mutually fixed and that saved his case from the bar of limitation.
The relief that he asked for from the Labour Court as well as Industrial Court was condonation of delay but so far as this relief is concerned, the Labour Court has unfortunately no power to condone the delay and hence 826 his request was rejected.
We are, therefore, of the view that the High Court was in error in holding that the application made by the respondent under section 78(1)(A)(a)(i) was within three months of the arising of the dispute and was hence not barred under section 79(3) (a).
We accordingly allow the appeal set aside the order passed by the High Court and restore the order of the Industrial Court rejecting the application of the respondent as barred under section 79(3)(a).
So far as the cost of this appeal is concerned, when the appellant was granted special leave, it was made a condition that the appellant would in any event pay the cost of the respondent.
Therefore, the appellant, though it has succeeded, will pay the cost of the appeal to the respondent.
V.P.S Appeal allowed.
| IN-Abs | A combined reading of sections 42(4), 78(1)(A)(a)(i), 79(1) and (3) of the Bombay Industrial Relations Act, 1946, and r. 53 of the Rules made under the Act, shows that an application under section 79(1) to the Labour Court, in respect of a dispute falling under section 78(1)(A)(a)(i) must be made within 3 months of the arising of the dispute; and that the dispute would be deemed to have arisen if, within a period of 15 days from the receipt of a letter of approach under section 42(4) by the employer, or within such further period as may be mutually fixed by the employer and the employee, no agreement is arrived at in respect of the change desired by the employee.
In the present case, the letter of approach under section 42(4) claiming that his age was only 56 years and so he should not be retired, was sent by the employee (respondent) to the employer (appellant) on February 13, 1973.
Since there was no response, the respondent requested the Labour Commissioner on March 17, 1973, to intervene.
The Labour Officer of the appellant appeared before the Labour Commissioner and took adjournment in order to compromise the dispute.
As no compromise was arrived at, the respondent filed his application under section 78(1)(A)(a)(i) read with section 79(1) before the Labour Court on June 7, 1973.
The Labour Court and on appeal the Industrial Court, held, that the period of 15 days from the date of the receipt of the letter of approach expired on February 28, 1973; that the dispute between the parties should be deemed to have arisen at the latest on March 1, 1973; that the application under section 79(1) to the Labour Court should have been filed within 3 months of that date, that is, on or before June 1, 1973; and that, therefore, the application filed on June 7, 1973, was barred under section 79(3)(a).
The High Court, however took the view that by reason of the Labour Officer of the appellant asking for adjournment for compromising the matter on or after March 17, 1973, there was an extension of the period to some date beyond March 17, 1973 by mutual agreement between the parties, and that therefore.
the application filed on June 7, 1973, was within 3 months of the arising of the dispute.
In appeal to this Court, the appellant contended that (1) there was no valid extension of the period for settlement as such extension should have been fixed before the expiry of the initial period of 15 days, and (2) no period was mutually fixed between the parties.
Allowing the appeal on the second ground, ^ HELD: (1) The further period for arriving at a settlement under r. 53(2) can be mutually fixed between the parties even after the expiration of the initial period of 15 days; and in such a case, the dispute would be deemed to have arisen only on the expiration of the extended period if within that time no settlement is arrived at.
[824 G] (a) There is nothing in the rule which provides that the further period should be fixed before the expiration of the initial period.
The words in the rule "within 15 days of the receipt of the application by the employer or within such further period as may be mutually fixed between the employer and the employee" are sufficiently wide to cover a situation where the further period is fixed after the expiration of the initial period.
[824 B.C.].
819 (h) The object of the rule is that, as far as possible, the employer and the employee should arrive at an agreement by negotiation in respect of the change desired by the employee and it is only where such an agreement is not possible that the employee should approach the Labour Court for adjudication.
It is possible that even after the expiry of the initial period, the parties may arrive at a settlement and such settlement should not be discouraged by compelling the employee to apply to the Labour Court within 3 months of the expiration of the initial period of 15 days.
[824 D F] [Obiter: The further period cannot, however, be fixed after 3 months have elapsed from the expiration of the initial period of 15 days and the application has become barred under section 79(3)(a).] [825 B] (2) But, it cannot be said in the present case that the further period was mutually fixed by the appellant and the respondent before the Labour Commissioner.
[825 C] (a) There must be a specific period agreed upon between the parties but there is no reference to any specific period in the present case.
[825 E] (b) Even on a liberal view that the Labour Commissioner granted the adjournment to the Labour Officer of the appellant for arriving at a settlement up to a specific date implying a specific period, there is no averment in the application under section 79 to the Labour Court, that such specific period was mutually fixed between the parties, nor even a remote suggestion to that effect.
It is not even stated that the respondent consented to the adjournment as to enable an inference of mutual agreement to be made.
[825 EF] (c) In fact, it was not the case of the respondent that any further period was mutually fixed to save the application from the bar of limitation.
On the contrary, he prayed for condonation of delay, but the Labour Court has no power to condone the delay.
|
Civil Appeal No. 219 of 1974.
Appeal by Special Leave from the Judgment and Order dated the 3 3 1972 of the Madras High Court in Writ Appeal No. 416 of 1970.
R. M. Mehta and section P. Nayar for the Appellant.
A. V. Rangam and Miss A Subhashini for Respondent.
The Judgment of the Court was delivered by RAY, C.J.
This appeal is by special leave from the judgment dated 3 March 1972 of the High Court of Madras.
The respondent in an application under Article 226 of the Constitution asked for a writ of mandamus directing the appellant Unison to pay the respondent pension at the rate of 1s 9d per rupee in accordance with Regulations 934 A and 934 D of the Civil Service Regulations.
862 The respondent is a Ceylonese national.
He joined the Indian Civil Service on 6th October 1933.
After 15 August 1947 he continued to serve in our country until his retirement on 31 December 1949.
At his retirement he was sanctioned an annuity of $ 743 2 shillings 6 pence per annum.
He commuted a part of his pension leaving a balance of Rs. 500 per month.
Between March, 1968 and October 1969 he resided in Uganda in East Africa.
When the respondent was in Uganda he claimed pension at the rate of 1s 9d to a rupee.
His request was accepted by the Accountant General, Madras.
The Union Government reversed the decision and directed that the conversion rate should be 1s 6d to a rupee and the excess payment should be recovered from the respondent.
The respondent thereafter made an application under Article 226 of the Constitution.
The High Court accepted the petition of the respondent on the ground that the respondent shifted his residence from Ceylon to Uganda and was, therefore, entitled to benefit under the second proviso to Article 934 of the Civil Service Regulations.
The second proviso to Article 934 was as follows: "Provided that save where a pensioner resides in India (which for the purpose of this Article and Articles 934 A, 934 B, 934 C. 934 D and 935 shall be deemed to include Burma, Ceylon, Nepal, and the French and Portuguese establishments in India) the minimum rate of conversion shall be 1/9 per rupee".
The question of payment of pension to Members of the Indian Civil Service in Sterling was examined by this Court in V. B. Raju & Ors.
vs State of Gujarat & Ors.
The Constitution (Twentyeighth Amendment) Act, 1972 introduced Article 312 A. Article 312 A confers power on Parliament to make law, inter alia, to vary or revoke prospectively or retrospectively the conditions of service as respects pension of persons who having been appointed by Secretary of State or Secretary of State in Council to a Civil Service of the Crown in India before the commencement of the Constitution retired or otherwise ceased to be in service at any time before the commencement of the Constitution (28th Amendment) Act, 1972.
The Constitution (28th Amendment) Act, 1972 came into existence on 27 August 1972.
Parliament on 21 September 1972 made the law called the Former Secretary of State Service Officers (Conditions Service) Act, 1972.
A former Secretary of State officer means a person referred to in sub clause (a) or sub clause (b) sub clause (1) of Article 312 A of the Constitution.
The respondent is a former Secretary of State Service officer within the meaning of sub clause (a) of clause (1) of Article 312 A. Section 8(1) of the Conditions of Service Act, 1972 enacts that no former Secretary of State Service officer shall be entitled or be deemed to have been entitled, to claim (a) pension in sterling; or (b) 863 that his pension shall be paid outside India; or (c) where his pension was expressed in sterling or a fixed sterling minimum was applicable in respect of the pension payable to him, that his pension shall be commuted in the rupee equivalent of the amount fixed in sterling at a rate of exchange exceeding the rate of rupees thirteen and one third to the pound sterling.
Section 12 of the Former Secretary of State Service officers (Conditions of Service) Act, 1972 states that the provisions of this Act or of any order made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any law other than this Act or in any rule, regulation or order or other instrument having effect by virtue of any law other than the 1972 Act.
The Constitution Bench of this Court in V. B. Raju 's case (supra) held that the former Members of the Indian Civil Service as a result of the Conditions of Service Act, 1972 are not entitled to claim payment of pension in sterling or outside India or by converting $ 1000 at the rate of exchange exceeding the rate of exchange of Rupees thirteen and one third to the pound sterling.
The judgment of the High Court cannot be sustained by reason of change in law.
The appeal is accepted and the judgment of the High Court is set aside.
Parties will pay and bear their own costs.
S.R. Appeal allowed.
| IN-Abs | The claim of his pension at the rate of 1sh 9d.
to a rupee by the respondeent, a former Secretary of State Service Officer was allowed by the Accountant General, but the Union appellant reversed it and directed recovery of the excess payment.
The respondent basing his claim under the second proviso to article 934 of the Civil Service Regulations moved the High Court under article 226 of the Constitution which was accepted.
The Letters Patent Appeal filed by the Union was dismissed.
The appeal by special leave, in view of the Constitution (28th amendment) Act 1972 introducing article 312A and the , was accepted and the court.
^ HELD: (i) Under section 12 of the Former Secretary of State Service Officers (Conditions of services) Act 1972, enacted by Parliament by virtue of article 312A of the Constitution the provisions of the Act or of any order made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any law other than the Act or in any rule, regulation or order or other instrument, having effect by virtue of any law other than the 1972 Act.
[863 B] (ii) The former members of the Indian Civil Service as a result of Ss. 8 & 12 of the Conditions of Service Act, 1972 are not entitled to claim payment of pension in sterling or outside India, or by converting $ 1000/ at the rate of exchange exceeding the rate of exchange of rupees thirteen one third to the pound sterling.
[863 C] (iii) The Judgment of the High Court holding that the second proviso to article 934 of the Civil Service Regulations applied to the instant case, cannot be sustained by reason of change in law.
[863 D] V. B. Raju vs State of Gujarat & Ors.
[1975] 1 S.C.R. 797, followed.
|
Civil Appeal Nos.
1565 1569/73.
Appeals by Special Leave from the orders Nos.
4844 4848 of 1972 dated 25th November 1972 of the Central Govt., Ministry of Finance, Govt.
of India.
D. V. Patel and K. R. Nambiyar for the Appellant.
G. L. Sanghi and Girish Chander for the Respondents.
The Judgment of the Court was delivered by UNTWALIA, J.
The appellant company in these appeals by special leave is a manufacturer of rubber tyres and tubes.
It imports several raw materials including Pyratex Vinyl Pyridine Latex used in the manufacture of rubber tyres and tubes.
The Customs authorities of the Government of India have been charging custom duty on V. P. Latex under the residuary item 87 of the Indin Tariff Act, 1934 instead of ICT 39 an item meant for charging duty on raw rubber.
The custom duty charged under item 87 is much more than the one chargeable under item 39.
A countervailing duty under item 15 A of the Central Excise Tariff in accordance with the Central Salt and Excise Act, 1944 is also charged if the article imported is not treated as raw rubber.
On five consignments of V. P. Latex imported by the appellant in the year 1968 custom duty was charged under item 87 by the Appraiser pursuant to his order of assessment.
Since he was an officer lower in rank than the Assistant Collector of Customs the appellant filed five applications before the Assistant Collector under section 27 (1) of the Customs referred to as the Act, for refund of the excess amount of duty charged.
In other words, the appellant took the stand that if a custom duty would have been charged on V. P. Latex under item 39 then the amount would have been less to the extent of Rs. 3,74,879.49 on the five consignments in question.
It, therefore, claimed the refund of the said amount, the details of which are as follows: ___________________________________________________________ Bill No. and date Date of Delay Amount claim for refund ____________________________________________________________ 1.
D. NO.
1644 dated 8 4 69 31/4 Months 50,305.53 24 6 1968 2.
D. No. 1024 dated 27 6 69 3 Months 60,339.97 18 9 1968 3.
D. No. 1132 dated 8 4 69 2 Months 1,61,615.10 21 8 1968 4.
D. No. 1931 dated 10 4 69 1 Months 50,512.71 23 7 1968 5.
D. No. 68 dated 10 4 69 4 Months 52,106.18 1 6 1968 ____________ 3,74,879.49 ____________________________________________________________ Under section 27(1) of the Act the application for refund had to be made before the expiry of six months from the date of payment of duty, the date of payment being the date of the bill in each case.
Thus there was a delay varying between 1 month to 4 months in the filing of each of the applications for refund.
The Assistant Collector of Customs dismissed the applications on the ground that they were filed out of time.
The appeals to the Appellate Collector of Customs filed under section 128(1) (b) of the Act failed.
The appellant took the matter in revision to the Central Government under section 131.
The revisions were dismissed by the Central Government by their order dated November 29, 1972 stating therein: "The Govt.
of India have carefully considered the reasons advanced by the petitioners for their failure to prefer the claims for refund within the time stipulated under section 27 of the , but see no justification to interfere with the appellate orders.
The revision applications are, therefore, rejected.
" These appeals were filed from the said order after obtaining special leave of this Court.
Mr. D. V. Patel learned counsel for the appellant submitted that in view of the recent decision of this Court in Dunlop India Ltd. etc.
vs Union of India & Ors.
V. P. Latex was chargeable to duty under item 39 only.
The applications filed by the appellant for refund of the excess amount have erroneously been dismissed on the ground of having been filed out of time.
Counsel submitted that the appellant used to pay custom duty not as and when a particular consignment was received but by making deposits in a running account.
Hence no parti 866 cular date of payment could be assigned in respect of a particular consignment.
He further submitted that the duty was paid under protest and hence under the proviso to sub section (1) of section 27, the limitation of six months did not apply.
Mr. G. L. Sanghi, learned counsel for the respondents contended that no case of running account had been made before the authorities below and that there was nothing to show that the duty had been paid under protest in relation to any of of the five consignments.
It is no doubt true that in view of the decision of this Court mentioned above the custom duty was chargeable on import of V. P. Latex under item 39.
The authorities below do not seem to have decided the refund applications of the appellant on merits.
They have dismissed them merely on the ground of limitation.
The only question, therefore, which falls for determination by us is whether the applications for refund were filed out of time.
Section 27 reads as follows: "27.
(1) Any person claiming refund of any duty, paid by him in pursuance of an order of assessment made by an officer of customs lower in rank than an Assistant Collector of Customs may make an application for refund of such duty to the Assistant Collector of Customs before the expiry of six months from the date of payment of duty: Provided that the limitation of six months shall not apply where any duty has been paid under protest.
Explanation Where any duty is paid provisionally under section 18, the period of six months shall be computed from the date of adjustment of duty after the final assessment thereof.
(2) If on receipt of any such application the Assistant Collector, of Customs is satisfied that the whole or any part of the duty paid by the applicant should be refunded to him, he may make an order accordingly.
(3) Where, as a result of any order passed in appeal or revision under this Act, refund of any duty becomes due to any person, the proper officer may refund the amount to such person without his having to make any claim in that behalf.
(4) Save as provided in section 26, no claim for refund of any duty shall be entertained except in accordance with the provisions section.
The appellant 's case obviously and admittedly was not covered by sub section (3) as it had not challenged the order of assessment in any appeal or revision.
Nor was it a case where any duty was paid provisionally under section 18.
The appellant 's case was governed by sub section (1) of section 27.
No. case of any running account was set up by the appellant nor was there anything in the records of this case to substantiate it.
Custom duty was paid in respect of each of the five consignments on the date of its respective bill.
Ultimately this 867 position could not be disputed before us.
The appellant, however, contended that the duty was paid always under general protest which covered the cases of these five consignments also.
Hence under the proviso to sub section (1) the limitation of six months does not apply.
Our attention was drawn to several letters in the records of the appeals before us to substantiate the plea of payment under protest, but none of them helps the appellant.
We may refer to only two of them.
The appellant wrote a letter on February 8, 1968 to the Assistant Collector of Customs, Madras making out a case therein that V. P. Latex was assessable to duty under item 39 ICT.
Finally in this letter a protest was made for the assessment of duty under item 87 on V. P. Latex imported by the company in the past.
This letter was written before the five consignments in question were imported and duty paid thereon.
The protest, therefore, embodied in the letter aforesaid was not in respect of any of these consignments.
A letter written on July 15, 1968 was a letter written at a point of time when two out of the five consignments had been imported; but three were imported after the writing of this letter by the appellant to the Asstt.
Collector of Customs, Madras.
This letter relates to a consignment of 59 drums of V. P. Latex which could not be connected with any of the five consignments in question.
Thus there is nothing to show that duty on them was paid under protest, general or specific.
It was lastly contended on behalf of the appellant that in view of the recent decision of this Court, the Govt. should be directed to refund the excess amount of Rs. 3,74,879.49 charged on the five consignments.
We are unable to do so because the present appeals arising out of the orders made by the Government of India in proceedings under section 27(1) of the Act have got to fail on the ground that the view taken by the authorities below on the question of limitation could not be shown the incorrect.
In the result the appeals fail and are dismissed.
There will be no order as to costs.
S.R. Appeals dismissed.
| IN-Abs | "V. P. Latex" imported by the appellants was treated as falling under item 87 of the Indian Tariff Act 1934, the custom Authorities and custom duty was charged, in addition to a countervailing duty under item 15A of the Central Excise Tariff, in accordance with the Central Salt & Excise Act 1944.
The appellants contending that V.P. Latex is an item of raw rubber covered only by item 39 of the Indian Tariff Act 1934 preferred refund claim under section 27(1) of the Customs Act before the Assistant Collector, which was dismissed on the ground of limitation.
The appeal under section 128(1)(b) and the Revision failed.
Dismissing the appeals, by special leave the Court.
^ HELD: In the instant case, there was nothing to show that duty was paid under protest, general or specific and therefore the claim was not within the period of limitation.
The view taken by the authorities on the question of limitation was correct.
[867 DE] Dunlop India Ltd., etc.
vs Union of India, [1976] (2) S.C.R., P. 98 referred to.
|
ivil Appeals Nos.
785 of 1971 and 1781 of 1975.
Appeal by Special Leave from the judgment and orders dated the 2nd September, 1970 and 25th March, 1974 of the Madhya Pradesh High Court in Misc.
Petition Nos. 3/68 and 390/72 respectively.
V. M. Tarkunde and K. J. John of M/s. J. B. Dadachanji & Co. for the appellant (In CA 785/71) Ram Panjwani, Dy.
Gen. (M.P.) with H. section Parihar for respondent No. 1 (In CA 785/71 & appellant in CA.
1781/75).
section P. Nayar for respondent No. 2 (In CA.
785/71) G. L. Sanghi, A. K. Sanghi, C. K. Ratnaparkhi and A. G. Ratnaparkhi for respondent No. 3 (in CA 785/71) M/s. Balakrishnan and Ghatate, for respondents in CA 1781/75.
The Judgment of the Court was delivered by UNTWALIA, J.
These two appeals by special leave have been heard together as they originate from a common dispute between the parties.
They are being disposed off by a common judgment and order.
To provide for the regulation of mines and the development of minerals under the control of the Union of India The , Central Act 67 of 1957 hereinafter referred to as the Act, was passed.
In section 3 of the Act clause (a) says: "minerals" includes all minerals except mineral oils.
" Clause (e) provides: "minor minerals" means building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral which the Central Government may, by notification in the Official Gazette, declared to be a minor mineral," For the sake of convenience and to distinguish minor minerals from minerals, the minerals are generally called major minerals and will be described as such hereinafter in this judgment.
Provisions of sections 4 to 13 are applicable to the grant of any prospecting licence or a mining lease for a major mineral.
In exercise of the power under section 13, the Central Government made the Mineral Concession Rules, 1960 hereinafter called the Central Rules.
The State Government was authorised by section 15 of the Act to make Rules for regulating the grant of prospecting licences (now quarry leases) and mining leases in respect of minor minerals.
The Government of Madhya Pradesh in exercise of the said power made the Madhya Pradesh Minor Mineral Rules, 1961 hereinafter called the State Rules.
In clause (iii) of Rule 2 'quarry lease ' was stated to mean a mining lease for minor minerals.
879 Limestone is found in abundance in the State of Madhya Pradesh.
The Central Government issued a notification dated the 1st June, 1958 in exercise of the powers conferred on them by clause (e) of section 3 of the Act declaring "limestone used for lime burning" as a minor mineral.
By a subsequent notification dated the 20th September, 1961 the description of the limestone as a minor mineral was changed and only "limestone used in kilns for manufacture of lime used as building material" was declared as a minor mineral.
The power to grant a quarry lease for limestone as a minor mineral or a mining lease for limestone as a major mineral rested in the State Government the former under the State Rules and the latter under the Central Rules.
Applicants had to apply to the State Government in the respective forms prescribed in the two Rules.
Gorelal Dubey the appellant in Civil Appeal No 785 of 1971 made and application on May 7, 1965 to the State Government for a quarry lease for "limestone for burning purpose" for a term of 10 years mentioning in paragraph 3 of the application "minor minerals" against the 6th column "Minor minerals or minerals which the applicant intends to mine.
" The land in respect of which the application was made by the appellant measured 8.36 acres and is situated in village Bistara, District Jabalpur.
The firm, Ram Chander Badri Prasad Gaur, respondent No. 3 filed an applications before the State Government on June 2, 1965 under the Central Rules in respect of the same area asking the Goverment to grant a mining lease to it for mining limestone as a major mineral By their order dated November 10 1965 a quarry lease was granted by the State Government to the appellant and a Lease Deed was executed on November 10, 1965 including special clause 18A therein.
Respondent No. 3 filed an application in revision before the Central Government.
They allowed the revision by their order dated December 14, 1967 holding therein that in substance the application for a lease filed by the appellant was an application for major mineral and lease granted was also not for minor mineral, hence the grant of the lease to the appellant was not competent.
The Central Government, therefore, directed the State Government to consider the application of respondent No. 3 for grant of mining lease for limestone over an area of 8.36 acres in village Bistara.
The appellant filed a writ petition (M.P. No. 3/1968) in the Madhya Pradesh High Court to challenge the order of the Central Government.
The High Court dismissed the writ application by order dated September 2, 1970 affirming the view of the Central Government that in substance and in effect the application for and grant of lease to the appellant by the State Government was for a major mineral and not a minor mineral.
Since the other two points urged before the High Court were not pressed in argument before us, we need not make any reference to them.
The appellant came to this Court against the order of the High Court.
Special leave to appeal was granted but stay was refused.
The result was that the appellant 's lease could remain in operation for a period of about 5 years and for the last 5 years, respondent No. 3 who was granted a mining lease pursuant 880 to the order of the Central Government has been carrying on its operation of mining limestone as a major mineral.
During the pendency of the lease in favour of the appellant, rate of royalty was enhanced by the State Government in exercise of their power under the State Rules.
Demands of more royalty were made from the appellant by the State Government.
He filed a writ petition (MP No. 328/1968) in the High Court on July 23, 1968 to challenge the demand of the enhanced royalty.
After the decision dated September 2, 1970 of the High Court in M.P. 3 of 1968 the appellant amended his M.P. 328/1968 by introducing paras 20A and 20B and a prayer (b)(i) in the writ application to say that he was liable to pay, in view of the decision of the High Court, royalty on the limestone quarried by him at a rate which were chargeable on limestone as a major mineral.
On certain grounds, which are not necessary to be detailed here, the High Court allowed M.P. 328/1968 by its judgment and order dated December 14, 1970 and remanded the matter of quantification of the amount royalty due from appellant to the authorities concerned.
After remand the authorities determined the amount of royalty due from the appellant at Rs. 16,722/ and demanded the same from him.
The appellant filed a writ petition (MP 390) 72) in the High Court to attack the demand of Rs. 16,722/ from him and contended that if royalty was charged from him on the basis of limestone as a major mineral then he had paid Rs. 36,000 and odd more.
The High Court by its judgment and order dated March 25, 1974 allowed M.P. 390/1972 and quashed the demand of Rs. 16,722 made by the State Government from the appellant.
The State of Madhya Pradesh filed an application for special leave to appeal from the said decision of the High Court.
During the course of hearing of Gorelal Dubey 's appeal, special leave was granted by us and thereupon the appeal was registered and numbered as CA 1781/75.
Mr. Tarkunde appearing for the appellant in CA 785/71 submitted that in view of the decision of this Court in Smt.
Rukmani Bai Gupta vs The State Government of Madhya Pradesh, Bhopal and others the decision of the Central Government as also of the High Court to the effect that the appellant application for and grant of lease to him was in substance a lease for a major mineral is erroneous.
He submitted that the order should be quashed and the State Government should be directed to grant a fresh lease to the appellant for another period of 10 years or the balance of the said period as the case may be.
Mr. Sanghi appearing for respondent No. 3 endeavoured to point out that the decision of this Court in Rukmani Bai 's case (supra) was distinguishable and the decision of the Central Government and the High Court is correct.
He further pointed out that the appellant had himself taken categorical stand in MP 328/1968 and MP 390/1972 that he had quarried limestone as a major mineral, disposed it of as such and was liable to pay royalty only on that basis.
Counsel further submitted that there was no renewal clause in the appellant 's lease and the period of 10 years having expired now 881 the appellant was entitled to no relief in this Court.
Mr. Ram Panjwani, appearing for the State of Madhya Pradesh supported the appellant on the question of the nature of his lease as being one for a minor mineral and pressed the Govermnent 's demand of Rs. 16,722 in C. A. 1781/75.
It appears even after the issuance of the notification dated September 20, 1961 by the Central Government making a change in the description of the limestone as a miner mineral confusion persisted amongst the applicants for quarry lease of limestone as also the governmental authorities.
They did not clearly appreciate the distinction between the new description of limestone as a minor mineral given in 1961 notification and the one which had been mentioned in the 1958 notification.
In Rukmani Bai 's case the appellant had stated in column 6 of the application "limestone for burning as a minor mineral" and the lease which was granted described it as "Iimestolle for burning".
Taking into consideration the totality of the facts it was held by this Court that the application and the grant of the lease was for limestone as a minor mineral.
The facts of the instant case are almost identical, the only difference being that in column 6 of the application the present appellant had merely stated 'minor minerals '.
But reading the said expression with the expression "limestone for burning purpose" mentioned in para 1 the same result follows.
A contrary view expressed by the Central Government and the High Court does not hold good.
We, therefore, hold that the application of the appellant was for a minor rnineral and the lease granted to him was for the same.
After the adverse decision of the High Court, he was ill advised to take the stand that he was liable to pay royalty on the amount of limestone quarried by him only as a major mineral.
We were a bit surprised to know that the amount of royalty which is chargeable on limestone as a major mineral is lower than the one chargeable upon it as a minor mineral.
Without further light it seems to us curious.
In paragraph 8 at page 996 it was pointed out in Rukmani Bai 's case by this Court with reference to the two notifications issued by the Central Government in the years 1958 and 1961: "The field of minor mineral, in so far as it concerned limestone, was narrowed down.
Formerly limestone used for burning for manufacture of lime, whatever may be the uses to which such lime may be put, whether as building material or for other purposes, was within the definition of 'minor mineral ', but after the amendment, it was only lime stone used for burning in kilns for manufacture of lime used as building material that was covered by the definition of minor mineral.
When limestone is used for burning for manufactories of lime for industrial or sophisticated purposes otherwise than as building material, it would have to be of superior quality and hence after the amendment, was classified as major mineral, leaving only limestone used for burning in kilns for manufacture of lime used as building 882 material to be regarded as minor mineral.
But in both cases, whether under the original notification or the amended notification, limestone was contemplated to be used for burning for manufacture of lime.
The only difference was that in the former, burning could be by any means or process and lime manufactured could be for any purpose in cluding building material, while in the latter, burning could be only in the kilns and for manufacture of lime used only as building material and for no other purpose.
" It was admitted at the Bar that ordinarily and generally only limestone of inferior grade is used as burning in kilns for manufacture of lime used as building material and limestone of superior grade is used either as such for industrial purposes or a high quality lime produced from it is used for purposes other than building material including industrial or sophisticated purposes.
For the purpose of some clarification we may add a few words to point out the distinction between the two notifications.
Limestone used for lime burning was a minor mineral under 1958 notification irrespective of the process of burning or the quality of the lime it produced.
After the 1961 notification only that type of limestone would be a minor mineral which is capable of being used for burning materials for producing that quality of lime which can ordinarily and generally be used as a building material.
The leasee 's responsibility ceases when the limestone quarried by him is used for burning in kilns producing the building material quality of lime.
It would be beyond his control to see that the lime so produced was actually used as a building material.
But then by and large the question of grant of a lease for quarrying or mining the limestone will have to be decided by the State Government on the basis of the quality of the limestone in a particular area.
Mr. Sanghji endeavioured to place materials before us to show that in the area in question was to be found limestone of high grade and quality.
He, therefore, submitted that the State Government should not be permitted to waste the national wealth of high grade limestone by granting a quarry lease as a minor mineral merely for the purpose of getting more royalty on it.
We see force in this argument but it is not possible for us to decide the contentious question as to whether the limestone found in the area was such that could be used as a minor mineral or was fit to be used as a major mineral.
If a major portion in the area is such that can be used as a minor mineral.
then a lease in accordance with the State Rules will have to be granted and a special clause like clause 18A may be provided therein if per chance some quality of limestone quarried in the demised area is found to be of high grade.
Similarly if the major portion is found to be of high grade limestone, then a mining lease for mining lime stone as a major mineral in accordance with the Central Rules will have to be granted.
A special clause may be incorporated in such a lease also.
In either event the lease will be liable to be cancelled if the lessee commits any breach of the terms of the lease including the one as to the purpose of using the limestone as a major or a minor mineral.
883 Following Rukmini Bai 's case we have held that the application filed by the appellant and the lease granted to him was for quarrying limestone as a minor mineral.
But that does not entitle him to get the relief as he wants from this Court.
A peculiar feature of this case, and which may occur in respect of some other area is that there, were two applicants one the appellant was wanted the lease of limestone as a minor mineral and the other respondent No. 3 who wanted it as a major mineral.
In such a situation it was not open to the State Government to merely ignore the application of respondent No. 3 and grant lease to the appellant.
Nor was it appropriate for the Central Government on the view which has been found to be erroneous by us to direct the State Government to consider the application of respondent No. 3 alone.
The proper course in such a situation is to direct the State Government to consider both the applications, determine the question as to whether the quality of the limestone contained in the area in question is such that a lease to quarry it as a minor mineral should be granted or is such that a lease for mining it as a major mineral should be granted and then it should proceed to grant the lease.
The proper course which ought to have been followed has neither been followed nor has been directed to be followed.
For the reasons stated above, we allow C.A. 785/71, quash the order of the High Court as also of the Central Government.
The leaser granted to respondent No. 3 pursuant to the said order shall cease to have effect.
The State Government is directed to consider both the applications for grant of lease and dispose of the matter afresh in the light of this judgment.
It will be open to the State Government to grant a lease for such period as it deems fit and proper to determine or for the balance of the period of the lease of the party to whom it may be granted.
For the past period the appellant will be liable to pay royalty on the amount of limestone quarried by him during the subsistence of his lease on the basis of the royalty payable on a minor mineral and respondent No. 3, similarly, will be liable to pay royalty on the amount of limestone extracted by it during the period of its lease on the basis of the rates chargeable on a major mineral.
Learned counsel for Gorelal Dubey during the course of argument had offered to withdraw his writ petitions M.P. 328/68 and M.P. 390/1972 and to pay the sum of Rs. 16,722, if it be found that the lease granted to him was a lease for a minor mineral.
In view of our finding recorded above, we allow CA 1781/75, set aside the orders of the High Court made in the two writ petitions and allow them to be withdrawn.
We shall make no order as to costs in any of the matters.
S.R. Appeals allowed.
| IN-Abs | In respect of an area of 8.36 acres of land containing limestone in the village Bistara, Jabalpur District, there were two applications before the State Government (Respondent in C.A. 785/71 & Appellant in C.A. 1781/75) empowered to grant prospecting licence or a mining lease for a major mineral under the Mineral Concessions Rules, 1960 or a "quarry lease" under the Madhya Pradesh Mineral Rules, 1961, for a minor mineral as defined in section 3(e) of the one by "GD", (the appellant in C.A. 785/71 and respondent in C.A. 1781/75) dated 7 5 1965 for a quarry lease for "limestone for burning purposes, minor minerals intended" and another by "RC" dated 2 6 1965 for a mining lease for "a major mineral".
The "quarry lease" was granted to "GD" on 1 11 1965 and the lease deed was executed on 10 11 1965 with a special clause 18A therein.
In revision by "RC" against the order granting quarry lease to GD the Central Government by its order dated 14 12 1967, holding that in substance the application of "GD" was an application for "major mineral" and, there fore.
the grant of the "quarry lease" to the appellant was not competent, directed the respondent State to consider the application of "RD" for the grant of mining lease.
As the writ petition No. 3/68 assailing the said order, filed by "GD" in the M.P. High Court was dismissed on 2 9 1970, GD obtained a special leave (CA 785/71), but the stay was refused, resulting in his lease running in operation only for a period of about 5 years and "RD" carrying on its operation of mining limestone as a major mineral.
During the pendency of the lease in favour of "GD" the rate of royalty was enhanced by the State Government and "GD" filed another writ petition (MP No. 328/1968) in the High Court on 23 7 1968.
As the MP 3/68 Was dismissed on 2 9 1970, "GD" amended the application suitable in MP 328/68 with the words "in view of the decision of the High Court, he was liable to pay royalty at a rate which were chargeable as a major mineral".
The High Court allowed the writ petition, remanded the matter of qualification of the amount of royalty due from "GD".
After the remand, the State Government determined the royalty at Rs. 16,722/ .
The said demand was again 877 challenged by "GD" for the third time by way of a writ petition No. MP 390/72 contending that if royalty was charged from him on the basis of a major mineral, then he had paid Rs. 36,000/ and odd more.
The writ was allowed in 25 3 1974 during the course of the hearing of CA 785/71 in the Supreme Court and the appeal by special leave (CA 1781/75) obtained by the respondent State against the order dated 25 3 1974 was heard with CA 785/71.
Allowing CA 785/71 on merits, following the decision in Rukmani Bai Gupta vs The State Government of Madhya Pradesh, Bhopal and others; , and allowing CA 1781/75 with permission to the appellant to withdraw the writ petitions No MP 328/68 and MP 390/72, the Court: ^ HELD: (1) The facts of the instant case, being almost identical as Smt.
Rukmani Bai Gupta 's case, with the only difference that in column 6 of his application the present appellant had merely stated "minor minerals" reading the said expression with the expression "limestone for burning purposes" mentioned in paragraph 1, the same result follows.
Therefore, the application of the appellant was for a minor mineral and the lease granted to him was for the same.
After the adverse decision of the High Court, he was ill advised to take the stand that he was liable to pay royalty on the amount of limestone quarried by him out as "a major mineral", that the amount of royalty which is chargeable upon it as "a major mineral" is lower than one chargeable upon it as a "minor mineral".
[881 CE] Smt.
Rukmani Bai Gupta vs The State Government of Madhya Pradesh, Bhopal and others.
; , followed.
HELD FURTHER: (2) The distinctive points between the 1958 and 1961 notifications are as under: (a) Limestone for lime burning was a 'minor mineral" under the 1958 notification irrespective of the process of burning or the quality of the lime it produced.
[882 C] (b) After the 1961 notification only that type of limesone would be a "minor mineral" which is capable or being used for burning in kilns for producing has quality of lime which can ordinarily and generally be used as a building material.
[882 D] (c) The lessees ' responsibility ceases when the limestone quarried by him is used for burning kilns producing the building material quality of lime.
It would be beyond his control to see that the lime so produced was actually used as a building material.
(3) The question of grant of a lease for quarrying or mining the limestone will have to be decided by the State Government on the basis of the quality of the limestone in a particular area.
If a major portion in the area is such that can be used as a "minor mineral" then a lease in accordance with the State Rules will have to be granted and a special clause like clause 18 may be provided therein if per chance some quality of limestone quarried in the demised area is found to be of high grade.
Similarly if the major portion is found to be of high grade limestone, then a mining lease for mining limestone as a major mineral in accordance with the Central Rules will have to be granted.
A special clause may be incorporated in such a lease also.
In either event the lease will be liable to be cancelled if the lessee commits any breach of the terms of the lease including the one as to the purpose of using the limestone as a major or a minor mineral.[882 EH] (4) In situations like the instant case where there were two applicants one wanting the lease of limestone as a minor mineral and the other who wanted it as a major mineral, it was not open to the State Government to merely ignore the application for major mineral and grant lease to the appellant; nor was it appropriate for the Central Government to direct the State Government to consider the application for major mineral.
The proper course in such a situation is to direct the State Government to consider both the applications, determine the question as to whether the quality of the limesone contained in the area in question is such that a lease to quarry it as a minor mineral should 878 be granted and then it should proceed to grant the leave.
In the instant case the proper course which ought to have been followed has neither been followed nor has been directed to be followed by the Central Government.
[883 AD]
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